[The following guest post is contributed by Nivedita Shankar, Senior Associate, Corporate Law Services Division.
She can be contacted at [email protected]]
She can be contacted at [email protected]]
The Institute of Company Secretaries of India (‘ICSI’) on May 12,
2015 issued a clarification to state that SS-1 and SS-2 will apply to all such
board meetings and general meetings in respect of which notices are ‘issued’ on
or after July 1, 2015. This clarification could have probably not come at a
more opportune time since companies are gearing up to convene board meetings to
approve annual accounts and finalise the notices of their annual general
meetings. With board meetings and annual general meetings on the anvil,
secretarial departments of companies have to take note of the many provisions
contained in SS-1 and SS-2 and understand the implications of the same.
However, given the way the clarification from ICSI has been drafted, what is
probably even more important to understand is the date of applicability of the
Secretarial Standards. The clarification from ICSI gives away nothing else
apart from the date of applicability of SS-1 and SS-2. Considering that
interpretation of the word ‘issued’ has been subject to various court rulings
in the past, it is pertinent to first understand the correct meaning of the
word ‘issued’.
2015 issued a clarification to state that SS-1 and SS-2 will apply to all such
board meetings and general meetings in respect of which notices are ‘issued’ on
or after July 1, 2015. This clarification could have probably not come at a
more opportune time since companies are gearing up to convene board meetings to
approve annual accounts and finalise the notices of their annual general
meetings. With board meetings and annual general meetings on the anvil,
secretarial departments of companies have to take note of the many provisions
contained in SS-1 and SS-2 and understand the implications of the same.
However, given the way the clarification from ICSI has been drafted, what is
probably even more important to understand is the date of applicability of the
Secretarial Standards. The clarification from ICSI gives away nothing else
apart from the date of applicability of SS-1 and SS-2. Considering that
interpretation of the word ‘issued’ has been subject to various court rulings
in the past, it is pertinent to first understand the correct meaning of the
word ‘issued’.
Provisions in SS-1 and
SS-2
SS-2
The need to understand the meaning of the word ‘issued’ achieves
importance more so because SS-1 and SS-2 have introduced provisions which are
either in addition to or overstepping the provisions contained in Companies
Act, 2013 (‘Act, 2013’). Listed below are a few such provisions in SS-1 and
SS-2:
importance more so because SS-1 and SS-2 have introduced provisions which are
either in addition to or overstepping the provisions contained in Companies
Act, 2013 (‘Act, 2013’). Listed below are a few such provisions in SS-1 and
SS-2:
1. Provisions in SS-1
a. Certain items of business have been
restricted from being transacted through video conferencing facilities as per
Act, 203 and allied Rules at board or committee meetings. However, SS-1 allows
such businesses to be transacted through video conferencing facilities with the
permission of the Chairman.
restricted from being transacted through video conferencing facilities as per
Act, 203 and allied Rules at board or committee meetings. However, SS-1 allows
such businesses to be transacted through video conferencing facilities with the
permission of the Chairman.
b. Draft resolution to be provided along
with the notes or be placed at the meeting. Traditionally, companies had the
practice of setting out the resolution in the minutes of the meeting which were
subsequently circulated for approval.
with the notes or be placed at the meeting. Traditionally, companies had the
practice of setting out the resolution in the minutes of the meeting which were
subsequently circulated for approval.
c. Any additional item can be taken up at
the meeting only with the permission of the Chairman and with the consent of
majority of directors including one independent director. If no independent
director is present at the meeting, then the minutes can be finalised only
after ratification by at least one independent director.
the meeting only with the permission of the Chairman and with the consent of
majority of directors including one independent director. If no independent
director is present at the meeting, then the minutes can be finalised only
after ratification by at least one independent director.
2. Provisions in SS-2
a. To convene any general meeting at shorter
notice, prior approval from members for the same should be sought.
notice, prior approval from members for the same should be sought.
b. Every director of the company has to
attend the general meetings. The Chairman of the general meeting has to explain
the reason for absence of any director.
attend the general meetings. The Chairman of the general meeting has to explain
the reason for absence of any director.
c.
The secretarial auditor or his
representative has to attend the annual general meeting.
The secretarial auditor or his
representative has to attend the annual general meeting.
d. Where on the one hand the Act, 2013
requires the members to elect one amongst themselves as the Chairman in case
the original Chairman is not present within 15 minutes, SS-2 allows the
directors to elect the Chairman from amongst themselves. In case no director is
also present within 15 minutes or if no director is willing to take the chair,
only then can the members appoint one amongst themselves to act as the
Chairman.
requires the members to elect one amongst themselves as the Chairman in case
the original Chairman is not present within 15 minutes, SS-2 allows the
directors to elect the Chairman from amongst themselves. In case no director is
also present within 15 minutes or if no director is willing to take the chair,
only then can the members appoint one amongst themselves to act as the
Chairman.
Analysis of the meaning of
the term ‘issued’
the term ‘issued’
The scope of the meaning ‘issued’ has been a subject matter of
discussions since the term was used at a number of places in the past viz., MCA’s
circular dated September 13, 2013 and provisions of the Income Tax Act. The term had attracted
discussions because taking the dictionary meaning of the term would have saved
companies from a lot of hardships. Take the case of MCA’s circular dated
September 13, 2013 wherein it was clarified that for all notices of general
meeting issued before September 12,
2013, section 292 of Companies Act, 1956 will prevail and such companies need
not seek a re-approval for their notices. On the other hand, by interpreting the term ‘issued’ in a wider sense,
the principle behind the enactment of provisions such as section 34(1) of
Indian Income tax Act, 1922 read with section 4 of the Amending Act (Act 1 of 1959) would
have been upheld. In fact section 4 of the Amending Act (Act 1 of 1959) was
introduced with the very intent to not render any notice issued by the Income
Tax Officer for re-assessment beyond the time stated in section 34(1) of Indian
Income tax Act, 1922 i.e. 8 years.
discussions since the term was used at a number of places in the past viz., MCA’s
circular dated September 13, 2013 and provisions of the Income Tax Act. The term had attracted
discussions because taking the dictionary meaning of the term would have saved
companies from a lot of hardships. Take the case of MCA’s circular dated
September 13, 2013 wherein it was clarified that for all notices of general
meeting issued before September 12,
2013, section 292 of Companies Act, 1956 will prevail and such companies need
not seek a re-approval for their notices. On the other hand, by interpreting the term ‘issued’ in a wider sense,
the principle behind the enactment of provisions such as section 34(1) of
Indian Income tax Act, 1922 read with section 4 of the Amending Act (Act 1 of 1959) would
have been upheld. In fact section 4 of the Amending Act (Act 1 of 1959) was
introduced with the very intent to not render any notice issued by the Income
Tax Officer for re-assessment beyond the time stated in section 34(1) of Indian
Income tax Act, 1922 i.e. 8 years.
Out of the several rulings of courts wherein the term ‘issued’ has
been interpreted and juxtaposed with the term ‘served’, one can refer to the
ruling of the Supreme Court in Banarsi Devi v. Income-tax Officer
((1964) 53 ITR 100), where in the Supreme Court held that the meaning of the
term ‘issued’ should be given a wider meaning such that it includes the entire process of sending the notice
as well as the service thereof. The case pertained to interpretation of the
meaning ‘issued’ in the context of section 34(1) of Indian Income tax Act, 1922
read with section 4 of the Amending Act (Act 1 of 1959). The Hon’ble Court
referred to a number of cases such as Commissioner
of Income-tax, Bombay South v. D. V. Ghurve[1],
Sri Niwas And Others vs The
Income-Tax Officer, A Ward to arrive at this conclusion. The Hon’ble
Court also referred to section 27 of General Clauses Act, 1897 wherein term
‘served’ had been taken to include the entire process of properly addressing,
prepaying and posting rather than being differentiated from the word ‘ issued’.
Of course, as stated in section 27 such a presumption is rebuttable if a
contrary intention can be established.
been interpreted and juxtaposed with the term ‘served’, one can refer to the
ruling of the Supreme Court in Banarsi Devi v. Income-tax Officer
((1964) 53 ITR 100), where in the Supreme Court held that the meaning of the
term ‘issued’ should be given a wider meaning such that it includes the entire process of sending the notice
as well as the service thereof. The case pertained to interpretation of the
meaning ‘issued’ in the context of section 34(1) of Indian Income tax Act, 1922
read with section 4 of the Amending Act (Act 1 of 1959). The Hon’ble Court
referred to a number of cases such as Commissioner
of Income-tax, Bombay South v. D. V. Ghurve[1],
Sri Niwas And Others vs The
Income-Tax Officer, A Ward to arrive at this conclusion. The Hon’ble
Court also referred to section 27 of General Clauses Act, 1897 wherein term
‘served’ had been taken to include the entire process of properly addressing,
prepaying and posting rather than being differentiated from the word ‘ issued’.
Of course, as stated in section 27 such a presumption is rebuttable if a
contrary intention can be established.
In another case, V.R.A. Cotton Mills (P) Ltd. v. Union of
India and Others[2],
the Punjab and Haryana High Court overruled its earlier decision in CIT v. AVI-OIL India (P.) Ltd.[3]
In the case of V.R.A. Cotton Mills (P)
Ltd (supra), on the ground that the legal precedents such as Banarsi Devi (supra), Collector of Central Excise v. M/s.
M. M. Rubber & Co. were not presented before the Court in the case of AVI-OIL India (supra) and therefore, the
Court, in ignorance of law, had given literal meaning to the word ‘served’ in
that case. Treating the decision of AVI-OIL India (supra) as per incuriam, the Court in V.R.A. Cotton Mills (supra) held that the purpose of the statute
would be better served, only if the expression ‘served’ was considered as being
issue of notice. The Court, in light of the aforesaid findings, construed the
expression ‘served’ as meaning ‘issue’ of notice.
India and Others[2],
the Punjab and Haryana High Court overruled its earlier decision in CIT v. AVI-OIL India (P.) Ltd.[3]
In the case of V.R.A. Cotton Mills (P)
Ltd (supra), on the ground that the legal precedents such as Banarsi Devi (supra), Collector of Central Excise v. M/s.
M. M. Rubber & Co. were not presented before the Court in the case of AVI-OIL India (supra) and therefore, the
Court, in ignorance of law, had given literal meaning to the word ‘served’ in
that case. Treating the decision of AVI-OIL India (supra) as per incuriam, the Court in V.R.A. Cotton Mills (supra) held that the purpose of the statute
would be better served, only if the expression ‘served’ was considered as being
issue of notice. The Court, in light of the aforesaid findings, construed the
expression ‘served’ as meaning ‘issue’ of notice.
The distinction between the
terms ‘ issued’ and ‘served’ was also clearly discussed in the case of Commissioner Of Income-Tax vs Sheo
Kumari Debi wherein the Patna High Court stated obiter that:
terms ‘ issued’ and ‘served’ was also clearly discussed in the case of Commissioner Of Income-Tax vs Sheo
Kumari Debi wherein the Patna High Court stated obiter that:
Merely because a
statute may provide that an order issued should also be properly served
subsequently on the person directly affected would not, in my view, in any way
render the words “issue” and “serve” as either synonymous
or identical. A very peculiar situation in a statute and the compulsion of
sound canon of construction may sometimes require the enlargement or extension
of a word to save the legislation from being rendered nugatory. That, indeed,
was the situation in Banarsi Debi’s case [1964] 53 ITR 100. However, this
cannot possibly be any warrant or authority for saying that the distinct and
separate words of the English language, namely, “issue” and
“serve” are in any way synonymous.
statute may provide that an order issued should also be properly served
subsequently on the person directly affected would not, in my view, in any way
render the words “issue” and “serve” as either synonymous
or identical. A very peculiar situation in a statute and the compulsion of
sound canon of construction may sometimes require the enlargement or extension
of a word to save the legislation from being rendered nugatory. That, indeed,
was the situation in Banarsi Debi’s case [1964] 53 ITR 100. However, this
cannot possibly be any warrant or authority for saying that the distinct and
separate words of the English language, namely, “issue” and
“serve” are in any way synonymous.
Where on one hand courts have held that the meaning of the terms
‘issue’ and ‘serve’ cannot be synonymous, on the other hand, the Supreme Court
in the more recent case of R.K.Upadhyaya vs Shanabhai P. Patel
disagreed with its earlier ruling in the case of Banarsi Devi (supra) stating that the scheme of things under Income
Tax Act, 1961 was different from that in section 34 of Indian Income tax Act, 1922. The Hon’ble Court stated obiter that sections 147, 148 and 149 of
Income Tax Act, 1961 vested power with the Income-tax Officer to proceed to
reassess after a notice was served within the period of limitations stated in
section 149. It was also stated that the requirement of issue of notice is
satisfied when a notice is actually issued. Since service under the Income Tax
Act, 1961 is not a condition precedent
to conferment of jurisdiction in the Income-tax Officer to deal with the matter
but it is a condition precedent to making of the order of assessment, the terms
‘issued’ and ‘served’ cannot be taken to mean the same. One may also refer to
the rulings of ITO vs. Lal Chand Agarwal
(ITAT Agra Third Member) and Sanjay Kumar
Garg vs. ACIT (ITAT Delhi).
‘issue’ and ‘serve’ cannot be synonymous, on the other hand, the Supreme Court
in the more recent case of R.K.Upadhyaya vs Shanabhai P. Patel
disagreed with its earlier ruling in the case of Banarsi Devi (supra) stating that the scheme of things under Income
Tax Act, 1961 was different from that in section 34 of Indian Income tax Act, 1922. The Hon’ble Court stated obiter that sections 147, 148 and 149 of
Income Tax Act, 1961 vested power with the Income-tax Officer to proceed to
reassess after a notice was served within the period of limitations stated in
section 149. It was also stated that the requirement of issue of notice is
satisfied when a notice is actually issued. Since service under the Income Tax
Act, 1961 is not a condition precedent
to conferment of jurisdiction in the Income-tax Officer to deal with the matter
but it is a condition precedent to making of the order of assessment, the terms
‘issued’ and ‘served’ cannot be taken to mean the same. One may also refer to
the rulings of ITO vs. Lal Chand Agarwal
(ITAT Agra Third Member) and Sanjay Kumar
Garg vs. ACIT (ITAT Delhi).
Analysis
Although, each of the rulings referred to above are in the context
of Income Tax Act, one can place reliance on them to conclude that ‘issued’
cannot be a synonym for ‘served’. The word ‘issued’ may have an expansive
meaning, including the whole range of activities from authorization of a notice
right up to its service, and may have a restrictive meaning, meaning the date
of its service. The word has to be interpreted in its natural surroundings –
that is, the context in which it is used. Take the case of notices of general
meetings which is issued in the name of, authority of, and as approved by a
board meeting. The question regarding service of notice is purely
administrative and beyond the control of the board meeting. Once the notice is
issued i.e. the postal department of the company sends the notice, the company
can do little to ensure that the notice also reaches the recipient on time. One
may argue that such an issue will be of no relevance when the notices are
dispatched through electronic means however considering that notice of general
meetings can be dispatched through post, it is important to factor in the
difference between ‘issued’ and ‘served’. If one were to conclude that ‘issued’
and ‘served’ mean the same, then for general meetings which are due to be
convened after July 1, 2015 and whose notices have already been dispatched,
will again require a board meeting to be called to approve the notice of
general meeting and consequently, the date of dispatch of the notices will get
delayed further, and even the minimum time required for a general meeting,
viz., 21 clear days, may not be available.
of Income Tax Act, one can place reliance on them to conclude that ‘issued’
cannot be a synonym for ‘served’. The word ‘issued’ may have an expansive
meaning, including the whole range of activities from authorization of a notice
right up to its service, and may have a restrictive meaning, meaning the date
of its service. The word has to be interpreted in its natural surroundings –
that is, the context in which it is used. Take the case of notices of general
meetings which is issued in the name of, authority of, and as approved by a
board meeting. The question regarding service of notice is purely
administrative and beyond the control of the board meeting. Once the notice is
issued i.e. the postal department of the company sends the notice, the company
can do little to ensure that the notice also reaches the recipient on time. One
may argue that such an issue will be of no relevance when the notices are
dispatched through electronic means however considering that notice of general
meetings can be dispatched through post, it is important to factor in the
difference between ‘issued’ and ‘served’. If one were to conclude that ‘issued’
and ‘served’ mean the same, then for general meetings which are due to be
convened after July 1, 2015 and whose notices have already been dispatched,
will again require a board meeting to be called to approve the notice of
general meeting and consequently, the date of dispatch of the notices will get
delayed further, and even the minimum time required for a general meeting,
viz., 21 clear days, may not be available.
To conclude, for the sake of practicality and to avoid undue
hardships during an already busy general meeting time, the meaning of the word
‘issued’ should mean the process of approval of general meeting notice by board
or dispatch of notice for board meeting. Once the same is dispatched, the date
of actual receipt will be of no relevance to assess the date of applicability
of secretarial standards.
hardships during an already busy general meeting time, the meaning of the word
‘issued’ should mean the process of approval of general meeting notice by board
or dispatch of notice for board meeting. Once the same is dispatched, the date
of actual receipt will be of no relevance to assess the date of applicability
of secretarial standards.
– Nivedita Shankar
The Institute of Companies Secretaries of India (ICSI) has come up with a clarification on the applicability of Secretarial Standards. Hope the same will clarify the issue to a great extent.