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The Law of digital signature

liability of company to pay income tax shifted to directors in case of default

Liability of the director(s) u/s 179 of the Income Tax Act is towards the amount of “tax” only and not towards “interest” and “penalty”

SANJAY GHAI Vs. ASSTT. CIT & ORS. in W.P.(C) 2303/2012 & 5175/2012 Dated 11.10.2012 (DHC)

Decided in favour of : Assessee

Issue Involved: In this case, the issue involved was that if there is a default on the part of a private limited company in payment of its income tax dues to the Income Tax Department then the liability of the company can be shifted to its director(s) u/s 179 of the Income Tax Act and accordingly, the Income Tax Department can hold the said director(s) liable to pay income tax dues of the company. The question arose as to whether it is the amount of “tax” only that can be shifted upon the director(s) or even other components of income tax demands such as “interest” and “penalty” can also be recovered from the director(s) u/s 179 of the Income Tax Act.

Held : Hon’ble Delhi High Court after analyzing Section 179 and other provisions of the Income Tax Act held that it is the amount of “tax” only which can be recovered form the director(s) u/s 179 and no other demand i.e. “interest” or “penalty” can be recovered from director(s) u/s 179 of the Income Tax Act.

This judgment would provide some relief and mental peace to the director(s) in case their companies have defaulted in payment of income tax dues because in many cases the portion of “interest” and “penalty” becomes much larger than the amount of tax. It is because of the reason that due to time lag the amount of interest becomes very large and penalty can be levied upto 300% of the amount of tax.

Is Trust a Body Corporate?

Can a 'Trust' under the Indian Trusts Act, 1882 be a 'Body Corporate' under the Companies Act, 1956?

Sub-section (7) of Section 2 of the Companies Act, 1956 defines a Body Corporate or Corporation as follows:-

“Body Corporate” or “Corporation” includes a company incorporated outside India but 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.

Institution or body which can be regarded body corporate---- Department’s Circular:---  The question whether a particular institution or body other than that specified in sub-clauses (a), (b) and (c) of clause (7) of section 2 is a “body corporate” under the Companies Act, 1956 has to be decided with reference, among other things, to the status, mode of incorporation, constitution, etc., of the institution. It is not possible for the Department to lay down any general definition other than that given in the Act or to furnish a list of bodies which are deemed to be “bodies corporate” under section 2(7). Generally speaking, the Department would consider that any corporate body, i.e., a body which has been or is incorporated under some statute and which has a perpetual succession, a common seal and is a legal entity apart from the members constituting it, will come within the definition of the term "body corporate".  The term will not, however, include a society registered under the Societies Registration Act, 1860, or any of the bodies which have been specifically excluded by sub-clauses (a), (b) and (c) of clause (7) of section 2. (Circular No. 8(26)/2(7)/63-PR, dated 13-03-1963)

The Supreme Court of India in Ashoka Marketing Ltd v Punjab National Bank, (1990) 4 SCC 406 held that “The expression ‘body corporate’ is used in legal parlance to mean a public or private corporation.”

Further, the Supreme Court of India, in Board of Trustees, Ayurvedic and Unani Tibia College v. State of Delhi, AIR 1962 SC 458 while posing the question as to what is a corporation, the court answered it with the statements contained in HALSBURY 4th Edn., Vol.9, para 1201 as:- “A Corporation may be defined as a body of persons (in the case of a corporation aggregate) or an office (in case of a corporation sole) which is recognized by the law as having a personality which is distinct from the separate personalities of the members of the body or the personality of the individual holder for the time being of the office, in question.”

The Supreme Court of India again in S. P. Mittal v. Union of India, AIR 1983 SC 1, summed up the essential elements in the legal concept of a corporation, which are: “(1) a continuous identity, i.e., the original member or members or his or their successors are one; (2) the persons to be incorporated, (3) the name by which the persons are incorporated, (4) a place, and (5) words sufficient in law to show incorporation. A corporation aggregate can express its will by deed under a common seal.”

Corporation also means any body corporate established by or under Central, Provincial or State Act. It can be brought into existence by a statute.

In legal parlance, a legal person is any subject-matter other than a human being to which the law attributes personality. The law, in creating legal persons, always does so by personifying some real thing. The thing personified may be termed the corpus of the legal person so created; it is the body into which the law infuses the animus of a fictitious personality. Thus a Corporation, being the creation of law is undoubtedly a legal person. It comes into existence by the lawful authority of incorporation. A corporation, having neither soul nor body, cannot act save through the agency of some representative in the world of real men. Whatever a corporation is reputed to do in law is done in fact by the directors or the shareholders as its agents and representatives.

Trust literally means a confidence which one reposes in another. Creation of a Trust is regulated by the Indian Trusts Act, 1882. According to Section 3 of the Act, a Trust is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner. A trust is a curious instance of duplicate ownership which allows for the separation of the powers of management and the rights of enjoyment. Trust property is that which is owned by two persons at the same time, the relation between the two owners being such that one of them is under an obligation to use his ownership for the benefit of the other. The former is called the trustee, and his ownership is trust-ownership; the latter is called the beneficiary, and his is beneficial ownership.

The trustee is destitute of any right of beneficial enjoyment of the trust property. His ownership, therefore, is a matter of form rather than substance, nominal rather than real. If we have regard to the essence of the matter rather than to the form of it, a trustee is not an owner at all, but a mere agent, upon whom the law has conferred the power and imposed the duty of administering the property of another person. In legal theory, however, he is not a mere agent but an owner. He is a person to whom the property of some one else is fictitiously attributed by the law, to the extent that the rights and powers thus vested in a nominal owner shall be used by him for the benefit of the real owner. As between trustee and beneficiary, the law recognizes the truth of the matter; as between two, the property belongs to the latter and not to the former. But as between the trustee and third persons, the fiction prevails. The trustee is clothed with the rights of his beneficiary, and is so enabled to personate or represent him in dealings with the world at large.

The purpose of trusteeship is to protect the rights and interests of persons who for any reason are unable effectively to protect them for themselves. The law vests those rights and interests for safe custody, as it were, in some other person who is capable of guarding them and dealing with them, and who is placed under a legal obligation to use them for the benefit of him to whom they in truth belong.

In a celebrated case, Sir Edward Coke C.J enunciated that the first essential for a valid corporation is a “lawful authority of incorporation”.

The courts in India in various decisions held that the instrument of registration does not by itself lend legal entity to a trust. The Supreme Court of India in AIR 1957 SC 887 (891) held that “A trustee is legal owner of trust property and the property vests in him. He holds trust property for the benefit of beneficiaries but does not hold it on their behalf.

In Duli Chand v Mahabir Prasad etc. Trust AIR 1984 Del 145 (DB) the court observed that a trust is “not like a corporation which has a legal existence of its own and therefore, can appoint an agent. A trust in not in this sense a legal entity. It is possible for some of the trustees to authorize the others to file a suit but this could only be done by the execution of a power of attorney.”

It was also held in H. N. Bhiwandiwala v Zoroastrian Co-op. Bank AIR 2001 Bom 267 that, a suit against a trust is not maintainable as it is not a legal entity. Observed, “all the trustees must be made a party.”

It was further held in N. T. P. C. v Canara Bank (1999) 97 Comp. Cas. 930 at Pages 937-38 that “Trusts created under Indian Trusts Act, 1882 are not legal entities as public trusts registered under the Societies Registration Act are.

It would be pertinent to speak about the section 10 of the Indian Trusts Act, 1882 which provides that every person capable of holding property may be a trustee, but where the trust involves the exercise of discretion, a trustee must be a person competent to contract. Thus there is no statutory prohibition upon the appointment of any person as a trustee, who should be a person capable of taking and holding legal estate, possessed of natural capacity and legal ability to execute the trust, and domiciled within the jurisdiction of the court.

In view of the above discussion as well as the decisions that a Trust is an obligation annexed to the ownership of property and a trustee is a person who accepts a confidence which gives rise to obligation annexed to the ownership of property. But a trust is not a legal entity in the eye of law as it has no lawful authority of incorporation. Generally, the assumption that an entity will behave substantially as expected. Trust may apply only for a specific function. As such a Trust under the Indian Trusts Act, 1882 cannot be a ‘Body Corporate’ under the Companies Act, 1956.

SEBI Updates 10-10-12

Rule 19A of the Securities Contracts (Regulation) Rules, 1957.

Clarification issued: "Public Shareholding" would be computed as "Shares held by public" as a total percentage of "total number of shares held by promoters, promoter group and public." Capital issued outside India will not be be included.

Regulation 26(1) of the SEBI (ICDR) Regulations, 2009

Listed entities coming out with further public offers (FPOs) will not be required to meet the profitability criteria stated in Regulation 26(1) of the SEBI (ICDR) Regulations, 2009. However they will be guided by the provisions of Regulation 27.

This will enable loss making companies to raise funds by way of FPOs.

FDI-Relaxation in Capitalization norms for subsidiaries of foreign owned NBFCs
An NBFC is a Company registered under Companies Act, 1956
engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government,

untraceable shareholders, sale of shares, japan

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Co-operative Dairy Companies Act 1949  022
Commenced: 20 Oct 1949 16   Forfeiture of shares of untraceable shareholders

   16. Forfeiture of shares of untraceable shareholders---(1)  This
 section shall apply in every case where---
   (a) The registered owner for the time being of shares in a company
         registered under this Act---
           (i) Has ceased for the whole of the immediately preceding
         period of 5 years to be a supplying shareholder of the company;
         and
           (ii) Has left his last address known to the company and has no
         agent whose address is known to the company; and
           (iii) In any case where a dividend has been declared by the
         company during the said period of 5 years, has failed to claim
         the said dividend:
   (b) The registered owner for the time being of shares in a company
         registered under this Act has been deceased for more than 5
         years and no application has been made to the company for
         registration of any transmission in respect of the shares and no
         probate or letters of administration in his estate have been
         produced to the company for noting.

   (2) In any case to which this section applies the company may publish
 a notice in 3 consecutive issues of a newspaper circulating in the
 district in which the company operates of its intention to forfeit the
 shares under this section at the expiration of 3 months from the date of
 the first publication of the notice, unless within that time the
 registered owner or his legal personal representative or some person
 claiming to be entitled to the shares establishes to the satisfaction of
 the directors good cause to the contrary. Every such notice shall set
 out the name of the registered owner, the number of shares, and the
 amount paid up thereon.

   (3) Unless within the said period of 3 months the registered owner or
 his legal personal representative or some other person establishes his
 title to the shares to the satisfaction of the directors, the directors
 may by resolution, at any time after the expiration of the said period
 of 3 months, declare the said shares to be forfeited, and, subject to
 the next 2 succeeding subsections, the shares shall thereupon be deemed
 to be forfeited to the company.

   (4) At any time within one year after the passing of a resolution of
 the directors under the last preceding subsection any person claiming to
 be entitled to the shares so forfeited may apply to the Co-operative
 Dairy Companies Tribunal for an order cancelling the forfeiture and
 restoring the shares to the share register of the company. Notice of the
 application shall be served by the applicant on the company at its
 registered office.

   (5) After considering the application the Tribunal shall make such
 order as it considers just and equitable in all the circumstances of the
 case, either dismissing the application or ordering the cancellation of
 the forfeiture and the restoration of the shares to the share register.

   (6) If no application under subsection (4) of this section is made
 within the said period of one year, or if every application made under
 that subsection in respect of those shares is dismissed by the Tribunal,
 the directors may, at any time after the expiration of the said period
 of one year or after all such applications have been dismissed by the
 Tribunal, whichever is the later, reissue or sell the shares on such
 terms as they think fit, and the company may receive the consideration
 given for the shares on the reissue or sale thereof, and may re-allot or
 execute a transfer of those shares in favour of the person to whom the
 shares are reissued or sold as aforesaid, and may register that person
 as the owner thereof. The title of any person so registered as the owner
 of the shares shall not be affected by any irregularity or invalidity in
 the proceedings in reference to the forfeiture, reissue, or sale of the
 shares.

   (7) The powers of forfeiture conferred by the foregoing provisions of
 this section shall be in addition to and not in substitution for any
 other powers which the company may have to forfeit shares.

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nz law on forfeiture of shares of untraceable shareholders

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Co-operative Dairy Companies Act 1949  022
Commenced: 20 Oct 1949 16   Forfeiture of shares of untraceable shareholders

   16. Forfeiture of shares of untraceable shareholders---(1)  This
 section shall apply in every case where---
   (a) The registered owner for the time being of shares in a company
         registered under this Act---
           (i) Has ceased for the whole of the immediately preceding
         period of 5 years to be a supplying shareholder of the company;
         and
           (ii) Has left his last address known to the company and has no
         agent whose address is known to the company; and
           (iii) In any case where a dividend has been declared by the
         company during the said period of 5 years, has failed to claim
         the said dividend:
   (b) The registered owner for the time being of shares in a company
         registered under this Act has been deceased for more than 5
         years and no application has been made to the company for
         registration of any transmission in respect of the shares and no
         probate or letters of administration in his estate have been
         produced to the company for noting.

   (2) In any case to which this section applies the company may publish
 a notice in 3 consecutive issues of a newspaper circulating in the
 district in which the company operates of its intention to forfeit the
 shares under this section at the expiration of 3 months from the date of
 the first publication of the notice, unless within that time the
 registered owner or his legal personal representative or some person
 claiming to be entitled to the shares establishes to the satisfaction of
 the directors good cause to the contrary. Every such notice shall set
 out the name of the registered owner, the number of shares, and the
 amount paid up thereon.

   (3) Unless within the said period of 3 months the registered owner or
 his legal personal representative or some other person establishes his
 title to the shares to the satisfaction of the directors, the directors
 may by resolution, at any time after the expiration of the said period
 of 3 months, declare the said shares to be forfeited, and, subject to
 the next 2 succeeding subsections, the shares shall thereupon be deemed
 to be forfeited to the company.

   (4) At any time within one year after the passing of a resolution of
 the directors under the last preceding subsection any person claiming to
 be entitled to the shares so forfeited may apply to the Co-operative
 Dairy Companies Tribunal for an order cancelling the forfeiture and
 restoring the shares to the share register of the company. Notice of the
 application shall be served by the applicant on the company at its
 registered office.

   (5) After considering the application the Tribunal shall make such
 order as it considers just and equitable in all the circumstances of the
 case, either dismissing the application or ordering the cancellation of
 the forfeiture and the restoration of the shares to the share register.

   (6) If no application under subsection (4) of this section is made
 within the said period of one year, or if every application made under
 that subsection in respect of those shares is dismissed by the Tribunal,
 the directors may, at any time after the expiration of the said period
 of one year or after all such applications have been dismissed by the
 Tribunal, whichever is the later, reissue or sell the shares on such
 terms as they think fit, and the company may receive the consideration
 given for the shares on the reissue or sale thereof, and may re-allot or
 execute a transfer of those shares in favour of the person to whom the
 shares are reissued or sold as aforesaid, and may register that person
 as the owner thereof. The title of any person so registered as the owner
 of the shares shall not be affected by any irregularity or invalidity in
 the proceedings in reference to the forfeiture, reissue, or sale of the
 shares.

   (7) The powers of forfeiture conferred by the foregoing provisions of
 this section shall be in addition to and not in substitution for any
 other powers which the company may have to forfeit shares.

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consolidation of share certificates

I presume the shareholder has given request for consolidating his share certificates.

As you know, on each share certificate, the distinctive number will be written. Basically, Share Certificate number and Distinctive Numbers are different. By changing the share certificate number, the distinctive number wont change.

Lets take your example:

Share certificate No. 12: Distinctive Numbers 101 - 105 - No. of shares 5

Share certificate No. 15: Distinctive Numbers 116 - 120- No. of shares 5

Share certificate No. 18: Distinctive Numbers 131 - 135 - No. of shares 5

The last certificate number of the company would be 20,000.

In this case, for consolidating the aforesaid 3 certificates, first the company should cancel the old share certificates (No. 12, 15 and 18) by writing a remark "canceled due to consolidation on ____" and then issue a new share certificate with No. 20,001. In the new share certificate No. 20,001, you should write all the distinctive numbers (not continuously) 101-105, 116-120, 131-135 and in the total shares "15" will be written.