Company Law-A new eraa

Some of the Changes in the New Companies Act,2013

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23. Public offer and private placements

(1) A public company may issue securities—

(a) to public through prospectus (herein referred to as “public offer”) by complying with the provisions of this Part; or

(b) through private placement by complying with the provisions of Part II of this Chapter

THE ABOVE CLAUSE b HAS NOT YET COME INTO EFFECT

(c) through a rights issue or a bonus issue in accordance with the provisions of this Act and in case of a listed company or a company which intends to get its securities listed, also with the provisions of the Securities and Exchange Board of India Act, 1992 and the rules and regulations made thereunder.

(2) A private company may issue securities—

(a) by way of rights issue or bonus issue in accordance with the provisions of this Act; or

(b) through private placement by complying with the provisions of Part II of this Chapter.

Explanation.—For the purposes of this Chapter, “public offer” includes initial public offer or further public offer of securities to the public by a company, or an offer for sale of securities to the public by an existing shareholder, through issue of a prospectus.

   OLD LAW

 

No specificprovision differentiating Public offer and Private Placements

      NEW LAW

New clause introduced in the Act.

For clarity, the entire chapter relating to issue of securities has been divided into two parts.

Part I relates to issue of public offer

Part II relates to issue of securities through private placement.

24. Power of Securities and Exchange Board to regulate issue and transfer of securities, etc.

24. (1) The provisions contained in this Chapter, Chapter IV and in section 127 shall,—

(a) in so far as they relate to —

(i) issue and transfer of securities; and

(ii) non-payment of dividend,

by listed companies or those companies which intend to get their securities listed on any recognised stock exchange in India, except as provided under this Act, be administered by the Securities and Exchange Board by making regulations in this behalf;

(b) in any other case, be administered by the Central Government.

Explanation.—For the removal of doubts, it is hereby declared that all powers relating to all other matters relating to prospectus, return of allotment, redemption of preference shares and any other matter specifically provided in this Act, shall be exercised by the Central Government, the Tribunal or the Registrar, as the case may be.

(2) The Securities and Exchange Board shall, in respect of matters specified in sub-section (1) and the matters delegated to it under proviso to sub-section (1) of section 458, exercise the powers conferred upon it under sub-sections (1), (2A), (3) and (4) of section 11, sections 11A, 11B and 11D of the Securities and Exchange Board of India Act, 1992 (15 of 1992).

 

Section 55A No change
25, Document containing offer of securities for sale to be deemed prospectus.

25. (1) Where a company allots or agrees to allot any securities of the company with a view to all or any of those securities being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents of prospectus and as to liability in respect of mis-statements, in and omissions from, prospectus, or otherwise relating to prospectus, shall apply with the modifications specified in sub-sections (3) and (4) and shall have effect accordingly, as if the securities had been offered to the public for subscription and as if persons accepting the offer in respect of any securities were subscribers for those securities, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of mis-statements contained in the document or otherwise in respect thereof.

(2) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, securities was made with a view to the securities being offered for sale to the public if it is shown—

(a) that an offer of the securities or of any of them for sale to the public was made within six months after the allotment or agreement to allot; or

(b) that at the date when the offer was made, the whole consideration to be received by the company in respect of the securities had not been received by it.

(3) Section 26 as applied by this section shall have effect as if —

(i) it required a prospectus to state in addition to the matters required by that section to be stated in a prospectus—

(a) the net amount of the consideration received or to be received by the company in respect of the securities to which the offer relates; and

(b) the time and place at which the contract where under the said securities have been or are to be allotted may be inspected;

(ii) the persons making the offer were persons named in a prospectus as directors of a company.

(4) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in sub-section (1) is signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be.

 

Section 64  No change
Section 29

Public offer of Securities in de-materialised form

29. (1) Notwithstanding anything contained in any other provisions of this Act,—

(a) every company making public offer; and

(b) such other class or classes of public companies as may be prescribed,

shall issue the securities only in dematerialised form by complying with the provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made thereunder.

(2) Any company, other than a company mentioned in sub-section (1), may convert its securities into dematerialised form or issue its securities in physical form in accordance with the provisions of this Act or in dematerialised form in accordance with the provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made thereunder.

 

68B. Initial offer of securities to be in dematerialised form in certain cases.—Notwithstanding anything contained in any

other provisions of this Act, every listed public company, making initial public offer of any security for a sum of rupees ten crores or more, shall issue the same only in dematerialised form by complying with the requisite provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made thereunder.

Under the new Act every company making public offer and other prescribed class of public companies will have to issue securities only in dematerialised form by complying with the provisions of the Depositories Act, 1996 and the regulations made thereunder. Other companies may convert their securities in dematerialised form or issue its securities in physical mode.
Advertisement of prospectus.

30. Where an advertisement of any prospectus of a company is published in any manner, it shall be necessary to specify therein the contents of its memorandum as regards the objects, the liability of members and the amount of share capital of the company, and the names of the signatories to the memorandum and the number of shares subscribed for by them, and its capital structure.

 

Section 66

Newspaper Adv. of Prospectus

The new act mandates specification of contents of its memorandum as regards the objects, the liability of members and the amount of share capital of the company, and the names of the signatories to the memorandum and the number of shares subscribed for by them, and its capital structure.

Mode of Adv: – not specified

Shelf prospectus.

31. (1) Any class or classes of companies, as the Securities and Exchange Board may provide by regulations in this behalf, may file a shelf prospectus with the Registrar at the stage of the first offer of securities included therein which shall indicate a period not exceeding one year as the period of validity of such prospectus which shall commence from the date of opening of the first offer of securities under that prospectus, and in respect of a second or subsequent offer of such securities issued during the period of validity of that prospectus, no further prospectus is required.

(2) A company filing a shelf prospectus shall be required to file an information memorandum containing all material facts relating to new charges created, changes in the financial position of the company as have occurred between the first offer of securities or the previous offer of securities and the succeeding offer of securities and such other changes as may be prescribed, with the Registrar within the prescribed time, prior to the issue of a second or subsequent offer of securities under the shelf prospectus:

Provided that where a company or any other person has received applications for the allotment of securities along with advance payments of subscription before the making of any such change, the company or other person shall intimate the changes to such applicants and if they express a desire to withdraw their application, the company or other person shall refund all the monies received as subscription within fifteen days thereof.

(3) Where an information memorandum is filed, every time an offer of securities is made under sub-section (2), such memorandum together with the shelf prospectus shall be deemed to be a prospectus.

Explanation.—For the purposes of this section, the expression “shelf prospectus” means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus.

Section 60A – Shelf Prospectus

 

Section 60B – Information Memorandum

 

Relates only to offer of securities by Financial Institutions

Companies required to file Shelf Prospectus will be notified by SEBI.
Red herring prospectus

32. (1) A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.

(2) A company proposing to issue a red herring prospectus under sub-section (1) shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer.

(3) A red herring prospectus shall carry the same obligations as are applicable to a prospectus and any variation between the red herring prospectus and a prospectus shall be highlighted as variations in the prospectus.

(4) Upon the closing of the offer of securities under this section, the prospectus stating therein the total capital raised, whether by way of debt or share capital, and the closing price of the securities and any other details as are not included in the red herring prospectus shall be filed with the Registrar and the Securities and Exchange Board.

Explanation.—For the purposes of this section, the expression “red herring prospectus” means a prospectus which does not include complete particulars of the quantum or price of the securities included therein.

 

No provision Newly introduced
Issue of application forms for securities.

33. (1) No form of application for the purchase of any of the securities of a company shall be issued unless such form is accompanied by an abridged prospectus:

Provided that nothing in this sub-section shall apply if it is shown that the form of application was issued—

(a) in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to such securities; or

(b) in relation to securities which were not offered to the public.

(2) A copy of the prospectus shall, on a request being made by any person before the closing of the subscription list and the offer, be furnished to him.

(3) If a company makes any default in complying with the provisions of this section, it shall be liable to a penalty of fifty thousand rupees for each default.

Section 72 Procedure has been simplified. The time of opening of subscription list is not mentioned.
34. Criminal liability for misstatements in prospectus.

Where a prospectus, issued, circulated or distributed under this Chapter, includesany statement which is untrue or misleading in form or context in which it is included or where any inclusion or omission of any matter is likely to mislead, every person who authorises the issue of such prospectus shall be liable under section 447:

Provided that nothing in this section shall apply to a person if he proves that such statement or omission was immaterial or that he had reasonable grounds to believe, and did up to the time of issue of the prospectus believe, that the statement was true or the inclusion or omission

63. Criminal liability for mis-statements in prospectus.—

 

Penalty provisions have been enhanced. In the event of mis-statement, term of imprisonment has been linked with punishment for fraud as stipulated under clause 447 reproduced herein below.

447. Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six

months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud:

Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.

Explanation.—For the purposes of this section—

(i) “fraud” in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss;

(ii) “wrongful gain” means the gain by unlawful means of property to which the person gaining is not legally entitled;

(iii) “wrongful loss” means the loss by unlawful means of property to which the person losing is legally entitled.

36. Punishment for fraudulently inducing persons to invest money.

Any person who, either knowingly or recklessly makes any statement, promise or

forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to enter into,—

(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for,

or underwriting securities; or

(b) any agreement, the purpose or the pretended purpose of which is to secure

a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; or

(c) any agreement for, or with a view to obtaining credit facilities from any bank or financial institution;

shall be liable for action under section 447.

68. Penalty for fraudulently inducing persons to invest money.—

 

Punishment for fraudulently misleading or inducing persons to invest in the company is similar to as stipulated under clause 447.
37. Action by affected persons.

A suit may be filed or any other action may be taken under section 34 or section 35 or section 36 by any person, group of persons or any association of persons affected by any misleading statement or the inclusion or omission of any matter in the prospectus.

No provision Newly introduced.

This clause in the act contains provision for class action suits affected by misleading statements .

Punishment for personation for acquisition, etc., of securities.

38. (1) Any person who—

(a) makes or abets making of an application in a fictitious name to a company for acquiring, or subscribing for, its securities; or

(b) makes or abets making of multiple applications to a company in different names or in different combinations of his name or surname for acquiring or subscribing for its securities; or

(c) otherwise induces directly or indirectly a company to allot, or register any transfer of, securities to him, or to any other person in a fictitious name,

shall be liable for action under section 447.

(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by a company and in every form of application for securities.

(3) Where a person has been convicted under this section, the Court may also order disgorgement of gain, if any, made by, and seizure and disposal of the securities in possession of, such person.

(4) The amount received through disgorgement or disposal of securities under sub-section (3) shall be credited to the Investor Education and Protection Fund.

Section 68A Punishment made more stringent.

Subsections 1(b), (3) and (4) have been introduced

Allotment of securities by company.

39. (1) No allotment of any securities of a company offered to the public for subscription shall be made unless the amount stated in the prospectus as the minimum amount has been subscribed and the sums payable on application for the amount so stated have been paid to and received by the company by cheque or other instrument.

(2) The amount payable on application on every security shall not be less than five per cent of the nominal amount of the security or such other percentage or amount, as may be specified by the Securities and Exchange Board by making regulations in this behalf.

(3) If the stated minimum amount has not been subscribed and the sum payable on application is not received within a period of thirty days from the date of issue of the prospectus, or such other period as may be specified by the Securities and Exchange Board, the amount received under sub-section (1) shall be returned within such time and manner as may be prescribed.

(4) Whenever a company having a share capital makes any allotment of securities, it shall file with the Registrar a return of allotment in such manner as may be prescribed.

(5) In case of any default under sub-section (3) or sub-section (4), the company and its officer who is in default shall be liable to a penalty, for each default, of one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less.

 

Section 69 No power to Board to decide minimum amount of subscription.

Minimum amount of subscription and minimum Application money has to be received within 30 days of issue of prospectus.

Penalty enhanced.

Securities to be dealt with in stock exchanges.

40. (1) Every company making public offer shall, before making such offer, make an application to one or more recognised stock exchange or exchanges and obtain permission for the securities to be dealt with in such stock exchange or exchanges.

(2) Where a prospectus states that an application under sub-section (1) has been made, such prospectus shall also state the name or names of the stock exchange in which the securities shall be dealt with.

(3) All monies received on application from the public for subscription to the securities shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than—

(a) for adjustment against allotment of securities where the securities have been permitted to be dealt with in the stock exchange or stock exchanges specified in the prospectus; or

(b) for the repayment of monies within the time specified by the Securities and Exchange Board, received from applicants in pursuance of the prospectus, where the company is for any other reason unable to allot securities.

(4) Any condition purporting to require or bind any applicant for securities to waive compliance with any of the requirements of this section shall be void.

(5) If a default is made in complying with the provisions of this section, the company shall be punishable with a fine which shall not be less than five lakh rupees but which may extend to fifty lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.

(6) A company may pay commission to any person in connection with the subscription to its securities subject to such conditions as may be prescribed.

 

Section 73 Penalty for non compliance enhanced.

A company may pay commission to any person in connection with the subscription to its securities subject to such conditions as may be prescribed.

The defense who failed to defend accused in Nirbhaya’s case.

The trial of Nirbhaya’s case is now over and the five accused were convicted and awarded highest form of punishment as per the law. But how the four accused before the Saket court defended their case. Although I personally feel that there should be no defense to their heinous acts, which shook the conscience of the country. But for a fair trial the accused person were given an opportunity to defend their case in consonance with the principles of natural justice. They all took different pleas but all their pleas were demolished by the evidence produced by the prosecution.

Here are the brief about various defense pleas taken by the accused in the Nirbhaya’s case and how each of their plea rejected by their Lordship.

1. Plea of Alibi

All the four accused took the plea of Alibi; they all stated they were not in the alleged bus where this heinous crime took place. But this plea was completely demolished by the inconsistencies in the statements of their own witnesses.

The evidence produced by the prosecution in which the DNA profiling of all the accused was found inside the bus and on the Nirbhaya’s clothes suggested their presence in that alleged bus on that fateful night.

2. DNA evidence is unreliable.

It was pleaded by the accused that the DNA profiling was unreliable as there is an apprehension that police has manipulated the MLC reports against the accused person, They also submitted that police is falsely creating a plot and the DNA report is fake.

The Prosecution established the authenticity of the DNA, MLC reports by showing the chain of transfer of these samples from different spots, they have also clearly established the tamper proof mechanisms implemented by the police and how the court could rely on the evidence on its accuracy and authenticity.

The stand of prosecution was believed by their lordship hence the stand of defense was again discredited.

3. Statements of Prosecutrix were tutored/Prosecutrix was not in the position to give statements and cannot be relied upon.

This Stand of defence was again demolished by the prosecution,  The prosecution stated that prosecutrix was conscious while she was giving her dying declaration and this fact was again certified by the doctors who were treating the prosecutrix, Then again it is hard to believe that prosecutrix who was facing an apprehension of death would give tutored statement.

4. Mukesh was only driving bus he had no participation in crime.

The prosecution has established its case U/s 34 IPC i.e  criminal conspiracy beyond reasonable doubt, There was premeditated plan and an overt act was done as per unlawful agreement between accused person. It is irrelevant whether the accused was driving the bus. Being a part of conspiracy he was equally responsible for the acts of others. The blood stains of Nirbhiya on clothes of mukesh clearly establishes his participation, even if he is not a participant still he was equally responsible.

5. Inconsistencies in Prosecutrix friend FIR.

There were Inconsistencies in the FIR of the prosecutrix friend relating to the identity of  accused person and hence plea of defense was that the accused was of a mistakenly identified.

Lordship on this point held that merely some averments in FIR cannot demolish the prosecution case completely as FIR is not conclusive evidence and it needs to be corroborated with other evidence. The stand of the defence was again demolished.

Conclusion

The case of the prosecution was based on strong scientific evidence which was again corroborated with statements of other witnesses especially the statements of prosecutrix herself and her friend which led to establish the case against accused beyond reasonable doubt and thereby vitiating all the defense pleas which ultimately led to their conviction.

Doctrine of Severability

The doctrine of severability is a guardian of our fundamental rights, suppose if any of the provisions in an act/statue is contrary to our fundamental rights then that provision only would consider being void and it is not the whole act that becomes void.

The nature of the provision is material, suppose if any of the provision or any sub section is void  due to its unconstitutional nature and if due to this the entire section adopts a different meaning such that the scheme of the whole section in the act changes, then the whole section must be declared un constitutional. The doctrine of severability depends on validity of provisions in an act and the effect of those provisions on the whole act itself.

This position of the law is proved in various cases

A.K. Gopalan v. State 0/ Madras, A.I.R. 1950 S.c. 27   where section 14 of prevention detention act was found out to be in violation of Article 14 of the constitution. It was held by the Apex court that it is section 14 of the act which is to be struck down not the act as a whole. It was also held that the omission of section 14 of the act will not change the object of the act and hence it is severable.

 R.M.D.C. v.Union of India, Where the provisions of the act are so mixed together i.e the invalid portion and the valid portion such that it would not possible to separate them,  then the act as whole would deemed to be void.

Conclusion

The doctrine of severability is necessary to protect the validity of the act as a whole without which an entire act would become void due to invalidity of one provision of the act. Now it is upto the courts to decide the question related to the effects of invalid provisions on the scheme of the act and accordingly adjudicate the question of declaring the validity of the act as a whole and various provisions of the act.

 

Pre Grant Opposition(Patents)

Patents are known for their inventiveness, novelty and non-obviousness. Patents when granted give its holder an exclusive sovereign right to have a monopoly over the patented product or a process.

A patent is granted only when an application for the patent is presented to the patent office and the patent office publishes the patent application in order to invite an opposition from various stakeholders. The application is open for any opposition after hearing the opposite party then only the Patent office decide either to give the patent or to reject the patent application. The opposition which may be filed before the grant of the patent is a pre grant opposition, which is filed under section 25(1) of the Indian Patent Act, 1970.

The grounds of patent opposition are mentioned below-:

  1. Patent claims were wrongfully obtained.
  2. That patent claims were published earlier.
  3. That the patent claim was already claimed.
  4. The specification was already known.
  5. That the information pertaining to patent claim is obvious.
  6. That the complete specification is not an invention within the meaning of the act.
  7. That the complete specification does not describe invention or method.
  8. That applicant failed to disclose the information by section 8 of the act.