Oral Coaching Classes, EDP, PDP, MSOP ... territorial limits of the state of Jammu & Kashmir will not be liable to Service tax irrespective of whether the service provider is residing

October, 2014 3 NIRC-ICSI Newsletter

Regional Council Writes

NIRC always celebrates with much fanfareand grandeur the days of significance for boththe nation and the institute. We celebrated ourfoundation day with a week-long celebrationsand events for the members and students.NIRC also celebrated the 68th IndependenceDay of our nation with great commitment anddevotion.

To serve both the members and students tomake better career choices, we haveintroduced a segment wise panel of expertsto guide and enlighten them about the variousopportunities and challenges in the differentsegments of the profession.

To reach to the wider audience and takethe benefits of the seminar at their door-s tep we ini t ia ted the process ofwebcasting of our seminars at the localchapters . In th is l ine we have a lsodecided to distribute the backgroundmaterial for the seminar in advance so asto accl imatise the members with thetopics beforehand.

We have introduced several panels forappointment of faculties at the level ofOral Coaching Classes, EDP, PDP, MSOPto bring in greater transparency in theirappointment and simultaneously open theprofession for other experts from thevarious fields of profession to share theirviews and experience with the buddingmembers.

NIRC in its constant endeavour to coordinatethe best possible placement for our youngmembers had been successful in placing

young members at an attractive package of Rs.15 lakh per annum.

NIRC has initiated the process of purchasingits own Auditorium as well as renovation ofexisting premises. NIRC has also extendedits support to various chapters to enhancetheir infrastructural capabilities byapproving building plans and projects aswell as shifting of offices to better premisesand facilities.

NIRC along with the Jaipur Chapterrepresentatives met Shri Shikhar Agarwal(IAS), Commissioner, Jaipur DevelopmentAuthority and requested him to allotresidential land/plots on very concessionalrate to Company Secretaries in the township/residential schemes of Government ofRajasthan and also allot a land to developCentre of Excellence for members andstudents to promote research and otheractivities.

So friends the success cannot be measured inwhat has been achieved but rather what hasbeen visualised for the future of theprofession and in laying down the path forthe progress. Success is not a destination butjust a pit stop in the journey of constantinnovation and development.

With best regards,

NIRC-ICSI


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SERVICE TAX: GATEWAY TO PROFESSIONAL OPPORTUNITIES ANDCHALLENGES*-BIMAL JAIN, INDIRECT TAX EXPERT

Service tax is a relatively new levy of tax on ‘provisionof services’ which was introduced in the year 1994. Inthis background, a new tax called as ‘Service tax’ wasintroduced in 1994 vide Chapter V of the Finance Act,1994 (hereinafter referred to as the “Finance Act”) underthe residuary entry 97 of the Union list of the SeventhSchedule to the Constitution. As held by the SupremeCourt in the case of UOI Vs.Harbhajan Singh Dhillon,AIR 1972 SC 1061: [1972] 83 ITR 582 (SC): (1971) 2 SCC779, the Parliament has exclusive powers to make lawswith respect to entry 97 of the Union list for any othermatters not enumerated in State List or Concurrent List,including any tax not mentioned in either of those lists.However, a Constitutional amendment videConstitutional (Eighty-Eighth Amendment) Act, 2003,new Article – 268A was inserted providing for taxing‘services’ to be levied by the Union and collected andappropriated by the Union and the States. New EntryNo.92C was inserted in Seventh Schedule toConstitution of India to provide for ‘Taxes on Services’.

Initially, only 3 services viz., Telephone, GeneralInsurance and Stock broking were brought within theambit of Service tax in 1994. Then Finance Minister (Dr.Manmohan Singh) in his budget speech that year said:“There is no sound reason for exempting services fromtaxation….Therefore, I propose to make a modest effort in thisdirection by imposing a tax on services of telephones, non-lifeinsurance and stock brokers”.

Selective taxation of services

It is relevant to note thatService tax levy was introducedunder the scheme of ‘Selective Taxation of Services’wherein specific services were defined in the statutoryprovisions. The selective taxation of services by way ofincremental additions over the years served well in thepast in acclimatizing both the tax payers and taxadministrators to the new levy.

Under this approach, the statutory provisions havebeen amended every year so as to add variousservices under the Service tax levy and this processof expansion of list of taxable services has increasedmanifold over the years.

*Views expressed by the Author are solely his own view and the Firm, NIRC or ICSI does not accept any responsibility.

Consequent to the amendments made vide the FinanceAct, 2012 and prior to introduction of ‘Negative List ofTaxation’ by the Finance Act, 2012 there were about 119taxable services. However, in Budget 2012, FinanceMinister observed that ‘Service tax’ has attainedadulthood by completing 18 years and therefore it istime to shift gears and accelerate ahead.

As stated above that the Service tax was levied on threeservices by the Finance Act, 1994 viz. General InsuranceServices, Stock Broking and telephone and Pagerservices and the tax rate was 5%. Thereafter, the numberof services has been increased to 119 and the rate hasbeen increased to 12%.

Services are one of the major contributors to thedevelopment of economy. As per the latest EconomicSurvey, the services sector has made a major contributionto the Indian Economy, growing by 8% annually andcontributing to about quarter of employment.

The Finance Act, 2012, w.e.f. July 1, 2012 has introducedcomprehensive approach for levy of Service tax to tax servicesbased on what is popularly known as “Negative List ofServices”. It means, if any activity meets the characteristicsof a “Service”, it is taxable unless specified in the NegativeList or otherwise exempted by the Mega ExemptionNotification. The Negative List comprises of 17 serviceswhich are listed in the Section 66D of the Finance Act.

Applicability of Service Tax:

Section 64 of the Finance Act deals with the‘applicability’ of levy and provides that ‘Service tax’will extend to the whole of India, except the state ofJammu & Kashmir.

Some important definitions under Section 65B of FinanceAct are as follows-

(i) “India” means,-

(a) the territory of the Union as referred to in clauses (2)and (3) of article 1 of the Constitution;

(b) its territorial waters, continental shelf, exclusiveeconomic zone or any other maritime zone as definedin the Territorial Waters, Continental Shelf,


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Exclusive Economic Zone and other Maritime ZonesAct, 1976; (80 of 1976.)

(c) the seabed and the subsoil underlying the territorialwaters;

(d) the air space above its territory and territorial waters;and

(e) the installations, structures and vessels located in thecontinental shelf of India and the exclusive economiczone of India, for the purposes of prospecting orextraction or production of mineral oil and naturalgas and supply thereof. [65B(27)]

(ii) “Taxable territory” means the territory to which theprovisions of this Chapter apply. [65B(52)]

Hence, the taxable territory covers whole of Indiaexcept the state of Jammu & Kashmir.

(iii) “Non-taxable territory” means the territory other thanthe taxable territory. [65B(35)]

In view of the above, the services provided within theterritorial limits of the state of Jammu & Kashmir willnot be liable to Service tax irrespective of whether theservice provider is residing in that state or not. However,any person residing in the state of Jammu &Kashmirproviding services in other parts of countrywould be liable to Service tax, to be paid by ServiceRecipient under Reverse charge mechanism.

Charge of Service Tax:

During the period prior to July 1, 2012, the charging ofService tax was provided in Section 66 of the Finance Actwhich provided that 12% Service tax isleviable on the‘taxable services’ referred in various sub-clauses of Section65(105) of the Finance Act which contained all thedefinitions of taxable services of about 119 services.

Consequent to the amendments made by the FinanceAct, 2012, which ushered in ‘Negative List of Taxationof services’ w.e.f. July 1, 2012, a new charging provisionis contained in Section 66B of the Finance Act whichprovides that a tax referred to as “Service Tax shall belevied at the rate of 12% of the value of all services, otherthan those services specified in the negative list, provided oragreed to be provided in the taxable territory by one personto another and collected in such manner as may beprescribed.”

Therefore, it is clear that w.e.f. July 1, 2012, all thoseactivities which get covered under the definition of‘Service’ as per Section 65B(44) of the Finance Actwould be liable to Service tax at 12% ad valorem withexception of those services which are contained in‘Negative List’ or exempted under the Mega ExemptionNotification No. 25/2012-ST dated June 20, 2012(effective from July 1, 2012).

What is “Service”:

As per Section 65B(44) of the Finance Act,”Service” meansany activity carried out by a person for another forconsideration, and includes a declared service, but shallnot include-

(a) an activity which constitutes merely,-

(i) a transfer of title in goods or immovable property,by way of sale, gift or in any other manner; or

(ii) such transfer, delivery or supply of any goods whichis deemed to be sale within the meaning of clause(29A) of article 366 of the Constitution; or

(iii) a transaction in money or actionable claim;

(b) a provision of service by an employee to the employer inthe course of or in relation to his employment;

(c) fees taken in any Court or tribunal established under anylaw for the time being in force.

Explanation 1.- For the removal of doubts, it is herebydeclared that nothing contained in this clause shallapply to,-

(A) the functions performed by the Members ofParliament, Members of State Legislative, Membersof Panchayats, Members of Municipalities andMembers of other local authorities who receive anyconsideration in performing the functions of thatoffice as such member; or

(B) the duties performed by any person who holds anypost in pursuance of the provisions of theConstitution in that capacity; or

(C) the duties performed by any person as a Chairpersonor a Member or a Director in a body established bythe Central Government or State Governments orlocal authority and who is not deemed as anemployee before the commencement of this section.

Explanation 2. For the purposes of this clause,transaction in money shall not include any activity


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relating to the use of money or its conversion by cash orby any other mode, from one form, currency ordenomination, to another form, currency ordenomination for which a separate consideration ischarged.

Explanation 3. For the purposes of this Chapter,-

(a) an unincorporated association or a body of persons, as thecase may be, and a member thereof shall be treated asdistinct persons;

(b) an establishment of a person in the taxable territory andany of his other establishment in a non-taxable territoryshall be treated as establishments of distinct persons.

Explanation 4. A person carrying on a business througha branch or agency or representational office in anyterritory shall be treated as having an establishment inthat territory;

Declared Services:

In terms of Section 65B(22) of the Finance Act,”declaredservice” means any activity carried out by a person foranother person for consideration and declared as such undersection 66E;

Section 66E of the Finance Act, 2012 contains the list ofactivities that have been declared to be services. Section66E lists the following as being declared services:

(a) Renting of immovable property;

Under the Negative List Taxation of Services’ w.e.f. July1, 2012, all types of renting of immovable property wouldbe liable to Service tax as being a Declared Service.

It is relevant to note that prior to July 1, 2012, the rentingof immovable property was leviable to Service tax only ifthe renting was “for use in the course of or for furtheranceof, business or commerce”.

(b) Construction of a complex, building, civil structure ora part thereof, including a complex or building intendedfor sale to a buyer, wholly or partly, except where theentire consideration is received after issuance ofcompletion certificate by the competent authority.

‘Construction services’ under the new regime is acombination of following two headings of old regime:

(a) Construction service was already taxable as part ofconstruction of residential complex service underSection 65(105) (zzzh); and

(b) Service in relation to commercial or industrialconstruction under Section 65(105) (zzq) of theFinance Act.

However, under the new entry under declared services,both the above referred headings have been combinedwith the following changes:

– Requirement of more than 12 residential units in aresidential complex has been removed. Now anybuilding with more than one residential unit could betermed as ‘residential complex’.

– Reference to commercial or industrial constructionhas been omitted.

Hence, all types of construction of buildings would getcovered under this heading with exception of where theentire consideration is received after issuance ofcompletion certificate by the competent authority.

Explanation (I) defines ‘competent authority’ as follows:

“(I) the expression “competent authority” means theGovernment or any authority authorized to issuecompletion certificate under any law for the time being inforce and in case of nonrequirement of such certificate fromsuch authority, from any of the following, namely:–

(A) architect registered with the Council of Architectureconstituted under the Architects Act, 1972; (20 of1972.) or

(B) chartered engineer registered with the Institution ofEngineers (India); or

(C) licensed surveyor of the respective local body of thecity or town or village or development or planningauthority;”

Explanation II to the above heading provides that theexpression “construction” includes additions, alterations,replacements or remodeling of any existing civil structure;

The above explanation expands the scope of thedefinition of ‘construction’ to include addition,alteration, replacements or re-modeling of any existingcivil structure.

(c) Temporary transfer or permitting the use orenjoyment of any intellectual property right;

‘Intellectual property right’ has not been defined in theAct. The phrase has to be understood as in normal tradeparlance as per which intellectual property rightincludes the following:


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• Copyright

• Patents

• Trademarks

• Designs

• Any other similar right to an intangible property

Only temporary transfer of IPR is liable to Service taxunder this heading and therefore all permanent transferswould get excluded from Service tax levy.

(d) Development, design, programming, customization,adaptation, upgradation, enhancement,implementation of information technology software;

The phrase ‘information technology software’ is definedin Section 65B of the Finance Act as follows:

(28) “information technology software” means anyrepresentation of instructions, data, sound or image, includingsource code and object code, recorded in a machine readableform, and capable of being manipulated or providinginteractivity to a user, by means of a computer or an automaticdata processing machine or any other device or equipment.

(e) Agreeing to the obligation to refrain from an act, orto tolerate an act or a situation, or to do an act;

This entry is unique one in the ‘Declared Services’wherein the following activities done by one person toanother person for consideration would be termed as‘declared service’:

• Agreeing to the obligation to refrain from an act.

• Agreeing to the obligation to tolerate an act or asituation.

• Agreeing to the obligation to do an act.

It is interesting to note this entry also covers thosetransactions where one party agrees to tolerate an act orsituation for a consideration.

(f) Transfer of goods by way of hiring, leasing, licensingor in any such manner without transfer of right to usesuch goods;

It is relevant to note that ‘transfer of right to use thegoods’ is one of the transaction of ‘deemed sale’ as perclause (d) of Article 366(29A) of the Constitution.

What is sought to be termed as ‘declared services’ isthat aspect of transaction where the goods are transferredby way of hiring, leasing, licensing etc., withoutinvolving ‘transfer of right to use’ such goods.

(g) Activities in relation to delivery of goods on hirepurchase or any system of payment by installments;

It is clear from the definition of ‘Service’ in Section65B(44) of the Finance Act that all ‘deemed sale’ as perArticle 366(29A) of the Constitution of India is excludedfrom the purview of ‘Service’.

As per clause (c) of Article 366(29A) of the Constitutionof India, the delivery of goods on hire purchase or anysystem of payment on instalment is a ‘deemed sale’,hence such transactions are not covered under thedefinition of ‘Service’.

However, under this entry, the activities or servicesprovided in relation to such ‘delivery of goods on hirepurchase or on instalment payment’ are sought to becovered.

(h) Service portion in the execution of a works contract;

Works Contract is one of the transaction which is coveredunder ‘deemed sale’ under Article 366(29A) of theConstitution of India.

However, only service portion in execution of a workscontract is specified as ‘declared service’.

In this context, the term ‘works contract’ is defined inclause (54) of Section 65B of the Finance Act:

“Section 65B (54) “works contract” means a contract whereintransfer of property in goods involved in the execution ofsuch contract is leviable to tax as sale of goods and suchcontract is for the purpose of carrying out construction,erection, commissioning, installation, completion, fitting out,repair, maintenance, renovation, alteration of any movable orimmovable property or for carrying out any other similaractivity or a part thereof in relation to such property;”

It is clear from the above that the new definition of ‘workscontract’ is similar to the definition contained in VATlaws of various states wherein contract includes transferof property in goods along with provision of services forcertain specified activities in relation to both movableand immovable properties.

It is relevant to note that only if the said transaction is a‘composite contract’ on the basis that service aspect isinextricably linked to the sale of goods and the actualamount towards the element of services cannot besegregated on the basis of documents available, then thenature of such transaction would be determined by theapplication of the dominant nature test laid down by theSupreme Court in BSNL Vs. UOI [2006 (2) STR 161 (SC)].


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(i) Service portion in an activity wherein goods, beingfood or any other article of human consumption or anydrink (whether or not intoxicating) is supplied in anymanner as a part of the activity.

It is relevant to note that the transaction of supply offood or beverages is covered under Article 366(29A) ofthe Constitution of India wherein supply of any goods,being food or any other article of human consumptionor any drink (whether or not intoxicating) in any manneras part of a service for cash, deferred payment or othervaluable consideration is deemed to be a sale of suchgoods.

In view of the above, what is being declared as serviceunder this entry is the ‘service portion’ of this transactionwherein food or any other article of human consumptionor any drink is subjected to Service tax.

In view of the provisions of Article 366(29A) of theConstitution of India, in the above referred transaction,it cannot be termed as ‘Service’ to the extent of the valueof goods so supplied. The remaining portion howeverconstitutes as service.

As held by the Supreme Court in BSNL‘s case [2006(2)STR 161 (SC)], a catering contract involves provision ofservice along with supply of such goods can be dissectedinto a contract of sale of goods and contract of provisionof service.

Service tax – a puzzle which can only be solved bycompetent professionals

Since the concepts in Service tax are complex in nature,it leaves the assessees unaware of the applicable currentprovision and unsure whether they are fully aware ofthe Service tax laws from all the perspectives of thetransaction. Once the liability under Service tax isconfirmed then the procedural compliance to avoiddemands and dispute is essential.

On one hand there is uncertainty about understandingof the taxability of transactions and on the other handthe Departmental officers either on enquiry,investigation or audits points out certain aspects whichmay bring in an impact on the organization which maybe nominal or quite substantial. Therefore it is cautiousfor any organization to reduce such risks by taking helpof professionals who would examine the transactions,systems, concepts, compliances, procedures and providesuggestion/ assist the organizations to achieve theobjective of minimizing the risk of later impact (financial

or otherwise) of non-compliance, short payment, non-payment etc. The exercise done by the professionals iscalled in different names like ‘Service Tax Review’,‘Service Tax Compliance Review’, ‘Internal Audit ofService Tax’ etc.

The Company Secretary is a versatile professional whohas unparalleled practical exposure with completeknowledge of various laws. He/ she is certainly in thetops 1-2% of the population in terms of education andknowledge. The area of Service tax practice/employmentcan render an intelligent way fordiversification to the CS professionals.

This article is an attempt to collate some of the mainareas/ opportunitiesunder Service tax which arediscussed as under:

1. Initial Registration – Similar to the incorporationof a Company, the registration services are the bestservices to start the venture under Service tax.Registration services includes analysing thetaxable category(s) of the service provider or servicerecipient under which registration is sought to beobtained, review of turnover and transactions ofpreceding financial year, drafting of appropriatecovering letter etc. This is a most important stageas the client is bound to offer us further services ifhe feels satisfied with the initial services offered.

2. Computation of Service Tax liability and itspayment – For a layman, computation of Service taxliability is in itself a cumbersome task. It involvescalculation of tax liability on output service, liabilityof tax payment under reverse charge, availment ofCenvat credit, export of services etc. Most importantly,this is a kind of service which is on-going in natureand owing to complex provisions, many of the clientslook for a professional assistance in this regard.However, the professional is required to keep himselfabreast of all the latest changes taking place underthe law so as to ensure quality services to his/ herclient.After correctly computing Service tax liability,payment of Service tax is to done monthly/ quarterlybasis depending upon the status of the client.

3. Filing of service tax returns (ST-3) – Proceduralcomplexity under Service tax starts with itsregistration and embraces in its fold the process offiling half-yearly Service tax returns which involvescollating of six monthly information and data of theclient and its intense verification. ST-3 is the basis on


which Department initiates any proceedings againstthe assessee and one has to be very careful whilefiling the returns appropriately. Even an educatedassessee chooses professional expertise for filing ofits return.

4. Opinions/ Clarification -The law of Service tax issubject to so many amendments, besides annualexercise, by way of Notifications, Circulars fromTRU, CBEC etc., that it is increasingly becomingdifficult to keep pace with such changes and trackthe amendments and clarifications. Further,amendments also give rise to interpretationalissues for which clients seeksclarification as to theapplicability of Service tax provisions.

5. Past period rectification – Complexity of law maynot pose problem in running current affairs butthere may also be a situation where a client has donesome errors in the past leading to non-compliancesfor which he may seek proper rectification andguidance.

6. One time review of records – Many serviceproviders opt for one time review of its records by aprofessional in order to check compliance along withthe examination of benefits/ abatements availableto them.

7. Interface with Departmental officers – Usually anassessee who normally has a very perfunctoryknowledge is dreaded by the Departmental officersduring audits. Therefore, a knowledgeableprofessional who can interface with theDepartmental officers could be of great value.

8. Drafting reply to Departmental Letters – The Servicetax law has resulted in a large number of disputesmainly due to the fact that the law is changingfrequently and drafting has been seen to have manyloose ends. As far as the professional is concerned,the maximum amount of work to be done in anydispute is to provide enough information with propercitation of relevant law and binding precedents soas to avoid issue of the Show Cause Notice. Hence,drafting proper reply to Departmental letters isundoubtedlythe need of the hour.

9. Other areas - Apart from above mentioned core areas,there could be training, teaching, writing articles,assisting advocates while representing beforeauthorities/ courts etc. Many new areas are emerging

and can be identified depending upon the needs of theclient.

Challenges ought to convert into opportunities

Service tax law and procedures offer wide range ofopportunities to the professionals including the CompanySecretaries. With introduction of Negative list regime ofService tax, most of the industrial and corporate world isexposed to Service tax, either as a service provider or as aservice receiver or importer or exporter of service or evenotherwise. The law is still evolving and new opportunitiesare emerging every day because of lack of knowledge, poorcompliance leading to penal provisions, frequentamendments in laws and rules, large and growing assesseebase and more importantly, heterogeneous group ofassessees. These opportunities are in all probability likelyto grow, given the likely advent of Goods and Services Tax.The Company Secretary can play a very proactive andcontributory role for the Government as well as in impartingproper advice to their clients or employers. They could actas a bridge on the knowledge gap, leading to fair andvoluntary compliance of law and rightful discharge of taxliability by assessees.

Innovate and Evolve

We therefore must evolve. One of the methods of evolutionis that we need to find ways and means of workingtogether and increasing revenue. We pool together theresources and the knowledge base. Some of us mustdevelop resources and some of us can develop knowledgebase. We can then take up larger assignments in thecorporate sector. We have to attune ourselves to thechanging economy and business structure. We need gettogether like-minded professionals and evolve a workingrelationship which can sustain in long run. We need todevelop a bigger brand as well.

Conclusion

Service tax is rightly referred to as Tax of the future.Continued growth in GDP accompanied by higher rateof growth in service sector promises new and wideravenues of practice in Service tax. The growingimportance of Service sector can be gauged from the ever-increasing contribution made by the Service Sector toGDP and thereby pushing back the contribution oftraditional contributors like agriculture andmanufacturing sectors.

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Annual General Meeting

Annual general meeting (AGM) is an important annualevent where members get an opportunity to discuss theactivities of the company. Section 96 provides that everycompany, other than a one person company is requiredto hold an annual general meeting every year.

Following are the key provisions regarding the holdingof an annual general meeting:

Holding of annual general meeting

1. Annual general meeting should be held once everyyear.

2. First annual general meeting of the companyshould be held within 9 months from the closing ofthe first financial year. Hence it shall not benecessary for the company to hold any annualgeneral meeting in the year of its incorporation.

3. Subsequent annual general meeting of the companyshould be held within 6 months from the closing ofthe financial year.

4. The gap between two annual general meetingsshould not exceed 15 months.

Extension of validity period of AGM

In case, it is not possible for a company to hold anannual general meeting within the prescribed time, theRegistrar may, for any special reason, extend the timewithin which any annual general meeting shall be held.Such extension can be for a period not exceeding 3months. No such extension of time can be granted bythe Registrar for the holding of the first annual generalmeeting,

Time and place for holding an annual general meeting

An annual general meeting can be called duringbusiness hours, that is, between 9 a.m. and 6 p.m. onany day that is not a National Holiday. It should beheld either at the registered office of the company or atsome other place within the city, town or village inwhich the registered office of the company is situate.The Central Government is empowered to exempt anycompany from these provisions, subject to suchconditions as it may impose.

COMPILATION OF IMPORTANT PROVISIONS RELATING TO ANNUAL GENERALMEETING, FINANCIAL STATEMENTS & BOARD REPORT*

*Views expressed by the Author are solely his own view and the Firm, NIRC or ICSI does not accept any responsibility.

"National Holiday" for this purpose means andincludes a day declared as National Holiday by theCentral Government.

Default in holding the annual general meeting

Section 99 provides that if any default is made incomplying or holding a meeting of the company, thecompany and every officer of the company who is indefault shall be punishable with fine which may extendto 1 lakh and in case of continuing default, with afurther fine which may extend to Rs. 5,000/- for eachday during which such default continues.

If any default is made in holding the annual generalmeeting of a company, any member of the companymay make an application to the Tribunal to call or directthe calling of, an annual general meeting of thecompany and give such ancillary or consequentialdirections as the Tribunal thinks expedient. Suchdirections may include a direction that one member ofthe company present in person or by proxy shall bedeemed to constitute a meeting.

Business to be transacted at annual general meeting:

Sub-section (2) of Section 102 provides that all otherbusinesses transacted at an Annual General Meetingexcept the following are special business:

(i) the consideration of financial statements and thereports of the Board of Directors and auditors;

(ii) the declaration of any dividend;

(iii) the appointment of directors in place of thoseretiring;

(iv) the appointment of, and the fixing of theremuneration of, the auditors.

Notice of Meeting

A general meeting of a company may be called by givingnot less than 21 clear days' notice either in writing orthrough electronic mode. Notice through electronicmode shall be given in such manner as may beprescribed.

Short notice

A general meeting may be called after giving a shorternotice also if consent is given in writing or by electronic

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mode by not less than 95% of the members entitled tovote at such meeting.

Contents of Notice

Place of meeting

The notice should state the place where the generalmeeting is scheduled to be held. In case of an annualgeneral meeting, the place of the meeting has to beeither the registered office of the company or some otherplace within the city, town or village in which theregistered office of the company is situated. No suchrestriction applies to an extraordinary general meeting.

Day of meeting

The day and date of the meeting should be clearlystated in the notice. In case of an annual generalmeeting, the day should be one that is not a NationalHoliday. An extraordinary general meeting canhowever be held on any day.

Time of meeting

Exact time of holding the meeting should be given inthe notice. An annual general meeting can be calledduring business hours only, that is, between 9 a.m.and 6 p.m. There is no need to follow such timings incase of an extraordinary general meeting.

Agenda

A statement of the business to be transacted at thegeneral meeting should be given in the notice. In case,the meeting is to transact a special business, aexplanatory statement should be attached about suchitem.

Proxy clause with reasonable prominence

Every notice calling a meeting of a company whichhas a share capital, or the articles of which provide forvoting by proxy at the meeting, should carry withreasonable prominence, a statement that a memberentitled to attend and vote is entitled to appoint a proxy,or, where that is allowed, one or more proxies, to attendand vote instead of himself, and that a proxy need notbe a member.

Notice through Electronic Mode

A company may give notice through electronic mode.Electronic mode' means any communication sent by acompany through its authorized and secured computerprogramme which is capable of producingconfirmation and keeping record of suchcommunication addressed to the person entitled to

receive such communication at the last electronic mailaddress provided by the member.

• There shall be no difference in the text of thephysical version of the notice and electronicversion except in respect of mode of dispatch ofnotice.

• Sending of notice via e-mail shall be subject to suchoption being confirmed by the member and e-mailaddress being updated in writing at least 30 daysprior to dispatch of notice.

In such cases, the company shall not be underobligation to deliver physical copy of the noticeunless specifically requested by the member inwriting before the date of the meeting.

• When notice or notifications of availability ofnotice are sent by e-mail, the company shouldensure that it uses a system which producesconfirmation of the total number of recipients e-mailed and a record of each recipient to whom thenotice has been sent. A copy of such record andany notices of any failed transmissions andsubsequent re-sending shall be retained by or onbehalf of the company as 'proof of sending'.

• The company's obligation shall be satisfied whenit transmits the e-mail and the company will notbe held responsible for a failure in transmissionbeyond its control. However the company shall,where it is aware of the failure in delivery of the e-mail (and subsequent attempts do not rectify thesituation), revert to sending physical copy of thenotice at the member's registered address within72 hours of the original attempt.

• If a member entitled to receive notice fails toprovide or update relevant e-mail address to thecompany, company shall not be in default for notdelivering notice via e-mail.

• Company may send e-mail through in-housefacility or authorize any third party agencyproviding bulk e-mail facility.

• Notice made available on the electronic link/ URLhas to be readable, and the recipient should beable to obtain and retain copies. The company shallgive the complete URL/address of the website andfull details of how to access the document/information.

• The notice is taken to be 'sent' on the date thenotification is sent. The notice must be available

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on the electronic link/ URL provided from the dateof notification until the conclusion of the meeting.The failure to make notice available throughoutthe required period shall be disregarded if it ismade available for part of that period and thefailure is wholly attributable to circumstances thatthe company could not reasonably have preventedor avoided.

The notice of the general meeting of the company shallbe simultaneously placed on the website of the companyand on the website as may be notified by the CentralGovernment.

Persons entitled to receive Notice

In terms of Section 101(3), notice of every meeting ofthe company must be given to:

(a) every member of the company, legal representativeof any deceased member or the assignee of aninsolvent member;

(b) the auditor or auditors of the company; and

(c) every director of the company.

Any accidental omission to give notice to, or the non-receipt of such notice by, any member or other personwho is entitled to such notice for any meeting shall notinvalidate the proceedings of the meeting.

Statement to be Annexed to Notice

In case of special business items to be transacted at ageneral meeting, a statement setting out the followingmaterial facts, shall be annexed to the notice callingthe meeting:

1. (a) the nature of concern or interest, financial orotherwise, if any, in respect of each item of:

• every director and the manager, if any;

• every other key managerial personnel; and

• relatives of the persons mentioned in sub-clauses (i) and (ii);

(b) any other information and facts that may enablemembers to understand the meaning, scope andimplications of the items of business and to takedecision thereon.

Where any item of special business to be transactedat a meeting of the company relates to or affectsany other company, the extent of shareholdinginterest in that other company of every promoter,director, manager, if any, and of every other key

managerial personnel of the first mentionedcompany shall, if the extent of such shareholdingis not less than 2% of the paid up share capital ofthat company, also be set out in the statement.

2. Where any item of business refers to any document,which is to be considered at the meeting, the time andplace where such document can be inspected.

Where as a result of the non-disclosure or insufficientdisclosure in any statement referred as above, beingmade by a promoter, director, manager, if any, or otherkey managerial personnel, any benefit which accruesto such promoter, director, manager or other keymanagerial personnel or their relatives, either directlyor indirectly, the promoter, director, manager or otherkey managerial personnel, as the case may be, shallhold such benefit in trust for the company, and shall,without prejudice to any other action being takenagainst him under this Act or under any other law forthe time being in force, be liable to compensate thecompany to the extent of the benefit received by him.

Quorum for Meetings

Quorum refers to the minimum number of members requiredto constitute a valid meeting. Following are the minimumnumbers provided in section 103, for various categories ofcompanies. However the Articles of Association of thecompany may provide for a higher number.

(a) Public company:

• 5 members personally present if the number ofmembers as on the date of meeting is not more than1000;

• 15 members personally present if the number ofmembers as on the date of meeting is more than1000 but up to 5000;

• 30 members personally present if the number ofmembers as on the date of the meeting exceeds 5000.

(b) Private company:

2 members personally present, shall be the quorum fora meeting of the company.

Absence of quorum

If the quorum is not present within half-an-hour fromthe time appointed for holding a meeting of thecompany:

(a) the meeting shall stand adjourned to the same dayin the next week at the same time and place, or to

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such other date and such other time and place asthe Board may determine; or

(b) the meeting, if called by requisitionists, shall standcancelled.

Adjourned meeting

In case of an adjourned meeting or of a change of day,time or place of meeting, the company shall give notless than 3 days notice to the members eitherindividually or by publishing an advertisement in thenewspapers (one in English and one in vernacularlanguage) which is in circulation at the place wherethe registered office of the company is situated. If at theadjourned meeting also, a quorum is not present withinhalf-an-hour from the time appointed for holdingmeeting, the members present shall be the quorum.

Chairman of Meetings

Unless the articles of the company otherwise provide,the members personally present at the meeting shallelect one of themselves to be the Chairman thereof on ashow of hands. If a poll is demanded on the election ofthe Chairman, it shall be taken forthwith in accordancewith the provisions of this Act and the Chairmanelected on a show of hands shall continue to be theChairman of the meeting until some other person iselected as Chairman as a result of the poll, and suchother person shall be the Chairman for the rest of themeeting.

Proxies

Appointment of a proxy is an important right of amember of the company. The Act contains elaborateprovisions regarding exercise of this right by a member.

Any member of a company entitled to attend and voteat a meeting of the company shall be entitled to appointanother person as a proxy to attend and vote at themeeting on his behalf.

Every notice calling a meeting of a company which hasa share capital, or the articles of which provide forvoting by proxy at the meeting, should carry withreasonable prominence, a statement that a memberentitled to attend and vote is entitled to appoint a proxy,or, where that is allowed, one or more proxies, to attendand vote instead of himself, and that a proxy need notbe a member. Hence a company not having a sharecapital can abstain from complying with this provisionby incorporating necessary clause in its articles ofassociation.

A proxy shall not have the right to speak at the meeting.A proxy shall be entitled to vote only on a poll.

A member of a company registered under section 8 shallnot be entitled to appoint any other person as his proxyunless such other person is also a member of suchcompany.

A person appointed as proxy shall not act as proxy onbehalf of more than fifty members and members holdingin the aggregate more than ten percent of the total sharecapital of the company carrying voting rights.

The instrument appointing the proxy must bedeposited with the company, 48 hours before themeeting. Any provision contained in the articles,requiring a longer period than 48 hours shall have effectas if a period of 48 hours had been specified.

The instrument appointing a proxy must be in FormNo. MGT. 11. It needs to be in writing and signed bythe appointer or his attorney duly authorised inwriting. If the appointer is a body corporate, theinstrument should be under its seal or be signed by anofficer or an attorney duly authorised by the bodycorporate. For execution of proxy, the Articles ofAssociation of a company can not specify any specialrequirement to be complied with.

Every member entitled to vote at a meeting of thecompany, or on any resolution to be moved thereat, isentitled to inspect the proxies lodged with thecompany, if at least 3 days notice is given to thecompany. Such inspection can be taken during theperiod beginning 24 hours before the time fixed for thecommencement of the meeting, during the businesshours of the company, and ending with the conclusionof the meeting.

Restriction on Voting Rights

A member shall not exercise any voting right in respectof any shares registered in his name on which any callsor other sums presently payable by him have not beenpaid or on which company has exercised any right orlien. No member can be prohibited from exercising hisvoting right on any other ground.

SECTION 134: FINANCIAL STATEMENT, BOARD'SREPORT ETC.

Section 134 deals with financial statements as well asboard's report. The Board's Report shall be preparedbased on the stand alone financial statements of thecompany and the report shall contain a separatesection wherein a report on the performance and

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financial position of each of the subsidiaries, associatesand joint venture companies included in theconsolidated financial statement is presented andapproved by the Board of directors before they aresigned and submitted to auditors for their report. Theauditor's report is to be attached to every financialstatement. A report by the Board of directors containingdetails on the matters specified, including director'sresponsibility statement, shall be attached to everyfinancial statement laid before company. The Board'sreport and every annexure has to be duly signed. Asigned copy of every financial statement shall becirculated, issued or published along with all notes ordocuments, the auditor's report and Board's report. Theclause also provides for penal provisions for thecompany and every officer of the company, in case ofany contravention.

Requirements as to financial statements

• Financial statement of the company includingconsolidated financial statements, if applicable,should be approved by the Board of Directors,before such statements are signed.

• Financial statement should be signed on behalf ofthe board by atleast - chairperson of company, dulyauthorised board, or

– two directors of whom one should be themanaging director, and

- chief executive officer, if he is director, chieffinancial officer and company secretary, if anyin the company

– One person company's financial statementsshall be signed by only one director.

• Such sign is required for submission of financialstatements to the auditor for his report.

• Auditors report is required to be attached to everyfinancial statement.

• Board report shall be attached to the statementslaid before the company in general meeting. Thereport by Board of directors includes -

(a) the extract of the annual return as provided undersubsection (3) of section 92 in Firm No. 7.9;

(b) number of meetings of the Board;

(c) Directors' Responsibility Statement;

The Directors' Responsibility Statement shallstate that -

a. in the preparation of the annual accounts, theapplicable accounting standards had beenfollowed along with proper explanationrelating to material departures;

b. the directors had selected such accountingpolicies and applied them consistently andmade judgments and estimates that arereasonable and prudent so as to give a trueand fair view of the state of affairs of thecompany at the end of the financial year andof the profit and loss of the company for thatperiod;

c. the directors had taken proper and sufficientcare for the maintenance of adequateaccounting records in accordance with theprovisions of this Act for safeguarding theassets of the company and for preventing anddetecting fraud and other irregularities;

d. the directors had prepared the annual accountson a going concern basis; and

e. the directors, in the case of a listed company,had laid down internal financial controls tobe followed by the company and that suchinternal financial controls are adequate andwere operating effectively;

f. the directors had devised proper systems toensure compliance with the provisions of allapplicable laws and that such systems wereadequate and operating effectively.

(d) a statement on declaration given by independentdirectors under sub-section of section 149;

(e) in case of a company covered under sub-section(1) of section 178, company's policy on directors'appointment and remuneration including criteriafor determining qualifications, positive attributes,independence of a director and other mattersprovided under sub-section (3) of section 178;

(f) explanations or comments by the Board on everyqualification, reservation or adverse remark ordisclaimer made-

(i) by the auditor in his report; and

(ii) by the company secretary in his secretarialaudit report;

(g) particulars of loans, guarantees or investmentsunder section 186;

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(h) particulars of contracts or arrangements withrelated parties referred to in sub-section (1) ofsection 188 in the Form No. AOC-2;

(i) the state of the company's affairs;

(j) the amounts, if any, which it proposes to carry toany reserves;

(k) the amount, if any, which it recommends shouldbe paid by way of dividend;

(l) material changes and commitments, if any,affecting the financial position of the companywhich have occurred between the end of thefinancial year of the company to which thefinancial statements relate and the date of thereport;

(m) the conservation of energy, technology absorption,foreign exchange earnings and outgo as follows;

(A) Conservation of energy:

(i) the steps taken or impact on conservation of energy.

(ii) the steps taken by the company for utilisingalternate sources of energy.

(iii) the capital investment on energy conservationequipments.

(B) Technology absorption:

1. The efforts made towards technology absorption.

2. The benefits derived like product improvement, costreduction, product development or importsubstitution.

3. In case of imported technology (imported duringthe last 3 years reckoned from the beginning of thefinancial year) -

(a) The details of technology imported.

(b) The year of import.

(c) Whether the technology been fully absorbed

(d) If not fully absorbed, areas where absorptionhas not taken place, and the reasons thereof.

4. The expenditure incurred on Research andDevelopment

(C) Foreign exchange earnings and Outgo

The Foreign Exchange earned in terms of actual inflowsduring the year and the Foreign Exchange outgo duringthe year in terms of actual outflows.

(n) a statement indicating development andimplementation of a risk management policy forthe company including identification therein ofelements of risk, if any, which in the opinion of theBoard may threaten the existence of the company;

(o) the details about the policy developed andimplemented by the company on corporate socialresponsibility initiatives taken during the year;

(p) in case of a listed company and every other publiccompany having such paid-up share capital ofTwenty Five crore rupees or more, calculated as atthe end of the preceding financial year, shall includein the report by its Board, a statement indicatingthe manner in which formal annual evaluation hasbeen made by the Board of its own performanceand that of its committees and individual directors;

(q) such other matters which includes -

(i) the financial summary or highlights;

(ii) the change in the nature of business, if any;

(iii) the details of directors or key managerial personnelwho were appointed or have resigned during theyear;

(iv) the names of companies which have become orceased to be its Subsidiaries, joint ventures orassociate companies during the year;

(v) the details relating to deposits covered underChapter V of the Act:

(a) Accepted during the year;

(b) remained unpaid or unclaimed as at the end of theyear;

(c) whether there has been any default in repayment ofdeposits or payment of interest thereon during theyear and if so, number of such cases and the totalamount involved:

i. at the beginning of the year

ii. maximum during the year

iii. at the end of the year

(vi) the details of deposits which are not in compliancewith the requirements of Chapter V of the Act;

(vii) the details of significant and material orders passedby the Regulators or courts or tribunals impactingthe going concern status and company's operationsin future;

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(viii) the details in respect of adequacy of internalfinancial controls with reference to the FinancialStatements. (Rule 8)

The report of Board of directors of one personcompany shall contact the explanations orcomments on every qualification, reservation oradverse remark or disclaimer made by auditor inhis report.

The Board's report shall disclose the compositionof an Audit Committee and where the Board hadnot accepted any recommendation of the AuditCommittee, the same shall be disclosed in suchreport along with the reasons therefor (Section177(8).

Every listed company shall disclose in its BoardReport the following:

i. the ratio of the remuneration of each director tothe median remuneration of the employees ofthe company for the financial year ;

ii. Percentage increase in remuneration of eachdirector and CEO in the financial year;

iii. Percentage increase in the medianremuneration of employees in the financialyear;

iv. Number of permanent employees on the rollsof company;

v. Explanation on the relationship betweenaverage increase in remuneration andcompany performance;

vi. Comparison of the remuneration of the KeyManagerial Personnel against the performanceof the company;

vii. The key parameters for any variable componentof remuneration availed by the directors;

viii.The ratio of the remuneration of the highestpaid director to that of the employees who arenot directors but receive remuneration in excessof the highest paid director during the year.

ix. Affirmation that the remuneration is as per theremuneration policy of the company

The board's report shall include a statement showingthe name of every employee of the company who-

(i) if employed throughout the financial year, was inreceipt of remuneration for that year which, in theaggregate, was not less than sixty lakh rupees;

(ii) if employed for a part of the financial year, was inreceipt of remuneration for any part of that year, ata rate which, in the aggregate, was not less thanfive lakh rupees per month;

(iii) if employed throughout the financial year or partthereof, was in receipt of remuneration in that yearwhich, in the aggregate,

or as the case may be, at a rate which, in the aggregate,is in excess of that drawn by the managing director orwhole-time director or manager and holds by himselfor along with his spouse and dependent children, notless than two percent of the equity shares of thecompany.

The above mentioned statement also covers thedesignation of the employee; remuneration received;nature of employment, whether contractual orotherwise; qualifications and experience of theemployee; date of commencement of employment; theage of such employee; the last employment held by suchemployee before joining the company; the percentageof equity shares held by the employee in the company;and whether any such employee is a relative of anydirector or manager of the company and if so, name ofsuch director.

The particulars of employees posted and working in acountry outside India, not being directors or theirrelatives, drawing more than sixty lakh rupees perfinancial year or five lakh rupees per month, as thecase may be, shall not be included in such statement ofthe Board's report but such particulars shall be filedwith the Registrar of Companies while filing thefinancial statement and Board Reports and suchparticulars shall be made available to any shareholderon a specific request made by him during the course ofannual general meeting wherein financial statementsfor the relevant financial year are proposed to beadopted by shareholders.

The company shall disclose non disqualification onaccount of receiving any remuneration or commissionfrom any holding company or subsidiary company andwho is a director, receiving any commission from thecompany and who is a managing director or a wholetime director. (Section 197(4))

Every listed company and the company who acceptdeposits from the public and borrowed money frombanks and public financial institutions in excess of fiftycrore rupees shall establish a vigil mechanism for theirdirectors and employees to report genuine concerns;

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and the details of establishment of such mechanismshall be disclosed by the company on its website, ifany, and in the Board's report.

The following disclosures shall be mentioned in theBoard of Director's report under the heading "CorporateGovernance", if any, attached to the financialstatement:-

(i) all elements of remuneration package such assalary, benefits, bonuses, stock options, pension,etc., of all the directors;

(ii) details of fixed component and performance linkedincentives along with the performance criteria;

(iii) service contracts, notice period, severance fees;

(iv) stock option details, if any, and whether the samehas been issued at a discount as well as the periodover which accrued and over which exercisable.

An independent director shall hold office for a term upto five consecutive years on the Board of a company,but shall be eligible for reappointment on passing of aspecial resolution by the company and disclosure ofsuch appointment in the Board's report. (Section149(10) Where the voting rights are not exerciseddirectly by the employees in respect of shares to whichthe scheme relates, the Board of Directors shall, interalia, disclose in the Board's report for the relevantfinancial year the following details:

a) names of the employees who have not exercisedthe voting rights directly;

b) reasons for not voting directly;

c) name of the person who is exercising such votingrights;

d) number of shares held by or in favour of, suchemployees and the percentage of such shares tothe total paid up capital of the company;

e) date of the general meeting in which such votingpower was exercised;

f) resolutions on which votes have been cast bypersons holding such voting power;

g) percentage of such voting power to the total votingpower on each resolution;

h) whether the votes were cast in favour of or againstthe resolution.

Signing of Board Report

The Board's report and any annexures thereto undersub-section (3) shall be signed by its chairperson of thecompany if he is authorised by the Board and where heis not so authorised, shall be signed by at least twodirectors, one of whom shall be a managing director, orby the director where there is one director.

Signed copy of financial statements (including cashflow statement) shall be issued / circulated / publishedalongwith copy of -

• notes to accounts forming part of financialstatements

• auditors report thereon

• board's report

Penal provisions

Any contravention of provisions of Section 134 ispunishable to the following extent -

a) company is punishable with fine of not less thanrupees fifty thousand but which may extend uptorupees twenty five lakhs, and

b) every officer in default is punishable with -

(i) imprisonment upto a term of three years, or

(ii) monetary fine from fifty thousand rupees torupees five lakh, or

(iii) both (i) and (ii) above

SECTION 135 : CORPORATE SOCIALRESPONSIBILITY

This section seeks to provide that every companyhaving specified net worth or turnover or net profitduring any financial year shall constitute the CorporateSocial Responsibility Committee of the Board. Thecomposition of the committee shall be included in theBoard's Report. The Committee shall formulate policyincluding the activities specified in Schedule VII. TheBoard shall disclose the content of policy in its reportand place on website, if any of the company. The sectionfurther provides that the Board shall ensure that atleasttwo per cent of average net profits of the company madeduring three immediately preceding financial yearsshall be spent on such policy every year. If the companyfails to spend such amount the Board shall give in itsreport the reasons for not spending. There was nocorresponding provision in the Companies Act, 1956but Ministry of Corporate Affairs, Government of Indiahad brought 'Corporate Social Responsibility VoluntaryGuidelines, 2009' in December, 2009. According to these

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guidelines, each business entity should formulate a CSRpolicy to guide its strategic planning and provide aroadmap for its CSR initiatives, which should be anintegral part of overall business policy and aligned withits business goals. The policy should be framed withthe participation of various level executives and shouldbe approved by the Board.

SECTION 136: RIGHT OF MEMBER TO COPIES OFAUDITED FINANCIAL STATEMENT

This section seeks to provide that a copy of financialstatements including consolidated financial statement,if any, auditor's report along with annexures/attachments shall be sent to every member, every trusteefor the debenture holder and all other persons who areso entitled, twenty one days before the date of generalmeeting. The provision of this section shall be deemedto be complied if a listed company may make availablethe copies of the documents for inspection at itsregistered office during working hours for a period oftwenty-one days before the date of the meeting and astatement containing the salient features of suchdocuments in Form AOC-3 prescribed by the CentralGovernment or the documents and sent the same toevery stake holder.

In case of all listed companies and such publiccompanies which have a net worth of more than onecrore rupees and turnover of more than ten crore rupees,the financial statements may be sent:

(a) by electronic mode to such members whoseshareholding is in dematerialised format andwhose email Ids are registered with Depository forcommunication purposes;

(b) where Shareholding is held otherwise than bydematerialized format, to such members who havepositively consented in writing for receiving byelectronic mode; and

(c) by despatch of physical copies through anyrecognised mode of delivery as specified undersection 20 of the Act, in all other cases.

Member's, Debenture trustee's right to get copies ofannual accounts

According to sub-section (1) of this section, everymember of the company, the trustee for the debenture-holders and every other person being the person soentitled, is entitled to get from the company, every year,

a copy of financial statement including consolidatedfinancial statements (if applicable), which are to be laidat a general meeting of the company, comprising of:-

i) Balance Sheet

ii) Profit and Loss Account

iii) Cash Flow Statement

iv) Statement of change in equity

v) Auditor's Report

vi) Director's Report

vii) Every other document required by law to beannexed or attached to the financial statement.

This right to have copies of financial statements is overand above the provisions of Section 101 which providesfor right to receive notice of general meeting.

Obligation of listed company

Proviso to sub-section (1) provides that in the case of acompany whose shares are listed on a recognised stockexchange, provisions shall be deemed to have beencomplied with, if the copies of the documents are madeavailable for inspection at its registered office, duringworking hours, for a period of twenty-one days beforethe date of the meeting and a statement containing thesalient features of such documents in the prescribedform or copies of the documents, as the company maydeem fit, is sent to every member of the company and toevery trustee for the holders of any debentures issuedby the company not less than twenty-one days beforethe date of the meeting.

Every listed company is required to supply a copy ofthe complete financial statements with auditor's reportand director's report, to such shareholders who ask forfull financial statements.

Every listed company is also required to place itsfinancial statements including consolidated financialstatements, if any, and all other documents required tobe attached thereto, on its website, which is maintainedby or on behalf of the company.

In case of companies not having share capital, thefinancial statements and other documents required tobe attached or annexed to it shall be required to be sentto all members and debenture holders, even if they arenot entitled to receive the notice of general meeting interms of section 101.

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Financial statements of subsidiaries

Every company (listed or unlisted) having subsidiaryor subsidiaries shall:

(d) place separate audited financial statements inrespect of each of its subsidiary on its website, ifany.

(e) provide copy of separate audited financialstatements if any shareholder demands a copy ofthe separate audited financial statements in respectof each of its subsidiary.

Right to inspect

Every company shall be under an obligation to allowevery member or trustee of the holder of any debenturesissued by the company to inspect the financialstatements and documents to be attached thereto statedunder sub-section (1) at its registered office duringbusiness hours. This right is not available to debentureholders.

In case of listed companies, copies of documents shallbe available for inspection at its registered office duringworking hours for a period of 21 days before the date ofmeeting and company may send the salient features offinancial statements to members and debenture trusteesin prescribed form. That will be sufficient complianceof sub section (1).

Penal provisions

If any default is made in complying with theprovisions of this section, the company shall be liableto a penalty of -

i) twenty-five thousand rupees and ii) every officer ofthe company who is in default shall be liable to apenalty of five thousand rupees. Both penalties shallbe imposed simultaneously.

SECTION 137: COPY OF FINANCIAL STATEMENTTO BE FILED WITH REGISTRAR

Section 137 requires every company to file thef inancial s tatements including consol idatedfinancial statement together with Form AOC- 4 withthe Registrar within 30 days from the day on whichthe annual general meeting held and adopted thefinancial statements with such fees or additionalfee as specified in Companies (Registration Officesand Fees) Rules, 2014.

If the financial statements are not adopted at the annualgeneral meeting or adjourned annual general meeting,such unadopted financial statements along with therequired documents be filed with the Registrar with inthirty days of the date of annual general meeting.

The Registrar shall take them in his record asprovisional, until the adoption at annual generalmeeting.

The One Person Company shall file the copy of financialstatements duly adopted by its members within a periodof one hundred and eighty days from the closure offinancial year.

The company shall also attach the accounts ofsubsidiaries incorporated outside India and whichhave not established their place of business in Indiawith the financial statements.

The class of companies as may be notified by theCentral Government from time to time, shallmandatorily file their financial statement in ExtensibleBusiness Reporting Language (XBRL) format and theCentral Government may specify the manner of suchfiling under such notification for such class ofcompanies (Rule 12(2).

If annual general meeting has not been held, thefinancial statement duly signed along with thestatement of facts and reasons for not holding theannual general meeting shall be filed with the Registrarwithin thirty days of the last days before which theannual general meeting should have been held.

If company fails to comply with the requirement ofsubmission of financial statement before Registrar,the company shall be punishable with fine of onethousand rupees for every day during which failurecontinues subject to maximum of rupees ten lakh. Themanaging director and CFO if any, and, in theabsence of such managing director or CFO, any otherdirector who is charged by the Board with theresponsibility of complying with the provisions ofthis section, in the absence of such director, alldirectors of the company shall be punishable withimprisonment for a term which may extend upto sixmonths or with fine which shall not be less than onelakh rupees but which may extend to five lakh rupeesor with both.

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LEGAL UPDATESWhether Company Law Board has the authorityto relax the provisions of buy-back of shares insection 77A by exercising its rights and powersunder section 402?

Shri. Nitin Mukund Sahasrabhojanee & Anr

..Petitioners

V.s

M/s Venus Automation Pvt. Ltd. & Ors.. RespondentsC.P No. 107 of 2013 DOJ 26-03-2014

The above captioned Company Petition has beenfiled by the Petitioners invoking the provisionscontained in Section 397 and 398 read with Section402 of the Companies Act, 1956

• The Petitioners, Shri. Nitin MukundSahasrabhojanee & Anr have filed a CompanyApplication praying therein to pass an orderdirecting M/s Venus Automation Pvt. Ltd.Company to file Form No.32 relating to theremoval of the Petitioner (Nitin Mukund)asDirector at the earliest possible time to avoidany further damage to the interest of theCompany's stake holder

• In the course of trial, the Parties negotiated andthey reached at a mutual settlement. Theyhave accordingly filed a Company Applicationalong with the Consent Sheet containing theConsent Terms therein

• In the aforesaid Company Application, theParties have interalia sought relaxation in therules and procedure prescribed under Section77A of the Act to allow buyback of shares heldby the Petitioners as contemplated in theSettlement Agreement irrespective of the factthat such buy-back would be:- 1)In excess of25% of total paid-up capital and frees reservesof the company. 2) Completed in next one yearirrespective of the debt equity ratio. 3)Without passing the special resolution. 4)Without depositing immediately after thedate of closure of the offer in the special bankA/c, such sum as would make up the entiresum due and payable as consideration for thebuy-back in terms of rules. 5) Without

Legal Updates

complying the rule that within 7 days of thetime specified in sub rule (4) of rule 6 ofPrivate Limited Company and Unlisted PublicLimited Company. 6) (buy-back of Securities)Rules 1999 company to make payment ofconsideration in cash or bank draft/ pay orderto those shareholders whose offer has beenaccepted or return the share certificates to theshareholders forthwith.

A query was raised from the Ld. Counselsappearing for both the sides as to whether theBench in the exercise of its rights and powersconferred upon it by virtue of the provisionscontained in Section 402 of the Act is empoweredto pass an order to relax the compliance of theprovisions contained in section 77A of the saidAct.

Petitioners submitted that the CLB in the exerciseof its rights and powers conferred upon it byvirtue of the provisions contained in Section 402of the Act, is empowered to exempt the Companyfrom making any compliance of the conditionslaid down in Section 77A relating to buyback ofshares as provided therein and the rules madethere under

JUDGEMENT

Upon a critical examination of all aspects, CLBMumbai bench directed that if exemption assought by the Parties is granted, nobody's interestis going to be prejudicially affected. It is pertinentto mention here that, the Company does not haveany embargo in reducing the capital as it does nothave term loan facility from any Bank. Thus, thereliefs whereby the Petitioners and Respondentshave requested exemption to 'open a separate bankaccount and deposit the whole considerationtherein' and 'to file return of buy back' may beallowed. It is, however, directed that theRespondent Company shall deposit all the chequestowards the consideration of buy-back of shareswithin 7 days of the receipt of this order with theescrow. C.P thus, stands disposed off as per theConsent Terms as contained in the Consent Sheetwhich shall form part of the order.


Career Awareness Programs

CHAPTERS OF NIRC-ICSIAgra, Ajmer, Allahabad, Alwar, Amritsar, Bareilly, Bhilwara, Chandigarh, Dehradun,Faridabad, Ghaziabad, Gurgaon, Jaipur, Jalandhar, Jammu, Jodhpur, Kanpur, Karnal-Panipat,Kota, Lucknow, Ludhiana, Meerut, Modinagar, Noida, Shimla, Sonepat, Srinagar, Udaipur,Varanasi & Yamuna Nagar.

INVESTOR AWARENESS PROGRAM

NIRC has organised 01 Investor Awareness Program during the month of September,2014 at Atmaram Sanatan Dharm College, University of Delhi, Delhi.

CAREER AWARENESS PROGRAMS/ FAIRS

In the above Schools, the students were apprised about the mode of registration in the course, syllabus, structureof the course and also the avenues available after completion of the Company Secretaryship Course both inemployment and in practice. Pamphlets of Career in Company Secretaryship Course were distributed to thestudents.

NIRC organised Career Awareness programs as per details given below :

Date Name & Address of School

17.09.2014 Career Awareness Program at Anglo Arabic Sr. Sec. School, Ajmeri Gate, Delhi

26.09.2014 Career Fair at DL DAV Model School, ND Block, Pitampura, New Delhi

30.09.2014 Career Fair at Sri Venkateshwar International School, Sec. 18, Dwarka, New Delhi

30.09.2014 Career Fair at Sanskriti School, Chanakya Puri, New Delhi

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Announcement

CORPORATE COMPLIANCE EXECUTIVE CERTIFICATE FOR STUDENTSThe Institute launched the ‘Corporate Compliance Executive Certificate’ in terms of Chapter IVA (Regulation 28A &28B) of the Company Secretaries Regulations, 1982 on 4th October, 2013.ELIGIBILITY FOR AWARD OF CORPORATE COMPLIANCE EXECUTIVE CERTIFICATEA person who –• is currently registered as a student of the Company Secretaryship course of the Institute;• has completed at least one group of the Intermediate/Executive Programme Examination of the Company

Secretaryship Course, and• has completed a training of Six months under Regulation 28A of the Company Secretaries Regulations, 1982,

which may include skill oriented practical /class room training for two weeks.PROCEDUREAn eligible student may apply for award of Corporate Compliance Executive Certificate by submitting an applicationin specified format (available on the website of the Institute www.icsi.edu ), after making payment of a fee of ¹ 2000(two thousand only), either in cash (at counters of the Institute across the county) or by way of Demand Draft infavour of ‘The Institute of Company Secretaries of India’ payable at New Delhi.STATUS OF HOLDER OF CORPORATE COMPLIANCE EXECUTIVE CERTIFICATE• The student who is awarded Corporate Compliance Executive Certificate of the Institute shall be entitled to use

the descriptive letters “Corporate Compliance Executive”.• The grant of Certificate of Corporate Compliance Executive Certificate shall not confer on the Corporate

Compliance Executive the rights of a member, nor entitle him to claim membership of the Institute.VALIDITY OF CERTIFICATE• The Corporate Compliance Executive certificate is valid for a period of three years (financial years) and is

renewable on completion of four Programme Credit Hours (PCH) and payment of requisite fee as the Councilmay determine from time to time.

OTHER DETAILS• The student shall have to complete the course of Corporate Compliance Executive Certificate including the

training requirements within the registration period.• The student having awarded the Corporate Compliance Executive Certificate may continue to pursue the regular

Company Secretaryship course if he so desires.• Except to the extent provided in this Chapter IVA (Regulations 28A & 28B) of the Company Secretaries

Regulations, 1982 or as decided by the Council from time to time, regulations in Chapter IV and VI relating to‘Registered Students’ and ‘Examinations’ shall mutatis-mutandis apply to the ‘Corporate Compliance ExecutiveCertificate Course’.

• A student after having awarded the Corporate Compliance Executive Certificate shall secure four ProgrammeCredit Hours (PCH) for renewal of Corporate Compliance Executive Certificate.

• There shall be no exemption from training.Brochure and application form are available at CCEC section on website of the Institute www.icsi.edu. For queriesplease write at [email protected] or contact on phone number 011-45341049.

Documents

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