“Decode Section 15 of the Companies Act 2013 and tackle INC-24 rejection. Understand the term ‘noted’ and take necessary steps for compliance. Expert insights on dealing with rejection remarks.”
‘Duly Noting’ the provisions of Section 15 of the Companies Act 2013: how to deal with INC-24 rejection where the rejection remark refers to Section 15
Introduction:
Section 15 of the Companies Act 2013 states that “every alteration made in the memorandum or articles of a Company shall be noted [emphasis added] in every copy of the memorandum or articles, as the case may be.” There are severe repercussions in the form of monetary penalties if the company fails to “note” the alteration(s) as well. The issue, however, is what the term “noted” stand for, and as a professional what would your actions be if you receive a rejection of INC-24, with remarks such as “…and duly noted as required u/s 15 of the CA, 2013 is to be attached.” This article interprets Section 15 and discusses the steps that need to be taken in its compliance. Further, it also discusses how to deal with the rejection of INC-24 particularly where the remark includes the term “noted” in line with Section 15.
Issues:
Recently I came across an interesting case in which an INC-24 rejection was based on the ground that altered MOA & AOA “and duly noted as required u/s 15 of the CA, 2013” was not attached. The main issue, therefore, was not only the compliance with the provisions of Section 15 but also the rectifications in line with the rejection remark. There was doubt as to whether attaching the altered MOA or AOA would cure the defect in INC-24, or whether there are some other steps that need to be taken. One could have simply mentioned that there was a need to attach the altered MOA in INC-24 if it was indeed a case of failure to attach the altered AOA or MOA. There are proper rejection codes for the same. However, mentioning something to the effect of “duly noted as required u/s 15 of the CA, 2013” in the remark made the rejection look as if there was a need to adopt some special procedure to duly note the altered MOA and AOA and to attach it with the INC-24 to cure the defects. The rejection made me curious to check the provisions of Section 15 leading to an expected outcome, which I have discussed in the following sections of this article.
Discussion:
Section 15 requires every alteration made to the MOA or the AOA of a company to be “noted” in every copy of the MOA or the AOA, as the case may be. The plain reading of the text itself indicates that by using the term “noted”, the provision requires the new changes to be incorporated in every copy of the MOA or the AOA post alteration. Nevertheless, an interpretation based on which a professional is going to base his or her action must be backed up by valid sources. Statutory interpretations by the courts play an important role in this regard. Accordingly, there was a need to check if the provisions of Section 15 were ever discussed in a court case. Unfortunately, however, no such cases were found. Accordingly, the sections of the Companies Act 1956 corresponding to Section 15 of the Companies Act 2013 were checked as another option to support the interpretation.
Section 40 of the Companies Act 1956 which was replaced by Section 15 of the Companies Act 2013 states as follows:
” 40. ALTERATION OF MEMORANDUM OR ARTICLES, ETC., TO BE NOTED IN EVERY COPY (1) Where an alteration is made in the memorandum or articles of a company, 1 [***], or any resolution, referred to in section 192, every copy of the memorandum, articles, agreement or resolution issued after the date of the alteration shall be in accordance with the alteration. (2) If, at any time, the company issues any copies of the memorandum, articles, resolution or agreement, which are not in accordance with the alteration or alterations made therein before that time, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 2 [one hundred] rupees for each copy so issued [emphasis added].”
Based on the provisions of Section 40 of the Companies Act 1956, it was now amply clear that Section 15 of the Companies Act 2013 requires making the proposed changes in every copy of the MOA/AOA that are issued post-alteration. Accordingly, ensuring that every copy of the MOA and the AOA reflects the new changes will result in adequate compliance with Section 15. Further, in relation to the rejection where the remark includes the term “noted” in line with Section 15, a resubmission of INC-24 along with the altered MOA or AOA shall cure the defect.
However, what if an altered MOA or AOA is attached and rejected with the same remarks? There does not appear any solution to such a case except the reattachment of the altered AOA and MOA. Such circumstances may arise because of contradictory interpretations of Section 15 by different stakeholders, which may not be correct. At the same time, adopting alternate means such as writing anything else in the MOA or the AOA other than their actual contents just to make sure that the INC-24 is not rejected should be avoided.
Conclusion:
In conclusion, the provisions of Section 15 of the Companies Act 2013 are a bit confusing, as compared to the provisions of Section 40 of the Companies Act 1956, as far as the meaning of the term “noting” is concerned. Such confusion can become a ground for rejection of the INC-24 form, which can be cured by attaching the altered MOA and AOA with INC-24. At the same time, Section 15 can be complied with by “incorporating” or “making” the changes in every copy of the MOA and the AOA.
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Disclaimer: I am a Company Secretary, but this is not my professional advice to you. You may not rely on the contents of this article to make any decision. If you are looking for professional advice, please consult a Company Secretary.
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