lR;eso t;rs

FIFTY-FIRST

ANNUAL REPORT

ON THE WORKING AND ADMINISTRATION OF THE COMPANIES ACT, 1956 YEAR ENDED MARCH 31, 2007

MINISTRY OF CORPORATE AFFAIRS GOVERNMENT OF INDIA NEW DELHI

The Report has been prepared in pursuance of Section 638 of the Companies Act, 1956, which lays down that the Central Government shall cause a general Annual Report on the Working and Administration of the Act to be prepared and laid before both Houses of Parliament within one year of the close of the year to which the Report relates. It covers the period from April 1, 2006 to March 31, 2007.

New Delhi

CONTENTS

CHAPTER CHAPTER I General Review CHAPTER II Review of Corporate Sector CHAPTER III Applications and Documents received under different Sections of the Companies Act, 1956 CHAPTER IV Corporate Management CHAPTER V Inspections, Investigations, Prosecutions, Oppression & Mismanagement, Cost Audit, Investors Education and Protection Fund, Investor Protection and Vanishing Companies CHAPTER VI Liquidation of Companies CHAPTER VII Mobilization of Funds by the Corporate Sector Chapter VIII Financial Aggregates of Corporate Sector APPENDIX STATISTICAL STATEMENTS (I TO XXV)

PAGE NO. 1

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58

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69 93

CHAPTER I

General Review

Ministry of Corporate AffairsThe Report relates to the 51st year of the Working & Administration of the Companies Act, 1956, namely, the financial year ending 31st March, 2007.

of the Companies Act, 1956. Certain powers of the Central Government under the Companies Act have been delegated to the Regional Directors. They have also been declared as Heads of Department. There is an Inspection Unit attached to the office of every Regional Director for carrying out the inspection of the books of accounts of companies under Section 209A of the Companies Act, 1956. 1.1.3 Registrars of Companies (ROCs) appointed under Section 609 of the Companies Act, 1956 covering various States and Union Territories are vested with the primary duty of registering companies floated in the respective States and the Union Territories and ensuring that such companies comply with statutory requirements under the Act. These offices function as registry of records, relating to the companies registered with them, which are available for inspection by members of the public on payment of the prescribed fee. The Central Government exercises administrative control over these offices through the respective Regional Directors. 1.1.4 The Official Liquidators are officers appointed by the Central Government under Section 448 of the Companies Act, 1956 and are attached to various jurisdictional High Courts. The Official Liquidators are under the administrative charge of the respective Regional Directors, who supervise their functioning on behalf of the Central Government. In the conduct of winding-up of affairs of the companies, however, Official Liquidators act under the directions and supervision of the High Courts. At the same time, the Central Government have the responsibility under Section 463 of the Companies Act, 1956 of exercising

Organisational set-up1.1.1 The Ministry of Corporate Affairs continues to deal with the working and administration of the Companies Act, 1956. The Ministry has a three tier organisational set-up for administration of the Act, namely, the Secretariat at New Delhi, the Regional Directors at Mumbai, Kolkata, Chennai and Noida (U.P.) and the Registrars of Companies in States and Union Territories. The Official Liquidators who are attached to various High Courts functioning in the country are also under the overall administrative control of the Ministry. The set-up at the Headquarters includes two Joint Secretaries, an Economic Adviser, Cost Adviser, two Directors of Inspection and Investigation and other officials providing expertise on legal, accounting, economic and statistical matters. It also includes the Company Law Board (CLB) and its four Benches located at New Delhi, Mumbai, Kolkata and Chennai, besides the Principal Bench at New Delhi and the additional Principal Bench at Chennai. 1.1.2 The four Regional Directors are in-charge of the respective regions, each region comprising a number of States and Union Territories. They supervise the working of the offices of the Registrars of Companies and the Official Liquidators working in their regions. They also maintain liaison between the respective State Governments and the Central Government in matters relating to the administration

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overall control over the Official Liquidators to ensure that they faithfully perform their duties and duly observe all the requirements imposed on them under the Act or the Rules there-under.

passed by the Company Law Board, application under Section 634A of the Companies Act, 1956 for enforcing the orders are entertained. During the year 2006-07, 1206 applications were considered under Section 58A(9) of the Companies Act, 1956 and 45QA of the RBI Act, 1934 of which 709 were disposed of. Under other Sections of the Companies Act, 1956, 6230 petitions were considered out of which 5065 petitions were disposed of during the year. This includes 820 cases compounded under Section 621A of the Companies Act, 1956. 1.2.4 As against the sanctioned strength of 9 Members (including Chairman and Vice-Chairman) the constitution of the Company Law Board as on 31st March, 2007 was as follows:1. 2. Shri S. Balasubramanian, Chairman Shri K.K. Balu, Vice Chairman, Addl. Principal Bench, Chennai Shri C.D. Paik, Member, Western Region, Mumbai 4. Smt. Vimla Yadav, Member, Northern Region, New Delhi 1.2.5 In respect of companies for which schemes have been sanctioned for repayment of public deposits, a Hardship Committee has been constituted for each of those companies. The Hardship Committee meetings are held every month/quarter to decide claims based on merits in respect of each case in the manner directed by CLB in its order. The working of Committees has been revamped since October, 2006 to ensure 100% refund on hardship ground. 1.2.6 The details of petitions/applications received and disposed of by all the Regional Benches including the Principal Bench and Additional Principal Bench during the period from 1.04.2006 to 31.03.2007 are given in Table 1.1.

Company Law Board1.2.1 The Company Law Board has been functioning as an independent quasi-judicial body w.e.f. 31.5.1991 set up by the Central Government under Section 10E of the Companies Act, 1956. The Company Law Board has framed Company Law Board Regulations, 1991 prescribing the procedure for filing applications/petitions before it. The Central Government has also prescribed fees for making applications/petitions before the Company Law Board under the Company Law Board (Fees on applications and Petitions) Rules 1991. 1.2.2 The Board has its Principal Bench at New Delhi and Additional Principal Bench at Chennai. It has Regional Benches at Mumbai, Kolkata, Chennai and New Delhi. The matters falling under Sections 235, 237(b), 247, 248, 250, 388B, 408 and 409 and matters falling under Chapter VI of Part VI of the Companies Act,1956 and under Section 2A of the Monopolies and Restrictive Trade Practices (MRTP) Act are dealt with by the Principal Bench at New Delhi and Additional Principal Bench, Chennai in so far as Southern Region is concerned. In order to reduce the pendency due to shortage of Members, Single Member Bench has been entrusted to hear all types of cases from September, 2002 onwards. 1.2.3 Petitions/Applications under Sections 17, 18, 19, 58A, 58AA, 79/80A, 111/111A, 113/113(3), 117, 117B, 117C, 118, 141, 144, 163, 167, 186, 196, 219, 269, 284, 304, 307, 614 , 621A and 643A of the Companies Act, 1956 and Section 45QA of the Reserve Bank of India Act, 1934 are filed before Regional Benches. In case the company fails to comply with the directions contained in the orders so

3.

2

Table 1.1Consolidated Statement of Petitions/ Applications received, disposed of and pending during the period from 1.4.2006 to 31.3.2007Composition of Bench & Section 1 Opening Balance Received as on 1.4.2006 during theyear 2 3 T otal Disposed of (Col. 2 & 3) during the year 4 5 Pending as on 31.3.2007 6

Single Member BenchSec. 17 Sec. 18/19 Sec. 45QA of RBI Act. Sec. 58A(9) Sec. 58AA(1) Sec. 79 Sec. 80A Sec. 113/113(3) Sec. 117 C Sec. 141 Misc. Applications Sec. 163 Sec. 167 Sec. 186 Sec. 196 Sec. 219 Sec. 284 Sec. 614 Sec. 621A Sec. 634A Total (a) 75 2 458 586 17 1 1 15 216 50 10 7 13 1 2 2 1 3 146 30 1636 744 29 43 119 10 0 3 55 2 2399 65 2 4 3 4 1 8 1 868 73 4433 819 31 501 705 27 1 4 70 218 2449 75 9 17 4 6 3 9 4 1014 103 6069 756 29 414 295 4 0 0 61 41 2394 59 5 9 3 4 3 7 2 820 102 5008 63 2 87 410 23 1 4 9 177 55 16 4 8 1 2 0 2 2 194 1 1061

Double Member BenchSec. 111 Sec. 634 A Total (b) Total (a+b) 128 1 129 1765 100 1 101 4534 228 2 230 6299 111 0 111 5119 117 2 119 1180

Principal Bench and Additional Principal BenchCases u/s. 235,237,247,250, 388(b), 397/398, 408, 409 and Interlocutary Applications. Grand Total 418 2183 719 5253 1137 7436 655 5774 482 1662

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Petitions/Applications considered and disposed of by the Company Law Board during the period from 1.4.2006 to 31.3.2007 Single Member Bench

Double Member Bench

Principal Bench and Additional Principal Bench

4 4

MCA21 E-Governance Project1.3.1 The Ministry of Corporate Affairs (MCA) has implemented an e-Governance initiative called MCA21 e-Governance Project. It is built on the Governments vision to introduce a service-oriented approach in the design and delivery of Government services. The Project offers availability of all registry related services including filing of documents, registration of companies and public access to corporate information through a secure portal. The portal services can be accessed/ availed from anywhere, at any time that best suits the corporate entities, professionals and the public at large. Thus, MCA21 enable efficient delivery of services and supervision of corporate processes through the use of modern information technology and computers in an easy and transparent manner. 1.3.2 The objective of the e-governance program is to improve the speed and certainty in delivery of MCA services in a transparent manner. This improvement is ensured primarily through the mechanism of secure electronic filing (e-filing) and easy online payment for all the services provided by the Registrar of Companies. It is, therefore, a significant step towards an end-to-end paperless delivery of the Government services with widespread use of Digital Signatures to carry out e-filing in a secure manner in conformity with the Information Technology Act, 2000. Starting with the launch of the first pilot on February 18, 2006 from Coimbatore and the major launch of the second pilot from Delhi by the Honble Prime Minister on March 18, 2006, the programme was rolled out at all the ROC locations in a phased manner by September 4, 2006. Electronic filing, using Digital Signatures, was made compulsory from September 16, 2006 with the amendment in the Companies Act, 1956. The facility for online payment through Credit Card and Internet Banking has also been provided on the portal through a secure payment gateway, to ensure prompt recognition of payment and delivery of services.

1.3.3 The solution architecture provides for a Data Centre, which has been set-up at Delhi and a Disaster Recovery Centre at Chennai. In the event of any technology break-down or disruption of services from the Data Centre, the services can be restored within a time-frame of twelve hours by taking recourse to the Disaster Recovery Centre. The project has been designed with provision for interoperability and interface with other Government Departments/ Ministries. 1.3.4 Keeping in view that the stakeholders including corporate entities and the public may face certain difficulties in the beginning in switching over from the manual filing system to an electronic filing system, facilitation centres at 52 locations across the country have been established to provide complete range of services for e-filing of documents to the st akeholders who do not have the necessary computing/ IT infrastructure or capability to use the same for e-filing from their own locations. The Project provides for continuation of this support for a period of three years from the Project Implementation Completion date without any charge to the stakeholders. Besides, a scheme for Certified Filing Centres (CFCs) managed through the practising professionals was introduced following the concept of user charges. About 900 such CFCs have been authorised throughout the country. 1.3.5 A concept of Director Identification Number (DIN) has been introduced to create a comprehensive and authentic database on the Directors. The DIN in the form of a unique identifier for an existing Director or a future intending director, containing personal information would help in fixing the identity of the person and also co-relate his participation in other companies, past or present. 1.3.6 The increased outreach and easy accessibility has increased the rate of compliance by the companies. The compliance rate of filing of Annual Returns and the Balance Sheets by the companies

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has registered an increase of 60% over the previous year. The operational statistics, as on March 31, 2007, are as under: SL.No. 1 Description 2 Number 3

Filling Status as on March 31, 2007 1 2 3 4 5 6 7 8 9 10 11 12 Average portal hits per day Peak Portal hits (29-Nov-2006) Maximum number of documents filed on a day (29-Nov-2006) Total filings done till date Companies registered online Total DIN issued till date Company records viewed online Number of Balance Sheets filed Number of Annual Returns filed Number of DIN-3 filed E-filing through VFO Online Payment transactions 20 lakhs 65 lakhs 36,242 18.33 lakhs 44,008 5.04 lakhs 2 lakhs 3.11 lakhs 3.14 lakhs 1.42 Lakhs 90% 33%

1.3.7 The project was recognized with the award of a path-breaking initiative for the year 2006. In a survey of the Chief Financial Officers (CFO) of top companies conducted by the Ernst & Young and aired on the CNBC, 92% of the CFOs unanimously qualified this initiative as a revolutionary step by the Government.

1.4.2 The Ministry has notified the Companies (Amendment) Act, 2006 with effect from 16 t h September, 2006 and 01st November, 2006 which provides for allotment of Director Identification Number (DIN) to the existing and intending directors who are on the Board of Companies registered under the Companies Act, 1956. The Amendment Act further provides for filing of returns/documents and other records/applications by the companies through electronic media. 1.4.3 Pursuant to the provisions of the Companies (Amendment) Act, 2006, the Ministry has notified the Companies (Electronic Filing and Authentication of Documents) Rules, 2006 effective from 16 t h September, 2006 and the Companies (Director Identification Number) Rules, 2006 effective from 01st November, 2006.

Legislative Changes made to Rules relating to MCA-21 e-governance Project and Companies ( Accounting Standards) Rules.1.4.1 The Ministry has taken up an exercise for notifying amendments to various rules and regulations made under the Companies Act, 1956 so as to make the rules and regulations and forms prescribed there-under compatible with Ministrys eGovernance programme, namely, MCA21.

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Revision of Companies Act,19561.5 With regard to comprehensive revision of Companies Act, a concept paper on Company Law was placed on Ministrys website on 4.8.2004. Wide consultations were held on the basis of responses received. An expert Committee headed by Dr. J.J. Irani was also setup to advise the Government on issues relating to company law. The committee submitted its Report on 31st May 2005. The final proposal for comprehensive amendments to the Companies Act, 1956 are being prepared in the form of a comprehensive Bill and being vetted by the Legislative Department of M/o Law & Justice. Once finalized, a new Companies Bill would be introduced in the Parliament with appropriate approvals.

notified by the Central Government in exercise of powers under section 211(3C) of the Companies Act, 1956. The Central Government notifies ASs after obtaining the recommendations of the National Advisory Committee on Accounting Standards (NACAS) constituted under section 210 A of the Companies Act, 1956. 1.6.4 With effect from December 7, 2006, 28 Accounting Standards, i.e., AS 1 to 7 and AS 9 to 29, have been notified by the Central Government under the Companies Act, 1956 on the recommendation of National Advisory Committee on Accounting Standards (NACAS). 1.6.5 Prior to this, from 1977, the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India used to issue Standards of Accounting for Members of the profession of Chartered Accountancy to follow. 1.6.6 The Accounting Standards are notified by the Government keeping in view international developments wherein International Accounting Standards/ International Financial Reporting Standards (IASs/IFRSs) are issued by the International Accounting Standards Board (IASB). The approach adopted is that of convergence with international norms laid down by IASs/IFRSs

Accounting Standards1.6.1 Pursuant to the provisions of section 21(3C) and 210A of the Companies Act, 1956, the Ministry in consultation with National Advisory Committee on Accounting Standards has notified the Companies (Accounting Standards) Rules, 2006. 1.6.2 The paradigm shift in the economic environment in India during last few years has led to increased attention being devoted to accounting standards as a means towards ensuring potent and transparent financial reporting by corporates. Further, increase in the volume of capital raised cross-border has also generated considerable interest in common internationally accepted accounting principles. Initiatives taken by International Organisation Securities Commission (IOSCO) towards propagating International Accounting St andards (IASs)/ International Financial Reporting Standards (IFRSs), issued by the International Accounting Standards Board (IASB), as a uniform language of business to protect the interests of international investors have brought into focus the need for development of Accounting Standards. 1.6.3 In India, Accounting Standards (ASs) are

NationalAdvisory Committee on Accounting Standards1.6.7 In 1999, the provisions (section 210A) for setting up a National Advisory Committee on Accounting Standards (NACAS) were inserted in the Companies Act, 1956 through Companies (Amendment) Act, 1999. NACAS was set up to advise the Central Government on the formulation and laying down of accounting policies and accounting standards for adoption by companies or class of companies under the Companies Act, 1956. This body is presently chaired by Shri Y.H.Malegam, renowned Chartered Accountant. The other

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members of this Committee are representatives from: (a) Central Government (in the Ministry of Corporate Affairs); (b) Central Board of Direct Taxes (CBDT); (c) Comptroller and Auditor General of India (C&AG); (d) Reserve Bank of India (RBI); (e) Securities and Exchange Board of India (SEBI); (f) Institute of Chartered Accountants of India (ICAI); (g) Institute of Cost and Works Accountants of India (ICWAI); (h) Institute of Company Secretaries of India (ICSI); (i) Chambers of Commerce (Two representatives); and (j) A person with background in accountancy, finance or business management from a recognized academic Institution. 1.6.8 The NACAS examines recommendations made by ICAI regarding accounting standards in the light of the international practices and their relevance in Indian context before making recommendations to the Central Government for prescribing them under the Companies Act, 1956.

AS 9 AS 10 AS 11

Revenue Recognition Accounting for Fixed Assets The Effects of Changes in Foreign Exchange Rates

AS 12 AS 13 AS 14 AS 15 AS 16 AS 17 AS 18 AS 19 AS 20 AS 21 AS 22

Accounting for Government Grants Accounting for Investments Accounting for Amalgamations Employee Benefits Borrowing Costs Segment Reporting Related Party Disclosures Leases Earnings Per Share Consolidated Financial Statements Accounting for Taxes on Income Accounting for Investments in Associates in Consolidated Financial Statements

Present status of Accounting Standards in India1.6.9 So far, 29 Indian Accounting Standards on the following subjects have been issued: AS 1 AS 2 AS 3 AS 4 Disclosure of Accounting Policies Valuation of Inventories Cash Flow Statements Contingencies and Events Occurring after the Balance Sheet Date AS 5 Net Profit/Loss for the Period, Prior Period Items and Changes in Accounting Policies AS 6 AS 7 AS 8 Depreciation Accounting Construction Contracts Accounting for Research and Development (Withdrawn pursuant to AS 26 becoming mandatory)

AS 23

AS 24 AS 25 AS 26 AS 27

Discontinuing Operations Interim Financial Reporting Intangible Assets Financial Reporting of Interests in Joint Ventures Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets

AS 28 AS 29

Amendments made to the Acts governing the Chartered Accountants Act, 1949, Cost and Works Accountants Act, 1959 and the Company Secretaries Act, 1980.1.7.1 The Professional Services are provided by the members of the Institute of Chartered Accountants

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of India (ICAI), the Institute of Cost and Works Accountants of India (ICWAI) and the Institute of Company Secretaries of India (ICSI). The professionals such as the chartered accountants, cost accountants and the company secretaries, trained by these Institutes, provide a range of service to corporate entities and have a major role to play, especially in the new economic scenario, where many companies are raising funds from the capital market and are required to conduct their operations in the interest of a wide range of stakeholders. To ensure that in this new environment the professionals do their job with due diligence, are accountable for their work and are able to exploit new opportunities becoming available with the opening up of the world economy, the Acts governing these Institutes viz. the Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959 and the Company Secretaries Act, 1980 were amended in 2006. 1.7.2 The main features of the Amendments were providing for an institutionalized disciplinary mechanism which could ensure well-considered yet expeditious disposal of the complaints against members of the Institutes and as such bringing out greater accountability of the members, providing for establishment of a Quality Review Board having outside experts to review the quality of services provided by the members of the Institutes, bringing out transparency in the financial affairs of the Institute providing greater autonomy to the Councils in the matters of fixing various fees, enabling the members of the Institutes to form multi-disciplinary firms and offer multi-professional services in a competitive and commercial manner, etc. 1.7.3 The Amendment Acts also provide for framing rules by the Central Government on certain aspects governed by the Acts so as to ensure proper implementation of the provisions of the Acts. In accordance with the provisions of the Amendment Acts, all the required rules, indicated below, have

already been notified:-

Institute of Chartered Accountants of India(i) The Chartered Accountants (Nomination of Members to the Council) Rules, 2006 The Chartered Accountants (Amendment) Regulations, 2006 (iii) The Chartered Accountants (Election to the Council) Rules, 2006 (iv) The Chartered Accountants (Election Tribunal) Rules, 2006 (v) The Appellate Authority (allowances payable to, and other terms and conditions of service of Chairperson and members and the manner of meeting expenditure of the Authority) Rules, 2006. (vi) The Chartered Accountants Procedures of Meetings of Quality Review Board, and Terms and Conditions of Service and allowances of the Chairperson and members of the Board Rules, 2006. (vii) The Chartered Accountants (Procedure of Investigations of Professional and Other Misconduct and conduct of Cases) Rules, 2007.

(ii)

Institute of Cost & Works Accountants of India(i) The Cost and Works Accountants (Nomination of Members of the Council) Rules, 2006 The Cost and Works Accountants (Election Tribunal) Rules, 2006 (iii) The Cost and Works Accountants (Election to the Council) Rules, 2006

(ii)

(iv) The Cost and Works Accountants (Procedures of Meetings of Quality Review Board, and Terms and Conditions of Service an allowances of the Chairperson and members of the Board) Rules, 2006

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(v)

The Cost and Works Accountants (Procedure of Investigations of Professional and Other Misconduct and conduct of Cases) Rules, 2007

(iv) The Company Secretaries Procedures of Meetings of Quality Review Board and Terms and Conditions of Service and Allowance of the Chairperson and Members of the Board Rules, 2006 (v) The Company Secretaries (Procedure of Investigations of Professional and Other Misconduct and conduct of Cases) Rules, 2007.

Institute of Company Secretaries of India(i) The Company Secretaries (Nomination of Members to the Council ) Rules,2006 The Company Secretaries (Election to the Council) Rules,2006 (iii) The Company Secretaries (Election Tribunal) Rules,2006

(ii)

Notifications, Circulars and Department Circulars1.8 During the period from 1.4.2006 to 31.3.2007, the following Notifications, Circulars and department Circular were issued:-

NOTIFICATIONS :Sl.No. Notification Number 1. S.O.-1273 (E) Date 9.8.2006

Subject Constitution of Advisory Committee namely National Advisory Committee on Accounting Standards (NACAS). Notification of the Cost and Works Accountants (Amendment) Act, 2006. Notification of the Company Secretaries (Amendment) Act, 2006. Notification of provision of the Chartered Accountants (Amendment) Act, 2006

2.

S.O.-1274 (E)

8.8.2006

3.

S.O.-1275 (E)

8.8.2006

4.

S.O.-1276 (E)

8.8.2006

5.

S.O.-1277 (E)

8.8.2006

Notification of provision of the Company Secretaries (Amendment) Act, 2006

6.

S.O.-1278 (E)

8.8.2006

Notification of provision of the Cost and Works Accountants (Amendment) Act, 2006

7.

GSR.-488 (E)

18.8.2006

Notification of the Cost and Works Accountants (Nomination of Members of the Council) Rules, 2006... Notification of the Company Secretaries (Nomination of Members of the Council) Rules, 2006. Notification of the Chartered Accountants (Nomination of Members of the Council) Rules, 2006. Amendment to the Companies Regulations, 2006. Amendment to the GSR-978 (E) dated 28.5.1963 published in the Gazette under section 620A of the Companies Act, 1956.

8.

GSR.-489 (E)

18.8.2006

9.

GSR- 490 (E)

18.8.2006

10. 11.

GSR-497 (E) GSR-517(E)

21.8.2006 31.8.2006

10

Sl.No. Notification Number 12. GSR-525 (E)

Date 31.8.2006

Subject Corrigendum to GSR-148(E) dated 8.3.2006in respect of the Cost Audit Report (Amendment) Rules, 2006. Corrigendum to GSR-147(E) dated 8.3.2006 in respect of the Companies (appointment of Sole Agents) Amendment Rules, 2006.

13.

GSR-526 E)

31.8.2006

14.

GSR-533 (E)

5.9.2006

Notification of the Company Secretaries (Election of the Council) Rules, 2006. Notification of the Chartered Accountants (Election of the Council) Rules, 2006. Notification of section 6 of the Company Secretaries (Amendment) Act, 2006.

15.

GSR-534 (E)

5.9.2006

16.

S.O.-1439 (E)

5.9.2006

17.

S.O.-1440 (E)

5.9.2006

Notification of section 6 of the Chartered Accountants (Amendment) Act, 2006.

18.

GSR.-546 (E)

8.9.2006

Notification of declaration 34 more Companies as Nidhi Companies.

19.

GSR-556 (E)

14.9.2006

Notification of the Companies (Third Amendment) Regulations, 2006. Notification of the Companies (Electronic filing and authentication of document) Rules, 2006. Notification of Section 4 of the Companies (Amendment) Act, 2006. Notification of the Companies (Central Governments) General Rules and Forms (Second Amendment) Rules, 2006.

20.

GSR-557 (E)

14.9.2006

21.

S.O.-1529 (E)

14.9.2006

22.

GSR-555 (E)

14.9.2006

23.

GSR-648 (E)

19.10.2006

Notification of Section 2 and 3 of the Companies (Amendment) Act, 2006.

24.

GSR-649 (E)

19.10.2006

Notification of the Companies (Director Identification Number) Rules, 2006.

25.

GSR-650 (E)

19.10.2006

Notification of the delegation of Powers under section 266-A and 266-B of the Companies (Amendment) Act, 2006 to the Regional Director, Joint Director, Deputy Director, Assistant Director posted in the Office of Regional Director, Northern Region.

26.

S.O.-1844 (E)

26.10.2006

Notification of the Scheme for filing of Statutory Documents and other Transactions of Companies in Electronic Mode.

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Sl.No. Notification Number 27. GSR-621 (E)

Date 4.10.2006

Subject Corrigendum to GSR-557 (E) dated 14th September, 2006 in respect of the Companies (Electronic Filing and Authentication of Documents) Rules, 2006.

28.

GSR-708 (E)

17.11.2006

Notification of the Chartered Accountants (Election Tribunal) Rules, 2006.

29.

GSR-709 (E)

17.11.2006

Notification of the Company Secretaries Rules, 2006.

(Election Tribunal)

30.

GSR-710 (E)

17.11.2006

Notification of the Cost and Works Accountants Tribunal) Rules, 2006

(Election

31.

GSR-711 (E)

17.11.2006

Notification of the Appellate Authority (Allowances payable to, and other terms and conditions of service of Chairperson and Members and the members of meeting expenditure of the Authority) Rules, 2006.

32.

GSR-712 (E)

17.11.2006

Notification of the Cost and Works Accountants (Election to the Council) Rules, 2006. Notification of the provision of the Company Secretaries (Amendment) Act, 2006. Notification of the provision of the Cost and Works Accountants (Amendment ) Act, 2006

33.

S.O.-1983 (E)

17.11.2006

34.

S.O.-1984 (E)

17.11.2006

35.

S.O.-1985 (E)

17.11.2006

Notification of the provision of the Chartered Accountants (Amendment ) Act, 2006

36.

GSR-734 (E)

27.11.2006

Notification of the Cost and Works Accountants procedures of Meeting of Quality Review Board, and terms and conditions of service and allowances of the Chairperson and members of the Board Rules, 2006.

37.

GSR-736 (E)

27.11.2006

Notification of the Company Secretaries procedures of Meeting of Quality Review Board, and terms and conditions of service and allowances of the Chairperson and members of the Board Rules, 2006.

38.

GSR-735 (E)

27.11.2006

Notification of the Chartered Accountants procedures of Meeting of Quality Review Board, and terms and conditions of service and allowances of the Chairperson and members of the Board Rules, 2006

39.

GSR-739 (E)

7.12.2006

Notification of the Companies (Accounting Standards) Rules, 2006.12

Sl.No. Notification Number 40. GSR-14 (E)

Date 9.1.2007

Subject Notification of Amendment to proviso to rule-4 of the Companies (Director Identification Number) Amendment Rules, 2006.

41.

S.O.-20 (E)

9.1.2007

Notification of Companies as Public Financial Institution under section 4A of the Companies Act, 1956.

42.

GSR-81 (E)

12.1.2007

Corrigendum to the Notification No.GSR- 712 (E) dated 17.11.2006 in respect of Cost and Works Accountants (Election to the Council) Rules, 2006.

43.

GSR-111 (E)

27.2.2007

Notification of the Company Secretaries (Procedures of Investigations and professional and other misconduct and conduct of cases) Rules, 2007.

44.

GSR-112 (E)

27.2.2007

Notification of the Chartered Accountants

(Procedures of

Investigations and professional and other misconduct and conduct of cases ) Rules, 2007 45. GSR-113 (E) 27.2.2007 Notification of the Cost and Works Accountants (Procedures of Investigations and professional and other misconduct and conduct of cases) Rules, 2007. 46. S.O.-339 (E) 9.3.2007 Notification of the Constitutions of National Advisory Committee on Accounting Standards (NACAS). Corrigendum to the Notification No.734 (E) dated 27.11.2006 in respect of Cost and Works Accountants Procedures of Meeting of Quality Review Board and terms and conditions of services and allowances to the Chairperson and members of the Board Rules, 2006. 48. GSR-225 (E) 22.3.2007 Corrigendum to the Notification No.708 (E) dated 17.11.2006 in respect of the Chartered Accountants (Election Tribunal) Rules, 2006. 49. GSR-226 (E) 22.3.2007 Corrigendum to the Notification No.710 (E) dated 17.11.2006 in respect of the Cost and Works Accountants (Election Tribunal) Rules, 2006. 50. GSR-227 (E) 22.3.2007 Corrigendum to the Notification No.709(E) dated 17.11.2006 in respect of the Company Secretaries (Election Tribunal) Rules, 2006 51. GSR-265 (E) 29.3.2007 Amendment to the proviso to rules 4 of the Companies (Director Identification Number) Amendment Rules, 2007.

47.

GSR-224 (E)

22.3.2007

13

CIRCULARS :Sl.No. Circular Number 1. 05/2006 Date 3.4.2006 Subject Amendment to the Companies (Appointment of Sole Agents) Rules, 1975. 2. 06/2006 12.6.2006 Gazette Notification of Ministry of Law and Justice (Legislative Department) regarding the Companies (Amendment) Act, 2006 (No.23 of 2006) published on 30.5.2006. 3. 07/2006 17.8.2006 Circulation of Notification, S.O.-1273 (E) dated 9.8.2006 regarding Constitution of Advisory Committee namely National Advisory Committee on Accounting Standards (NACAS). Circulation of Notification, S.O.-1274 (E) dated 8.8.2006 regarding Cost and works Accountants (Amendment) Act, 2006. Circulation of Notification, S.O.-1275 (E) dated 8.8.2006 regarding Company Secretaries (Amendment) Act, 2006. Circulation of Notification, S.O.-1276 (E) dated 8.8.2006 regarding provision of the Chartered Accountants (Amendment) Act, 2006. Circulation of Notification, S.O.-1277 (E) dated 8.8.2006 regarding provision of the Company Secretaries (Amendment) Act, 2006. Circulation of Notification, S.O.-1278 (E) dated 8.8.2006 regarding provision of the Cost and Works Accountants (Amendment) Act, 2006 4. 08/2006 29.8.2006 Circulation of Notification No. GSR-488 (E) published on 18.8.2006 regarding Cost and Works Accountants (Nomination of Members of the Council) Rules, 2006. Circulation of Notification No. GSR-489 (E) published on 18.8.2006 regarding Company Secretaries (Nomination of Members of the Council) Rules, 2006. Circulation of Notification No. GSR-490 (E) published on 18.8.2006 regarding Chartered Accountants (Nomination of Members of the Council) Rules, 2006 Circulation of Notification No. 497 (E) dated 21.8.2006 regarding Amendment of the Companies regulations, 1956.

14

Sl.No. Circular Number 5. 09/2006

Date 7.9.2006

Subject Circulation of Notification No.GSR-517(E) published on 31.8.2006 regarding Amendment in GSR-978 dated 28.5.1963 published in the Gazette under section 620A of the Companies Act, 1956.

6.

10/2006

19.9.2006

Circulation of GSR -525 (E) dated 31.8.2006 in respect of Corrigendum with reference to GSR-148(E) dated 8.3.2006 regarding read with Cost Audit Report (Amendment) Rules, 2006 in place of Cost Audit Report Rules, 2006 in Hindi version. Circulation of GSR-526 (E) dated 31.8.2006 in respect of corrigendum with reference to S.O.-147(E) dated 8.3.2006 regarding Companies (Appointment of Sole Agents ) Amendment Rules, 2006 read with GSR-147(E) in place of S.O.147 (E).

7.

11/2006

19.9.2006

Circulation of Notification No. GSR- 534(E) dated 5.9.2006 regarding the Central Government makes a Company Secretaries (Election to the Council) Rules, 2006. Circulation of Notification No. GSR- 533(E) dated 5.9.2006 regarding the Central Government makes a Chartered Accountants (Election to the Council) Rules, 2006. Circulation of Notification No. S.O.-1439(E) dated 5.9.2006 regarding Company Secretaries (Amendment) Act, 2006. Circulation of Notification No. S.O.-1440(E) dated 5.9.2006 regarding Chartered Accountants (Amendment) Act, 2006. Circulation of Notification No. GSR-546(E) dated 8.9.2006 regarding 34 more companies declared as a Nidhi Companies. Circulation of Notification No.556 (E) dated 14.9.2006 regarding the Central Government makes a Regulations, this is called (Third Amendment) Regulations, 2006. Circulation of Notification No.557 (E) dated 14.9.2006 regarding the Central Government makes a Rules, this is called the Companies (Electronic filing and Authentication of Documents) Rules, 2006. Circulation of Notification No. S.O.-1529(E) dated 14.9.2006 regarding Companies (Amendment) Act, 2006, enforcement of section 4 of the Act.

15

Sl.No. Circular Number 8. 12./2006

Date 4.10.2006

Subject Circulation of Notification No.GSR-555 (E) dated 14.9.2006 regarding the Companies (Central Governments) General Rules and Forms (Second Amendment) Rules, 2006.

9.

13/2006

31.10.2006

Circulation of Notification No.GSR.-648(E) dated 19.10.2006 regarding the Section 2 and 3 of the Companies (Amendment) Act, 2006. Circulation of Notification No.GSR.-649(E) dated 19.10.2006 regarding the Companies (Director Identification Number) Rules, 2006. Circulation of Notification No.GSR.-650(E) dated 19.10.2006 regarding the delegation of powers under section 266-A & 266-B of the Companies (Amendment) Act, 2006 to the Regional Director, Joint Director, Deputy Director, or Assistant Director posted in the office of Regional Director, Northern Region.

10

14/2006

20.11.2006

Circulation of Notification No. S.O.-1844(E) dated 26.10.2006 regarding Scheme for filing of Statutory Documents and other transactions by Companies in Electronic Mode.

11

15/2006

6.12.2006

Circulation of Notification No.621 (E) dated 4.10.2006 regarding corrigendum to GSR-557(E) dated 14.9.2006 in respect of the Companies (Electronic Filing and Authentication of Documents) Rules, 2006. Circulation of Notification GSR-708(E) dated 17.11.2006 regarding Chartered Accountants (Election Tribunal) Rules, 2006. Circulation of Notification GSR-708(E) dated 17.11.2006 regarding Company Secretaries (Election Tribunal) Rules, 2006. Circulation of Notification GSR-710(E) dated 17.11.2006 regarding Cost and Works Accountants (Election Tribunal) Rules, 2006. Circulation of Notification GSR-712(E) dated 17.11.2006 regarding Cost and Works Accountants (Election to the Council) Rules, 2006

16

Sl.No. Circular Number

Date

Subject Circulation of Notification GSR-711(E) dated 17.11.2006 regarding Appellate Authority (Allowances payable to and other terms and condition of service of Chairperson and Members and the members of meeting expenditure of the Authority) Rules, 2006. Circulation of Notification S.O.-1983 (E) dated 17.11.2006 regarding Company Secretaries (Amendment) Act, 2006. Circulation of Notification S.O.-1984 (E) dated 17.11.2006 regarding Cost and Works Accountants (Amendment) Act, 2006. Circulation of Notification S.O.-1985 (E) dated 17.11.2006 regarding Chartered Accountants (Amendment) Act, 2006. Circulation of Notification GSR.-734 (E) dated 27.11.2006 regarding Cost and Works Accountants procedures of Meeting of Quality Review Board, and Terms and conditions of service and allowances of the Chairperson and members of the Board Rules, 2006. Circulation of Notification GSR.-736 (E) dated 27.11.2006 regarding Company Secretaries procedures of Meeting of Quality Review Board, and Terms and conditions of service and allowances of the Chairperson and members of the Board Rules, 2006

12

1/2007

11.1.2007

Circulation of Notification GSR.-735 (E) dated 27.11.2006 regarding Chartered Accountants procedures of Meeting of Quality Review Board, and Terms and conditions of service and allowances of the Chairperson and members of the Board Rules, 2006. Circulation of Notification GSR-739(E) dated 7.12.2006 regarding the Companies (Accounting Standards Rules, 2006. Circulation of Notification GSR-14 (E) dated 9.1.2007 regarding Amendment to proviso to rule-4 of the Companies (Director Identification Number)Amendment Rules, 2006 Circulation of Notification S.O.-20 (E) dated 9.1.2007 regarding the two Companies as Public Financial Institution under section 4A of the Companies Act, 1956.

17

Sl.No. Circular Number 13 2/2007

Date 12.2.2007

Subject Filing of Form DIN-3 under the Companies (Director Identification Number) Rules, 2006. GSR-81(E) dated 12.1.2007, corrigendum GSR-712(E) dated 17.11.2006 in respect of Cost and Works Accountants (Election to the Council) Rules, 2006.

14

3/2007

22.2.2007

15

4/2007

14.3.2007

GSR-111(E) dated 27.2.2007 regarding Notification of the Company Secretaries (procedures of Investigations of Professional and other misconduct and conduct of Cases) Rules, 2007 GSR-112(E) dated 27.2.2007 regarding Notification of the Chartered Accountants (procedures of Investigations of Professional and other misconduct and conduct of Cases) Rules, 2007 GSR-113(E) dated 27.2.2007 regarding Notification of the Cost and Works Accountants (procedures of Investigations of Professional and other misconduct and conduct of Cases) Rules, 2007 S.O.-339(E) dated 9.3.2007 regarding Notification of the Constitution of National Advisory Committee on Accounting Standards (NACAS).

DEPARTMENTAL CIRCULAR 1. 03/2006 6.9.2006 Processing of documents automatic taken on file by the Registrar of Companies on the basis of straight through process (STP).

18

Revenue Receipts & Expenditure : 2002-03 to 2006-071.9 The Revenue Receipts and Actual

Expenditure incurred under the Companies Act, 1956/MRTP Act, 1969 during the last five years are indicated in the table :-

Year (1) 2002-03 2003-04 2004-05 2005-06 2006-07

Revenue Receipts (Rs. crore) (2) 324.30 399.69 474.31 728.22 1037.98

Expenditure (Rs. crore) (3) 36.61 50.35 46.29 74.21 122.19

19

CHAPTER II

Review of Corporate Sector

2.1 Growth of the Corporate Sector in terms of registration of new companies in different categories, companies at work, liquidation of companies and data on foreign companies during the year 2006-07 are reviewed in this chapter.

of new companies registered during the year was equivalent to 7 per cent of the companies at work as on 31.3.2007. The authorised capital of 51708 companies with liability limited by shares registered during the year aggregated to Rs. 72,510.90 crore. 2.2.2 Of the 51708 companies with liability limited by shares registered during the year, 1950 were public limited companies with an authorised capital of Rs. 47297.45 crore and 49758 were private limited companies with an aggregate authorised capital of Rs.25213.45 crore. Table 2.1 sets out the pattern of registration of new companies during the year 200607. State-wise distribution of companies limited by shares registered during the year 2006-07 is given in Statement-I ( Appendix).

Company registration2.2.1 During the year 2006-07, 51971 companies were registered under the Companies Act, 1956. These included 116 Government companies with liability limited by shares, 51592 non-Government companies limited by shares, 22 non-Government companies with unlimited liability and 241 nonGovernment companies with liability limited by guarantee and associations not for profit. The number

Table 2.1 Companies registered during the year 2006-07Government Number Type of Company 1 I. Liability limited by Shares (i) (ii) Public Limited Private Limited Sub-Total II. III. Unlimited Liability Liability limited by Guarantee and Associations not for profit Total 52 64 116 0 0 12723.15 88.75 12811.90 0.00 0.00 1898 49694 51592 22 241 34574.30 25124.70 59699.00 3.70 180.00 1950 49758 51708 22 241 47297.45 25213.45 72510.90 3.70 180.00 2 Authorised Capital(Rs. crore)

Non-Government Number Authorised Capital(Rs. crore)

Total Number Authorised Capital(Rs. crore)

3

4

5

6

7

116

12811.90

51855

59882.70

51971

72694.60

20

2.2.3 Industrial Activitywise distribution of companies registered during the year 2006-07 is indicated in Table 2.2 below:

Table 2.2 Registration of Companies Limited by Shares : Distribution by Industrial Activity during the year 2006-07Sl. No. Industrial Classification Public Number Authorised Number Capital (Rs. Crore) Private Total Authorised Capital (Rs.Crore)

Authorised Number Capital (Rs. Crore)

1 1 2 3 4 5 6 7 8 9 10

2 Agriculture and Allied Activities Mining and quarrying Manufacturing Electricity, Gas and water Companies Construction Trade, Hotels and Restaurants Transport, Storage & Communication Finance, Insurance, Real Estate & Business Services Community, Personal and Social Services Unclassified Total

3 55 46 511 109 352 375 71 294 115 22 1950

4 240.41 6492.55 2978.84 9328.97 2648.23 12328.15 5224.85 7068.84 424.81 561.80 47297.45

5 1237 551 9875 504 8483 17495 1609 6657 2778 569

6 295.03 326.15 5818.58 299.11 4246.98 5922.18 1018.44 6155.12 913.68 218.18

7 1292 597 10386 613 8835 17870 1680 6951 2893 591 51708

8 535.44 6818.70 8797.42 9628.08 6895.21 18250.33 6243.29 13223.96 1338.49 779.98 72510.90

49758 25213.45

Activity - wise Distribution of Newly Registered Compnies (2006-07)

21

2.2.4 The number of companies with liability limited by shares registered during the last five years from 2002-03 to 2006-07 is given in Table 2.3. This shows that the number of new companies with liability

limited by shares registered during the year 2006-07 was lower by 4.28 per cent over the new companies registered during the previous year.

Table 2.3 Registration of New Companies Limited by Shares during the years 2002-03 to 2006-07Year Public Limited Number Authorised Capital (Rs. Crore) 3 2340.54 11077.89 5228.77 7688.11 47297.45 Private Limited Number Authorised Capital (Rs. Crore) 5 3262.22 6065.60 6248.20 11894.10 25213.45 Number Total Authorised Capital (Rs. Crore) 7 5602.76 17143.49 11476.97 19582.21 72510.90

1 2002-03 2003-04 2004-05 2005-06 2006-07

2 1065 1233 1393 1890 1950

4 22986 28843 38666 52130 49758

6 24051 30076 40059 54020 51708

Registration of New Companies Limited by Shares during the years 2002-03 to 2006-07

22

Companies at work2.3.1 There were in all 7,50,364 companies at work

as on 31st March, 2007, as summarised in Table 2.4 below.

Table 2.4 Companies at work as on 31st March, 2007Sl. No. I. Type of Company Companies Limited by Shares (a) Government Companies Public Limited Private Limited Sub-Total (a) (b) Non-Government Companies Public Limited Private Limited Number of Companies

1098 571 1669 89556 652453 742009 743678 520 3846 2310

Sub-Total (b) Total (a+b) II. III. IV. Companies with Unlimited Liability Companies limited by Guarantee and Associations not for profit Foreign Companies (as defined under Section 591 of the Companies Act)

Grand Total 2.3.2 St ate-wise and Industrial Activity-wise distribution of companies limited by shares at work as on 31st March, 2007 is given in statements V to X (Appendix) respectively. 2.3.3 The Companies limited by shares at work

750354 Companies Act,1956 i.e. the years 1956-57 to 200607. It will be observed that the companies limited by shares have recorded a phenomenal growth. The number of such companies at work increased by 25.33 times from 29357 at the end of 1956-57 to 743678 at the end of 2006-07. 2.4.2 Unlike companies limited by shares, the companies limited by Guarantee and Associations not for profit at work in the country have not shown much variation in their number over the period. Their number at the end of 1956-57 was 1364 which increased to 3846 at the end of 2006-07. 2.4.3 The first company with unlimited liability was registered in 1973-74. The number of such companies at the end of 2006-07 was 520. 2.4.4 Besides the companies registered under the

recorded a growth of 1.6 per cent during 2006-07 (i.e. as on 31.3.2007 as compared to 31.3.2006). The growth in number of Companies limited by shares at work between 31.3.2003 and 31.3.2007 was 21.5 per cent, private limited companies grew by 21.9 per cent compared to 18.5 per cent in case of public limited companies.

Long Term Trends2.4.1 Statement XI (Appendix) gives the data on growth of the corporate sector by various categories of companies at work during operation of the

23

Companies Act,1956 there are Branches of Foreign companies, as defined under Section 591 of the Companies Act, operating in the country. The number of Branches of Foreign companies operating in the country, which was 551 at the end of 1956-57 remained almost constant till 1973-74. With the coming into force of the Foreign Exchange Regulation Act, 1973, on 1.1.1974, the number of such Branches recorded gradual decline till the end of 1980-81 when there were 300 such branches. Their number has increased thereafter and as on 31.3.2007, the figure is reported to be 2310.

GOVERNMENT COMPANIES Registration of New Companies:2.5.1 During the year 2006-07, 116 Government companies were registered with an authorised capital of Rs. 12811.90 crore. State-wise distribution of Government companies limited by shares registered during the year 2006-07 is given in St atement II (Appendix). 2.5.2 Table 2.5 shows trend in registration of Government companies during the last five years.

Table 2.5 Registration of New Government Companies during 2002-03 to 2006-07Public Limited Year Number Authorised Capital (Rs. crore) 3 333.44 9053.60 2402.30 3948.65 12723.15 Private Limited Number Authorised Capital (Rs. crore) 5 525.00 5.00 6.00 224.20 88.75 Total Number Authorised Capital (Rs. crore) 7 858.44 9058.60 2408.30 4172.85 12811.90

1 2002-03 2003-04 2004-05 2005-06 2006-07

2 19 25 17 18 52

4 3 1 2 6 64

6 22 26 19 24 116

Government companies at work:2.6 There were 1352 Government companies limited by shares at work in the country as on 31st March, 2006. After taking into account the newly registered companies, conversion between Government and Non-Government companies, mergers, amalgamation and liquidation as reviewed in the preceding paragraphs, there were 1669 Government companies limited by shares at work in the country as on 31st March, 2007. Of these 1669 companies, 1098 were public limited and 571 were private limited companies.

NON-GOVERNMENT COMPANIES Registration of New Companies:2.7 During the year 2006-07, 51592 NonGovernment companies limited by shares were registered in the country with an authorised capital of Rs. 59699.00 crore. Of these, 1898 were Public limited companies with aggregate authorised capital of Rs. 34574.30 crore and 49694 were Private limited companies with aggregate authorised capital of Rs. 25124.70 crore. State-wise distribution of NonGovernment companies limited by shares registered during the year 2006-07 is given in Statement III (Appendix). Table 2.6 below indicates the trend in registration of new Non-Government companies limited by shares during the last five years.24

Table 2.6 Non-Government Companies Limited by Shares New RegistrationPublic Limited Year Number Authorised Capital (Rs. crore) 3 2007.1 2024.3 2826.5 3739.5 34574.3 Private Limited Number Authorised Capital (Rs. crore) 5 2737.2 6060.6 6242.2 11669.9 25124.7 Total Number Authorised Capital (Rs. crore) 7 4744.3 8084.9 9068.7 15409.4 59699.0

1 2002-03 2003-04 2004-05 2005-06 2006-07

2 1046 1208 1376 1872 1898

4 22983 28842 38664 52124 49694

6 24029 30050 40040 53996 51592

State-wise Distribution:2.8 Out of 51592 Non-Government companies registered during the year 2006-07, 36134 companies or 70 per cent of the total were registered in the 5 States/ Union Territories, viz. Delhi, Maharashtra, West Bengal, Tamil Nadu and Andhra Pradesh. Delhi occupied the top position with 13040 new registration (25.3 per cent) followed by Maharashtra (18.3 per cent), West Bengal (11.4 per cent), Tamil Nadu (8.1 per cent) and Andhra Pradesh (7.0 per cent). The other States and Union Territories together accounted for 15,855 registrations of new non Government companies.

Industrial Activity Pattern:2.9 Table 2.7 shows the distribution of NonGovernment companies by broad activity classification registered during the year 2006-07. The largest number of companies registered during the year viz. 17850 companies or 34.60 per cent of the total, belonged to the group Trade, Hotel and Restaurants followed by 10364 or 20.1 per cent of the total registered under the group of Manufacturing.

Table 2.7

Industrial Activity pattern of Non-Government Companies limited by share registered during 2006-07S. No. 1 1 2 3 4 5 6 7 8 9 10 Number of Companies Number Per cent 2 3 4 Agriculture and Allied Activities 1288 2.50 Mining and quarrying 592 1.15 Manufacturing 10364 20.09 Electricity, Gas and water Companies 592 1.15 Construction 8823 17.10 Trade, Hotels and Restaurants 17850 34.60 Transport, Storage and Communication 1667 3.23 Finance, Insurance, Real Estate & Business Services 6939 13.45 Community, Personal and Social Services 2887 5.60 Unclassified 590 1.14 Industrial Classificaiton Authorised Captial (Rs. Crore) Per cent 5 6 535.28 0.90 5498.64 9.21 7769.45 13.01 4408.53 7.38 6870.37 11.51 18246.96 30.57 1236.47 2.07 13021.15 21.81 1332.27 2.23 779.88 1.31

Total

51592

100.00

59699.00

100.00

25

Non-Government Companies which ceased to work:2.10 During the year 2006-07, 17818 NonGovernment companies limited by shares were reported to have ceased to work either by going into liquidation or their names having been struck off under Section 560(5) of the Companies Act. The

aggregate paid-up capital of these companies was Rs. 21305.34 crore. State/ Region-wise distribution of companies which ceased to work during 2006-07 is shown in Statement IV (Appendix). Table 2.8 shows the details of liquidated and struck off companies during the last five years.

Table 2.8 Non-Government Companies which ceased to work during 2002-03 to 2006-07Voluntary Liquidations Number Paid-up Capital(Rs Crore)

Year

Liquidations under Companies Courts Order struck off Number Paid-up Number Paid-up Capital Capital(Rs Crore) (Rs Crore)

Total Number Paid-up Capital(Rs Crore)

1 2002-03 2003-04 2004-05 2005-06 2006-07

2 21 21 5 8 NA*

3 4.30 19.01 0.00 1.99 NA*

4 58 53 20 59 NA*

5 0.00 0.01 0.00 0.07 NA*

6 872 424 1752 1313 NA*

7 617.60 0.04 73.31 10.54 NA*

8 951 498 1777 1380 17818

9 621.90 19.06 73.31 12.6 21305.34

NA* = Information is not available.

Non-Government Companies Limited by shares at work:2.11.1 There were 7,42,009 non-Government companies limited by shares at work in the country as on 31st March, 2007. These comprised 89,556

Public limited companies and 6,52,453 Private limited companies. 2.11.2 The non-Government companies at work as on 31.3.2007 registered 1.53 per cent increase over the previous year in terms of number of companies.

Non-Government Companies Limited by Shares at work during (1994-2007)

No. of Companies

Year

26

Non-Government Companies with Unlimited liability2.12 During the year 2006-07, twenty two (22) nonGovernment companies with unlimited liability were registered. These companies were registered in the state of Delhi (9), West Bengal (5), Maharashtra (4),

Andhra Pradesh (2), Himachal Pradesh (1) and Karnataka (1). Taking into account 498 companies with Unlimited Liability already at work in the Country as on 31.03.2006, there were 520 companies with Unlimited Liability as on 31.03.2007. Table 2.9 gives state-wise distribution of Non-Government companies with unlimited liability during 2006-07.

Table 2.9State-wise distribution of Non-Government Companies with Unlimited liability during 2006-07State / Union Territory Number of Companies registered during 2006-07 4 0 0 9 1 0 0 5 0 0 2 0 0 1 0 0 22 Number of Companies at work as on 31.3.2007 179 72 33 117 18 18 3 15 45 2 3 8 4 1 1 1 520

Maharashtra Gujarat Goa,Daman & Diu Delhi Karnataka Punjab Chandigarh West Bengal Tamil Nadu Bihar Andhra Pradesh Uttar Pradesh Madhya Pradesh Himachal Pradesh Kerala Orissa Total

Companies with Liability limited by Guarantee and Associations not for profit:2.13 There were 3605 Guarantee companies and Associations not for profit at work in the country as on 31.3.2006. 241 such companies were registered under the Companies Act during the year 2006-07. The total number of Guarantee companies and Associations not for profit at work, therefore, in the country as on 31.3.2007 was 3846.

Foreign Companies:2.14 The number of foreign companies which are reported to have places of business in the country as on 31.3.2007 is 2310. Table 2.10 gives the countrywise distribution of such foreign companies as on 31.3.2006 and 31.3.2007. 2.15 Statistical information given above is as generated under MCA21 system.

27

Table 2.10 Distribution of Foreign Companies defined Under Section 591 of the Companies Act,1956 by their country of incorporation as on 31.3.2006 and 31.3.2007Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Country of incorporation of the Foreign Companies United Kingdom United States of America Japan France Germany Italy Canada Hong Kong Pakistan Bangladesh Netherland Switzerland Sweden Australia Panama Belgium Thailand Nepal UAE Others Total Number of Companies as on 31.3.2006 329 437 157 80 96 39 37 94 5 9 56 33 22 52 12 24 15 4 15 5242040

Number of Companies as on 31.03.2007 349 486 176 94 104 48 39 102 5 10 66 38 25 62 13 24 17 4 18 6302310

Growth of Foreign Companies in India (31.3.2000 -31.3.2007)

28

CHAPTER-III

Applications and Documents Received Under Different Sections of the Companies Act, 19563.1.1 The receipt and disposal of applications and documents under various Sections of the Companies Act, 1956 during the year 2006-07, except those relating to managerial personnel, are reviewed in this Chapter. Applications relating to managerial personnel are dealt with in Chapter IV. 3.1.2 The applications and documents are received either by (i) Regional Directors / Registrars of Companies and (ii) the Central Government / the Company Law Board. These have been reviewed separately under respective sub-heads.

Application and Documents received by the Regional Directors/Registrars of Companies Applications received under Sections 20, 166(1) and 210(4)3.2.1 Applications received during the year 2006-07 in the Offices of the Registrars of Companies under Sections 20, 166(1) and 210(4) of the Companies Act aggregated to 2,06,639. Of the total applications received during the year, 1,28,548 applications related to availability of names under Section 20. The break-up of applications received during the last three years is given in Table 3.1.

Table 3.1 Applications received under Sections 20, 166(1) and 210(4) of the Companies Act, 1956 during the years 2004-05, 2005-06 and 2006-072004-05Subject/ Section Brought forward from previous year Received during the year Total Brought forward from previous year

2005-06Received during the year Total

2006-07Brought Received forward during the from previyear ous year Total

1 1. Availability of name (Section 20) 2. Extension of Annual General Meeting (Section 166(1)) 3. Extension of Financial year [Section 210(4)] 4. Others (Misc.) Total

2 534 2

3 94148 1080

4 94682 1082

5 4854 0

6 98897 1060

7 103751 1060

8 4921 0

9 128548 992

10 133469 992

2 5716 6254

150 120788

152 126504

3 4885 9742

108 179886

111 184771

1 4793 9715

104 76995

105 81788

216166 222420

279951 289693

206639 216354

3.2.2 Taking into account the 2,06,639 applications received during the year under review and 9,715 applications brought forward from the previous year, the number of applications considered during the year

came to 2,16,354. Of these, 1,91,935 applications were allowed, 16,167 were rejected and 8,252 were under examination/ consideration at the end of the year. Table 3.2 gives Section-wise details of disposal of the applications during the year 2006-07.29

Table 3.2 Disposal of applications received under Sections 20, 166(1) and 210(4) of the Companies Act during the year 2006-07Subject/Section Brought forward from the previous year Received during the year Total Col. 2 & 3 Allowed during the year Rejected during the year Pending at the end of the year

1 1. Availability of Name (Section 20) 2. Extension of Annual General Meeting (Section 166(1)) 3. Extension of Financial year (Section 210(4)) 4. Others (Misc.) Total

2 4921 0

3 128548 992

4 133469 992

5 113935 885

6 15652 79

7 3882 28

1

104

105

79

15

11

4793 9715

76995 206639

81788 216354

77036 191935

421 16167

4331 8252

Documents filed under Sections 159, 160 and 2203.3.1 The statutory documents filed by companies may be broadly classified under 3 categories viz. (i) Annual Returns (Sections 159 and 160), (ii) Balance Sheets and Profit and Loss Accounts (Section 220) and (iii) Other Documents. In all 16,25,717 documents were filed by the companies with the Registrars of Companies during the year 2006-07. Of these,

3,13,689 were Annual Returns under Sections 159 and 160 of the Act., 3,17,778 were Balance Sheets and Profit and Loss Accounts filed under Section 220 of the Act, and the remaining 9,94,250 documents were filed under the miscellaneous provisions of the Act. The number of documents filed with the Registrars of Companies during the last three years are given in Table 3.3.

Table 3.3Documents received under Sections 159, 160, 220 etc. of the Companies Act, 1956 during the years 2004-05 , 2005-06 and 2006-07Nature of document and Section concerned 2004-05 Brought Received forward during the from previyear ous year 2 3 Total Brought forward from previous year 5 2005-06 Received during the year 6 Total 2006-07 Brought Received forward during the from previyear ous year 8 9 Total

1

4

7

10

1. Annual Returns (Sections 159&160) 2. Balance Sheets & Profit & Loss Accounts (Section 220) 3 Other (Misc.) Total

22667 25793

332896 339932

355563 365725

64845 72949

316520 317326

381365 390275

32184 40641

313689 345873 317778 358419

52040 100500

807117

859157

99048 236842

967369 1066417 1601215 1838057

113315

994250 1107565

1479945 1580445

186140 1625717 1811857

30

3.3.2 Taking into account the 16,25,717 documents received during the year under review and 1,86,140 documents brought forward from the previous year, the total number of documents requiring scrutiny during the year was 18,11,857. Of these, 17,38,854

documents were taken on record as being in order, 33,952 were returned for rectification of defects and 40,051 remained pending at the end of the year. Section-wise details of disposal of documents are shown in Table 3.4.

Table 3.4Disposal of applications received under Sections 159, 160 and 220 etc. of the Companies Act during the year 2005-06Nature of documents and Section concerned 1 Brought forward from the previous year 2 Received during the year 3 Total Col. 2 & 3 Taken on record Returned for rectification 6 Pending at the end of the year 7

4

5

1. Annual Returns (Section 159 & 160) 2. Balance Sheets and Profit & Loss A/c (Section 220) 3. Others (Misc.) Total

32184 40641

313689 317778

345873 358419

339940 351702

4475 5377

1458 1340

113315 186140

994250 1625717

1107565 1811857

1047212 1738854

23100 32952

37253 40051

Inspection of Documents Under Section 610(1)(a)3.4 During the year 2006-07, 1,53,258 documents were inspected in the Office of the Registrars of Companies by shareholders and members of the public under Section 610(1)(a) of the Companies Act,1956. The fees realised by the Registrars of Companies on this account amounted to Rs. 77,16,050. The number of documents inspected in the previous year (2005-06) was 1,30,764 and the amount of fee realised was Rs 67,30,875. The largest number of documents inspected during the year under review was of the Registrar of Companies, Delhi i.e. 46493 documents representing 30.34 per cent of the total. The number of documents in the office of the Registrar of Companies, Mumbai (viz. 36121 representing 23.57 per cent) came next, followed by documents inspected in the Office of the Registrars of Companies, Chennai, West Bengal and Gujarat ( viz. 14022, 9392 and 7117 respectively) in

that order. The documents inspected in the offices of these five Registrars of Companies together accounted for 73.83 per cent of the total documents inspected under this Section in the offices of all the Registrars of Companies during the year.

Issue of Certificates and certified copies of documents under Section 610(1)(b).3.5 The number of certificates of incorporation and certified copies of documents issued during the year 2006-07 by the Registrars of Companies under Section 610(1)(b) of the Companies Act totalled 27,998 and fees realised on this account amounted to Rs. 70,78,276. During the year 2005-06, 22,812 certificates of incorporation and certified copies of documents were issued and fee of Rs. 85,25,741 was realised.

Conversion of Companies under Section 31 and 43A3.6 There were 978 conversions of companies

31

from private to public and vice-versa during the year 2006-07. Of these, 669 conversions from private to public and 275 from public to private were by alteration of articles of association under Section 31 of the Act. Remaining 34 conversions, were from private to public (31) and public to private (3) took place under Section 43A of the Act.

Complaints3.8.1 During the year 2006-07, 6,489 complaints were received in the offices of the Registrars of Companies and in the Headquarters, at New Delhi from shareholders and members of the public. The number of complaints received in the previous year was 9,720. 3.8.2 During the year 2006-07, 26,892 complaints were considered including 20,403 complaints brought forward from the previous year. Of these, action was taken on 6,216 complaints after necessary scrutiny and inquiry and 20,676 complaints remained pending at the end of the year. Table 3.5 gives the comparative position regarding the complaints received and disposed of during the last three years.

Special Resolutions under Section 3143.7 During the year 2006-07, 713 resolutions were passed under Section 314 of the Companies Act, 1956 by 712 companies for regularisation of the appointment of 713 Directors . In the previous year, 574 resolutions were passed by 567 companies regularizing the appointment of 567 Directors and 19 relatives of Directors in the offices of profit.

Table 3.5 Complaints received and disposed of during the year 2004-05, 2005-06 and 2006-07Year Brought forward from the previous year 2 12475 18839 20403 Received during the year 3 14181 9720 6489 Total Col. 2 & 3 Disposed of during the year 5 7817 8156 6216 Pending at the end of the year 6 18839 20403 20676

1 2004-2005 2005-2006 2006-2007

4 26656 28559 26892

Nature of Complaints3.9 The grounds of complaints varied in nature 812 complaints or nearly 12.5 per cent of the total number of complaints received during the year 2006-07 related to non-payment of public deposits by companies. The other grounds on which a large number of complaints received related to non-receipt of Balance-sheets (9.1 percent), non-receipt of notice (6.2), non-payment of dividend (6.0 percent ) and nonissue of shares (5.1). The break-up of complaints according to their nature is shown in Table 3.6.

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Table 3.6 Nature of complaints 2006-07Sl. No. Nature of complaint s Brought forward from the previous year Received Percentage during of the total the year receipts Total Col. 3+4 Disposed of during the year Percentage Pending of the total at the disposal end of the year

1 1 2 3 4 5 6 7 8 9

2 Received by Registrars of Companies: Non-payment of public deposits Mismanagement Non-payment of dividend Non-receipt of Balance Sheets Non-receipt of Notices Non-registration of Transfer of Shares Non-issue of Share certificates Improper holding of meetings Non-holding of Annual General Meetings

3 782 22 187 320 119 20 71 12 32 43 1 16 1 5 1 301 18470 20403

4 812 91 387 590 401 271 330 32 76 171 22 72 12 18 4 1728 1472 6489

5 12.5 1.4 6.0 9.1 6.2 4.2 5.1 0.5 1.2 0.0 2.6 0.3 1.1 0.2 0.3 0.1 26.6 22.7 100.0

6 1594 113 574 910 520 291 401 44 108 214 23 88 13 23 5 2029 19942 26892

7 1105 112 519 706 504 263 395 42 107 213 23 82 13 23 4 1829 276 6216

8 17.8 1.8 8.3 11.4 8.1 4.2 6.4 0.7 1.7 3.4 0.4 1.3 0.2 0.4 0.1 29.4 4.4 100.0

9 489 1 55 204 16 28 6 2 1 1 0 6 0 0 1 200 19666 20676

10 Non-receipt of Dividend warrant 11 Misappropriation 12 Fraud/ Embezzlement 13 Misapplication of funds 14 Improper election of Directors 15 Failure to allow inspection of Minute Books 16 Other complaints (Miscellaneous) Received by Headquarters, New Delhi: 17 General complaints Total

ROC-wise distribution of complaints3.10 The Registrar of Companies, Mumbai received the largest number of complaints during the year 2006-07, viz. 1,911 (29.4 per cent of the total) followed by the Registrars of Companies, Punjab/H.P./ Chandigarh, Andhra Pradesh, Delhi/Haryana and West Bengal who received 696, 355,332, and 316 complaints respectively. These Registrars of

Companies together accounted for 3,610 (55.6 per cent of the total number of complaints) complaints received during the year. The ROC-wise break-up of complaints received during the year 2006-07 is given in Table 3.7. In addition 1472 complaints were received at the Headquarters (22.7 per cent of the total number of complaints).

33

Table 3.7 ROC-wise break-up of complaints received during 2006-07Sl. No. State/Union Territory Brought forward from the previous year Received during the year Percentage of Total receipts Total Col. 3+4 Disposed Percentage Pending of during of at the the year grand total end of disposal the year

1

2 Received by Registrars of Companies:

3

4

5

6

7

8

9

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Andhra Pradesh Assam Bihar Delhi/ Haryana Goa Gujarat Jammu & Kashmir Karnataka Kerala Madhya Pradesh Maharashtra(Mumbai) Pune Orissa Pondicherry Punjab/H.P./Chandigarh Rajasthan Chennai Coimbatore Uttar Pradesh West Bengal Received at the Headquarters, New Delhi Grand Total

955 0 0 0 34 138 0 56 0 0 369 2 0 0 146 4 212 2 15 0 18470 20403

355 8 10 332 6 261 1 28 113 131 1911 111 39 4 696 272 164 56 203 316 1472 6489

5.5 0.1 0.2 5.1 0.1 4.0 0.0 0.4 1.7 2.0 29.4 1.7 0.6 0.1 10.7 4.2 2.5 0.9 3.1 4.9 22.7 100.0

1310 8 10 332 40 399 1 84 113 131 2280 113 39 4 842 276 376 58 218 316 19942 26892

594 8 10 328 13 388 1 84 109 131 2152 109 39 4 798 272 357 49 201 293 276 6216

9.6 0.1 0.2 5.3 0.2 6.2 0.0 1.4 1.8 2.1 34.6 1.8 0.6 0.1 12.8 4.4 5.7 0.8 3.2 4.7 4.4 100.0

716 0 0 4 27 11 0 0 4 0 128 4 0 0 44 4 19 9 17 23 19666 20676

Applications considered and disposed of by the Regional Directors and Registrars of Companies.3.11 The powers and functions of the Central Government in respect of some Sections of the Companies Act,1956 have been delegated to the Regional Directors located at Kolkata, Mumbai,

Chennai and Noida (U.P.) and to the Registrars of Companies. Table 3.8 below shows the disposal of applications dealt with by the Regional Directors/ Registrars of Companies under the delegated powers. It would be seen that during the year under review 96,273 applications including 12,862 brought

34

forward from the previous year were considered. The largest number of applications, viz. 70,975 ( 73.72 per cent of the total ) were considered under Section 108(1D) of the Act regarding extension of time for

registration of transfer of shares. Out of the total 96,273 applications, 90,807 were disposed of during the year leaving 5,466 applications pending as on 31st March, 2007.

Table 3.8 Applications considered and disposed of by the Regional Directors and Registrars of Companies under various Sections of the Companies Act, 1956 during the year 2006-07Sl. Section of the Companies Act and the No. subject matter of the application Applications pending as on 31.3.2006 Applications Total Applications Applications received ( Col. 3+4) disposed of pending during the during the as on year year 31.03.2007 2006-07 2006-07

1 1 2 3 4 5 6 7 8 9

2 21 - Change of name by company 22 - Rectification of name company 25 - Grant of licence 25(8) - Alteration in Memorandum & Articles of Association 31 - Alteration in Articles through Special Resolution 108(1D) - Extension of time for Registration of transfer of shares 224(3)(7) - Appointment and remuneration of Auditors Section 394-A amalgation of companies (pub/pvt. Companies) by RD 555(7)(b) - Company liquidation Accounts

3 499 33 115 40 60 152 23 205 319 11416 12862

4 6462 79 160 62 3921 70823 23 916 308 657 83411

5 6961 112 275 102 3981 70975 46 1121 627 12073 96273

4 6441 58 183 67 3843 70820 17 971 136 8271 90807

5 520 54 92 35 138 155 29 150 491 3802 5466

10 560 striking of name of the companies in the Register maintained by ROC

Total

Applications received by the Central Government and Company Law Board Invitation and acceptance of Deposits under Section 58A3.12.1 Section 58A of the Companies Act, 1956 which came into force on 1.2.1975, regulates the invitation and acceptance of deposits by non-banking non-

financial companies. The Companies (Acceptance of Deposits) Rules, 1975 framed in pursuance of subsection (1) of Section 58A of the aforementioned Act, prescribe the limits, manner and conditions subject to which deposits may be invited and accepted by these companies either from the public or from their members. These Rules prescribe every company to

35

advertise at the time of inviting deposits, a summarized financial position of the company for the preceding two financial years. The rules lay down the following conditions governing the acceptance of deposits: Ceiling limits of deposits with reference to the companys net worth Maximum period of 36 months for which the deposits can be accepted. Maximum rate of brokerage, which can be paid by the company to brokers through whom the deposits are collected. Maintenance of liquid assets to the extent of 15% of deposits maturing during the year to be invested in specified securities in order to safeguard the interests of depositors. Maximum rate of interest payable on deposits 3.12.2 Under the proviso to sub-section (7) of Section 58A, the Government is empowered to exempt a class of companies from all or any of the provisions of Section 58A. The Ministry has granted exemption vide Notification GSR No. 1075E dated 29.12.1989 from the provisions of sub-section (1) to (6) of Section 58A in respect of acceptance of deposits through issue of Commercial paper by companies which satisfy the eligibility criteria laid down by Reserve Bank of India in the Non-Banking Companies (Acceptance of Deposits through Commercial Paper) Directions 1989. The said Notification has come into force on and from 1.1.1990. 3.12.3 Sub-section (8) of Section 58A of the Companies Act,1956 empowers Central Government, if it considers necessary for avoiding any hardship or for any other just and sufficient reason, to grant extension of time to a company or class of companies to comply with or exempt any company or class of companies from all or any of the provisions of Section

58A either generally, or for a specified period subject to such conditions as may be specified, either prospectively or retrospectively from a date not earlier than the commencement of the Companies (Amendment) Act, 1974. In case exemption is to be granted for a class of companies, it is to be done after consultation with Reserve Bank of India. 3.12.4 Sub-sections (9) & (10) of Section 58A Act empower the Company Law Board to take cognizance of any case of non-repayment of deposits on maturity and direct the company to make repayment of such deposits within such time and subject to such conditions, as may be specified in the order. Non-compliance of the orders of the Company Law Board would attract penalty by way of imprisonment, which may extend to three years and shall also be liable to a fine of not less than Rs. 500/ - for every day till such non-compliance continues.

(A) Applications Disposed of by the Central Government (a) Applications for exemption/extension of time under Section 58A(8).3.13 During the period with effect from 1.4.2006 to 31.3.2007, 10 applications for exemption/extension of time under Section 58A (8) of the Companies Act, 1956 were received in addition to 23 applications brought forward from the previous year. Out of the total 33 applications 18 applications were disposed of during the said period, and 15 applications were under examination as on 31.3.2007.

(b) Reduction of Equity Share Capital under Section 1013.14 As of 01.04.2006, 4 (four) applications made under Section 101 were pending. During the year 1(one) more application was received. Out of these 5 (five) cases, 3 (three) cases were considered and disposed of with issue of orders. 2 (two) cases were pending as on 31.03.2007.

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(c) Restriction on Acquisition/Transfer of certain shares under Section 108A3.15.1 Under section 108A, prior approval of the Central Government is required to be obtained for acquisition/transfer of shares by or to, an individual, firm, group constituent of a group body corporate or bodies corporate under the same management in relation to dominant undertaking provided there is any increase in dominance as a result of such an acquisition or transfer of shares. 3.15.2 During the period from 1.4.2006 to 31.3.2007, 2 applications were received, while no application was brought forward from the previous year. Out of these 2 applications, 1 application was disposed of

during the year and 1 application was under examination as on 31.3.2007. (d) Permission to Government Companies Under Section 166 3.16 The Central Government has powers under Section 166(1) & (2) of the Companies Act, 1956 to grant extension of time by three months to Government Companies for holding Annual General Meetings (AGM) and for change of venue of AGM to a place other than where the registered office of the company is situated. The number of applications for extension of time and change of venue received and disposed of during the year 2006-07 are given in Table 3.9.

Table 3.9 Applications under Section 166 received and disposed of during 2006-07Section of Companies Act,1956 Nature of Applications Pending at the beginning Received duing the Year T otal Col. 3+4 Disposal during the year Request accepted 1 166(1) 2 Annual General Meeting (Extension of time) Annual General Meeting (Change of venue) TOTAL 3 0 4 191 5 191 6 187 Request rejected 7 3 8 1 Pending as on 31.3.2007

166(2)

0

28

28

28

0

0

0

219

219

215

3

1

(e) Payment of Dividends under section 205(1)(c) and 205A (3)3.17.1 Proviso (c) to Section 205(1) of the Companies Act, 1956 empowers the Central Government to allow any company, if it thinks necessary to do so in the public interest to declare any dividend for any financial year out of the profits of the company for that year or any previous year or years without providing for depreciation. During the

year 2006-07, 6 applications were received under this Section. Of these, 1 application was considered and 5 applications were under consideration as on 31.3.2007. 3.17.2 Section 205A(3) of the Companies Act, 1956 makes it obligatory for a company to seek prior approval of the Central Government where owing to inadequacy or absence of profits in any year, it

37

proposed to declare dividend out of the accumulated profits earned in the previous years and transferred to the reserves and where declaration of dividend is not in accordance with the Rules, namely, the Companies (Declaration of Dividend out of Reserves) Rules, 1975 framed under the said section. 3.17.3 During the year 2006-07, one (1) application was received under this section, while no application was brought forward from the previous year. The said application was disposed of during the year under review and same application was pending as on 31.3.2007.

(h) Accounts of Subsidiaries Under Section 212(8)3.20 Section 212 of the Companies Act, 1956 provides that the Balance sheet of a holding company should include certain documents of its subsidiaries. However sub-section (8) thereof empowers the Central Government to exempt a holding company from the requirements of including in balance sheet the said documents of subsidiary companies. 443 applications, including 63 brought forward from the previous year were considered by the Central Government under this Section during the year 200607. Of these, 427 applications were disposed of and 16 were under examination as on 31.3.2007.

(f) Permission for Reduction in rate of Depreciation3.18 As of 01.04.2006, nil application made under Section 205(2)(c) & (d) was pending. During the year 6(six) applications were received. Out of these 6 (six) cases, 1 (one) case was considered and disposed of with issue of orders. 5 (five) cases were pending as on 31.03.2007.

(i) Appointment of Cost Auditors under Section 233B(2)3.21 Consequent upon the launch of MCA-21 Programme under e-Governance, Companies under Cost Audit have started filing applications for appointment of Cost Auditors and the Cost Audit Reports through electronic mode from September 2006. In compliance with Section 233B(2) of the Companies Act, 1956, 1588 applications were received for approval of appointment of cost auditors and exemption/withdrawal from cost audit during the year 2006-07 as against 1458 applications received during the previous year 2005-06. The amount of fees collected on these applications aggregated to Rs.29.44 lakh during the year 2006-07 as against Rs. 27.31 lakh received during the previous year 2005-06.

(g)

Annual Accounts Under Section 211

3.19 Part II of Schedule VI to the Companies Act,1956 dealing with the preparation of Profit and Loss Accounts provides that the manufacturing and other companies should give by way of notes, additional data in regard to turnover, installed capacity, licensed capacity, actual production, raw material consumed, opening and closing stock of good produced etc. Some of the Companies which on account of certain difficulties, are unable to comply with the said provisions to furnish the additional data, can approach the central Government for order under section 211(4) of the Companies Act, 1956 for exemption from furnishing this information. During the year 2006-07, 253 applications including 38 brought forward from the previous year were considered by the Central government. Of these, 242 applications were disposed of and 11 applications were under examination at the end of the year.

(j) Appointment of Sole Selling/Buying Agents Under Section 294AA (1), (2) & (3)3.22.1 Sub-Section (1) of sub-section 294AA of the Companies Act, 1956 requires that where the Central Government is of the opinion that the demand for goods of any category is substantially in excess of the production or supply of such goods and that the services of the Sole Selling Agents will not be

38

necessary to create a market for such goods, the Central Government may, by notification in the Official Gazette, declare that Sole Selling Agent shall not be appointed by a company for the sale of such goods for such period as may be specified in the declaration. At present, the said prohibition on appointment of Sole Selling Agents exists only in respect of Bulk drugs, drugs and Formulations which has been extended for a period of three years w.e.f. 23.2.2004 vide Notification No. GSR 130(E) dated 23.2.2004. 3.22.2 Sub- sections (2) and (3) of Section 294-AA of the Companies Act, 1956 require the companies to obtain approval of Central Government for appointment of Sole Selling Agents. Sub-section (2) applies to those companies, in which the Sole Selling Agents either by themselves or through their relatives, hold paid-up-capital of Rs. 5 lakhs or 5 per cent of the paid-up-capital of the company, whichever is less. Sub-section (3) applies to the companies whose paidup capital is Rs. 50 lakh or more. 3.22.3 During the year 2006-07, 6 applications were received under sub-sections (2) & (3) of Section 294AA of the above said Act while 9 applications were brought forward from the previous year. Out of the total 15 applications, 8 applications were disposed of and 7 applications were pending at various stages of consideration as on 31.3.2007.

are interested and to other body corporate falling within the ambit of clauses (d) & (e) of sub-Section (1) of the said Section 3.23.2 During the year 2005-06, the Central Government received 32 applications and 27 applications were brought forward from the previous year under Section 295. Out of these 59 applications, 36 applications were disposed of and 23 applications were pending as on 31.3.2007

(l) Contracts in which Directors are interested under Section 2973.24.1 Section 297(1) of the Companies Act, 1956, as amended by the Companies (Amendment) Act, 1974 which came into force with effect from 1st February, 1975 makes it obligatory for companies having paid-up share capital of not less than Rs. 1 crore to seek prior approval of the Central Government in respect of any contract to be entered into (a) for sale, purchase or supply of goods, material or service or supply of goods, material or service or (b) for underwriting the subscription of any share or debentures of the company with a Director of the company or his relatives, a firm in which such a Director or relative is a partner, any other partner in such a firm or a private company of which a Director is a member or Director. The powers of Central Government to accord approval under Section 297(1) of the Companies Act, 1956 have been delegated to Regional Directors with effect from 19.8.1993. This has been done with the twin purposes of decentralisation and expeditious disposal. 3.24.2 During the period from 1.4.2006 to 31.3.2007, Regional Directors considered 1541 applications including 555 applications brought forward from the previous year. Out of these, 1239 applications have been decided leaving a balance of 302 applications under consideration with Regional Directors as on 31.3.2007.

(k) Loan to Directors, giving guarantee or providing security in connection with a loan-Section 2953.23.1 Section 295 of the Companies Act, 1956 requires all public companies or their subsidiaries to obtain the previous approval of the Central Government before making any loan to, or giving any guarantee or providing any security in connection with a loan made by any other person to, or to any other person by their directors, relatives of such directors, firms or private companies in which such directors

39

(m) Amalgamation/ Merger between Government companies under Section 391394.3.25 As of 01.04.2006, 3 (three) applications made under Section 391-394 were pending. During the year no application was received. Out of these 3 (three) cases, 2 (two) cases were considered and disposed of with issue of orders. 1 (one) case was pending as on 31.03.2007.

Nidhi Companies vide Not