Study on Section 146 of the Companies Act 1956

Study on Section 146 of the Companies Act, 1956 (Registered Office)

Every company registered under the Companies Act, 1956 be it public or private, is required to have a registered office. 

A. Section 146 of the Companies Act 1956 is considered while deciding the territorial jurisdiction of the Courts or not?

On analyzing section 146 (Registered Office of the Company) of the Companies Act 1956 as stated below the following conclusions can be drawn:

-         The section primarily speaks about the formation of the registered office alone.

-         The section does not speak about the territorial jurisdiction.

-    Hence during the time of disputes while analyzing the territorial jurisdictions the following  sections are considered:

Nature of dispute	Section to be considered
Dispute arises at the registered office of the company	Section 10 of the Companies Act 1956.
Dispute arises in any other place other than the registered office of the company	Section 10 of the Companies Act 1956 or Section 20 of the Civil Procedure Code 1908

Case study:

Areva T&D; India Ltd. vs Power Grid Corp. Of India Ltd. on 13 June, 2008

(Punjab – Haryana High Court)

B. When the company functions from an address other than the address mentioned as registered office in the annual report, is there violation of section 146 of the Companies Act 1956 if : 

On reading section 146 of the Companies Act 1956 the following conclusion is drawn:

-       Mere mention of an address as the office of the company in the annual report shall not make   it as the registered office of the company if it is different from the one available in the ROC records.

-  Any difference in the address of the registered office communicated to the ROC and mentioned in the return, report, certificate, balance-sheet, prospectus, statement or other document as required by or for the purposes of any of the provisions of this Act, then it amounts to violation of section 146 and provisions of Section 628 (Penalty for false statement) of the companies act may be attracted.

-     For the purpose of analyzing the officer in default under section 146 of the Companies Act 1856, Section 5 of the Companies Act 1956 is considered.

Case Study: 

Vijay Kumar Gupta And Ors. vs Registrar Of Companies And Ors. on 4 March, 2003

(Himachal Pradesh High Court)

Section 5 of the Companies Act (Officer in Default) states as follows:

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

(a) the managing director or managing directors;

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

(c) the manager;

(d) the secretary;

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

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

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

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

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

Section 146 of the Companies Act (Registered Office of the Company) states as follows:

(1) A company shall, as from the day on which it begins to carry on business, or as from the thirtieth day after the date of its incorporation whichever is earlier, have a registered office to which all communications and notices may be addressed.

(2) Notice of the situation of the registered office, and of every change therein, shall be given within thirty days in Form 18 after the date of the incorporation of the company or after the date of the change, as the case may be, to the Registrar who shall record the same:

Provided that except on the authority of a special resolution passed by the company, the registered office of the company shall not be removed:-

(a) in the case of an existing company, outside the local limits of any city, town or village where such office is situated at the commencement of this Act, or where it may be situated later by virtue of a special resolution passed by the company; and

(b) in the case of any other company, outside the local limits of any city, town or village where such office is first situated, or where it may be situated later by virtue of a special resolution passed by the company.

(3) The inclusion in the annual return of a company of a statement as to the address of its registered office shall not be taken to satisfy the obligation imposed by sub-section (2).

(4) If default is made in complying with the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

Depreciation allowable on Goodwill or not?

Yes, depreciation is allowable on goodwill:

No, depreciation is not allowable on goodwill:

- In the case of B. Raveendran Pillai, the Kerala High Court has held that even on good will the depreciation is allowable Franchise rights are considered as goodwill: - Yes, in Hindustan Coca Cola Beverages Pvt. Ltd, the view of the AO is considered and the franchise rights was considered as goodwill and decided that depreciation is allowable even on goodwill. Such view was affirmed by the Delhi High Court

-   JAIPUR, DEC 21, 2011: When an assessee purchases a running business in a slump sale with huge liabilities, the goodwill acquired in such a deal is of no value, and hence no depreciation is allowable on the same. -   Facts of the case: Assessee Company, engaged in the manufacturing of Aerated water, filed its return of income claiming depreciation on the franchise rights. The AO was of the view that the franchise rights were not entitled for depreciation. The AO further alleged that the assessee had not filed any documentary evidence in relation to the claim of depreciation. Before CIT(A) it was explained that the assessee had taken over the business as a slump sale, and the brand owner had given his assent to the assessee in writing for continuing the business of manufacturing Aerated water. CIT(A) allowed the appeal of the assessee. Before the ITAT the DR argued that the franchise rights were akin to goodwill and hence the depreciation was not allowable. - For the purpose of charging depreciation, the word goodwill is not mentioned along with the other intangible assets under Section 32 (1)(ii) of the Income Tax Act 1961.

Conclusion:

Point to be noticed, to decide if depreciation is allowable on goodwill or not: - the base point still remains if the Goodwill is purchased or not. When purchased, depreciation is allowable.

Secretarial Standards (Amendment) Bill 2011

The main highlights in the Secretarial Standards (Amendment) Bill 2011 is:                                                                                
It provides provisions for the formation of the LLPs and to take benefits of provisions provided under the LLP Act.

Today's News

What is the gov trying to do?


http://www.thehindubusinessline.com/industry-and-economy/article2726654.ece

Today's One Pager

INDIAN GOLD MARKETS

“The story of gold has a deeper message, one that has none of the transitory qualities of what we choose to use as money. Seen in this broader sense, the story of gold has no ending.” _ Peter Bernstein in The Power of Gold

When compared in world level India is considered to be as the largest consumer of Gold. Until 1990, Gold Control Act, huge quantity of gold was entering into India either through legal or illegal means. The private holders used to hold around 10 tola bars of gold which would be converted into jewellery during family functions.  Investment in 22 carat gold still beats the security markets and it still remains  the favoured mode of investment. This attitude of the people has paved way for the banks to bring in the Gold Deposit Scheme, and even sale of gold through Banks.

As per the report of the World Gold Council in November 2011, it is observed that on a yearly basis the increase of demand for gold in India is around 15% despite the increase in the value by around 46% and the highest gold price close during the year was at INR. 90421.97/oz on November 30, 2011.

The World Gold Council reports: “In the longer term, we are confident that India’s favorable demographic trends, the growing affluent middle class and declining age profile, should ensure a buoyant consumption growth.”

India produces only 0.5% of its annual gold consumption and the remaining is imported. The import of gold is roughly around 700 Tons per annum.

Market condition: When compared to the previous year the percentage of sale of gold in quantity has gone down due to increase in the prices, however this has not affected the profits of the players in the gold market as the people still try to buy gold with all the amount that they possess

History of gold during inflation: In1970’s gold was valued as per the gold standards. The inflation during 1970’s was up 306% and the value of the gold was officialy $35 an ounce. Despite the increase in inflation the gold which was priced at $850 per ounce in 1980 had dropped down to $300 in 2001 losing 65% of its value. On a study it is observed that inflation does not necessarily translate into higher gold prices.

Demand for Gold:

Despite the risk of fall in Gold prices it still has its market due to:

-         fear of inflation

-         the fear that most of the commercial bonds or other paper documents may lose their intrinsic value.

-         Looking at the history it is observed that despite the fall of its prices on a temporary basis it is believed that the prices of Gold would continue to increase.

---

Case Study

                                                 Amul sues Nestle

A case on Amul Vs. Nestle

 

http://economictimes.indiatimes.com/news/news-by-industry/cons-products/food/amul-sues-nestle-for-copying-a-brand/articleshow/10999949.cms

One Pager

FDI IN RETAIL IS IT BENEFICIAL TO INDIA

Prime Minister Manmohan Singh projects FDI in retail as a boon for the agricultural sector. Unfortunately, if you examine the realities, it will spell a death knell for farming. It will be the beginning of an end for Indian farmers.

It has happened in the United States. Ever since big retail - dominated by multi-brand retailers like Wal-Mart - entered the market, farmers have disappeared, and poverty has increased. So has hunger.

Today, not more than 700,000 farmers remain on the farm in America. Poverty has grown, and hunger has broken past 14-years record.

In Europe, despite the dominance of the big retail, every minute one farmer quits agriculture. This is because farmer's income across US/EU is on a downslide.

Though FDI in retail trade is restricted till recent announcement, but the Government of India has a more liberal policy towards wholesale trade, franchising, and commission agents’ services, thus preparing the ground for FDI in retail as well. Foreign retailers have already started operations in India through various routes: (i) joint ventures where the Indian firm is an export house; (ii) franchising (eg. Kentucky Fried Chicken, Nike); (iii) sourcing of supplies from small-scale sector; (iv) ‘cash and carry’ operations (Giant in Hyderabad, Metro in Bangalore); (v) non-store formats – direct marketing (Amway). Large international retailers of home furnishing and apparels such as Pottery Barn, The Gap and Ralph Lauren have made India one of their major sourcing hubs. Up to 100 per cent FDI is allowed in ‘cash and carry’ operations. The Great Wholesaling Club Ltd is one such example. In February 2002, the world’s largest retailer, Wal-Mart, opened a global sourcing office in Bangalore. In November 2006, it announced its entry under a joint venture with the Indian corporation Bharti. For the time being, Bharti is to own the chain of front-end retail stores, while the two firms will have an equal share in a firm that will engage in wholesale, logistics, supply chain and sourcing activities. This is seen as a preliminary step by Wal-Mart pending the removal of all restrictions on FDI in retail trade.

The reasons given by the Government for allowing FDI in retail:

Why is the government so keen in inviting FDI in the retail sector? Let us look at some arguments made by the Government for allowing FDI:

 (i) “Only a few global firms possess proprietary expertise in retail trade. They would not transfer their expertise to local firms unless they were allowed to operate in the domestic market.”

Reality: In the literature on retail, we could not trace the existence of any cutting edge proprietary expertise – either technical or managerial.

(ii) “The government needs FDI to meet its foreign exchange requirements.”

Reality: Because of large capital inflows, the Government of India is today burdened with huge and growing foreign exchange reserves. By April 13, 2007, the foreign exchange reserves had swollen to $203 billion. The argument for FDI in retail to attract foreign exchange is not tenable.

(iii) “Only global retailers can satisfy the rising and varied demands of Indian consumers.”

Reality: It has yet to be shown which product or service is being offered by foreign retail firms is unavailable at present to Indian consumers, or cannot be provided without FDI. Moreover, the alleged benefits of ‘consumer choice’ are being inflated. Indeed, the availability of excessively wide choice makes it so complex and time-consuming for the consumer to decide that it leads to stronger loyalty to particular brands.

At one side Government is giving reason for allowing FDI in retail that it will improve supply chain management and avoid the wastage of food because lack of cold storage as the global firms have expertise in supply chain management and they will establish cold  storage in India, but why Government cannot establish more   cold storage or improve supply chain management. This is only because they are indulging in more politics than our Country.

Despite the destruction of farming globally by the supermarkets, the Ministry for Commerce and Industry is gung-ho about the virtues of foreign direct investment in multi-brand retailing, which means allowing the big players like Wal-Mart and Tesco to swamp the Indian market.