Historical Regime of Company Legislation in India

There was an era, when people used to opt for the sole proprietorship or partnership business and they were so reluctant to invest their money in such concern in order to gain profit. These kind of business method still do exist in the today’s world but due to advancement in technology and change in the consumers need requiring huge investment etc.; according to me is not preferable. The concept of company choose to be a remedial measure for it.

History of Company Legislation in India:

Company Legislation in India started with the Joint Stock Companies Act, 1850 which was based on the  England Corporate Law, 1844. The act provided for the incorporation of the Company without  obtaining a Royal Charter or Sanction by a Special Act of Parliament.

This Joint Stock Companies Act, 1850 recognized Companies as a distinct legal entity but failed to introduce the concept of limited liability. Later on, the same was recognised by the Companies Act, 1857 closely following the England Companies Act, 1856. But the liability for the members of the Banking Company was unlimited. It was in the year 1858 that the limited liability concept was extended to Banking Company also.

Thereafter in 1866, the Companies Act, 1866 was passed for consolidating and amending the law relating to incorporation, regulation and winding-up of trading companies and other associations. This act was based on the English Companies Act, 1862. This Act continued till 1913 when it was replaced by the Companies Act, 1913. The Act of 1913 had been passed following the English Companies Consolidation Act, 1908.

Since the Indian Companies Act closely followed the English Acts, the decisions of the English Courts under the English Company Law were also closely followed by the Indian Courts.

Till 1956, the business companies in India were regulated by this Act of 1913.

Indian Company Law has been largely based on the prevailing English Law. The predecessor of the 1956 act was the 1913 act which undergone several changes and amendments including the drastic amendments of the 1936 and 1951 act.

The period of second world war and the post war years witnessed an upsurge of Industrial and Commercial activity in an unprecedented scale in India. During these period, large developments was observed in the organisation and management of Joint Stock Companies which more attracted the public attention.

After the war, the Cohen Committee (Company Law Amendment Committee) of United Kingdom after an enquiry over two years submitted its report recommending far reaching changes in the English Companies Act, 1929.

In India also, there was a in-depth feeling in view of the experience gained during the war years; the  time was ripe for fresh legislation. So, the government of India took up the revision of the Company Law immediately after the world war.

Two Company Lawyers- One from Bombay and the other from Madras was appointed to give their opinions to the government upon the revision of the 1913 act. Their reports were considered and memorandum was circulated by the end of 1949 for eliciting opinion.

On 28th October, 1950; the government of India formed a committee of 12 members under the chairmanship of C.H. Bhabha to form an opinion on the revision of the company law. They submitted its report on March, 1952 recommending the changes in companies act, 1913. The report was again placed before the Chambers of Commerce, Trade associations, Professional bodies, Leading industrialists, shareholders and representatives of labour.

The bill which eventually emerged as the Companies Act, 1956 was introduced in the parliament on 2nd September, 1953. The bill underwent some further amendments and was passed on November, 1955. The new companies act came into force on 1st April, 1956.

Replacement of the Companies Act, 1956 by 2013: