Annual General Meeting and other Meetings - Companies Act 2013

 Q. Discuss the different kinds of meeting held by company. What is the importance of Annual General Meeting? [2016 - 20 marks]

Q. Short note on Annual General Meeting [2017, 2018 - 4 marks]


Kinds of meeting held by companies

Various kinds of meetings are conducted by the companies. These can be categorized as below:


1. Annual General Meeting

2. Extraordinary General Meeting

3. Statutory Meeting

4. Board Meeting

5. Meeting of the Debenture Holders


1. Annual General Meeting

The Companies Act 2013 by its section 96 makes it mandatory to hold Annual General Meeting (AGM) of the shareholders every year.  The company must give a clear 21 days’ notice to its members for calling the AGM. The notice should mention the place, the date and day of the meeting, and the hour at which the meeting is scheduled. The notice should also mention the business to be conducted at the AGM.


In case of Private Ltd company there should be at least 2 members present in the AGM. In case of Public limited company quorum should be as follows:

(i) at least 5 members present if the number of members is within 1000

(ii) at least 15 members present if the number of members is between 1000 to 5000

(iii) at least 30 members present if the number of members is more than 5000


2. Extraordinary General Meeting (EOGM)

All general meetings other than the AGM and Statutory meetings are called Extraordinary General Meetings. These meetings are convened to deal with all the extraordinary matters, which fall outside the usual business of the Annual General Meetings. Every business transacted at these meetings is called Special Business.

3. Statutory Meeting

The Companies Act, 2013 provides that every public company should hold a meeting of the shareholders within 6 months but not earlier than one month from the date of commencement of business of the company. 

Usually, the statutory meeting is the first general meeting of the company. It is conducted only once in the lifetime of the company. A private company or a public company having no share capital need not conduct a statutory meeting.

4. Board Meeting

Board meetings are the meetings of the directors of the company. These are the most frequently held meetings in any company. 

5. Meeting of the Debenture Holders

Meeting of the Debenture Holders means a meeting of the Debenture Holders, duly called, convened and held in accordance with the provisions set out in Schedule 1 (Provisions for the Meetings of the Debenture Holders) of Part A (Standard/Statutory Information in Connection with the Issue) of this Deed.


Punishment: Definition, Types and Theories

Q. Define punishment. Critically explain the various theories of punishment. [2018 - 20 marks]
Q. Explain the various types of punishments to which offenders are liable under the Indian Penal Code. [2019 - 10 marks]
Q. In criminal administration of justice why punishment is said to be as end of justice? Also explain theory of punishment. [2019 - 20 marks]
Q. What is administration of justice? Analyse the different theories of punishment. [2023 marks - 20 marks]
Theories of Punishment is important for both IPC and Jurisprudence papers.


Punishment
 Punishment is a consequence or result of a wrong committed by a person. Provision for punishment are provided under Sec 53 of the Indian Penal Code (IPC). 

Administration of Justice
Administration of justice is maintenance of right by the state by means of physical force. For sound administration of justice, physical force of the state is prime requirement. 

According to Salmond, a state maintains law and order and establish peace and social security. If state failed to maintain the law and order it can’t be called state. The main function of the administration of justice is the protection of individuals' rights, enforcement of laws and punishment of criminals.


Types of Punishment
Section 53 of the IPC provides the follwing kinds of punishments
1. Death
2. Imprisonment for life
3. Imprisonment
    (a) Rigorous
    (b) Simple
4. Forfeiture of property
5. Fine

Section 73 of IPC provides for another kind of punishment that is 
6. Solitary confinement

1. Death (also called capital) punishment
This is awarded in rarest of rare cases. This is sanctioned by the government. The constitutionality of death punishment was questioned in the case of Jagmohan Singh vs State of Uttar Pradesh.
The Supreme Court held that deprivation of life is constitutionally lawful if that is done according to the procedure set by law.

2. Life Imprisonment 
As per section 57 of the Code, the period for life imprisonment is 20 years only for calculating purposes. Imprisonment for life is always rigorous imprisonment.

As per section 433(b) of the CrPC and section 55 of the IPC, the appropriate government has the power to reduce or suspend the sentence of imprisonment for life to imprisonment for a term of not more than 14 years. 

3. Imprisonment
Rigorous Imprisonment : The convict is kept in prison where the convict has to go for hard labour.
Simple Imprisonment : Confinement in prison without any hard labour

4. Forfeiture of Property : this means sizure of property of the criminal by the state

5. Fine: There is provision to fine a criminal as the sole punishment

6. Solitary confinement: a portion of the prison term not exceeding 3 months can be converted to solitary confinement

Theories of Punishment
1. Deterrent theory : Convicts are punished to deter them from future wrong doing. 
This theory can be divided further. They are specific deterrence and general deterrence.

In specific deterrence maintains that punishment reforms the criminal. Hence punishment is designed to reform the criminals that are subjected to this punishment. 

The general deterrence is designed to give an exemplary punishment to avoid future occurrence of the same crime. Instead of reforming it frightens the convict.

2. Retributive theory: This theory insists that a person deserves punishment as he has done a wrongful deed. this theory signifies that no person shall be arrested unless that person has broken the law. This theory puts the below conditions where a person is considered as an offender. These are:

(i) The penalty given will be equivalent to the grievance caused by the person.
Performed a crime of certain culpability.
(ii) That similar persons have been imposed for similar offenses.
(iii) That the action performed was by him and he was only responsible for it. Also, he had full knowledge of the penalty system and possible consequences.

3. Preventive theory: This theory has used a restraint that an offender if repeats the criminal act is culpable for death, exile or imprisonment. The theory gets its importance from the notion that society must be protected from criminals. Thus, the punishment here is for solidarity and defense.

5. Reformative theory: According to this theory, the objective of punishment needs to be reformation by the offender.

Strict Liability and Absolute Liability

Q. What do you understand by strict or Absolute liability in Criminal Law? Discuss. [2018 - 10 marks - Law of Crimes]
Q. What is the difference between strict liability and absolute liability of tort? [2021 - 10 marks - Law of Torts]


Strict Liability 
The principle of strict liability states that any person who keeps hazardous substances on his premises will be held responsible if such substances escape the premises and causes any damage. 

The principle of strict liability evolved in the case of Rylands v FletcherFletcher built a reservoir on his land to power his mill. Accidentally, the water from the reservoir flooded the coal mines owned by Rylands. The Court held that the defendant built the reservoir at his risk, Hence, the defendant was liable for the escape of the water causing damage to F.

Absolute Liability
The principle of Absolute liability was laid down in the case of MC Mehta vs. Union of India involving hazardous gas leak from Union Carbide causing deaths of more than 3000 people. 

The principle of absolute liability states that Where an enterprise is engaged in a hazardous or inherently dangerous activity, and harm results to anyone on account of an accident in the operation of such hazardous or inherently dangerous activity is strictly and absolutely liable to compensate all those who are affected by the accident, and such liability is not subject to any of the exceptions which operate vis-à-vis the tortious principle of strict liability under the rule in Rylands vs Fletcher.

Difference between Strict Liability and Absolute Liability
  1. Absolute liability is applicable only to enterprises operating with a commercial objective. Whereas any person can be made liable for strict liability.
  2. Escape of a dangerous material is important in strict liability, whereas, in absolute liability, an enterprise can be made responsible even without an escape.
  3. There are certain exceptions available to a person in strict liability, but there is no defense available in absolute liability.

Facts and Legal principles established in Aishbury Rly Carriage and Iron Co. Ltd. Vs. Riche (1875)

Q. State the facts and legal principles established in 'Aishbury Railway Carriage and Iron Comp. Ltd. Vs. Riche (1875) CR 7 HL 653 [2019 - 10 marks]

Facts and legal principles established in 'Aishbury Railway Carriage and Iron Comp. Ltd. Vs. Riche (1875) 

Facts of the Case
Incorporated under the Companies Act 1862, the Ashbury Railway Carriage and Iron Company Ltd’s memorandum, clause 3, stated that its objects were "to make and sell, or lend on hire, railway-carriages…" and clause 4 stated that activities beyond this needed a special resolution. But the company agreed to give Riche and his brother a loan to build a railway from Antwerp to Tournai in Belgium.[1] Later, the company repudiated the agreement. Riche sued, and the company pleaded that the action was ultra vires.

Legal Principles established
The House of Lords held that if a company pursues objects beyond the scope of the memorandum of association, the company's actions are ultra vires and void. 

Lord Cairns LC said, It was the intention of the legislature, not implied, but actually expressed, that the corporations, should not enter, having regard to this memorandum of association, into a contract of this description. The contract in my judgment could not have been ratified by the unanimous assent of the whole corporation.

Implication in Current Context
Its importance as case law has been diminished as a result of the Companies Act 2013, s 31, which allows for unlimited objects for which a company may be carried on. Furthermore, any limits a company does have in its objects clause have no effect whatsoever for people outside a company (s 39 CA 2013), except as a general issue of authority of the company's agents.

Doctrine of Constructive Notice, Indoor Management and Exceptions : Company Law

Q. What is the doctrine of Indoor Management? [2019 - 10 marks]
Q. What do you mean by the doctrine of Indoor Management? [2018 - 10 marks]
Q. Short note on Doctrine of constructive Notice [2017 - 4 marks]
Q. What is doctrine of 'Indoor management’? Discuss with the help of decided cases. [2017 - 20 marks]
Q. Discuss the doctrine of Indoor Management with exceptions. [2016 - 20 marks]

Doctrine of Constructive Notice

Memorandum and Articles of Association, two main documents of any registered company,  are the public documents.  Section 399 of the Companies Act, 2013 makes the documents electronically available to all public for their view, taking note of and referring them for any legal purpose. 

Before any deals with a company, one must inspect its documents and verify conformity with the provisions. The law assumes that any person dealing with the company is aware of the contents of the documents, irrespective of whether or not the person actually has read the documents. This is called Constructive Notice.

Doctrine of Indoor Management

The Doctrine of Indoor Management presumes that all the internal procedures as per the Memorandum and Articles of Associations of the company are complied with by the company. As the outsiders will not have access to the internal workings of the company, to protect the interest of the outsiders dealing with the company, this doctrine was introduced in the famous case of The Royal British Bank vs. Tarquand, This is also known as Tarquand rule.

Exception to the Doctrine of Indoor Management

The Doctrine of Indoor Management is not applicable under the following cases:

The outsider has actual or constructive knowledge of the irregularity
In the above situation the Doctrine of Indoor Management cannot be applied to plead protection.

The outsider is negligent in his conduct
The Doctrine of Indoor Management shall not be applicable to protect the outsider if the outsider behaves negligently.

Forgery
In any transaction if there is forgery, the transaction becomes null and void. Hence no protection is available to outsider  if there is forgery in the transaction.

Decided Case Law
The Doctrine of Indoor Management was applied in Diwan Singh Hira Singh vs, Minarva Mills Ltd. In this case the director of the company was authorized to allot 5,000 shares only but the director had allotted 13,000 shares. It was held the the allottees had purchased the shares in good faith that the director is working within his specified power conferred to him.

One person company : Company Act 2013

One person company [2019 - 4 marks]

One person company

Section 2(62) of the Companies Act 2013 defines One person company (OPC) as a company which has only one person as a member. 

Any natural person (should not be minor) who is an Indian citizen whether a resident in India or not i.e. NRI  shall be eligible to  incorporate a One Person Company and appoint nominee of an OPC, Timeline for Non-resident individuals has been reduced to 120 days.

Minimum Subscription - Companies Act 2013

Minimum Subscription [2019 - 4 marks]

Minimum Subscription
Minimum subscription refers to the minimum amount which a company should raise at the time of issuing capital. Section 26(a)(xii) of the Companies Act mandates that the minimum subscription should be a part of the Prospectus.  It has been provided by the Companies Act, that the company must receive applications for a certain minimum number of shares before going ahead with the allotment of shares in order to prevent companies from commencing business with inadequate resources. 

Prospectus: Definition, Golden Rule of Framing and Liability on Mis-statement - Companies Act 2013

Q. Define Prospectus as per Companies Act 2013. [2019 - 4 marks]
Q. Who are liable for mis-statement in prospectus? Explain the extent of civil and criminal liability for such mis-statement. [2019 - 20 marks]
Q. What is 'Prospectus'? Who are liable for a misstatement in a prospectus? [2017 - 20 marks]
Q. State the golden rules which must be observed while framing a prospectus. [2016 - 10 marks]

Prospectus under Companies Act 2013

Section 2(70) of the Companies Act 2013 defines prospectus‖ means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of body corporate.

Golden Rule of Framing Prospectus

1.The prospectus must be an honest statement of the company’s profile; there must be no misleading, ambiguous or erroneous reference to the company in its prospectus.

2.Every important aspect of a contract of the company should be clarified.

3.The contents of the prospectus should conform to the provision of the Companies Act.

4.The restrictions on the appointment of directors must be kept in mind.

5.The conditions of civil liability as laid down must have strictly adhered to issue and registration of prospectus or legal requirement regarding the issue of the prospectus.


Liability on mis-statement in a Prospectus

Criminal Liability on mis-statement in a Prospectus
Section 34 of the Companies Act fixes criminal liability on mis-statement in a prospectus to every person who have authorised such wrong or untrue or misleading information on the prospectus.

Civil Liability on mis-statement in a Prospectus
Section 35 of the Act fixes the civil liability on wrong or untrue or misleading information on a prospectus to the directors, including acting directors and the promoters of the company at the time of publication of the prospectus




Holding Company

Q. Holding Company [2019 - 4 marks]

Holding Company
Section 2(46) of the Companies Act 2013 defines holding company as, in relation to one or more other companies, means a company of which such companies are subsidiary companies.

In general terms, a holding company is a type of financial organization that owns a controlling interest in other companies, which are called subsidiaries. The holding companies generally do not perform any business of manufacturing or selling.

Forfeiture of Shares under Companies Act 2013

Q. What is forfeiture of shares. [2019 - 4 marks]

Forfeiture of shares 

Section 28 to 30 of the Companies Act 2013 provides the process of forfeiture of shares.
As per section 28 of the act, if a member fails to pay any call or installment there of by the stipulated due date, a notice is to be served on the member to that effect.

Section 29 of the act describes the process and contents of the notice. A time period as Articles of Association of the company is to be given,

Section 30 of the act empowers the company to forfeit the shares of the member if he fails to comply with the notice served/

The forfeited shares may be sold to others by the company. The members still remain liable to pay any dues as on the date of forfeiture of the shares

Powers and Duties of Auditor of Company

Q. State the powers and duties of Auditor of Company. [2016 - 4 marks]

Powers and Duties of Auditor of Company

Section 143 of the Companies Act 2013 provides the powers and duties of auditors of company as discussed below.

Rights of Auditor

  1. Right to access to the books of account and vouchers [Sec. 143(1)]
  2. Right to get information and explanation [Sec. 143(1)]
  3. Right to visit branch offices of a company and access to branch account
  4. Right to receive notice and attend general body meeting
  5. Right to make representation
  6. Right to report to members 
  7. Right to sign audit report
  8. Right of seeking opinion of an expert
  9. Right to receive remuneration

Duties of Auditor

  1. Report to members [Sec.143(2)]
  2. Examination of accounts
  3. Reporting on true & fair view
  4. Duty as to Enquiry [Sec.143(1)]
  5. Report as to additional matters
  6. Duty to sign report
  7. Duty as to statutory report
  8. Duty as to prospectus [Sec.56]
  9. Duty to assist investigation

Difference between Public Limited and Private Limited Company

Q. Distinguish between Public Company and Private Company. [2016 - 4 marks,  2019 - 10 marks]

Differences between Public Limited Company and Private Limited Company

1. Number of Directors: For a Private Limited Company the minimum number of directors are 2 whereas for a Public Limited Company the minimum number directors are 3.
2. Number of Members: Private limited company may have minimum 2 and maximum 50 members. Public limited company minimum 7 members. There is no limit to the maximum number of members.
3. Transferability of Shares: Shares of private limited company are non transferable. There is no restriction in transfer of share of public limited company.
4. Issue of Shares: Public limited company can raise capital through public issue of shares and debentures. Private limited company can not do so.
5. Naming Convention: It is mandatory to add Private to the name of a private limited company. In case of public limited company, it is mandatory to add the word Public limited in the name,
6. Capital: For public limited company minimum paid up capital is 5 lakh rupees. For private limited company it is one lakh rupees.

Difference between Share Certificate and Share Warrant

Q. Distinguish between Share Certificate and Share Warrant. [2016 - 4 marks]

Distinguish between Share Certificate and Share Warrant.
1. Share certificate is a documentary evidence of possession of the shares. Share warrant is a document of title.
2. Share certificates are issued against partially paid up shares also. Share warrant is issued against fully paid up shares only.
3. It is compulsory to issue share certificates as soon as shares are allotted. Same is not true for share warrants.
4. Share warrants are only issued by the Public Limited companies.

Sweat Equity Shares

Sweat Equity Shares

Section 2(88) of the Companies Act 2013, sweat equity shares means such equity shares as are issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.

Section 54 of the act makes it sure that the shares are issued on a special resolution of the company which can be issued only after completing one year of business by the company.

Debenture : Definition, Features, Types and difference with shareholding

Q. Define a debenture. What are usual features of debentures? [2016 - 4 marks]
Q. What is the difference between shareholder and debenture holders? Explain. [2018 - 10 marks]

Definition of Debenture
As per section 2(30) of the Companies Act 2013, debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not.

In simple terms debenture can be defined as a debt instrument issued against a fixed rate of interest by a company to raise fund for their long term capital requirements. It is a debt fund.

Features of Debenture
1. There is a fixed rate of interest
2. These are long term instruments
3. May be secured or unsecured
4. Interest on debentures are payable even if there is a loss

Types of Debentures
1. Ordinary debentures
2. Mortgage debentures
3. Partially Convertible debentures
4. Fully convertible debentures
5. Non-convertible debentures
6. Redeemable debentures
7. Irredeemable debentures
8. Registered debentures
9. Unregistered debentures

Difference between Share Holders and Debenture Holders
1. Shares are the company owned capital. Debentures are the borrowed capital of the company.
2. Shareholders are the owner of the company. Debenture holders are the creditors to the company.
3. Shareholders get dividend if there is a profit. Debenture holders get fixed rate of interest whether there is profit or not.
4. Shareholders are liable for the loss of the company. Debenture holders are not liable for the loss of the company.
5. Shareholders possess voting rights. Debenture holders do not have such right.

Fraudulent Transfer - Transfer of Property Act 1882

Fraudulent Transfer

Sections 53(1) and (2) of the Transfer of Property Act 1882, defines Fraudulent transfer as:
(1)Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.

(2) Every transfer of immoveable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.

In general terms, fraudulent transfer means transfer of assets with an intent to defraud the creditors. 

Condition Precedent - Transfer of Property Act 1882

Condition Precedent

Condition precedent is defined in section 26 of the Transfer of Property Act 1882. 
The term precedent means prior. So, the condition that is are to be fulfilled prior to the transfer of any property is called a condition precedent. This is not mandatory to follow all the condition precedents. A substantial compliance of the conditions are good enough for the transfer to happen.

Easement by Prescription - The Indian Easement Act 1882

Easement by Prescription

As per Section 15 of The Indian Easement Act 1882, to acquire a prescriptive right of easement to access and use light or air in any building or support from another persons land, it must have been peacefully enjoyed as an easement without interruption for twenty years. A right of way or any other easement it must have been peacefully and openly enjoyed as a right without interruption for twenty years.

Exchange - Transfer of Property Act 1882

Exchange

Definition of Exchange as per Section 118 of Transfer of Property Act 1882  — When two persons mutually transfer the ownership of one thing for the ownership of another neither thing or both things being money only, the transaction is called an “exchange”. 
A transfer of property in completion of an exchange can be made only in manner provided for the transfer of such property by sale.

Actionable Claim - Transfer of Property Act 1882

Actionable Claim

According to Section 4 of the Transfer of Property Act 1882, “actionable claim” means a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, occurring, conditional or contingent.

Dominant and Servient heritages - The Indian Easement Act 1882

Dominant and servient heritages

Section 4 of the Indian Easement Act 1882 defines the terms Dominant and Servient heritages.

Dominant heritages —The land for the beneficial enjoyment of which the right exists is called the dominant heritage and the owner or occupier thereof the dominant owner.

Servient heritages — The land on which the liability is imposed is called the servient heritage, and the owner or occupier thereof the servient owner. 

Ostensible Owner - Transfer of Property Act 1882

Ostensible Owner

Section 41 of the Transfer of Property Act 1882 defines as - Where, with the consent, express or implied, of the persons interested in immoveable property, a person is the ostensible owner of such property.

Ostensible Owner as the one who has possession of the property and also may have his name on the records, but is not real owner of the property.

Such situation may arise when property is acquired in others name, the the property is Benami. The Benamidar in whose name the property is purchased is the Ostensible Owner. This may also arise due to willful neglect of the real owner.

Essential requirements for a valid transfer by an Ostensible Owner
1. The transferor must be an Ostensible Owner
2. There must be express or implied consent of the real owner
3. There must be a consideration for the transfer. The ostensible owner can not transfer the property without any consideration to the transferee.
4. And most importantly, the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith. 

If all of these requirements are fulfilled, the transfer by the ostensible owner is valid and the rights of the transferee is protected.

Notice - Transfer of Property Act 1882

Notice

Notice is defined in Section 3 of the Transfer of property Act 1882 as - 
"A person is said to have notice” of a fact when he actually knows that fact, or when, but for willful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it.

So, in legal terms notice is referred to have the knowledge of the fact.

Charge and Mortgage - Transfer of Property Act, 1882

Charge

As per Section 100 of the Transfer of Property Act 1882, charge is - Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.

Mortgage 

As per Section 58(a) of Transfer of Property Act 1882, —  A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.

Difference between Charge and Mortgage



Onerous Gifts - Transfer of Property Act 1882

Onerous Gift

Section 127 of the Transfer of Property Act defines Onerous Gift as follows:
Where a gift is in the form of a single transfer to the same person of several things of which one is, and the others are not, burdened by an obligation, the donee can take nothing by the gift unless he accepts it fully.
 
So, though there would be no consideration for the gift, but there may be considerations for the other things bundled with it, and the Donee has to accept it in total. The gift can not be received partially

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Difference between Criminal Conspiracy and Abatement : IPC

Q. Distinguish between criminal conspiracy and Abetment. [2018 - 10 marks]

Criminal Conspiracy
According to Section 120A of Indian Penal Code (IPC) Criminal Conspiracy is an agreement between two or more persons to do an illegal act or a legal act by illegal means. It is clear from the definition that the following two types of agreements can be termed as criminal conspiracy:
(i) agreement to do an illegal act or
(ii) agreement to do an act which is not illegal by illegal means. This means, the act to be done is legal but the way it is to be performed is illegal.

Difference between Criminal Conspiracy and Abatement
1. Section 120 A and Section 120 B deal with criminal conspiracy, Sections 107 to 120 deal with abatement.

2. Conspiracy is an agreement between two or more persons for doing an illegal act or doing a legal act by illegal means. Abetment, on the other hand, is a process by which one or more person engage others for doing and illegal act.

3. One person is sufficient to commit an abatement. For conspiracy  at least two persons are required.

4. Abatement is a wider term which also include conspiracy.

5. Conspiracy is a substantive offence, abatement is not.