Corporate Laws and Other Laws AmendmentsCorporate Laws and Other Laws Amendments CA INTERMEDIATE May 2019 and Nov 2019 Attempt

Corporate Laws and Other Laws Amendments

COL Amendments

Part 1 – Companies Act, 2013


Section 2(6)


Associate Company[Sec. 2(6)]

Amended Explanation to section 2(6) is as follows-

  • The term ‘significant influence’ means control of at least 20% of total voting power or control or participation in business decisions under an agreement.
  • ‘Joint Venture’ means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Section 2(28)


Cost Accountant[Sec. 2(28)]

It is clarified that the Cost Accountant must have valid certificate of practice under section 6(1) of Cost and Works Accountants Act [This was provided in various sections. Now, it is provided in main definition section itself. Thus practically, there is no change in statutory provisions].


Section 2(30)


Debenture[Sec. 2(30)]

Debentures will not include instruments referred to in Chapter III-D of RBI Act.
Further, other instruments as notified by Central Government in consultation with RBI will not be ‘debentures’ for purpose of Companies Act, 2013.


Section 2(41)


Change of Financial Year[Sec. 2(41)]

Financial year of a company can be changed if holding or subsidiary is outside India. This facility is now available in case of associate company also.


Section 2(46)


Holding Company[Sec. 2(46)]

This concept has been extended to any ‘body corporate’. So far it was applicable only in case of a ‘company’. A ‘body corporate’ can be holding or subsidiary company.


Section 2(49)


Interested Director[Sec. 2(49)]

This definition is being omitted, possibly because the conditions are already specified in section 188. The definition under section 2(49) was too broad.


Section 2(51)


Key Managerial Personnel[Sec. 2(51)]

KMP can include an officer one level below the level of directors, who is whole-time employee of the company and who is designated as KMP by Board.


Section 2(57)


Net Worth[Sec. 2(57)]

The net worth will include debit and credit balance in profit and loss account. Thus, one major lacuna in definition has been removed.


Section 2(71)


Public Company[Sec. 2(71)]

The word ‘and’ has been added to clarify that public company should not be a private company and has minimum paid up share capital [Only correction of a drafting mistake. This was even otherwise clear].


Section 2(72)


Public Financial Institution[Sec. 2(72)]

It is clarified that a company incorporated under Companies Act cannot be notified as PFI (Public Financial Institution).


Section 2(76)


Related Party[Sec. 2(76)]

The definition has been widened to include body corporate (a) which is holding, subsidiary or associate company of such company (b) a subsidiary of a holding company to which it is also a subsidiary (c).
It will also cover investing company or the venture of a company i.e. a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate [i.e. at least 20% voting power].


Section 2(85)


Small Company- Definition Widened[Sec. 2(85)]

Eligibility criteria to term a company as small company is proposed to be liberalised. The paid up capital can be prescribed upto Rs. ten crores and turnover as per immediately preceding financial year can be prescribed upto Rs. one hundred crores by a notification. This is only an enabling provision. Further, it is clarified that only turnover of previous financial year is required to be considered.


Section 2(87)


Subsidiary company- Voting Power Relevance[Sec. 2(87)]

Present definition states that a company will be subsidiary if the other company holds or controls more than 50% of total share capital on its own or with one or more of its subsidiaries. Now it is clarified that ‘total voting power’ will be considered and not total share capital. Thus, preference share holding will be considered only if payment of dividend is in arrears for more than two years.


Section 2(91)


Turnover[Sec. 2(91)]

The present definition means ‘aggregate value of the realisation of amount’. It is now changed to ‘gross amount of revenue recognised in profit and loss account from sale, supply or distribution of goods or an account of services rendered, or both, by a company during a financial year’.


Section 3A


Effect if number of members fall below 2 or 7 for period exceeding six months[Sec. 3A]

Section 3A is being inserted in Companies Act, to clarify that if number of member falls below specified number, and if business is carried out for more than six months, every member who was cognisant of the fact will be severally liable for payment of whole debts of the company contracted during that time. They can be severally sued for such debts.


Section 4(5) (i)


Reservation of Name[Sec. 4(5) (i)]

The section is amended to provide that name will be reserved by Registrar only for 20 days from date of approval or such other period as may be prescribed (present period is 60 days). If application is to change name of existing company, the name will be reserved for 60 days from date of approval.


Section 7(1) (c)


Declaration instead of Affidavit- Incorporation of Company[Sec. 7(1) (c)]

Declaration from each subscriber is sufficient that he is not guilty of any fraud or misfeasance under Companies Act and all documents filed are correct. Affidavit is not required [ease of doing business].


Section 12(1) and 12 (4)


Registered office of company[Sec. 12(1) and 12 (4)]

Intimation of registered office or change of registered office should be filed within 30 days [present limit 15 days].


Section 21


Authentication of documents proceedings and contracts[Sec. 21]

Authentication can be done by Key Managerial personnel or any officer or employee authorised by Board [The word ‘employee’ has been added].


Section 26


Matters to be stated in prospectus to be as per SEBI Regulations[Sec. 26]

Prospectus shall contain reports on financial information as specified by SEBI in consultation with Central Government. Till SEBI specifies the information and reports for financial information, information as required under SEBI Regulations shall be provided [Even otherwise it was obvious].
Contents of prospectus as contained in section 26 (1) (a), (b) and (d) have been omitted. [Anyway, this was duplication as these details were already contained in SEBI Regulations].


Section 35


Civil Liability of Misstatements in Prospectus[Sec. 35]

Section 35 (2) (c) is inserted to provide that a person will not be liable for misstatement if he establishes that he had reasonable ground to believe in truthfulness of the statement. The person making the statement was competent to make that statement and consent was not withdrawn.


Section 42


Private Placement[Sec. 42]

This section has been completely replaced by new section but there does not appear to be any major change in the provisions.

The earlier section 142 did not specifically state that private placement should be only to ‘identified persons’, though it was implied in earlier section 42 (7) also. Further, more than one issue of securities can be made to each class of identified persons.

A company (private or public) can issue shares on private placement basis- section 42(1) of Companies Act, 2013.

“Private placement” means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum application which satisfies the conditions specified in section 42 of Companies Act, 2013 – Explanation I to section 42(3) of Companies Act, 2013 (as amended)

Such private placement can be made to maximum 50 ‘identified persons’ or higher number prescribed (by notification) in a financial year, excluding (a) Qualified Institutional Buyer (QIB) [QIB as defined in SEBI (ICDR) Regulations] (b) employees under stock option scheme under section 62 (1) (b) of Companies Act, 2013 – Section 42 (2) of the companies Act, 2013.

More than one issue of securities can be made to each class of identified persons as may be prescribed within limit of maximum number of identified persons- proviso to section 42 (5) of Companies Act, 2013.

If offer is to more than prescribed number, it will be a deemed public offer, whether or not the company intends to list its securities on a stock exchange. In such case, all provisions relating to public offer shall have to be complied with – Explanation III to section 42(3) and section 42(11) of Companies Act, 2013 (as amended).

[The provisions are fallout of decision in Sahara Real Estate Corpn. Ltd. V. SEBI (2012) 115 SCL 478 = 25 taxmann.com 18(SC) = (2013) 1 SCC 1. In this case the company argued that 50 persons limit is 50 at a time (that time the word ‘in financial year’ were not there). It was also argued that Company does not intend to list the shares on any stock exchange. Supreme Court observed that when listing is compulsory, you cannot ‘intend’ something which is contrary to law].

No fresh offer shall be made unless allotment made earlier has been completed or withdrawn – section 42(5) of Companies Act, 2013.

All money should be received by cheque or draft on banking channel but not by cash – section 42 (4) of Companies Act, 2013.

Money received on application shall be kept in a separate bank account till adjusted towards allotment or refunded – proviso to section 42(6) of Companies Act, 2013.

The money shall not be utilised unless allotment is made and return of allotment is filed with Registrar.

Allotment must be made within 60 days. If not made within 60 days, amount should be refunded within 15 days. Otherwise, interest at 12% will be payable. The money shall be kept in a separate bank account, either for allotment or for repayment – proviso to section 42(6) of Companies Act, 2013.

The offer shall be made to specific persons by name and complete information and record of such offer shall be filed with ROC within 30 days of circulation of private placement offer – section 42(7) of Companies Act, 2013.

No advertisement through media, marketing or distribution channels or agents shall be made of such offer – section 42 (7) of Companies Act, 2013.

Return of allotment with complete details of security holders shall be filed with Registrar – section 42(8) of Companies Act, 2013.

Contravention can attract penalty equal to amount involved in the offer or Rs. two crores which is lower or promoters and directors. Further, company shall repay all moneys to subscribers –section 42 (10) of Companies Act, 2013.

Relaxations in case of Nidhi companies – Relaxations have been given from rigors of section 42 of Companies Act, 2013 in respect of private placement – MCA Notification dated 5-06-2015 issued under section 462 of Companies Act, 2013.


Section 47


Voting Rights in General meeting in case of related party transactions[Sec. 47]

Amendment to section 47(1) clarifies that voting rights of member at general meeting are subject to restrictions on voting right as contained in section 188(1) of Companies Act, 2013 [This sub-section provides for restrictions on voting in case of related party transactions].


Section 53


Prohibition of issue of shares at discount not applicable when debt converted into shares[Sec. 53]

Newly inserted section 53 (2A) provides that company can issue shares at discount to its creditors when its debt is converted into shares in pursuance of insolvency resolution plan or debt restructuring scheme in accordance with guidelines of RBI.


Section 53


Prohibition of issue of shares at discount not applicable when debt converted into shares[Sec. 53]

Newly inserted section 53 (2A) provides that company can issue shares at discount to its creditors when its debt is converted into shares in pursuance of insolvency resolution plan or debt restructuring scheme in accordance with guidelines of RBI.


Section 54


Issue of sweat Equity shares[Sec. 54]

Section 54 (1) (c) stated that sweat equity shares cannot be issued within one year from date of commencement of business. This restriction has been removed.


Section 62


Further issue of share capital[Sec. 62]

Section 62 (1) (c) has been amended to clarify that further issue of shares on basis of special resolution and valuation by registered valuers will be in consonance with applicable provisions in Chapter III (this chapter is relating to public offer) and any other conditions as may be prescribed.

Notice to members can be sent through courier or any other mode having proof of delivery (like hand delivery) – section 62 (2) (as amended).


Section 73


Acceptance of deposits from public[Sec. 73]

Amount equal to 20% of amount of its deposits maturing during following financial year shall be kept in a scheduled bank before 30th April – section 73 (2) (c) as amended [present limit – 15% of amount due in current financial year and following financial year. No time limit was specified in existing section for deposit of money in scheduled bank].

Provision regarding deposit insurance, as contained in section 73 (2) (d) has been omitted, as such insurance schemes are not presently available.

If company had defaulted in repayment of deposit and interest thereon, further public deposits cannot be accepted for five years after default is made good – section 73 (2) (e).


Section 74


Repayment of public deposits accepted prior to 1-4-2014[Sec. 74]

The deposits accepted prior to 1-4-2014 can be repaid within three years or the period for which deposits where accepted, whichever is earlier – section 74 (1) (b) [present limit is one year which is already over long ago. The three years period is also over].


Section 76 A


Punishment for contravention of section 73 or 74 relating to public deposits[Sec. 76 A]

The monetary penalty has been reduced to maximum Rs. one crore.

Punishment can be upto seven years imprisonment and fine (and not imprisonment or fine as per existing provision).


Section 77


Registration of Charges[Sec. 77]

Provisions of registration of charges shall not apply to such charges as may be prescribed in consultation with RBI – fourth proviso to section 77 (1) being inserted.


Section 78


Application for registration of charge[Sec. 78]

Section 78 is amended to clarify that charge is required to be registered within 30 days. Otherwise any other person can apply for registration of charge.


Section 82


Filing of satisfaction of charge[Sec. 82]

Intimation of satisfaction of charge should be filed within 30 days. No provision for granting extension.

However, Registrar can allow such filing within 300 days on payment of additional fees – proviso to section 82 (1) inserted.


Section 89


Declaration of beneficial interest in any share[Sec. 89]

Section 89 (6) and 89 (7) have been amended to clarify that declaration is required to be filed within 30 days

Beneficial interest in a share includes –

  • directly or indirectly,
  • through any contract, arrangement or otherwise,
  • the right or entitlement of a person alone or together with any other person to –
    • exercise or cause to be exercised any or all of rights attached to such shares, or
    • receive or participate in any dividend or other distribution in respect of such share – section 89 (10) inserted.


Section 90


Declaration and register of significant beneficial owners in a company[Sec. 90]

This is a completely new provision. Earlier section 90 provided for investigation of beneficial ownership by Government.

‘Significant beneficial owner’ means (a) not less than 25% in shares of a company or right to exercise control over company as defined in section 2 (27) of Companies Act, 2013 (b) every individual, acting alone or with together, or through one or more persons or trust and persons resident outside India, holds beneficial interest of 25% or more or such other percentage as may be prescribed – section 90(1).

Such person shall make declaration of beneficial interest in prescribed form and manner – section 90 (1) of companies Act, 2013.

The register shall be open for inspection.

The company shall file return of significant beneficial ownership with ROC – section 90(4) of Companies Act, 2013.

If company is aware of any person having beneficial interest, it shall give notice to such person.

The concerned person shall give such information within 30 days – section 90(6) of Companies Act, 2013.

If such person fails to provide information, company shall apply to NCLT within 15 days of period specified in the notice, that such shares may be subject to restrictions on transfer of interest, suspension of all rights attached to such shares and such other matters as may be prescribed – section 90(7) of Companies Act, 2013.

NCLT shall pass order within 60 days – section 90(8) of Companies Act, 2013.

Company or person aggrieved by order of NCLT can apply to NCLT for relaxation or lifting of restrictions placed under section 90(8).

Failure to file declaration required under section 90(1), not maintaining register under section 90(2) or furnishing false or incorrect information will be punishable with fine.

Investigation of beneficial interest on beneficial owner – Central Government can appoint inspectors to investigate and report matters relating to company and its membership for purposes of determining the true persons who have or had beneficial interest in shares of a company – section 216 (1) (c) inserted.


Section 92


Annual Returns[Sec. 92]

Some simplifications have been made.

Indebtedness of company is not required to be disclosed in Annual Return.

Name, address, countries etc. of Foreign institutional investors need not be submitted. Only specified details should be disclosed.

Central government can prescribe abridged annual return for OPC, small companies and other class of companies – second proviso to section 92(1) inserted.

Annual return is required to be placed on website of company with link. The link should be disclosed in Board Report – section 92(3) substituted. Thus, extract of Annual return need not form part of Report of Board.


Section 93


Return not required to be filed in case of change in promoters’ stake[Sec. 93]

This section is being omitted. Thus, it is not necessary to file such return.


Section 94


Place of keeping and inspection of registers, returns[Sec. 94]

It is not necessary to give advance intimation to ROC of proposed special resolution, for change of such place, which is to be approved by special resolution.

Particulars of prescribed registers, indexes or returns shall not be available for inspection – proviso to section 94(3) being inserted.


Section 96


Annual general meeting of unlisted company anywhere in India[Sec. 96]

Annual General Meeting of unlisted company can be held anywhere in India with consent of all members in advance. Consent can be in writing or by electronic mode – second proviso to section 96(2) inserted.


Section 100


Extraordinary general meeting to be held in India[Sec. 100]

EOGM of a company, other than of the wholly owned subsidiary of a company incorporated outside India, shall be held at a place within India – proviso to section 100(1) inserted.

[Really, if subsidiary is incorporated outside India, whether or not a wholly owned subsidiary, how its meeting can be held in India unless law of that country provides for holding of meeting outside that Country?]


Section 101


Notice of General Meeting[Sec. 101]

  1. Company having Share Capital –

    Notice of general meeting, (other than Annual General Meeting) can be given at shorter notice (less than 21 clear days) with –

    • consent of majority in number entitled to vote and
    • who represent not less than 95% of such part of paid up share capital of the company as gives a right to vote at meeting.
  2. If company does not have share capital,

    • consent of members having 95% of voting power exercisable at the meeting is required –

Thus at least 50.1% of members (by number) and with 95% voting rights should consent in case of meeting other than AGM (for companies having share capital)

In case of AGM, not less than 95% of such part of paid up share capital of the company as gives a right to vote at meeting, should agree for short notice. Thus, in case of AGM, requirement of consent of majority in number entitled to vote is not required.

Corresponding amendment has been made in section 136 also regarding sending copy of financial statement to members. However, in that section, in case of AGM, requirement of consent of at least 50.1% of members (by numbers) is also specified.

If some members can vote only on some resolutions and not on others, those members shall be taken into account only in respect of resolutions where they are entitled to vote and not in respect of other resolutions.


Section 110


Voting by Postal Ballot[Sec. 110]

Any item of business required to be transacted by means of postal ballot can be transacted at general meeting by a company which is required to provide facility to members to vote by electronic means under section 108 – proviso to section 110(1) inserted.

Very practical provision indeed.


Section 117


Resolutions and Agreement to be filed with ROC[Sec. 117]

Minimum fine for non-filing of resolutions and agreements as required is reduced to Rs. one lakh (from Rs. five lakhs).

Resolution of company under section 180(1) (c) [borrowing money in excess of share capital and reserves] is not required to be filed with ROC – section 117(1) (e) omitted.

Banks are not required to file with ROC, the Board resolution passed under section 179(3) (f) to grant loans, provide security or give guarantee in ordinary course of business – second proviso to section 117(3) (g) inserted.


Section 123


Declaration of Dividend[Sec. 123]

  1. In computing profits –

    • any amount representing unrealised gains, notional gains or revaluation of assets and
    • any change in carrying amount of an asset or of a liability on measurement of the asset or the liability at fair value

    shall be excluded –proviso to section 123(1) (a) inserted.

  2. Dividend can be declared out of free reserves (and not any reserves) subject to prescribed conditions – second proviso to section 123(1) amended.
  3. BOD of a company many declare INTERIM DIVIDEND during any financial year or at any time during the period from closure of financial year till holding of the AGM out of –
    • Surplus in the Profit & Loss Account, or
    • Out of Profits of Financial Year for which such Interim Dividend is sought to be declared, or
    • Out of profits generated in Financial Year till quarter preceding the date of declaration of Interim Dividend

Earlier Provision –

BOD of a company many declare INTERIM DIVIDEND during any financial year out of –

  • Surplus in the Profit & Loss Account, and
  • Out of Profits of Financial Year in which such Interim Dividend is sought to be declared, or


Section 129


Financial statement – Details of associate companies to be included[Sec. 129]

Consolidated Financial Statement should be made by including associate companies also [so far only consolidated statement of subsidiaries was required]. The consolidated financial statements should be prepared as per applicable accounting standards. This should be laid before AGM, along with financial statement of the company as required under section 129(2) – section 129(3) amended.

A separate statement containing salient features of financial statement of subsidiary/subsidiaries, and associate company/ companies as may be prescribed should be attached to financial statement of company – first proviso to section 129(3) amended to include reference of associate company.

Central Government can provide for consolidation of accounts of company, in prescribed manner – second proviso to section 129(3) continued.


Section 130


Re-opening of accounts on order of court or tribunal[Sec. 130]

Notice for re-opening of accounts is required to be given to any person concerned who has applied for re-opening of accounts [drafting correction].

Accounts cannot be opened for a period greater than eight financial years immediately preceding the current financial year – section 130(3) inserted.

However, if Central Government has issued directions under section 128(3) to keep books of account for more than eight years, the accounts can be opened for such larger period.


Section 132


National financial reporting authority[Sec. 132]

Penalties that can be imposed by NFRA slightly lowered.

Appeal against order of NFRA shall be filed before NCLAT – section 132(5) amended.

Provisions relating to constituting separate authority for appeal against order of NFRA dropped (cost saving).


Section 134


Financial statement and board report[Sec. 134]

The Financial statement, including consolidated financial statement shall first be approved by Board of Directors. Then it can signed by Chairperson of company if any. Otherwise it can be signed by two directors, one of which should sign Board report. All these must sign before submitting the financial statement to auditors for their report. In case of OPC, any one director can sign financial statement –section 134(1) amended.

Board report should contain web address where annual return under section 92(3) is placed – section 134(3) (a) substituted [till now, extract of annual return was required].

In case of listed company or public company having prescribed paid up capital, Board report should contain statement indicating manner in which annual evaluation of performance of Board, its committees and of individual directors has been made – section 134(3) (p) substituted.

So far, such evaluation could be made by Board of its own performance, its committees and individual directors. Now, evaluation of performance of Board can be made by some third agency. However, section 178(2) provides that the nomination and remuneration committee shall specify the manner for effective evaluation of performance of Board, its committees and individual directors to be carried out by the Board, by the Nomination and Remuneration Committee or by an independent external agency and review its implementation and compliance.

Thus Board itself can evaluate its own performance and performance of committees and individual directors.

If disclosures as required in Board report are made in financial statement, its reference in Board Report is sufficient. Its repetition is not required –first proviso to section 134(3) inserted.

If company’s policy in respect of appointment of directors and policy of corporate social responsibility are available on website of company, the Board report may only contain salient features and changes and web-address of company where the policy is available – second proviso to section 134(3) inserted.

Central Government can prescribe abridged Board’s report of OPC and small company – section 134(3A) being inserted.


Section 135


Corporate social responsibility[Sec. 135]

Liability to spend on CSR will be based on net worth or net profit of the immediately preceding financial year (and not ‘any financial year’ as at present) – section 135(1) amended.

A company which is not required to appoint any independent director under section 149(4) of Companies Act, 2013 can have CSR committee of any two or more directors – proviso to section 135(1) inserted.

For purpose of section 135 ‘net profit’ shall not include such sums as may be prescribed. It shall be calculated as per provisions of section 198 – Explanation inserted after section 135(5).

Section 198 is Calculation of Profits

Probably, it may be prescribed that net profit should be calculated after considering debit and credit balance in profit and loss account.

CSR will apply to foreign companies also – section 384 amended.


Section 136


Copies of audited financial statement can be given less than 21 days in advance[Sec. 136]

Section 136(1) started with the words ‘without prejudice to section 101’. These words have been omitted. [Section 101 provides for notice of general meeting. That section really has no direct relation with copies of audited financial statement, though, if financial statement is to be adopted at AGM, its copy is required to be sent along with notice of AGM]

A proviso has been added to section 136(1) to provide that audited financial statement can be given less than 21 clear days before date of general meeting, with consent of majority in number entitled to vote and who represent not less than 95% of such part of paid up share capital of the company as gives a right to vote at meeting. If company does not have share capital, consent of members having 95% of voting power exercisable at the meeting is required. The consent can be writing or by electronic means.

Corresponding amendment has been made in section 101 also. However, in that section, in case of AGM, requirement of consent of at least 50.1% of members (by numbers) is not specified for giving shorter notice of AGM.

The combined effect is that if notice of general meeting is send to members with less than 21 days, the financial statement, audit report, report of board etc. can be sent along with notice of AGM even if the period is shorter than 21 days.

This will be sufficient compliance of section 136 i.e. if meeting is held with short notice, the audited financial statements can be sent with notice even if the period is less than 21 days.

Additional requirements in case of listed companies having subsidiaries- Fourth proviso to section 136(1) has been amended. As per the amended provisions, the listed company shall place on its website separate audited accounts in respect of each subsidiary.

Further, as per fifth proviso to section 136(1) [newly inserted], if the foreign subsidiary is statutorily required to prepare consolidated financial statement that can be placed on company’s website, instead of stand-alone statement of the foreign subsidiary.

If foreign subsidiary is not required to get its account audited as place of that country where it is incorporated, unaudited financial statement may be placed on company’s website.

If the financial statement of foreign subsidiary is in language other than English, then English transaction should be uploaded on website of company.

Providing copies of audited or unaudited financial statements of subsidiary to members- Copies of separate audited or unaudited financial statements of subsidiary (where audit is not required of foreign subsidiary) should be sent to members who ask for such copy – proviso to section 136(2) inserted. [Really if the statements are available on website of company, asking for copies is simply harassment to company by nasty shareholders].


Section 137


Copy of financial statement to be filed with ROC[Sec. 137]

Fourth proviso provides for filing financial statements of foreign subsidiary.

Fifth proviso has been added to section 137(1) to Companies Act, 2013 to clarify that where the audit is not required of foreign subsidiary as per law of that country, filing unaudited financial statements of such foreign subsidiary is sufficient.

If the financial statement is in language other than English, translated copy of the financial statement should also be filed.


Section 139


Appointment of auditors – ratification every year not required[Sec. 139]

Ratification for appointment of auditors is not required at every AGM when auditors have been appointed for five years – proviso to section 139(1) omitted [practical amendment].


Section 140


Removal and resignation of auditors[Sec. 140]

Auditor who has resigned is required to file statement in form ADT 3 with company and ROC within 30 days. If he fails to do so, penalty of Rs. 50,000 or his audit fee, whichever is lower is payable –section 140(3) amended [present provision is to impose penalty of minimum Rs. 50,000, even if audit fees were less than Rs. 50,000].


Section 141


Eligibility, Qualifications and Disqualifications of Auditors[Sec. 141]

Section 141(3) (d) (i) [as amended] provides that an auditor is not eligible for appointment if he directly or indirectly, renders any service referred to in section 144 to the company or its holding company or subsidiary company. As per explanation to this clause, the term ‘directly or indirectly’ shall have meaning assigned to it in Explanation to section 144.

[Earlier drafting of clause (i) was faulty. Now it has been corrected].


Section 143


Powers and duties of auditors and auditing standards[Sec. 143]

Auditors will have access to records of its subsidiaries and associated companies so far as it relates to consolidation of its financial statements – proviso to section 143(1) amended.

[Presently, access is only to records of subsidiary companies. Now since, financial statements of associated companies are also required to be consolidated, such access is now necessary].

Auditor is now required to report whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls –section 143(3) (i) amended. [Words in italics have been added through amendment. Earlier, he was required to report about adequacy of internal financial controls in any matter].

Section 143(4) is amended to provide that the provision of section 143 are applicable to ‘cost accountant’. Earlier the words were ‘cost accountant in practice’. The word ‘in practice’ have been dropped in section 143(14) as those requirements have been included in main definition of ‘cost accountant’ in section 2(28) of Companies Act, 2013 itself.


Section 147


Punishment for Contravention relating to auditors[Sec. 147]

In section 147(2), the penalty that can be imposed on auditors is now linked to his remuneration.

Section 147(3) is amended to provide that auditor is liable to pay damages to company, statutory authorities or bodies, members or creditors of the company for loss arising out of incorrect or misleading statements in his audit report [presently, such damages are payable to ‘any person’, who may or may not be member or creditor of the company].


Section 148


Cost Audit[Sec. 148]

Section 148 is amended to provide that the cost records should be audited by ‘cost accountant’. Earlier the words were ‘cost accountant in practice’. The words ‘in practice’ have been dropped in section 148(3) and 148(5) as those requirements have been included in main definition of ‘cost accountant’ in section 2(28) of Companies Act, 2013 itself.

Name of ‘Institute of Cost and Works Accountants of India’ has been corrected to ‘Institute of Cost Accountants of India’.


Part 2 – Other Laws – Negotiable Instruments Act, 1881


Section 143A
Power to direct interim compensation

  1. Not withstanding anything contained in the code of criminal procedure,1973, the court trying an offence under section 138 may order the drawer of the cheque to pay interim compensation to the complainant-
    1. in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaints; and
    2. in any other case, up one framing of charge.
  2. The interim compensation under sub-section (1) shall not exceed twenty percent of the amount of the cheque.
  3. The interim compensation shall be paid within sixty days from the date of the order under sub-section (1) or within such further period not exceeding thirty days as may be directed by the court on sufficient cause being shown by the drawer of the cheque.
  4. If the drawer of the cheque is acquitted, the court shall direct the complainant repay to the drawer the amount of interim compensation, with interest at the bank rate as published by the reserve bank of India, prevalent at the beginning of the relevant financial year, within such further period not exceeding thirty days as may be directed by the court on sufficient cause being shown by the complainant.
  5. The interim compensation payable under this section may be recovered as if is where a fine under section 421 of the code of criminal procedure, 1973
  6. The amount of fine imposed under section 138 or the amount of compensation awarded under section 357 of the code of criminal procedure,1973, shall be reduced by the amount paid or recovered as interim compensation under this section”.

Section 148
Power of Appellate appeal against conviction

  1. Not withstanding anything contained in the code of criminal procedure, 1973, in an appeal by the drawer against conviction under section 138, the appellant to deposit such sum which shall be a fine a compensation awarded by the trial court.
    Provided that the amount payable under this sub-section shall be in addition to any interim compensation paid by the appellant under section 143A
  2. The amount referred to in sub-section (1) shall be deposited within sixty days from the date of the order, or within such further period not exceeding thirty days as may be directed by the court on sufficient cause being shown by the appellant.
  3. The Appellate court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of the appeal:
    Provided that if the appellant is acquitted, the court shall direct the complainant to repay to the appellant the amount so released, with interest at the beginning of the relevant financial year, within sixty days from the further period not exceeding thirty days as may be directed by the court on sufficient cause being shown by the complainant.

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