Tag Archives: Directors

Penalty for Frauds – By an Officer of the Company

Under Section 241(2) of the Companies Act, 2013, the Central Government, if it is of the opinion that the affairs of the Company are being conducted in a manner prejudicial to public interest, may apply itself to the Tribunal for orders under the said Chapter, which is headed “prevention of Oppression and Mismanagement”. Apart from the vast powers that are given to the Tribunal under Section 242, powers under Sections 337 and 339 are also given in aid of this power, which will apply mutatis mutandis.         Section 337 of the Companies Act refers to penalty for frauds by an officer of the Company in which mismanagement has taken place. Likewise, Section 339 refers to any business of the company which has been carried on with intent to defraud creditors of that company. Obviously, the persons referred to in Section 339(1) as persons who are other than the parties “to the carrying on of the business in the manner aforesaid” which again refers to the business of the company which is being mismanaged and not to the business of another company or other persons. Usha Ananthasubramanian v. Union of India, (2020) 4 SCC 122.

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Filed under Companies Act, 2013, Penalty for Fraud

Transfer of Securities – Registration of

Under Section 58(2) of the Companies Act, 2013 the securities or interest of any member in a public company are freely transferable. However, under Section 58(4), it is open to the public company to refuse registration of the transfer of the securities for a sufficient cause. To that extent, Section 58(4) has to be read as a limited restriction on the free transfer permitted under Section 58(2). Section 10-F of the Companies Act, 1956, provides that an appeal against an order passed by the Company Law Board can be filed before the High Court on questions of law. Right to refuse registration of transfer on sufficient cause is a question of law and whether the cause shown for refusal is sufficient or not in a given case, can be a mixed question of law and fact. Mackintosh Burn Ltd. v. Sarkar and Chowdhary Enterprises Private Ltd., (2018) 5 SCC 575.

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Filed under Corporate Law, Transfer of Securities