BIAS BY OFFICERS
The Supreme Court in State of Punjab Vs. Davinder Pal Singh Bhullar has examined the concepts of 'Judicial Bias' and the Doctrine of Waiver. The Supreme Court has held that the issue of bias should be raised by the party at the earliest, if it is aware of it and knows its right to raise the issue at the earliest, otherwise it would be deemed to have been waived. While examining various judicial authorities on the subject, the Supreme Court held as under;
LEGAL ISSUES : I. JUDICIAL BIAS
10. There may be a case where allegations may be made against a Judge of having bias/prejudice at any stage of the proceedings or after the proceedings are over. There may be some substance in it or it may be made for ulterior purpose or in a pending case to avoid the Bench if a party apprehends that judgment may be delivered against him. Suspicion or bias disables an official from acting as an adjudicator. Further, if such allegation is made without any substance, it would be disastrous to the system as a whole, for the reason, that it casts doubt upon a Judge who has no personal interest in the outcome of the controversy.
11. In respect of judicial bias, the statement made by Frank J. of the United States is worth quoting:-
"If, however, `bias' and `partiality' be defined to mean the total absence of preconceptions in the mind of the Judge, then no one has ever had a fair trial and no one will. The human mind, even at infancy, is no blank piece of paper. We are born with predispositions ....... Much harm is done by the myth that, merely by....... taking the oath of office as a judge, a man ceases to be human and strips himself of all predilections, becomes a passionless thinking machine." [In re: Linahan, 138 F. 2nd 650 (1943)]
(See also: State of West Bengal & Ors. v. Shivananda Pathak & Ors., AIR 1998 SC 2050).
12. To recall the words of Mr. Justice Frankfurter in Public Utilities Commission of the District of Columbia v. Franklin S. Pollak, 343 US 451 (1952) 466: The Judicial process demands that a judge moves within the framework of relevant legal rules and the covenanted modes of thought for ascertaining them. He must think dispassionately and submerge private feeling on every aspect of a case. There is a good deal of shallow talk that the judicial robe does not change the man within it. It does. The fact is that, on the whole, judges do lay aside private views in discharging their judicial functions. This is achieved through training, professional habits, self- discipline and that fortunate alchemy by which men are loyal to the obligation with which they are entrusted.
13. In Bhajan Lal, Chief Minister, Haryana v. M/s. Jindal Strips Ltd. & Ors., (1994) 6 SCC 19, this Court observed that there may be some consternation and apprehension in the mind of a party and undoubtedly, he has a right to have fair trial, as guaranteed by the Constitution. The apprehension of bias must be reasonable, i.e. which a reasonable person can entertain. Even in that case, he has no right to ask for a change of Bench, for the reason that such an apprehension may be inadequate and he cannot be permitted to have the Bench of his choice. The Court held as under:-
"Bias is the second limb of natural justice. Prima facie no one should be a judge in what is to be regarded as `sua causa', whether or not he is named as a party. The decision- maker should have no interest by way of gain or detriment in the outcome of a proceeding. Interest may take many forms. It may be direct, it may be indirect, it may arise from a personal relationship or from a relationship with the subject-matter, from a close relationship or from a tenuous one."
LIABILITY OF DEVELOPERS OF REAL ESTATE AND CONTRACTORS UNDER GST
Liability of Real Estate Developers ; Works Contractors under GST
l
Developers
1. The real estate developers are ordinarily known as builders for residential or commercial use or both and the said construction is undertaken for sale of units to individual buyers along ordinarily with land underneath the structure without retaining any right, at the end of the project,in respect of land and buildings. After entering into agreements for sale before the project is completed ( before Occupation Certificate is received [OC]) or after the project is completed (after Occupation Certificate is received) attracts different liabilities under GST law. Ordinarily, when full consideration for transfer of unit is received after obtaining OC, GST is not attracted but if the part of consideration is received before obtaining OC, GST at applicable rate is payable by developer. When the OC is received, the possession is handed over to buyers, after receiving full consideration agreed upon. For the purpose of undertaking a project there are broadly various modules adopted by developers as follows:
i) The developer purchases open land from land owner and pays consideration of land. Thereafter, construction activity is carried out on the said plot of land.
ii) The developer obtains leasehold land from a development authority and starts construction where lump sum lease premium for a particular period is paid to Development Authority.
iii) A land lord (including housing societies) owns land with or without a construction thereon, but the potential of development that is development rights are transferred with available basic FSI and right to load TDR wherever it is permissible by planning authority, for a consideration which can be lump sum monetary consideration as also handing over on ownership basis part of units constructed with same area or additional area or members of housing society, free of monetary cost, and/or corpus fund, rent for temporary alternate accommodation, shifting charges with right to sale balance area in open market.
iv) Where a developer is landlord or has become land lord and agrees with tenants for permanent alternative accommodation of same area or more with benefits of corpus fund, rent for temporary alternate accommodation, shifting charges with right to sale balance area in open market.
v) The construction can be residential, commercial or residential cum commercial.
2. The liability of developers for GST is deemed by the CGST Act to be liability for providing services. Schedule II 5(b).
3. Before 1.4.2019, liability was governed by Notification 11/2017 dt 28.06.2017 Item No 3(i). The Scheme was simple. The Developers has to pay GST at 18 % (9% CGST and 9% SGST) on the consideration agreed upon with the buyer on the value of agreement reduced by 1/3 rd amount of consideration towards cost of land sough to be transferred along with the unit ( as per paragraph 2 of the Notification.) Hence effective rate was 6 % + 6% = 12 %. This was when part of consideration was received prior to OC or first occupancy of building. Only when entire consideration is received after OC or first occupancy, no GST was payable. The developers has to pay the GST as and when installments are received or billed as per time of supply provided in section 13 of CGST Act. The developers was entitled to full input tax credit on goods and services received for implanting the project.
4. The Notification 11/2017 dt 28.06.2017 has been amended with effect from 1.4.2019 for projects which are ongoing or will start after 1.4.2019. The amended provisions have a condition, inter alia, that no ITC shall be available and liability shall be paid in cash. However, any ongoing project as on 1.4.2019 can continue to follow this earlier scheme of paying effective 12 % with availing ITC, if option to opt for that scheme with full ITC is exercised before 20.5.2019. In cases where construction activities are conducted by a subcontractor with materials and /or labour, the GST charged on such supply of services is not available for ITC in hands.
5. Any project ongoing as on 1.4.2019 does not opt for the earlier module, the rate of tax has been given for different buildings per classification in Notification No. 3 of 2019 dt 29.3.2019. The developer who comes under the new scheme has to pay GST as per rates provided in the Notification No 3 of 2019 dt 29.3.2019 on the value of consideration received after deducting 1/3 rd towards land cost. Any ITC claimed on the stock of goods or semi finished goods on 31.3.2019 will have to be reversed on 1.4.2019. Two major conditions are prescribed. Firstly, the GST shall be paid in cash and no ITC will has been taken. It is not clear that ITC, if not taken for availing rate provided in Notification No. 3 of 2019 dt 29.3.2019 lapses or can be taken for other outward supplies. Secondly, the developer shall pay GST on the value of constructed units given to landlord as a consideration for transfer of FSI or TDR or development rights. Thirdly, 80 % of the purchases of goods and services for the project must be from Registered Supplier. Any short fall there of below 80 %, the developer shall be liable to pay 18 %,on RCM [ Notification No. 07/2019- Central Tax (Rate) Dt 29th March, 2019] before the date of filing return for the first quarter after the end of the financial year, except supply of gods or services by way of :
(i) grant of development rights,
(ii) long term lease of land (against upfront payment in the form of premium, salami, development charges etc.) or FSI (including additional FSI),
(iii) electricity, high speed diesel, motor spirit, natural gas.
However, cement shall be liable to GST at the rate (28%) applicable for Cement on RCM
However, inputs and input services on which tax is paid on reverse charge mechanism (RCM) shall be deemed to have been purchased from registered person;
The capital goods are also included in the short fall portion..The records for different projects shall be maintained separately project wise.
Though ITC is not available, the same should be shown in Return 3B as ineligible ITC.
6. Rates of tax are as follows. These rates are applicable unless the developer has opted to go for the earlier scheme of taxes before 20thMay 2019.
7. In affordable residential apartments with commercial portion is not more than 15 % that is Residential Real Estate Project (RREP) in metro cities where the carpet area of unit is upto 60 meters and in non metro cities is upto 90 meters, and consideration is upto Rs 45,00,000/- the rate of GST is 0.75 % + 0.75 % = 1.5% on value of consideration received after reducing 1/3 rd of value for land cost. Therefore effective rate is 1%.The same rate is applicable on Real Estate Project( REP )project.[ Item 3(i)]
8. In projects other than affordable residential apartments ( where the carpet area of unit is more than 60 meters in metro cities / more than 90 meters in non metro cities is, or consideration is more than Rs 45,00,000/-) with commercial portion not more than 15 % (RREP), rate of GST on residential apartments is 3.75 % + 3.75%=7.5% on consideration value reduced by value of land cost at 1/3rdof total consideration. Hence, effective rate is 5%. [ Item 3(ia)] For Commercial apartments in RREP also where commercial portion is not more than 15 % same rate is applicable..[ Item 3(ib)]
9. In any other project where the commercial portion carpet area is more than 15% (REP other than RREP) of total carpet area rate of tax on affordable residential apartments (where the area of unit is upto 60 meters and in non metro cities is upto 90 meters, and consideration is upto Rs 45,00,000/-) rate of GST for residential portion shall be same 0.75 % + 0.75 % = 1.5% on value of consideration received after reducing 1/3 rd of value towards land cost. Hence, effective rate is 1%..[ Item 3(ic)]
10. In any other project where the commercial portion is more than 15% (REP other than RREP other than affordable residential apartments, rate of GST on residential apartment shall be 3.75 % + 3.75%=7.5% on consideration value less value of land at 1/3rdof total consideration. Hence, effective rate is 5%.
11. In REP project where the commercial apartments’ carpet area or units are more than 15%, on commercial apartments, residual rate of 9 % +9% = 18 % with claim of ITC, and no condition of 80 % purchase from Registered Supplier shall be applicable. Here land cost is not allowed to be deducted from the consideration since in residuary entry Paragraph 2 is not applicable. This is gross discrimination. Here proportionate ITC attributable to commercial portion is available in REP as per formula given in Annexure I. Same is applicable for RREP in Annexure II.
12. The liability in respect of goods purchased from unregistered supplier, the tax on RCM is payable at 9% + 9% = 18 %.[Notification No. 08/2019- Central Tax (Rate) Dt the 29th March]
GST on transfer of development rights or FSI or Lease Premium
Now transfer of development rights FSI or TDR to developer by land lord is or upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, on or after 01.04.2019, for construction of residential apartments by a promoter in a project, intended for sale to a buyer, is specifically exempted (nil rated) from the liability of GST in case of residential apartments. The exemption is only for residential apartments that are where part consideration is received before OC or first occupation, and in case of unsold flat where the entire consideration is received after OC, proportionate GST on Transfer of Development Rights or FSI shall be payable on RCM [ Notification No. 05/2019- Central Tax (Rate) dt 29th March, 2019] by developer. Rate of tax in such cases is 0.5 % in affordable housing and 2.5% in other than affordable housing apartments. However, the liability of GST on transfer of development rights in respect of the commercial portion of project is not available and the same payable at the time of OC on RCM Exemption is available only for residential apartments and not commercial portion and hence proportionate for commercial construction, value is to be determined on the basis of total area ratio to commercial area. The same calculation applies to one time premium for lease land known as salaami etc. The liability is of developers. But no ITC is available on residential apartments remained unsold and GST on that count is payable. ( Notification No. 04/2019- Central Tax (Rate) dt 29th March, 2019 and Notification No. 06/2019-Central Tax (Rate) dt 29th March, 2019]
Contractors
Now we deal with the liability of contractors in case of development projects under various schemes as contained in item no (iii) to (vi) of the Notification No. 11 of 2017.
The rate of tax for the following items (i) to (xii) is 6 %.
It must be noted that these works contract are not Real Estate Projects for sale as defined in the RERA Act but are works contract for certain categories and hence clauses (i) to (if) shall not be applicable. Moreover, in the item No. (3) (iv), (v), (va), the applicability of these following categories be attracted only when they are not covered by Entry 3 (i), (ia), (ib), (ic), (id), (ie), and (if) as per amendment of the Notification 11/2017 by Notification 03/2019. It means if any of the item if covered by Entry 3 (i), (ia), (ib), (ic), (id), (ie), and (if) shall not be covered by rates in item 3(iv) and (v). In other words, those works contract or projects fall under Entry 3 (i), (ia), (ib), (ic), (id), (ie), and (if) shall automatically excluded following clauses (i) to (xi) after 1.4.2019.
(i) Any composite supply of works contract u/s 2(119) by way of civil structure pertaining to a scheme under JNNURM (Jawaharlal Nehru National Urban Renewal Mission ) or Rajiv Awas Yojana. (Item 3 (iv ) (c)of of Notification No. 11 of 2017.
(ii) Any composite supply of works contract u/s 2(119) by way of construction of a civil structure or any other original works pertaining to the “ln-situ redevelopment of existing slums using land as a resource, under the Housing for All (Urban) Mission/ Pradhan Mantri AwasYojana (Urban) Item 3 (iv ) (d)of of Notification No. 11 of 2017.
(iii) Any composite supply of works contract u/s 2(119) by way of construction any composite supply of works contract u/s 2(119) by way of construction a civil structure or any other original works pertaining to the “Economically Weaker Section (EWS) houses” constructed under the Affordable Housing in partnership by State or Union territory or local authority or urban development authority under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban); Item 3 (iv ) (da)of of Notification No. 11 of 2017.
(iv) Any composite supply of works contract u/s 2(119) by way of construction acivil structure or any other original works pertaining to the “houses constructed or acquired under the Credit Linked Subsidy Scheme for Economically Weaker Section (EWS)/ Lower Income Group (LIG)/ Middle Income Group-1 (MlG-1)/ Middle Income Group-2 (MlG-2)” under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban); Item 3 (iv ) (db)of of Notification No. 11 of 2017.
(v) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to single residential unit otherwise than as a part of a residential complex. Item 3 (v ) (b)of of Notification No. 11 of 2017.
(vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;Item 3 (v ) (c)of of Notification No. 11 of 2017.
(vii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to low cost houses up to a carpet area of 60 square meters per house in a housing project approved by the competent authority under- (1) the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri AwasYojana; (2) any housing scheme of a State Government; Item 3 (v ) (d)of of Notification No. 11 of 2017.
(viii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to low-cost houses up to a carpet area of 60 square metres per house in an affordable housing project which has been given infrastructure status vide notification of Government of India, in Ministry of Finance, Department of Economic Affairs vide F. No. 13/6/2009-INF, dated the 30th March,2017; Item 3 (v ) (da) of Notification No. 11 of 2017.
(ix) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017,provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity by way of construction of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession.However, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities Item 3 (v i) (a) of Notification No. 11 of 2017.
(x) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017,provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity by way of construction of a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; Item 3 (v i) (b)of of Notification No. 11 of 2017.
(xi) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017,provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity by way of construction of a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017. Item 3 (vi ) (c) of Notification No. 11 of 2017
(xii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of affordable residential apartments having area upto 60 sq meters in metro cities or 90 sq meters in non-urban area at a price not more than Rs 45 lakhs, in a project which commences on or after 1st April, 2019, or in an ongoing project in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if), as the case may be, in the manner prescribed therein. The precondition is that the that carpet area of the affordable residential apartments, is not less than 50 per cent. of the total carpet area of all the apartments in the project. It ultimately it is found that there was shortfall, then by RCM the Developer shall be liable to pay differential tax on rate actually chargeable and rate applied.Item 3 clause (va) of Notification No 11/2017 as amended by Notification No. 3/2019.
By Vinay Sonpal LL.M.
Advocate,High Court Mumbai
INPUT TAX CREDIT ON CAPITAL GOODS
ITC on Capital Goods
INPUT TAX CREDIT (ITC) IN RESPECT OF CAPITAL
GOODS UNDER GST LAW
1. As per
section 16 if CGST Act, every registered person will be entitled to take input tax
credit (ITC) in
respect of input tax charged to him on supply of goods or services to
him, if it is used or intended to be used in the course of or in furtherance of
his business. Two conditions, by way of rules, as may be prescribed and manner
provided in section 49 are attached to enjoyment of ITC. As per provisions of
section 49, inter alia, the manner of utilization of ITC is provided. The
person who is entitled to ITC must be registered person. One who has not taken
registration in time and afterwards either registration is enforced or
voluntarily taken on the ground that the Turnover exceeded threshold limit,
will not be entitled to ITC for the unregistered period though his
purchases were on payment of GST on procurement side. On payment side during
this unregistered period, full liability without ITC, has to be discharged. The
section does not make any distinction between capital goods and other goods for
allowing credit of ITC. Hence, ITC in respect of capital goods, is
available to be taken, since ITC credit for capital goods is in parity
with other goods, and is available in the month/quarter/year of purchase.
2. The
Section 2(19) provides for definition of capital goods. It provides, capital
goods are those goods, values where of have been capitalized and are used
or intended to be used in the course or in furtherance of business. Hence,
capital goods which are not capitalized, that is to say, not debited to
respective asset account, ITC in respect thereof, is not available to be
taken credit.
3. However,
Section 2(59) provides that “input” means any goods other than capital
goods used or intended to be used in the course or in furtherance of business.
It has implication that wherever word input is used, and not input tax, the
same shall mean input other than capital goods.
4. As per
section 16(3), ITC is not available in respect of tax element of capital
goods upon which depreciation is claimed under Income Tax Act 1961 as part of
cost of asset. Hence, it is advisable not to claim the tax component of inward
supply as part of cost of capital asset while claiming depreciation. And
additional words used are “plant and machinery” even if debited to profit and
loss account , and not capitalized , will be be available for claiming ITC,
unless tax component of plant and machinery, is not added in the value of
plant and machinery for claiming depreciation. There appears to be absurdity ,
if capitalized it will be , covered by earlier terms “capital goods” and if not
capitalized no depreciation can not ordinarily claimed.
5. As
provided in section 18(1) (c) and (d) r/w Rule 40 if dealer opts for
Composition Scheme as per section 10 and thereafter , for any reasons , ceases
to be entitled to Composition Scheme, he is entitled to claim ITC on
capital goods, inter alia other goods, semi-finished or finished, held on the
date on which he once again liable to GST u/s 9 (regular levy), subject
reduction under Rule 40 of 5% per centage per quarter from the date of invoice
for purchase of such capital goods, i.e. 20% per annum assuming life of asset
as five years. The period of five years artificial and is not realistic.
Hence, coming to taxability u/s 9 is after five years of date of invoice of
capital assets, no ITC shall be available even if held. [S
18(1)(c)].The same principle applicable when goods supplied by taxable person
which is exempt becomes taxable liable to GSTS [S.18(1)(d)]. Similarly, if the
taxable person opts for Composition Scheme u/s 10 or good become exempt
subsequently, then ITC , earlier claimed, will be paid back after reduction of
5% per quarter from the date of purchase of capital goods, till the date of
opting for Composition Scheme or date of of exemption[S 18(4) Rule 44(1)
(b)].Similarly, when the capital goods or plant and machinery which are supplied,(i.e.
sold) , the registered person shall pay the amount of ITC availed thereon as
reduced by 5% per quarter from the date of the inward supply invoice to the
date of supply, in respect of such capital goods or plant and machinery[S18(6),
Rule 40(2)].
6. In respect
of capital goods sent for job work, full ITC is available notwithstanding that
the goods have not been sent to job worker from the place of the taxable
person[S19(4) and (5)].But the supply of capital goods to job worker
shall be deemed to be supply of goods if the said capital goods have not been
returned back to the taxable person within three years from the date of supply
by taxable person [S 19(6)].Consequently, ITC claimed will have to be
reversed and paid in cash, u/s 18(6), after reducing the amount calculated at
5% per quarter from the date of invoice of capital goods till the date of
expiry of three years.
7. If the
registration of the taxable person is cancelled then whatever ITC utilized in
respect of such capital assets shall be debited to electronic cash/credit
register, after reducing 5 % percentage per quarter from the date of the
invoice of capital goods till the date of cancellation of Registration [S
29 r/w Rule 44(1)(b)].
8. If
CENVAT credit is carried forward in respect of capital goods
in a return by a taxable person while filing return under erstwhile excise law,
the taxable person other than taxable person under Composition Scheme, can take
ITC of that amount .Conditions for availing ITC are :
(a) The said
credit is admissible as input tax credit under the provisions of the CGST Act;
(b) The
registered person has furnished all the returns required under the existing law
for the period of six months immediately preceding the appointed date.
(c) Input tax
credit does not relate to goods manufactured and cleared under exemption
notifications as are notified by the Government.
(d) Input tax
credit carried forward will not be allowed if such credit relates to goods
manufactured and cleared under exemption notifications as notified by the
Government.
(e) Trans I
(Rule 117) is filed within 90 days from 1.7.2017 this date has been extended
from time to time by Government and Courts.
9. Thus,
though ITC is available for capital goods, it is with certain conditions and
restrictions as stated above.
By Vinay Sonpal LL.M. Advoca
P
Guidelines and consultation for Re-development of societies in Mumbai
I am having special interest in exploring possibilities, preparing project legal report and settling terms for re development of societies in Mumbai so as to fully protect the socities while assigning work to builders and developers.
SUIT FOR INFRINGEMENT OF COPYRIGHT/TRADEMARK/DESIGN ETC
Suit for infringement of copy right/trade mark/ design/passing off:
Minimum Pleadings:
Ø Goodwill of the product in market
Ø Period of Use of mark
Ø Deceptive similarity
Ø Intention to passing off
Ø Details of sales for several years
Ø Advertisement expenses incurred for several years
Ø Public interest for protection
Minimum Pleadings:
Ø Goodwill of the product in market
Ø Period of Use of mark
Ø Deceptive similarity
Ø Intention to passing off
Ø Details of sales for several years
Ø Advertisement expenses incurred for several years
Ø Public interest for protection
Power of Attorney -Scope as Witness
Man Kaur (Dead) By Lrs. Versus Hartar Singh Sangha apex court by its judgment dt 5.10.2010 has shown guidlines for a witness power of attorney about his scope of leading evidence as follows:
We may now summarise for convenience, the position as to who should give evidence in regard to matters involving personal knowledge:
(a) An attorney holder who has signed the plaint and instituted the suit, but has no personal knowledge of the transaction can only give formal evidence about the validity of the power of attorney and the filing of the suit.
(b) If the attorney holder has done any act or handled any transactions, in pursuance of the power of attorney granted by the principal, he may be examined as a witness to prove those acts or transactions. If the attorney holder alone has personal knowledge of such acts and transactions and not the principal, the attorney holder shall be examined, if those acts and transactions have to be proved.
(c) The attorney holder cannot depose or give evidence in place of his principal for the acts done by the principal or transactions or dealings of the principal, of which principal alone has personal knowledge.
(d) Where the principal at no point of time had personally handled or dealt with or participated in the transaction and has no personal knowledge of the transaction, and where the entire transaction has been handled by an attorney holder, necessarily the attorney holder alone can give evidence in regard to the transaction. This frequently happens in case of principals carrying on business through authorized managers/attorney holders or persons residing abroad managing their affairs through their attorney holders.
(e) Where the entire transaction has been conducted through a particular attorney holder, the principal has to examine that attorney holder to prove the transaction, and not a different or subsequent attorney holder.
(f) Where different attorney holders had dealt with the matter at different stages of the transaction, if evidence has to be led as to what transpired at those different stages, all the attorney holders will have to be examined.
(g) Where the law requires or contemplated the plaintiff or other party to a proceeding, to establish or prove something with reference to his `state of mind' or `conduct', normally the person concerned alone has to give evidence and not an attorney holder. A landlord who seeks eviction of his tenant, on the ground of his `bona fide' need and a purchaser seeking specific performance who has to show his `readiness and willingness' fall under this category. There is however a recognized exception to this requirement. Where all the affairs of a party are completely managed, transacted and looked after by an attorney (who may happen to be a close family member), it may be possible to accept the evidence of such attorney even with reference to bona fides or `readiness and willingness'. Examples of such attorney holders are a husband/wife exclusively managing the affairs of his/her spouse, a son/daughter exclusively managing the affairs of an old and infirm parent, a father/mother exclusively managing the affairs of a son/daughter living abroad.
We may now summarise for convenience, the position as to who should give evidence in regard to matters involving personal knowledge:
(a) An attorney holder who has signed the plaint and instituted the suit, but has no personal knowledge of the transaction can only give formal evidence about the validity of the power of attorney and the filing of the suit.
(b) If the attorney holder has done any act or handled any transactions, in pursuance of the power of attorney granted by the principal, he may be examined as a witness to prove those acts or transactions. If the attorney holder alone has personal knowledge of such acts and transactions and not the principal, the attorney holder shall be examined, if those acts and transactions have to be proved.
(c) The attorney holder cannot depose or give evidence in place of his principal for the acts done by the principal or transactions or dealings of the principal, of which principal alone has personal knowledge.
(d) Where the principal at no point of time had personally handled or dealt with or participated in the transaction and has no personal knowledge of the transaction, and where the entire transaction has been handled by an attorney holder, necessarily the attorney holder alone can give evidence in regard to the transaction. This frequently happens in case of principals carrying on business through authorized managers/attorney holders or persons residing abroad managing their affairs through their attorney holders.
(e) Where the entire transaction has been conducted through a particular attorney holder, the principal has to examine that attorney holder to prove the transaction, and not a different or subsequent attorney holder.
(f) Where different attorney holders had dealt with the matter at different stages of the transaction, if evidence has to be led as to what transpired at those different stages, all the attorney holders will have to be examined.
(g) Where the law requires or contemplated the plaintiff or other party to a proceeding, to establish or prove something with reference to his `state of mind' or `conduct', normally the person concerned alone has to give evidence and not an attorney holder. A landlord who seeks eviction of his tenant, on the ground of his `bona fide' need and a purchaser seeking specific performance who has to show his `readiness and willingness' fall under this category. There is however a recognized exception to this requirement. Where all the affairs of a party are completely managed, transacted and looked after by an attorney (who may happen to be a close family member), it may be possible to accept the evidence of such attorney even with reference to bona fides or `readiness and willingness'. Examples of such attorney holders are a husband/wife exclusively managing the affairs of his/her spouse, a son/daughter exclusively managing the affairs of an old and infirm parent, a father/mother exclusively managing the affairs of a son/daughter living abroad.
GUIDELINES FOR APPROVAL NAME OF COMPANY
Department’s guidelines for deciding cases for availability of names*
Superseding all previous Circulars and Instructions (Circular Letter No. 10(1)–RS/60,
dated 01-04-1960 and Circular Letter No. 10 / (19)-RS/61, dated 15-03-1962) the
Department of Company Affairs has laid down the following principles for deciding
cases for availability of names:
Guiding instructions for availability of names
The procedure for scrutinizing the availability of names of new companies has
recently been re-examined carefully in this Department, having taken into account
the difficulties experienced by some Registrars in the following the instruction
given to them vide Department’s Letter No 10/(19)-RS/61, dated 15-03-1962. This
letter together with the enclosed set of instructions as revised, consolidates, and
is in supersession of all the previous instruction issued from time to time by this
Department. An illustrative list of names considered to be undesirable within the
meaning of Section 20 of the Companies Act, has also been given herewith. The
guiding instructions for deciding cases of making a name available for registration
are given in Appendix A to this letter. In addition to these, the Registrars of
Companies are requested to note the following general instructions also.
1. As the Registrars have hitherto been doing, they should refer only doubtful
and hard cases where they might find it difficult to take a decision, to the
Research and Statistics Division at the Headquarters.
2. Where consultation with the Regional Director on the spot is possible,
Registrars of Companies would take advice before referring doubtful and hard
cases to the Headquarters.
3. The Registrars of Companies may ask the promoters to suggest a panel of
three to five names quite distinct from each other for consideration.
4. The Registrars should adopt a polite attitude and persuade the Company
promoters to suggest names consistent with the guiding principles. They
should explain the difficulties of the Administration in approving names likely
to create confusion in the minds of the public and harm the interest of the
promoters.
5. In case any of the names proposed by the promoters is not agreed to by the
Registrars as available, it should be open to them to follow up the matter by
subsequent letters or application for the same fee within a reasonable period
which may normally be construed to mean three months from the date of
rejection of the name/names proposed.
6. The Registrars may permit the promoters to use the name of the firm in
brackets after the duly approved names as incorporating or successor to
(name of the firm) in order to fulfill the desire of the promoters to retain the
goodwill of their business in cases where the names of firms seeking
registration under the Companies Act is considered as undesirable within the
meaning of Section 20 of the Companies Act.
7. Registrars should ascertain from the promoters if the proposed name/names
were applied for to any other Registrar of Companies and if so, with what
result. In case there is some difference of opinion between the two Registrars
in making the name available, then the case may be referred to the Board for
advice.
8. The following guidelines were substituted vide amended Rule 4A of the
Companies (Central Governments) General Rules & Forms 1956) Notification
G.S.R 720(E) dated 16th November 2007.
8a.The Registrar shall cause to examine the application as to whether
the changed name or the name with which the proposed company is
to be registered, as the case may be, is undesirable within the
meaning of section 20. In case the name is undesirable, he may reject
the same or ask for resubmission of the application with new names
or calls for further information, ordinarily within three days of
receipt of the application.
8b.The applicants shall be given only upto two opportunities for resubmission
of their proposal against the fee paid in the first instance
for name availability after the original application is filed. In the
event the registrar does not find the proposals so submitted and
resubmitted as fit for approval, he shall reject the application after
the second re-submission. However, the applicant will be at liberty to
file fresh application along with prescribed fee.
8c.The Registrar of Companies informs the company or the promoters of
the company that the changed name or the name with which the
proposed company is to be registered, as the case may be, is not
undesirable, such name shall be available for adoption by the said
company or by the said promoters of the company for a period of
sixty days from the date the name is allowed.
8d.If the name so allowed is not adopted on or before the expiry of the
period of sixty days from the date it is allowed, the applicant may
apply for extension for retention of such name for a further period of
thirty days on payment of fifty per cent of the fee prescribed for the
application at the initial stage. No further extension will be granted
after expiry of ninety days from the date the name is allowed in the
first instance. The name allowed shall lapse after expiry of sixty or
ninety days, as the case may be, from the date it is allowed first.
8e.The name allowed by the Registrar before the date of this
notification comes into force, if not adopted, shall lapse after the
expiry of a period of six months from the date on which the name was
initially allowed or renewed. However, in case the name has not been
renewed earlier, the applicant on or before the date of expiry, may
apply for one time extension of such name for a further period of
thirty days on payment of fifty per cent of the fee prescribed for the
application at the initial stage.
9. It is necessary that the “keyword” of proposed name/names are checked
separately with the names of the existing companies beginning with those
“keywords” so as to avoid any possibility of allowing a name with a little
rearrangement of the same words of the existing company which may be
said to be closely resembling each other.
It may be further added that although it is not possible to lay down hard and
fast rules for determining whether a particular name or any two names too
nearly resemble each other, each case, however, will be decided on its merits.
As already emphasized in the earlier circular letter of this Department on the
subject dated 15th March 1962 that the various criteria set out in the guiding
principles at Appendix “A” are not exhaustive but only illustrative of what is
considered to be undesirable names under Section 20 of the Companies Act and
that, by the very nature of the subject all possible cases could not be covered.
It is therefore, suggested that where the Registrars find that certain proposed
names could not be referred to the Research and Statistics Division at the
Headquarters after availing of the help of the Regional Director if available on
the spot.
Guiding instructions for deciding cases of making
a name available for registration
Departments’ guiding principles
The Department has evolved the following guiding principles for deciding
availability of names:
A name which falls within the categories mentioned below will not generally be
made available:
1. If it is not in consonance with the principal objects of the company as set
out in its memorandum of association. This does not necessarily mean that
every name should be indicative of its objects. Bu when there is some
indication of business in the name then it should be in conformity with its
objects.
2. If the Company / Companies main business is finance unless the name is
indicative of that particular financial activities. Viz. Chit Funds /
Investments / Loan, etc.
3. If it includes any word or words which are offensive to any section of the
people.
4. If the proposed name is the exact Hindi translation of the name of an
existing company in English especially an existing company with a
reputation.
5. If the proposed name has a close phonetic resemblance to the name of the
company in existence for example, J.K Industries Ltd., Jay Kay Industries
Limited.
6. If the name is only a general one like Cotton Textile Mills Ltd., or Silk
Manufacturing Ltd., and not specific like Calcutta Cotton Textiles Mills
Limited or Lakshmi Silk Manufacturing Company Limited.
7. If it includes, the word “Co-operative”, Sahakari or the equivalent of word
“Co-operative” in the regional languages of the country.
8. If it attracts the provisions of the Emblems and Names (Prevention of
Improper Use) Act, 1950 as amended from time to time, i.e. use of improper
names prohibited under this Act.
Department of Company Affairs Circulars
General Circular No: 24 of 2001, dated 21-11-2001
Instruction No. 8 of the Guiding instructions circulated, vide this
Department’s Letter No. 10(1)-RS/65, dated 27th November 1965 provides
that a name in the category mentioned below will not generally be made
available:
1. “If it attracts the provisions of the Emblems and Names (Prevention of
Improper Use) Act, 1950 as amended from time to time. i.e. use of
improper names, prohibited under this Act.”
2. It is observed from a communication received from the Department of
Consumer Affairs that the above said instructions are not being followed
scrupulously.
3. The ROCs are advised to take into account the provisions of the above
said Emblems and Names Act while making names available to companies
under the Companies Act, 1956. All the ROCs are requested to adhere to
the above instructions for strict compliance.
9. If it connotes Government’s participation or patronage unless circumstances
justify it. E.g., a name may be deemed undesirable in certain context if it
includes any of the words such as National, Union, Central, Federal,
Republic, President, Rashtrapathi, Small-Scale Industries, Cottage Industries
and Financial Corporation etc.
10. If the proposed name contains the words “British India”
11. If the proposed name implies association or connection with Embassy or
Consulate which suggests connection with local authorities such as
Municipal, Panchayat, Delhi Development Authority or any other body
connected with the Union or the State Government.
12. If the proposed name is vague like D.J.M.O Limited or T.N.V.R Private
Limited or S.S.R.P Limited.
13. If a proposed name implies association or connection with or patronage of a
national hero or any person held in high esteem or important personages
who are occupying important positions in Government so long as they
continue to hold such positions.
14. If it resembles closely the popular or abbreviated descriptions of important
companies like TISCO (Tata Iron and Steel Company Limited), HMT
(Hindustan Machine Tools), ICI (Imperial Chemical Industries), TEXMACO
(Textile Machinery Corporation), WIMCO (Western India Match Company)
etc. In some cases, the first word or first few words may be the key words
and care should be taken that they are not exploited. Such words should not
be allowed even though they have not been registered as trademarks.
a. Where the existing companies are stated and found to be well known
in their respective fields by their abbreviated names, these
companies may be allowed to change their names, by way of
abbreviation with the prior approval of the Regional Director
concerned.
Department’s Circular, dated 31-03-1993
The abbreviated name will be considered only in the case of change of name
under section 21 of the Companies Act, 1956, with the prior approval of the
Regional Director concerned and should not be allowed for adoption by new
companies. [Circular No. 4/93: F. No. 3/14/93-CL V, dated 31-03-1993]
Press Note, dated 05-05-1993
As per existing guidelines, the companies well known in their respective
field by abbreviated names are allowed to change their names by way of
abbreviation (e.g. ABC Limited) with the approval of Department of
Company Affairs after following the requirement of Section 21 of the
Companies Act, 1956. It has now been decided that any such change of
name will require only the prior approval of Regional Director concerned.
The company will, however, continue to make applications in Form 1A for
availability changed names to the concerned Registrar of Companies. It may
be noted that the abbreviated name will not be allowed for adoption by a
new company proposed to be incorporated under the Act [No 3/14/93-CL V:
Press Note No. 1/93, dated 05-05-1993]. The power of Central Government
is now vested with the Registrar.
Department’s Circular, dated 16-02-1995
Presently, there is a restriction on use of abbreviated names (like ITC
Limited) in case of existing companies requiring approval of the Regional
Director concerned. No such approval of Regional Director will now be
necessary and ROCs may take a final decision on such applications in the
light of existing guidelines. (Para iii) [Circular No. 1/95 F. No. 14/6/94-CL V,
dated 16-02-1995]
15. If it is different from the name/names of the existing company/companies
only to the extent of having the name of a place within brackets before the
word limited; for example, Indian Press Limited. To this rule, however,
frequent exceptions are made in the case of the subsidiary and in the case
of a company carrying on local business and in other cases on their merits.
As for an example, “Corner Garage (Delhi) Private Limited” may be allowed
notwithstanding that there is an existing company “Corner Garage Private
Limited” at Calcutta. So would be “Regent Cinema Limited” at Madres, if
there is a company by the name Regent Cinema (Delhi) Limited. These
names may also be allowed if they are in the same group of management.
16. If the proposed name includes common words like “Popular, General,
Janta”, if they are in the same State doing the same business. But in case of
companies in different business in the same State and in all cases when the
registered office of the company is in different States, the name might be
allowed. For instance, if there is “Popular Drug House Private Limited”
existing, another company by the name of “Popular Plastics Private
Limited” should not be objected to.
17. If it includes a name of registered trade-mark unless the consent of the
owner of the trade-mark has been produced by the promoters. It may not be
possible in all cases to check up the proposed name with the trade mark.
However, if the Registrars are in the knowledge or some interested party /
parties bring to their notice a trade mark which is included in the proposed
name then it should not be allowed unless a no-objection certificate is
obtained from the party who has registered the trade mark in its own name.
[Note: Section 20(2)/(3) has been amended by the Trade Marks Act, 1999.
The amended section now provides statutory protection of trade marks in
the matter of availability of name]
18. If a name is identical with or too nearly resembles, the name of which a
company in existence has been previously registered. A few illustrations of
closely resembling names are given below for guidance. The names as
proposed in column 1 should not (normally) be made available in view of the
companies in existence as shown in column 2. However, if a proposed
company is to be under the same management or in the same group and like
to have a closely resembling name to the existing companies under the same
management or group with a view to have advantage of the goodwill
attached to the management or group name such a name may be allowed.
Even in the case of unregistered companies or firms who have built up a
reputation over a considerable period, the principle (that if a name is
identical with or too closely resembles the name by which a company has
been previously registered and is in existence, it should not be allowed)
should be observed as far as practicable. In view of the difficulty in
checking up whether a proposed name is identical with or too nearly
resembles the name of an unregistered company or a firm of repute, it
should at least be ensured that a proposed name is not allowed if it is
identical with or too nearly resembles the name of a firm within the
knowledge of the Registrar. The cases of foreign companies of repute should
also be similarly treated even if there are no branches of such companies in
India.
Proposed Name Existing Company too nearly
resembling name
Hindustan Motor and General Finance Company Hindustan Motor Limited
The National Steel Mfg. Co. Private Limited National Steel Works
Trade Corporation of India Limited State Trading Corporation of India Limited
Viswakaram Engineering Works Private Limited Viswakaram Engineer (India) Private Limited
General Industrial Financing & Trading Co. Ltd. General Financial & Trading Corporation
India Land & Finance Limited Northern India Land & Finance Limited
United News of India Limited United Newspaper Limited
Hindustan Chemicals and Fertilizer Limited Hindustan Fertilizers Limited
19. If it is identical with or too nearly resembles the name of a company in
liquidation, since the name of a company in liquidation is borne on the
register till it is finally dissolved. A name which is identical with or too
closely resembles the name of a company dissolved as a result of liquidation
proceeding should also not be allowed for a period of 2 years from the date
of such dissolution since the dissolution of the company could be declared
void within the period aforesaid by an order of the Court under section 559
of the Act.
Further, as a company which is dissolved in pursuance of action under
section 560 of the Act can be revived by an order of the court before the
expiry of 20 years from the publication in the Official Gazette of the
company being so stuck off, it is considered desirable to stop or
conditionally allow the registration of a proposed name which is identical
with or too nearly resembles the name of such dissolved company for a
period indicated below. Since the period of 20 years as prescribed under the
law is considered an unduly long period, the registration of a proposed name
which is identical with or too nearly resembles the name of the company
dissolved in pursuance of section 560 should not be allowed for a period of
first five years only. During the next five years such a proposed name may
be allowed subject to the condition that in the event of the dissolved
company being restored to life by an order of the Court the new company
would have to change its name. After a lapse of ten years, name identical
with or too nearly resembling those of the dissolved companies may be
allowed without any such condition.
20. If it is different from the name of an existing company merely by the
addition of words like New Modern, Nay etc. Names such as New Bata Shoe
Company, New Bharat Electronic etc should not be allowed. Different
combination of the same words also requires careful consideration. If there
is a company in existence by the name of “Builders and Contractors
Limited” the name “Contractors and Builders Limited” should not ordinarily
be allowed.
21. If it includes words like “Bank”, “Banking”, “Investment”, “Insurance” and
“Trust”. These words may, however, be allowed in cases where the
circumstance justify it. In cases of banking companies the Reserve Bank of
India should be consulted and its advice should be taken before a name is
allowed for registration. The purpose of such consultation is to prevent
small banking companies from misleading the general public by adopting the
names of some well established and leading banks functioning elsewhere
than in India. In case of differences of opinion with the Reserve Bank of
India the matter should be referred to the Board for advice.
22. If the name includes the word “Industries” or “Business” unless the name is
indicative of the business of the proposed company for otherwise it serves
as a lever for the company to diversify its activities.
23. If it includes proper name which is not a name or surname of a director –
such names should not be allowed except for valid reasons. For example, for
sentimental reasons, sometimes, the name of the relatives such as wife, son
or daughter of the director may have to be allowed provided one other word
suggested makes the name quite distinguishable.
24. If it is intended or likely to produce a misleading impression regarding the
scope or scale of its activities which would be beyond the resources at its
disposal. For example, names like Water Development Corporation of India
(Private) Limited, Telefilm of India (Private) Limited, All India Sales
Organization Limited, Inter Continental Import and Export Company
Limited, etc. should not be allowed. When the authorized capital is to be
only a few lakh and the area of operation limited to a State, words like
“International”, “Hindustan”, “India”, “Bharat”, “New India” etc., included
in the proposed name need not stand the same test as Hindustan, India etc.
(as they do not give the same sense). Similarly the words, Bharat, India etc.
If stated in the bracket before the words limited or private limited need not
stand the same test as the words India, etc., put at the beginning of the
name. Also the word “India” or “Bharat” in brackets before the words
limited or private limited does not necessarily mean that the company is an
Indian Branch of some foreign company, such as “Marsdon Electricals (India)
Private Limited”.
25. If the proposed name includes the word “State” along with the name of the
State such as Kerala State Company Limited should not be allowed as it
would give an impression of the Kerala State Government participating in
the share capital of the proposed company. However, if the name of a State
only is included without the addition of the word “State” in the proposed
name then it may be allowed as it is not likely to give the impression that
the company has the State Government’s interest in it.
26. If the proposed name includes the word “Corporation” unless the company
could be recorded as a big sized company. However, the word “Corporation”
and “Company” may be regarded as closely resembling for purposes of
allowing a new name. For example, a company by the name of Rajasthan
Finance Company should be regarded as undesirable within the meaning of
section 20 of the Act as another company by name “Rajasthan Finance
Corporation” already exists.
27. If the proposed name includes words like French, British, German, etc.,
unless the promoters satisfy that there is some form of collaboration and
connection with the foreigners of that particular company or place the
name of which is incorporated in the name. Thus, the name “German Tool
Manufacturing Company Limited” should not be allowed unless the company
has some connection with Germany.
28.Even where except for the first word all the other words of the proposed
name are similar to those of an existing company, the first word should be
considered to be sufficient to distinguish it from the name of the existing
company. For example, “Oriental…. Limited”. [Circular Letter No. 10(1)-
RS/65, dated 27-11-2965. See also Circular No. 10(19)-RS/61, dated 05-05-
1962]
The word “Hindustan” should be kept reserved only for public sector
companies. It may, however, be allowed to be used in the names of the
private sector companies in a large way of business. Similarly the word
“Corporation” may be allowed in the name of the company in case the
authorized capital is more than Rs. 5 crores. [Circular No. 16/74 – F.No.
27/9/74-CL-III dated 27.08.1974]
Further Guidelines for availability of names
Departmental Circular dated 13-05-1999
As ROCs are aware this Department has issued exhaustive guidelines on
avoiding undesirable names for companies as mentioned in section 20 of the
Companies Act, 1956 through Circular No. 10(19)-RS/61 dated 05-05-1962.
Further guidelines were also issued through Circular No. 2/90 (No 1/1/90-
CL-V-27/1/89-CL-III) dated 05-01-1990.
2. In recent times this Department had received a few references which
needed further clarification. The following guidelines / clarifications are
accordingly issued.
3. Names starting with small letters / having small letters / alphabets
3.1 In the past the name search for allowing names for companies used to
be a manual search based on list of names already in existence on a
particular date, names made available by different ROCs (which used to
be circulated periodically) etc. The name search is no longer manual. It
has become a computerized operation in all RoC offices. In view of this
some of the old constraints (like alphabetical listing) which could be a
restrictive factor in manual system do not exist under the present
computerized system.
3.2 ROCs may therefore now allow names starting with small alphabets (like
i2 Technologies Ltd., etc) as such names are being increasingly used by
many companies in other countries. It should however be ensured that
the name starting with small alphabets does not have phonetic or visual
resemblance to the name of a company in existence.
4. Change of name by companies on Computer Software Business
4.1 In recent times it appears that quite a few companies whose principal
object was not computer software and who had actually involved in
financing activities have changed their names to indicate as if they were
in the business of computer software. For this purpose they have
included words like – “Infosys; Software; Systems; Infosystem;
Computers; Cyber; Cyberspace etc” in their names.
4.2 In order that investors are not misled by the strategy adopted by a few
companies ROCs are hereby advised that in future they should allow
change of name to companies to reflect the business of software only if
a substantial portion of their income (as reflected from their audited
accounts or accounts certified by a Chartered Accountant) is derived
from software business. If this is not proved then such change of name
should not be allowed.
5. Companies in Insurance Sector
5.1 It may be recalled that in Guideline No. 21 (printed above) you have
been advised not to allow the word “Bank”, “Banking”, ”Investment”,
”Insurance” and “Trust” unless circumstances justify it. The activities of
the Insurance Sector are being regulated by the Insurance Regulatory
Authority.
5.2 In view of this, in partial modification of the above mentioned
Guideline, it is hereby clarified that ROCs may allow companies to be
registered by them with the word “Insurance” or “Risk Corporation” as
part of the name only after consulting the Reserve Bank of India and
Insurance Regulatory and Development Authority.
Department’s Clarification, dated 30-06-2000
Attention is invited to this Department’s Circular No. 6 of 1999
(5/35/98-CL-V) dated 13th May 1999, in regard to allow ability of
names for entrepreneurs seeking to promote companies for providing
insurance services, in terms of the above circular, such names were
being given only after consulting the Insurance Regulatory
Development Authority Act, 1999, with effect from 19th April 2000 the
Department has received a reference from the Insurance Regulatory
Authority advising that the embargo on registration of names by new
companies could be lifted. In view of this all ROCs are advised that
they may allow names with the word insurance / assurance or Risk
Corporation as part of the name without any need to consult the
Insurance Regulatory Authority. It is hereby clarified that such names
can be allowed only to new companies and not for change of name as
existing companies are not allowed to carry on any insurance activity.
[Circular No. 5, Dated 30-06-2000]
Department’s circular dated 25-04-2003
In partial modification of General Circular No. 5/2000 dated 30th June
2000 it is hereby further clarified that since the Insurance Regulatory
and Development Authority has been notified (Insurance Regulations,
2002 permitting private sector companies to carry on the insurance
business, the Registrar of Companies may permit change of name of
existing companies on their changing the objects to undertake the
business of insurance brokers also. [Circular No. 19/2003, dated 25-
04-2003, F. No. 5/6/2003-CL-V]
6. Use of Generic Names
6.1 Guideline No. 5 relates to inadvisability of allowing companies to have
only generic names without any other proper noun preceding /
succeeding it. Under this category would come the word “Y2K” (i.e.
Year 2000)
6.2 It may kindly be noted that this is a generic one and cannot be allowed
for any company as a “Stand Alone” name [Issued by DCA, vide No.
5/35/98-CL-V: General Circular No. 6/99, dated 13-05-1999]
Use of Name of “Chamber of Commerce” in UK – In England the Company
and Business Names (Chamber of Commerce, etc) Act 1999 restricts the use
of the name chamber of commerce by companies.
Guidelines as to use of Key words
“With a view to maintain uniformity, the following guidelines may be
followed in the use of keywords, as part of name, while making available
the proposed names under section 20 and 21 of the Companies Act, 1956
# Key Words Required
Authorized Capital
1 Corporation Rs. 5 Crore
2
International, Globe, Universal, Continental, Inter
Continental, Asiatic, Asia being the first word of the
name
Rs. 1 Crore
3
If any of the words at (2) above is used within the name
(with or without brackets)
Rs. 50 Lakh
4 Hindustan, India, Bharat being first word of the name Rs. 50 Lakh
5
If any of the words at (4) above is used within the name
(with or without brackets)
Rs. 5 Lakh
6 Industries / Udyog Rs. 1 Crore
7 Enterprises, Products, Business, Manufacturing Rs. 10 Lakh
2. These names with key words at Serial Nos. (6) And (7) may be considered
when the company proposes to deal in various business activities or the
company is already carrying on various business activities (in the case of
change of name). F. No. 27/1/87-CL-III dated 13-03-1989: (1989) 65 com
cases 536 (St.)
No objection from applicants who do not sign memorandum & articles
I. Department’s Circular
“As per Application Form for availability of names (Form No. 1A) prescribed
under rule 4A of the Companies (Central Governments) General Rules and
Forms, 1956, the promoters are, inter alia, required to give the names and
addresses of the prospective directors or promoter, as also the name and
address of the person(s) applying for availability of name. You are requested
to advise your constituents to ensure that the application form is filled up in
all respects and application is made by one or more amongst the promoters.
The Registrars of Companies have been advised to ensure at the time of
registration of a new company that the subscribers to the memorandum and
the articles of association tally with the list of promoters / first director
stated in the application for availability of name and in case, one or more of
the promoters are not interested to participate in the promotion of a new
company at a later state. “No objection letter” from such promoter(s) is
made available to the Registrar, while submitting the documents for
registration. The Registrars of Companies are also being advised to dispose
of applications for availability of name ordinarily within 14 days of the
receipt of application and to correspond with the applicant promoter(s), in
this behalf” No. 27/1/89-CL-III dated 17-02-1989: (1989) 65 Com Cases 575
(St.)
II. Department’s Circular
“I am directed to refer to this Department’s Circular No. 27/1/89-CL-III
dated 17th February 1989 [Printed above] on the above subject, wherein you
were requested to advise your constituents to ensure that the application
form is signed by one or more amongst the promoters and in case one or
more of the promoters are thereafter no more interested in participating in
the promotion of the new company, a no objection letter from such
promoter is made available to the Registrar of Companies at the time of
registration of the new company. Instances came to the notice of the
Department that some promoters are pre-empting the names, which is not a
healthy practice. It has, accordingly, been decided that, in future,
Registrars of Companies should register the company only in cases where
the promoters, as per availability of name and application, are also the
subscribers to the memorandum and articles of association of the proposed
company at the time of its registration. In case of any change in the name(s)
amongst the subscribers the changed subscribers are advised to make fresh
application for the availability of name. The Registrar may, as per existing
procedure, allow the same name, if otherwise available, after three months
from the date when the name was allowed to the original promoter(s)”.
Circular No. 1 of 1990 dated 5th January 1990; (1990) 67 Com Cases 230 (St.)
III. Department’s Circular dated 16-02-1995
The Department vide Circular No. 27/1/89/CL-III dated 17-02-1989 [Printed
above] advised the ROCs to ensure that at the time of registration of a new
company, the subscribers to the Memorandum of Association should tally
with the list of promoters / first directors stated in the application for
availability of name and in case one or more of the promoters are not
interested in participation in the promotion of a new company at a later
stage, a “no objection” letter from such promoter(s) is made available to
RoC. This circular was amended on 05-01-1990 (No. 1/90) [Printed above] to
the effect that ROCs should register the company only in case where the
promoters as per the availability of name application are also subscribers to
the Memorandum. On reconsideration it has now been decided, in partial
modification of the above circular, that so long as there is at least one
promoter common both in name availability application and the subscription
clause of Memorandum & Articles of Association, and others have no
objection, the company may be registered. (Para ii) [Circular No. 1/95, F.
No. 14/6/94-CL-V dated 16-02-1995].
Incorporation of Stock Exchanges, advance approval of name by SEBI
I am directed to draw your attention to this Department’s Circulars No.
27/22/85-CL-III dated 13-01-1986 and 23-03-1993 on the above subject and to
enclose a copy of letter, dated 18-03-1996 [Printed below] received from the
Chairman, SEBI in this regard. You are requested to ensure that under no
circumstance a company is registered with the words “Stock Exchange” as part
of its name without obtaining in principle approval / no objection of Securities
and Exchange Board of India. It may kindly be noted that non-compliance with
these instruction will be viewed very seriously.
Copy of SEBI’s letter, dated 18-03-1996
It has come to our notice that certain companies calling themselves Stock
Exchanges are enrolling members and collecting substantial deposits from
them. The companies who have not obtained permission to operate as a stock
exchange under section 19 of Securities Contracts (Regulation) Act, 1956 or
have not been granted recognition by Central Government / SEBI under section
4 of the above Act are collecting such deposits in violation of the provisions of
the said Act. Section 19(1) of Securities Contracts (Regulation) Act, 1956
prohibits organizing or assisting in organizing any stock exchange without the
permission of the Central Government / SEBI.
In this regard, we request you not to allow such names to new companies which
have the words “Stock Exchange” in them unless they have been given in
principle approval of “No objection” from SEBI. This would ensure that the
investors are not misled by such names into dealing with members of
unrecognized stock exchanges [Circular No. 3/96, vide No. 3/4/96-CL-V dated
12-04-1996]
Incorporation of Venture Capital Companies
Department’s Circular
As per guidelines issued by the Ministry of Finance, Department of Economic
Affairs vide press release No: S 11(86)-CCI/11/87, dated 25-11-1988, only such
venture capital companies which abide by these guidelines shall take advantage
of tax benefits. As per guidelines, approval would be given for establishment of
venture capital companies / funds by the Department of Economic Affairs or
such authority as many be nominated by the Government. It is possible that
some promoters may float a company and call it a Venture Capital Company but
may not avail of the tax benefits available to such companies and in such a
situation, a common investor would not be able to distinguish between
approved venture companies which are within the discipline of the guidelines
and eligible for tax benefits from those who call themselves Venture Capital
Companies, but prefer to remain outside the guidelines and forego tax benefits.
To avoid such eventuality, it has been decided that the words “Venture Capital
/ Venture Capital Company / Venture Capital Finance Company” or such similar
name as part of the proposed name of a company be only allowed when the
company or the promoters have obtained approval from the Department of
Economics Affairs or such authority as may be nominated by the Government on
this behalf”. Circular No. 13/90 dated 27-08-1990.
Incorporation of Asset Management Companies (AMCs) other intermediaries
Guidelines for registration of AMCs
Department’s Circular I
The following guidelines are issued in respect of registration of Asset
Management Companies (AMCs) in consultation with the Securities and
Exchange Board of India:
(a) Approval of AMC by SEBI: As per guidelines, AMC shall be authorised for
business by SEBI on the basis of certain criteria and the memorandum and
articles of association of the AMC would have to be approved by SEBI.
Accordingly, you are advised not to register any company under the
Companies Act 1956, without the memorandum and articles of association
being approved by SEBI.
(b) Authorized Capital of AMC: The primary objective of setting up of an AMC
is to manage the assets of the mutual funds and other activities which it can
carry out, such as, financial services consultancy which do not conflict with
the fund management activity and are only secondary and incidental. That
being so, it may not be practical to expect a company to be set up with a
paid-up capital of Rs. 5 crores to carry on only incidental activities, without
any assurance of its receiving an approval from SEBI to act also as an Asset
Management Company for a mutual fund. You should, therefore, not have
any objection in registering an AMC is the authorized capital of such a
company is approved by SEBI.
3. A copy of these guidelines may also be placed on the notice board of your
office for general information. (Department’s Circular No. 4/92; F. No.
3/14/92-CL-V dated 02-09-1992, addressed to Registrar of Companies)
Department’s Circular II
“Some Registrars are insisting upon the promoters proposing to carry
on the activity as merchant bankers, registrars to an issue,
investment advisers, portfolio managers, etc to obtain prior approval
of SEBI before making available the proposed name or incorporation
of a company. In this connection, it may be pointed out that under
section 12 of the SEBI Act, 1992 the intermediaries associated with
securities market are required to seek registration by making an
application to SEBI, as per regulation made there under, which inter
alia require the applicant to state the date and place of registration,
details of directors, as also to furnish Memorandum and Articles of
Association, if the applicant is a company. However in terms of
Regulation 18(2) of the SEBI (Mutual Fund) Regulations, 1993, Asset
Management Companies (AMCs) are required to submit to SEBI their
respective Memoranda and Articles of Association for approval.
Therefore, unlike the Memoranda and Articles of Association of other
intermediaries, it would be in the interest of concerned AMC’s to get
their Memoranda and Articles of Association cleared by SEBI before
the same are presented to the concerned Registrar of Companies for
registration. In view of the above, you are requested not to insist
upon seeking prior approval of SEBI for registration of intermediaries
like merchant bankers, Registrar to an issue, investment adviser,
portfolio manager etc. However, this Department’s Circular No. 4/92
(No. 3/14/92-CL-V) dated 02-09-1992 will continue to be in force and
you may register an AMC only after its draft Memorandum and
Articles of Association is cleared by SEBI” (Department’s Circular No.
5/94; f. No. 3/14/92-CL-V dated 15-04-1994, addressed to Registrars
of Companies)
User of the words “NIDHIS” or “Mutual Funds” as part name
The Registrars of Companies (ROCs) have been directed by the
Department of Company Affairs (DCA) not to allow registration of
names with words “mutual funds” forming part of some Non-Banking
Financial Companies (NBFCs / NIDHIS under Section 20 of the
Companies Act, 1956) unless such companies are going to be
incorporated actually as mutual funds. ROCs have been informed that
companies declared as NIDHIS and mutual benefits societies under
section 620A of the Companies Act are not mutual funds. Therefore,
names with words “mutual funds” forming part thereof shall also not
be allowed to companies proposed to be incorporated as “NIDHI” or
“mutual benefit societies”. It has come to the notice of the DCA that
some NBFCs or NIDHIS have been registered with words “mutual
funds” forming part of their names, although they are not actually
mutual funds. This is likely to create confusion in the minds of
investors. In case where NBFCs or NIDHIS have already been asked to
get their names changed under section 21 of the Companies Act, 1956
within a reasonable time of six months failing which report would be
sent to the DCA for initiating action for withdrawal of notification
issued in their favour under section 620A of the companies Act. [PIB
Press Release New Delhi dated 14th February 2000]
Superseding all previous Circulars and Instructions (Circular Letter No. 10(1)–RS/60,
dated 01-04-1960 and Circular Letter No. 10 / (19)-RS/61, dated 15-03-1962) the
Department of Company Affairs has laid down the following principles for deciding
cases for availability of names:
Guiding instructions for availability of names
The procedure for scrutinizing the availability of names of new companies has
recently been re-examined carefully in this Department, having taken into account
the difficulties experienced by some Registrars in the following the instruction
given to them vide Department’s Letter No 10/(19)-RS/61, dated 15-03-1962. This
letter together with the enclosed set of instructions as revised, consolidates, and
is in supersession of all the previous instruction issued from time to time by this
Department. An illustrative list of names considered to be undesirable within the
meaning of Section 20 of the Companies Act, has also been given herewith. The
guiding instructions for deciding cases of making a name available for registration
are given in Appendix A to this letter. In addition to these, the Registrars of
Companies are requested to note the following general instructions also.
1. As the Registrars have hitherto been doing, they should refer only doubtful
and hard cases where they might find it difficult to take a decision, to the
Research and Statistics Division at the Headquarters.
2. Where consultation with the Regional Director on the spot is possible,
Registrars of Companies would take advice before referring doubtful and hard
cases to the Headquarters.
3. The Registrars of Companies may ask the promoters to suggest a panel of
three to five names quite distinct from each other for consideration.
4. The Registrars should adopt a polite attitude and persuade the Company
promoters to suggest names consistent with the guiding principles. They
should explain the difficulties of the Administration in approving names likely
to create confusion in the minds of the public and harm the interest of the
promoters.
5. In case any of the names proposed by the promoters is not agreed to by the
Registrars as available, it should be open to them to follow up the matter by
subsequent letters or application for the same fee within a reasonable period
which may normally be construed to mean three months from the date of
rejection of the name/names proposed.
6. The Registrars may permit the promoters to use the name of the firm in
brackets after the duly approved names as incorporating or successor to
(name of the firm) in order to fulfill the desire of the promoters to retain the
goodwill of their business in cases where the names of firms seeking
registration under the Companies Act is considered as undesirable within the
meaning of Section 20 of the Companies Act.
7. Registrars should ascertain from the promoters if the proposed name/names
were applied for to any other Registrar of Companies and if so, with what
result. In case there is some difference of opinion between the two Registrars
in making the name available, then the case may be referred to the Board for
advice.
8. The following guidelines were substituted vide amended Rule 4A of the
Companies (Central Governments) General Rules & Forms 1956) Notification
G.S.R 720(E) dated 16th November 2007.
8a.The Registrar shall cause to examine the application as to whether
the changed name or the name with which the proposed company is
to be registered, as the case may be, is undesirable within the
meaning of section 20. In case the name is undesirable, he may reject
the same or ask for resubmission of the application with new names
or calls for further information, ordinarily within three days of
receipt of the application.
8b.The applicants shall be given only upto two opportunities for resubmission
of their proposal against the fee paid in the first instance
for name availability after the original application is filed. In the
event the registrar does not find the proposals so submitted and
resubmitted as fit for approval, he shall reject the application after
the second re-submission. However, the applicant will be at liberty to
file fresh application along with prescribed fee.
8c.The Registrar of Companies informs the company or the promoters of
the company that the changed name or the name with which the
proposed company is to be registered, as the case may be, is not
undesirable, such name shall be available for adoption by the said
company or by the said promoters of the company for a period of
sixty days from the date the name is allowed.
8d.If the name so allowed is not adopted on or before the expiry of the
period of sixty days from the date it is allowed, the applicant may
apply for extension for retention of such name for a further period of
thirty days on payment of fifty per cent of the fee prescribed for the
application at the initial stage. No further extension will be granted
after expiry of ninety days from the date the name is allowed in the
first instance. The name allowed shall lapse after expiry of sixty or
ninety days, as the case may be, from the date it is allowed first.
8e.The name allowed by the Registrar before the date of this
notification comes into force, if not adopted, shall lapse after the
expiry of a period of six months from the date on which the name was
initially allowed or renewed. However, in case the name has not been
renewed earlier, the applicant on or before the date of expiry, may
apply for one time extension of such name for a further period of
thirty days on payment of fifty per cent of the fee prescribed for the
application at the initial stage.
9. It is necessary that the “keyword” of proposed name/names are checked
separately with the names of the existing companies beginning with those
“keywords” so as to avoid any possibility of allowing a name with a little
rearrangement of the same words of the existing company which may be
said to be closely resembling each other.
It may be further added that although it is not possible to lay down hard and
fast rules for determining whether a particular name or any two names too
nearly resemble each other, each case, however, will be decided on its merits.
As already emphasized in the earlier circular letter of this Department on the
subject dated 15th March 1962 that the various criteria set out in the guiding
principles at Appendix “A” are not exhaustive but only illustrative of what is
considered to be undesirable names under Section 20 of the Companies Act and
that, by the very nature of the subject all possible cases could not be covered.
It is therefore, suggested that where the Registrars find that certain proposed
names could not be referred to the Research and Statistics Division at the
Headquarters after availing of the help of the Regional Director if available on
the spot.
Guiding instructions for deciding cases of making
a name available for registration
Departments’ guiding principles
The Department has evolved the following guiding principles for deciding
availability of names:
A name which falls within the categories mentioned below will not generally be
made available:
1. If it is not in consonance with the principal objects of the company as set
out in its memorandum of association. This does not necessarily mean that
every name should be indicative of its objects. Bu when there is some
indication of business in the name then it should be in conformity with its
objects.
2. If the Company / Companies main business is finance unless the name is
indicative of that particular financial activities. Viz. Chit Funds /
Investments / Loan, etc.
3. If it includes any word or words which are offensive to any section of the
people.
4. If the proposed name is the exact Hindi translation of the name of an
existing company in English especially an existing company with a
reputation.
5. If the proposed name has a close phonetic resemblance to the name of the
company in existence for example, J.K Industries Ltd., Jay Kay Industries
Limited.
6. If the name is only a general one like Cotton Textile Mills Ltd., or Silk
Manufacturing Ltd., and not specific like Calcutta Cotton Textiles Mills
Limited or Lakshmi Silk Manufacturing Company Limited.
7. If it includes, the word “Co-operative”, Sahakari or the equivalent of word
“Co-operative” in the regional languages of the country.
8. If it attracts the provisions of the Emblems and Names (Prevention of
Improper Use) Act, 1950 as amended from time to time, i.e. use of improper
names prohibited under this Act.
Department of Company Affairs Circulars
General Circular No: 24 of 2001, dated 21-11-2001
Instruction No. 8 of the Guiding instructions circulated, vide this
Department’s Letter No. 10(1)-RS/65, dated 27th November 1965 provides
that a name in the category mentioned below will not generally be made
available:
1. “If it attracts the provisions of the Emblems and Names (Prevention of
Improper Use) Act, 1950 as amended from time to time. i.e. use of
improper names, prohibited under this Act.”
2. It is observed from a communication received from the Department of
Consumer Affairs that the above said instructions are not being followed
scrupulously.
3. The ROCs are advised to take into account the provisions of the above
said Emblems and Names Act while making names available to companies
under the Companies Act, 1956. All the ROCs are requested to adhere to
the above instructions for strict compliance.
9. If it connotes Government’s participation or patronage unless circumstances
justify it. E.g., a name may be deemed undesirable in certain context if it
includes any of the words such as National, Union, Central, Federal,
Republic, President, Rashtrapathi, Small-Scale Industries, Cottage Industries
and Financial Corporation etc.
10. If the proposed name contains the words “British India”
11. If the proposed name implies association or connection with Embassy or
Consulate which suggests connection with local authorities such as
Municipal, Panchayat, Delhi Development Authority or any other body
connected with the Union or the State Government.
12. If the proposed name is vague like D.J.M.O Limited or T.N.V.R Private
Limited or S.S.R.P Limited.
13. If a proposed name implies association or connection with or patronage of a
national hero or any person held in high esteem or important personages
who are occupying important positions in Government so long as they
continue to hold such positions.
14. If it resembles closely the popular or abbreviated descriptions of important
companies like TISCO (Tata Iron and Steel Company Limited), HMT
(Hindustan Machine Tools), ICI (Imperial Chemical Industries), TEXMACO
(Textile Machinery Corporation), WIMCO (Western India Match Company)
etc. In some cases, the first word or first few words may be the key words
and care should be taken that they are not exploited. Such words should not
be allowed even though they have not been registered as trademarks.
a. Where the existing companies are stated and found to be well known
in their respective fields by their abbreviated names, these
companies may be allowed to change their names, by way of
abbreviation with the prior approval of the Regional Director
concerned.
Department’s Circular, dated 31-03-1993
The abbreviated name will be considered only in the case of change of name
under section 21 of the Companies Act, 1956, with the prior approval of the
Regional Director concerned and should not be allowed for adoption by new
companies. [Circular No. 4/93: F. No. 3/14/93-CL V, dated 31-03-1993]
Press Note, dated 05-05-1993
As per existing guidelines, the companies well known in their respective
field by abbreviated names are allowed to change their names by way of
abbreviation (e.g. ABC Limited) with the approval of Department of
Company Affairs after following the requirement of Section 21 of the
Companies Act, 1956. It has now been decided that any such change of
name will require only the prior approval of Regional Director concerned.
The company will, however, continue to make applications in Form 1A for
availability changed names to the concerned Registrar of Companies. It may
be noted that the abbreviated name will not be allowed for adoption by a
new company proposed to be incorporated under the Act [No 3/14/93-CL V:
Press Note No. 1/93, dated 05-05-1993]. The power of Central Government
is now vested with the Registrar.
Department’s Circular, dated 16-02-1995
Presently, there is a restriction on use of abbreviated names (like ITC
Limited) in case of existing companies requiring approval of the Regional
Director concerned. No such approval of Regional Director will now be
necessary and ROCs may take a final decision on such applications in the
light of existing guidelines. (Para iii) [Circular No. 1/95 F. No. 14/6/94-CL V,
dated 16-02-1995]
15. If it is different from the name/names of the existing company/companies
only to the extent of having the name of a place within brackets before the
word limited; for example, Indian Press Limited. To this rule, however,
frequent exceptions are made in the case of the subsidiary and in the case
of a company carrying on local business and in other cases on their merits.
As for an example, “Corner Garage (Delhi) Private Limited” may be allowed
notwithstanding that there is an existing company “Corner Garage Private
Limited” at Calcutta. So would be “Regent Cinema Limited” at Madres, if
there is a company by the name Regent Cinema (Delhi) Limited. These
names may also be allowed if they are in the same group of management.
16. If the proposed name includes common words like “Popular, General,
Janta”, if they are in the same State doing the same business. But in case of
companies in different business in the same State and in all cases when the
registered office of the company is in different States, the name might be
allowed. For instance, if there is “Popular Drug House Private Limited”
existing, another company by the name of “Popular Plastics Private
Limited” should not be objected to.
17. If it includes a name of registered trade-mark unless the consent of the
owner of the trade-mark has been produced by the promoters. It may not be
possible in all cases to check up the proposed name with the trade mark.
However, if the Registrars are in the knowledge or some interested party /
parties bring to their notice a trade mark which is included in the proposed
name then it should not be allowed unless a no-objection certificate is
obtained from the party who has registered the trade mark in its own name.
[Note: Section 20(2)/(3) has been amended by the Trade Marks Act, 1999.
The amended section now provides statutory protection of trade marks in
the matter of availability of name]
18. If a name is identical with or too nearly resembles, the name of which a
company in existence has been previously registered. A few illustrations of
closely resembling names are given below for guidance. The names as
proposed in column 1 should not (normally) be made available in view of the
companies in existence as shown in column 2. However, if a proposed
company is to be under the same management or in the same group and like
to have a closely resembling name to the existing companies under the same
management or group with a view to have advantage of the goodwill
attached to the management or group name such a name may be allowed.
Even in the case of unregistered companies or firms who have built up a
reputation over a considerable period, the principle (that if a name is
identical with or too closely resembles the name by which a company has
been previously registered and is in existence, it should not be allowed)
should be observed as far as practicable. In view of the difficulty in
checking up whether a proposed name is identical with or too nearly
resembles the name of an unregistered company or a firm of repute, it
should at least be ensured that a proposed name is not allowed if it is
identical with or too nearly resembles the name of a firm within the
knowledge of the Registrar. The cases of foreign companies of repute should
also be similarly treated even if there are no branches of such companies in
India.
Proposed Name Existing Company too nearly
resembling name
Hindustan Motor and General Finance Company Hindustan Motor Limited
The National Steel Mfg. Co. Private Limited National Steel Works
Trade Corporation of India Limited State Trading Corporation of India Limited
Viswakaram Engineering Works Private Limited Viswakaram Engineer (India) Private Limited
General Industrial Financing & Trading Co. Ltd. General Financial & Trading Corporation
India Land & Finance Limited Northern India Land & Finance Limited
United News of India Limited United Newspaper Limited
Hindustan Chemicals and Fertilizer Limited Hindustan Fertilizers Limited
19. If it is identical with or too nearly resembles the name of a company in
liquidation, since the name of a company in liquidation is borne on the
register till it is finally dissolved. A name which is identical with or too
closely resembles the name of a company dissolved as a result of liquidation
proceeding should also not be allowed for a period of 2 years from the date
of such dissolution since the dissolution of the company could be declared
void within the period aforesaid by an order of the Court under section 559
of the Act.
Further, as a company which is dissolved in pursuance of action under
section 560 of the Act can be revived by an order of the court before the
expiry of 20 years from the publication in the Official Gazette of the
company being so stuck off, it is considered desirable to stop or
conditionally allow the registration of a proposed name which is identical
with or too nearly resembles the name of such dissolved company for a
period indicated below. Since the period of 20 years as prescribed under the
law is considered an unduly long period, the registration of a proposed name
which is identical with or too nearly resembles the name of the company
dissolved in pursuance of section 560 should not be allowed for a period of
first five years only. During the next five years such a proposed name may
be allowed subject to the condition that in the event of the dissolved
company being restored to life by an order of the Court the new company
would have to change its name. After a lapse of ten years, name identical
with or too nearly resembling those of the dissolved companies may be
allowed without any such condition.
20. If it is different from the name of an existing company merely by the
addition of words like New Modern, Nay etc. Names such as New Bata Shoe
Company, New Bharat Electronic etc should not be allowed. Different
combination of the same words also requires careful consideration. If there
is a company in existence by the name of “Builders and Contractors
Limited” the name “Contractors and Builders Limited” should not ordinarily
be allowed.
21. If it includes words like “Bank”, “Banking”, “Investment”, “Insurance” and
“Trust”. These words may, however, be allowed in cases where the
circumstance justify it. In cases of banking companies the Reserve Bank of
India should be consulted and its advice should be taken before a name is
allowed for registration. The purpose of such consultation is to prevent
small banking companies from misleading the general public by adopting the
names of some well established and leading banks functioning elsewhere
than in India. In case of differences of opinion with the Reserve Bank of
India the matter should be referred to the Board for advice.
22. If the name includes the word “Industries” or “Business” unless the name is
indicative of the business of the proposed company for otherwise it serves
as a lever for the company to diversify its activities.
23. If it includes proper name which is not a name or surname of a director –
such names should not be allowed except for valid reasons. For example, for
sentimental reasons, sometimes, the name of the relatives such as wife, son
or daughter of the director may have to be allowed provided one other word
suggested makes the name quite distinguishable.
24. If it is intended or likely to produce a misleading impression regarding the
scope or scale of its activities which would be beyond the resources at its
disposal. For example, names like Water Development Corporation of India
(Private) Limited, Telefilm of India (Private) Limited, All India Sales
Organization Limited, Inter Continental Import and Export Company
Limited, etc. should not be allowed. When the authorized capital is to be
only a few lakh and the area of operation limited to a State, words like
“International”, “Hindustan”, “India”, “Bharat”, “New India” etc., included
in the proposed name need not stand the same test as Hindustan, India etc.
(as they do not give the same sense). Similarly the words, Bharat, India etc.
If stated in the bracket before the words limited or private limited need not
stand the same test as the words India, etc., put at the beginning of the
name. Also the word “India” or “Bharat” in brackets before the words
limited or private limited does not necessarily mean that the company is an
Indian Branch of some foreign company, such as “Marsdon Electricals (India)
Private Limited”.
25. If the proposed name includes the word “State” along with the name of the
State such as Kerala State Company Limited should not be allowed as it
would give an impression of the Kerala State Government participating in
the share capital of the proposed company. However, if the name of a State
only is included without the addition of the word “State” in the proposed
name then it may be allowed as it is not likely to give the impression that
the company has the State Government’s interest in it.
26. If the proposed name includes the word “Corporation” unless the company
could be recorded as a big sized company. However, the word “Corporation”
and “Company” may be regarded as closely resembling for purposes of
allowing a new name. For example, a company by the name of Rajasthan
Finance Company should be regarded as undesirable within the meaning of
section 20 of the Act as another company by name “Rajasthan Finance
Corporation” already exists.
27. If the proposed name includes words like French, British, German, etc.,
unless the promoters satisfy that there is some form of collaboration and
connection with the foreigners of that particular company or place the
name of which is incorporated in the name. Thus, the name “German Tool
Manufacturing Company Limited” should not be allowed unless the company
has some connection with Germany.
28.Even where except for the first word all the other words of the proposed
name are similar to those of an existing company, the first word should be
considered to be sufficient to distinguish it from the name of the existing
company. For example, “Oriental…. Limited”. [Circular Letter No. 10(1)-
RS/65, dated 27-11-2965. See also Circular No. 10(19)-RS/61, dated 05-05-
1962]
The word “Hindustan” should be kept reserved only for public sector
companies. It may, however, be allowed to be used in the names of the
private sector companies in a large way of business. Similarly the word
“Corporation” may be allowed in the name of the company in case the
authorized capital is more than Rs. 5 crores. [Circular No. 16/74 – F.No.
27/9/74-CL-III dated 27.08.1974]
Further Guidelines for availability of names
Departmental Circular dated 13-05-1999
As ROCs are aware this Department has issued exhaustive guidelines on
avoiding undesirable names for companies as mentioned in section 20 of the
Companies Act, 1956 through Circular No. 10(19)-RS/61 dated 05-05-1962.
Further guidelines were also issued through Circular No. 2/90 (No 1/1/90-
CL-V-27/1/89-CL-III) dated 05-01-1990.
2. In recent times this Department had received a few references which
needed further clarification. The following guidelines / clarifications are
accordingly issued.
3. Names starting with small letters / having small letters / alphabets
3.1 In the past the name search for allowing names for companies used to
be a manual search based on list of names already in existence on a
particular date, names made available by different ROCs (which used to
be circulated periodically) etc. The name search is no longer manual. It
has become a computerized operation in all RoC offices. In view of this
some of the old constraints (like alphabetical listing) which could be a
restrictive factor in manual system do not exist under the present
computerized system.
3.2 ROCs may therefore now allow names starting with small alphabets (like
i2 Technologies Ltd., etc) as such names are being increasingly used by
many companies in other countries. It should however be ensured that
the name starting with small alphabets does not have phonetic or visual
resemblance to the name of a company in existence.
4. Change of name by companies on Computer Software Business
4.1 In recent times it appears that quite a few companies whose principal
object was not computer software and who had actually involved in
financing activities have changed their names to indicate as if they were
in the business of computer software. For this purpose they have
included words like – “Infosys; Software; Systems; Infosystem;
Computers; Cyber; Cyberspace etc” in their names.
4.2 In order that investors are not misled by the strategy adopted by a few
companies ROCs are hereby advised that in future they should allow
change of name to companies to reflect the business of software only if
a substantial portion of their income (as reflected from their audited
accounts or accounts certified by a Chartered Accountant) is derived
from software business. If this is not proved then such change of name
should not be allowed.
5. Companies in Insurance Sector
5.1 It may be recalled that in Guideline No. 21 (printed above) you have
been advised not to allow the word “Bank”, “Banking”, ”Investment”,
”Insurance” and “Trust” unless circumstances justify it. The activities of
the Insurance Sector are being regulated by the Insurance Regulatory
Authority.
5.2 In view of this, in partial modification of the above mentioned
Guideline, it is hereby clarified that ROCs may allow companies to be
registered by them with the word “Insurance” or “Risk Corporation” as
part of the name only after consulting the Reserve Bank of India and
Insurance Regulatory and Development Authority.
Department’s Clarification, dated 30-06-2000
Attention is invited to this Department’s Circular No. 6 of 1999
(5/35/98-CL-V) dated 13th May 1999, in regard to allow ability of
names for entrepreneurs seeking to promote companies for providing
insurance services, in terms of the above circular, such names were
being given only after consulting the Insurance Regulatory
Development Authority Act, 1999, with effect from 19th April 2000 the
Department has received a reference from the Insurance Regulatory
Authority advising that the embargo on registration of names by new
companies could be lifted. In view of this all ROCs are advised that
they may allow names with the word insurance / assurance or Risk
Corporation as part of the name without any need to consult the
Insurance Regulatory Authority. It is hereby clarified that such names
can be allowed only to new companies and not for change of name as
existing companies are not allowed to carry on any insurance activity.
[Circular No. 5, Dated 30-06-2000]
Department’s circular dated 25-04-2003
In partial modification of General Circular No. 5/2000 dated 30th June
2000 it is hereby further clarified that since the Insurance Regulatory
and Development Authority has been notified (Insurance Regulations,
2002 permitting private sector companies to carry on the insurance
business, the Registrar of Companies may permit change of name of
existing companies on their changing the objects to undertake the
business of insurance brokers also. [Circular No. 19/2003, dated 25-
04-2003, F. No. 5/6/2003-CL-V]
6. Use of Generic Names
6.1 Guideline No. 5 relates to inadvisability of allowing companies to have
only generic names without any other proper noun preceding /
succeeding it. Under this category would come the word “Y2K” (i.e.
Year 2000)
6.2 It may kindly be noted that this is a generic one and cannot be allowed
for any company as a “Stand Alone” name [Issued by DCA, vide No.
5/35/98-CL-V: General Circular No. 6/99, dated 13-05-1999]
Use of Name of “Chamber of Commerce” in UK – In England the Company
and Business Names (Chamber of Commerce, etc) Act 1999 restricts the use
of the name chamber of commerce by companies.
Guidelines as to use of Key words
“With a view to maintain uniformity, the following guidelines may be
followed in the use of keywords, as part of name, while making available
the proposed names under section 20 and 21 of the Companies Act, 1956
# Key Words Required
Authorized Capital
1 Corporation Rs. 5 Crore
2
International, Globe, Universal, Continental, Inter
Continental, Asiatic, Asia being the first word of the
name
Rs. 1 Crore
3
If any of the words at (2) above is used within the name
(with or without brackets)
Rs. 50 Lakh
4 Hindustan, India, Bharat being first word of the name Rs. 50 Lakh
5
If any of the words at (4) above is used within the name
(with or without brackets)
Rs. 5 Lakh
6 Industries / Udyog Rs. 1 Crore
7 Enterprises, Products, Business, Manufacturing Rs. 10 Lakh
2. These names with key words at Serial Nos. (6) And (7) may be considered
when the company proposes to deal in various business activities or the
company is already carrying on various business activities (in the case of
change of name). F. No. 27/1/87-CL-III dated 13-03-1989: (1989) 65 com
cases 536 (St.)
No objection from applicants who do not sign memorandum & articles
I. Department’s Circular
“As per Application Form for availability of names (Form No. 1A) prescribed
under rule 4A of the Companies (Central Governments) General Rules and
Forms, 1956, the promoters are, inter alia, required to give the names and
addresses of the prospective directors or promoter, as also the name and
address of the person(s) applying for availability of name. You are requested
to advise your constituents to ensure that the application form is filled up in
all respects and application is made by one or more amongst the promoters.
The Registrars of Companies have been advised to ensure at the time of
registration of a new company that the subscribers to the memorandum and
the articles of association tally with the list of promoters / first director
stated in the application for availability of name and in case, one or more of
the promoters are not interested to participate in the promotion of a new
company at a later state. “No objection letter” from such promoter(s) is
made available to the Registrar, while submitting the documents for
registration. The Registrars of Companies are also being advised to dispose
of applications for availability of name ordinarily within 14 days of the
receipt of application and to correspond with the applicant promoter(s), in
this behalf” No. 27/1/89-CL-III dated 17-02-1989: (1989) 65 Com Cases 575
(St.)
II. Department’s Circular
“I am directed to refer to this Department’s Circular No. 27/1/89-CL-III
dated 17th February 1989 [Printed above] on the above subject, wherein you
were requested to advise your constituents to ensure that the application
form is signed by one or more amongst the promoters and in case one or
more of the promoters are thereafter no more interested in participating in
the promotion of the new company, a no objection letter from such
promoter is made available to the Registrar of Companies at the time of
registration of the new company. Instances came to the notice of the
Department that some promoters are pre-empting the names, which is not a
healthy practice. It has, accordingly, been decided that, in future,
Registrars of Companies should register the company only in cases where
the promoters, as per availability of name and application, are also the
subscribers to the memorandum and articles of association of the proposed
company at the time of its registration. In case of any change in the name(s)
amongst the subscribers the changed subscribers are advised to make fresh
application for the availability of name. The Registrar may, as per existing
procedure, allow the same name, if otherwise available, after three months
from the date when the name was allowed to the original promoter(s)”.
Circular No. 1 of 1990 dated 5th January 1990; (1990) 67 Com Cases 230 (St.)
III. Department’s Circular dated 16-02-1995
The Department vide Circular No. 27/1/89/CL-III dated 17-02-1989 [Printed
above] advised the ROCs to ensure that at the time of registration of a new
company, the subscribers to the Memorandum of Association should tally
with the list of promoters / first directors stated in the application for
availability of name and in case one or more of the promoters are not
interested in participation in the promotion of a new company at a later
stage, a “no objection” letter from such promoter(s) is made available to
RoC. This circular was amended on 05-01-1990 (No. 1/90) [Printed above] to
the effect that ROCs should register the company only in case where the
promoters as per the availability of name application are also subscribers to
the Memorandum. On reconsideration it has now been decided, in partial
modification of the above circular, that so long as there is at least one
promoter common both in name availability application and the subscription
clause of Memorandum & Articles of Association, and others have no
objection, the company may be registered. (Para ii) [Circular No. 1/95, F.
No. 14/6/94-CL-V dated 16-02-1995].
Incorporation of Stock Exchanges, advance approval of name by SEBI
I am directed to draw your attention to this Department’s Circulars No.
27/22/85-CL-III dated 13-01-1986 and 23-03-1993 on the above subject and to
enclose a copy of letter, dated 18-03-1996 [Printed below] received from the
Chairman, SEBI in this regard. You are requested to ensure that under no
circumstance a company is registered with the words “Stock Exchange” as part
of its name without obtaining in principle approval / no objection of Securities
and Exchange Board of India. It may kindly be noted that non-compliance with
these instruction will be viewed very seriously.
Copy of SEBI’s letter, dated 18-03-1996
It has come to our notice that certain companies calling themselves Stock
Exchanges are enrolling members and collecting substantial deposits from
them. The companies who have not obtained permission to operate as a stock
exchange under section 19 of Securities Contracts (Regulation) Act, 1956 or
have not been granted recognition by Central Government / SEBI under section
4 of the above Act are collecting such deposits in violation of the provisions of
the said Act. Section 19(1) of Securities Contracts (Regulation) Act, 1956
prohibits organizing or assisting in organizing any stock exchange without the
permission of the Central Government / SEBI.
In this regard, we request you not to allow such names to new companies which
have the words “Stock Exchange” in them unless they have been given in
principle approval of “No objection” from SEBI. This would ensure that the
investors are not misled by such names into dealing with members of
unrecognized stock exchanges [Circular No. 3/96, vide No. 3/4/96-CL-V dated
12-04-1996]
Incorporation of Venture Capital Companies
Department’s Circular
As per guidelines issued by the Ministry of Finance, Department of Economic
Affairs vide press release No: S 11(86)-CCI/11/87, dated 25-11-1988, only such
venture capital companies which abide by these guidelines shall take advantage
of tax benefits. As per guidelines, approval would be given for establishment of
venture capital companies / funds by the Department of Economic Affairs or
such authority as many be nominated by the Government. It is possible that
some promoters may float a company and call it a Venture Capital Company but
may not avail of the tax benefits available to such companies and in such a
situation, a common investor would not be able to distinguish between
approved venture companies which are within the discipline of the guidelines
and eligible for tax benefits from those who call themselves Venture Capital
Companies, but prefer to remain outside the guidelines and forego tax benefits.
To avoid such eventuality, it has been decided that the words “Venture Capital
/ Venture Capital Company / Venture Capital Finance Company” or such similar
name as part of the proposed name of a company be only allowed when the
company or the promoters have obtained approval from the Department of
Economics Affairs or such authority as may be nominated by the Government on
this behalf”. Circular No. 13/90 dated 27-08-1990.
Incorporation of Asset Management Companies (AMCs) other intermediaries
Guidelines for registration of AMCs
Department’s Circular I
The following guidelines are issued in respect of registration of Asset
Management Companies (AMCs) in consultation with the Securities and
Exchange Board of India:
(a) Approval of AMC by SEBI: As per guidelines, AMC shall be authorised for
business by SEBI on the basis of certain criteria and the memorandum and
articles of association of the AMC would have to be approved by SEBI.
Accordingly, you are advised not to register any company under the
Companies Act 1956, without the memorandum and articles of association
being approved by SEBI.
(b) Authorized Capital of AMC: The primary objective of setting up of an AMC
is to manage the assets of the mutual funds and other activities which it can
carry out, such as, financial services consultancy which do not conflict with
the fund management activity and are only secondary and incidental. That
being so, it may not be practical to expect a company to be set up with a
paid-up capital of Rs. 5 crores to carry on only incidental activities, without
any assurance of its receiving an approval from SEBI to act also as an Asset
Management Company for a mutual fund. You should, therefore, not have
any objection in registering an AMC is the authorized capital of such a
company is approved by SEBI.
3. A copy of these guidelines may also be placed on the notice board of your
office for general information. (Department’s Circular No. 4/92; F. No.
3/14/92-CL-V dated 02-09-1992, addressed to Registrar of Companies)
Department’s Circular II
“Some Registrars are insisting upon the promoters proposing to carry
on the activity as merchant bankers, registrars to an issue,
investment advisers, portfolio managers, etc to obtain prior approval
of SEBI before making available the proposed name or incorporation
of a company. In this connection, it may be pointed out that under
section 12 of the SEBI Act, 1992 the intermediaries associated with
securities market are required to seek registration by making an
application to SEBI, as per regulation made there under, which inter
alia require the applicant to state the date and place of registration,
details of directors, as also to furnish Memorandum and Articles of
Association, if the applicant is a company. However in terms of
Regulation 18(2) of the SEBI (Mutual Fund) Regulations, 1993, Asset
Management Companies (AMCs) are required to submit to SEBI their
respective Memoranda and Articles of Association for approval.
Therefore, unlike the Memoranda and Articles of Association of other
intermediaries, it would be in the interest of concerned AMC’s to get
their Memoranda and Articles of Association cleared by SEBI before
the same are presented to the concerned Registrar of Companies for
registration. In view of the above, you are requested not to insist
upon seeking prior approval of SEBI for registration of intermediaries
like merchant bankers, Registrar to an issue, investment adviser,
portfolio manager etc. However, this Department’s Circular No. 4/92
(No. 3/14/92-CL-V) dated 02-09-1992 will continue to be in force and
you may register an AMC only after its draft Memorandum and
Articles of Association is cleared by SEBI” (Department’s Circular No.
5/94; f. No. 3/14/92-CL-V dated 15-04-1994, addressed to Registrars
of Companies)
User of the words “NIDHIS” or “Mutual Funds” as part name
The Registrars of Companies (ROCs) have been directed by the
Department of Company Affairs (DCA) not to allow registration of
names with words “mutual funds” forming part of some Non-Banking
Financial Companies (NBFCs / NIDHIS under Section 20 of the
Companies Act, 1956) unless such companies are going to be
incorporated actually as mutual funds. ROCs have been informed that
companies declared as NIDHIS and mutual benefits societies under
section 620A of the Companies Act are not mutual funds. Therefore,
names with words “mutual funds” forming part thereof shall also not
be allowed to companies proposed to be incorporated as “NIDHI” or
“mutual benefit societies”. It has come to the notice of the DCA that
some NBFCs or NIDHIS have been registered with words “mutual
funds” forming part of their names, although they are not actually
mutual funds. This is likely to create confusion in the minds of
investors. In case where NBFCs or NIDHIS have already been asked to
get their names changed under section 21 of the Companies Act, 1956
within a reasonable time of six months failing which report would be
sent to the DCA for initiating action for withdrawal of notification
issued in their favour under section 620A of the companies Act. [PIB
Press Release New Delhi dated 14th February 2000]
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