1.
Introduction:
The
Department of Company Affairs (“DCA”) has pronounced its
recent Notification
dated
12.07.2000
providing
considerable relief in payment of registration fee on increase
in authorised capital by existing companies. The long-standing
demand of India Inc. for removal of unjust provision is
accepted by the Government, though belatedly.
The
said amendment has come only recently. Till then, all the
companies having gone for increase in the authorised capital
have paid exorbitant fees to the Government right from 21.06.1995
when the Notification of even date (“1995
Notification”) came into force. At that time, a lot of
hue and cry was voiced by the companies, but the same fell, as
usual, on deaf ears of the bureaucrats. All the companies have
borne the unbearable financial burden for long 5 years till
the recent Notification which came into force from 12.07.2000.
2. Difference Between Two
Notifications:
In order to understand the likely consequences of recent
judgment of Hon’ble
Delhi High Court discussed in the following paras, it is
necessary to know the relevant legal provisions.
The new para 1.3 of Schedule X of the Companies Act, 1956 (“Act”)
as amended by the Notification dated 12.07.2000
reads as under:
"For filing a notice of any increase in the nominal
share capital of a company, the difference
between the fees PAYABLE
on the increased share capital on the date of filing the
notice for registration of company and the fees PAYABLE
on existing authorised capital at the rates prevailing on the
date of filing the notice."
The old para 1.3 of Schedule X of the Act effective till recently by
virtue of the Notification dated 21.06.1995
is reproduced hereunder:
“For filing a notice of any increase in the nominal share
capital of a company, the difference between the fees payable
on the date of filing the notice for the registration of a
company with a nominal share capital equal to the increased
share capital and the fees paid
on such date for the registration of a company with a share
capital equal to the nominal share capital of the company
filing the notice immediately before the increase.”
The
mere replacement of the word “payable” by the word
“paid” and vice-versa has significant financial impact on
the companies.
In fact, the position now prevailing after the latest
amendment was also
existing prior to 21.06.1995. However, Notification
No. GSR 565(E) dated 21.06.1995 entirely changed the
position by replacing the word “payable” by the word
“paid” which resulted in greater financial burden on the
companies.
3.
Companies Not Hit by
the 1995 Notification:
The 1995 Notification has not adversely affected each and
every company increasing the authorised capital.
The said Notification did not have any effect where the
registration fees remained stagnant between the date on which
the company was floated or, as the case may be, the date on
which the last increase in the authorised capital was effected
and the date on
which the authorised capital is now proposed to be increased.
However, difficulty would arise where the registration fees
have gone up between the said events.
For example, the
registration fees have
remained same between 01.04.1992 and 30.04.2000.
Accordingly, any company registered between 21.06.1995 (the
effective date of 1995 Notification) and 30.04.2000 and
raising the authorised capital during the said period was not
at all affected by the 1995 Notification. Similarly, any company having raised the authorised capital once
between the said two dates and again raises the authorised
capital during the same period, the 1995 Notification will not
affect it adversely.
However,
if such company has raised the authorised capital between
01.05.2000 and 11.07.2000, then it must have borne the repercussion of the 1995 Notification. This is because the
registration fees have been enhanced substantially effective
from 01.05.2000. The
backlash of 1995 Notification ended with the Notification
dated 12.07.2000.
4. Recent Judgment
of Delhi High Court:
It seems that the
Government may have to pay heavy penalty for not paying heed
to the genuine difficulties of the companies when the
Notification dated 21.06.1995 was made effective.
Recently,
a Division Bench of Hon’ble Delhi High Court
has allowed the appeal filed by Phoenix Lamps India
challenging the said Notification
dated 21.06.1995 and held the same to be unconstitutional.
The said judgment
will, if finally
affirmed by the apex court, force the Government to refund
the additional registration fees fully which was collected on
the basis of the said Notification of 1995.
5.
Consequences of Judgment:
Although the
figure of such additional fees collected subsequent to the
said Notification of 1995 is yet to be known, even a simple
guess would lead to conclude that the Government will refund
much more than what it has collected so far through its
on-going extended Company Law Settlement Scheme, 2000 (“CLSS”).
In other words, even the recent collection under CLSS will not provide the Government
enough funds to refund the differential amount of fees
collected pursuant to the Notification of 1995, if
so required.
There is no doubt that now after the said decision, almost
all the companies which have paid excess registration fees
post-1995 Notification will rush to the respective ROC offices
and will claim refund of such excess fees paid. Even
some companies perhaps might have already lodged the refund
claim, especially with the office of ROC in Delhi as the said
judgment of Delhi High Court is as good as the law for that
region, unless the Supreme Court reverses the same. The
amount of such refunds by each office of ROC may run into
crores of rupees.
6.
Conclusion:
One wonders why
the Government did not make the recent Notification dated
12.07.2000 effective retrospectively, i.e., with effect from
21.06.1995 and thus nullifying the effect of draconian 1995
Notification. Instead of refunding the excess amount to the
respective companies, the same could perhaps
be transferred to a special fund for, say, redressal of
grievances of the investors at large or for any
such common purpose.
The recent Notification
dated 12.07.2000 has restored the position prevailing
prior to the Notification dated 21.06.1995 and is an indirect
confirmation that the latter Notification was entirely unfair.
This recent Notification does lead one to believe that the
same would not have come
forth but for the numerous suits filed in different courts
across the country challenging the 1995 Notification which was
undoubtedly unfair.
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