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COMPANIES ACT

Ministry of Law and Justice

Act nº 1 of 1956


  • Part 1
  • Part 1A. Board of Company Law Administration
  • Part 1B. National Company Law Tribunal
  • Part 1C
  • Part 2
  • Part 3
  • Part 4
  • Part 5
  • Part 6
    • Chapter 1
    • Chapter 2
    • Chapter 3
    • Chapter 4
    • Chapter 4A. Powers of Central Government to Remove Managerial Personnel from Office on the Recommendation of the Tribunal
    • Chapter 5
    • Chapter 6
    • Chapter 7. Constitution and Powers of Advisory Committee
    • Chapter 8
  • Part 6A. Revival and Rehabilitation of Sick Industrial Companies
  • Part 7
    • Chapter 1
    • Chapter 2. Winding Up by the Tribunal
    • Chapter 3
    • Chapter 4
    • Chapter 5
  • Part 8
  • Part 9
  • Part 9A. Producer Companies
    • Chapter 1
    • Chapter 2
    • Chapter 3
    • Chapter 4
    • Chapter 5
    • Chapter 6
    • Chapter 7
    • Chapter 8
    • Chapter 9
    • Chapter 10
    • Chapter 11
    • Chapter 12
  • Part 10
  • Part 11
  • Part 12
  • Part 13
  • Schedules
  • Amending Acts
  • Act nº 1 of 1956

Preamble

THE COMPANIES ACT, 1956

[Act, No. 1 of 1956]1

[18th January, 1956]

PREAMBLE

An Act to consolidate and amend the law relating to companies and certain other associations.

be it enacted by Parliament in the Sixth Year of the Republic of India as follows:-

1. This Act has been extended to Goa, Daman and Diu by Regulation 12 of 1962 (with modifications); Section 3 and Schedule to Dadar and Nagar Haveli by Regulation 6 of 1963, Section 2 and Schedule I and to Pondicherry by Regulation 7 of 1963, Section 3 and Schedule I.

The Provisions of this Act shall apply to Goa, Daman and Diu, subject to the exceptions, modifications and adaptations contained in the Schedule to G.S.R. 615, dated 24th April, 1965 [Gazette of India, Pt. II, Section 3 (i), p. 670]. Amended in its application to Goa, Daman and Diu by Regulation 11 of 1963, Section 9.


Part 1

Section 1. Short title, commencement and extent

(1) This Act may be called the Companies Act, 1956.

(2) It shall come into force on such date1 as the Central Government may, by notification in the Official Gazette, appoint.

2 [(3) It extends to the whole of India:]

3 [***]

4 [Provided 5 [***] that it shall apply to the State of Nagaland subject to such modifications, if any, as the Central Government may, by notification in the Official Gazette, specify.]

1. Came into force on 1-4-1956 vide S.R.O. 612, dated 8th March, 1956, published in the Gazette to India of India, Extra. 1956, Part II., Section 3, Page 473.

2. Substituted by Act 62 of 1956, Section 2 and Schedule, for sub-section (3) (w.e.f. 1-11-1956).

3. First proviso omitted by Act 25 of 1968, Section 2 and Schedule (w.e.f. 15-8-1968).

4. Inserted by Act 31 of 1965, Section 2 (w.e.f. 15-10-1965).

5. The word "further" omitted by Act 25 of 1968, Section 2 and Schedule (w.e.f. 15-8-1968).


Section 2. Definitions

In this Act, unless the context otherwise requires, -

1 [(1)] "abridged prospectus" means a memorandum containing such salient features of a prospectus as may be prescribed;]

2 [(1A)] "alter" and "alteration" shall include the making of additions and omissions;

3 [(1B) "Appellate Tribunal" means the National Company Law Appellate Tribunal constituted under sub-section (1) of section 10FR;]

(2) "articles" means the articles of association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act, including, so far as they apply to the company, the regulations contained, as the case may be, in the Table Bin the Schedule annexed to Act No. 19 of 1857 or in Table A in the First Schedule annexed to the Indian Companies Act, 1882 (6 of 1882), or in Table A in the First Schedule annexed to the Indian Companies Act, 1913 (7 of 1913), or in Table A in Schedule I annexed to this Act;

4 [***]

(5) "banking company" has the same meaning as in the Banking Companies Act, 1949 (10 of 1949)5 ;

(6) "Board of directors" or "Board", in relation to a company, means the Board of directors of the company;

(7) "body corporate" or "corporation" includes a company incorporated outside India but 6 [does not include -

(a) a corporation sole;

(b) a co-operative society registered under any law relating to co-operative societies; and

(c) any other body corporate (not being a company as defined in this Act) which the Central Government may, by notification in the Official Gazette, specify in this behalf;]

(8) "book and paper" and "book or paper" include accounts, deeds, 7 [vouchers,] writings and documents;

8 [(9) "branch office" in relation to a company means -

(a) any establishment described as a branch by the company; or

(b) any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company; or

(c) any establishment engaged in any production, processing or manufacture, but does not include any establishment specified in any order made by the Central Government under section 8;]

(10) "company" means a company as defined in section 3;

9 [(10A) "Company Law Board" means the Board of Company Law Administration constituted under section 10E;]

10 [(11) "the court" means, -

(a) with respect to any matter relating to a company (other than any offence against this Act), the court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10;

(b) with respect to any offence against this Act, the court of a Magistrate of the First Class or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence;]

(12) "debenture" includes debenture stock bonds and any other securities of a company, whether constituting a charge on the assets of the company or not;

11 [(12A) "Depository" has the same meaning as in the Depositories Act, 1996 (22 of 1996);

(12B) "derivative" has the same meaning as in clause (aa) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);]

(13) "director" includes any person occupying the position of director, by whatever name called;

(14) "District Court" means the Principal Civil Court of original jurisdiction in a district, but does not include a High Court in the exercise of its ordinary original civil jurisdiction;

11 [(14A) "dividend" includes any interim dividend;]

(15) "document" includes summons, notice, requisition, order, other legal process, and registers, whether issued, sent or kept in pursuance of this or any other Act or otherwise;

11 [(15A) "employees stock option" means the option given to the whole-time directors, officers or employees of a company, which gives such directors, officers or employees the benefit or right to purchase or subscribe at a future date, the securities offered by the company at a pre-determined price;]

(16) "existing company" means an existing company as defined in section 3;

(17) "financial year" means in relation to any body corporate, the period in respect of which any profit and loss account of the body corporate laid before it in annual general meeting, is made up, whether that period is a year or not:

Provided that, in relation to an insurance company, "financial year" shall mean the calendar year referred to in sub-section (1) of section 11 of the Insurance Act, 1938 (4 of 1938);

(18) "Government company" means a Government company within the meaning of section 617;

12 [***]

(19) "holding company" means a holding company within the meaning of section 4;

11 [(19A) "hybrid" means any security which has the character of more than one type of security, including their derivatives;

3 [(19AA) "industrial company" means a company which owns one or more industrial undertakings;

(19AB) "industrial undertaking" means any undertaking, pertaining to any industry carried on in one or more factories or units by any company, as defined in clause (aa) of section 3 of the Industries (Development and Regulation) Act, 1951 (65 of 1951) but does not include a small-scale industrial undertaking as defined in clause (j) of that section;]

(19B) "information memorandum" means a process undertaken prior to the filing of a prospectus by which a demand for the securities proposed to be issued by a company is elicited, and the price and the terms of issue for such securities is assessed, by means of a notice, circular, advertisement or document;]

13 [***]

(21) "insurance company" means a company which carries on the business of insurance either solely or in conjunction with any other business or businesses;

(22) "issued generally" means, in relation to a prospectus, issued to persons irrespective of their being existing members or debenture-holders of the body corporate to which the prospectus relates;

(23) "limited company" means a company limited by shares or by guarantee;

11 [(23A) "listed public companies" means a public company which has any of its securities listed in any recognized stock exchange;]

(24) "manager" means an individual (not being the managing agent) who, subject to the superintendence, control and direction of the Board of directors, has the management of the whole, or substantially the whole, of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called and whether under a contract of service or not;

14 [***]

(26) "managing director" means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with 15 [substantial powers of management] which, would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called:

16 [Provided that the power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within substantial powers of management:

Provided further that a managing director of a company shall exercise his powers subject to the superintendence, control and direction of its Board of directors;]

(27) "member", in relation to a company, does not include a bearer of a share-warrant of the company issued in pursuance of section 114;

(28) "memorandum" means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act;

(29) "modify" and "modification" shall include the making of additions and omissions;

3 [(29A) "net worth" means the sum total of the paid-up capital and free reserves after deducting the provisions or expenses as may be prescribed.

Explanation.--For the purposes of this clause, "free reserves" means all reserves created out of the profits and share premium account but does not include reserves created out of revaluation of assets, write back of depreciation provisions and amalgamation;]

17 [(30) "officer" includes any director, manager or secretary, or any person in accordance with whose directions or instructions the Board of directors or any one or more of the directors is or are accustomed to act;]

(31) "officer who is in default", in relation to any provision referred to in section 5, has the meaning specified in that section;

11 [(31 A)] "option in securities" has the same meaning as in clause (d) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);]

3 [(31AA) "operating agency" means any group of experts consisting of persons having special knowledge of business or industry in which the sick industrial company is engaged and includes public financial institution, State level institution, scheduled bank or any other person as may be specified as the operating agency by the Tribunal;]

(32) "paid-up capital" or "capital paid up" includes capital credited as paid up;

(33) "prescribed" means, as respects the provisions of this Act relating to the winding up of companies except sub-section (5) of section 503, 18 [sub-section (3) of section 550, section 552 and sub-section (3) of section 555], prescribed by rules made by the Supreme Court in consultation with 19 [The Tribunal], and as respects the other provisions of this Act including sub-section (5) of section 503, 18 [sub-section (3) of section 550, section 552 and sub-section (3) of section 555], prescribed by rules made by the Central Government;

(34) "previous companies law" means any of the laws specified in clause (ii) of sub-section (1) of section 3;

(35) "private company" means a private company as defined in section 3;

(36) "prospectus" means 20 [any document described or issued as a prospectus and includes any] notice, circular, advertisement or other document 21 [inviting deposits from the public or] inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate;

(37) "public company" means a public company as defined in section 3;

(38) "public holiday" means a public holiday within the meaning of the Negotiable Instruments Act, 1881 (26 of 1881):

Provided that no day declared by the Central Government to be a public holiday shall be deemed to be such a holiday, in relation to any meeting, unless the declaration was notified before the issue of the notice convening such meeting;

(39) "recognised stock exchange" means, in relation to any provision of this Act in which it occurs a stock exchange whether in or outside India, which is notified by the Central Government in the Official Gazette as a recognised stock exchange for the purposes of that provision;

(40) "Registrar" means a Registrar, or an Additional, a Joint, a Deputy or an Assistant Registrar, having the duty of registering companies under this Act;

(41) "relative" means, with reference to any person, any one who is related to such person in any of the ways specified in section 6, and no others;

(42) "Schedule" means a Schedule annexed to this Act;

(43) "Scheduled Bank" has the same meaning as in the Reserve Bank of India Act, 1934 (2 of 1934);

22 [***]

23 [(45) "secretary" means a Company Secretary within the meaning of clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) and includes any other individual possessing the prescribed qualifications and appointed to perform the duties which may be performed by a secretary under this Act and any other ministerial or administrative duties;]

24 [(45A)] "secretary in whole-time practice" means a secretary who shall be deemed to be in practice within the meaning of sub-section (2) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) and who is not in full time employment;]

11 [(45AA)] "securities" means securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and includes hybrids;]

25 [45B) "Securities and Exchange Board of India" means the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]

(46) "share" means share in the share capital of a company, and includes stock except where a distinction between stock and shares is expressed or implied;

11 [(46A)] "share with differential rights" means a share that is issued with differential rights in accordance with the provisions of section 86;]

3 [(46AA) "sick industrial company" means an industrial company which has--

(i) the accumulated losses in any financial year equal to fifty per cent, or more of its average net worth during four years immediately preceding such financial year; or

(ii) failed to repay its debts within any three consecutive quarters on demand made in writing for its repayment by a creditor or creditors of such company;

(46AB) "State level institution" means any of the following institutions, namely:--

'(a) the State Financial Corporations established under section 3 or section 3A and institutions notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);

(b) the State Industrial Development Corporations registered under this Act;]

(47) "subsidiary company" or "subsidiary" means a subsidiary company within the meaning of section 4;

(48) "total voting power", in regard to any matter relating to a body corporate, means the total number of votes which may be cast in regard to that matter on a poll at a meeting of such body, if all the members thereof and all other persons, if any, having a right to vote on that matter are present at the meeting, and cast their votes;

(49) "trading corporation" means a trading corporation within the meaning of entries 43 and 44 in List I in the Seventh Schedule to the Constitution;

26 [(49A) "Tribunal" means the National Company Law Tribunal constituted under sub-section (1) of section 10FB;]

(50) "variation" shall include abrogation; and "vary" shall include abrogate.

1. Inserted by Act 53 of 2000, Section 2 (w.e.f. 13-12-2000).

2. Clause (1) renumbered as clause (1A) thereof by Act 53 of 2000, Section 2 (w.e.f. 13-12-2000).

3. Inserted by Act 11 of 2003, Section 2 (w.e.f. 1-4-2003).

4. Clauses (3) and (4) omitted by Act 53, 2000, Section 2 (w.e.f. 13-12-2000).

5. Now the Banking Regulation Act, 1949 (10 of 1949).

6. Substituted by Act 65 of 1960, Section 2 for "does not include a corporation sole" (w.e.f. 28-12-1960).

7. Inserted by Act 31 of 1965, Section 3 (w.e.f. 15-10-1965).

8. Substituted by Act 65 of 1960, Section 2, for clause (9) (w.e.f. 28-12-1960).

9. Inserted by by Act 53 of 1963, Section 2 (w.e.f. 1-1-1964).

10. Substituted by Act 65 of 1960, Section 2, (w.e.f. 28-12-1960).

11. Inserted by Act 53 of 2000, Section 2 (w.e.f. 13-12-2000).

12. Clause (18A) Inserted by Act 41 of 1974, Section 2 (w.e.f. 1-2-1975) and omitted by Act 30 of 1984, Section 52 (w.e.f. 1-8-1984).

13. Clause (20) omitted by Act 62 of 1956, Section 2.

14. Clause (25) omitted by Act 53 of 2000, Section 2 (w.e.f. 13-12-2000).

15. Substituted by Act 65 of 1960, Section 2, for "any powers of management" (w.e.f. 28-12-1960).

16. Inserted by Act 65 of 1960, section 2 (w.e.f. 28-12-1960).

17. Clause (30) Substituted by Act 65 of 1960, Section 2 (w.e.f. 28-12-1960) and again Substituted by Act 53 of 2000, Section 2 (w.e.f. 13-12-2000).

18. Substituted by Act 65 of 1960, Section 2, for "sub-section (1) of section 549 and sub-section (3) of section 550" w.e.f. 28-12-1960.

19. Substituted by Act 11 of 2003, Section 2 for "High Courts" (w.e.f. 1-4-2003).

20. Substituted by Act 65 of 1960, Section 2, for "any prospectus."

21. Inserted by Act 41 of 1974, Section 2 ( w.e.f. 1-2-1975).

22. Clause (44) omitted by Act 53 of 2000, Section 2 (w.e.f. 13-12-2000).

23. Clause (45) Substituted by Act 65 of 1960, Section 2 (w.e.f. 28-12-1960) and again Substituted by Act 31 of 1988, Section 2 (w.e.f. 15-6-1988).

24. Inserted by Act 31 of 1988, Section 2 (w.e.f. 15-6-1988).

25. Inserted by Act 22 of 1996, Section 30 and Schedule (w.r.e.f. 20-9-1995).

26. Clause (49A) omitted by Act 17 of 1967, Section 4 and Schedule (w.e.f. 1-7-1967) and again Inserted by Act 11 of 2003, Section 2 (w.e.f. 1-4-2003).


Section 2A. Interpretation of certain words and expressions

1[ 2A. Interpretation of certain words and expressions

Words and expressions used and not defined in this Act but defined in the Depositories Act, 1996 (22 of 1996) shall have the same meanings respectively assigned to them in that Act.]

1. Inserted by Act 22 of 1996, Section 30 and Schedule (w.r.e.f. 20-9-1995).


Section 3. Definitions of "company", existing company" "private company" and "public company"

(1) In this Act, unless the context otherwise requires, the expressions "company", "existing company", "private company" and "public company" shall, subject to the provisions of sub-section (2), have the meanings specified below:--

(i) "company" means a company formed and registered under this Act or an existing company as defined in clause (ii);

(ii) "existing company" means a company formed and registered under any of the previous companies laws specified below:

(a) Any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866) and repealed by the Act;

(b) The Indian Companies Act, 1866 (10 of 1866);

(c) The Indian Companies Act, 1882 (6 of 1882);

(d) The Indian Companies Act, 1913 (7 of 1933);

(e) The Registration of Transferred Companies Ordinance 1942 (54 of 1942); and

1[(f) Any law corresponding to any of the Acts or the Ordinance aforesaid and in force--

(1) in the merged territories or in a Part BState (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913); or

(2) in the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956),2[in so far as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968) insofar as other corporations are concerned];]

3[(g) the Portugese Commercial Code4[***], in so far as it relates to "sociedades anonimas";]

(iii) "private company"5[means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by its articles,--]

(a) restricts the right to transfer its shares, if any;

(b) limits the number of its members to fifty not including--

(i) persons who are in the employment of the company, and

(ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; and

(c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company:

6[(d) prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives:]

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member;

7[(iv) "public company" means a company which--

(a) is not a private company;

(b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed.

(c) is a private company which is a subsidiary of a company which is not a private company;]

(2) Unless the context otherwise requires, the following companies shall not be included within the scope of any of the expressions defined in clauses (i) to (iv) of sub-section (1), and such companies shall be deemed, for the purposes of this Act, to have been formed and registered outside India:--

(a) a company the registered office whereof is in Burma, Aden or Pakistan and which immediately before the separation of that country from India was a company as defined in clause (i) of sub-section (1);

8[***]

6(3)Every private company, existing on the commencement of Act 53 of 2000, with a paid-up capital of less than one lakh rupees, shall, within a period of two years from such commencement, enhance its paid-up capital to one lakh rupees.

(4) Every public company, existing on the commencement of Act 53 of 2000, with a paid-up capital of less than five lakh rupees, shall within a period of two years from such commencement, enhance its paid-up capital to five lakh rupees.

(5) Where a private company or a public company fails to enhance its paid-up capital in the manner specified in sub-section (3) or sub-section (4), such company shall be deemed to be a defunct company within the meaning of section 560 and its name shall be struck off from the register by the Registrar.

(6) A company registered under section 25 before or after the commencement of Companies (Amendment) Act, 2000 shall not be required to have minimum paid-up capital specified in this section.]

1. Substituted by Act 62 of 1956, Section 2 and Schedule, for clause (f) w.e.f. 1-11-1956.

2. Inserted by Act 25 of 1968 Section 2 and Schedule w.e.f. 15-8-1968.

3. Inserted by Goa, Daman and Diu (Laws) No. 2 Regulation, 1963.

4. The words "Carta Lei of the 11th April, 1901" omitted by Act 52 of 1964, Section 3 and Schedule II (w.e.f. 29-12-1964).

5. Substituted by Act 53 of 2000, Section 3, for "means a company which, by its articles, -" (.w.e.f. 13-12-2000).

6. Inserted by the Companies (Amandment) Act, 2000, Section 3, for "means a company which, by its articles,

7. Substituted by the Companies (Amandment) Act, 2000, Section 3.

8. Clause (b) omitted by Act 62 of 1956, Section 2 and Schedule (w.e.f. 1-11-1956).


Section 4. Meaning of "holding company" and "subsidiary"

(1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if,-

(a) that other controls the composition of its Board of directors; or

1[(b) that other -

(i) where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company;

(ii) where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or]

(c) the first-mentioned company is a subsidiary of any company which is that other's subsidiary.

Illustration

Company Bis a subsidiary of CompanyA,and CompanyCis a subsidiary of Company B.Company C is a subsidiary of Company A,by virtue of clause (c) above. If CompanyD isa subsidiary of Company C, CompanyDwill be a subsidiary of Company Band consequently also of Company A, by virtue of clause (c) above; and so on.

(2) For the purposes of sub-section (1), the composition of a company's Board of directors shall be deemed to be controlled by another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships; but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say:-

(a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such a power as aforesaid;

(b) that a person's appointment thereto follows necessarily from his appointment as director2[***] or manager of, or to any other office or employment in, that other company; or

3[(c) that the directorship is held by an individual nominated by that other company or a subsidiary thereof.]

(3) In determining whether one company is a subsidiary of another,-

(a) any shares held or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it;

(b) subject to the provisions of clauses (c) and (d), any shares held or power exercisable-

(i) by any person as a nominee for that other company (except where that other is concerned only in a fiduciary capacity); or

(ii) by, or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary capacity,

shall be treated as held or exercisable by that other company;

(c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first-mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded;

(d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary [not being held or exercisable as mentioned in clause (c)] shall be treated as not held, or exercisable by that other, if the ordinary business of that other or its subsidiary as the case may be, includes the lending of money and the shares are held or the power is exercisable as aforesaid by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its subsidiary.

(5) In this section, the expression "company" includes any body corporate, and the expression "equity share capital" has the same meaning as in sub-section (2) of section 85.

(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not.

4[(7) A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India.]

1. Substituted by Act 65 of 1960, Section 3, for clause (b) (w.e.f. 28-12-1960).

2. The words ",managing agent, secretaries and treasurers" omitted by the Companies (Amandment) Act, 2000, Section 4.

3. Substituted by Act 65 of 1960, Section 3, for clause (c) (w.e.f. 28-12-1960).

4. Inserted by Act 65 of 1960, Section 3 (w.e.f. 28-12-1960).


Section 4A. Public financial institutions

1 [4A. Public financial institutions. -

(1) Each of the financial institutions specified in this sub-section shall be regarded, for the purposes of this Act, as a public financial institution, namely: -

(i) the Industrial Credit and Investment Corporation of India Limited, a company formed and registered under the Indian Companies Act, 1913 (7 of 1913);

(ii) the Industrial Finance Corporation of India, established under section 3 of the Industrial Finance Corporation Act, 1948 (7 of 1948);

(iii) the Industrial Development Bank of India, established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964);

(iv) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);

(v) the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963);

2 [(vi) the Infrastructure Development Finance Company Limited, a company formed and registered under this Act.]

3 [* * *]

(2) Subject to the provisions of sub-section (1) the Central Government may, by notification in the Official Gazette, specify such other institution as it may think fit to be a public financial institution:

Provided that no institution shall be so specified unless -

(i) it has been established or constituted by or under any Central Act, or

(ii) not less than fifty-one per cent of the paid-up share capital of such institution is held or controlled by the Central Government.]

1. Inserted by Act 41 of 1974, Section 2 w.e.f. 1-2-1975.

2. Inserted by Act 21 of 1999, Section 2 w.r.e.f. 31-10-1998.

3. Omitted by The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act 2004.


Section 5. Meaning of "officer who is in default"

1 [5. Meaning of "officer who is in default"

For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely:-

(a) the managing director or managing directors;

(b) the whole-time director or whole-time directors;

(c) the manager;

(d) the secretary;

(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act;

(f) any person charged by the Board with the responsibility of complying with that provision:

Provided that the person so charged has given his consent in this behalf to the Board;

(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors:

Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form.]

1. Substituted by Act 31 of 1988, Section 3, for Section 5 (w.e.f. 15-7-1988).


Section 6. Meaning of "relative"

1 [6. Meaning of "relative"-

A person shall be deemed to be a relative of another if, and only if, -

(a) they are members of a Hindu undivided family; or

(b) they are husband and wife; or

(c) the one is related to the other in the manner indicated in Schedule IA.]

1. Substituted by Act 65 of 1960, Section 4, for section 6 ( w.e.f. 28-12-1960 ) .


Section 7. Interpretation of "person in accordance with whose directions or instructions directors are accustomed to act"

Except where this Act expressly provides otherwise, a person shall not be deemed to be, within the meaning of any provision in this Act, a person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act, by reason only that the Board acts on advice given by him in a professional capacity.

Section 8. Power of Central Government to declare an establishment not to be a branch office

The Central Government may, by order, declare that in the case of any company,1[***] any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company, or2[any establishment engaged in any production, processing or manufacture], shall not be treated as a branch office of the company for all or any of the purposes of this Act.

1.The words "not being a banking or an insurance company" omitted by Act 65 of 1960, Section 5 (w.e.f. 28-12-1960 ).

2.Substituted by Act 65 of 1960, Section 5, for "any production or manufacture" (w.e.f. 28-12-1960 ).


Section 9. Act to override memorandum, articles, etc.

Save as otherwise expressly provided in the Act

(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and

(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.

Section 10. Jurisdiction of courts

(1) The court having jurisdiction under this Act shall be

(a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and

(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.

(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the court, not being the jurisdiction conferred

(a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive;

(b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (sections 425 to 560) and the other provisions of this Act relating to the winding up of companies.

(3) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up.

Section 10A. Constitution of Tribunal [Repealed]

1 [10A. Constitution of Tribunal

[Repealed by the Companies Tribunal (Abolition) Act, 1967 (17 of 1967). Section 4 and Schedule (w.e.f. 1-7-1967).]]

1. Section 10A to 10D inserted by Act 53 0f 1963, Section 3 (w.e.f. 1-1-1964).