ASSIGNMENT- 3

VIVEKANANDA GLOBAL UNIVERSITY

JAIPUR (RAJASTHAN)

SUBJECT:- COMPANY LAW, 2013

SUBMITTED TO:- MA’AM PRIYANKA SARAOGI

FACULTY OF LAW

SUBMITTED BY:- FARHAT SHEIKH

BA-LLB (LAW)

DATE OF SUBMISSION:- NOVEMBER 22, 2023

1. Ram, the auditor of Ltd. appointed by the company in its last general meeting has
resigned from the office of auditor of the company for some personal reasons.
Referring to the provisions of the Companies Act, 2013, answer the following:
(i) Who is the competent authority to accept and approve the resignation?
(ii) State the manner in which the vacancy caused by Manohar's resignation shall
be filled in.

Ans.

(i) Competent Authority to Accept and Approve the Resignation:

The competent authority to accept and approve the resignation of an auditor in India is the
Registrar of Companies (ROC) or the Regional Director (RD), depending on the
circumstances.

(ii) Filling the Vacancy Caused by Ram's Resignation:

When a vacancy is caused by the resignation of an auditor, the following steps need to be
taken:

1. Notice to the Company: The resigning auditor, Ram, is required to provide a written notice
of his resignation to the company, the Board of Directors, and the RoC within 30 days of
resigning. This notice should include the reasons for resignation.

2. Special General Meeting (SGM): The company must call a Special General Meeting
(SGM) within 45 days from the date of the notice of resignation. The purpose of this SGM is
to appoint a new auditor to fill the vacancy.

3. Appointment of New Auditor: At the SGM, the members of the company should appoint a
new auditor by passing an ordinary resolution. The new auditor will hold office until the
conclusion of the next Annual General Meeting (AGM).
4. Intimation to RoC: After the appointment of the new auditor, the company should intimate
the RoC about the appointment within 15 days.

2. Indica Ltd. was incorporated under the Companies Act, 2013. The memorandum of
association of the company in its objects clause stated that the company was
established to make and sell or to carry on the business of mechanical engineers and
general contractors. The company entered into a contract with Prominent Ltd., a
firm of railway contractors to finance the construction of a railway line in Mumbai.
The contract was ratified by the shareholders in general meeting. Subsequently, the
contract was repudiated by the company. On what ground the contract was
repudiated? Explain and decide whether Prominent Ltd. will succeed for breach of
contract.

Ans.

In this scenario, Indica Ltd. entered into a contract with Prominent Ltd. to finance the
construction of a railway line in Mumbai will be null and void. However, the contract was
later repudiated by Indica Ltd. To determine whether Prominent Ltd. will succeed in a claim
for breach of contract, we need to understand the grounds on which the contract was
repudiated and whether this repudiation is legally justified.
The primary ground on which the contract may have been repudiated is related to the
company's "ultra vires" actions, which means actions beyond the scope of its objects clause
in the memorandum of association. The memorandum of association of Indica Ltd. stated
that the company's objects were limited to "mechanical engineers and general contractors."
Here's the key legal principle:
1. Doctrine of Ultra Vires: Under the doctrine of ultra vires, a company is not allowed to
undertake activities that are beyond the objects stated in its memorandum of association.
If a company enters into a contract that falls outside its objects, it can be considered ultra
vires and, therefore, void or unenforceable.
CASE:- ASHBURY RLY CARRIAGE AND IRON COMPANY LTD VS RICHE
For the Constitution of companies incorporated under the company sect. 2000 and six, a
memorandum of Association containing the purpose for which it is incorporated is no
longer a requirement. However, for companies limited by shares incorporated under the
company set 1985 a memorandum of Association clearly stating the purpose for which it
was formed was required. Such object may not be unlawful or its registration may be
quashed. The lawful purpose for which a company may be formed is unlimited, and
 companies can do most of the things required to fulfil his purpose. However, the position
of a company performing a lawful activity which is outside of the scope of its object
clause was unclear until the House of Lords dealt with this issue. And Ashbury Railway
Carriage and Iron Company Limited vs Richie
Given that Indica Ltd.'s primary objects are related to mechanical engineering and general
contracting, engaging in the financing and construction of a railway line might be considered
ultra vires if it falls outside the scope of these objects.
As for whether Prominent Ltd. will succeed in a claim for breach of contract, it depends on
the circumstances and the specific terms of the contract. If the contract was ratified by the
shareholders in a general meeting, it could be argued that the shareholders effectively
expanded the company's objects to include the railway project. In such a case, Prominent Ltd.
might have a stronger claim for breach of contract.
However, it's essential to consider the following:
- The specific terms of the contract.
- Whether there was any indication that the contract was contingent upon shareholder
approval.
- Any other relevant facts and circumstances.
3. Mr. Kisan is a small shareholder of Sunshine LIMITED and after that he was
appointed as the small shareholder director Sunshine LIMITED and as on 1 July
2020 went to company to inspect the books of accounts but accounts manager object
that he can’t inspect because it is prejudicial to the interest of company if Mr. Kisan
would be allowed to inspect. Explain as per provisions of companies act 2013
whether Mr. Kisan has a power to inspect?

Ans.

Under the Companies Act, 2013, small shareholders of a company have certain rights,
including the right to inspect the books of accounts. Let's examine whether Mr. Kisan has the
power to inspect the books of accounts of Sunshine Limited based on the relevant provisions
of the Act.

Section 151 of the Companies Act, 2013, deals with the right of a small shareholder to
inspect the books of accounts of the company. According to this section:

1. Right to Inspect: A small shareholder, which is defined as a shareholder who holds

2. Notice to Company: To exercise this right, a small shareholder must give a written notice
to the company at least 14 days in advance.
3. Grounds for Refusal: The company can refuse the request to inspect the books of
accounts only on the grounds that the inspection is likely to be detrimental to the
company's interests.

4. Application to Tribunal: If the company refuses to allow the inspection, the small
shareholder can apply to the National Company Law Tribunal (NCLT) for an order to
enforce the right of inspection.

In the scenario you described, Mr. Kisan, as a small shareholder director of Sunshine
Limited, has a statutory right to inspect the books of accounts of the company under Section
151 of the Companies Act, 2013. The objection raised by the accounts manager that allowing
the inspection would be prejudicial to the company's interest is one of the limited grounds on
which such inspection can be refused.

However, this objection does not automatically deny Mr. Kisan's right to inspect. If Mr.
Kisan's request is denied, he can follow the legal process and apply to the National Company
Law Tribunal (NCLT) to enforce his right to inspect. The NCLT would then determine
whether the objection is valid and whether Mr. Kisan's request for inspection should be
granted.

4. Board of director of HDC LTD has approved the financial statement on which Mr.
Ravi has signed as chairman, for which is no authorization has been received by the
BOD for signed, ROC issued the show cause notice to the company why penalty
under sec 134(8) shall not to be imposed. Explain the action of ROC is tenable under
law?

Ans.

The action of the Registrar of Companies (ROC) in issuing a show-cause notice to HDC Ltd.
regarding the signing of financial statements without proper authorization is in accordance
with the provisions of the Companies Act, 2013. Let's analyze whether the ROC's action is
tenable under the law.

Section 134(8) of the Companies Act, 2013, deals with the penal provisions related to the
signing of financial statements. It states:

"Where any person, who is required to sign the financial statement, fails to sign it, or where
there are two or more signatories to the financial statement, and any one or more of them
fails to sign it, for any reason, the company and every officer of the company who is in
default shall be punishable with fine which shall not be less than fifty thousand rupees but
which may extend to five lakh rupees."
In your scenario, Mr. Ravi, as the chairman of HDC Ltd., signed the financial statement
without proper authorization or approval from the Board of Directors (BOD). This action
appears to be in violation of Section 134(8), as he signed without the requisite authorization.

The ROC is within its legal authority to issue a show-cause notice to HDC Ltd. to inquire
into the matter and seek an explanation as to why a penalty should not be imposed. This is a
standard procedure to ensure compliance with the Companies Act and to hold individuals and
the company accountable for any violations.

To address this situation, HDC Ltd. should respond to the show-cause notice, providing a
valid explanation or rectifying the issue by obtaining proper authorization for the signing of
the financial statements. The ROC will consider the response and circumstances before
making a decision on whether to impose a penalty.

The actions of the ROC are in line with the legal provisions of the Companies Act, 2013, and
are intended to uphold corporate governance and compliance standards. It is essential for
companies to adhere to these regulations to ensure transparency and accountability in
financial reporting.

5. Wipro ltd has no provision in AOA for the appointment of director 5 subscriber
become the director of a company but another 2 didn’t want to become a director
Mr. Rohan the company secretary of the company specify that subscribers to the
memorandum who are individuals shall be deemed to be the first directors of the
company until the directors are duly appointed, it is mandatory that all subscriber
shall be consider as director. Clarify contention of Mr Rohan is correct as per
provision of companies act 2013.

Ans.

The contention of Mr. Rohan, the company secretary of Wipro Ltd., is not correct as per the
provisions of the Companies Act, 2013. While it is common practice to appoint subscribers
to the memorandum as the first directors of a company until the directors are duly appointed,
it is not mandatory, and the law allows for flexibility in this regard.

According to Section 152(1) of the Companies Act, 2013:

 "The subscribers to the memorandum of a company shall be deemed to have agreed to

This section makes it clear that the subscribers to the memorandum are deemed to be the first
directors, but it does not mandate that all subscribers must become directors. It leaves room
for flexibility, and some of the subscribers may choose not to become directors.
In practice, companies often appoint subscribers as the initial directors for administrative
convenience and to facilitate the incorporation process. However, the law does not require all
subscribers to serve as directors if they do not wish to do so.

In the case of Wipro Ltd., if two of the subscribers do not want to become directors, they are
not obligated to do so. The remaining subscribers who are willing to serve as directors can
proceed to be appointed as the first directors of the company, as long as the necessary
formalities are followed.

Mr. Rohan's contention that all subscribers must be considered as directors is not in line with
the flexibility provided by the Companies Act, 2013. It is not mandatory for all subscribers to
serve as directors, and those who do not wish to become directors can opt out of this role.