RULES OF LAW

Supreme Court Civil Appeal No 527 of 2023 Securities and Exchange Board of India Versus V. Shankar filed by the Securities and Exchange Board of India under Section 15Z of the Securities and Exchange Board of India Act 1992 arises from a judgment dated 1 November 2022 of the Securities Appellate Tribunal. The Securities Appellate Tribunal, while allowing the appeal by the respondent, set aside an order dated 22 March 2022 of the Whole Time Member under Section 15HA of the SEBI Act by which a penalty of Rs Ten lakhs was imposed on the respondent for violating of Sections 68 and 77A of the Companies Act 1956 and Regulations 3(a), ( b), (c), (d), 4(1), 4(2)(f), (k) and (r) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations 2003 read with Sections 12A (a), (b) and (c) of the SEBI Act. The respondent was a Company Secretary of Deccan Chronicle Holdings Limited for two years, 2009-10 and 2010-...

The Company’s Memorandum of association represents its charter as it defines the objects for which it has been setup. In Cotman Vs. Brougham (1918)AC 514, it was observed that “the purpose of memorandum is to enable the shareholders, creditors and those dealing with the company to know what is its permitted range of enterprise”. The Memorandum of association sets out the boundaries beyond which the company cannot traverse. Any action of a company which is beyond the memorandum is ultra virus and void and incapable of being ratified. Where there is no connection or nexus between the power exercised and the attainment of an object, the exercise of such power shall be deemed to be ultra virus. Section 4(1) of the Companies Act 2013   provides the relevant information that a Memorandum of association shall provide, which includes, in sub-clause (a) the name of the company; in sub-clause (b) the State in which the registered office of the company is to be situated; in sub-Clause (c)...

In civil   appeal no. 2776 OF 2022 in the matter of MAHIMA DATLA VERSUS DR. RENUKA DATLA & ORS. Supreme Court of India held that Duomatic Principle is applicable even in the Indian context. Strict adherence to a statutory requirement may be dispensed with if it is demonstrated any act that the members of a company can do by formal resolution in a general meeting is done with the consent of all the members of the Company. Although this Principle is only applicable in those cases wherein bona fide transactions are involved in case of fraud this principal is a clear exception. The Duomatic Principle can be briefly stated as “anything the members of a company can do by formal resolution in a general meeting, they can also do informally, if all of them assent to it.” This Principle was derived from the decision In Re: Duomatic Ltd., [1969] 2 Ch. 365, wherein Buckley, J. held as under: “where it can be shown that all shareholders who have a right to attend and vote at a general m...