WESTERN INDIA REGIONAL COUNCIL e- Newsletter January ... · Escorts Limited – AIR 1986 SC 1370 (1986) 59 Comp Cas 548 SC by the apex court that, a shareholder cannot be restrained

WESTERN INDIA REGIONAL COUNCIL

e- Newsletter

January – February 2020

ICSI WIRC Focus January-February 2020

2

WIRC – FOCUS

Committee (2020)

Index Page No.

CS Rahul Sahasrabuddhe,

Chairman WIRC (Editor)

WIRC Focus Committee, Publisher

Declaration and Index

2

CS Dipika Kataria

From the Desk of Chairman – WIRC 3

CS Gaurav Pingle

Announcement regarding ICSI WIRC’s

Annual Regional Conference

4

CS Jigar Shah

Articles on:

CS K Venkataraman

SPICe PLUS – A Plus Factor for

Incorporation of New Companies

5

CS Sagar Kulkarni Removal of Director – Brief Analysis,

Judicial Prospect and Legislative

Processes

8

CS Sneha Ghuriani

Companies (Creation and Maintenance of

Databank of Independent Directors)

Rules, 2019

13

CS Swapnil J. Dixit

====================

“What’s the good word”: Drafting skills

– Practical insights

19

Publisher Photo Gallery 29

Dr. Rajesh Kumar Agrawal,

Regional Director-

ICSI WIRC

CSBF Appeal

33

Disclaimer: You are receiving this e-Newsletter since you are a member of ICSI. Views expressed in

this newsletter are of authors and not necessarily of ICSI or WIRC of ICSI. ICSI or WIRC of ICSI does

not verify authenticity of legal provisions contained in this newsletter. Neither authors, editors,

publishers nor printers and distributers would be liable in any manner to any person by reason of any

mistake or omission in this newsletter or for any action taken or omitted to be taken or advice rendered

or accepted on the basis of this work. All rights reserved. All claims, disputes or complaints will be

subject exclusively to jurisdiction of courts/ forums/ tribunal at Mumbai only.

WIRC of ICSI Premises:

13, 56 & 57, Jolly Maker Chambers No. 2 (1st & 5th Floors),

Nariman Point, Mumbai – 400021 e-mail: [email protected], Phone

Nos. : 022- 61307900 / 61307901 / 61307902


3

From the Desk of the Chairman…

“The difference between what we do and we are

capable of doing would suffice to solve most

of the world’s problems. – Mahatma Gandhi”

CS Rahul Sahasrabuddhe

Dear Professional Brothers and Sisters,

At the outset, let me congratulate my fellow young Company Secretaries for the courage and

steel shown by them in light of a very recent amendment implemented in Companies Act,

2013. Also, I must deeply appreciate the efforts of senior fellow Company Secretaries for

guiding the young members of the Institute through this challenging phase. Remember, a

ship is safe in harbour; but that is not what the ships are built for. The increase in limit of

paid up share capital requirement for an obligatory appointment of Company Secretary in a

Company was done with one eye on “Ease of doing Business” and another on attaining

objective of ensuring better compliances by corporates in general. Friends, this amendment

will not only increase the opportunities for Company Secretaries in Practice but will also

ensure deliverables like expanding one’s work profile beyond company law compliances,

which our brothers and sisters in the employment fraternity, are capable of delivering.

The vision statement of the ICSI, “To be a global leader in promoting Good Corporate

Governance” reflects the collective aspirations of the stakeholders and provides a defined

goal for the ICSI, if read with the mission statement of ICSI, “To develop the high calibre

professionals facilitating good Corporate Governance”, which provides understanding of

expectations of stakeholders from “Company Secretary” professional, in practise as well as

in employment.

Western India Regional Council (WIRC) of ICSI will devote this entire year to make

Company Secretaries future ready. For this purpose, WIRC has decided to pursue “Vision

New ICSI 2022” in its letter and spirit. The year 2020 turned up in my life with many

expectations from all of you, and I am sure, with your help, I will be able to live up to these

expectations.

Yours Truly,

Rahul Sahasrabuddhe

Chairman

Western India Regional Council of

the Institute of Company Secretaries of India

Place: Mumbai

Date: January 19, 2020


4

ANNOUNCEMENT ON ANNUAL REGIONAL CONFERENCE TO BE

HELD AT MUMBAI ON 26TH AND 27TH MARCH 2020

The Ministry of Health and Family Welfare, Government of India has issued an Office

Memorandum dated 5th March 2020 (Memo-

https://www.mohfw.gov.in/advisoryformassgathering.pdf) as an advisory cautioning

against mass gathering and the World Health Organisation has also declared Novel

Coronavirus (COVID-19) as global pandemic advising against mass congregation.

It is therefore necessary to postpone the Two days Annual Regional Conference of ICSI-

WIRC to be held at Mumbai on March 26 and March 27, 2020 at a future date. The revised

date of the conference shall be declared at a later date.

Those, who are unable to attend the postponed Annual Regional Conference, shall get

refund of fees paid for the conference.

CS Rahul Sahasrabuddhe

Chairman

ICSI-WIRC

https://www.mohfw.gov.in/advisoryformassgathering.pdf





5

SPICe PLUS – A Plus Factor for Incorporation of New Companies

Authored by:

1) Jaya Sharma-Singhania, Founder, Jaya Sharma & Associates. [email protected]

2) Ayush Maheshwari, Associate, Jaya Sharma & Associates. [email protected]

To ensure hassle-free incorporation, the Ministry of Corporate Affairs revised the incorporation

process by introducing a new form - ‘SPICe+’ (pronounced ‘SPICe Plus’) which will replace

the existing SPICe form. SPICe+ would be an integrated Web form offering multiple services

at one place which provides 10 services to save TIME and COST for starting a new Company.

EASE OF DOING BUSINESS (EODB) INITIATIVE:

The Ministry of Corporate Affairs (MCA) has recently taken a step forward in improving

ranking at global level in ease of doing business in India and to incorporate company in less

time with greater e-governance and transparency. The MCA as a part of Government of India’s

Ease of Doing Business (EODB) initiatives has launched a web-based system for company

registration in India, the Spice Plus form (Spice+) with effect from 15th February 2020. This

move is aimed to further the ease of doing business in India and is set to revolutionize the way

the companies are registered in India.

KEY FEATURES OF SPICe+:

The existing SPICe + form is web-based and could

only be electronically uploaded.

SPICe+ being an integrated Web form offering

multiple services viz. Name Reservation,

Incorporation, DIN Allotment, mandatory issue of

PAN, TAN, EPFO, ESIC, and Opening of Bank Account

and it will also facilitate allotment of GSTIN wherever so

applied for by the Stakeholders.

Professional Tax for Maharashtra (A person earning an income from salary or anyone

practicing a profession such as chartered accountant, company secretary, lawyer, doctor

etc. are required to pay this professional tax).

Ensuring consistency through one form for all types of companies SPICe+ is now the only

form for incorporation of all types of companies viz Producer Company or a Section 8

Company or a Nidhi company.

By filling the e-form AGILE alongside the filling of SPICe form, hours of time spent in

documentation, approvals required because of multiplicity in filing can be saved. When

these two forms are linked together, three important registrations for every business

namely GSTIN, EPFO and ESIC can be obtained together.

mailto:[email protected]



6

DEMERIT OF SPICe+:

A company is required to take ESI registration only when it has 10 or more employees and

PF when 20 or more employees are there. In Spice+ the registration of ESI and PF has

been made mandatory at time of incorporation, thus creating an additional liability on the

company to do monthly or quarterly compliances under PF and ESI laws involving their

extra Time and Cost.

A small company or startup company with only two promoter directors cum shareholders

shall not be required these mandatory registration like PF, ESI and Professional Tax,

however, under this new regime of incorporation, such companies will have to bear the

burden of regular compliances for having these registrations.

CONSEQUENCES ON DEPLOYEMENT OF SPICe+:

Present web – form RUN (Reserve Unique Name) which was used for reservation of names

shall discontinue with the introduction of SPICe+ and shall be applicable only for change

of name of existing companies.

All new name reservations for new companies as well as new incorporations shall be

applied through SPICe+ only.

However, incorporation of companies for names reserved through the existing RUN

service would continue to be filed in the existing SPICe e-form along with related linked

forms as applicable and if marked under resubmission would have to be resubmitted in

SPICe e-form.

The declaration which were required in form INC-9 of the subscribers and the directors,

it’s now be auto-generated in PDF format and accordingly to be submitted electronically.

However, it is exempted only for two cases. The first case is when the total number of

directors or subscribers is more than 20 and the other case is when any of the directors

or the subscribers do not possess either DIN or PAN.


7

PROCEDURE FOR FILING SPICe+:

The services in SPICe+ consist of 2 parts mainly:

Part A is of the Part B is of the rest

Name Reservation of the services

The User may apply for the name reservation first (Part A) for reserving a name and

thereafter submit Part B for other services or file part A and B services simultaneously.

Incorporation applications (Part B) after name reservation (In Part A) can be submitted as

a seamless process in continuation of Part A of SPICe+. SRN of approved name is not

required as will be prominently displayed on the Dashboard.

The applicant can save and modify the entered information. All the check forms and pre-

scrutiny validations (except DSC validation) will take place after the completion of the

form, the applicant should convert the form into PDF format to affix DSC.

The applicant can modify the application even after affixing DSC and upload it again. The

DSC and other validation will take place at the level of uploading.

CONCLUSION:

Main Purpose of SPICe+ is to provide better platform to the Promoters and remove difficulties

and delay in starting the new business.

SOURCE:

http://www.mca.gov.in/Ministry/pdf/IntitativesOfEODB.pdf

******


8

REMOVAL OF A DIRECTOR – BRIEF ANALYSIS, JUDICIAL PROSPECT &

LEGISLATIVE PROCESSES

Authored by: CS Ninad Sahasrabuddhe, Partner, Sahasrabuddhe Parab & Co. LLP,

[email protected]

Introduction:

Board of Directors are rightly referred to as the vertebra of the Company, being formed with

individual directors acting together, forming backbone of the Company to steer the Company

throughout its time span. The Company enjoys perpetual succession; but the director does not,

irrespective of the director being an executive director, non-executive director or an

independent director. The Company may, by virtue of power vested in the hands of

shareholders of the Company, can remove a director before expiry of the period of his office.

Section 169 of the Companies Act 2013 substituted Section 284 of the Companies Act 1956

which contains provisions relating to removal of a director before expiry of period of his office.

Referring to Section 169 of the Companies Act 2013, a Company can remove a director before

expiry of the period of his office, and after giving him reasonable opportunity of being heard,

by passing an ordinary resolution in a duly conveyed general meeting. The Company however,

by virtue of MCA Notification S.O. dated 768(E) called the Companies (Removal of

Difficulties) Order dated 21st February 2018, shall remove an independent director re-

appointed for a second term under Section 149(10) of the Companies Act, 2013 only by passing

a special resolution in a duly conveyed general meeting, and after giving him reasonable

opportunity of being heard. It was held in case of LIC of India Vs. Escorts Limited – AIR 1986

SC 1370 (1986) 59 Comp Cas 548 SC by the apex court that, a shareholder cannot be restrained

from calling an extra ordinary general meeting for removal of director.

A special notice as per Section 115 of the Companies Act, 2013 and rule 23 of the Companies

(Management and Administration) Rules, 2014 is required to remove a director or to appoint a

new director in place of director so removed.

In the matter of B. V. Thirumalai Vs. Best Ventures Trading Private Limited (2005) 57 SCL

98(CLB), it was held that the removal of director from his office without giving him special

notice under Section 284 of the Companies Act 1956 was contrary to the provisions. In Queens

Kuries & Loans P Ltd. V Sheena Jose {1993} 76 Comp Cases 821 [Ker], it was held that the

special notice should disclose the grounds of removal of a director.

Pre-requisites of a special notice:

• A special notice shall be signed by member(s), either individually or collectively holding

not less than one percent of total voting power or holding shares having paid up share

capital value of not less than Rupees Five Lakhs.

• The notice shall be sent by member(s) to the Company not earlier than three months but at

least 14 days prior to the date of meeting at which resolution is to be moved, excluding the

day on which the notice is given and the day of the meeting.



9

• The Company on receipt of such notice give its members notice of resolution along with

the explanatory statement pursuant to Section 102 of the Companies Act 2013 and with the

representation made by director concerned in writing, if any, at least seven days before the

meeting excluding the day of dispatch and day of the meeting, in a same manner as notice

of any other general meeting.

• Where it is not practicable to give the notice in the same manner as it gives notice of any

general meetings, the notice shall be published in English language in English newspaper

and in vernacular language in a vernacular newspaper, both having wide circulation in the

State where the registered office of the Company is situated and such notice shall also be

posted on the website, if any, of the Company.

• The notice shall be published at least seven days before the meeting, exclusive of the day

of publication of the notice and day of the meeting.

A vacancy created by such removal of the director, irrespective of director being appointed in

a board meeting or as an Additional Director or as a Director in a General Meeting, be filled

by appointment of another director in his place at a meeting at which the erstwhile director was

removed, provided a special notice for intended appointment is being given. If the vacancy is

not filled this way, it may be filled as casual vacancy as per the provisions of Section 164 of

the Companies Act 2013. A director so appointed, shall hold the office till the date up to which

his predecessor would have held the office if he had not been removed.

The director who was removed from office shall not be re-appointed as a director by the Board

of Directors.

What constitutes reasonable opportunity of being heard before removal?

In Queens Kuries & Loans P Ltd. V Sheena Jose {1993} 76 Comp Cases 821 [Ker], it was held

that, it is essential that by way of principle of natural justice, the director concerned should be

given a reasonable opportunity of being heard to defend his case as to why he should not be

removed. Only after hearing his defence that the decision of removal should be taken by the

members.

In terms of Section 169(4) of the Companies Act, 2013, a Director concerned can make a

representation in writing to the Company and requests its notification to the members of the

Company. The Company shall, if time permits,

a) State the fact of the representation having been made in notice of resolution given to

members

b) Send a copy of representation to every member to whom the notice of meeting is sent

In case copy of representation is not sent due to insufficient time or due to Company’s default,

the director may without prejudice to his right to be heard orally require that the representation

shall be read out at the meeting.

However, the representation need not be sent out and the representation need not be read out at

the meeting if, on the application either of the company or of any other person who claims to

be aggrieved by such representation, the Tribunal (NCLT) is satisfied that the rights conferred

by this sub-section are being abused to secure needless publicity for defamatory matter; and

the Tribunal (NCLT) may order the company’s costs on the application to be paid in whole or

in part by the director notwithstanding that he is not a party to it.


10

Director appointed on basis of principle of Proportional Representation:

At an outset, it may be noted that, the director, if appointed according to a principle of

proportional representation cannot be removed in terms of provisions of Section 169 of the

Companies Act 2013.

Section 163 of the Companies Act 2013 says that, “Notwithstanding anything contained in this

Act, the articles of a company may provide for the appointment of not less than two-thirds of

the total number of the directors of a company in accordance with the principle of proportional

representation, whether by the single transferable vote or by a system of cumulative voting or

otherwise and such appointments may be made once in every three years and casual vacancies

of such directors shall be filled as provided in sub-section (4) of section 161”

Single transferable vote system means, each shareholder irrespective of his shareholding is

entitled for one vote per post of directors to be appointed.

Cumulative voting system means, each shareholder is entitled to have number of votes as per

his shareholding. For instance, in a situation where a shareholder has 500 number of shares in

a company and there are 2 directors to be elected out of a total of 5 candidates, he is eligible to

cast 500*2=1000 number of votes. He can use all these votes for a single candidate or he can

divide his votes amongst all the candidates to be elected.

As stated earlier, the director appointed by adopting an option of Proportional Representation

cannot be removed as per the provisions of Section 169 of the Companies Act 2013. However,

there is no enough clarity on removal of director appointed by adopting an option of

Proportional Representation.

Can averments made in an Explanatory Statement as per Section 102 of the Companies

Act 2013 by the Company be treated / prosecuted for defamation in a court of law?

Section 499 of the Indian Penal Code defines defamation in the following manner:-

"Whoever, by words either spoken or intended to be read, or by signs or by visible

representations, makes or publishes any imputation concerning any person intending to harm,

or knowing or having reason to believe that such imputation will harm, the reputation of such

person, is said, except in the cases hereinafter excepted, to defame that person."

The Hon’ble Bombay High Court in the matter of Ratan N. Tata and Ors. Vs. The State of

Maharashtra and Anr. (Writ Petition No. 1238 of 2019), where the impugned independent

director who was removed as a director has opted for legal recourse for defamation for

statements contained in the special notice, has taken a view that, “the imputation contained in

the Special Notice cannot be viewed independent of the purpose for which it is included in the

Special Notice and if the petitioners have adopted a legal course permissible to be adopted

under the frame work of statute governing it, we do not think the allegations can be termed as

‘per se defamatory’”

On circulation of alleged defamatory imputations contained in the Special Notice, the Hon’ble

Bombay High Court has observed that, “we are satisfied that there is no prima facie case of

defamation in the present case as there was no intent on the part of the petitioners to cause

harm to the reputation of the respondent as contemplated by Section 499 of the IPC nor can


11

we discern any actual harm caused to his reputation, since the element of mens rea being absent

and since the publication was only limited to the Board of Directors of the holding Company

and the respective shareholders of these Companies, it could not be said that it was circulated

widely over a section of general public.”

In light of the above stated judgement, a conclusion can be drawn as the contains of the special

notice and the averments made in the explanatory statements are not defamatory per se, as the

same falls under the permissible legal course under framework of Section 169 of the Companies

Act, 2013, provided the contains of the special notice and the averments made in the

explanatory are factual.

Can a director so removed be restored as Director again by the Judicial Process?

This forms a very intricate question in the available legal framework. A director who is

removed from a position of a director by passing an ordinary / special resolution in a general

meeting as applicable, cannot be restored as a director again for the remaining of the term, in

stricter legal sense. However, a director who is aggrieved on being removed as a director, is

also a shareholder in a Company holding not less than one tenth of the total issued share capital

of the Company or in concert with not less than hundred members of the company or one tenth

of total number of members whichever is less, and most importantly on having reasonable

cause to file an application to the National Company Law Tribunal under Section 241 of the

Companies Act for oppression and mismanagement, praying for specific directions in this

regard.

The Tribunal may, if it deems fit and proper, under the powers conferred to it under Section

242 of the Companies Act 2013 may pass order(s) including restoration of director who was

removed as a Director of the Company for remaining of his term for smooth conduct of

operations of the Company in the future.

In a very recent judgement, the Hon’ble National Company Law Appellate Tribunal, in

Company Appeal No. 254 of 2018 and in the matter of Cyrus Investments Pvt. Ltd. V/s. Tata

Sons Limited and Ors. has s held removal and other action taken against Mr. Cyrus Pallonji

Mistry illegal and setting aside the same, has directed to restore Mr. Cyrus Pallonji Mistry to

his original position as Executive Chairman of ‘Tata Sons Limited’ and consecutively as

Director of ‘Tata Companies’ for rest of the tenure.

Method(s) of removal of directors other than as prescribed under Section 169 of the

Companies Act 2013

Sub section (8) of Section 169 of the Companies Act provides that nothing in Section 169 will

be taken as derogating the Company from any power to remove a director under other

provisions of the Act. Articles of Association are in the nature of an agreement between the

shareholders who are the joint owner(s) of the Company. If some specific methodology is

devised by consent, nothing precludes the members / shareholders from doing so, as held by

the Hon’ble Delhi High Court in Ravi Prakash Singh Vs. Venus Sugar Limited & ors. [(2008)

1 CompLJ 283 Del;2008 84 SCL 75 Delhi]. For instance, where the Articles of Association of

the Company empowers the Board to remove director(s) including the managing director, such

power will not be affected by Section 169 of the Companies Act 2013, as was held by the

Hon’ble Allahabad high Court in Home Choudhary (A.K) Vs. National Textile Corporation

U.P. Limited [184(48) Indian Factories and Labour Reports at page no. 101]


12

Non deprival of person removed as director of the Company

Referring to Section 169(8)(a) of the Companies Act 2013, nothing in this section shall be taken

as depriving a person removed under this section of any compensation or damages payable to

him in respect of the termination of his appointment as director as per the terms of contract or

terms of his appointment as director, or of any other appointment terminating with that as

director.

The Company cannot, on a reason of such removal deny the rightful compensation to the person

so removed as director and the removed director is lawfully apt to get all the damages and

compensation, as may be specified in the contract, except stated otherwise.

Conclusion

Section 169 of the Companies Act 2013 is like a whip for director(s) of the Company, making

them apprehensive that the shareholders of the Company are as powerful as anyone else,

individually or together holding requisite power, even to remove a captain of a ship, if deem

fit and proper.

(Sources: www.taxman.com , www.mca.gov.in , Premier on Company Law published by ICSI)

******

http://www.taxman.com/

http://www.mca.gov.in/


13

COMPANIES (CREATION AND MAINTENANCE OF DATABANK OF

INDEPENDENT DIRECTORS) RULES, 2019

Authored by: CS Nachiket Sohani

[email protected]

Clause 49 of the erstwhile Listing Agreement required listed companies to appoint prescribed

number of Independent Directors on their boards in order to improve their corporate credibility

and governance standards. SEBI (Listing Obligations & Disclosure Requirements)

Regulations, 2015 also requires listed companies to appoint prescribed number of directors as

Independent Directors on their boards. The Independent Directors perform various functions

including that of a watchdog and also play a vital role in risk management. They are also

appointed in various committees of the Board to ensure good governance. Independent

Directors are considered to be the mentors of management and supervisors who are expected

to ensure that the acts of the management create value to shareholders. They are responsible

for protecting minority shareholders’ interests. They are expected to be independent from the

management and act as trustees of shareholders. Today there are many individuals who have

been appointed as Independent Directors on the boards of eminent companies and have

contributed immensely to ensure good governance to their boards.

Provisions under the Companies Act, 2013

The Companies Act, 1956 did not provide for any specific definition of an Independent

Director. The term ‘Independent Director’ has been defined under the Companies Act, 2013

(“Act”). There is a separate criterion under the Act for the companies to have an Independent

Director on their Board.

Section 2(47) of the Act defines the term ‘Independent Director’ which reads as follows:

"Independent director" means an independent director referred to in sub-section (6) of section

149;

Section 149(6) of the Act reads as follows:

An independent director in relation to a company, means a director other than a managing

director or a whole-time director or a nominee director,—

(a) who, in the opinion of the Board, is a person of integrity and possesses relevant

expertise and experience;

(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate

company;

(ii) who is not related to promoters or directors in the company, its holding, subsidiary

or associate company;

(c) who has or had no pecuniary relationship, other than remuneration as such director or

having transaction not exceeding ten per cent. of his total income or such amount as

may be prescribed, with the company, its holding, subsidiary or associate company, or



14

their promoters, or directors, during the two immediately preceding financial years or

during the current financial year;

(d) none of whose relatives—

(i) is holding any security of or interest in the company, its holding, subsidiary or

associate company during the two immediately preceding financial years or during

the current financial year:

Provided that the relative may hold security or interest in the company of face value

not exceeding fifty lakh rupees or two per cent. of the paid-up capital of the

company, its holding, subsidiary or associate company or such higher sum as may

be prescribed;

(ii) is indebted to the company, its holding, subsidiary or associate company or their

promoters, or directors, in excess of such amount as may be prescribed during the

two immediately preceding financial years or during the current financial year;

(iii) has given a guarantee or provided any security in connection with the indebtedness

of any third person to the company, its holding, subsidiary or associate company

or their promoters, or directors of such holding company, for such amount as may

be prescribed during the two immediately preceding financial years or during the

current financial year; or

(iv) has any other pecuniary transaction or relationship with the company, or its

subsidiary, or its holding or associate company amounting to two per cent. or more

of its gross turnover or total income singly or in combination with the transactions

referred to in sub-clause (i), (ii) or (iii);

(e) who, neither himself nor any of his relatives—

(i) holds or has held the position of a key managerial personnel or is or has been

employee of the company or its holding, subsidiary or associate company in any of

the three financial years immediately preceding the financial year in which he is

proposed to be appointed;

Provided that in case of a relative who is an employee, the restriction under this

clause shall not apply for his employment during preceding three financial years.

(ii) is or has been an employee or proprietor or a partner, in any of the three financial

years immediately preceding the financial year in which he is proposed to be

appointed, of—

(A) a firm of auditors or company secretaries in practice or cost auditors of the

company or its holding, subsidiary or associate company; or

(B) any legal or a consulting firm that has or had any transaction with the company,

its holding, subsidiary or associate company amounting to ten per cent. or more

of the gross turnover of such firm;

(iii) holds together with his relatives two per cent. or more of the total voting power of

the company; or

(iv) is a Chief Executive or director, by whatever name called, of any nonprofit

organisation that receives twenty-five per cent or more of its receipts from the

company, any of its promoters, directors or its holding, subsidiary or associate

company or that holds two per cent. or more of the total voting power of the

company; or

(f) who possesses such other qualifications as may be prescribed.


15

The relevant extracts of the Companies (Appointment and Qualification of Directors) Rules,

2014 as amended from time to time, relating to requirement and appointment of Independent

Directors are as follows:

Rule 4 - Number of Independent Directors

(1) The following class or classes of companies shall have at least two directors as

independent directors -

(i) the Public Companies having paid up share capital of ten crore rupees or more; or

(ii) the Public Companies having turnover of one hundred crore rupees or more; or

(iii) the Public Companies which have, in aggregate, outstanding loans, debentures and

deposits, exceeding fifty crore rupees:

Provided that in case a company covered under this rule is required to appoint a higher

number of independent directors due to composition of its audit committee, such higher

number of independent directors shall be applicable to it:

Provided further that any intermittent vacancy of an independent director shall be filled-

up by the Board at the earliest but not later than immediate next Board meeting or three

months from the date of such vacancy, whichever is later:

Provided also that where a company ceases to fulfil any of three conditions laid down in

subrule (1) for three consecutive years, it shall not be required to comply with these

provisions until such time as it meets any of such conditions;

Explanation. - For the purposes of this rule, it is here by clarified that, the paid up share

capital or turnover or outstanding loans, debentures and deposits, as the case may be, as

existing on the last date of latest audited financial statements shall be taken into account:

Provided that a company belonging to any class of companies for which a higher number

of independent directors has been specified in the law for the time being in force shall

comply with the requirements specified in such law.

(2) The following classes of unlisted public company shall not be covered under sub-rule (1),

namely:-.

(a) a joint venture;

(b) a wholly owned subsidiary; and

(c) a dormant company as defined under section 455 of the Act.

Rule 5 - Qualifications of Independent Director

(1) An independent director shall possess appropriate skills, experience and knowledge in

one or more fields of finance, law, management, sales, marketing, administration,

research, corporate governance, technical operations or other disciplines related to the

company’s business.

(2) None of the relatives of an independent director, for the purposes of sub-clauses (ii)

and (iii) of clause (d) of sub-section (6) of section 149,-

(i) is indebted to the company, its holding, subsidiary or associate company or their

promoters, or directors; or

(ii) has given a guarantee or provided any security in connection with the indebtedness

of any third person to the company, its holding, subsidiary or associate company

or their promoters, or directors of such holding company,

for an amount of fifty lakhs rupees, at any time during the two immediately preceding

financial years or during the current financial year.


16

Further, the Code for Independent Directors is prescribed under Schedule IV of the Act which

acts as a guide to professional conduct for the Independent Directors

Thus, it can be said that an independent director is a non-executive director of a company who

assists the company in improving its corporate credibility and governance standards. He does

not have any kind of relationship with the company that may affect the independence of his

judgment.

Background of the Rules:

However, over the years, it has been noticed that some of the Independent Directors have failed

to discharge their duties. The notable instances of such failure include the Satyam fiasco of

2009 and the recent IL&FS fiasco. In both the instances, it was revealed that the Independent

Directors of both these companies were found to be grossly negligent while discharging their

duties. Moreover, the rate of resignation of Independent Directors from the boards of listed

companies has increased significantly in comparison to previous years.

On June 12, 2019, Mr. Injeti Srinivas, Secretary to the Ministry of Corporate Affairs (“MCA”),

said that the Government was considering revamping India's corporate governance structure.

As part of it, the independent directors would be required to appear and clear a corporate

literacy test on a range of topics before their appointment. He further said that the Government

wanted to do away with the myth that the Independent Directors did not have any fiduciary

duties. He further said that the Government aimed to propagate corporate literacy to make the

Independent Directors aware of their duties, roles and responsibilities. He further said that the

Government was planning to devise a new oversight programme shortly and would be

implemented once it was ready.

Accordingly, the MCA vide notification dated October 22, 2019 amended the Companies

(Appointment and Qualification of Directors) Rules, 2014 and further vide notification dated

October 22, 2019 introduced the Companies (Creation and Maintenance of databank of

Independent Directors) Rules, 2019 (“Rules”), both with effect from December 1, 2019,

relating to creation of data bank for the individuals who intend to be appointed as Independent

Directors and online examination for the existing as well as potential Independent Directors.

The highlights of the said Rules are as follows:

- Application to the Indian Institute of Corporate Affairs for inclusion of name in

the data bank:

Every person who has been appointed as Independent Director of a company as on the

date of commencement of the said Rules i.e. December 01, 2019 shall make an

application to the Indian Institute of Corporate Affairs (“Institute”) (website –

www.iiac.nic.in ) notified under Section 150 of the Act within a period of three months

from the date of commencement of these rules for inclusion of his name in the data


17

bank and any other person who intends to get appointed as Independent Director shall

after the commencement of the said Rules shall be required to apply to the Institute

before his appointment till the time he continues to hold the office of an Independent

Director in any company. The validity of the application shall be for a period of one

year of five years or for life-time. Also, any individual including a person not having

DIN may voluntarily apply to the Institute for inclusion of his name in the data bank.

- Renewal of application:

An application for renewal of name in the data bank maintained by the Institute shall

be made for a period of one year or five years or life-time within a period of thirty days

from the date of expiry of period up to which the name of the individual was applied

for inclusion in the data bank. Failure to renew the name within stipulated time would

result in removal of name of such individual from the data bank of the Institute.

However, an individual who has paid life-time fees shall not be required to apply for

renewal.

- Declaration of compliance:

Every Independent Director shall submit a declaration of compliance of the said Rules

to the Board every time he submits the declaration under Section 149(7) of the Act.

Accordingly, the declaration at the time of his appointment and annual declaration shall

be modified accordingly.

- Online examination:

Every individual whose name is included in the data bank under the Rules shall be

required to pass an online proficiency self-assessment test which would be conducted

by the Institute within a period of one year from the date of inclusion of his name in the

data bank. Failure of the same would result in removal of his name from the data bank.

However, the an individual who has served as Director or Key Managerial Personnel

for a period not less than ten years in a listed company or in an unlisted public company

having paid-up share capital of rupees ten crore or more shall not be required to pass

the online proficiency selfassessment test. The Institute will conduct this exam. It will

also create and maintain a data bank with names, addresses and qualifications of people

who are eligible to be appointed as Independent Directors for companies. Also, the

companies would be required to disclose the results of these tests in their Annual

Report.

- Other requirements:

An individual who has obtained a score not less than sixty percent in aggregate in the

online proficiency self-assessment test shall be deemed to have passed the test. There

is no limit on the number of attempts an individual may take for passing the online

proficiency self assessment test.


18

Conclusion: From the above discussions, it sounds weird that Independent Directors would be

required to appear for an examination before their appointment. This is because a person who

is appointed as Independent Director in a company is appointed on the basis of his

qualifications and/or experience in a certain industry (ies) which will benefit the company

ultimately. The common question which comes to our mind is whether a test is adequate and

appropriate for determining the proficiency of a person as an Independent Director. There will

be many rhetoric questions raised on this amendment. However, this amendment should be

seen as one of the corrective measures taken by the Government to curb the prevalent

negligence of duties by the Independent Directors and not as foolproof solution to the problem.


19

“WHAT’S THE GOOD WORD”: DRAFTING SKILLS – PRACTICAL

INSIGHTS

Authored by: CS Kanchan Bhave, Head – Head Subsidiary Governance South Asia,

Standard Chartered Bank, [email protected]

“Verba volant, scripta manent” is a Latin proverb, which means “spoken words fly away,

written words remain!”

OBJECTIVE: The objective of this article is to share

some practical examples, suggestions, do’s and don’ts,

use of appropriate words and expressions so that the

document being drafted is concise, crisp, lucid and

relevant to the subject matter.

INTRODUCTION:

Drafting of various documents in a company usually

forms part of multifaceted duties of the Company

Secretary. It can range from core work of minutes

writing, regulatory communication, investor interface,

notes to Chairman, briefing notes, to certain legal

documents like Power of Attorneys, authorisation letters, contracts, deeds, agreements etc.

A proper understanding of drafting cannot be realised unless the nexus between the law, the

facts, and the language is fully understood and

accepted. Choice of befitting words is the fine balance a Company Secretary must strive to

achieve. Carefully chosen words ensure that the finished work is cohesive and imparts the

meaning or information the author intended.

Words can be chosen for either their denotative meaning, which is the definition found in a

dictionary or the connotative meaning, which is the emotions, circumstances, or descriptive

variations the word evokes.

Linguistic flexibility should not be at the risk of creating ambiguity and hence it is pertinent to

know and understand use of appropriate words.

WORDS TO WATCH OUT:

# Etymology, i.e. the origin of the word

AFFECT EFFECT

Affect means to influence or to produce a

change in something.

# from French affecter

Effect is a noun, and it means the result of a

change.

# from Latin effectus

So, if an event affects your life, you will feel the event’s effect. A is for action

(affect); E is for end result (effect).



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Events occurring after Balance Sheet date:

There were no significant events that

occurred after the Balance Sheet date apart

from the ones mentioned in the ‘material

changes and commitments affecting

financial position between the end of the

fiscal and date of the report in the Boards

report.

Diversity in the backgrounds, skills and

experiences of Directors enhances board

effectiveness by bringing a wider range of

perspectives and knowledge to bear on issues

of company performance, strategy and risk.

Board diversity can also send a positive and

motivating signal to customers, shareholders

and employees, and can contribute to a better

understanding by the company’s leadership

of the diverse constituencies that affect its

success.

We operate in jurisdictions that impose

transfer pricing and other tax related

regulations on us, and any failure to comply

could materially and adversely affect our

profitability.

the observations or comments of the auditors

on financial transactions or matters which

have any adverse effect on the functioning of

the company

The difference between affect and effect is confusing that people have tendency of using

"impact" as a verb instead. Don't be one of them!

Discretion Prerogative

Discretion implies the possibility of its being limited by rules and regulations.

# from Latin discernere / discretio

Prerogative refers to decision making

intrinsically free of regulation

# from Latin prae (before) rogare (ask)

The Board, at its discretion, may change the

Corporate Governance guidelines

periodically to achieve stated objectives.

To make it easier for shareholders to exercise

their prerogatives at the annual shareholders’

meeting, their votes can be cast by authorised

proxies.

A Directors term may be extended at the

discretion of the committee beyond the age

of 60 or 70 years with the shareholders’

approval

In case of Government Committees: The

prerogative of National Interdepartmental

Doing Business Committee, which includes

public and private sector stakeholders, is to

formulate the reform agenda and to ensure

the high-level monitoring of its

implementation.

Disinterested Uninterested

Disinterested mean Impartial or without vested interest.

Uninterested means not showing interest.


21

Disinterested means having no stake in the matter whereas uninterested is not

attentive

The directors who consider the bid must be

disinterested and not receive a benefit from

the transaction, and they must be governed

by an overarching duty of care owed to the

association.

The board may not be aware of the CSR

initiatives being conducted by the company.

This may be due to insufficient information flows from management or uninterested

board members in these types of activities.

Like good judges, researchers should be

passionately interested in the problems they

tackle but completely disinterested when

they seek to solve those problems

Despite Asha’s enthusiasm, her manager

remained uninterested in the project.

Adapt Adopt

Adapt means to change for a new situation.

# from Latin ad (to) aptus / aptare (fit)

Adopt means to take something legally as

your own

# from Latin ad (to) Optare (choose)

Adapt is to change or adjust whereas adopt means to choose to take up or follow

or use

Directors are under pressure to adapt to new

environmental circumstances like the Digital

reality. Today, enterprises are advancing on

their digital transformation journey to adapt

to rapidly changing markets, business needs

and consumer preferences.

XBRL offers major benefits at all stages of

business reporting and analysis. Because

XBRL is extensible and flexible, it can be

adapted to a wide variety of different

requirements

The Board Diversity Policy adopted by the

Board sets out its approach to diversity.

Policies, processes or framework is adopted

by the

Board

A company shall adopt any of the model

Forms of the memorandum of association

mentioned above, as may be applicable to it.

Exceptions, modification and ………………… to Section 8

Non -Profit) Companies.

(Adapt / Adopt)?

Adverse Averse

Adverse means unfavourable

# Latin ad (to) vertere (to turn) adversus

(against, opposite)

Averse means strongly dislike or opposed to

# Latin adversus (turned away from)


22

Adverse is used to describe effects or events whereas averse is used to describe

people

Negative media coverage and public scrutiny

may divert time and attention of Board and

Management and adversely affect reputation

and price of equity shares.

A risk averse investor is an investor who

prefers lower returns with known risks rather

than higher returns with unknown risks.

Appraise Apprise

Appraise means to assess

Apprise means to inform

Appraise is to determine the worth whereas apprise is to notify, update

Formal appraisals of the board as a whole,

and also of individual board members and the

CEO, help ensure a healthy balance of power

between the board and the

It shall be the responsibility of a director to

fully understand the undertakings of the

company he serves. A director must be fully

apprised of the affairs,

chief executive. If, done properly, board

appraisals may improve the relationship

between a company's board and its

management.

business and operations of the company, and

should take such steps as are required or

necessary to this end.

Advice Advise

Advice recommendations about what to do Advise to recommend something

While the distinction is between that of a noun and verb, have same function but different

parts of

speech and hence aren’t interchangeable

Non-executive directors should have

sufficient time to meet their board responsibilities. They should provide

constructive challenge, strategic guidance, offer specialist advice and hold management

to account.

Access to independent professional advice

may be one of the resources that board

committees may require.

Company secretaries cannot tell

directors what to do, they can only advise.

The company secretary is often referred to as

the ‘conscience of the company’. This is

because, in fulfilling the role as governance

professional, the company secretary is often

called on to advise the board what the right

thing is to do in the long-term interests of the

organisation.


23

Duty of the Company Secretary is to assist and ………………the Board in

ensuring good corporate governance and in complying with the corporate

governance requirements and best practices.

(Advice / Advise)?

Discreet Discrete

Discreet, 'careful not to attract attention or

give offence'

Discrete, which means 'separate, distinct'.

# from Latin word, discretus

Gradual and discreet purchase of shares in a

company.

Forward looking boards have been discreetly

transforming themselves to new digital

revolution.

Board may have discrete committees for

different projects.

Imply Infer

To imply is to suggest something indirectly To infer is to gather, deduce, or figure out.

Implied authority is by virtue of a position or

role i.e. can be ostensible authority. Implied authority of Board of Directors, Managing Director or Chairman.

A trading company has an implied power to

borrow money, draw and accept bills of

exchange in the

It should not be inferred from the language of

the section that with the consent of the

company in general meeting, the board of

directors may contribute to charitable funds

to an unlimited extent, unless MoA and AoA

authorizes such expenditure. If it

ordinary form, but a railway company cannot

issue bills although it may borrow money.

does not authorize so it will be ultra vires the

powers of the company.

Assent Ascent

Agreement, Approval Action of rising

The powers of the company are defined by its Memorandum of Association and any

contract made beyond the limits laid down in the Memorandum of Association, will be

ultra vires to the company and void even if all the shareholders assent to it.

Directors ascent to the Chairmanship position

came after a long and illustrious career.


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Enquire Inquire

To ask Formal Investigation

A basic and fundamental characteristic of a

statutory corporation is its immunity from

Parliamentary enquiry into its day-to-day

working, as distinct from matters of policy.

The Registrar must make preliminary

enquiries to ensure that the name allowed by

him is not misleading or intended to deceive

with reference to the Objects Clause of the

memorandum.

In Killick Nixon Ltd. v. Dhanraj Mills Ltd.,

it was held that the company is not bound to

enquire into the capability of the transferee to

enter into a contract. The company has to act

on the basis of what is presented in the

transfer deed.

The provisions of Chapter XIV (Inspection,

Inquiry and Investigation) shall apply

mutatis mutandis to the Indian business of a

foreign company as they apply to a company

incorporated in India.

The shifting of registered office shall not be

allowed if any inquiry, inspection or

investigation

has been initiated against the company or any

prosecution is pending against the company

under the Act.

It is important to remember that the doctrine of “constructive notice”, can

be invoked by the company and it does not operate against the company. It

operates against the person who has failed to ………………… but does not

operate in his favour. But the doctrine of “indoor management” can be

invoked by the person dealing with the company and cannot be invoked by

the company. (Inquire / enquire)?

Assume Presume

To suppose without proof Presume is to suppose on the basis of

probability

Normally the disclaimer clause makes use of

the word assume. E.g. This document

contains statements about expected future

events and financials of AAA Limited, which

are forward-looking. By their

Section 233(4) provides that if the Registrar

or Official Liquidator has any objections or

suggestions, he may communicate the same

in writing to the Central

Government within a period of thirty days. If

no such


25

nature, forward-looking statements require

the Company to make assumptions and are

subject to inherent risks and uncertainties.

There is significant risk that the

assumptions, predictions and other forward-

looking statements may not prove to be

accurate. Readers are cautioned not to place

undue reliance on forward-looking

statements as a number of factors could cause

assumptions, actual future results and events

to differ materially from those expressed in

the forward-looking statements.

Accordingly, this document is subject to the

disclaimer and qualified in its entirety by the

assumptions, qualifications and risk factors

referred to in the Management Discussion

and Analysis of this Annual Report.

communication is made, it shall be presumed

that he has no objection to the scheme.

Under Doctrine of indoor management:

While persons contracting with a company

are presumed to know the provisions of the

contents of the memorandum and articles,

they are entitled to assume that the provisions

of the articles have been observed by the

officers of the company. It is no part of the

duty of an outsider to see that the company

carries out its own internal regulations.

In case of any INDEMNITY clause: Lessee agrees to comply with all laws,

regulations and orders relating to the possession, operation, and use of the

Equipment and …………..all risks and liabilities arising from or pertaining to the

possession, operation or use of the Equipment.

(Assume / presume)?

Compare with Compare to

Compare with can be used when the

similarities have been identified

To compare is to judge the similarity or difference between two things

Preference shares compared with Equity

Shares

LLP have lesser compliance requirements as

compared to a company.

For obtaining greater facilities possessed by one large company, as ………….a

number of smaller companies, for raising additional capital, for buying raw

materials, etc. and for securing better credit facilities on the most favourable terms,

and, what is, of increasing importance now a days, for carrying out research work on a large

and co-ordinated scale and basis (Compared with / Compared to)?

Denote Connote

Denote means literal meaning Connote means attribute the

meaning of something

Winter denotes a season but connotes cold weather


26

Perpetual succession denotes the ability of a

company to maintain its existence by the

succession of new individuals who step into

the shoes of those who cease to be members

of the company.

The term “body corporate” connotes a wider meaning than the term “company”.

Any part of the proposed name includes the

words indicative of a separate type of

business

The word "promoter" is used in common

parlance to denote any individual, corporate,

syndicate, association or partnership which

has taken all the necessary steps to create and

mould a company and set it going.

constitution or legal person or any

connotation thereof e.g. co-operative, trust,

LLP, partnership, society, proprietor, HUF,

firm, INC., etc.;

The word ‘subscribed’ ………………..that the shares were acquired directly from

the company by allotment.

(Denotes / Connotes)?

Words ………….. the singular include the plural and vice versa unless the contrary

appears from the context.

(Denote / Connote)?

START UP AGE:

Just as the traditional words have relevance and usage, current digital era has given rise to new

words which one should be aware of. After all Company secretaries are joining new start-ups

and fintech companies and should be well versed with new words.

Digitisation has gathered pace in the various sectors, like financial, banking, insurance etc.

accelerated by advanced technological developments. Digitisation, Digital disruption, Digital

business, Digital transformation are the buzz words used most often to refer to various types of

business or tools used to create new value in business models, customer experiences and the

internal capabilities that support its core operations. As a Company Secretary one must

understand certain terms as they form part of the key documents like Memorandum (Object

clause), minutes, agreements, Board report update on new business etc while working in

FINTECH companies or start-ups.

• Data facilities – online facilities of regulatory data collected by national government

agencies, and often open source for public access and analysis.

• Internet of things (IoT) – is the inter-networking of ‘smart’ physical devices, vehicles,

buildings, etc. that enable these objects to collect and exchange data.


27

• Chatbots – systems for interacting with regulated companies, registrants and the general

public for using natural language and speech.

• Big data – is the process of examining very large data sets to uncover hidden patterns,

unknown correlations etc; data sets that are so complex that traditional data processing

application software is inadequate to deal with them.

• Artificial intelligence (AI) – system able to perform tasks normally requiring human

intelligence.

• Behavioural / predictive analysis – the analysis of large and varied data sets to uncover

hidden patterns, unknown correlations, customer preferences etc to help make informed

decisions.

• Block chain technologies – technologies underpinning digital currency, that secures,

validates and processes transactional data.

Drafting is a science and can be improved by practice. General

principles to follow are: conceiving thoughts, logical arrangement

of facts, attention to detail when referring legal provisions, self-

explanatory, division in para with each para being distinct subject

matter on the topic, group of words reduced to one, prefer active

over passive voice, avoid repetitions, and most importantly write

from the readers point of view.

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

Answers to test yourself questions: (1) Inquire (2) Denotes (3) Adaptations (4) Advise (5)

Denoting (6) Compared with (7) Assumes

==================================================================


28

MANDATORY COMPLETION OF PROGRAM CREDIT HOURS

(PCH) BY MEMBERS

• It may be noted that the PCH requirement for the block year 2017-2020 as below is ending

by 31.03.2020. Members who have not completed the stipulated hours may complete the

same by 31.03.2020. The Guidelines for Compulsory Attendance of Professional

Development Programmes by the Members is available at

link https://www.icsi.edu/media/webmodules/cp/PDPGuidelines3.pdf

• PCH for company secretary in employment is mandatory. Members in employment (i.e.

members in whose name Form 32 has been filed to work as Company Secretary under the

provisions of Sec. 383A of the Companies Act, 1956) shall be required to obtain 10

Programme Credit Hours in each year or 35 Programme Credit Hours in a block of three

years.

*(Members who have completed the PCH may kindly ignore)

http://lnk.icsi.edu/gtrack?clientid=83928&ul=%0DVVYEVQgdBBoVW1xcSQ0Qc1VeUVsJTVdYDklP&ml=VVYJUkRRSVJQCEQ=&sl=Jh5yGG0ySTUrZURZXw9KWlFAWRwAB0FLUw==&pp=0&


29


30

PHOTO GALLERY

OFFICE BEARERS WIRC – ICSI 2020

CS Rahul P. Sahastrabuddhe

Chairman - WIRC

CS Pawan Chandak

Vice Chairman - WIRC

CS Rajesh Tarpara

Secretary - WIRC

CS Snehal Shah

Treasurer - WIRC

CHAPTERS IN ACTION

Half day Seminar on 11th January, 2020

Ahamadabad Chapter of WIRC of ICSI

Republic day Celebration – 26th January, 2020

Kolhapur Chapter of WIRC of ICSI


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GLIMPSES OF WIRC PARTICIPATION IN YUVOTSAV 2020 ORGANISED BY

EASTERN INDIA REGIGIONAL COUNCIL OF ICSI

Rajkot Chapter

Nashik Chapter

Independent Directors Proficiency Test,

Section 185 & Section 186- Organised by

Vadodara Chapter of WIRC of ICSI on

18.01.202

Latest Amendments in Companies Act Including

Independent Director & Related

Party Transactions- Organised by Thane Chapter of

WIRC of ICSI on 18.01.2020

Peer Review for PCS & CS Induction and

Basic Concepts of Income Tax for CSs-

Organised by Nashik Chapter of WIRC of

ICSI on 25.01.2020

Forensic Audit- Role of CS, Professional

Opportunities for CS – 04.01.2020 Organised by

Nashik Chapter of WIRC of ICSI on 04.01.2020


32

WIRC was awarded with 2nd Place Award for Best Region and 2nd Place Award for Highest

Participation (28 From Nashik & 17 from Rajkot)


33

Documents

WESTERN INDIA REGIONAL COUNCIL e- Newsletter January ... · Escorts Limited – AIR 1986 SC 1370 (1986) 59 Comp Cas 548 SC by the apex court that, a shareholder cannot be restrained