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  • Dipak Shah
    www.cliofindia.com info@cliofindia.com ________________________________ COMPANY CASES (CC) HIGHLIGHTS ... requirements of section 97 on increase in authorised
    Message 1 of 214 , Nov 30, 2011

      CLI
      www.cliofindia.com
      info@...

      COMPANY CASES (CC) HIGHLIGHTS


      ISSUE DATED 2.12.2011

      Volume 168 Part 2


      HIGH COURT JUDGMENTS



      F Transferee company need not comply with requirements of section 97 on increase in authorised capital: Claro India Ltd., In re (Mad) p. 132

      F Priority of claim of workmen's dues only where company ordered to be wound up or proceedings for winding up pending : K. V. Sasidharan Pillai v. Indian Overseas Bank (Ker) p. 137

      F Where transfer of shares disputed and application seeking confirmation of transfer filed after 18 years with no explanation for delay, transfer not confirmed : Rathnam P. V. v. Official Liquidator, High Court of Bombay (Bom) p. 168




      COMPANY LAW BOARD ORDERS



      F Where petitions u/ss. 397 and 398 filed before Principal Bench and Western Region Bench and grounds raised in petition covered under section 237(b) of Act, Western Region Bench alone has jurisdiction to hear matter : Sanjay Damji Shah v. Vijay Dewellers P. Ltd. p. 97

      F Belated challenge to allotment of shares following procedure prescribed in articles of association not to be entertained : Albert Cambata v. Cambata Aviation P. Ltd. p. 108

      F Director staying abroad and attending some meetings of board of directors held abroad cannot complain non-receipt of notice of meetings : Failure to declare dividends is affairs of company, CLB cannot interfere : Albert Cambata v. Cambata Aviation P. Ltd. p. 108

      F Where shares transferred 20 years after death of original owner without sufficient cause, restoration of name of original shareholder ordered : Gopal Giridharilal Doda v. Vishesh Ispat P. Ltd. p. 129

      F Where conduct of respondents wrongful, harsh and lacking in probity, petitioner permitted to exit company on receiving fair value for his shares fixed by CLB : Mangaleshwar Singh Baghel v. Rewanchal Industrial Security India P. Ltd. p. 142

      F CLB has no jurisdiction to deal with petition u/s. 111(4) of 1956 Act seeking restoration of member expelled from membership of club : Pankaj Chimanbhai Patel v. Karnavati Club Ltd. p. 162




      STATUTES AND NOTIFICATIONS



      Policy :
      F Consolidated FDI Policy : p. 53




      JOURNAL


      F Avoid Latin words and phrases-Dr. K. R. Chandratre : p. 13

      F Corporate Social Responsibility : Indian legal perspective-Varun Kumar : p. 23





      NEWS-BRIEF


      F New Companies Act a complete change in the corporate law framework

      The Union Cabinet approved the long-awaited Companies Bill that will completely recast the key provisions of the decades-old Companies Act, 1956.

      It will bring in a new corporate responsibility framework, a rigorous regime and greater role for independent directors, more responsibility on independent directors and introduces new concepts like one person company, class action suits and women directors on boards.

      "The Cabinet has cleared the Companies Bill, 2011. It is likely to be tabled in the ongoing Winter Session", the Corporate Affairs Minster said after the Cabinet meeting.

      The Government has been attempting an overhaul of the Companies Act for almost a decade. Experts say the move will bring about a complete change in the corporate law framework, in line with the changing times.

      The Bill was originally introduced in the Lok Sabha in 2008 but had lapsed because of change of Government. It was reintroduced in August 2009. The Bill suggests that profit-making companies above a certain threshold will have to spend at least 2 per cent. of the average profits in the preceding three years on CSR activities and make a disclosure to shareholders about the policy adopted in the process.

      The Government diluted the provision after stiff opposition from the industry and decided not to make 2 per cent. CSR spend mandatory. The Bill also seeks to provide for class action suits and a fixed term for independent directors. Among other things, it proposes to tighten laws for raising money from the public.

      The Bill also seeks to prohibit any insider trading by company directors or key managerial personnel by treating such activities as a criminal offence. The Bill will give more powers to the Serious Frauds Investigation Office.

      The Corporate Affairs Ministry had moved a fresh proposal after resolving the overlap issues, and giving SEBI regulations a greater force in case of a conflict with any other law, and the repetitive complaints are wearing thin. [Source : www.economictimes.com dated November 25, 2011]

      F Validity of cheques reduced from 6 to 3 months

      The Government said the Reserve Bank of India (RBI) has decided to reduce the validity of cheques and bank drafts from the present six months to three months beginning next fiscal.

      The RBI has advised that with effect from April 1, 2012, banks should not make payments against cheques, drafts, pay orders or banker's cheques if they are presented after the period of three months from date of issue, the Minister of State for Finance said in a written reply to the Rajya Sabha.

      "It was reported to Central Economic Intelligence Bureau (CEIB) that some persons are taking undue advantage of the practice of banks of making payment of cheques or draft presented within a period of six months from the date of the instrument as these instruments are being circulated in the market like cash for six months", he said.

      Subsequently, CEIB constituted an Inter-Ministerial Group (IMG) on "Street Financing" which recommended reducing the validity period of the cheques or drafts, he added. [Source : www.businessstandard.com dated November 23, 2011]

      F ICAI to switch over to new reporting format at the earliest to follow suit

      The Government has asked the accounting regulator to remind companies that they have only a week left for switch over to the new financial reporting format, after data showed less than 7 per cent. of companies had complied till a week ago.

      All listed companies and some unlisted ones are required to file their financial statements for the year ended March 31 in the XBRL format by November 30, the third revised deadline this year.

      Regulators hope to use this new format as a tool to check accounting frauds. "We are very worried about this abysmal turnout. MCA needs to report back to the secretariat with a report of progress within a month", a ministry official said.

      The conversion to XBRL (eXtensible Business Reporting Language), a global standard for exchanging business information introduced by the Ministry of Corporate Affairs (MCA) earlier this year, is being closely monitored by the Prime Minister's Office after the country was hit by a spate of scams.

      According to sources, among those yet to file in XBRL format are most of the top BSE-Sensex companies that are audited by the big four accounting firms. "We are writing to accountants across companies to sensitise them and prod them to comply with the new format as soon as possible", the Institute of Chartered accountants of India president said.

      "Companies as well as accountants need to realise that XBRL is not as trivial as an excel file. It requires domain knowledge", said a CEO of business services company, one of the first few firms to have filed. XBRL uses an electronic glossary of business and financial terms known as taxonomy.

      Under this, companies report their financial statements using XBRL syntax as an .xml file instead of uploading their balance-sheets in .doc or .pdf format. [Source : www.economictimes.com dated November 24, 2011]

      F Corporate Tribunals constituted

      The Government proposes to set up National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) which will replace Company Law Board, Board for Industrial and Financial Reconstruction and Appellate Authority for Industrial and Financial Reconstruction.

      Provisions regarding constitution of NCLT and NCLAT were incorporated in the Companies (Second Amendment) Act, 2002. The Act was, however, challenged in the Madras High Court. The matter was finally decided by the Supreme Court vide their judgment dated May 11, 2010. The revised Companies Bill, 2011, incorporating the guidelines provided by the Supreme Court in their said judgment, is likely to be introduced in Parliament shortly. [Source : www.pib.nic.in dated November 24, 2011]

      F SEBI sets minimum allotment for anchor investors

      The Securities and Exchange Board of India (SEBI) set a minimum allotment size of Rs. 5 crores ($1 million) for issuing shares in an initial public offer to "anchor" or cornerstone investors. The SEBI also set a maximum number of anchor investors in a capital raising, it said in a statement, but did not give details, but the minimum allotment size would make the concept more effective.

      SEBI allowed anchor investors for initial public offerings in June 2009, aimed at improving issuers ability to sell the issue and to boost investor confidence. It allowed them to subscribe up to 30 per cent. of the quota for institutional investors. Anchor investors are required to lock-in their holdings for a period of one month from the date of the share allotment.

      In a separate decision, SEBI also set a maximum tenure of 12 months for warrants issued along with public issues or rights issues of securities. [Source : www.businessstandard.com dated November 24, 2011]

      F Easing loan norms for private companies will have an adverse impact on banking sector

      Some State-run lenders and private companies are under scanner of the Corporate Affairs Ministry after allegations that these firms in collusion with bank officials misappropriated bank loans to generate cash among their subsidiaries and inflate enterprise value.

      "There were allegations that bank officials are easing sanctioning norms for term loans and working capital loans to some private companies", said an official from the Ministry of Corporate Affairs (MCA).

      The Finance Ministry is investigating the role of some of the officials in leading public sector banks such as Indian Overseas Bank, Bank of India, Oriental Bank of Commerce and Bank of Baroda, the official said.

      Companies or promoters used a part of these loans to purchase fixed assets such as land and then used them to borrow further loans by pledging them as collateral.

      The remaining loan amount is shown as used for purchasing moveable assets through fake invoices and the cash was shared between the borrower and conniving bank official, the official said.

      "The entire loan amount will turn into bad assets and banks will have nothing much to recover", the official added. MCA is also likely to look into allegations that promoters are using their subsidiaries to help convert cash into equities at higher premiums, thereby multiplying their shared capital. The Finance Ministry official said most of the bankers have been given a clean chit. "The allegations were examined by the chief vigilance officer of these banks and no evidence was found", he said. [Source : www.economictimes.com dated November 23, 2011]






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      Dear Subscriber,
       

      The following important judgement is available for download at itatonline.org.

      C& C Construction Pvt Ltd vs. CIT (Delhi High Court)

      S. 260A: High Court has no power to consider issue not raised before Tribunal
       
      The assessee filed an appeal before the Tribunal in which it argued that it had constructed a “temporary construction” which was eligible for 100% depreciation. This was rejected by the Tribunal on the basis that the construction was permanent. Before the High Court, the assessee argued for the first time that the expenditure was “revenue” in nature and admissible as business expenditure. HELD not permitting the assessee to raise the plea:

      Regards,

      Editor,

      ---------------------
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    • Dipak Shah
      Dear Subscriber,   The following important judgement is available for download at itatonline.org. Basu Distributor Pvt Ltd vs. ACIT (Delhi High Court) S.
      Message 214 of 214 , Mar 17, 2012
        Dear Subscriber,
         

        The following important judgement is available for download at itatonline.org.


        Basu Distributor Pvt Ltd vs. ACIT (Delhi High Court)


        S. 40A(3): Financial crises may be “exceptional or unavoidable circumstance” for cash payment
         
        The assessee made payments exceeding Rs. 10,000 in cash and claimed that a disallowance u/s 40A(3) read with Rule 6DD(j) & Circular No.220 dated 31.05.1997 could not be made as a payment by cheque etc was not possible due to “exceptional or unavoidable circumstances” etc. The Tribunal rejected the assessee’s claim on the ground that that the assessee’s explanation that the payees would not accept cheques as they had been dishonoured on earlier occasions was “fantastic and fanciful” as in such case the assessee could have deposited cash and obtained bank drafts. It was also held that the assessee had not explained how it obtained the cash for making the payments & if the amounts were borrowed, there was a violation of s.269SS. On appeal by the assessee to the High Court, HELD reversing the Tribunal:

        Regards,

        Editor,

        ---------------------
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