Thursday, August 8, 2013

ICL on New Companies Law; 'COURT JURISDICTION'; et al


A Radical idea >

Posted: 22 Aug 2014 04:25 AM PDT
Last week’s Schumpeter column in the Economist carries a provocative idea that involves a complete relook at the way boards of companies are structured and operated. It borrows a proposal from an article titled “Boards-R-Us: Reconceptualizing Corporate Boards” authored by two leading US corporate law academics. The column summarizes the proposal as follows:

In the May edition of the Stanford Law Review Stephen Bainbridge of the University of California, Los Angeles, and Todd Henderson of the University of Chicago offer a proposal for fixing boards that goes beyond tinkering: replace individual directors with professional-services firms. Companies, they point out, would never buy legal services or management advice from people only willing to spare a few hours a month. Why do they put up with the same arrangement from board members? They argue for the creation of a new category of professional firms: BSPs or Board Service Providers. Companies would hire a company to provide it with “board services” in the same way that it hires law firms or management consultants. The BSP would not only supply the company with a full complement of board members. It would also furnish it with its collective expertise, from the ability to process huge quantities of information to specialist advice on things such as mergers.

 Guest Post - Company Deposits: New Rules Change The Game
Posted: 03 Jul 2014 06:41 PM PDT
[The following post is contributed by Abhishek Bansal and Stuti Bansal, Corporate Professionals, Advisors & Advocates. The authors can be reached at abhishek@indiacp.comand respectively)
 ".....may force companies to consider other alternatives such as taking loans from banks instead of accepting deposits."

The new rules, as understood, has the one basic objective of safeguarding and protecting the interests of the investing public, mostly in the category suffering from ignorance or imbecility , having no capacity to know the nitty-gritty or not-so-obvious risk factors. Even if the "other alternatives" were to be resorted by the invested companies,that would have the same frightful consequences; the only difference being it is the banks and stakeholders to whom the same risk factors would be passed and be faced with.

As regards the mentioned requirements of filing returns or documents with the ROCs, without the machinery of a sophisticated kind in place to constantly scrutinize and keep monitoring as a continuous exercise,it seems to be a mere empty formality, so called paper-tiger, with no real purpose to serve.

Similarly , the requirement
"to obtain credit rating at regular intervals during the tenure of the deposit", is at best, of nuisance value, again with no real purpose to be served.

These , noted to have been simply glossed over in the write-up, nonetheless , in one's perspective, do call for a rethinking and drastic modifications of the new rules, seemingly framed with no insightful examination of the intricate implications.


 MCA further clarifies on Shares held in fiduciary capacity


June 28

The “some further concerns raised herein” may have to be read together with the observations / concerns raised  
In the previous article titled,-

As indicated/implied in the comment on the latter, the new provisions of the 2013 Act, rwt the MCA clarification might have irresolute implications for taxation of such companies now on.

For an appreciation of the angle in one’s mind, it needs to be noted:

a)          In the new corporate law, section 43A of the erstwhile law has been deleted; and in place, the corresponding provisions incorporated are as revamped and freshly drafted/structured.

b)         In the 1961 IT Act (as amended from time to time), the related provisions , -refer section 2 (18), (besides section 104, 108 , later deleted) are those as drafted and enacted having regard to the erstwhile company law.

To one’s information (subject to correction if anyone else’s is different), there is no clue whether, and when, the IT Act would be amended so as to bring it in line/alignment with the new company law. There is no gainsaying that, by necessary inference, till then, the legal position for taxation of such companies would, it seems certain, remain muddled and be in limbo.

Should the foregoing observations be regarded to be not without substance or merit, then to simply say, - over to the concerned ministries / empowered authorities for being looked into, on a war footing. 

Open / subject to differing viewpoints, if any, of both company law and (cum!) tax experts.


 MCA Clarifies on Status of Private Subsidiary of a Foreign Company

Tentative (subject to further study) :
On a reading of the discussion herein , one feels that the tax case in re. Daimler Chrysler India (P) Ltd.  v Dy. CIT, ITAT (Pune) may make for a useful comparative study. For a discussion /critique of the ITAT (Pune) Order,  may be looked up 181 Taxman Pg 10 (Mag).  In that case the issue raised under Section 79 of IT Act turned on  the relationship of a foreign company and its Indian subsidiary wprt the definition section 2 (18) of IT Act read with the company law definition. 
Tentative reaction is, the discussed MCA clarification under the new company law is prima facie not readily compatible with the view of the ITAT taken after considering the Indo-German DTAA.  Further developments in that case , so also the judicial view in like later cases , need to be looked into, for enlightenment.


 Govt accepts report on rationalising FDI, FII




Add on>

For addl. links  of a useful study of the topic (of controversy) herein below, refer the mails to self included in the spl. Folder for ICL

New Corplaw

 Guest Post: Identifying KMPs under Companies Act, 2013

Looking at the language of the newly inserted Rule 8A,
(b) Another way of reading it is.. Accordingly Rule 8A covers all and UNLISTED PUBLIC COMPNIES ...”

Sorry! This type of companies, to one’s limited knowledge, does not seem to be thus far known or heard of.
The other basic points one may wish to emphasise are these:
A) Any person designated or otherwise, and internal or external, functioning as a ‘secretary’, has undeniably a crucial role to play, as even ever before. As such, even without the law having to say so, he has always been looked upon as/ expected to discharge his functions as a KMP.
B)The ideologically better view is that, in the larger interests of all the stakeholders, not merely the ‘shareholders’ , the need requires to be urged  for every corporate, for that matter all entities coming within the administrative control of MCA, to have a ‘secretary’. Especially so, if the increasing number of ‘enactments (law), coupled with the inevitable incomprehensibility/complicity of every one of them, with no exception, were to be kept in sharp focus.
C) Some of the common sense observations, if not all, reported to have been very recently made by the RBI Governor, disapproving of the idea of a single regulatory authority, are perceived to be logically sound; hence worthwhile giving an in-depth consideration.

     Read in Business Standard, @


Pleading not guilty of “misquoting her”as alleged, may have to pinpoint that the words in inverted commas (in the opening of comments) are precisely the same as in the subject write-up.  In case what Anonymous is saying, or wanted to say, is that there has been a misunderstanding of the import of the highlighted words, wish to tentatively make self clear that, going by an altruistic perception, the type of company he ostensibly has in mind,- as may be found if closely scouted around, - is denoted, rightly so, as a “publicly unlisted company”, as distinct from “public company”.

Incidentally, Mr Anonymous , though presumably quite more  informed on Indian law (s), will do well to care and read through, among several others elsewhere in public domain, HERE , - Unlisted Public Companies - The Economic Times  , which as read and understood by self , is seen to bring out the ‘ignominy’ of a spercial kind/ the economic risks the other concept  of ‘publicly  unlisted company’ is believed to entail.   
Self open to, and always remain to, be ‘enlightened’, by the Experts at large as ever before.  Bottom of Form

 more >
Unlisted companies catch the fancy again, but tread with caution: Experts ET 04 Apr 2014, 14:30 IST
Unlike listed stocks, unlisted companies are unavailable on a trading platform. Their trading prices are not public like shares traded in exchanges.

On the seemingly right premise that the investment in such "publicly unlisted companies", an obnoxious concept admittedly riddled with inherent economic risks, is that not a 'blind love' for choosing to go in for. If so, is it not a paradox to call or imagine them to be 'sophisticated'!

Stock exchange for unlisted startups to make exits easier ET 04 Oct 2015, 18:38 IST
Entrepreneur Manish Kumar’s proposed stock exchange, Grex, is intended to be a private placement platform for high growth startups.

Commissioner Of Income-Tax vs Kalpaka Enterprises - Indian Kanoon

 Codification of Directors’ Duties: Is Common Law Excluded?

What is Statutory Law?

Statutory law is an affirmed legal code offered by a legislature or by an individual legislature. The laws which encompass statutory law therefore differ from regulatory law, which are promulgated by an executive branch or common law, which are typically established through precedent and offered by judges presiding over a legal matter. - See more at:  


itatonline (Update)

Sec 234 D
CIT vs. Reliance Energy Ltd (Supreme Court)

(Click Here To Read More)

> Contrast with Indian Oil Corporation 254 CTR 113 (Bom) where it was held that s. 234D applies even pre 1.6.2003 if the assessment order is passed after that date

MCA invites Suggestions on Draft Rules under Companies Act 2013 – 2nd Phase

Clarification on Effectiveness of the Companies Act, 2013

Sept 16

Companies Act, 2013: Additional Disclosures in Notices of Meetings

[The following post is contributed by Nidhi Ladha, who is a junior partner at Vinod Kothari & Co. She can be reached at]
Comment on opening observations, etc., called for- e.g. 'enforced', coming into 'effect', so on ?

WPRT the observations in the concluding para. above, further developments have come to be reported in the website of Taxguru @ Company Law - Clarification on the Commencement notification dated 12.09.2013 on TaxGuru.

Comments posted thereon reproduced below, for ready reference:

Historically, as has been the common experience, more often than not, difficulties have arisen in regard to clearly understanding, so as to appropriately act/comply with, having regard to the implications of ‘date of coming into effect/force’ of any provision of law, as prescribed for the purpose. By and large, except in cases where the enactment itself so specifies, the effective date is the one as announced in the related Gazette Notification.
So far as the new company law is concerned, mostly it is the latter-mentioned procedure that has been chosen, unwittingly or otherwise, to be followed.
If critically examined, it will be realized that, each and every one of the new provision, especially if mandatory, might have to be independently gone into, in every detail, with a multi-dimensional focus, so as to ensure that as far as feasible no scope is left for any difficulty in the understanding of and accordingly following/complying therewith by the mandated.
Several such instances are known to have cropped up in the realm of the law on income-tax and other tax laws as well. For helpful clues and useful guidance on the foregoing facets, one may look up some of the court cases; also the subsequent amendments warranted hence came to be made later based on the wisdom gathered in hindsight. One such instance that readily comes to mind pertains to section 234D of the IT Act, giving rise to disputes, but eventually amended, to clarify. For a better understanding thereof, the published article in – (2008) 173 TAXMAN pg. 80 (Mag.) may come in handy.

<previousSept 15
US-Big Brother !

The Occupy Movement is Dead – Long Live Participatory Democracy!
by Lorna Howarth
"There are people all over the world who haven’t forgotten the wisdom of their ancestors and who are coming together in the name of ‘participatory democracy’ to ensure that their voice is heard; that they are not silent witnesses to the crime of ecocide."


Hamid Ansari: Rules of procedure are being violated


Some Sections of the Companies Act, 2013 Come Into Force

Exercise in speculation or wonderland . nay futility, is rife; ICL keeps itself erngaged in...


MCA notifies 98 Sections of the Companies Act

Download Commencement Notification Of Companies Act 2013, Dated 12.09.2013 issued by MCA


  • Press Release On The Report Of The Expert Committee On GAAR
  • Companies Act 2013 Is Available For Download

  • Draft Companies Rules 2013 Is Available For Download
    September 9th, 2013
    Pursuant to the Companies Act 2013 which was enacted on 29.08.2013, the Ministry of Corporate Affairs has released the Draft Companies Rules 2013.

    "On Class Action"

    Why a law-man should not head the law ministry- ????

    <> IMPROMPTU (in a different stroke):

    "... a Recipe for Confusion"-
    If intelligently perceived, especially in the light of decades- old history of Indian legislation, anyone who allows self to believe that the recipe spoken of  i.e. "Class Action"  is a new one, - or the one and only, or a rare, instance of its kind, brimming with confusions,- not to put it wildly, will be making a serious mistake. So serious that he will be unkind to self by offending own intelligence and integrity.
    As quite rightly underlined, any such enactment, framed and brought on,  though claimed to being made for the benefit of  so called 'minority' of the stakeholders, are bound to be eventually faced with long drawn controversies, hence  entailing inevitable litigation. At best, that might defeat the very object; at best, might only prove an added lucrative field, to the advantage and delight of the 'law men' (in its natural sense) at large, for simply proving individuals’ prowess / mettle, nothing more or less.
    Loudly, rather sadly, wondering: Could it at all provide  a welcome reprieve or respite, if not a lasting solution, if  the nation  were to conceive  and bring about a drastic change in, to begin with,  the basic set-up / constitution of the law ministry itself. Do so by having in mind and adopting sincerely, with no qualms or personal prejudices  influencing or coming in the way,  some of the  ideally efficacious  remedies/measures , which the great humanitarian and social activist of our times, -late  N A Palkhivala  used  to tirelessly keep advocating for (To hint at, - look up his thoughts -/ wisdom- rich published speeches /articles).
    <Intend to continue

    To share more thoughts:
    Here is a random selected specimen remedy prescribed by the renowned humanist:
    <The bewildering complexity of ..laws is coupled with the hyper-technical sprit in which the laws are made and being administered.  The words “The Letter Killeth” should be inscribed over the portals of
    The integrated pattern of the child of abstract theory and a doctrinaire approach.  One wishes that sometimes the government would take counsel from men of humanity, vision and imagination, men of practical experience of human affairs and perceptive understanding of the national character.
    ...a perceptive passage in Charles Morgan’s Liberties of the Mind..Where problems of deep policy are concerned the government takes advice. Commissions are set up, ministers appoint advisory councils to examine a particular problem and report back. Whoever looks carefully at the constitution of these bodies will note that one element is always absent – a humane counsellor appointed for his quality of humanism. Commissions and committees generally include.. experts on  various aspects of the problem to be examined. One or two “fancy” members are sometimes added. Why is no humane counsellor appointed, a philosopher, a historian, a scholar, a painter -yes, even a poet or a story teller – THE WHOLE VALUE OF WHOSE PRESENCE WOULD BE THAT HE IS NOT A TECHNICAL EXPERT AND DOES NOT REPRESENT A VESTED INTEREST, A PARTY OR AN ASSOCIATION? He might ask the questions, leading to the “real issue”, which the others forgot to ask, for it is THE ESSENCE OF HUMANISM AND OF ALL ART TO ASK QUESTIONS GOVERNING THE RELATIONSHIP OF REALITY   TO APPEARANCES AND OF TRUTH TO HALF-TRUTH. Extremely adroit princes did not regard as valueless the opinion of Voltaire, and the author of Paradise Lost was not considered a helpless dreamer. If such judgments were of value in days when the world was comparatively simple and statesmanship leisurely, of how much greater value would they be today! > (UPPERCASE for emphasis)
    He spake thus on The Union Budget 1958-59.
    (Source: WE, THE PEOPLE )
    Point of poser is,- even if that be so, should not these apply and be ideally followed, with greater justification, also with respect to corporate and other man-made laws; further, as a guiding model rule for a re-approach and freshly deciding on the framework/constitution of the Law ministry /attached departments.
    The observations in the introductory paragraph read:
    “…Indian Corporate Sector which was reeling under the age old Companies Act, 1956 has got a fresh lease of life and the old legislation has got the much deserved adieu.”
    In one’s perceptive view, however,that does not seem to reflect the true implications of the new corporate law. As intelligently brought out in lawyers’ circle – refer the ICL Blog titled – “Companies Act, 2013 Receives Presidential Assent ” (link), and comments posted thereon, the clinching provision of section 1(3) (so also 1(4)) require to be kept in sharp focus.


    Companies Act, 2013 Receives Presidential Assent
    Refer the reproduced provision of section 1 (3). It ought not to have been over-sighted, but rightly require to have been made a conscious note of, that such a provision typifies and is reminiscent of the lately developed practice, not a palatable one. That concerns the pattern of legislation that has come to be increasingly adopted, and largely accepted/invariably taken in the stride.
    If remembered (subject to checking), one such legislation is the Regulatory Bill for the realty sector but long pending enactment.
    In one's conviction, this type of legislation, leaving open to be given effect, not in one-go but in bits and pieces, that too, intriguingly, with no certainty or definiteness of the timing of it, has the potential to numerous legal, besides ethical, controversies. So much so, entail the otherwise avoidable scope for an inconclusive, mainly the apprehensive cum reprehensive lawyer -stimulated, litigation. 
    It is for eminent law experts, truly righteous with an impartial thinking among them, to devoutly deliberate and make their well-considered multidimensional views/opinion known to the concerned rest / the men in power, essentially in the larger public interest.

    ICL Blog:

    Key: The Companies Act provides the broad framework and a substantial part of the details of the corporate law regime will be governed by various sets of rules to be promulgated by the Central Government. The implementation of the Act will be subject to finalization of the rules, and hence various substantive provisions will become effective once the respective rules are promulgated. Hence, it is likely that there could be a phased implementation of the Act, somewhat similar to the process followed in the case of the UK Companies Act of 2006. In that case, a timetable for implementation was set out upfront, but in India’s case there is an element of uncertainty as no implementation schedule has been announced yet.

    < In the growingly modern times, such type of legislation is observed to have become more or less the common trend. And such a practice has come to be followed by the men in governance, from to time, more so accepted by the elite circle/ supposed to be well-pinformed/knowledgeable section of the people , with not even batting an eyelid. 
    Be that as it could not be expected to be otherwise, anyone having a passion for independent thiinking, may not find the said practice as one objectionable hence deserve to be ideologically spaeking eschewed for more than one seemingly valid reason:

    < Delay in carrying through  any such legislation

    Whitepaper inviting ideas, viewpoints from the concerned
    by and large, reasistance offered
    as a way of compromise to accommodate OFTEN A A PLOY but at the same TIME NOT TO GIVE IN or not to create the impressioin of rolling back any one or more of the original proposals, to make it appear as to have stuck to the gun, proposals ON MANY SCORES GONE AHEAD WITH
    9to be completed/edited)



    The new Companies Bill is certainly more challenging for audit professionals. S. Santhanakrishnan, Chairman, ICAI’s Corporate Laws 

    <> The observations in the write-up  coming from a senior professional  (CA) are devoted to  some of the aspects / common or special  concerns of  everyone with vested interests in the legislation; especially , as to what is in store for them if and when  the provisions of the new company  law take effect , - that is,  after they  are completely  ready to be implemented. Of course, the bill  passed by the Parliament is notified  to have received the formal assent of the President. Even so, none can rightly bypass certain intriguing facets; importantly of all, as to when the requisite rules for actual implementation and enforcement of all the substantive provisions of the new law could be expected to have been given a final shape and be completely notified. 
    The Blogs @ the links below are seen to bear out  some relevant hints :

    The pattern (piecemeal kind) of legislation is notably like or similar to other recent enactments on income-tax -including DTC, also to the Regulatory Bill for Realty, pending enactment.


    "......  Supreme Court decision of Swastik Gases Private Limited v. Indian Oil Corporation Limited, relating to ouster of jurisdiction clauses has been discussed on this blog here. ...."
    "......the application of “expressio unius est exclusio alterius”, i.e., expression of one is the exclusion of another....."

    "In Hanila Era, the only seeming rationale for applying “expressio unius est exclusio alterius” is that a larger part of cause of action arose within the territorial limits of the courts mentioned. However, Section 20(c) of Code of Civil Procedure, 1908, specifies that all courts where cause of action, wholly or in part arises have jurisdiction. It does not say that Courts where larger part of cause of action arose will have preference. Thus, even applying the test of where a larger part of cause of action does not seem right."

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