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Our company could not hold its Annual General Meeting (AGM) within
the statutory period specified by the Companies Act, 1956 (CA 56),
and took a three-month extension from the Registrar of Companies
(RoC). The three-month extension has now lapsed without our AGM
being held. How can we hold our AGM in a legally valid manner?
Once a company defaults in convening its AGM within the time specified
by Section 166 of ca56, and if an extension of time has been obtained
by the company from the roc and the extended time has also lapsed,
the company cannot on its own convene the AGM. Section 167 of ca56
specifically lays down the procedure to be followed if a default
is made in holding an AGM in accordance with Section 166 of ca56.
Now your AGM can only be convened in terms of Section 167 of ca56,
on the direction of the Company Law Board (CLB). Neither the shareholders
nor the board of directors can call the AGM of your company unless
an application is made to the CLB by a shareholder of company and
the CLB directs the holding of the AGM.
An AGM, if held by your company out of time
without the directions of the CLB, would not be a valid meeting.
In Company Petition No. 5/167/97-CLB Taihan Electric Wire Co. Ltd
and Another vs TDT Copper Ltd and Others (1998) 29 CLA 126 (CLB),
it was held that since the time limit prescribed under section 166
had already lapsed, the company on its own could not validly call
the AGM. A default has been committed admittedly and in order to
regularise the AGM, intervention of the CLB is required. However,
an application to the CLB for directions for holding the AGM does
not condone the default of not holding the AGM within the prescribed
time or excuse the penalty prescribed by Section 168 of ca56 for
such default. A separate application has to be made to the roc under
Section 621-A of ca56 for compounding the defaults for not holding
the AGM within the time specified under the ca56.
One of the conditions of the Secretariat
of Industrial Assistance (SIA) approval received for our foreign
technical collaboration is that the agreement entered into with
our foreign collaborator must be governed by Indian laws. Our foreign
collaborator, however, wishes to have the agreement governed by
the laws of England. Is this possible?
In addition to the condition that the agreement
entered into by your company with the foreign collaborator must
be governed by Indian laws, your SIA approval letter is likely to
contain another condition that the SIA approval letter is made a
part of the agreement to be executed between your company and the
foreign collaborator and only those provisions of the agreement
that are covered by the SIA approval letter or are not at variance
with the provisions of the SIA approval letter will be binding on
the Government of India or the Reserve Bank of India (RBI).
The SIA approval letter is, therefore, incorporated
by implication in the agreement between your company and its foreign
collaborator and will necessarily need to be governed by Indian
laws in terms of the SIA approval (which forms a part of your agreement).
If the agreement is governed by the laws of England, it will not
be binding on the Indian Government or the RBI. Since the conditions
stipulated in the SIA approval letter are primarily imposed to regulate
payment of technical collaboration fees, whether by way of royalties
and/or lump-sum fees, to the foreign collaborator, you may consider
subjecting the provisions relating to technical collaboration fees,
including payment, remittance and any disputes arising therefrom,
to Indian laws, while other provisions of the agreement may be governed
by English laws.
The views expressed here should not be construed
as legal opinion and is for reference only. Business Today and/or
the author will not be responsible for any decision taken by readers
on the basis of these views. Please send in your queries to Legal.bt@intoday.com
or Going By the Book, c/o Business Today, F-26, Connaught Place,
New Delhi-110001.
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