Utilization of ECB proceeds for Rupee expenditure

RBI/2011-12/539
A. P. (DIR Series) Circular No.119	May 7, 2012

To

All Category-I Authorised Dealer Banks

Madam / Sir,

External Commercial Borrowings (ECB) Policy - Utilization of ECB proceeds for Rupee expenditure

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to  A.P.  (DIR Series) Circular No. 5 dated August 1, 2005 and  A.P. (DIR Series) Circular

 No. 52 dated November 23, 2011 relating to External Commercial Borrowings.

2.            As per the extant guidelines, ECB proceeds can be utilized for permissible foreign currency expenditure and Rupee expenditure. On a review, it has been decided that at the time of availing Loan Registration Number (LRN) from the Reserve Bank, borrowers should provide bifurcation of the utilization of the ECB proceeds towards foreign currency and Rupee expenditure in Form-83.

3.            The  primary  responsibility  to  ensure  that  the  ECB  proceeds  meant  for

Rupee expenditure in India are repatriated to India for credit to their Rupee accounts with AD Category- I banks in India as per A.P. (DIR Series) Circular No.

52    dated November 23, 2011 is that of the borrower concerned and any contravention of the ECB guidelines will be viewed seriously and will invite penal action under the Foreign Exchange Management Act (FEMA), 1999. The designated AD bank is also required to ensure that the ECB proceeds meant for

Rupee expenditure are repatriated to India immediately after drawdown.

4.            The modifications to the ECB policy will come into force with immediate effect and subject to review. All other aspects of the ECB policy shall remain unchanged.

5.            AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Rashmi Fauzdar)

Chief General Manager

 

link for the notification 

Reports on Section 295 (Loan to Directors)

Reports on Section 295 (Loan to Directors)

1.      295        Making of loans, or to give guarantee or to provide

                    security to directors or their related parties.

Rational Behind prohibition of loan to directors: the object of this enlargement of the scope of the present section is to cover loans given to those companies which although registered as public companies, are really private companies. A director of the lending Company may not be ostensible be associated with the management of the borrowing company but he may be the moving spirit behind it.

Restrictions on providing loan to a director or to a person connected with a director: Section 295 put restrictions on a public company or a private company being a subsidiary of a public company intending to make any type of transaction with a director of the company or partner or relative of a director, etc. whether, directly or indirectly to make any loan, or to give any guarantee, or to provide any security in connection with a loan made by any other person to, or to any other person by, and it calls for obtaining the previous approval of the Central Government.

1. Section 295 (Loan to Directors)

Section 295 provides that:

(1) Save as otherwise provided in sub-section (2) no company (hereinafter in this section referred to as "the lending company") without obtaining the previous approval of the Central Government in that behalf shall, directly or indirectly, make any loan to, or give any guarantee, or provide any security in connection with a loan made by any other person to, or to any other person by,—

(a) any director of the lending company, or of a company which is its holding company, or any partner, or relative of any such director;

(b)   any firm in which any such director or relative is a partner;

(c)   any private company of which any such director is a director or member;

(d)  any body corporate at a general meeting of which not less than twenty-five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or

(e)  any body corporate, the Board of directors, managing director or manager     whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

(2)  Sub-section (1) shall not apply to—

(a)   any loan made, guarantee given, or security provided—

(i) by a private company unless it is a subsidiary of a public         company, or (ii) by a banking company;

(b)   any loan made by a holding company to its subsidiary company;

(c)    any guarantee given, or security provided by a holding company in respect of any loan made to its subsidiary company.

3.Where any loan made, guarantee given, or security provided by a lending company and outstanding at the commencement of this Act could not have been made, given or provided, without the previous approval of the Central Government, if this section had then been in force, the lending company shall, within six months from the commencement of this Act or such further time not exceeding six months as the Central Government may grant for that purpose, either obtain the approval of the Central Government to the transaction or enforce the repayment of the loan made, or in connection with which the guarantee was given or the security was provided, notwithstanding any agreement to the contrary.

4. Every person who is knowingly a party to any contravention of sub-section (1) or (3), including in particular any person to whom the loan is made or who has taken the loan in respect of which the guarantee is given, or the security is provided, shall be punishable either with fine which may extend to fifty thousand rupees or with simple imprisonment for a term which may extend to six months:

Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been repaid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.

(5) All persons who are knowingly parties to any contravention of sub-section (1)

 or (3) shall be liable, jointly and severally, to the lending company for the repayment of the loan or for making good the sum which the lending company may have been called upon to pay in virtue of the guarantee given or the security provided by such company.

(6) No officer of the lending company or of the borrowing body corporate shall be punishable under sub-section (4) or shall incur the liability referred to it sub-section (5) in respect of any loan made, guarantee given, or security provided after the 1st day of April, 1956 in contravention of clause (d) or (e) of sub-section (1) unless at the time when the loan was made, the guarantee was given, or the security was provided by the lending company, he knew or had express notice that clause was being contravened thereby.

3.      Applicability

Section 295 is applicable to a public company or a private company, which is a subsidiary of a public company. Therefore, a private company shall be exempted from the provisions of section 295 of the Act.

Section 295 applies to the loans, etc. given by a company 'directly or indirectly'. Indirect loan means that the company shall not give a loan through the agency of one or more intermediaries; the word 'indirectly' in the section cannot be read as converting what is not a loan into a loan. As such, a debt, which is not in the nature of loan cannot be said to be the case of an indirect loan. Fredie Ardeshir Mehta (Dr.) v Union of India (1989) 2 CLA 244 (Bom): (1991) 70 Comp Cas 210 (Bom): (1991) 1 Comp LJ 437 (Bom)]

3. Exemption

Following companies are exempted from provisions of section 295 and these companies can give loan to their directors without the approval of Central Government:

(a) Private Company which is not a subsidiary of public company; (b) Banking Company;

(c)   Government Company'

(d)   Loan made by holding company to its subsidiary company;

(e) Guarantee given or security provided by holding company in respect of any loan made to its subsidiary company.

4. Persons covered under section 295

The section has wider scope and any transaction with the following types of persons by a public company or a private company which is a subsidiary of a public company shall be within the purview of section:—

(a) any director of the lending company; (b) any director of the holding company; (c) any partner of any such director; (d) any relative of any such director;

(e)   any firm in which any such director is a partner;

(f) any firm in which a relative of such a director is a partner; (g) any private company of which any such director is a director; (h) any private company of which any such director is a member;

(i) any body corporate of which not less than 25% of the total voting power may be exercised or controlled at a general meeting by any director or by two or more directors together; and

(j) any body corporate, the Board of directors, managing director or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

5. Non-applicability of the provisions of section 295

Any transaction of making any loan or giving any guarantee or providing any security in connection with a loan made by any other person to, or to any other person will not apply on:—

1.     any loan made to an employee of the company, who is not a relative of any director;

2.     any loan or advance made to a trust in which directors are trustees;

3.     any quasi-loan;

4.     any advance or deposit made in connection with leasing/hire-purchase transaction;

5.     any advance payment of salary given to an employee who is a relative of a director as per the rules of the company; [M.R. Electronic Components Ltd. v Asst. Registrar of Companies (1987) 61 Comp Cas 8 (Mad)]

6.     any investment made in acquiring residential accommodation for director(s) (whether by way of purchase or entering into a lease agreement);

7.     house building loan given to a director subject to the guidelines issued for that purpose by the Central Government;

8.     any loan made to a Registered Co-operative Society;

9.     any loan given by a holding company to any director of its subsidiary company;

10.    advance given for services to be rendered or goods to be supplied provided it is reasonable and commensurate with the services to be rendered or goods to be supplied;

11.    section 295(1) does not apply to a government company provided that such company has obtained the approval of the Ministry or Department of the Central Government, which is administratively in charge of the company, or as the case may be or the State Government.

6. Requirement for obtaining previous approval of the Central Government

Previous approval of the Central Government (Ministry of Corporate Affairs) is required before making any loan or giving any guarantee or providing security in connection with any loan.

security was provided by the lending company, he knew or had express notice that clause was being contravened thereby.

Department clarification:

The issue relating to applicability of section 295/370, in respect of inter corporate deposits has been reconsidered in this department in consultation with the law ministry that deposit kept by one Company with another company is “Loan” as envisaged under section 295/ 370 (Section 370 is substituted by section 372A) of the Companies Act, 1956, and therefore the provision of section 370 of the Companies Act,1956 are attracted in such a case. In this connection, your attention is invited to the decision of the Rajasthan high court in Totalal v.State, AIR 1963 Raj {press note dated 04.06.1985 ;( 1986)59 com cases (St) 8}

Thanking You

Prashant Kumar Kesharwani

Company Secretary

GAAR application deferred by a year, amendments to provisions announced

NEW DELHI: After weeks of protest by both foreign and Indian investors, FM Pranab Mukherjee on Monday announced that the General Anti-Avoidance Rules (GAAR) will be applied from 2013-14 onwards, deferring its application by a year.

Speaking on amendments in the Finance Bill in parliament, Mukherjee also said the onus of proof will lie with the tax authorites and that the proposed retrospective amendment of income tax laws will not override DTAAs with 82 countries.

Along with the announcement of the introduction of an independent member in the GAAR panel, Mukherjee also proposed an STT of 0.2% on the sale of unlisted securities.

"To provide greater clarity and certainty in the matters relating to GAAR, a committee has been constituted under the chairmanship of Director General of Income Tax to give recommendations for formulating the rules and guideline for implementation of GAAR provision and to suggest safeguards so that the provisions are not applied indiscriminately," Mukherjee said.

The Finance Minister also said that the capital gains tax on private equity will be halved to 10 per cent.

Dinesh Kanabar, Deputy CEO and Chairman-Tax, KPMG told ET Now that few things that the Finance Minister said in his speech are very critical.

"First, pushing back of GAAR by a year but more important is this proposal to set up a committee to examine the provisions of GAAR. The reason why it is important is that when GAAR was put together in this Finance Bill there were already certain recommendations made by the standing committee, which had suggested how GAAR should be actually implemented," he said.

Radhika Rao, Economist, said, "These comments should provide short-term relief to the domestic markets, however, the decision to put the onus on tax authorities to prove liabilities could infuse some extent of ambiguity and subjectivity into the proposals. For now, the markets will cheer clarity on the provisions and deferment of the implementation date."

A deferment of GAAR can perk up sentiment in general, but the overall mood towards emerging markets is so weak there may not be a flood of investments, says Abheek Barua, chief economist, HDFC Bank. Under the GAAR regime, authorities can deny tax benefit to any arrangement that is entered into primarily to avoid tax. The rule will almost certainly tax foreign institutional investors that route portfolio investments into India through token operations in Mauritius with which India has a tax treaty.

Avalanche of Criticism

India's economic growth dropped to its lowest after the 2008 financial crisis, expanding just 6.1% for the quarter ended December 31, 2011, way below the near-9% between 2004 and 2008. Capital formation growth has turned negative while the current account deficit is close to 4%, regarded as a danger zone by economists.

On Friday, a slowdown in capital flows prompted the Reserve Bank of India to raise the interest rates banks can offer nonresident Indians to encourage them to bring in dollars. The Sensex ended below the 17,000 mark for the first time since January 24, 2012, closing at 16,831 -down 320 points.

The avalanche of criticism has evoked a mix of incredulity and anger among finance ministry mandarins. "There is an attempt to pull India down. It is fashionable to criticise the government," said Economic Affairs Secretary R Gopalan, who nonetheless conceded that inflows will have to increase and investors reassured. "We will talk to foreign investors," he told ET in an interview on May 2. Another finance ministry official described the barrage of criticism as an attempt to 'blackmail', in which the media has been complicit.


Link from ET for the news

EPFO close to finalise plan to provide portable provident fund account numbers to organised workers

 Organised workers may soon be able to maintain their retirement savings while changing jobs because the Employees' Provident Fund Organisation is close to finalising a plan to provide portable account numbers.

The EPFO has dumped its earlier plan of providing a separate unique number to each of its 48 million subscribers. It will instead allow the subscribers to tag the provident fund accounts with their existing permanent account number, unique identification number or national population register number.

A high-powered committee, headed by the Central Provident Fund Commissioner RC Mishra and comprising senior officials from the Unique Identification Authority of India and the ministries of information technology and labour, is in the process of shortlisting a consultant to implement the initiative."The broad contours of the proposal have been finalised by the committee. We are hopeful that all required infrastructure would be in place within the next few months and the project can be implemented by the beginning of the new fiscal," said an official who did not wish to be named.

The portable number will not just help employees retain their accounts when they change jobs but also serve as the reference number for claiming pension and other related benefits.

The EPFO wants to give employees an option of choosing between three existing unique numbers so that no subscriber gets left out. "There may be many that have just one of the three. By giving a choice, we will ensure that all our subscribers get covered. Gradually, we may move to just one number," the official said.

Once a consultant is appointed, the EPFO will follow its advice for business process re-engineering to redesign the workflow within the organisation. "All existing PF numbers will have to be replaced by the portable number. Employers will be able to do it on their own online. We will develop a software for that," the official said.

The EPFO plans to implement the initiative straightaway by using the best software. The project will cost the government about 200 crore, an amount that the EPFO says is a pittance compared with the savings that it will lead to.

"More than 80% of our workload would come down as we do not have to spend time towards claim settlement. We could channelise this time towards other work and make the office more efficient," the official said.

The EPFO hopes that cases of premature withdrawal will recede once the portable number is implemented. In a pilot study conducted at its Karnal office, it found that over 30.2% subscribers withdrew their PF within a year of joining service while 54.3% did so by the end of the second year. "This happens because employees find withdrawal of PF money an easier option than getting their accounts transferred once they change jobs. All this is going to change soon," the official said.

The organisation processes more than six million claims every year. It manages over 3,00,000 crore of employees' deposits and receives incremental deposits ranging between 25,000 crore and 30,000 crore every year.

Link for the News from TOI 

EPFO is introducing Electronic Challan cum Return (ECR) from April, 2012

EMPLOYEES’ PROVIDENT FUND ORGANISATION
(Ministry of Labour & Employment, Govt. of India)

Attention
All Establishments covered under EPF


EPFO is introducing Electronic Challan cum Return (ECR) from April, 2012
remittance of contributions by all employers with a view to provide:-

1.  Greater transparency.
2.  Better quality of service to Employees.
3. Greater convenience and ease to Employers.

Advantages to all stakeholders:

 Automatic updation of accounts on receipt of contribution by EPFO.
 Employers can download Annual Accounts slips for their employees for the year
2010-2011 onwards from our website.
 No need to file returns in Form 5, 10, 12A, 3A, 6A by employer of un-exempted
establishment and 3PS, 4PS, 5PS, 6PS, 7PS, 8PS by the employees of PF
Exempted Establishment
.
 No need for annual updation of accounts.
 Members can get the detailed account statements with all credit and debit on
request through our website w.e.f. 1st May 2012 (after launching of Member e-
Sewa)

Action by Employers:

 Employers/Authorized Signatory are required to register their establishment on
EPFO website www.epfindia.gov.in for their user ID and Password with effect
from 20th March, 2012 for filing the Electronic Challan cum Return (ECR) for
wage month of March 2012 (payable in April 2012) onward.
For further details and steps to be followed for depositing contributions through ECR,

Link for the News

WHO CAN FILE PETITION FOR WINDING UP

  

WHO CAN FILE PETITION FOR WINDING UP

Section 439 provides that an application to the Court for the winding up of a company can be made:—

(a) by the company;

(b) by any creditor or creditors, including any contingent or prospective              Creditor or creditors;

(c) by any contributory or contributories;

(d) by all or any of the parties at (a), (b) and (c), whether together Or separately;

(e) by the Registrar of Companies;

(f) by any person authorised by the Central Government as a result of investigation carried out on the affairs of a company pursuant to section 237;

(g) by the Central Government or a State Government, in a case falling under clause (h) of section 433

By a creditor or creditors

Any creditor or creditors of the company may present a petition to the Court for winding up, alleging that the company is unable to pay the debts of the creditor in the manner specified in section 433 or 434. The Court will ascertain the wishes of a majority of the creditors and where the majority  oppose the petition, the Court will not make the order.

The Court can direct winding up of a Company even if the petition is filed at the instance of a single creditor. A petition for winding up can be presented by a contingent or prospective creditor and it is for the Court to satisfy itself about the eligibility of such person to present a petition.

A debenture holder is a creditor of a company and entitled to present a petition for winding up of the company subject to the terms of covenants contained in the terms of the debenture. [Narotamdas Trikamdas Toprani v Bombay Dyeing & Manufacturing Co. Ltd (1990) 68 Comp Cas 300 (Bom): (1986) 3 Comp LJ 179 (Bom)]

The person guaranteeing loans granted to the company is entitled to move a petition seeking winding up. [Kermeen Foods (P) Ltd, In re (1984) 56 Comp Cas 445 (Guj)]

CREDITORS' VOLUNTARY WINDING UP

Section 498 provides that where the liquidator is of the opinion that the company will not be able to pay its debts in full, it will be considered as the creditors' voluntary winding up and not a members' voluntary winding up and he shall summon a meeting of the creditors as per section 495 of the Companies Act.

Meeting of Creditors

Section 500 of the Act provides that on the same day or the day following the day of the general meeting at which the resolution for voluntary liquidation is proposed as per section 484, a meeting of the creditors will be held. The notice of the meeting of the creditors will be advertised in the Official Gazette and also in two newspapers circulating in the district where the registered office of the company is situated.

At the creditors' meeting the Board shall place before the meeting a statement of the position of the company's affairs together with a list of creditors of the company and the amounts of their claims.

The meeting will be presided over by one of the directors. If the director did not turn up, the creditors could appoint their own nominee to preside over their meeting.

If default is made in complying with the provision, the company, its Board or the director entrusted with the duty of presiding over the meeting shall each be punishable with fine upto Rs. 10,000 and in case of default by the company, every officer who is in default shall be liable to the like punishment.

Adjournment of the Meeting

If the meeting of the company is adjourned and the resolution for voluntary winding up is passed at the adjourned meeting, any resolution passed at the meeting of creditors shall have effect as if it had been passed immediately after the passing of the resolution for winding up of the company.

Notice of resolution passed by creditors' meeting shall be given to the Registrar

In compliance with the provisions of section 501 of the Act, the notice of the resolution passed at the meeting of creditors in accordance with the provisions of section 500 shall be given by the Company to the Registrar with the e-Form 23 electronically within 10 days of passing.

In case if default is made, by the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs. 500 for every day during which the default continues. For the purpose of this section the liquidator of the Company shall be deemed to be an officer of the Company.

Appointment of liquidator

Section 502 gives powers to the members and the creditors to nominate different person to be liquidator at their respective meetings and where they do so, the person nominated by the creditors shall be the liquidator. However, where there is difference of opinion, any director, member or a creditor may move to the Court within 7 days of the nomination made by the creditors for an order regarding nomination of liquidator and the Court may direct that the person nominated by the members will be the liquidator or he may act jointly with the person nominated by the creditors or the Court may also appoint the Official Liquidator to be the liquidator.

Appointment of Committee of Inspection

The creditors at their first meeting or at any subsequent meeting appoint a Committee of Inspection consisting of not more than five persons. The members of the company in the meeting where the resolution for voluntary winding up is passed or at a subsequent meeting may also appoint such number of persons not exceeding five to act as members of the committee. The creditors in a meeting have the power to resolve that all or any the persons appointed by the company shall not be members. But the Court, on an application made to it, may appoint other person to the Committee in place of the persons nominated by the creditors. [Section 503]

Body corporate may be appointed as liquidator

Section 513 makes restrictions on the appointment of body corporate as Liquidator in case of a voluntary winding up.

A proviso to sub-section (3) of section 513 provides that notwithstanding anything contained in any other law for the time being in force a body corporate consisting of such professionals as may be approved by the Central Government from time to time shall be qualified for appointment as Official Liquidator under section 448 of the Companies Act, 1956.

Fixation of remuneration of liquidators

The Committee of Inspection or where there is no such Committee, the creditors may fix the remuneration to be paid to the liquidators. Where it is not so fixed, the Court may fix the same.

Duty of liquidator to call meetings of the company and its creditors

                                                         

Section 508 provides that in a creditors' voluntary winding up, the liquidator shall call a meeting of members and a meeting of creditors at the end of every year from the date of commencement of winding up which will be held not later than three months from the end of the year or such longer time as the Central Government may allow. The liquidator shall place before the meeting all details of the winding up.

Power of Court to appoint or remove liquidator

Where in a voluntary winding up there is no Liquidator acting due to any reason whatsoever, the Court may appoint the Official Liquidator or any other person as the liquidator. On a cause being shown, the Court may remove a liquidator and appoint the Official Liquidator or any other person as the liquidator. The Registrar may also apply to the Court in this regard. If the Official Liquidator is appointed as liquidator under the proviso to sub-section (2) of section 502 or section 515, the remuneration shall be fixed by the Court and shall be credited to the Central Government.

Arrangements binding on company if approved by the members

Any arrangement regarding winding up between the company and its creditors shall be binding on the company and the creditors if it is approved by a special resolution of the company in general meeting and by three -fourths in number and value of the creditors. Such arrangement is appealable to the Court by any creditor or contributory within three weeks from the completion of the arrangement.

Powers of High Court in creditors voluntary winding up

In a voluntary winding up, the liquidator or any contributory or any creditor may apply to the Court to determine any question arising in winding up or to exercise any power to set aside any attachment or distress against the company or the staying of the proceeding of winding up or the enforcing of calls or any of the powers which the Court may exercise if the company were being wound up by the Court.

Copy of the order of the Court staying the winding up will be filed by the company with the Registrar.

Report of the liquidator and issuance of Order by Court for public examination

The Liquidator may, during the course of winding up, make a report to the Court stating that in his opinion a fraud had been committed by:

(i)    any person in the promotion or formation of the company or

(ii)    any officer of the company in relation to the company since its formation.

After considering the report, the Court may direct that the concerned person shall attend before the Court and will be examined in public on a day named in the order.

Final meeting and dissolution

In terms of the provisions of section 509, as soon as the affairs of the company are wound up, the liquidator shall make up an account showing how the winding up has been conducted and how the property has been disposed of. The liquidator shall call a general meeting of members and a general meeting of creditors by publishing a notice in the Official Gazette at least one month before the meeting and also in some newspapers circulating in the district where the registered office is situated, at least one month in advance.

Return to the Registrar and the Official Liquidator

The liquidator shall, within one week after the date of the meetings or where the meetings are held in different dates, within one week of the second meeting, send to the registrar and the official liquidator a copy each of the account placed before the meetings of members and creditors and also a return of the holding of the meetings. If quorum is not present at either of the meeting, that fact must also be intimated to the said two officers within one week of the said meeting. The official liquidator will report the matter to the Court and submit a report whether the affairs of the company have not been conducted prejudicial to the interests of members or public interest. Action similar to the action taken in a members' voluntary winding up as explained above is taken by the Court in dissolving the company.

Procedure for members' voluntary winding up

The company which proposes to proceed for voluntary winding up its affairs is required to comply with the following procedure for effective voluntary winding up:—

Convene a Board meeting by issuing notice to all the directors of the company as per provisions of section 286.

Within five weeks, immediately preceding the date of resolution for winding up, make sure that the company can pay its debts in full within a period of three years, if the company is put to liquidation and make a declaration therein to this effect in Form 149 prescribed under rule 313 of the Companies (Court) Rules, 1959. The declaration should also be verified by an affidavit.

Ensure that the aforesaid declaration is accompanied by:—

(i) the audited balance sheet and the profit and loss account ending on the latest practicable date before the date of declaration;

(ii)    a statement of the company's assets and liabilities as at that date; and

(iii) a copy of the report of the auditors of the company on the above two documents. [Section 488(2)]

Approve in the said Board meeting the draft of the resolution for putting the company into members' voluntary winding up, appointing liquidator(s) and fixing his/their remuneration and it should also fix the date, time, place and agenda of the general meeting. [Sections 484 and 490]

If the winding up takes place as per the period or event determined in the articles of association, then the resolution required will be an ordinary resolution, otherwise a special resolution will be required. [Section 484(1)]

Confirm that a body corporate is not appointed as a liquidator. [Section 513]

The declaration mentioned in Item No. 2 above should be duly verified by an affidavit before a Judicial Magistrate and deliver the same with the concerned Registrar, with the e-Form 62 before the general meeting is held for passing the resolution for winding up. [Section 488(2)(a)]

Issue notices for the general meeting (not less than 21 days before the meeting) in writing proposing the ordinary or special resolution, as the case may be, with suitable explanatory statement. [Section 484(1)(a) and (b)] (Appendix 2)

Hold the general meeting and pass the ordinary resolution by ordinary majority or special resolution by 3/4th majority for winding up as the case may be.

It should be noted carefully that the winding up shall commence from the date and time of passing the requisite resolution by the members at their meeting.

In case of the listed company, forward promptly to all the stock exchanges in which the company is listed, 6 copies of notice and a copy of the proceedings of the general meeting.

Within 10 days of the passing of the resolution, file a notice with the e-Form 62 electronically with the concerned Registrar for the appointment of liquidator after paying a requisite fee as prescribed under Schedule X to the Companies Act, 1956 in the prescribed manner.

Submit to the liquidator a statement on the company's affairs in the prescribed form in duplicate, duly verified in e-Form 58 within 21 days from the commencement of winding up.

File the certified copies of the special or ordinary resolution as the case may be for winding up alongwith the explanatory statement with the concerned Registrar within 30 days of its passing in e-Form 23 with the requisite fees as per Schedule X of the Act.

Within 14 days of passing of the resolution for voluntary winding up, give a notice of the resolution in the Official Gazette and also advertise at least in two newspapers, one in English and one in local language circulating in the district where the registered office of the company is situated. [Section 485(1)]

In case of a listed company, forward promptly to the stock exchange with which the company is listed, 6 copies of the resolution advertised as above.

Confirm that the liquidator files a notice of his appointment with the concerned Registrar together with the e-Form 62 in Form 152 of the Companies (Court) Rules, 1959, and publish the same in the Official Gazette in Form 151 of the said rules within 30 days of his appointment. [Section 516 and rule 315 of Companies (Court) Rules, 1959]

Also confirm that the liquidator gives notice of his appointment to the Income Tax Commissioner having jurisdiction on the company within 30 days of his appointment. [Section 178 of the Income-tax Act, 1961]

If vacancy occurs by death, resignation or otherwise in the office of the liquidator, call a general meeting to fill up the vacancy and also inform to the concerned Registrar about the vacancy and repeat the formalities as in items 12, 15 and 17 hereof.

If the liquidator at any time form an opinion that the company will not be able to pay its debts in full within the period stated in the declaration of solvency or that the period has expired without

the debts having been paid in full, he has to summon forthwith a meeting of the creditors, and lay before the meeting a statement of the assets and liabilities of the company in Form 150 of the Companies (Court) Rules, 1959. [Section 495 and rule 314 of the Companies (Court) Rules, 1959]

In case if the process of winding up continues for more than a year, liquidator shall call a general meeting within 3 months from the end of every year from the date of commencement of winding up, or within such longer period as the Central Government may allow and lay before the meeting the account of his acts and dealings together with the statements in Form 153 of the Companies (Court) Rules, 1959, and duly verified in Form 154 of the said Rules. [Section 496]

Where the case falls under item 21, the meeting of creditors is also required to be like wisely called except, in case of the meeting at the end of the first year where the same shall not be required to be called unless the meeting held under item 20 hereof has been held more than 3 months before the end of the year. [Rule 328 of the Companies (Court) Rules, 1959 and section 498]

If the winding up is not concluded within a year after its commencement then the liquidator shall file a statement with the concerned with the e-Form 62 electronically Registrar twice in every year. [Rule 327 of the Companies (Court) Rules, 1959]

The first year's statement should be duly audited for the full year, that is the period commencing from the appointment of the liquidator to the end of twelve months, from the commencement of winding up and thereafter subsequent statement in every 6 months. [Form 153 of the Companies (Court) Rules, 1959]

The aforesaid 2 statements should be duly verified in Form 154 of the said Rules and file the same with the concerned Registrar, electronically with the e-Form 62 within 12 months from the end of the year. [Rule 327 of the Companies (Court) Rules, 1959 and section 551]

The auditor's report should be in the form as agreed to between the Government and the Institute of Chartered Accountants of India, a draft of which may be taken from the concerned Registrar.

Even where there is no receipt and payment, the aforesaid statement is required to be filed stating this fact.

Complete the winding up by realising all assets and paying of all liabilities and returning the share capital and surplus, if any.

The provisions of sections 426 to 432, 452, 487, 491, 511, 511A, 512, 514, 515, 517 to 520, 528 to 549 and 553 to 556 and the prescribed forms and Rules of the Companies (Court) Rules, 1959, should also be noted in this respect.

As soon as affairs of the company are fully wound up, prepare the liquidators account of the winding up in Form 156 of the Companies (Court) Rules, 1959 and get the same audited as stated in Item No. 20 above. [Section 497]

Call the final general meeting by giving notice in Form 155 of the Companies (Court) Rules, 1959. The notice has to be given not less than 1 month before the meeting in the Official Gazette and should also give advertisement in some newspaper circulating in the district where the Registered Office of the company is situated. [Section 497]

If the case falls in Item No. 20 hereof then call the creditors meeting also. [Section 498]

The company should also pass the special resolution for disposal of the books and papers of the company when the affairs of the company are completely wound up and it is about to be dissolved. [Section 550]

Within a week of the final meeting (and where the case falls within item 16 then within a week of members' meeting or the creditors' meeting, whichever is held later), file a copy of the above account with the concerned Registrar with the e-Form 62 electronically as well as with the Official Liquidator and file a return to each of them in Form 157 of the Companies (Court) Rules, 1959.

If required quorum is not present, in the aforesaid meeting, file a return in Form 158 of the Companies (Court) Rules, 1959. [Rule 331 of the Companies (Court) Rules, 1959]

The Registrar, on receiving the account and either the return mentioned in sub-section (3) of section 497, or the return mentioned in sub-section (4) of section 497, shall forthwith register them. [Section 497(5)]

The Official Liquidator, on receiving the account and either the return mentioned in sub-section

(3) of section 497, or the return mentioned in sub-section (4) of section 497, shall as soon as may be, make a scrutiny of books and papers of the company and the liquidator and all officers, past or present, of the company shall give the Official Liquidator all reasonable facilities to do so.

If on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interest of its members or to the public interest, then, from the date of the submission of the report to the Court, the company shall be deemed to be dissolved. [Section 497(6)]

If on such scrutiny the Official Liquidator makes a report to the Court that the affairs of the company have been conducted in a manner prejudicial, as aforesaid, the Court shall by an order direct to the Official Liquidator to make further investigations of the affairs of the company and for that purpose shall vest him with all such powers as the Court may deem fit. [Section 497(6A)]

On receipt of the report of the Official Liquidator on such further investigation, the Court may either make an order that the company shall stand dissolved with effect from the date to be specified by the Court therein or make such other order as per the circumstances of the case brought out in the report. [Section 497(6B)]

File the special resolution mentioned in item 32 with the concerned Registrar within thirty days of passing in the e-Form 23 electronically after paying the requisite fee prescribed under Schedule X to the Companies Act, 1956 in the prescribed manner.

The Court may in a fit case declare the dissolution void within two years of the date of dissolution on application by the liquidator of the company or by any other person who appears to the Court to be interested.

A person who obtains the said order of the Court shall file the certified copy of the Court's order with the Registrar in the e-Form 21 electronically within 30 days or such further time as may be allowed by the Court after paying the requisite fee prescribed under Schedule X to of the Companies Act, 1956 in the prescribed manner.

Authority to dispose of property after commencement of winding up

In case of Orkay Industries Ltd. v State of Maharashtra (1999) 32 CLA 94 (Bom), it was held that section 536(2) would come into play and there could be no disposition of property after issuance of order for winding up or appointment of provisional liquidator by the Court and transaction relating to payment to creditors would not been wide immediately on presentation of petition for winding up.

45. Disposition made during interregnum not null and void

It is difficult to lay down that all disposition of property made by a company during the interregnum between the presentation of a petition for winding up and the passing of the order for winding up would be null and void. If such a view is taken the business of the company would be paralyzed for, the company may have to deal with very many day-to -day transactions, make payments of salary to the staff and meet urgent contingencies. If any such view is adopted, a fraudulent company may deceive any bona fide person transacting business with the company by stage-managing a petition to be presented for winding up in order to defeat such bona fide customers.

46. Cheque issued after presentation of winding up petition does not amount to disposition of the company's property

When once it is held that payment is not void ab initio the company cannot contend that it is legally forbidden from making payment of the cheque amount when the payee regarding dishonor of the cheque issued notice. A cheque can be an order on the banker to pay the amount to the holder thereof and no disposition of property would take place until the banker makes the payment pursuant thereto. At the most drawing of a cheque can be considered as a step towards disposition of property but that is insufficient to amount to disposition of property. [Pankaj Mehra v State of Maharashtra (2000) 100 Comp Cas 417 (SC): (2000) 36 CLA 316 (SC)]