Law Relating to Notices

Basics of the Notices

INTRODUCTION

The word “notice” is a word of everyday use. Generally, it is self-defined and well known. In fact, it cannot be defined correctly and fully. It simply means and includes an information, intimation or direction, knowledge, etc. the object behind giving a notice is to make aware or to make known the facts of the case or give an opportunity to the other party to reconsider his position before a legal proceeding is started against him.

The word “notice” may denote merely intimation to the party concerned of a particular fact. It seems that the Court cannot limit the words “notice in writing” to only a letter. Notice may take several forms. It must to be sufficient, be in writing and must intimate quite clearly that the award has been made and signed (Parasramika Commercial Company Vs. Union of India, AIR 1970 SC 1654 at 1956)

DEFINITION

There is no particular definition for notices. According to Chamber’s 20^th Century Dictionary 1961, the word, “notice” stands for intimation, announcement, information, warning a writing etc.” generally, the object of the notice is to give an opportunity to the other to reconsider his position before an action or any legal proceedings is started against him.

“Notice” inter alia means “information”, “knowledge”, or “to know”; and it also stands to signify “observation”, “cognizance”, “attention”, “information”, “intelligence”, “warning”, “announcement” (of something to be done or to occur subsequently), written statement; to refer to; or make mention of.

“Noticeable” means remarkable, conspicuous, attracting notice. Notification means an act of making known or notifying, an act of giving notice of; notice so given; formal notice given under various Act or Parliament. “To notify” means to give to, to inform, or to make known.

OBJECT OF NOTICE

The object of the notice is to enable the party to whom the notice is given to settle the points of dispute without going to Court of Law. Thus the principles laid down in Section 106 and other related provisions of Transfer of Property Act to make the tenant aware of the intention of the landlord to terminate the lease [AIR 1955 Pat. 371] and so in Section 80 of the Code of Civil Procedure, 1908.

The purpose of the notice would be completed only when the same is received or it is refused by the addressee and not simply by posting the notice. For a example, a landlord sends a notice to his tenant terminating the tenancy by tendering it in post office and the same is returned with the endorsement “addressee not available at the delivery time”, “addressee not available”, “addressee has left”, or “addressee gone out for long time” then this notice will not be binding on the tenant because he has not received the said notice or he has no knowledge of any notice of his landlord.

The sole purpose of a notice under section 80 of the Civil Procedure Code to the party concerned is to afford him an opportunity to reconsider the position with regard to the claim made and if so advised, whether to settle it or otherwise to make amends without recourse of Courts. The objects underlying the section is to a clear notice of claim to the Government so that it may settle the claim and avoid the impending suit and consequential costs of the suit in the event of claim being decreed. [AIR 1960 SC 1309 State of Madras Vs. C. P. Agencies]. The object of giving the notice under section 80 of the code to Railway administration the defendants, was to inform them that a suit is to be brought against them so that they may, if they so desire, compromise the case or compensate the person concerned without letting him have his recourse to a Court of Law [AIR 1961. 200 Bhagwanlal Vs. Union of India].

The object of the notice under section 80 is to give to the Government or the public servant concerned an opportunity to reconsider its or his legal position and if that course is justified to make, amends or settle the claim out of Court. The section is no doubt imperative; failure to serve notice complying with the requirements of the State will entail dismissal of the suit. But the notice must be reasonably construed. Any unimportant error or defect cannot be permitted to be treated as an excuse for defeating a just claim. In considering whether the provisions of the statute are complied with, the Court must take into consideration the following matters in each case; (1) whether the name, description and residence of the plaintiff are given so as to enable the authorities to identify the person serving the notice, (2) whether the cause of action and the relief which the plaintiff claims are set out with sufficient particulars, (3) whether a notice in writing has been delivered to or left at the office of the appropriate authority mentioned in the section, and (4) whether the suit is instituted after the expiration of two months next after notice has been served, and the plaint contains a statement that such a notice has been delivered or left. In construing the notice the Court cannot ignore the object of legislature viz. to give to the Government or public servant concerned an opportunity to reconsider its or his legal position. If an reasonable reading of the notice the plaintiff is shown to have given the information which the statute requires him to give, any incidental defects or irregularities should be ignored. It is true the terms of Section 80 must be strictly complied but that does not mean that the terms of the notice should be scrutinized in an artificial or pedantic manner [Beohar Rajendra Singh Vs. The State of Madhya Pradesh, AIR 1969 SC 1256: (1969) 1 SCC 789].

Kinds of Notices

According to the Blacks’ Law Dictionary, 7^th Edition, pp. 1087, 1088; kinds of notices are as follows:

1.       Actual notice – Notice given directly to, or received personally by, a party.

2.       Constructive notice – Notice arising by presumption of law from the existence of facts and circumstances that a party had a duty to take notice of, such as a registered deed or a pending law suit; notice presumed by law to have been acquired by a person ad thus imputed to that person (legal notice).

3.       Direct notice – Actual notice of a fact that is brought directly to a party’s attention (Positive notice).

4.       Due notice – Sufficient and proper notice that is intended to and likely to reach a particular person or the public; notice that is legally adequate given the particular circumstance (adequate notice).

5.       Express notice – Actual knowledge or notice given to a party directly, nor arising from any inference, duty or inquiry.

6.       Fair notice – (1). Sufficient notice apprising a litigant of the opposing party’s claim. (2). The requirement that a pleading adequately apprise the opposing party of a claim. (3). Fair warning.

7.       Immediate notice – 1. Notice given as soon as possible. 2. More commonly, and especially on notice of an insurance claim, notice that is reasonable under the circumstances.

8.       Implied notice – Notice that is inferred from facts that a person had a means of knowing and that is thus imputed to that person; actual notice of facts or circumstances that, if properly followed up, would have led to a knowledge of the particular fact in question (implied notice; presumptive notice).

9.       Imputed notice – Information attributed to a person whose agent having received actual notice of the information, has a duty to disclose it to that person.

10.   Inquiry notice – Notice attributed to a person when the information would lead an ordinarily prudent person to investigate the matter further; especially the time at which the victim of an alleged securities fraud became aware of facts that would have prompted a reasonable person to investigate.

11.   Personal notice – Oral or written notice, according to circumstances, given directly to the affected person.

12.   Public notice – Notices given to the public or persons affected, by publishing in a newspaper of general circulation (notice by publication).

13.   Reasonable notice – Notice that is fairly to b expected or required under the particular circumstances.

14.   Record notice – Constructive notice of the contents of an instrument, such as a deed or mortgage that has been properly recorded.

15.   Notice doctrine – The equitable doctrine that when a new owner takes a estate with notice someone else had a claim on it at the time of the transfer, that claim may still be asserted against the new owner even if it might have been disregarded at law.

Nature and Scope

Laws pertaining to notices are procedural laws or adjective laws; therefore have to be followed with the greatest possible degree of care and diligence. Law does not excuse mistakes committed in drawing up notices, especially in respect of those which are statutory and mandatory. Mistakes which do not violate or infringe or contravene the provisions of law or affect the cause of action are generally excused. 

Classification of Notices

Oral or Verbal Notice, Written Notice

Generally speaking a notice should be in writing because a written notice is easy to prove its contents are certain. However, a notice may be oral or verbal. A verbal notice to quit is sufficient to terminate tenancy unless there is express provision requiring a written notice [Zingu Vs. Ramji Mahadu AIR 1929 Nag. 169].

A notice under section 14(2) of the Arbitration Act, 1940 may be given orally. Section 94 of the Negotiable Instruments Act, 1881 (26 of 1881), says that a notice may be oral or written; may, if written, be sent by post and may be in any form.

Public and Private Notices

Public notices are those notices which are issued on matters in which the members of the general public are likely to be interested or by which the public are likely to be or expected to be affected. E.g. notice of dissolution of a registered firm, a notice to creditors in respect of deceased’s notice.

Private notices pertain to matters affecting or touching individuals. E.g. Notice of claim to a debtor, Notice by tenant to repair.

Actual and Constructive Notice

In the case of actual notice, knowledge of a fact is carried to a party by sending to him or by giving him a notice. Constructive notice is the knowledge which the Courts impute to a person upon a presumption so strong of the existence of the knowledge that it cannot be allowed to be rebutted, whether from his knowing something which ought to have put him upon further inquiry or from his willfully abstaining from inquiry, so avoid notice.

Contractual and Optional Notice

Notice issued in accordance with the terms of a contract is referred to as contractual notice. E.g. Notice for termination of tenancy or lease where the relevant agreement provides for issue of notice.

Where a notice is given not under any law or any contract or agreement and the notice given is not thus bound to give the notice, such notice is referred to as optional notice. E.g. Notice claiming arrears of rent, notice claiming dues on credit accounts and so on.

Reasonable and Defective Notice

Where a notice is not required to be issued under any law but the principles of a natural justice or reasonableness warrant that a notice should be issued, such notice is referred to as “reasonableness notice”. A notice which is inconsistent with the requirements of law and a notice which is not a reasonable notice is referred to a defective notice. Defective notices are sometimes referred to as “invalid notice” or “void notice”.

Composite Notices

A composite notice is a notice issued under separate enactments in a combined form or under two or more sections of the same enactments. For example a notice under section 106 of Indian Railways Act, 1989 read with section 80 of the Civil Procedure Code.

Notice to Admit

A party to an action may serve notice upon the other party to admit any document. Such notice is to be given under Order XII, Rule 2 of the Code of Civil Procedure, 1908. The parties to a suit may, by their solicitors, agree to admit at the trial documents and facts; and such agreement often saves trouble and expose and expense, where there is no ground for disputing them.

Notice to Produce

Any party to an action may call upon the other party to produce any documents referred to in his pleadings or affidavit [Order XI, Rule 16 of the Code of Civil Procedure, 1908]. If one party is in possession of any written instrument which would be evidence for the other if produced, a notice to produce it at the trial may be served either upon him, his solicitor, or agent. The notice must specify the instrument with a particularity sufficient to inform the opposite party what he called upon to produce. It must be served at a reasonable time before trail, so as to enable the party served to make an effectual search, and produce the same at the proper time.

Notification

Notification is the act of notifying or giving notice; notice given in words or in writing, anything which communicates information, as a letter, a telegram or an advertisement. 

Notice of Assessment

A notice given by a taxing authority such as an officer of the Income Tax Department or of an officer of a municipal Corporation or Panchayat in relation to real property situated within the limits of his Municipality or Panchayat, whereby the tax payer is advised of the assessment of taxes payable by him.

Notice of Accident

The notice of Accidents Act, 1906, requires annual return and notices of accidents in mines and quarries to be given, ad in the case of accidents in factories and workshops notice must be sent to the district inspector, and also in certain events to the certifying surgeon of the district. In case of mines, provision for notice is made by the Coal Mines Act, 1911.

Notice of Dishonour

Sections 91 to 98 of the Negotiable Instruments Act, 1881 deal with this aspect. In relation to bills of exchange, a notice of dishonour is a notice given by the payee or endorsee thereof to all parties other than the acceptor that the bill had been dishonoured upon presentment. The notice of dishonour is given to enable the parties to protect themselves by promptly taking up the bill and proceeding against the party ultimately liable upon it.

Notice to Quit

Notice to be given by a landlord to a tenant or by a tenant to a landlord. A written notice given by a landlord to his tenant, stating that the former desires to repossess himself of the demised premises, and that the latter is required to quit ad remove from the same at a tie designated, either at the expiration of the term, if the  tenant is In under a lease, or immediately, if the tenancy is at will or by sufferance. The term is also sometimes applied to a written notice given by the tenant to the landlord to the effect that he intends to quit the demised premises and deliver possession of the same on a day named.

Notice of Knowledge and Notice of Fact

Notice and knowledge are not the same thing, although loosely one sometimes talks as if to act with notice and to act with knowledge were indeed the same. A person is said to have notice of a fact either when he actually know that fact or when but for the willful abstention from enquiry or gross negligence he would have known it or when information of the fact is given to or obtained by his agent, under the circumstances mentioned in Section 229 of the Indian Contract Act, 1872

Notice of Appeal

The words “notice of appeal” means the notice to the respondent of the actual date of hearing fixed for the disposal of the appeal [Bachcha Vs. Kameshwar Prasad Singh, AIR 1963 ALL 311 (312-13)].

Requirement of Notice

Generally speaking there is no particular form for any particular notice. Thus, a notice u/s 80 of the Code of Civil Procedure, 1908 (V of 108) or a notice u/s 106 of the Transfer of Property Act, 1882 (IV of 1882) or a notice u/s 106 of the Indian Railways Act, 1989 (24 of 1989), or a notice u/s 43 (1) of the Indian Partnership Act, 1932 (9 of 1932) does not require to be given any particular form. It must, however, be noted in this connection that several forms of notices have been prescribed under the Civil Procedure Code, 1908, and these forms have to be used when there is occasion for issuing such notices.

It is not necessary that the section of a statute under which a notice is issued must be mentioned in the notice for the validity of the notice. Again, a notice which is invalid in the eyes of law would not be valid only because the section of an Act under which it had been issued and had been mentioned in it. In [Sunderlal Vs. Yakoob Ali (AIR 1979 NOC 38 (ALL)], it was held that a mere mention of section 106 in the notice without there being a recital, express or implied, terminating the tenancy of the person to whom the notice had been addressed was not sufficient in law to bring about termination of tenancy.

Service of Notice

This is also an important factor so far notice is concerned. If the notice is not received by the addressee then he cannot be bound by the notice. So to bind the addressee with the contents of a notice it is essential to see that the notice is served on him.

In case of joint tenancy, if the notice is served on one of the joint tenants then it is notice to all the joint tenants [Rotion Vs. Prurshottam Lal. AIR 1965 ALL. 287].

Presumption of Service of Notice

In Hari Charan Singh Vs. Siv Rani, AIR 1981 SC 1284: (1981) 2 SCC 535, the Supreme Court has observed “when a registered envelop is tendered by a postman to the addressee but he refused to accept it, there is due service effected upon the addressee by refusal, the addressee must therefore, be imputed with the knowledge of the contents thereof and, this follows upon the presumptions that are raised under section 27 of the General Clauses Act, 1897 and section 114 of the Evidence Act. The presumptions both under section 27 of the General Clauses Act a well as under section 114 of the Evidence Act are rebuttable but (in the absence of proof of contrary) the presumption of proper service or effective service on the addressee would arise, which must mean service of everything that is contained in the notice. It cannot be said that before knowledge of the contents of the notice could be imputed the sealed envelope must be opened and read by the addressee or when the addressee happens to be an illiterate person the contents should be read over the addressee is det aermined to decline to accept the sealed envelope”.

Modes of Service

There may be direct and indirect modes of service. The following are the direct modes:-

1.       Personal service – Delivery of a notice to the person on whom it is to be served constitutes what is known as “Personal Service”. When a personal service is effected, a receipt acknowledging delivery of the notice in writing should be insisted from the addressee.

2.       Service by Post – the most commonly adopted mode of service of a notice is “service by post”, i.e., sending a notice to the addressee, addressed at his usual place of abode or the last known place of abode or business, by post. A notice may be sent by –

a.       Ordinary post – Dispatch of a notice by ordinary post is not free from risks inasmuch as the notice giver has had left with him nothing to prove service of the notice if the addressee denied of having received the notice.

b.      Certificate of Post – A certificate of posting, issued by the post office of dispatch, certifies posting of a letter containing a notice but it is not a guarantee that the letter must have reached the addressee.

c.       Registered Post – Sending a notice under registered post places the notice-giver in a better place and surer footing and the law will presume that a notice, sent under registered post, was duly served on the addressee.

3.       Statutory mode of Service – When a particular provision of law directs a particular manner as to how a notice has to be served i.e., in a case of a notice u/s 80 of  Civil Procedure Code directing the notice “to be delivered to or left at the office of the Secretary to the Union, Provincial Government. General Manager of a railway or the Collector of a district as the case may be, the notice is to be served in the manner prescribed under the statute.

4.       Contractual mode of Service – When an agreement of a contract contains a term as to the mode of service of notice, the notice should be service conforming strictly to such mode.

5.       Special mode of Service – Leaving a notice in a conspicuous part of the premises of the addressee.

Indirect mode of service by implication arises when a notice giver sends a notice through a bearer or special messenger or through post office but the addressee refuses to take it. Refusal is by implication good service of the notice on the addressee.

DEFINITION OF CAPITAL PROFIT

Capital profit is any profit which is not a revenue profit. However this is an indicative/guiding definition which does not clarify as to what are the transactions results in to capital profit. To understand capital profit better, capital profit arises due to the following :

– an asset is sold for more than the cost,
– write back of certain capital receipts like loan received are no more payable and hence written back in the profit and loss account.
– upward revaluation of assets/downward revaluation of long term liability
– profit on forfeiture of shares.

The specific definition of capital profit is given in the Guidance note on terms used in Financial Statements issued by Institute of Chartered Accountants of India (‘ICAI’) which reads as under : –

Capital Profit – Excess of proceeds realized from the sale, transfer or exchange of the whole or a part of a capital asset over its cost. When the result of this computation is negative it is referred to as capital loss. 

The next question is what should be the accounting treatment of the capital profit in the books. There are two views, one transfer the same to capital reserves and second transfer the same to profit and loss account if permitted by accounting standards notified under the Companies Accounting Standard rules, 2000 (as amended) (‘Rules’). To understand the first view we need to know what is the definition of capital reserve?

Let us now explore the meaning of capital reserve. Capital reserve is the transfer of capital profit to reserve as mandated in certain cases by the regulation governing the entity. E.g. in case of redemption of preference shares an amount equal to face value of preference share capital is to be transferred from free reserve to capital redemption reserve (capital redemption reserve is type of capital reserve). There are certain other transactions where the capital profit is transferred directly to capital reserve without routing the same through the profit and loss account. However when we look at specific definition of the capital reserve the guidance can be drawn from the Guidance note on terms used in Financial Statements (‘GN’) issued by ICAI and part III of schedule VI of the Companies Act, 1956 which reads as under:

CAPITAL RESERVES AS PER GN
Capital Reserve – A reserve of a corporate enterprise which is not available for distribution as dividend. Capital reserve as per Part III of schedule VI of the Companies Act, 1956 gives the “interpretation”-of Capital reserve “the expression capital reserve shall not include an amount regarded as free for distribution through the profit and loss account.”

The implication of profit being capital in nature or revenue in nature can have far-reaching implications in terms of its impact on availability of profit for payment of managerial remuneration, its availability for distribution to the shareholders as dividend and its taxability. Hence the question of any profit being of capital in nature or revenue in nature and further its accounting treatment warrants special attention.
 

CONSIDERATION OF CAPITAL PROFIT WHILE CALCULATING THE PROFIT TO BE CONSIDERED FOR MANAGERIAL REMUNERATION
Under the Companies Act sub-section (3) of section 349 reads as under :

“In making the computation aforesaid, credit shall not be given for the following sums : –
(a) profits, by way of premium, on shares or debentures of the company, which are issued or sold by the company;
(b) profits on sales by the company of forfeited shares;
(c) profits of a capital nature including profits from the sale of the undertaking or any of the undertakings of the
company or of any part thereof,
(d) profits from the sale of any immovable property or fixed assets of a capital nature comprised in the undertaking or any of the undertakings of the company, unless the business of the company consists, whether wholly or partly, of buying and selling any such property or assets :

Provided that where the amount for which any fixed asset is sold exceeds the written-down value thereof referred to in section 350, credit shall be given for so much of the excess as is not higher than the difference between the original cost of that fixed asset and its written-down value.”

Thus the Companies Act very specifically states (through the above proviso) that the profit on sale of asset resulting in capital profit need to be deducted for computing the managerial remuneration. However one need to be very careful about the interpretation of capital profit here. As already explained, capital profit is the profit over the original cost which sometimes misinterpreted as the profit on sale of asset while calculating the managerial remuneration resulting in lower profit available for managerial remuneration. Following is an example explaining the concept of capital profit, revenue profit and profit of capital nature to be
 

deducted in calculating the managerial remuneration :

Original cost of an asset                                Rs. 100
WDV at the end of 6 years                           Rs. 40
                                                             Scenario 1                   Scenario 2
Sale proceeds at the end                            Rs. 120                       Rs. 80
of six years
Profit on sale of asset                                  Rs. 80                        Rs. 40
                                                          (Rs. 120-Rs. 40)            (Rs. 80-Rs. 40)
Capital profit incl in above                           Rs. 20                        Rs. Nil
profit                                                   (Rs. 120-Rs. 100)
Revenue profit                                             Rs. 60                        Rs. 40
Profit to be deducted for                              Rs. 20
arriving at the profit to be                          (and not Rs. 80)
considered for the
Managerial remuneration

AVAILABILITY OF PROFIT (CAPITAL PROFIT) FOR DISTRIBUTION AS DIVIDEND
Section 205 of the Companies Act deals with the profit available for dividend. It reads as under : No dividend shall be declared or paid by a company for any financial year except out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2) or out of the profits of the company for any previous financial year or years arrived at after providing for depreciation in accordance with those provisions and remaining undistributed or out of both or out of moneys provided by the Central Government or a State Government for the payment of dividend in pursuance of a guarantee given by that Government :
 

Provided that –(a) if the company has not provided for depreciation for any previous financial year or years which falls or fall after the commencement of the Companies (Amendment) Act, 1960 it shall, before declaring or paying dividend for any financial year provide for such depreciation out of the profits of that financial year or out of the profits of any other previous financial year or years;
(b) if the company has incurred any loss in any previous financial year or years, which falls or fall after the commencement of the Companies (Amendment) Act, 1960 then, the amount of the loss or an amount which is equal to the amount provided for depreciation for that year or those years whichever is less, shall be set off against the profits of the company for the year for which dividend is proposed to be declared or paid or against the profits of the company for any previous financial year or years, arrived at in both cases after providing for deprecation in accordance with the provisions of subsection (2) or against both;
(c) the Central Government may, if it thinks necessary so to do in the public interest, allow any company to declare or pay dividend for any financial year out of the profits of the company for that year or any previous financial year or years without providing for depreciation :

Provided further that it shall not be necessary for a company to provide for depreciation as aforesaid where dividend for any financial year is declared or paid out of the profits of any previous financial year or years which falls or fall before the commencement of the Companies (Amendment) Act, 1960.

As dividend can be distributed from net profits of the current year after providing for aforementioned items including depreciation, we need to understand the meaning of profits for the year. Guidance can be drawn from Para 5 of Accounting Standard (‘AS’) 5. All items of income and expense which are recognised in a period should be included in the determination of net profit or loss for the period unless an Accounting Standard requires or permits otherwise. Anything which is credited to the profit and loss account of the current year is included in the profit for the year in terms of the definition given in the AS 5 issued by ICAI. Further, AS 10 (Accounting for fixed assets) vide para 14.3 provides that in historical cost financial statements, gains or losses arising on disposal are generally recognised in the profit and loss statement.

This clearly indicates that irrespective of whether the profit on disposal of assets is revenue or capital in nature the same has to be credited to profit and loss account. (In the example given in the table above in both scenario Rs 80 and Rs 40 will be credited to profit and loss account)

Now the question is, even though the above forms part of net profit for the year is there any restriction in the Companies Act which restrict the distribution of capital profit to shareholders? (like it does have for managerial remuneration as explained in the earlier section). The answer to that is, that the Companies Act is silent as to whether capital profit is distributable as dividend or not. However courts have adopted liberal view in this regard. In Lubbock v Bank of South America Ltd., the Court expressed the view that capital profit on sale of assets is distributable as dividend. However questions as to appreciation of value in assets is also capital profit and hence distributable as dividend has been discussed in various decisions and finally the same has been settled by concluding that the unrealized gain is not distributable as dividend. Hence though realized capital profit is distributable as dividend, the unrealized profit is not distributable as dividend.

Taxability
The dividend so declared will be exempt in the hands of recipient of the dividend. However the companies distributing the same will have to pay dividend distribution tax @15% plus surcharge.1 Further, under provisions of income tax sale proceeds have no connection to the taxability of profit due to block of asset concept which is being followed in the Income tax. (However the block of assets and related issues are not covered in this article but interested reader may refer section 32, 43 of Income-Tax Act, 1961.)

Another aspect which needs consideration of Indian companies going forward while revaluing their assets is as to whether the capital profit arising from such revaluation will be available or not for distribution to shareholders. The same will be considered for the purpose of calculation of Minimum alternate tax liability in terms of proposed DTC. As per proposed DTC, MAT will be calculated as 2% of total assets. This means that higher tax will have to be paid if the book assets are upward revalued though the same is not realized.

CONCLUSION
The capital profit can be classified in to realizable and non realizable profit. Non realizable capital profit can never be distributed as dividend to shareholders unless the same is realized. In respect of realizable capital profit if it is permitted to credit the same to the profit and loss account in the light of prevalent AS being notified under the Rules, the same can be distributed as dividend. For managerial remuneration computation, capital profit being explicitly excluded in terms of sec 349 from profit available for managerial remuneration the same will need to be excluded.

Notes:

1. Raised to 18 per cent vide Finance Act 2010 

(Published in Chartered Secretary October 2010 - ICSI)
Kevin Daftary, Manager, S.R. Batliboi & Co., Mumbai.

Can a listed company ‘send’ or ‘supply’ its annual report to its shareholders electronically

The annual report of Infosys Technologies Limited for 2009- 10 carries the following note under the title “Green Innovation”:

“During the previous year, we started a sustainability initiative with specific focus on reducing the carbon footprint involving our Annual Reports. Toward this end, we had stated that commencing fiscal 2010, our printed copy of the Annual Report to shareholders would contain only the statutory details. Accordingly, the Annual Report for the year ended March 31, 2010, contains only those details that are statutorily required to be published in the Annual Report along with Abridged Standalone Financial Statements prepared in compliance with Section 219 of the Companies Act, 1956. Additional details are available on our website, www.infosys.com. Through this initiative, we propose to reduce consumption of paper by about 100 tonnes.”

This is consonant with the Ministry of Corporate Affairs’ call through Corporate Social Responsibility Voluntary Guidelines 2009 (CSR) which is as under:“5. Respect for Environment: Companies should take measures to check and prevent pollution; recycle, manage and reduce waste, should manage natural resources in a sustainable manner and ensure optimal use of resources like land and water, should proactively respond to the challenges of climate change by adopting cleaner production methods, promoting efficient use of energy and environment friendly technologies.”

The company has sent its members abridged annual accounts in Form No. 23AB prescribed in terms of clause (iv) of the proviso to section 219(1)(b) of the Companies Act 1956 (‘the Act’), considering the environmental and cost aspect involved in printing and circulation of full annual accounts, though clause 32 of the listing agreement entered into by the company with the stock exchanges specifically requires sending the shareholders full annual accounts. Has the company committed a non-compliance with the clause 32, is the question this article examines.

Companies Act requirement
According to section 219(1) of the Act, a copy of every balance sheet (including the profit and loss account, the auditors’ report and every other document required by law to be annexed or attached, as the case may be, to the balance sheet) which is to be laid before a company in general meeting shall, not less than twenty-one days before the date of the meeting, be sent to every member of the company. Collectively these documents are called ‘annual report’. Thus, every listed company must send its members a copy of the annual report in respect of every financial year.

However, according to clause (iv) of the proviso to section 219(1), in the case of a company whose shares are listed on a recognised stock exchange, if the copies of the documents aforesaid are made available for inspection at its registered office during working hours for a period of twenty-one days before the date of the meeting and a statement containing the salient features of such documents in the prescribed form or copies of the documents aforesaid, as the company may deem fit, is sent to every member of the company and to every trustee for the holders of any debentures issued by the company not less than twenty-one days before the date of the meeting, the listed company need not comply with the proviso to section 219(1).

Listing agreement requirement
Moreover, the company must also comply with the requirement of clause 32 regarding consolidated financial statement. The requirements of the listing agreement in this regard are in addition to those under the Act; hence every listed company has to comply with both the requirements. The facility of sending abridged annual report under clause (iv) of the proviso to section 219(1) has however been made ineffective by clause 32 of the listing agreement according to which the Issuer will supply a copy of the complete and full Balance Sheet, Profit and Loss Account and the Directors’ Report to each shareholder. The only exemption is what is stated in the second paragraph of clause 32. Clause 32 (to the extent relevant here), reads as follows:

“32. The Company will supply a copy of the complete and full Balance Sheet, Profit and Loss Account and the Directors’ Report, to each Shareholder and upon application to any member of the Exchange. However, the company may supply single copy of complete and full Balance Sheet and Profit & Loss Account and Directors’ report to shareholders residing in one household (i.e., having same address in the Books of Company/ Registrars/Share transfer agents). Provided that, the company on receipt of request shall supply the complete and full Balance Sheet and Profit & Loss Account and Directors report also to any shareholder residing in such household. Further, the company will supply abridged Balance sheet to all the shareholders in the same household.

The Company will also give a Cash Flow Statement along with Balance Sheet and Profit and Loss Account. The Cash Flow Statement will be prepared in accordance with the Accounting Standard on Cash Flow Statement (AS-3) issued by the Institute of Chartered Accountants of India, and the Cash Flow Statement shall be presented only under the Indirect Method as given in AS-3. The company will mandatorily publish Consolidated Financial Statements in its Annual Report in addition to the individual financial statements. The company will have to get its Consolidated Financial Statements audited by the statutory auditors of the company and file the same with the Stock Exchange.”

              Interpretation of ‘shall … be sent to every member’ and ‘supply … to each shareholder’

The words used in section 219(1) of the Act are a copy … shall be sent to every member of the company …. Thus, the verb ‘send’ is used which contemplates the act of ‘sending’ by the company to the members. Section 53(1) of the Act provides for the method of service of documents on members by a company. Its sub-section (1) states: 

“A document may be served by a company on any member thereof either personally, or by sending it by post to him to his registered address, or if he has no registered address in India, to the address, if any, within India supplied by him to the company for the giving of notices to him.” This provision also requires ‘sending’ of a document, but by ‘post’. However it also allows service of a document on a member ‘personally’.

As against these provisions of section 219, clause 32 of the listing agreement requires a listed company to supply a copy of the complete and full Balance Sheet, Profit and Loss Account and the Directors’ Report, to each Shareholder.1 

Thus while sections 219(1)(iv) and 53 use the word ‘send’, clause 32 of the listing agreement uses the word ‘supply’. The dictionary meaning of the word ‘send’ includes “to cause to be conveyed or transmitted to a destination” [see Random House Webster’s Unabridged Dictionary] or ‘to dispatch by a means of communication’ [Merriam Webster’s 11th Colligate Dictionary], and the word ‘supply’ includes ‘transmit, dispatch and send off/out’. The American Heritage Dictionary of the English Language gives the following meaning of the word ‘send’: “To dispatch, as by a communications medium: send a message by radio.” Thus both the words ‘send’ and ‘supply’ connote the act of conveying or transmitting something (a letter, document, etc).

Does annual report have to be ‘printed’?
Wherever the Legislature intended to provide that a document shall be in a printed form, it has used appropriate express wording to convey that intention. For example, the Act specifically provides in section 15 that a memorandum of association shall be ‘printed’. Section 30 provides likewise about articles of association. Sections 17(4) and 31(2A) also use the words ‘a printed copy’. Similarly, in section 241 it is provided that the inspector’s report shall be written or printed. Section 192 provides that a copy of every resolution or agreement to which this section applies shall, within thirty days after the passing or making thereof, be printed or typewritten and duly certified under the signature of an officer of the company and filed with the Registrar who shall record the same.

In contrast, neither of the sections 219 and 53 provides in express terms that the documents be sent or supplied should be in printed form. The words ‘send’ and ‘supply’ can be interpreted having regard to the modern means of communication and if so interpreted can be said to be including communication or dispatch of a document through email or internet (world wide web). Statutory interpretation vis-à-vis technological developments 

It is a well settled principle of statutory interpretation that law should keep pace with the changing environment; it should change constantly and not remain static. The legislature and the executive, the statute and administrative law-making bodies, are expected to change laws and rules to tone them with changes happening around. Courts are likewise expected to do so.

Maxwell on The Interpretation of Statutes, 12th edition deals with this fact of statutory interpretation at page 102 thus : “Extension to new things The language of a statute is generally extended to new things which were not known and could not have been contemplated when the Act was passed, when the Act deals with a genus and the thing which afterwards comes into existence was a species of it. Thus the provision of Magna Carta which exempted lords from the liability of having their carts taken for carriage was held to extend to degrees of nobility not known when it was made, such as dukes, marquises and viscounts. [2 Inst. 35]

So, the Engraving Copyright Act 1734, which imposed a penalty for piratically engraving, by etching or otherwise, or “in any other manner” copying prints and engravings, applied to copying by photography, though that process was not invented until more than a century after the Act was passed. [Gambart v. Ball (1863) 32 L.J.C.P. 166] And Edison’s telephone was held to be a “telegraph” within the meaning of the Telegraph Acts 1863 and 1869, even though it was unknown in 1869. [Att.-Gen, v. Edison Telephone Co. of London (Ltd.) (1880) 6 Q-B.D. 244]. Similarly, bicycles were held to be “carriages” within the provision of the Highway Act 1835 against furious driving, [Taylor v. Goodwin (1879) 4 Q.B.D. 228] and tricycles capable of being propelled by steam to be “locomotives” within the Locomotives Acts 1861 and 1865 [Parkyns v. Preist (1881) 7 Q.B.D. 313] though not invented when these Acts were passed.”

In G P Singh’s Principles of Statutory Interpretation, 9th edition, the principle is summarized at page 228 as follows: “It is possible that in some special cases a statute may have to be historically interpreted “as if one were interpreting it the day after it was passed.” But generally statutes are of the “always speaking variety” and the court is free to apply the current meaning of the statute to present day conditions. There are at least two strands covered by this principle. The first is that courts must apply a statute to the world as it exists today. The second strand is that the statute must be interpreted in the light of the legal system as it exists today.”

The Courts nowadays resort to what is called “creative interpretation of a statute”. Creative interpretation of the provisions of the statute demands that with the advance in science and technology, the Court should read the provisions of a statute in such a manner so as to give effect thereto.2

In State of Maharashtra v. Dr. Praful B .Desai3 court had opined that recording of evidence through Video Conferencing is permissible in terms of Section 273 of the Code of Criminal procedure. In State of Maharashtra v. Dr. Praful B. Desai AIR 2003 SC 2053; 2003 AIR SCW 1885, the Supreme Court held, with regard to section 273 of the Criminal Procedure Code 1974 (which provides that all evidence taken in the course of the trial or other proceeding shall be taken in the presence of the accused, or, when his personal attendance is dispensed with in the presence of his pleader), as to the question whether recording of evidence by video conferencing is permissible:

“Video conferencing has nothing to do with virtual reality. Advances in science and technology have now, so to say, shrunk the world. They now enable one to see and hear events, taking place far away, as they are actually talking place. Video conferencing is an advancement in science and technology which permits one to see, hear and talk with someone far away, with the same facility and ease as if he is present before you i.e. in your presence. In fact he/ she is present before you on a screen. Except for touching one can see, hear and observe as if the party is in the same room. In video conferencing both parties are in presence of each other. Recording of evidence by video conferencing also satisfies the object of providing, in section 273, that evidence be recorded in the presence of the accused. The accused and his pleader can see the witness as clearly as if the witness was actually sitting before them. … The advancement of science and technology is such that now it is possible to set up video conferencing equipment in the Court itself for recording the evidence through video conferencing.”

The superior courts must remember a well known principle of law that the court while construing an ongoing statute must take into consideration the changes in the societal condition. It would be a relevant fact. It must take into consideration the development in science and technology. For the purpose of giving an effective and meaningful construction of the provisions, the court is bound to take into consideration the situational change. The statute is an ongoing one. The Act must be interpreted differently as the court cannot ignore the ground realities.4

Bearing in mind that statutes are usually intended to operate for many years it would be most inconvenient if courts could never rely in difficult cases on the current meaning of statutes. Recognising the problem Lord Thring, the great Victorian draftsman of the second half of the last century, exhorted draftsmen to draft so that ‘An Act of Parliament should be deemed to be always speaking’ (see Practical Legislation 1902) p 83; see also Cross Statutory Interpretation (3rd edn, 1995) p 51 and Pearce and Geddes Statutory Interpretation in Australia (4th edn, 1996) pp 90–93). In cases where the problem arises it is a matter of interpretation whether a court must search for the historical or original meaning of a statute or whether it is free to apply the current meaning of the statute to present day conditions. Statutes dealing with a particular grievance or problem may
sometimes require to be historically interpreted.5

Francis Bennion in his ‘Statutory Interpretation’, 5th edition, has stressed the need to interpret a statute by giving “allowances for any relevant changes that have occurred, since the Act’s passing, in law, social conditions, technology, the meaning of words, and other matters.” He says at page 893: “In construing an ongoing Act, the interpreter is to presume that Parliament intended the Act to be applied at any future time in such a way as to give effect to the true original intention. Accordingly the interpreter is to make allowances for any relevant changes that have occurred, since the Act’s passing, in law, social conditions, technology, the meaning of words, and other matters. Just as the US Constitution is regarded as ‘a living Constitution,’ so an ongoing British Act is regarded as ‘a living Act.’ That today’s construction involves the supposition that Parliament was catering long ago for a state of affairs that did not then exist is no argument against that construction. Parliament, in the wording of an enactment, is expected to anticipate temporal developments. The drafter will try to foresee the future, and allow for it in the wording.................… An enactment of former days is thus to be read today, in the light of dynamic processing received over the years, with such modification of the current meaning of its language as will now give effect to the original legislative intention. The reality and effect of dynamic processing provides the gradual adjustment. It is constituted by judicial interpretation, year in and year out. It also comprises processing by executive officials.”

Again, at page 905, Bennion says:

“Developments in technology The nature of an ongoing Act requires the court to take into account changes in technology, and treat the statutory language as modified accordingly when this is needed to implement the legislative intention. Mann LJ relied upon this statement in holding that the reference to ‘any writing proved … to be genuine’ in the Criminal Procedure Act 1865 Section 8 (which permits comparison of a disputed writing with any such genuine writing) must now be taken to allow comparison with a photocopy of the genuine writing since the legislators of 1865 could not have foreseen ‘the facsimile reproductions which now we both suffer and enjoy’.”6

In Statutory Interpretation by Cross, 3rd edition, page 52 it is stated: 

“… the courts regularly apply a statutory provision to new developments in technology or society which come within its original purpose and wording. The former situation can be illustrated by Royal College of Nursing of the United Kingdom v. Department of Health and Social Security [1981] 1 All ER 545. The Abortion Act 1967 permitted the termination of a pregnancy ‘by a registered medical practitioner’ in certain circumstances. At the time, only surgical and intra-amniotic methods existed for terminating a pregnancy, and both required the continuous presence of a doctor. However, since 1971 a new, extra-amniotic method had become current, which involved inducing the abortion over a long period of up to 30 hours by the administration of a drug, prostaglandin. The Department of Health and Social Security advised that, as long as a doctor approved and initiated the process, a nurse could lawfully continue it, starting and regulating the actual supply of the drug. The Royal College of Nursing sought a declaration that this advice was incorrect, and that the Act did not protect the nurse in the application of extra-amniotic methods. The House of Lords upheld the view of the department, the majority reasoning that the new method came within the purpose of the Act, designed to liberalise legal abortions. The inclusion of a telephone within the notion of ‘telegraph’ in the Telegraph Act 1869 [A-G v. Edison Telephone Co (1880) 6 QBD 244], or a microfilm within that of ‘bankers books’ in the Bankers Books Evidence Act 1879 [Barker v. Wilson [1980] 2 All ER 82 are further examples of this process.”

The courts are alive to the need for forward-looking interpretation since ancient times. Thus, Communication by telephone was held to be a ‘telegraph’, within the meaning of Telegraphs Acts of 1863 and 1869, notwithstanding that the telephone had not been invented or contemplated when those Acts were passed. [Attorney General v. Edison Telephone Co Ltd [1880] 6 QBD 244.

In Barker v. Wilson [1980] 2 All ER 82, section 9 of the Bankers’ Books Evidence Act 1879, provided that “Expressions in this Act relating to “bankers’ books” include ledgers, day books, cash books, account books,  and all other books used in the ordinary business of the bank.’” It was held that For the purposes of section 9 of the Bankers’ Books Evidence Act 1879 ‘bankers’ books’ include a record of a customer’s transactions and details of cheques recorded by a bank on microfilm, and accordingly such microfilm may be used for the purpose of proving banking transactions in legal proceedings in accordance with the 1879 Act. Bridge J said:

“The Bankers’ Books Evidence Act 1879 was enacted with the practice of bankers in 1879 in mind. It must be construed in 1980 in relation to the practice of bankers as we now understand it. So construing the definition of ‘bankers’ books’ and the phrase ‘an entry in a banker’s book’, it seems to me that clearly both phrases are apt to include any form of permanent record kept by the bank of transactions relating to the bank’s business, made by any of the methods which modern technology makes available, including, in particular, microfilm.” [emphasis mine].

There are a few recent instances of courts adopted forwardlooking approach to interpretation of law. In SIL Import v. Exim Aides Silk Exporters 1999 AIR SCW 1218; (1999) 4 SCC 567; [1999] 97 Comp Cas 575 (SC), the Supreme Court has applied this canon to interpret the expression ‘notice in writing’ in section 138 of the Negotiable Instruments Act as including notice sent by fax. The court said: When the legislature contemplated that notice in writing should be given to the drawer of the cheque, the legislature must be presumed to have been aware of the modem devices and equipment already in vogue and also in store for future. If the court were to interpret the words “giving notice in writing” in the section as restricted to the customary mode of sending notice through postal service or even by personal delivery, the interpretative process would fail to cope up with the change of time.

Facsimile (or fax) is a way of sending handwritten or printed or typed material as well as pictures by wire or radio. In the West such mode of transmission came to wide use even way back in the late 1930s. By 1954 the International News Service began to use facsimile quite extensively. Technological advancement like facsimile, internet, e-mail etc. were in swift progress even before the Bill for the Amendment Act was discussed by Parliament. So when Parliament contemplated notice in writing to be given we cannot overlook the fact that Parliament was aware of modem devices and equipment already in vogue.

Francis Bennion in Statutory Interpretation has stressed the need to interpret a statute by making “allowances for any relevant changes that have occurred, since the Act’s passing, in law, social conditions, technology, the meaning of words, and other matters”.

For the need to update legislations, the courts have the duty to use interpretative process to the fullest extent permissible by the enactment. The following passage at p. 167 of the above book has been quoted with approval by a three-Judge Bench of this Court in State v. S. J. Choudhary ((1996) 2 SCC 428 : 1996 SCC (Cri) 336) :

“It is presumed that Parliament intends the court to apply to an ongoing Act a construction that continuously updates its wording to allow for changes since the Act was initially framed (an updating construction). While it remains law, it is to be treated as always speaking. This means that in its application on any date, the language of the Act, though necessarily embedded in its own time, is nevertheless to be construed in accordance with the need to treat it as current law.”

So if the notice envisaged in clause (b) of the Proviso to Section 138 was transmitted by fax it would be in compliance with the legal requirement.

The above pragmatic and progressive interpretation of the expression “notice in writing” would be relevant in connection with the identical expression in section 286 of the Companies Act which provides that notice of every meeting of the Board of directors of a company shall be given in writing to every director for the time being in India, and at his usual address in India to every other director.

As regards the holding of meetings of board of directors or shareholders, the Act does not define the word ‘meeting’. One of the canons of interpretation of statutes, as laid down by the courts in India in a number of cases, is that when a word is used but not defined in a statute, it should be interpreted by its ordinary meaning and in such a case dictionary is the guide. As such, the word ‘meeting’, in the context of the Act, ought to be interpreted in its ordinary meaning, i.e. the coming together of two or more persons face to face so as to be in other’s company. This implies that for there to be a meeting, everyone participating in the meeting must be in the same place, face to face; present bodily, conferring together, so that a meeting through audio or audio-visual links is no meeting to satisfy the law. It was held in an old English case that it is possible to show that the word “meeting” has a different meaning from the ordinary meaning, but where that is not shown, a meeting could no more be constituted by one person than a meeting could have been constituted if no shareholder at all had attended. [Sharp v. Dawes (1876) 2 QB 26]. Thus, for a meeting, there must be at least two persons. [Ibid]; see also Re Sanitary Carbon Co. (1877) WN 223; State of Kerala v. West Coast Planters Agencies Ltd (1958) 28 Comp Cas 13 Ker)].

However, a case which interpreted the word ‘meeting’ in the context of a shareholders’ meeting in a wider connotation in consonance with the technological advancement is the UK’s Court of Appeal’s decision in Byng v. London Life Associaiton Ltd (1989) 5 BCC 227 (CA): (1989) 2 CLA 16. The court said that the rationale behind the requirement for meetings in the Companies Act is that the members shall be able to attend in person so as to debate and vote on matters affecting the company. Until recently this could only be achieved by everyone being physically present in the same room face to face. Given modern technological advances, the same result can now be achieved without all the members coming face to face; without being physically, present in the same room they can be electronically in each other’s presence so as to hear and be heard and to see and be seen. The fact that such a meeting could not have be foreseen in the time the first statutory requirements for meetings were laid down, doesnot mean that such a meeting is not within the meaning of the word “meeting” in the Companies Act.

In Selvarajan & Co v Registrar (1987) 62 Comp Cas 220: (1986) 3 Comp LJ 725 (Mad), the Madras High Court interpreted the word ‘printed’ having regard to technological advancement and held that the word ‘printed’ in section 15 of the Act must be interpreted as including computer-printed documents.

“With the advancement of printing technology, computer printing fulfils every requirement of printing. … Law is
never static, but it is dynamic. Looked at from the point of view, the word “printing” cannot be so technically construed, as the Registrar would have it, to enable him to contend that this will water down the statutory requirements. If, as quoted above from Bouvier’s Law Dictionary printing is the art of impressing letter and it is a process of multiplying the copies of a composition by sheets, certainly, computer-printing clearly falls within the definition. Obstacles should not be thrown on the road to scientific progress by these orthodox representations, unmindful of the great changes taking place with scientific technological advancement. In this connection, I am tempted to quote Viscount Simon.

“Qui haeret in litera haeret in cortice. He who clings to the letter clings to the dry barren shell and misses the truth and substance of the matter.” [1952] AC 166, 183.7 

.”, the Court said.

It is also relevant to state that, the effect on the environment may also be considered to be a relevant factor in interpreting a law in the present context (which was not considered as seriously in the past as it is today). 

It is said that in interpreting a statutory provision the courts should take into account not only technological changes but also changes in the society which have occurred since the law was enacted. As noted earlier, In Statutory Interpretation by Cross, 3rd edition, page 52 it is stated that the courts regularly apply a statutory provision to new developments in technology or society which come within its original purpose and wording.

Information Technology Act Section 4 of the Information Technology Act, 2000, provides as under:

“4. Legal recognition of electronic records. – Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have satisfied if such information or matter is-
(a) rendered or made available in an electronic form; and
(b) accessible so as to be usable for a subsequent reference.”

In view of the words “notwithstanding anything contained in such law” section 4 of the Information Technology Act overrides the Companies Act and listing agreement. Hence if the unabridged annual report comprising full balance sheet, profit and loss account and the directors’ report and consolidated financial statements in addition to the individual financial statements) are made available in electronic form and the same is accessible so as to be usable for a subsequent reference, it will amount to necessary compliance with section 219 of the Act as well as clause 32 of the listing agreement. Thus ‘sending’ or ‘supplying’ unabridged annual report or even abridged one would comply with both the requirements.

SEBI’s proposal that is not yet implementd

In the circular SEBI/CFD/DIL/LA/2/2007/ 26/4 dated April 26, 2007 issued by the Securities and Exchange Board of India and contended that it has not been rescinded and that the Company has not come across any subsequent superseding circular rescinding this circular, the Securities and Exchange Board of India had declared its intention to amend clause 32 of the listing agreement, which, inter alia, stated:

“I. The extant Clause 32 of the Equity Listing Agreement requires listed companies to supply a copy of the complete and full Balance Sheet, Profit and Loss Account and Directors’ report to each shareholder and upon application to any member of the Exchange. This requirement was stipulated at a time when information dissemination was at the barest minimum and the Annual Report of the company containing the Balance Sheet and the Profit and Loss Account was the only means through which the shareholders of the company could keep themselves informed about the affairs of the company.

II. In the context of changes brought about in the market scenario, SEBI reviewed the existing provisions of Clause 32 of the Equity Listing Agreement, particularly in the light of (i) the need to contain rising cost of compliance and (ii) the measures taken to enhance disclosures which has enabled availability of information about listed companies in public domain such as the website of the company, of the stock exchanges, of the Common Filing Platform website jointly maintained by BSE and NSE i.e www.corpfiling.co.in etc.

III. Having regard to the above, SEBI has decided to amend Clause 32 of the Equity Listing Agreement to align it with the provisions of Section 219(iv) of the Companies Act i.e. to permit listed companies to send a statement containing the salient features of the (i) Balance Sheet, (ii) the Profit and Loss Account and (iii) the Auditors’ Report instead of sending full Balance Sheet and Annual Report.”

But this proposal seems to have not been implemented nor has the circular been withdrawn.

As per recent amendment to Clause 51 and 52 of the Listing Agreement (Refer to SEBI Circular Number CIR/CFD/ DCR/3/2010 dated April 16, 2010), even Stock Exchanges have directed the listed companies to submit annual report copy electronically to them so that they can upload same for dissemination to the investors, besides sending hard copy.


Notes:
1. Incidentally, it is now well settled by a series of decisions of Supreme Court and High Court that the terms ‘member’ and ‘shareholder’ are synonymous under the Companies Act. “In the case of a company limited by  shares, a member is a person holding shares in the company; there can be no membership, i.e. proprietary relationship to a company, otherwise than through the medium of shareholding. Consequently, the terms  “member” and “shareholder” are synonymous ….” [Palmer’s Company Law, 25th edition, para 7.001]. The expressions “member”, “shareholder” and “the holder of a share” are used in the Act in the same sense,  meaning persons holding shares in a company and registered as such in the register of members of the company. see Balkrishna Gupta v. Swadeshi Polytex Ltd. (1985) 58 Comp Cas 563 (SC); Howrah Trading Co Ltd v. CIT (1959) 29 Comp Cas 282 (SC); Hindustan Investment Corpn Ltd. v. CIT (1955) 25 Comp Cas 57 (Cal); Killick Nixon v. Bank of India (1985) 57 Comp Cas 831 (Bom).

2. Suresh Jindal v. BSES Rajdhani Power Limited and Ors. 2007 AIR SCW 6748.

3. (2003)4 SCC 601.

5. R v. Ireland [1997] 4 All ER 225 (HL).

6. Lockheed-Arabia Corpn v Owen [1993] QB 806 at 814; [1993] 3 All ER 641.

7. Qui haeret in litera haeret in cortice is a legal maxim meaning “He who considers merely letter of an instrument goes but skin-deep into its meaning.”

(Published in Chartered Secretary Dec 2010 - ICSI)
Author: Dr. K.R. Chandratre, FCS, Practising Company Secretary, Pune