by Aggarwals Associates | Jul 9, 2020 | General
Private Limited Company is one of the most opted business structures in India to start a business. It is the most prevalent and popular type of corporate legal entity in India. The Companies Act, 2013 and the Companies Incorporation Rules, 2014 provides the provisions related to registration of Private Limited Company in India. Minimum two shareholders and two directors are required for registering a Private Limited Company. However, most entrepreneurs remain unaware of the legal compliance for registration of a Private Limited Company. There are some formalities involved in Private Limited Company registration in India. Here is the list of formalities:
How many numbers of Directors and Shareholders are required?
The basic requirement to register a Private Limited Company is that there must be a minimum 2 directors and 2 shareholders in the company. However, the directors and shareholders can be the same person. A maximum of 200 members can be shareholders and a maximum of 15 members can be directors of a Private Limited Company at any given time.
One of the directors of a Private Limited Company has to be an Indian Citizen. The other directors can be a foreign national. The shareholders can be natural person or an artificial legal entity. Hence, a company can be owned by two corporate, who are domiciled in India or abroad.
Director Identification Number (DIN):
As per Section 153 of the Companies Act, 2013, it is mandatory for every person who is proposed to be a director of the Private Limited Company to have a DIN in their name. Director Identification Number (DIN) is an 8 digit unique code assigned to every director upon registration with the Ministry of Corporate Affairs.
Digital Signatures Certificate:
A digital signatures certificate is the electronic form of a physical signature. It is a form of identity proof of the individual or business for online or electronic transactions. A digital signatures certificate is used for the online filing of ITR, business incorporation, filing annual returns, e-tenders etc. It must be obtained for the proposed directors of the company. A digital signatures certificate is required for attesting the incorporation application and a Private Limited Company cannot be incorporated without it.
RUN Name Approval:
A private Limited Company must have a valid name and it must be approved by the Ministry of Corporate Affairs before it can be registered. Upto 2 names can be provided. In case of rejection, an opportunity is provided for re submission of the form with 2 more names. A company can submit the company name that adheres to the guidelines prescribed under the company laws in India.
Memorandum of Association and Articles of Association:
After the approval of the name of the company, Memorandum of Association and Articles of Association are drafted. These lays down the objectives and goals of the company, the manner in which its functions will be performed and the rights and duties of the directors, shareholders and employees of the company.
Private Limited Company Incorporation Application:
After obtaining the digital signature and director identification number, the application can be submitted in SPICe form with the Ministry of Corporate Affairs. There is no requirement for obtaining RUN name approval for submission of SPICe form. However, if the name of the Private Limited Company is not available, the incorporation documents need to be submitted again later.
What other documents are required for registration of Private Limited Company?
There are several other documents that are required for registering a Private Limited Company:
- PAN card of all directors
- Identification proof such Aadhaar Card, Voter ID or Driving License of all directors.
- Permanent address proof like bank passbook or latest utility bill of all directors.
- Address proof of proposed registered office of company like NOC with the utility bill from the owner in case of property taken on rent and sale deed with an electricity bill if property is owned by the director.
- Passport size photographs of all directors.
- Objects of the proposed company in detail.
Conclusion:
It is important to be well informed about the basic before diving into a registration process. Most of the startups prefer to choose the legal structure of Private Limited Company due to less complication involved in its incorporation and management. The documents and other requirements of Private Limited Company registration are very less as compared to many other leading business structures. A Private Limited Company is a type of company that features several advantages such as limited liability, easy incorporation, and high degree of flexibility, separate legal existence and many more.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali
by Aggarwals Associates | Jul 3, 2020 | General
“All all events, arbitration is more rational, just, and humane than the resort to the sword”
-Richard Cobden
Arbitration is a process in which impartial outsider is engaged by the parties to make decision and such disposal of the dispute is usually binding on the both parties. As a measure to provide a substitute to litigation, Alternative Dispute Resolution methods are used to resolve legal disputes. Alternative Dispute Resolution methods is a process to resolve a legal dispute between two sides without involving the court and taking the dispute to a neutral third party who uses different modes of communication to reach an outcome. One such method of peaceful resolution is Arbitration. Arbitration and Conciliation Act, 1996 enshrined provisions regarding arbitration process in India.
Meaning of Arbitration:
Arbitration is one of the Alternative Dispute Resolution mechanisms whereby parties mutually agree to involve a third party to resolve any legal dispute. The third party known as an Arbitrator who hears the issued raised by both the sides, the remedy sought by them and comes to an amicable resolution of their dispute. The award of the Arbitrator is binding upon the disputing parties.
Advantages of Arbitration:
Arbitration proceedings are less formal than court. The many benefits of Arbitration include the following:
- Flexible Process: The process followed in Arbitration is far more flexible than court proceedings as the parties can mutually decide a date on which they wish to conduct arbitration proceedings and also choose the Arbitrator who will preside over the process.
- Private process: It’s a private process where only designated parties become present and proceedings are kept confidential. This feature is an aid in certain cases the revelation of the subject matter of the dispute might affect the reputation of the company.
- Expeditious: The Arbitration process takes lesser time as compared to legal proceedings in court as there are no multiple hearing and court dates.
- Cost effective: Arbitration process consumes less time to settle dispute for that reason it is considered to be cheaper than litigation. With the aspect of limited evidence and discovery, this also leads considerable reduction in costs.
Types of Arbitration:
There are various kind of arbitration depends upon its subject matter of the dispute, terms and the law governing to the arbitration agreement. Some types of the arbitration are including the following:
- Ad-hoc Arbitration: When a dispute or difference arises between the parties in course of commercial transactions. This kind of arbitration is agreed to get justice by balancing the un-settled part of the dispute only.
- Institutional Arbitration: There is a prior agreement between the parties to settle future dispute or differences that may arise during their commercial transactions. Such disputes or differences are settled by arbitration according to the clause provided in that agreement.
- Statutory Arbitration: This kind of arbitration is mandatory in nature, usually imposed on the parties by operation of law. Statutory arbitration is conducted in accordance with different laws that lay down arbitration as the method to resolve the dispute like the Cantonments Act, 1924, the Indian Electricity Act, 1910, the Land Acquisition Act, 1894.
- Domestic or international Arbitration: Arbitration that took place in India and has all the parties belong to India is termed as domestic arbitration. An arbitration in which any party to the dispute belongs to other than India and the dispute is to be settled in India is termed as international arbitration.
- Foreign Arbitration: When arbitration proceedings are conducted outside India and outcome of such proceedings i.e. arbitral award is required to be enforced in India, it is termed as Foreign Arbitration.
The Arbitration and Conciliation Act, 1996
The Arbitration and Conciliation Act, 1996 lays down the procedure to be followed in the arbitration and conciliation proceedings and applicability of arbitral awards. The UNCITRAL model law on International Commercial Arbitration, 1985 is the base of the Act. The Act ensures that the supervisory role of a court in arbitration procedure is limited and the court can only come into the picture in case an appeal needs to be filed against the arbitral award. Under the Act, two parties can enter into a contract to conduct arbitration proceedings or include an arbitration clause in their agreement.
The affected party has three years to initiate the arbitral proceedings from the date of cause of action arise. The affected party needs to send a notice to the other party regarding the issue, the remedy and the intention to initiate arbitration proceeding to settle the dispute. The arbitrator hears both the sides, records the claim of the parties and pronounces an arbitral award. The enforcement of an arbitral award must be according to the provisions of the Civil Procedure Code.
The Arbitration and Conciliation (Amendment) Act, 2019
The President of India gave his assent to the amendments to the Arbitration and Conciliation Act, 1996. The Amendment introduces the concept of Arbitral Institution under Section 11(3A) of the Act, where power is vested with the Supreme Court of India and High Courts to designate the Arbitral Institutions, where parties can approach for the appointment of arbitrators.
Part 1 A has been incorporated in the Act which introduce the concept of an Arbitration Council of India. The council will be established by Central Government through notification having its headquarters at Delhi. The composition of ACI includes (i) Chairperson who is either a Judge of the Supreme Court/a Judge of a High Court/Chief Justice of a High Court or an eminent person with expert knowledge in conduct of arbitration (ii) Other members will include an eminent arbitration practitioner and an eminent academician.
Under the previous Act, Arbitral Tribunals are required to make their award within a period of 12 months for all arbitration proceedings. The Amendment seeks to remove this time restriction for International Commercial Arbitration. The 2019 Amendment provides that the written claim and the defense to the claim in arbitration proceedings should be completed within six months for the appointment of the arbitrators, earlier there was no time limit for the same. The new Amendment also provides confidentiality of the arbitration proceedings except the award where its disclosure is necessary for the purpose of implementation and enforcement of award.
SC on Arbitration Process
In Cheran Properties Ltd. V. Kasturi and Sons Ltd. & Ors. (Civil Appeal 10025/2017), the court while observing the principle enunciated in Chloro Controls that a non-signatory may also be bound by an arbitration agreement in certain cases held that the group of companies doctrine is essentially intended to facilitate the fulfillment of a mutually held intent between the parties, where the circumstances indicate that the intent was to bind both signatories and non-signatories.
In Purushottam S/o Tulsiram Badwaik V. Anil & Ors. (Civil Appeal No. 4664 of 2018), the Supreme Court observed in this case that even if an arbitration agreement entered into after the 1996 Act had come to force were to make a reference to the applicable provisions of those under Indian Arbitration Act or 1940 Act, such stipulation would be of no consequence and the matter must be governed under the provisions of 1996 Act. Further, the court held that an incorrect reference or recital regarding the applicability of the 1940 Act would not render the entire arbitration agreement invalid.
In M/S Emaar MGF Land Limited & Anr. V. Aftab Singh, (2018 SCC Online SC 2771), SC upheld the decision of NCDRC whereby it ruled that an Arbitration Clause in a Buyer’s Agreement cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.
In Garware Mall Ropes Ltd. V. Coastal Marine Constructions & Engineering Ltd. (Civil Appeal No. 3631/2019), Court held that the High Court must impound the instrument which has not borne stamp duty and hand it over to the authority who will then decide issues qua payment of stamp duty and penalty (if any) as expeditiously as possible, and preferably within a period of 45 days from the date on which the authority receives the instrument. As soon as the stamp duty is paid on the instrument, any of the parties can bring the instrument to the notice of the high court which will then proceed to expeditiously hear and dispose of the Section 11 application.
Conclusion:
Arbitration proceedings are pretty simple and easy in nature. It is not in complex in nature unlike in regular courts. Arbitration and other alternative dispute resolution processes not only save resources and time of the parties dealing with a dispute but also helps the courts which are already overburdened with lacs of pending cases. For disputes relating to employment or business, arbitration is the most preferred method of dispute resolution.
-Kiranpreet Kaur
Associate at Aggarwals & Associates S.A.S Nagar, Mohali
by Aggarwals Associates | Jul 1, 2020 | General
Parliament and State legislature while exercising their powers within their respective spheres should keep within the field assigned to it. That law is not valid which is made by one which trespasses or encroaches upon the field assigned to the other. When law is challenged on the basis that one level of government has trespassed into the exclusive jurisdiction of another level of the government, in that situation doctrine of Pith and Substance came into picture. Doctrine of Pith and Substance is basically originated in Canada, but now it firmly established in the Indian Constitutional Jurisprudence.
Meaning of Doctrine of Pith and Substance:
It is a legal doctrine used to determine under which head of power piece of legislation falls. Literally Pith means ‘true nature’ and substance means ‘the essential part of something’ as a whole it defines the true nature of the most important part of something. The doctrine of pith and substance comes into picture where question of separation of powers of legislation arises.
Why it is required Under Indian Context?
To circumscribe the declaration of law to be invalid on the grounds of encroached powers is the basic reason for adoption of doctrine of Pith and Substance in the Indian Constitutional Jurisprudence. It provides flexibility in the otherwise rigid scheme of distribution of powers. As per this doctrine, the legislation is to be examined as a whole to its “true nature and character” to determine under which list it falls.
If the object of the legislation substantially falls within the powers conferred on the legislation which has enacted it, then it not deemed to be invalid, merely because of its incidental encroachment on matters which have been assigned to legislation.Thus it is clear that if the encroachment is only incidental then it will not affect validity of law. In case of Prafulla Kumar Mukherjee V. The Bank of Commerce (1947) 49 BOMLR 568, the court held that whatever may be the ancillary or incidental effects of a Statute enacted by a State Legislature, such a matter must be attributed to the appropriate list according to its true nature and character.
SC on Doctrine of Pith and Substance:
While discussing this doctrine in Kartar Singh V. State of Punjab 1994 SCC (3) 569, a Constitutional Bench of this Hon’ble Court observed that, “This Doctrine of Pith and Substance is applied when the legislative competence of a legislature with regard to a particular enactment is challenged with reference to the entries in various lists i.e. a law dealing with the subject in one list is also touching on a subject in another list. In such a case, what has to be ascertained is the pith and substance of the enactment. On a scrutiny of the Act in question, if found, that the legislation is in substance one on a matter assigned to the legislature enacting that statute, then that Act as a whole must be held to be valid notwithstanding incidental trenching upon matters beyond its competence i.e. on a matter included in the list belonging to the other legislature. To say differently, incidental encroachment is not altogether forbidden.”
The State of Bombay and Another V. F.N. Balsara 1951 AIR 318, in this case the Court upheld the Doctrine of Pith and Substance and said that it is important to ascertain the true nature and character of a legislation for the purpose of determining the List under which it falls.
In the case of Zameer Ahmed Latifur Rehman Sheikh V. State of Maharashtra and Ors (Civil Appeal No. 1975 of 2008), the Court held that this doctrine is applied when the legislative competence of the legislature with regard to a particular enactment is challenged with reference to the entries in various lists. If there is a challenge to the legislative competence, the courts will try to ascertain with Pith and Substance of such enactment on a scrutiny of the Act in question. In this process, it is necessary for the courts to go into and examine the true character of the enactment, its object, its scope and effect to find out whether the enactment in question is genuinely referable to a field of the legislation allotted to the respective legislature under the constitutional scheme.
In the case of Mt. Atiqa Begam and Anr. V. Abdul Maghni Khan and Ors. AIR 1940 All 272, the Court held that, in order to decide whether the impugned Act falls under which entry, one has to ascertain the true nature and character of the enactment i.e. its “Pith and Substance.” The Court further said that, “it is the result of this investigation, not the form alone which the statute may have assumed under the hand of the draughtsman, that will determine within which of the Legislative Lists the legislation falls and for this purpose the legislation must be scrutinized in its entirety.”
Conclusion:
This doctrine is not only for general understanding, infact it helps judiciary to find out the object of judiciary. The real meaning of this doctrine is that where legislation falls entirely within the scope of an entry and within the competence of the State Legislature then this doctrine will apply and the Act will not be stuck down. The doctrine of pith and substance gives an additional dimension to the powers of Centre as well as the states. The Central legislation would prevail, where the Central and the State legislation covers the same field.
-Kiranpreet Kaur
Associate at Aggarwals & Associates S.A.S. Nagar, Mohali
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