Not for every one

Arbitration Law

2011-08-09T13:53:00.000+05:30

A dissatisfied party may apply to the court for setting aside the Award, subject to the conditions as mentioned in Section 34(2) and 34(3). An Arbitral award may be set aside by the court only if the party making the application proves that:

It was under some incapacity
The arbitration agreement is not valid under the law
The party was not given proper notice of the arbitral proceedings
The award deals with a dispute not within the ambit of arbitration.
The composition of the tribunal or the arbitral procedure was not in accordance with the agreement.
The dispute cannot be settled by arbitration under the law for the time being.
The award is in conflict with the public policy of India

The maximum permissible period for an application to set aside the award is a period of three months.

Frequently asked Questions About Nuclear Power

2011-07-25T13:24:00.000+05:30

Can a Chernobyl type accident take place in Indian Nuclear Power Plants?

Nuclear power has a very good safety record for a period spanning more than three decades. The Three Mile Island (TMI) accident in March, 1979 and the Chernobyl accident in April, 1986, Have raised apprehensions in the minds of the public all over the world. In the case of TMI, no radiation injury had occured to any member of the Public. In fact all the safety systems had worked as designed and no radioactivity was released to the atmosphere. At chernobyl, 31 people died and they are all plant personnel. However, it must be recognised that the Chernobyl accident occured due to the negligence of operaters who violated the safety procedures. Besides, the Chernobyl reactor is a totally different type. It employed Graphite as a moderator. Graphite is a form of carbon and its combustible property contributed to explosion in the reactor core. Such a sequence of events in the Nuclear plants is not possible and explosion in the core is ruled out as it is cooled and moderated by heavy water. Adequate safety features in the plant are provided to ensure its safe operation. Paramount importance is given in setting up of nuclear power installations, to the safety of operating staff, public and environment. Safety experts and regulatory personnel are associated at all — missioning and operation of nuclear power plants. Thus Chernobyl type accident is ruled out in Indian Nuclear Power Plants.

What is India’s 3-Phase Nuclear Power Programme?

In view of the limited fossil fuel availability with the country, the relevance of Nuclear Power in meeting the short and long term needs of our energy was recognised right at the initial stage. From the very beginning, as a long term strategy, the Nuclear Power Programme formulated by Dr. Homi Bhabha embarked on the three stage nuclear power programme, linking the fuel cycle of Pressurised Heavy Water Reactor (PHWR) and Fast Breeder Reactor (FBR) for Judicious utilisation of our limited reserves of Uranium and vast Thorium reserves. The emphasis of the programme was self-reliance and thorium utilisation as a long term objective. The PHWR was chosen due to extensive research and development facilities covering diverse areas for supporting absorption.

The 3-stage of our Nuclear Power Programme are :

Stage-I : envisages, construction of Natural Uranium, Heavy Water Moderated and Cooled Pressurised Heavy Water Reactors (PHWRs). Spent fuel from these reactors is reprocessed to obtain Plutonium.
Stage-II : evisages, construction of Fast Breeder Reactors (FBRs) fuelled by Plutonium produced in stage-I. These reactors would also breed U-233 from Thorium.
Stage-III : would comprise power reactors using U-233 / Thorium as fuel.

What are India’s available energy resources?

India’s available energy resources are shown in the following table : Identified Energy Reserves
Coal		186	billion tonnes
Lignite		5,060	million tonnes
Crude Oil		728	million tonnes
Natural Gas		686	billion Cu-m
Uranium		78,000	tonnes
Thorium		3,63,000	tonnes
Hydro		84,000	MW at 60 % PLF
Renewables	Biomass	6000	MWe
	Wind, Solar etc.	20,000	MWe

How is environment surrounding Nuclear Plant is monitored?

This is done by the Environmental Survey Laboratory (ESL) set up well before starting the operation of the plant. The ESL collects data on forest, flora and fauna, marine products, food and air etc., to set up base level data on their quality prior to commencement of the operation of the plant. Samples are drawn and regularly analysed to ascertain the status on a continuos basis. The ESL functions independent of plant authorities and the data collected is checked by the regulatory authorities for control purposes.

Protection of Women from Domestic Violence Act 2005

2010-03-06T18:03:00.002+05:30

Procedural Aspect

As far as the procedures for obtaining the orders and relief are concerned, an aggrieved person or PO or any other person on behalf of the aggrieved person may present an application to the Magistrate seeking relief under this Act. The Magistrate at any stage of the proceedings may direct the respondent or the aggrieved person to undergo counselling. What is important about the Act is that it rejects the Anglo-Saxon notion of locus standi. Anybody on behalf of the aggrieved person may also file a report. Secondly, the Magistrate shall fix the first date of hearing within three days from the receipt of an application by the Court. The Magistrate passes the protection order in favour of the aggrieved person, prohibits the respondent from committing or aiding in the commission of acts of domestic violence, attempting to communicate with the aggrieved, alienating the asset of the aggrieved person. The Magistrate is also empowered to pass an order of residence. From the above it is clear that the Act tries to grant relief to the aggrieved party on an urgent basis but in so doing it ends up in overlooking the ground realities of the situation of the victims of domestic violence as is evident from the judgement pronounced in the following case. The Supreme Court declared in S.R. Batra versus Tareena Batra that a woman could claim this right only in relation to a household owned and rented by her husband.32 The judgement is a clear oversight of the ground social realities of the joint family system in India. Even if the right to residence is granted, in such a situation there is always a threat to the life and dignity of the woman. Consequently she has no way but to search for an alternative shelter. Also the Act acknowledges speedy justice in the cases. Though the law is civil in nature, criminal procedure is to be applied in accessing reliefs.33 Again, though the Act addresses the need to have speedy justice in such cases, it overlooks the security needs of victims of domestic violence. Also the offence under the Act is non-bailable, and anyone may play with the Act and create problems in the family.34

The Magistrate may also direct the respondent to pay the ‘monetary relief’ to meet the expenses incurred and losses suffered by the aggrieved person. However, the Act does not take into account the financial condition of the other party (that is, the respondent)—how the ‘losses’ and ‘expenses’ are estimated being very subjective terms there are again no clear guidelines in the Act. While the maintenance provision under the HMA 1956 clearly defines the amount of monetary support (as maintenance) not to exceed one-third of the total income,35 no such provisions are enumerated in the PWDV Act (2005)—how long monetary relief shall be provided is also not mentioned in the Act. Moreover there is a provision for compensation for the damages and injuries including mental torture and emotional distress by acts of domestic violence. But the entire provision of monetary compensation, relief and other protections is largely dependent on the subjective satisfaction of the Magistrate. The Magistrate may even give custody of the child to the aggrieved (though temporary) which is contrary to the provisions of the Hindu Guardianship Act 1956 which declares the father as the natural guardian36 and which may further create guardianship tussel between the parents causing legal complications for the aggrieved. Ideally justice should be delivered within three months but in view of the fact that the courts are overloaded with work, the case may linger on for months. In many places, including the model State of Andhra Pradesh, cases may drag on for more than six months.

If in case of domestic violence the complaint is registered both under the PWDVA 2005 as well as Section 498-A of the IPC, both the agencies carry out their investigations and if the reports are contradictory then what is the way out? Double enquiry may create confusions.37

The Act may further be criticised on the following grounds:

1. A lot of scope for the Magistrate’s discretion in matters pertaining to monetary relief, monetary compensation, child custody, contradictory reports of enquiring authorities (as the complaint may simultaneously be filed under Section 498A of the IPC as well as the PWDVA 2005). Similarly there are maintenance provisions within the various personal laws (Hindu, Muslim and Christian) which may stand contrary to the provisions of monetary compensation and relief and even right to residence within the PWDVA 2005.

2. The Act is not ‘gender neutral’ since it is for ‘women’ only. There are about five petitions challenging it on the grounds of constitutional right to equality.

3. There are no safety valves in the Act to prevent its misuse. It may prove disastrous not only for an individual in case the complainant has ‘malafide’ intentions. The Act is civil in nature but criminal in procedure and offence under this Act is cognisable and non-bailable.

4. Violence faced by the ‘mother-in-law’ is completely missing. There is no mention of it. The Act completely ignores violence by the daughter in-law against the in-laws. The country has already seen the misuse of the Dowry Prohibition Act 1986. It was found that every four minutes in India, innocent persons including old mothers/pregnant sisters/children, are facing false and fabricated dowry cases and are sent behind bars without any evidence (Section 498A is non-bailable).38

5. There is no mechanism to make it mandatory by the States to enforce the law in its totality; consequently in most of the States implemen-tation is half-hearted. One can find extreme disparities in the appointment of POs: providing inadequate budgetary support, maintaining poor record thus making the collection of data difficult; for example, while Maharashtra has appointed approximately 3687 POs, Assam only 27 and Gujarat just 25. The Act needs a Centrally sponsored scheme for effective implementation.

6. Too many laws on one issue create lots of confusion in the large number of already illiterate women who are without any/adequate knowledge of law. It creates confusion for the decision-making authorities also, notably the judiciary. Consequently there is wider scope for judicial discretion—something that appeals to their wisdom than becomes the legal remedy or law. At the same time it also creates scope for further exploitation of the “victim” by lawyers.39

7. The biggest beneficiaries or main users are still ‘married women’ for whom there are already enough laws. This fact thus puts a question-mark on its wider utility and application.

8. Moreover this Act provides only temporary reliefs and on urgent basis; permanent solutions are still to be found in personal laws. The failure of personal law due to its civil nature is an open fact; for example, most of the Hindu women still prefer to seek maintenance under Section 125, CrPC rather than under the Hindu Maintenance Act 1956.40

9. At the same time creation of a new law despite the existing legal provisions on the issue of violence against women, including domestic violence, reflects the gravity of the problem. Taking into account this fact the state should have given emphasis to the overall (socio-economic and political) empowerment of women to strengthen their position in society and family. However, one may see the apathy of the government towards the issue of empowerment of women. Law, though very important, is not the complete solution for such problems.

10. Any legislation should have a simultaneous legal literacy and sensitisation plan. It is an open fact that the victims of domestic violence themselves do not accept it as something wrong. There is total ignorance regarding rights as well as the law on the part of women. Therefore, laws remain paper tigers rather than being the instruments of social change.

Conclusion

To conclude, it may be said that the strategy of the Indian state towards a problem, and particularly that of women, is to rely largely on law and often only on law. The responsibility of the state ends with the drafting of the required laws, whereas the problems relating to women, particularly domestic violence, are socio-economic and cultural problems which demand a multi-faceted approach. Multiplication of laws relating to women has led to the problem of overlapping, legal dilemmas and legal confusion. Moreover, to overcome the problem of socio-economic and cultural hurdles, it is desirable to adopt a human rights approach to women’s problems. It is only through the human rights perspective that one can help safeguard human dignity and create a “violence-free home” leading to a “violence-free society”

Credits : http://www.mainstreamweekly.net/article1936.html

Difference between Resume, C.V. & BIODATA

2010-02-19T10:22:00.000+05:30

People use the words RESUME, C.V., and BIO-DATA interchangeably for the document highlighting skills, education, and experience that a candidate submits when applying for a job. On the surface level, all the three mean the same. However, there are intricate differences.

RESUME

Resume Is a French word meaning “summary”, and true to the word meaning, signifies a summary of one’s employment, education, and other skills, used in applying for a new position. A resume seldom exceeds one side of an A4 sheet, and at the most two sides. They do not list out all the education and qualifications, but only highlight specific skills customized to target the job profile in question. A resume is usually broken into bullets and written in the third person to appear objective and formal. A good resume starts with a brief Summary of Qualifications, followed by Areas of Strength or Industry Expertise in keywords, followed by Professional Experience in reverse chronological order. Focus is on the most recent experiences, and prior experiences summarized. The content aims at providing the reader a balance of responsibilities and accomplishments for each position. After Work experience come Professional Affiliations, Computer Skills, and Education

C.V CURRICULUM VITAE

C.V Is a Latin word meaning “course of life”. Curriculum Vitae (C.V.) is therefore a regular or particular course of study pertaining to education and life. A C.V. is more detailed than a resume, usually 2 to 3 pages, but can run even longer as per the requirement. A C.V. generally lists out every skills, jobs, degrees, and professional affiliations the applicant has acquired, usually in chronological order. A C.V. displays general talent rather than specific skills for any specific positions.

BIO-DATA

Bio Data the short form for Biographical Data, is the old-fashioned terminology for Resume or C.V. The emphasis in a bio data is on personal particulars like date of birth, religion, sex, race, nationality, residence, martial status, and the like. Next comes a chronological listing of education and experience. The things normally found in a resume, that is specific skills for the job in question comes last, and are seldom included. Bio-data also includes applications made in specified formats as required by the company.

A resume is ideally suited when applying for middle and senior level positions, where experience and specific skills rather than education is important. A C.V., on the other hand is the preferred option for fresh graduates, people looking for a career change, and those applying for academic positions. The term bio-data is mostly used in India while
applying to government jobs, or when applying for research grants and other situations where one has to submit descriptive essays.

Resumes present a summary of highlights and allow the prospective employer to scan through the document visually or electronically, to see if your skills match their available positions. A good resume can do that very effectively, while a C.V. cannot. A bio-data could still perform this role, especially if the format happens to be the one recommended by the employer.

Personal information such as age, sex, religion and others, and hobbies are never mentioned in a resume. Many people include such particulars in the C.V. However, this is neither required nor considered in the US market. A Bio-data, on the other hand always include such personal particulars.

Companies Act- Related Party Transaction

2010-02-08T00:37:00.000+05:30

Section 297 of the Indian companies act, 1956 – A Detailed analysis

Section 297 provides that :

Section 297 - Board’s sanction to be required for certain contracts in which particular directors are interested

(1) Except with the consent of the Board of directors of a company, a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm, or a private company of which the director is a member or director, shall not enter into any contract with the company–

(a) for the sale, purchase or supply of any goods, materials or services; or

(b) after the commencement of this Act, for underwriting the subscription of any shares in, or debentures of, the company:

Provided that in the case of a company having a paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government.

(2) Nothing contained in clause (a) of sub-section (1) shall affect–

(a) the purchase of goods and materials from the company, or the sale of goods and materials to the company, by any director, relative firm, partner or private company as aforesaid for cash at prevailing market prices; or

(b) any contract or contracts between the company on one side and any such director, relative, firm, partner or private company on the other for sale, purchase or supply of any goods, materials and services in which either the company or the director, relative, firm, partner or private company, as the case may be, regularly trades or does business:

Provided that such contract or contracts do not relate to goods and materials the value of which, or services the cost of which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts; or

(c) in the case of a banking or insurance company any transaction in the ordinary course of business of such company with any director, relative, firm, partner or private company as aforesaid.

(3) Notwithstanding anything contained in sub-sections (1) and (2), a director, relative, firm, partner or private company as aforesaid may, in circumstances of urgent necessity, enter, without obtaining the consent of the Board, into any contract with the company for the sale, purchase or supply of any goods, materials or services even if the value of such goods or cost of such services exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract; but in such a case, the consent of the Board shall be obtained at a meeting within three months of the date of which the contract was entered into.

(4) Every consent of the Board required under this section shall be accorded by a resolution passed at a meeting of the Board and not otherwise; and the consent of the Board required under sub-section (1) shall not be deemed to have been given within the meaning of that sub-section unless the consent is accorded before the contract is entered into or within three months of the date on which it was entered into.

(5) If consent is not accorded to any contract under this section, anything done in pursuance of the contract shall be avoidable at the opinion of the Board.

(6) Nothing in this section shall apply to any case where the consent has been accorded to the contract before the commencement of the Companies (Amendment) Act, 1960 (65 of 1960).

Underlying Principle

The provisions enacted in Section 297 of the Companies Act are founded on the principle that the director is precluded from dealing on behalf of the company as himself and from entering into engagements in which he has a personal interest conflicting or which may possibly conflict with the interest of those with whom he is bound by fiduciary duty. A director occupies a fiduciary position in relation to a company and he must act bona fide in the interests of the company. If a director makes a contract with the company and does not disclose his interest, he will be committing breach of trust.[1]

Section 297 embodies the principle of good faith and fiduciary relationship of a director and enjoins upon him certain statutory obligations.

Applicability of the Section

This section applies to :

1. all companies, public and private.[2]

2. contract for sale, purchase or supply of any goods, materials or services in which a director or any person connected with a director in any of the ways mentioned in sub-section (1) of section 297 is interested,

3. contract for underwriting subscription of any shares in or debentures of the company,

4. oral contract, if it can be proved by circumstantial evidence. Under the Indian Contract act, a contract need not be in writing, and an oral contract is also valid in law. The provisions of Section 297 will accordingly also apply in respect of an oral contract.

This section does not apply to :

1. contracts between two public companies

2. transaction in immovable properties [Letter No. 9/4190-CL-X, dated 27th March, 1990],

3. contract of employment of a director or managing or whole-time director [Circular No. 8/11/75-CL-V, dated 5th June, 1975],

4. contract entered into by the company with a dealer on a principal to principal basis [Circular No. FM 8/297/56-PR, dated 2nd August, 1956],

5. professional services of the nature given by firms of solicitors and advocates, etc. [Circular No. 8/11/75-CL-V, dated 5th June, 1975],

6. indirect interest of a director as provided in section 299. unlike Section 299 this Section does not deal with indirect interest of a director, even though it may be substantial or real.[3]

7. a government company in respect of contracts entered into by it with another Government company [Notification GSR No. 233, dated 31st January, 1978].

8. A company and a body corporate or a co-operative society in which a director or relative is a member or diretor.[4]

Applicability of the Section is to be determined at the time of entering into the contract. If no permission under this section is required at the time of entering into the contract, subsequent permission is not necessary even though there may be a change of circumstances which would require permission to be taken for a fresh contract.

Scope of the Section

The Section requires the consent of the Board of Directors for all contracts [except those exempted under sub-section (2)] with the company by a director or a relative or a firm in which the director or relative of his, is a partner or any other partner of such firm or a private company in which such a director is a partner or a member.

This section does not apply to contracts between two public companies and also is not attracted to a transaction of loan made by a director to the company because it is not a sale or purchase of goods or a contract to render services.

For instance, if ‘X’ is a director of A Ltd and also a director/member of B Pvt. Ltd., then Section 297(1) will apply to contracts between these two companies, subject to the exceptions provided therein. However, if only the relatives of X are director/members of B Pvt Ltd. (and not X himself) the section will not apply.

It may be noted that all contracts, whatever their value, with the directors and other persons mentioned in the section require the previous approval of the Central Government. Contracts will include service contracts such as appointment to offices. Advertisement Services have been held to be covered by this section.[5]

“goods” – definition

In the absence of any definition of ”goods” in the Act, reference may be made to the definition given under the Sale of Goods Act, 1930 according to which “goods” means every kind of moveable property. Thus, for the purpose of the Section, sale or purchase as also lease of immoveable property is outside the scope of the Section. However, if the machinery is not permanently attached to the earth, it may fall in the category of goods within the meaning of this section.

Object of the Section

The object of the Section is that the Board of Directors should have knowledge about the extent of interest of a director in any contractual dealings with the company, or of any person connected with the director in any of the ways mentioned in sub-section (1), and accord their consent to such dealings.

Specific consent of the Board

It is the specific consent of the Board of directors which is required for entering into contracts of the kinds specified in section 297. Such consent must be accorded by a resolution passed at a meeting of the Board and not by means of a resolution passed by circulation.

The consent contemplated is not a general consent but a consent referable to each particular or specific contract or contracts. Consent requires knowledge of the specific facts and materials which leads to the consent and cannot be given in a general or abstract manner.[6]

However, sub-section (3) lays down that in case of urgent necessity, a contract may be entered into without obtaining the consent of the Board, even if the value of such goods or cost of such services exceeds Rs. 5000 in the aggregate in any year, provided consent of the Board is obtained within 3 months of the date on which the contract was entered into. It must be noted that this sub-section does not dispense with the necessity of obtaining previous approval of the Central Government, though it is possible that the Government may, by general order or notification, give general approval for certain classes or kinds of contracts.

The applicability of section 297 of the Act is to be examined at the time of entering into the contract and the consent should be obtained within three months of entering into the contract. If a director becomes interested after the contract is entered into, there is no need to get Board’s consent. The term `director’ includes alternate director for the purpose of section 297 of the Act

Procedure

The Company Law Board in the case of Yashovardhan Saboo v Groz-Beckert Saboo Ltd.[7] has observed that Section 297, 299 and 300 of the Companies Act are founded on the principle that a director occupies a fiduciary position in relation to a company. The are related provisions and have a combined effect. Thus the procedure for carrying out contracts in which any of the Company’s director is interested or concerned combines the provisions of Section 297, 299 and 300 and applies to all companies, public and private but not to contracts between two public companies.

1. A Board meeting shall be convened to consider the terms of the contract. Board’s consent must be accorded by a resolution passed at a meeting of the Board and not by circulation.

2. Directors interested or concerned shall disclose the nature of their interest or concern at the meeting of Board of directors in Form No. 24AA of Companies General Rules and Forms as required under section 299(3).

It may be noted that so far as section 299 is concerned, instead of disclosing interest or concern every time, a general notice may be given annually in the last month of the financial year. Thus, the validity of such notice given by the director is for one financial year and it has to be renewed every year.

Such general notice should be placed before the Board meeting for its recording by means of a resolution.

3. If the paid-up capital of the company is Rs. One Crore or more, an application shall be made to the Regional Director in Form No. 24A of Companies General Rules and Forms for its prior approval.

The Section requires such an application to be made to the Central Government but the Central Government has delegated to the Regional Directors at Bombay, Calcutta, Madras and Kanpur the powers and functions under the Section vide Notification No. GSR 563 (E), dated 19-8-1993.

4. In case the Board cannot have requisite quorum of disinterested directors, then the contract shall be approved by shareholders by convening a general meeting.

5. Necessary entries shall be made in the register of contracts maintained under section 301, within 7 days of the Board meeting, and it shall be signed by all the directors present in the next Board meeting.

6. Except for some of the cases mentioned in section 300(2), an interested director shall not take part in the proceedings of Board meeting or voting in respect of a contract or arrangement in which he is interested or concerned. Such an interested or concerned director will not be counted for the purposes of quorum. Where the number of such interested directors exceeds or is equal to two-thirds of the total strength of the Board, then two disinterested directors present in the meeting will be deemed to be proper quorum.[8]

Exceptions

Sub-section (2) lays down three exceptions to the rule under sub-section (1). They are as follows :

a) When the transaction for sale or purchase of goods and material is on cash basis at prevailing market prices the consent of the Board is not required. A cheque is considered equivalent to cash for the purpose of this section.[9]

b) Where a party to the contract as specified in sub-section (2)(b), regularly trades or does business, provided that the aggregate value of transactions over a calendar year do not exceed Rs. 5000.

c) In the case of banking or insurance company, any transaction with any director, etc., in the ordinary course of its business.

Such transactions will neither require the consent of the Board nor the previous approval of the Central Government.

Non-compliance

The only consequence of not obtaining the consent of the Board is that in such case the Board is given the option to avoid the contract. If the Board chooses to condone the defect and pass a resolution not to avoid the contract or gives ex post facto consent, there is an end of the matter. The company in general meeting cannot interfere unless the Board’s act amounts to a breach of trust, resulting in loss to the company.

Apart from consent of the Board, previous approval of the Central Government is also required where the paid – capital of the company is Rupees One Crore or more. In the absence of approval of the Central Government where necessary the contract shall be void.

Thus, it appears that, where contracts entered into by companies when their paid – capital was less than Rupees One Crore, and raised upwards subsequently, approval of the Central Government would not be necessary until the expiry of the contract.[10]

Offence, Penalty and Compoundability

Section 297 does not provide any penalty for non – compliance. The penalty therefore will be as per the provision of Section 629A.Entering into certain contracts with the company in which particular directors are interested without Board’s sanction and where paid-up share capital is not less than Rs. One Crore, without the previous approval of the Central Government (now Regional Director) the company and every officer in default shall be punishable with fine upto Rs. 5000 and further fine upto Rs. 500 for each day of default [sub-section (1)]. The offence punishable is compoundable under section 621A read with section 629A.

Conclusion

A fruitful source of misuse of power by directors is that which is exemplified by contracts entered into with the company of which they are directors by themselves or through their relatives or firms or companies in which they are interested for the sale, purchase or supply of goods, materials or services, as the case may be. Section 297 and its subsequent amendments strive to safeguard the interest of the company especially when directors are in a position to take advantage of inside information for personal gain. It provides for a two fold measure of ensuring that the interest of the company is not affected by a breach of trust by the directors.

Section 297 & 299 of the Companies Act, 1956

2009-12-11T18:03:00.001+05:30

Section 297 & 299 of the Companies Act, 1956

The Directors occupy a fiduciary position in relation to a Company. They must act bona fide and in the interest of the Company. This duty of good faith which fiduciary relationship imposes is identical with those imposed on trustees. In this sense, it can also be concluded that the Directors are trustees.

Thus, if a Director makes contract with the Company and does not disclose his interest therein he will be committing breach of trust.

TYPE OF COMPANIES

Section 297 applies to all companies, public as well as private. However, it does not apply to the contracts where both the parties to the contract are public companies. The section would apply where one of the two companies (being parties to the contract) is a private company and the other is a public company, but in such a case, it will have to be complied with by the public company only.

BOARD’S CONSENT AND CENTRAL GOVERNMENT’S APPROVAL FOR CERTAIN CONTRACTS IN WHICH PARTICULAR DIRECTORS ARE INTERESTED [Sec. 297]

The object of the Section is that the Board should have knowledge of the extent of interest of a director in any contractual dealings with the company; or of any person connected with the director and accord their consent to such dealings.

The consent of Board of Directors of the Company is required for the contracts entered with the Company, except for the contracts which are exempted under Section 297 (2), as one of the party and other party being any of the following: -

1) director of the Company; or

2) any relative of any director of the Company; or

3) any partnership firm in which any director of the Company is partner; or

4) any partnership firm in which any relative of any director of the Company is partner; or

5) any partner of the partnership firm in which any director of the Company is a partner; or

6) any partner of the partnership firm in which any relative of any director of the Company is a partner; or

7) any private company in which any director of the Company is a member; or

8)any private company in which any director of the Company is a director.

The Contract to be entered can be for:

(a) sale, purchase or supply of any goods or material;

(b) sale, purchase or supply of any;

Apart from the consent of the Board, previous approval of the Central Government is also required where the paid up capital of the Company is Rs. One Crore or more. (However, this power of giving approval has been delegated to the Regional Director at Kanpur, Bombay, Calcutta and Madras). The Application for approval shall be made to the concerned Regional Director in Form No. 24A prescribed under Companies (Central Government’s) General Rules & Forms, 1956 alongwith a certified copy of the contract and / or relevant papers and Demand Draft for the fees payable under the Companies (Fees on Applications Rules, 1968). Further, this provision does not has any impact on contacts entered into prior to the date of crossing of the limit of Rs. One Crore, and subsisting after that date. However, the Central Government’s approval is not required in respect of contracts entered into by the Government Company with any other Government Company.

CONSENT OF THE BOARD OF DIRECTORS

1. A consent of the Board of Directors to a contract attracting Section 297 may be given:

either before entering into a contract;

after entering into a contract in circumstances of urgent necessity, but within three months of the date of which the contract was entered into.

2. Consent required to be given by the Board cannot be a general one; it must be specific with respect to the particular transaction.

3. Board must give its consent by a resolution passed at its meeting and not otherwise; it cannot be accorded by a circular resolution or in any other manner.

4. If consent is not accorded to any contract, then anything done in pursuance of the contract shall be voidable at the option of the Board.

EXEMPTED CONTRACTS

Any contract falling within the purview of any of the three exemptions as mentioned in clauses (a), (b) and (c) of sub-section (2) of Section shall neither require the consent of the Board of Directors of the Company nor the previous approval of the Central Government. Such contracts are as under:

(i) The contract for the purchase of the goods and materials from the company; or the sale of goods and materials to the Company by any of the parties as mentioned earlier, for cash at prevailing market price.

Note:

A Cheque is to be treated as equivalent of cash payment

This clause is not applicable to contracts of service irrespective of any value involved.

The expression at prevailing market price suggests that the price charged ought to be the ruling market price of the seller and no extra favour vis-à-vis the other buyers should be shown as to the prices.

(ii) The contract, between the company and any one of the parties as mentioned earlier, for sale, purchase or supply of any goods, materials or services, in which the company or the director / relative/ firm/ partner / private company regularly trades or does business and the value of such goods / materials or the cost of the services does not exceed Rs. 5,000/- in aggregate in any year, materials or services;

(iii) In the case of banking company or an insurance company, any transaction in the ordinary course of business of such company with any of the parties as mentioned earlier.

DUTY CAST BY SECTION 299

Section 299 casts upon directors of companies an onerous obligation. It is a statutory obligation violation of which may result in serious consequences. This Section applies to all companies and all directors. It also applies to directors nominated by Government on the Board of the Company.

The Object of Section 299 is that the Board of Directors should be made aware of all contracts and arrangements in which any director has an interest, whether direct or indirect, so that the Board may be in a position to satisfy itself as to the fairness and reasonableness of the contract from the point of view of the company and then accord its consent therefor.

As per Section 299, every Director of a company must disclose to its Board of Directors at a meeting of the Board the nature of his / her interest: -

if he / she is any way, whether directly or indirectly, concerned or interested in any contract or arrangement or proposed contract or arrangement entered into or proposed to be enter into, by or on behalf of the company.

GENERAL NOTICE OF INTERST [SECTION 299 (3)]

Where general notice is given to the Board as regards the interest of a director in any contract or arrangement, it is not effective, unless the director concerned either gives it at a meeting of the Board or takes reasonable steps to secure that it is brought up and read at the next meeting of the Board after it is given. The Notice then gets entered in the minutes of the Board Meeting at which it is given or read. The Notice in Form No. 24AA as prescribed under Companies (Central Government’s) General Rules & Forms, 1956, is also required to be given afresh year after year, so that new directors who may be coming into the Board may be aware of the interest of that particular director. Once a director has give general notice of interest, it is not necessary for him to once again disclose his interest when the matter comes up before the Board.

Nothing in Section 299 is applicable to any contract or arrangement between two companies, if any one or more of the directors of the one company together holds / hold 2% or less of the paid–up share capital in the other company. [Section 299 (6)].

This limit of 2% has to be taken either as an individual director’s holding or the aggregate holding of two or more directors. It is, therefore necessary for the company to ascertain the aggregate holding of Directors even if every director has given in the general notice his individual holding. The point of time with reference to which the fact whether or not the holding exceeds 2% limit laid down in sub-section (6) should be verified is the date on which the contract is entered into.

SECTION 25 COMPANIES

Section 299 does not apply to companies incorporated under Section 25 of the Companies Act, 1956, in respect of the cases to which sub-sections (1) and (3) of the Section 297 applies.

SECTION 299 VIS-À-VIS SECTION 297

Section 299 applies to any contract or arrangement to which a company is party and in which a director is interested. This Section is wider in scope than Section 297, which refers to certain direct contracts only. Thus, the contracts falling within the purview of Section 297 necessarily attract Section 299, although the converse may not be true. A contravention of section 297 would also result in contravention of Section 299, hence its consequences would also follow.

_______________________________________

Credit Mohan Kulkarni

Railway accident in Thane on 23rd October 2009

2009-10-23T17:39:00.005+05:30

POWER OF ATTORNEY: HOW TO AVOID MISUSE and REVOKE IT

2009-09-09T21:47:00.002+05:30

By observing certain safeguards, one can safely grant a power of attorney without having to worry about it being used.

There are many cases where a power of attorney (POA) is granted with a specific intent but with passage of time the attorney holder assumes much more control due to liberal or sometimes even deficient drafting of the POA.
To ensure you power of attorney is not misused or it does not become a source of concern or a loss for you, the following factors should be remembered:

Ensure you know the attorney holder personally and do not issue a POA to person you are not confident about. Identification details of the attorney holder such as a passport number, PAN or election card should be available with you.
A POA should never be irrevocable unless you are selling a property. Always ensure the POA is revocable so that you can cancel it any time.
The POA should always be registered. This way it is easy to cancel or revoke it at the appropriate time.
You should not give open ended and sweeping powers in the POA. Avoid the use of words such as “all rights,” “and right”, “any action that the attorney holder deems fit”. You should identify to the purpose for which the POA is needed and draft a POA conforming to the duties and rights needed.
Always ensure that the photograph of the executives and the attorney is fixed on the POA.
In case the powers to the attorney are needed only for a limited period then you should prepare the POA for a fixed period only.
A general POA should be avoided unless absolutely necessary. You should grant a specific POA at all times.

How to revoke a power of attorney
Revocation of a power of attorney is a necessary when the purpose of which the POA is granted is no longer required or when the executants finds that the attorney is either misusing the powers under the POA or is acting against the interest of the executant.
No reasons need to be assigned in case a POA needs to be revoked. A POA is operational during the pleasure and consent of the executants. It can be revoked at any point.
The procedure usually followed when revoking a POA is as follows:

A notice of stop of use and cancelling of powers under the POA so granted to the attorney has to be issued. This needs to be done by recorded delivery so that a valid date of cessation of powers is recorded.
Further the POA has to be cancelled at the registrar’s office where it was originally registered at the time of issue.
In case the POA had been in widespread use then it is always advisable to publish a public notice in a newspaper which has reasonable circulation in the city where the POA was issued.
A POA can also be cancelled by destruction of the original document.

A POA is difficult to cancel in the following cases:
When the attorney holder and the original POA document is not traceable. Hence is advisable that the attorney is known to you.
When the POA is not registered. This creates a lot of hassle in making the POA non-operative.
A POA which is irrevocable cannot be revoked unless there are suitable and justified grounds that the irrevocable POA was issued fraudulently.
The key to having a control over the POA you issue and revoking it at your convenience is, to follow all procedure and precautions at the time of issue of POA.

[Source: Consumer Voice, July 2009]

For any query:- deepakmiglani@hotmail.com

PROCEDURE FOR CONVERSION OF PARTNERSHIP FIRM INTO A COMPANY

2009-09-09T13:13:00.001+05:30

Conversion of Firm under Part IX of the Companies Act, 1956 :- The firm may be converted into a company by following the provisions of Part IX of the Companies Act, 1956. Sections 565 to 581 deal with conversion of firms into a company under theCompanies Act, 1956.

For the purpose of Part IX so far as it relates to the registration of companies limited by shares, a joint stock company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly in the other, and formed on the principle of having for its members the holders of thoseshares or that stock, and no other persons. Such a company, when registered withlimited liability under the Companies Act, 1956 shall be deemed to be a companylimited by shares.

A company cannot be registered under part IX unless the assent of majority of itsmembers as are present in person or where proxies are allowed, by proxy, at a general meeting summoned for the purpose is obtained.

Since the liability of the members of the firm is unlimited, when a firm desires to register itself as a company under Part IX as a limited company, the majority required to assent as aforesaid shall consist of not less than ¾ of the members as are present in person or where proxies are allowed, by proxy, at a general meeting summoned forthe purpose.

Steps for incorporation of company under part IX

STEP 1

Hold a meeting of the partners to transact the following business

Assent of majority of its members as are present in person or where proxies are allowed, by proxy, at a general meeting summoned for the purpose of registeringthe firm under Part IX of the Companies Act, 1956. Since the liability of the membersof the firm is unlimited, when a firm desires to register itself as a company under Part IX as a limited company, the majority required to assent as aforesaid shall consist of not less than ¾ of the members as are present in person or where proxies are allowed, by proxy, at a general meeting summoned for the purpose.
To authorize one or more partners to take all steps necessary and to execute all papers, deeds, documents etc. pursuant to registration of the firm as a Company.
To execute a supplementary Partnership Deed to align it with the requirements as under:
There must be at least 7 partners in the partnership firm;
The firm may be registered with the Registrar of Firms;
There must be a fixed capital divided into units ;
There must be provision of converting a firm into company.
There must be an agreement by the partners to convert the partnership to a company. This can be done by a contract in writing to this effect to which the partner’s resolution for conversion can be attached as annexure.
Execute a settlement deed.

Step 2

APPLICATION FOR DIRECTOR’S IDENTIFICATION NUMBER AND DIGITAL SIGNATURERS CERTIFICATE

Ministry of Company Affairs has made Director’s Identification Number mandatory for each Director. Following details are required for DIN: Name(s) , Father’s Name(s), Permanent Residential Address(s), Present Residential Address(s), Occupation, Name of the Companies in which the promoter is Director/Promoter, Date of Birth , E-mail IDs (Minimum 2 for private company).
Ministry of Company affairs have initiated the process of E-filing of the Documents, wherein the either of the Director needs to have Digital Signature Certificate. For the matter of Convenience in submission of documents with Registrar of Companies and expediting the processing, it is advisable to obtain the Digital Signature Certificate from prescribed authorities.
Following documents are required for DIN/Digital Signature: Copy of Passport/ Voter ID/Ration Card/Driving License/ PAN Card/Telephone Bill/Electricity Bill/Bank Statement.
The application is required to be signed by the promoter(s).
Normally the process takes 5 to 7 working days after submitting the documents with DIN Cell.

Note: In case of a Private Limited Company at least two Directors should be appointed.

Step 3

NAME APPROVAL

An application in Form No. 1A needs to be filed with the Registrar of Companies(ROC) with following annexure(s) stating the fact that the partnership firm proposed to be converted under part IX of the Companies Act. (Annexure 1).
Certified true copy of Partnership Deed .
Certified true copy of the latest balance sheet of the partnership.
Certified true copy of the latest income tax assessment order/return.
Consent of all the partners stating that they have agreed to register the partnership firm as a Company .
Certified True Copy of the resolution passed by the firm in this regard .
The application is required to be digitally signed by one of the promoters.
The details to be state in the said application are as follows :

1. Maximum Six alternative names for the proposed company. (in order of preference)

2. Names , Father’s/ Husband’s Name, Permanent Residential Addresses, Present Residential Address, Occupation, Name of the Companies in which the Promoter is Director/Promoter , Date of Birth , DIN of the Promoters.

3. Authorised Capital of the proposed Company.

4. Main objects of the proposed company.

5. State of Registered Office of Company

6. Copy of Trade Mark Application/Certificate If name of proposed company based on a Trade Mark,

Note:

1. As per Indian Companies Act, 1956, a Private Company should have a minimum Paid up Capital of Rupees One Lac.
2. As per Indian Companies Act, 1956 there should be at least two promoters in a Private Limited Company.
3. The Registrar of Companies will ordinarily inform within a period of seven days from the date of submission of the application whether any of the names applied for is available.
4. If the name is not made available, the Registrar of Companies may reject the application and if it happens, new names to be provided for approval.

Step 4

Registration of Company

On obtaining the approval of name , file the following documents with the registrar of Companies within 60 days from the date of name approval
- Two sets of Memorandum and Articles of Association of the Company. One set shall be duly stamped. A memorandum of association and articles of association may be made for the company which will be similar in all respects to a normal Memorandum and Articles of Association except that it incorporate therein terms of settlement deed.
- After drafting The Memorandum and Articles of Association is required to be stamped as per the Indian Stamp Act. (in Delhi its Rs. 200/- on MOA & 0.15% of Authorized Capital on AOA).
- Thereafter these documents are required to be executed by the promoters in their own hand in the presence of professionals after the date of Stamping of Memorandum & Article of Association in duplicate stating their full name, father’s name, residential address, occupation, number of shares subscribed for & Signature etc.
- However, if any director is foreigner and not present in India after the date of Stamping of the Memorandum & Article of Association, in that case, his signature should be attested in Indian Embassy located in his home country.
- Form No. 1 – This is a declaration to be executed on a non-judicial stamp paper by one of the directors of the proposed company or other specified persons such as Chartered Accountants, Company Secretaries, Advocates, etc. stating that all the requirements of the incorporation have been complied with. (Annexure 2)
- Form No. 18 – This is a form to be filed by one of the directors of the company informing the ROC the registered office of the proposed company. (Annexure 3).
- Form No.: 32 – This is a form stating the fact of appointment of the proposed directors on the board of directors from the date of incorporation of the proposed company and is signed by one of the proposed directors. (Annexure 4).
- Power of Attorney signed by all the subscribers of MOA authorizing one of the subscribers or any other person to act on their behalf for the purpose of incorporation and accepting the certificate of incorporation.
- Form No. 37 along with Form No. 39 (Annexure 5 & 6).
- Declaration by two partners verifying the particulars set forth in the above mentioned documents.
- Consent letters from Directors
- Filing fees as may be applicable
- Other information to be submitted:

i) A list showing the names, addresses and occupations of all persons who on a day named in the list, not being more than 6 clear days before the date of registration were members of the company, with the addition of the shares or stock held by them respectively, distinguishing, in cases where the shares are numbered, each share by its number.

ii) If the company is intended to be registered as a limited company, a statement specifying the following particulars :-

a) the nominal share capital of the company and the number of shares into which it is divided or the amount of stock of which it consists

b) the number of shares taken and the amount paid of each share

c) the name of the company, with the addition of the word “Limited” or “Private Limited” as the case may be, as the last word / words, in case the company is being registered with limited liability.

Step 5

On completion of the formalities, the registrar shall register the Company under Part IX of the Act and issue a certificate of incorporation.

Steps for Incorporation of a public limited company

First Five stages are almost same for incorporation of a public limited company except there should be at least seven subscribers, three directors and the minimum paid up capital are Rs. 5 lacs.

After completion of first three stages a private limited company may commence its business but a public limited company is required to obtain certificate for commencement of business from Registrar of Companies. For obtaining the Certificate for commencement of its business, the Company is required to submit following documents with Registrar of Companies:

Form 20 to be executed on a non-judicial stamp paper (Annexure 5)
Statement in lieu of Prospectus
Affidavit from each directors stating that the Company has not commenced its Business
Details of Preliminary expenses
Board Resolution for approval of preliminary expenses.
Board resolution for appointment of first Auditors
Consent letter from the Auditors for acting as there Statutory Auditors.

Registrar of Companies thereafter shall process the documents and if all the documents are in order then it will issue a Certificate for commencement of Business.

Steps after incorporation of private company

Once the new company is formed, the takeover agreement would be entered between the Partnership Firm and the newly incorporated company.

Convene a Board Meeting after giving notice to all the directors of the newly incorporated company immediately after incorporation as per section 286 of the Companies Act, 1956 to adopt the agreement entered into by the company and the partner of the firm for the acquisition of business of the firm.

In such a situation, the entire business of the firm along with all its assets and liabilities is transferred to the company.

The company may issue shares or other securities to the Partner of the firm.

Steps after incorporation of public company

Once the new company is formed, the takeover agreement would be entered between the Partnership firm and the newly incorporated company.

In the above Board Meeting also fix up the date, time , place and agenda for calling a General Meeting to pass a Special Resolution under section 81(1A) of the Companies Act, 1956 giving powers to the Board of Directors to issue and allot equity shares to Partners of the firm.

Effect of Registration under part IX

Vesting of Property : All property, movable as well as immovable belonging to or vested in the firm at the time of registration shall, on such registration pass to and vest in the company as incorporated under Part IX.
The Registration of a company under Part IX shall not in any manner affect its rights or liabilities in respect of any debt or obligation incurred or any contract entered into, by, to, with or on behalf of the firm before registration.
All suits and other legal proceedings taken by or against the company or any public officer or member thereof which where pending at the time of registration may be continued in the same manner as if registration had not taken place. However, no execution can be done against the property or person of any individual member of the company on any decree or order obtained in such suit or proceeding. If the property of the company is inadequate to satisfy the decree or order, an order for winding up the company may be obtained.
All provisions of any Indian law or other instrument constituting or regulating the company shall apply to the registered company in the same manner as if the company had been formed under the Companies Act, 1956 and those conditions were required to be contained and were contained in its Memorandum and Articles of Association.
As per section 383A of the Companies Act, if the paid up capital of the Company is Rs. 500 lacs or more than the company is required to appoint a full time Company Secretary.
As per section 269 of the Companies Act, 1956 if the paid up capital of the company is Rs. 500 Lacs or more than the Company is required to appoint either Managing Director or Whole Time Director or Manager.
Debts and liabilities are not automatically transferred to the new company and therefore a novation agreement will have to be entered into by the company with its debtors and creditors.
Obtain an indemnity from the company to the partnership firm for all acts, deeds and things done after the registration under Part IX and vice versa.
Comply with all the relevant provisions of the Companies Act, 1956 i.e. call requisite meetings, register charges, comply with section 58A if necessary, etc.
Stamp duty. Conversion of firm to company is exempted from payment of stamp duty as there is no change in the ownership and no transfer is involved.

GUIDANCE NOTE ON CLAUSE 17A OF 3CD REPORT – AMOUNT INADMISSIBLE U/S. 23 OF THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006

2009-08-26T23:42:00.000+05:30

This is a new clause inserted by the Central Board of Direct Taxes through its Notification No. 36/2009 dated 13-4-2009, in the Form No.3CD in Appendix II of the Income-tax Rules, 1962 .

The tax auditor is required to state the amount of interest inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006. The Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act) is an Act to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto.

Section 23 of the MSME Act lays down that an interest payable or paid by the buyer, under or in accordance with the provisions of this Act, shall not for the purposes of the computation of income under the Income-tax Act,1961 be allowed as a deduction.

The inadmissible interest has to be determined on the basis of the provisions of the MSME Act. Section 16 of the MSME Act provides for the date from which and the rate at which the interest is payable. Accordingly, where a buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall , notwithstanding anything contained in any agreement between the buyer and the supplier or any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed date or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.

Section 15 of the MSME Act, requires the buyer to make payment on or before the date agreed upon in writing, or where there is no agreement in this behalf, before the appointed day. It also provides that the period agreed upon in writing shall not exceed forty five days from the day of acceptance or the day of deemed acceptance.

Section 22 of the MSME Act provides that where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely:-

i. The principal amount and interest due thereon (to be shown separately) remaining unpaid to any supplier as at the end of each accounting year.

ii. The amount of interest paid by the buyer in terms of Section 16, along with the amount of payment made to supplier beyond the appointed date during each accounting year.

iii. The amount of interest due and payable for the delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act.

iv. The amount of interest accrued and remaining unpaid at the end of each accounting year; and

v. The amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure under section 23.

Where the tax auditor is issuing his report in Form No.3CB, he should verify that the financial statements audited by him contain the information as prescribed under section 22 of the MSME Act. If no disclosure is made by the auditee in the financial statements he should give an appropriate qualification in Form No.3CB, in addition to the reporting requirement in clause 17A of Form No. 3CD.

The tax auditor while reporting in respect of clause 17A should take the following steps:

(a) The auditor should seek information regarding status of the enterprise i.e. whether the same is covered under the Micro, Small and Medium Enterprises Development Act, 2006. Where the information is available and has been disclosed the same should be reported as such in Form No. 3CD. Where the information is not available the auditor should also mention the same in the Form No.3CD.

(b) Since Schedule VI and Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 requires disclosure of information, the tax auditor should cross check the disclosure made in the financial statements.

(c) Obtain a full list of suppliers of the assessee which fall within the purview of the definition of “Supplier” under section 2(n) of the Micro, Small and Medium Enterprises Development Act, 2006. It is the responsibility of the auditee to classify and identify those suppliers who are covered by this Act.

(d) Review the list so obtained.

(e) Verify from the books of account whether any interest payable or paid to the buyer in terms of section 16 of the MSME Act has been debited or provided for in the books of account.

(f) Verify the interest payable or paid as mentioned above on test check basis.

(g) Verify the additional information provided by the auditee relating to interest under section 16 in his financial statement.

(h) If on test check basis, the auditor is satisfied, then the amount so debited to the profit and loss account should be reported under clause 17A.

Where the tax auditor, upon due verification, finds that the auditee has neither provided for nor paid any interest payable under the MSME Act, the no amount is inadmissible under section 23 of MSME Act. In such a case ‘Nil’ can be reported against clause 17A.

A question may come up, as to what would be disallowance, in case the auditee is liable to pay any interest under MSME Act, but he has not provided the interest in his accounts. In such a case, there can be no disallowance, as he has not claimed the same in his accounts. But whenever he pays and claim such interest, the same will be disallowable in year of payment. In case the auditee has adopted mercantile system of accounting, the non-provision may affect true and fair view and the auditor should give suitable qualification.

The relevant extracts of the MSME Act are as follows:

“Appointed day” means the day following immediately after the expiry of the period of 15 days from the day of acceptance or the day of deemed acceptance.

“Day of acceptance” means the day of actual delivery of the goods or the rendering of service or where any objection is made in writing by the buyer regarding the acceptance of goods or services within 15 days from the day of delivery of goods or rendering of services, the day on which the objection is removed by the supplier.

“day of deemed acceptance” means , where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of deliver of the goods or rendering of services, the day of the actual delivery of goods or the rendering of services.

“Buyer” means who so ever buys any goods or receives any services from the supplier for a consideration.

“Supplier” means a micro or small enterprise, which has filed a memorandum with the authority referred to in section 7(1)(a).

“Micro Enterprise” means:

a) In case of enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951 an enterprise, where the investment in plant and machinery does not exceed twenty five lakh rupees;

b) In case of enterprises engaged in providing or rendering services, an enterprise, where the investment in equipment does not exceed ten lakh rupees.

“Small enterprise” means:

a) In case of enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries(Development and Regulation) Act, 1951 an enterprise, where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees.

b) In case of enterprises engaged in providing or rendering services, an enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees;

“Medium enterprise” means

a) In case of enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries(Development and Regulation) Act, 1951 an enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees.

b) In case of enterprises engaged in providing or rendering services, an enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupee.

credit: http://www.taxguru.in/income-tax/guidance-note-on-clause-17a-of-3cd-report-amount-inadmissible-us-23-of-the-micro-small-and-medium-enterprises-development-act-2006.html

Companies Bill, 2009

2009-08-15T18:39:00.000+05:30

Companies Bill, 2009

On August 3, 2009 , a new Companies Bill was introduced in the Lok Sabha. The name of the bill is Companies Bill, 2009. Actually It is the Companies Bill, 2008, which lapsed with the dissolution of the 14th Lok Sabha, and was reintroduced by the corporate affairs minister Salman Khurshid in Lok Sabha.

Why this bill is needed?
The older Companies Act, 1956, needs to be amended in keeping with the changes in the corporate world. Mainly the governance and capital structuring requirements of the Companies Act 1956 need an urgent amendment and there is a demand to allow easier incorporation and quick winding up. The existing Act suffers from several infirmities that prevent healthy development of our corporate sector. In particular, the provisions for winding up sick companies have been a sticking point with the industry.

Features of the New Bill:

The new Bill will be shorter and will try to harmonise the company law framework with sectoral regulations.
It will have 480 sections compared to over 600 sections in the Companies Act, 1956 in addition to providing for greater shareholder democracy and less government intervention.
It will try to promote shareholders democracy with protection of rights of minority shareholders, responsible self-regulation with adequate disclosure and accountability and lesser government control over internal corporate processes.
It will also make it mandatory for listed companies to have 33 per cent independent directors
It provides for formation of One Person Company
It empowers the government to provide a simpler compliance regime for small companies.
The Bill also proposes to make stringent provisions for companies seeking to raise money from the public. They would not be allowed to raise deposits from the public without obtaining permission from the relevant regulator.
The bill proposes a single forum for approval of mergers and acquisitions, whether domestic or with foreign entities.
Procedure for merger of holding and wholly-owned subsidiaries would be shortened.
Bill seeks to prohibit insider trading by company directors or key managerial personnel. Such activities will be treated as a criminal offence.
Every company director would be required to acquire a unique Director Identification Number, a provision which would check the menace of vanishing companies.
It provides for a framework for enabling fair valuations of companies for various purposes and strengthening Investor Education and Protection Fund.
It makes Consolidated financial statements of subsidiaries mandatory
It removes the Clause that disallows claims over unclaimed dividend after seven years.
It clearly defines role of independent directors.
It simplifies the Process for formation of companies simplified

applicability of service tax on commission paid to Whole time directors.

2009-08-01T10:20:00.002+05:30

Remunerations paid to Managing Director / Directors of companies whether whole-time or independent when being compensated for their performance as Managing Director/Directors would not be liable to service tax.

The services aprovided by the whole time directors can not be considered as Business Auxilary services and hence service tax is not applicable.

The whole time directors are a part of Management and they do not act as consultants or advisors hence can not be termed as Business Auxilary services.

Limited Liability Partnership Act 2008

2009-07-13T23:57:00.000+05:30

Key Limited Liability Partnership Act 2008 and Limited Liability Partnership Rules, 2009

• The Limited Liability Partnership (LLP) Bill 2008 was passed by the Parliament on December 12, 2008 and legislated vide notification of the Act in the Gazette of India on January 7, 2009. Subsequently ‘The Limited Liability Partnership Rules, 2009’ were notified by the Central Government on April 01, 2009.

• Key features of the LLP Act are as below:

–– An LLP is a separate legal entity under the Limited Liability Partnership Act, 2008 and can sue and be sued.

–– An LLP has a perpetual succession and partners may come and go.

–– The LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP.

–– Minimum 2 partners with no limitation on maximum number of partners.

–– Foreign Nationals can be a Partner in an LLP.

–– The liability of partners is limited to the extent of their contribution, except in case of intentional fraud or wrongful act of omission or commission by the partner.

• In essence LLP combines the advantages of both the Company and Partnership into a single form of organization.

While one partner is not responsible or liable for another partner’s misconduct or negligence, in an LLP, all partners have a form of limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly.

Taxation of LLPs

Taxation scheme for LLP prescribed on the same lines as currently applicable for Partnership Firms, i.e. tax will be levied on LLP and Partners will be exempt from tax.

The definition of the terms ‘firm’, ‘partner’ and ‘partnership’ have been substituted so as to define in the context of an entity registered under the Limited Liability Partnership Act, 2008 in addition to the definitions in the context of a partnership formed under the Indian Partnership Act,1932.

In the case of LLP, the return of income shall be signed and verified by the designated partner and where for any unavoidable reason the designated partner is not able to sign the return of income or where there is no designated partner, by any other partner.

In the case of liquidation of an LLP, every person who is a partner of the LLP at any time during the previous year shall be jointly and severally liable for the payment of any unrecovered tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the LLP.

It is also proposed to increase the ceiling limits of remuneration paid to the working partner of a partnership firm, which is allowed as deduction from income. For simplicity and administrative ease, the limits for professional and non-professional firms have been brought in uniformity.

The proposed ceiling limits with effect from FY 2009-10 are:

Book Profit

Maximum deductible remuneration

On the first Rs. 300,000 of the

book-profit or in case of a loss

Rs. 150,000 or at the rate of 90% of the book-profit, whichever is more

On the balance of the book-profit

At the rate of 60%

REQUIREMENT FOR FORMATION OF LIMITED LIABILITY PARTNERSHIP LIMITED LIABILITY PARTNERSHIP (LLP) IN INDIA

2009-06-29T18:51:00.003+05:30

Partner

There should be atleast 2 persons (natural or artificial) are required to form a LLP. In case any Body Corporate is a partner, than he will be required to nominate any person (natural) as its nominee for the purpose of the LLP.

Following can become a partner in the LLP

Company incorporated in and outside India
LLP incorporated in & outside India
Individuals resident in & outside India

Contribution

In case of LLP, there is no concept of any share capital but every partner is required to contribute towards the LLP in some manner. The said contribution can be tangible, movable or immovable or intangible property or other benefit to the limited liability partnership, including money, promissory notes, and other agreements to contribute cash or property, and contracts for services performed or to be performed.

In case the contribution is in intangible form, the value of the same hall be certified by a practicing Chartered Accountant or by a practicing Cost Accountant or by approved valuer from the panel maintained by the Central Government. The monetary value ofcontribution of each partner shall be accounted for and disclosed in the accounts of thelimited liability partnership in the manner as may be prescribed.

The LLP Agreement must specify the contribution intended to be paid all the members and the form in which it will be paid.

Designated Partners

‘Designated Partner’ means a partner who is designated as such in the incorporation documents or who become a designated partner by and in accordance with the Limited Liability Partnership Agreement.

Every limited liability partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India Provided that in caseof a limited liability partnership in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such limited liability partnership or nominees of such bodies corporate shall act as designated partners.

Designated Partner shall be:

Responsible for the doing of all acts, matters and things as are required to be done by the limited liability partnership in respect of compliance of the provisions of this Act including filing of any document, return, statement and the like report pursuant to the provisions of this Act and as may be specified in the limited liability partnershipagreement; and
Liable to all penalties imposed on the limited liability partnership for any contravention of those provisions.

Explanation.—for the purposes of this section, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one year.

Designated Partners Identification Number (DPIN)

Every Designated Partner is required to obtain a DPIN from the Central Government.

DPIN is an eight digit numeric number allotted by the Central Government in order to identify a particular partner and can be obtained by making an online application in Form 7 to Central Government and submitting the physical application along with necessary identity and Address proof of the person applying with prescribed fees. However if an individual already holds a DIN (Director Identification Number), the same shall deemed to be the DPIN (Designated Partner Identification Number), and for the purpose, an intimation to be made in Form 25 with Central Government.

It is not necessary to apply Designated Partner Identification Number every time you are appointed partner in a LLP, once this number is allotted it would be used in all the LLP’s in which you will be appointed as partner.

Digital Signature Certificate

All the forms like eForm 1, eForm 2, eForm 3 etc which are required for the purpose of incorporating the LLP are filed electronically through the medium of Internet. Since all these forms are required to be signed by the partner of the proposed LLP and as all these forms are to be filed electronically, it is not possible to sign them manually. Therefore, for the purpose of signing these forms, at least one of the Designated Partner of the proposed LLP needs to have a Digital Signature Certificate (DSC).

The Digital Signature Certificate once obtained will be useful in filing various forms which are required to be filed during the course of existence of the LLP with the Registrar of Companies.

LLP Name Approval, Prohibited word, Words which require Approval

Selection of the name for the proposed LLP to be incorporated is one of the important processes of the entire incorporation process, ideally the name of the LLP should be such which represents the business or activity intended to be carried on by the LLP. Before selecting the name of the LLP, it is necessary to evaluate the proposed name under the following given criteria:

LLP with Similar Name: The proposed name of the LLP should not be similar to the name of the Company or LLP, which is already registered in India.For example:Name of Company already registered: XYZ Consultants Pvt Ltd Name of Proposed LLP: XYZ Consultants LLP Whether Proposed Name would be available: No

Prohibited Word: The Ministry of Corporate Affairs of India has prescribed certain words, which should not form part of the name of LLP intended to be incorporatedin India, such words are prohibited under The Emblems and Names (Prevention of improper use) Act, 1950. Following is the List of Prohibitive words alongwith reasons:-

1. National, Union, Central, Federal, Republic, President, Rasthrapathi, Small Scale Industries, Cottage Industries, Financial Corporations, Municipality, Panchayat or any other word imparting connection Union or State Government : It signifies Government Patronage or Participation.
2. State together with the name of Particular State for e.g. Delhi state corporations Ltd : Itgives an impression that the state is also participating in the paid up share capital of the company.
3. Ashoka Chakra, Dharma Chakra, Name of Parliament , State Legislature : Prohibited Under Emblems & Names (Prevention of Improper Use ) Act, 1955.
4. Rama Krishna Math, Ramakrishna Sarada Mission, Bharat Scouts, Interpol : Prohibited Under Emblems & Names (Prevention of Improper Use ) Act, 1955.
5. Chhatarpait Shivaji Maharaj, Mahatma Gandhi or the name of any Prime Minister/President of India : Prohibited Under Emblems & Names (Prevention of Improper Use ) Act, 1955.

Words Based on Approval: Various government regulatory authorities operatingin India like Securities & Exchange Board of India, Reserve Bank of India, has prescribed certain words, which if forms part of the name of the proposed LLP to be incorporated, requires there first hand approval.Following is the List of Words which requires approval alongwith the Name of the Authority from whom approval is required:-
1. Venture Capital/Venture Capital Company/Venture Capital Fund/Venture Capital Finance Company:- Department of Economic Affairs/ SEBI
2. Stock Exchange/Mutual Funds:- Securities Exchange Board of India (SEBI)
3. Name belongs to registered trade mark:- Owner of the registered trade mark
4. Insurance:- Insurance Development Regularity Authority of India (IDRA)
5. Bank, Banker, Banking:- Reserve Bank of India (RBI)
6. Names reserved for Foreign LLP/Companies: In case Foreign LLP/Companies have reserved their name under rule 18 of the LLP Rules 2009, than that name will not be applicable for forming of LLP to persons other than the Foreign LLP/Company

LLP Agreement

For the purpose of forming a LLP, there should be agreement between the partners interested in forming the LLP to be known as LLP Agreement. The said Agreement forms the basis of the formation of LLP and lays down its founding structure. The LLP agreement is an agreement between the Partners and between the LLP & its partners.

The basic contents of Agreement are:

Name of LLP
Name of Partners & Designated Partners
Form of contribution
Profit Sharing ratio
Rights & Duties of Partners

In case no agreement is entered into, the rights & duties as prescribed under Schedule I to the LLP Act shall be applicable. It is possible to amend the LLP Agreement but every change made in the said agreement must be intimated to the Registrar of Companies.

Registered Office

The Registered office of the LLP is the place where all correspondence related with the LLP would take place, though the LLP can also prescribe any other for the same. . A registered office is required for following purposes:

All the statutory records and books of accounts of the LLP will be maintained at this office.
The Jurisdiction of Registrar of Companies is based on the registered office of the LLP

At the time of incorporation, it is necessary to submit proof of ownership or right to use the office as its registered office with the Registrar of Companies.

courtesy

Cheque Bouncing in Dubai

2009-06-29T10:00:00.002+05:30

The UAE legal system considers the cheque instrument of payment as substitute of money, consequently the non-payment of cheque can be pursued not only through civil litigation but also as a crime that makes necessary to inflict criminal punishment under criminal proceeding as per Article Art. 401 of the Federal Penal Code No. 3 of 1987.

The drawer shall be punished with imprisonment that may not be less than 1month and not more than 3years or with fine not less than Dh100 and not exceeding Dh30,000. Moreover, the Civil Court may order in addition the punishment of publishing the extract of the judgment in a daily newspaper, to withdraw the cheque book of the convicted and to ban granting new cheque book for a period to be decided by the court.

Just a quote from an article "Fraud, including bouncing cheques and the non-payment of bills (including hotel bills), is regarded seriously in the UAE and can result in imprisonment and/or a fine. Bail is generally not available to non-residents of the UAE who are arrested for crimes involving fraud."

Resolution - Not to fill the vacancy of Director

2009-06-25T17:00:00.003+05:30

In certain cases a Company may decide to reduce the number fo directors, in such cases the company will decide not to fill the vacancy created by the retiring director. listed below is the specimen resolution to be passed in the Annaul General Meeting.

"Resolved that Mr. _______, a director liable to retire by rotation, who does not seek re-election, be not re-appointed a Directorof the Company.

Resolved Further that the vacancy, so created on the Board of Directors of the Company, be not filled."

Preference Shares

2009-06-21T19:53:00.001+05:30

The maximum period for which preference shares can be issued shall not exceed 20 years (according to Section 80A). This means that preference shares must be redeemed within a period of 20 years from the date of issue and companies are prohibited from issuing irredeemable preference shares.

Where shares are redeemed otherwise than from the proceeds of a fresh issue, the company is required to transfer, out of the profits of the company which would otherwise be available for dividends, to a capital redemption reserve account a sum equal to the nominal amount of shares redeemed. The reserve account is treated as if it were paid-up share capital. This is based on the fundamental principle that the capital of the company must be maintained intact. The subscription made to the capital of a company cannot be taken back, but can be converted into liquid cash by the sale of relative shares in the market. For the same reason, the redemption of preference shares must be done only out of the company's profits. Such redemption is an exception to the prohibition contained in Section 77 of the act as the company cannot buy its own shares.

In the case of cumulative preference shares, the fixed dividend accumulates to the credit of the preference shareholder.

A preference shareholder is a shareholder of the company and not its creditor, and hence cannot exercise the rights of a creditor if the company fails to redeem the shares on the due date. However, the shareholder may approach the court for the winding-up of a company in default on just and equitable grounds.

The redemption of preference shares does not reduce the authorized and issued capital of a company. Where preference shares are redeemed, the company has the power to reissue preference shares up to the nominal amount of the shares redeemed.

Another distinctive feature of preference shares is that the capital redemption reserve account may be applied in paying for unissued shares of the company to be issued to members as fully paid bonus shares.

preference shareholders also have a right to vote on every resolution placed before the company at any meeting if dividends due on preference capital or any part of such dividends has remained unpaid. In the case of non-cumulative preference shares, the right to vote arises if the dividend is in arrears in respect of a period of not less than two years ending with the expiry of the financial year immediately preceding the meeting or in respect of an aggregate period of not less than three years in the six years ending with the expiry of the financial year. The voting right on a poll is in the same proportion as the capital paid up in respect of preference shares is to the total paid-up equity capital of the company.

The rate of dividends on preference shares or convertible preference shares should not exceed 300 base points over the prime lending rate of the State Bank of India on the date of the board meeting at which the issue of such shares is recommended.

Foreign institutional investors can invest up to an individual limit of 10% with an aggregate limit of 24% by all foreign institutional investors; this can be increased to 49% with the approval of the board or general meeting of the investee company. Similarly, non-resident Indians can invest in a Indian company with an individual limit of 5%. The non-resident Indian portfolio investment can be up to 10%, and can be increased to 24% with the approval of the board or general meeting of the investee company. These percentages refer to the paid-up capital of the Indian company.

FAQ ON AS 11

2009-05-20T12:03:00.001+05:30

FREQUENTLY ASKED QUESTIONS ON AS 11 RELATED TO EXCHANGE RATE DIFFERENCE

MAY 18, 2009 Accounting

Frequently Asked Questions on AS 11 notification – Companies (Accounting Standards) Amendment Rules, 2009 (G.S.R. 225 (E) dt. 31.3.09) issued by Ministry of Corporate Affairs.

ASB Guidance in the form of FAQs on AS 11 notification – Companies (Accounting Standards) Amendment Rules, 2009 (G.S.R. 225 (E) dt. 31.3.09) issued by Ministry of Corporate Affairsdoes not form part of the Standard. The purpose of this Guidance is to illustrate and to assist in clarifying the application of the notification.

(1) The notification uses the term ‘depreciable capital asset’. What is meant by the term ‘depreciable capital asset’ as none of the accounting standards uses this terminology?

Response

The notification dated 31.03.2009 issued by the Ministry of Corporate Affairs seeks to insert paragraph 46 after paragraph 45 in the Accounting Standard (AS) 11 relating to the “The Effects of Changes in Foreign Exchange Rates”. It requires that exchangedifferences arising on reporting of long term foreign currency monetary items at rates different from those at which they were initially recorded during the period (in respect of accounting periods commencing on or after 7^th December 2006) or reported in previous financial statements, in so far as it relates to the acquisition of a depreciable capital asset can be added to or deducted from the cost of the asset. The notification also requires that depreciation on such capital asset be provided over the balance life of such an asset. The term “depreciable capital asset” has not been used in theaccounting standards or the “Guidance Note on Terms used in Financial Statements”. The nearest term available is “depreciable assets” in paragraph 3.2 of AS 6, reproduced below:

“Depreciable assets are assets which

(i) are expected to be used during more than one accounting period; and

(ii) have a limited useful life; and

(iii) are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for administrative purposes and not for the purpose of sale in the ordinary course of business.”

Further paragraph 3.1 of AS 6 states: “Depreciation includes amortisation of assets whose useful life is predetermined”.

Accordingly, in the view of the ASB, the term “depreciable capital asset” would cover tangible fixed assets and intangible assets that are subject to depreciation, amortisation or impairment.

(2) Would the notification cover exchange differences including those arising in terms of paragraph 36 of the Standard which deals with the forward exchange contracts?

Response

The notification would cover exchange differences including those arising in terms of paragraph 36 of AS 11 which deals with the forward exchange contracts provided such exchange differences relate to long term foreign currency monetary items as per the notification.

(3) Which other category of long term monetary assets would be covered apart from the depreciable capital asset? For example will this cover Fixed Deposits with a foreign bank held for more than 12 months as well as the amounts payable for a period exceeding 12 months?

Response

The notification covers the exchange differences arising on reporting of long termforeign currency monetary items and would cover all the long term monetary assets in foreign currencies which have a term of 12 months or more at the date of the origination of the asset or liability.

(4) Will the assets acquired in India by payment in foreign currency also be covered by the notification? If this presumption is correct will it contradict the requirements of Schedule VI to the Companies Act 1956?

Response

The notification would apply to all the depreciable capital assets which are acquired using the long term foreign currency monetary items as no distinction is made with regard to the place of acquisition of assets. It may be added that Schedule VI has simultaneously been amended so as to delete the paragraph dealing with the increase or decrease in original cost of fixed asset acquired from a country outside India as a consequence of change in the exchange rate. This paragraph was a part of the Horizontal form of Balance Sheet under heading “Instructions in accordance with which assets should be made out”.

(5) The exemption provided by the notification is in respect of those items which are covered in paragraph 15 which deals with monetary items that in substance form part of the net investment in a non-integral foreign operation of the enterprise. Whether the monetary items in case of integral foreign operation will be covered by the notification?

Response

The notification specifically exempts exchange differences dealt with in accordance with paragraph 15 of AS 11 which deals with monetary items that in substance form part of the net investment in a non-integral foreign operation of the enterprise. However, monetary items in the case of integral foreign operations will be covered by the notification provided it falls under the definition of “long term foreign currencymonetary items”.

(6) How the transitional account under head ‘Foreign Currency Monetary Item Translation Difference Account’ is to be amortised?

Response

Illustration

An example illustrating application of the amendments in AS 11 is given below:

A company borrowed US $ 100000 on 1st April 2005 which has been used for other than acquiring depreciable assets repayable in full, after a period of 6 years. Exchange rate on that date was $ 1 equal to Rs. 40. The company follows the financial year as its accounting year. The detail of the exchange rates and the accounting treatment made by the company in subsequent years is as follows:

Year ending	Exchange rate $ 1 equal to Rs.	Accounting treatment
March 31, 2006	41	Loss of Rs. 1,00,000 recognised in profit and loss
March 31, 2007	39	Rs. 2,00,000 gain recognised in profit and loss
March 31, 2008	48	Rs. 9,00,000 loss recognised in profit and loss
March 31, 2009	50	¾
March 31, 2010	51 (assumed)	—-
March 31, 2011	52 (assumed)	—-

The company has opted to follow the Companies (Accounting Standards), Amendment Rules, 2009.

Year Ending	Opening Balance	Exchange difference	Total	Amount to be recognised in P&L Account	Closing Balance	Remarks
March 31, 2006	NIL	(1.00)	(1.00)	1.00	NIL	No change
March 31,2007	NIL	2.00	2.00	2.00	NIL	No change
March 31,2008	NIL	9.00	9.00	2.25	6.75	*
March 31,2009	6.75	2.00	8.75	2.92	5.83**	Total is amortised over a period of 3 years
March 31, 2010	5.83	1.00	6.83	3.41	3.42***	Total is amortised over a period of 2 years
March 31, 2011	3.42	1.00	4.42	4.42	NIL	Full amount is amortised

* On 1.4.2008, Rs. 6.75 Lakhs would be credited to general reserve and debited toForeign Currency Monetary Items Translation Difference Account in the year ended 31.03.2009.

** (8.75 minus 2.25 + 1/3 of Rs.2.00 lakh)

*** (5.83 minus 2.92 + 1/2 of Rs.1.00 lakh)

(7) Will exercising the option under the Companies (Accounting Standards) Amendment Rules, 2009 be a change in the accounting policy?

Response

As the notification involves the adoption of an option available (a different accounting policy), it will be treated as change in accounting policy and it should be disclosed in accordance with Para 32 of AS 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.

(8) Is the option once exercised irreversible? If an enterprise does not want to adopt the treatment as per the new paragraph, can it do so? Can it exercise the option?

Response

As per the notification, if the option is exercised, the fact of exercise of such option and of the amount remaining to be amortised in the financial statements of the period in which such option is exercised and in every subsequent period so long as any exchange difference remains unamortised should be disclosed. The option once exercised is irrevocable.

The company has a discretion not to adopt the treatment as per the notification and can follow the principles stated in AS 11. A decision with regard to the exercise of the option will have to be taken in first financial statements approved on or after the date the notification comes into force, i.e. March 31, 2009. However, in case a company did not have any long term foreign currency monetary items, in such accounting period (being a period commencing on or after 7th December 2006) but such liability is incurred say in a subsequent accounting period, i.e., the accounting period ending on 31st March 2010, it may be possible for such a company to exercise the option in such subsequent year ending on 31st March 2010.

(9) What will be the status of the ICAI announcement regarding derivatives? Will derivatives also be valued on the basis of this notification or the announcement of ICAI would continue to be applicable?

Response

The notification applies to long-term foreign currency monetary items (including foreign currency derivatives) to which AS 11 applies. If the company has opted for early adoption of AS 30, Financial Instruments: Recognition and Measurement, it should continue to apply the treatment enunciated in AS 30. In other cases, ICAI announcement dated 29.03.08 regarding derivatives will apply.

(10) Will the recognition of income and expense in accordance with the notification be treated as an item of unusual nature referred to in paragraph 12 and 13 of AS 5?

Response

Paragraph 12 of AS 5 requires as under:

“When items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items should be disclosed separately.”

Paragraph 13 of the said Standard also states that although the items of income and expense described in paragraph 12 are not extra ordinary items, the nature and amount of such items may be relevant to users of the financial statements in understanding the financial position and performance of an enterprise and in making projections about financial position and performance. Paragraph 13 also requires the disclosure of such information which is sometimes made in the notes to financial statements.

The compliance of these paragraphs will have to be made in case the circumstances described in the said two paragraphs are applicable to the exchange differences dealt with by the aforesaid notification. This is a matter of judgment by the management and the management needs to consider whether the said paragraphs apply in the circumstances of their case.

(11) Will assets acquired from foreign currency monetary item that are not depreciated but amortised be included?

Response

As per paragraph 3.1 of AS 6, depreciation includes amortisation of assets whose useful life is predetermined. Hence assets acquired from long term foreign currency monetary items that are not depreciated but amortised are covered by notification.

(12) In case the foreign currency monetary item is not fully utilised for acquisition of fixed assets, then will proportionate adjustment be permissible in the fixed asset cost and balance of exchange fluctuation will be adjusted to Foreign Currency Monetary Items Translation Difference Account?

Response

Proportionate adjustment based on actual application of funds should be done to the fixed asset cost and ‘Foreign Currency Monetary Item Translation Difference Account’.

(13) If the long term foreign currency monetary item is received in instalments whether the installment received within a period of 12 months should be treated as short term in nature?

Response

Yes, each loan installment should be treated as a separate monetary item. The principle should be to amortise the exchange difference proportionately over the period of the monetary item and not to carry forward any unamortised amount beyond the settlement of the monetary item to which the exchange difference relates. Treating the entire loan as a single monetary item would result in the exchange difference relating to the loan instalment which is settled being amortised in accounting periods even after such settlement.

(14) How ‘Foreign Currency Monetary Item Translation Difference Account’ should be presented in the Balance Sheet?

Response

The ‘Foreign Currency Monetary Item Translation Difference Account’ should be shown as a separate line item in the Balance Sheet, in line with treatment given to Deferred Tax Asset/Liability, i.e. after the head ‘Investments’ or after the head ‘Unsecured Loans’ as the case may be and separately from current assets and current liabilities.

(15) Does this notification apply to exchange difference arising on forward exchange contracts entered into to hedge the foreign currency risks of future transactions in respect of which firm commitments are made or which are highly probable forecast transactions or only to forward contracts foreign currency items included in Para 36 of AS 11?

Response

The notification does not cover the contracts entered into to hedge the foreign currency risks of future transactions in respect of which firm commitments are made or which are highly probable forecast transactions. AS 30 or the announcement issued by ICAI dated 29.3.08 will apply in such cases. The amendment is applicable only to foreign currency items referred to in paragraph 36 of AS 11.

(16) Whether the notification applies to non-corporate entities which are not covered by Companies Act?

Response

The notification applies to Companies registered under the Companies Act, 1956. In respect of all other entities, AS 11 as issued by ICAI is required to be followed.

(17) Does the notification also apply to those exchange differences which are regarded as an adjustment to interest costs in terms of paragraph 4(e) of Accounting Standard (AS) 16, Borrowing Costs?

Response

No. Paragraph 6 of AS 11 excludes from the scope of the Standard exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs under paragraph 4(e) of AS 16. Paragraph 6 of AS 11 and paragraph 4(e) of AS 16 have not been amended by the notification. Thus, the exchange differences referred to above still remain outside the scope of AS 11 and within the scope of AS 16. Accordingly, these exchange differences should continue to be accounted for in accordance with AS 16.

(18) Should we capitalise exchange differences arising on settlement of long term foreign currency monetary items?

Response

As per paragraph 7.3 of AS 11, exchange differences include differences arising out of settlement also. Hence, such differences also should be capitalised.

(19) The notification refers to the acquisition of depreciable capital assets. Will it include the self constructed assets and acquired by other means?

Response

The term acquisition is wide enough to include self constructed assets and assets acquired by other means in case a long term foreign currency monetary item is incurred in relation to such acquisition.

(20) Suppose a company has got two separate long term foreign currency monetary items; one for use in connection with acquisition of a depreciable asset and second for use in working capital. Should the treatment suggested in the notification be followed only for acquisition of depreciable assets?

Response

The company should capitalise the exchange difference relating to a depreciable capital asset on the basis of the notification. The difference relating to the long term monetary liability in respect of working capital should be adjusted through ‘Foreign Currency Monetary Items Translation Difference Account’. The accounting treatment in the notification, if opted for, would need to be applied to all long-term foreign currency monetary items.

(21) If capitalisation of exchange differences results in carrying value greater than recoverable amount. Is it permissible?

Response

The provisions of AS 28, Impairment of assets, will apply in such cases.

(22) If the company exercises the option, what are the implications on current tax and deferred tax?

Response

Where the option is not exercised by the company, the foreign exchange losses and gains would continue to be treated as per the present practice for determining the current tax liability. However, the accounting treatment as per the option in the notification may give rise to timing differences under AS 22, Accounting for Taxes on Income.

Adjustment to the general reserves should be made on a net of tax basis. This is supported by the approach taken by the ICAI in other cases. Thus, the deferred tax asset/liability arising in the event of the option being exercised is to be recognised against the corresponding net adjustment to the general reserves.

(23) What are the disclosures to be furnished in the financial statements if the option is exercised?

Response

The exercise of the option will be a change in accounting policy. This would require a disclosure as per the requirements of Paragraph 32 of AS 5 apart from the following additional disclosures.

Additional disclosures are:

a) That the company has chosen to avail the option.

b) Amount of amortisation charged to the Profit and Loss Account

c) Amount remaining to be amortised in financial statements of the period in which such option is exercised and in every subsequent period so long as the exchange differences remain unamortised.

d) Comparative figures should be furnished based on last audited figures.

e) The effect of adjustment (relating to amounts previously recognised) made through general reserve or if no balance is available through the balance in opening surplus/deficit in Profit and Loss Account.

Cheque Bouncing u/s 138 of Negotiable Instruments Act.

2009-03-29T20:03:00.005+05:30

The Offence
The provision of sec. 138 of the Negotiable Instruments [NI] act can be invoked where, cheque was issued in discharge of a legally enforceable debt or even in case of any other liability; not legally enforceable.
The debt should not have been a time barred debt, as specified under the Indian Limitation Act 1963. a complaint is not tenable if a cheque issued towards repayment of time bared debt gets dishonoured.
The provision u/s 138 can be invoked where cheque was bounced due to non-availability of funds and closure of the Bank account.

Notice
A notice be sent to the drawer of the cheque within 30 days from the date of dishonour of cheque.
Notice should be in writing calling up on the drawer to pay the sum of cheque.
If the notice states an amount greater than the cheque amount proper justification must be mentioned in the notice or else the notice will be treated as defective.
The drawer needs to pay the amount of cheque within 15 days from receiving the abovementioned notice.
Notice be given to all the partners of partnership firm. In case of unregistered firm notice be given to the person who has signed the cheque.
A single notice for dishonour of two or more cheques to the same drawer of cheque is also permitted.
A notice can be issued in the name of the person who has signed the cheque irrespective of his position / authority.
Dishonour of cheque because of incomplete signature of drawer does not not attract sec. 138

Complaint
Criminal complaint should be filed within one month of expiry of 30 days provided to the drawer for payment.
A complaint should be filed in the court of Metropolitan Magistrate or First Class Judicial magistrate.
Once notice is issued under Sec.138, failure to initiate prosecution would forfeit the right to prosecute.
Once a notice is issued the bounced cheque can not be re-deposited.
Complaint is not maintainable in case the drawer Request not to present the cheque and even after such request the cheque is presented and got dishonoured.

Complainant
With the permission of the court, legal heirs of the payee can continue the case.

Punishment
Imprisonment for the term of 2 years and payment of fine to the extent of twice the amount of the cheque

Personal Liability
A person or a director of a company can be made personally responsible towards bouncing of cheque provided the same is specifically mentioned in the complaint issued vide sec. 138 of the NI Act. Every director is not automatically vicariously liable for the offence committed by the company. Merely being a director is not sufficient to make the person liable u/s 141 of the NI Act. Its necessary to provide that the director is on a position and in control of the affairs of the business or he is the signatory of the cheque. The signatory of the cheque is clearly responsible for the incriminating act and will be covered under u/s 141(2). The complaint must disclose the necessary facts which makes the person liable. Even a person who is not a director can be made liable u/s 141 of the NI act.
Nominee directors are not liable for prosecution.

Accused
On the death of the drawer / accused, his legal heirs are not liable to pay the amount of cheque or fine as the act of dishonour of cheque is of criminal nature and hence the case can not be continued against the legal hairs of the drawer.
Appearance of accused in the court
A director can file an application to dispense with his personal appearance as provided in sec. 205 of the Criminal Procedure code 1973
Exemption from appearing in the court is not granted to the accused at the first instance. While granting an Exemption from personal appearance of an accused a court may demand an Undertaking viz. bail bond.

Compounding/ Compromise
Compounding of the offense is possible u/s 147 of the NI Act. In January 2010 the Supreme Court held that the offence of issuing cheque, which is dishonoured for want of funds can be compromised between the parties. In this case, K M Ibrahim vs KP Mohammed, the drawer was convicted. The courts below held that the offence was not ‘compoundable’. The Supreme Court stated that under Section 147 of the Negotiable Instruments Act, the parties can compromise as the offence is listed as ‘compoundable’.

© Copyright 2009, Shreerang Ketkar, All rights reserved.

Protection of Women from Domestic Violence Act, 2005

2009-03-27T16:05:00.000+05:30

The Act has received President’s assent in September 13th 2005.It extends to the whole of India except the State of Jammu & Kashmir. The Act is an extremely progressive one not only because it recognizes women who are in a live in relationship but also extends protection to other women in the household, including sisters and mothers.

Even a single act of omission or commission may constitute domestic violence. The law covers children also. Preventing one's wife from taking up a job or forcing her to leave job are also under the purview of the Act. Violence covers sexual violence like forced intercourse, sexual, verbal and economic violence Forcing a woman to look at pornography or any obscene pictures, any act of sexual nature to abuse, humiliate or degrade a woman's integrity.

Her 'tormentor' would be ordered not to attempt to communicate with her, including at her workplace. Apart from this, the woman can rightfully continue to live under the same roof with the man while fighting him in the court. It also provides a woman a right to reside in the matrimonial and shared household, whether or not she has any title in the household. She also has the right to simultaneously file her own complaint under Section 498A of the Indian Penal Code.

All crimes in the Domestic Violence Act are non-bailable. Husband or live-in partner who would be guilty of domestic violence can be put behind bars for one year and fined Rs 20,000.

MS Office Shortcuts

2009-03-01T23:59:00.000+05:30

MS Office Shortcuts

CTRL+C (Copy)
CTRL+X (Cut)
CTRL+V (Paste)
CTRL+Z (Undo)
DELETE (Delete)
SHIFT+DELETE (Delete the selected item permanently without placing the item in the Recycle Bin)
CTRL while dragging an item (Copy the selected item)
CTRL+SHIFT while dragging an item (Create a shortcut to the selected item)
F2 key (Rename the selected item)
CTRL+RIGHT ARROW (Move the insertion point to the beginning of the next word)
CTRL+LEFT ARROW (Move the insertion point to the beginning of the previous word)
CTRL+DOWN ARROW (Move the insertion point to the beginning of the next paragraph)
CTRL+UP ARROW (Move the insertion point to the beginning of the previous paragraph)
CTRL+SHIFT with any of the arrow keys (Highlight a block of text)
SHIFT with any of the arrow keys (Select more than one item in a window or on the desktop, or select text in a document)
CTRL+A (Select all)
F3 key (Search for a file or a folder)
ALT+ENTER (View the properties for the selected item)
ALT+F4 (Close the active item, or quit the active program)
ALT+ENTER (Display the properties of the selected object)
ALT+SPACEBAR (Open the shortcut menu for the active window)
CTRL+F4 (Close the active document in programs that enable you to have multiple documents open simultaneously)
ALT+TAB (Switch between the open items)
ALT+ESC (Cycle through items in the order that they had been opened)
F6 key (Cycle through the screen elements in a window or on the desktop)
F4 key (Display the Address bar list in My Computer or Windows Explorer)
SHIFT+F10 (Display the shortcut menu for the selected item)
ALT+SPACEBAR (Display the System menu for the active window)
CTRL+ESC (Display the Start menu)
ALT+Underlined letter in a menu name (Display the corresponding menu)
Underlined letter in a command name on an open menu (Perform the corresponding command)
F10 key (Activate the menu bar in the active program)
RIGHT ARROW (Open the next menu to the right, or open a submenu)
LEFT ARROW (Open the next menu to the left, or close a submenu)
F5 key (Update the active window)
BACKSPACE (View the folder one level up in My Computer or Windows Explorer)
ESC (Cancel the current task)
SHIFT when you insert a CD-ROM into the CD-ROM drive (Prevent the CD-ROM from automatically playing)

Dialog Box Keyboard Shortcuts

CTRL+TAB (Move forward through the tabs)
CTRL+SHIFT+TAB (Move backward through the tabs)
TAB (Move forward through the options)
SHIFT+TAB (Move backward through the options)
ALT+Underlined letter (Perform the corresponding command or select the corresponding option)
ENTER (Perform the command for the active option or button)
SPACEBAR (Select or clear the check box if the active option is a check box)
Arrow keys (Select a button if the active option is a group of option buttons)
F1 key (Display Help)
F4 key (Display the items in the active list)
BACKSPACE (Open a folder one level up if a folder is selected in the Save As or Open dialog box)

Microsoft Natural Keyboard Shortcuts

Windows Logo (Display or hide the Start menu)
Windows Logo+BREAK (Display the System Properties dialog box)
Windows Logo+D (Display the desktop)
Windows Logo+M (Minimize all of the windows)
Windows Logo+SHIFT+M (Restore the minimized windows)
Windows Logo+E (Open My Computer)
Windows Logo+F (Search for a file or a folder)
CTRL+Windows Logo+F (Search for computers)
Windows Logo+F1 (Display Windows Help)
Windows Logo+ L (Lock the keyboard)
Windows Logo+R (Open the Run dialog box)
Windows Logo+U (Open Utility Manager)

Accessibility Keyboard Shortcuts

Right SHIFT for eight seconds (Switch FilterKeys either on or off)
Left ALT+left SHIFT+PRINT SCREEN (Switch High Contrast either on or off)
Left ALT+left SHIFT+NUM LOCK (Switch the MouseKeys either on or off)
SHIFT five times (Switch the StickyKeys either on or off)
NUM LOCK for five seconds (Switch the ToggleKeys either on or off)
Windows Logo +U (Open Utility Manager)

Windows Explorer Keyboard Shortcuts

END (Display the bottom of the active window)
HOME (Display the top of the active window)
NUM LOCK+Asterisk sign (*) (Display all of the subfolders that are under the selected folder)
NUM LOCK+Plus sign (+) (Display the contents of the selected folder)
NUM LOCK+Minus sign (-) (Collapse the selected folder)
LEFT ARROW (Collapse the current selection if it is expanded, or select the parent folder)
RIGHT ARROW (Display the current selection if it is collapsed, or select the first subfolder)

Shortcut Keys for Character Map

After you double-click a character on the grid of characters, you can move through the grid by using the keyboard shortcuts:
RIGHT ARROW (Move to the right or to the beginning of the next line)
LEFT ARROW (Move to the left or to the end of the previous line)
UP ARROW (Move up one row)
DOWN ARROW (Move down one row)
PAGE UP (Move up one screen at a time)
PAGE DOWN (Move down one screen at a time)
HOME (Move to the beginning of the line)
END (Move to the end of the line)
CTRL+HOME (Move to the first character)
CTRL+END (Move to the last character)
SPACEBAR (Switch between Enlarged and Normal mode when a character is selected)

Microsoft Management Console (MMC) Main Window Keyboard Shortcuts

CTRL+O (Open a saved console)
CTRL+N (Open a new console)
CTRL+S (Save the open console)
CTRL+M (Add or remove a console item)
CTRL+W (Open a new window)
F5 key (Update the content of all console windows)
ALT+SPACEBAR (Display the MMC window menu)
ALT+F4 (Close the console)
ALT+A (Display the Action menu)
ALT+V (Display the View menu)
ALT+F (Display the File menu)
ALT+O (Display the Favorites menu)
MMC Console Window Keyboard Shortcuts
CTRL+P (Print the current page or active pane)
ALT+Minus sign (-) (Display the window menu for the active console window)
SHIFT+F10 (Display the Action shortcut menu for the selected item)
F1 key (Open the Help topic, if any, for the selected item)
F5 key (Update the content of all console windows)
CTRL+F10 (Maximize the active console window)
CTRL+F5 (Restore the active console window)
ALT+ENTER (Display the Properties dialog box, if any, for the selected item)
F2 key (Rename the selected item)
CTRL+F4 (Close the active console window. When a console has only one console window, this shortcut closes the console)

Remote Desktop Connection Navigation

CTRL+ALT+END (Open the m*cro$oft Windows NT Security dialog box)
ALT+PAGE UP (Switch between programs from left to right)
ALT+PAGE DOWN (Switch between programs from right to left)
ALT+INSERT (Cycle through the programs in most recently used order)
ALT+HOME (Display the Start menu)
CTRL+ALT+BREAK (Switch the client computer between a window and a full screen)
ALT+DELETE (Display the Windows menu)
CTRL+ALT+Minus sign (-) (Place a snapshot of the active window in the client on the Terminal server clipboard and provide the same functionality as pressing PRINT SCREEN on a local computer.)
CTRL+ALT+Plus sign (+) (Place a snapshot of the entire client window area on the Terminal server clipboard and provide the same functionality as pressing ALT+PRINT SCREEN on a local computer.)

Microsoft Internet Explorer Navigation

CTRL+B (Open the Organize Favorites dialog box)
CTRL+E (Open the Search bar)
CTRL+F (Start the Find utility)
CTRL+H (Open the History bar)
CTRL+I (Open the Favorites bar)
CTRL+L (Open the Open dialog box)
CTRL+N (Start another instance of the browser with the same Web address)
CTRL+O (Open the Open dialog box, the same as CTRL+L)
CTRL+P (Open the Print dialog box)
CTRL+R (Update the current Web page)
CTRL+W (Close the current window)