I had previously posted on a decision of a Single Judge of the Madras High Court on the role and duties of an Official Liquidator. The facts in TCI Distribution Centres v. Official Liquidator (C.A. 1953/2008 in C.P. 526/2000) were that the Official Liquidator had sold certain properties through an auction-sale. The auction-purchaser later found out that the properties were not exactly the same as...
From ‘Oppression’ to ‘Prejudice’?
In this post, I had noted that the proposed Companies Bill appears to introduce some substantive changes in the law dealing with oppression (covered under Section 397 of the present Act). The proposed Companies Bill, 2009 states, in Section 212: “212. (1) Any member of a company who complains that— (a) the affairs of the company have been or are being conducted in a manner prejudicial to...
Bombay High Court on the Entry of Foreign Law Firms
The Bombay High Court (Swatanter Kumar C.J. and J.P. Devdhar J.) has held that foreign law firms are not eligible to practice law in India even in a non-litigation context. Foreign law firms are also not entitled to open liaison offices in India. The case is Lawyers Collective v. Bar Council of India and Others, Writ Petition No. 1526/1995, judgment dated 16th December 2009 (per Devdhar J.). It...
“Consent in writing” and Standing for Oppression and Mismanagement: Section 399(3)
Having discussed the apparent relaxation in standing requirements under Section 399(1), this post will now consider what the requirements under Section 399(3) are. In particular, the effect of the Justice Ruma Pal’s decision in J.P. Srivastava v. Gwalior Sugars will be considered. Section 399(3) states: 3) Where any members of a company are entitled to make an application in virtue of sub-section...
Locus Standi for Oppression and Mismanagement: Dilution of Section 399(1)
Remedies for oppression and mismanagement under Section 397 and 398 of the Companies Act, 1956 provide for some relief to shareholders. However, in order to invoke the provisions of Sections 397/398, the petitioners must demonstrate their standing under Section 399. Section 399, which deals with the right to apply under Sections 397 and 398, says in the relevant part: (1) The following members of...
Recent proposals for a Tobin Tax
Recently, the UK government proposed the levying of a ‘Tobin tax’ or a financial transactions tax to recover the cost of bailouts in recession situations. The proposal has not won many supporters; indeed, India is one of the countries which has opposed the tax. Despite initial rejections of the idea, the IMF is said to be considering the implications of such a tax. Named after the economist James...
‘Business connection’, ‘Attribution’ and the withdrawal of Circular 23 of 1969
Through Circular No. 7 of 2009, the CBDT has withdrawn Circular No. 23 of 1969 (“Circular 23”). Circular 23 explained the position relating to ‘business connection’ under Section 9 of the Income Tax Act, 1961. The Circular was relied upon in the arguments in the Morgan Stanley case before the Supreme Court; as also by the Bombay High Court in SET Satellite. These decisions had laid down the broad...
UN Corporate Law Tools project: Corporate Structures and Governance and Human Rights
The United Nations has been developing a project on Reports on Corporate Law Tools, which involves leading law firms from across the globe working with UN Special Representative John Ruggie to analyse how corporate structures in different legal systems foster respect for human rights. The idea behind the project is found in this note prepared by the Special Representative. Reports from several...
Fiduciary Duties and Non-Executive Directors
An earlier post had discussed a recent Australian judgment on the role and duties of a non-executive director, Australian Securities and Investment Commission v. MacDonald. More recently, according to a report on the Corporate Law and Governance blog, the Inner House of the Court of Session of Scotland has again commented on the role of non-executive directors. (The Court of Session is Scotland’s...
Compliance with Accounting Standards and the “True and Fair” View
Can it be said that just because the Accounting Standards are not complied with, the accounts of a company do not present a true and fair picture of its financial position? Is compliance with the Accounting Standards mandatory, or are certain deviations justified? The Supreme Court’s observations in JK Industries v. Union of India, [2008] 143 Comp Cas 325 (SC), appeared to have settled the issue...
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