As per Article 21 of the Constitution of India, “No person shall be deprived of his life or personal liberty except according to procedure established by law, nor shall any person be denied equality before the law or the equal protection of the laws within the territory of India”. It also covers a just and fair trial without any arbitrary procedure, which confers that arrest should not only be legal but also justified. In this context, this article consists of the procedural and constitutional rights of the accused before and after the arrest in India. Except when exceptions are created, the accused person, unless and until provided otherwise, is considered innocent until proven guilty before the court of law.
1. Article 22 of the Constitution of India deals with the protection against arrest and detention in certain cases:
2. Section 50 of the Code of the Criminal procedure (Cr.P.C.) states that the person arrested has to be informed of the grounds of arrest and his right to bail:
3. Section 50-A of the Code of the Criminal procedure (Cr.P.C.) talks about the obligation of the police officer making the arrest to inform about the arrest to a nominated person –
4. Section 55 of the Code of the Criminal procedure (Cr.P.C.) deals with arrests when a police officer deputes a subordinate to arrest the accused without a warrant.
5. Section 75 of the Code of the Criminal procedure (Cr.P.C.) provides that the police officer or other person executing a warrant of arrest shall notify the substance thereof to the person to be arrested and, if so required, shall show him the warrant.
A landmark judgment of Joginder Kumar v. State it was held that although the police had the absolute legal powers to arrest a person in a criminal case, every arrest had to be justified. Arrests could not be made routinely, merely on an allegation or a suspicion of their involvement in a crime.
Every arrest should be made after the police officer reached a reasonable satisfaction after the Investigation that the complaint was genuine and bona fide, the accused was complicit in the Crime, and the arrest was necessary and justified.
1. Article 22 (2) of the Constitution of India provides that every person who is arrested and detained in custody shall be produced before the nearest magistrate within twenty-four hours of such arrest, excluding the time necessary for the journey from the place of detention to the court of the magistrate and no such person shall be detained in custody beyond the said period without the authority of a magistrate.
2. Section 57 of the Code of the Criminal procedure (Cr.P.C.) stipulates that the subject to the terms of the arrest, a police officer who arrests without a warrant should produce the arrested individual without undue delay before the Magistrate with jurisdiction or a police officer in charge of the police station.
3. Section 76 of the Code of the Criminal procedure (Cr.P.C.) states that the person who is arrested is to be brought before Court without delay.
As mentioned in Section 57 that such delay shall not, in any case, exceed twenty- four hours exclusive of the time necessary for the journey from the place of arrest to the Magistrate’s Court.
Section 50 (2) of the Code of the Criminal procedure (Cr.P.C.) states that where a police officer arrests without warrant any person other than a person accused of a non-bailable offense, he shall inform the person arrested that he is entitled to be released on bail and that he may arrange for sureties on his behalf.
Article 14 of the Constitution of India states that every person is equal before the law means that every person in the dispute shall have equal treatment.
The Supreme Court has held in several judgments that a speedy trial is guaranteed by Article 21 of the Constitution. The right to a speedy trial is first mentioned in that landmark document of English law, the Magna Carta. In the case of Huissainara Khatoon v. Home Secretary, State of Bihar, the Hon’ble court held that the State could not avoid its constitutional obligation to provide a speedy trial to the accused by pleading financial or administrative inability. The State is under a constitutional mandate to ensure a speedy trial, and whatever is necessary for this purpose must be done by the State.
In Ashim v. National Investigation Agency, Hon’ble Supreme Court held that the deprivation of personal liberty without ensuring a speedy trial is inconsistent with Article 21 of the Constitution of India.
1. Article 22 of the Constitution provides that no arrested person shall be denied the right to consult a legal practitioner of his choice.
2. Section 41D of the Code of the Criminal procedure (Cr.P.C.) provides that when any person is arrested and interrogated by the police, he shall be entitled to meet an advocate of his choice during interrogation, though not throughout the interrogation.
3. Section 303 of the Code of the Criminal procedure (Cr.P.C.) deals with the rights of the person against whom proceedings are instituted. Any person accused of an offense before a Criminal Court or against whom proceedings are created under this Code may be defended by a pleader of his choice.
4. Article 39 A of the Constitution of India states that the State shall secure that the operation of the legal system promotes justice based on equal opportunity and shall, in particular, provide free legal aid by suitable legislation or schemes or in any other way, to ensure that opportunities for securing justice are not denied to any citizen because of economic or other disabilities.
In the landmark case of Khatri v. the State of Bihar, Hon’ble Justice P.N. Bhagwati made it mandatory for Session Judges to inform the accused of their rights to free legal aid and to advise individuals if they are unable to retain a counsel to defend themselves caused by poverty or destitution. In Sheela Barse v. Union of India, the Hon’ble Court ruled that a person’s fundamental right to a speedy trial is contained in Article 21 of the Indian Constitution. Also, in the case of Suk Das v. Union Territory of Arunachal Pradesh, Hon’ble Justice P. N. Bhagwati stated that India has many illiterate people unaware of their rights. As a result, it is critical to developing legal literacy and awareness among the general public and is also an essential component of legal aid.
5. Section 304 of the Code of the Criminal procedure (Cr.P.C.) provides that where, in a trial before the Court of Session, the accused is not represented by a pleader, and where it appears to the Court that the accused has not sufficient means to engage a pleader, the Court shall assign a pleader for his defense at the expense of the State.
When a confession or statement is made in court, the magistrate must determine whether the announcement was made voluntarily or not. No one can be compelled to speak in court against their will. The right to remain silent is not recognized in any law, but it can be based on constitutional provisions or the Indian Evidence Act. The right to a fair trial is important because it helps ensure that people are treated fairly in court.
Article- 20(2) of the Constitution of India reiterates that no person, whether accused or not, cannot be compelled to be a witness against himself. This act of exposing oneself is the principle of self-incrimination. In the Landmark judgment of Nandini Sathpathy v. P.L. Dani & Others, the Court noted that Article 20(3) existed in the form of general fundamental right protection and was available to every accused person in India. Still, its wording was not very specific about which situations it applied to. Also, no one can forcibly extract statements from the accused, and the accused has the right to keep silent during interrogation.
Section 54 of the Code of the Criminal procedure (Cr.P.C.) stipulates that when a person who is arrested, whether on a charge or otherwise, alleges, at the time when he is produced before a Magistrate or at any time during the period of his detention in custody, that the examination of his body will afford evidence which will disprove the commission by him of any offense or which will establish the commission by any other person of any crime against his body, the Magistrate shall, if requested by the arrested person so to do direct the examination of the body of such person by a registered medical practitioner unless the Magistrate considers that the request is made for vexation or delay or for defeating the ends of justice.
1. Section 55A of the Code of the Criminal procedure (Cr.P.C.) deals with the health and safety of an arrested person- It shall be the duty of the person having the custody of an accused to take reasonable care of the health and safety of the accused.
2. Section 358 of the Code of the Criminal procedure (Cr.P.C.) deals with the compensation to persons who got arrested groundlessly-
3. Section 41A of The Code of the Criminal procedure (Cr.P.C.) provides the notice of appearance of arrested person before a police officer.
In Arnesh Kumar v. State of Bihar & Anr, the Supreme Court had inter-alia directed that the notice of appearance in section 41A CrPC should be served on the accused before making the arrest. The Court had issued the direction to prevent unnecessary arrests, which, in the opinion of the Court, bring humiliation, curtail freedom and cast scars forever. The endeavor of the court was to ensure that police officer do not arrest accused unnecessarily and Magistrate do not authorize detention casually and mechanically. The Supreme Court also gave the following directions:
The judgment of the Supreme Court in Munawar v. The State of M.P., since the police had failed to issue a notice under Section 41A Cr.P.C., as mandated by the Supreme Court in Arnesh Kumar Vs. the state of Bihar, the applicants ought to have been straightway admitted to interim bail.
4. Section- 46 of the Code of the Criminal procedure (Cr.P.C.) stipulates the mode of arresting an accused person, including submission to the custody by the accused, physically touching the body, or to a body. Except when the person to be arrested is accused of an offense punishable by death or life imprisonment, when the accused person is attempting to resist his arrest by becoming violent and aggressive unnecessarily, or when the accused is trying to flee, the police officer must not cause the death of the accused person while attempting to arrest the person.
5. Section 49 of the Code of the Criminal procedure (Cr.P.C.) stipulates that the person arrested shall not be subjected to more restraint than is necessary to prevent his escape.
In D.K. Basu v. State of West Bengal Supreme Court held that under Section 49, the police are not permitted to use more restraint than is necessary to prevent the person’s escape. The court further stated that the police officer would be held in contempt of court and subject to a departmental inquiry if they could not carry out his duties correctly. Any High Court with jurisdiction over the case above may be approached for such a dispute.
6. Section 41B of the Code of the Criminal procedure (Cr.P.C.) states the arrest procedure and duties of the officer making an arrest. Unless the memorandum is attested by a member of his family, inform the person arrested that he has a right to have a relative or a friend named by him be informed of his arrest.
7. 41D of the Code of the Criminal procedure (Cr.P.C.) stipulates that when any person is arrested and interrogated by the police, he shall be entitled to meet an advocate of his choice during interrogation, though not throughout the interrogation.
Modern constitutional law has come a long way in terms of protecting and safeguarding the rights of persons guilty of crimes. Patrol officers are especially prone to making mistakes since they serve under public scrutiny and are expected to achieve speedy results. India has a significant problem with illegal arrests and custodial deaths, primarily caused by unlawful arrests. According to India’s legal system, which supports the concept of “Innocent until proven guilty,” an accused person has certain rights as an arrested person that are untouched whenever a police officer knocks on his door to make an arrest. The Supreme Court of India in D.K. Basu v. West Bengal is not being effectively implemented. There should be proper execution of provisions and guidelines stated in this case to ultimately assist in decreasing the proportion of illegal arrests and resulting custodial deaths.
The aim of this article is to discuss in detail the fundamental differences between private and public companies in India under the Companies Act, 2013. It also looks into those areas under the Indian company law where the distinction between the two gets blurred.
A company is an Artificial Person created by the process of law and can only be destroyed by the process of law. A company is a Legal Person, it means that a company can sue and be sued “by its own name”. A company can hold property, acquire, sell, lease, mortgage, gift or otherwise transfer a property by its own name. In other words, a company as such can be a transferor or a transferee of a property.
A company is a separate legal entity distinct from its members. It means that the assets of a company are not the assets of its members. Conversely, the assets of the members are not the assets of the company. Further, since the company is created by the process of law, it can be killed only by the process of law. Until a company is dissolved, it continues to be a legal person. The Companies Act, 2013 provides for a variety of companies that may be promoted and registered under the Act.
The two common types of companies which may be registered under the Act are:
Before going through the differences between a private company and a public, let us first understand the basic meaning of the same.
As per Companies Act, 2013, a private company is referred as a business entity that defies the fundamental of the transferability of the shares. It also means that members of the private limited company are not allowed to issue shares and debentures to the general public. Also, the same act set out the provision on the number of members that can exist in such a business model. As of now, private limited companies are only allowed to retain a maximum of 200 members. Moreover, the privately-held business is liable to include the term “private limited” at the end of their company’s name.
The Companies Act, 2013 defines a public company which stick to the limited liability and may offer shares to the “general public” by Initial Public Offer (IPO). An individual can also acquire the shares of such a company where the company is listed via the stock market. A public limited company is often referred to as a joint-stock company. Such a business model is regulated by the provisions of the Indian Companies Act, 2013.
A public limited company can be set up by the group of volunteers (irrespective of their numbers). Unlike private business entities, this business model doesn’t impose any limitation on the transferability of the shares. It means that the company can send an invitation to the general public for the issuance of shares and debentures.
Following are the main points of difference between a public company and a private company:
1. Minimum Paid-Up Share Capital: A company to be incorporated as a private company must have a minimum paid-up capital of Rs. 1,00,000, whereas a public company must have a minimum paid-up capital of Rs. 5,00,000. (NOTE: The minimum paid up share capital requirement has been done away with by the Companies (Amendment) Act, 2015.)
2. Minimum Number of Members: The minimum number of members required to form a private company is 2, whereas a public company requires at least 7 members.
3. Maximum Number of Members: The maximum number of members in a Private Company is restricted to 200. The Public Company have no restriction on a maximum number of members.
4. Transferability of Shares: There is complete restriction on the transferability of the shares of a private company through its articles of association, whereas there is no restriction on the transferability of the shares of a public company.
5. Issue of Prospectus: A private company is prohibited from inviting the public for subscription of its shares i.e., a private company cannot issue prospectus, whereas a public company is free to invite public for subscription i.e., a public company can issue a prospectus.
6. Number of Directors: A private company may have two directors to manage the affairs of the company, whereas a public company must have at least three directors.
7. Consent of the Directors: There is no need to give the consent by the directors of a private company, whereas the directors of a public company must have filed with the
Registrar consent to act as director of the company.
8. Qualification Shares: The directors of a private company need not sign an undertaking to acquire the qualification shares, whereas the directors of a public company are required to sign an undertaking to acquire the qualification shares of the public company.
9. Commencement of Business: A private company can commence its business immediately after its incorporation, whereas a public company cannot start its business until a certificate to commencement of business is issued to it.
10. Shares Warrants: A private company cannot issue share warrants against its fully paid shares, whereas a public company can issue share warrants against its fully paid-up shares.
11. Further Issue of Shares: A private company need not offer the further issue of shares to its existing shareholders, whereas a public company has to offer the further issue of shares to its existing shareholders as right shares. Further issue of shares can only be offer to the general public with the approval of the existing shareholders in the general meeting of the shareholders only.
12. Statutory Meeting: A private company has no obligation to call the statutory meeting of the members, whereas a public company must call its statutory meeting and file statutory report with the Registrar of Companies.
13. Quorum: The quorum in the case of a private company is two members present personally, whereas in the case of a public company five members must be present personally to constitute quorum when the number of members as on the date of the meeting is 1000 or less, fifteen members are required to present in person when the number of members as on the date of the meeting is more than 1000 but less than 5000, and thirty members are required to present in person when the number of members as on the date of the meeting is more than 5000.
14. Managerial Remunerations — Total managerial remuneration in the case of a public company cannot exceed 11% of the net profits, and in case of inadequate profits a maximum of Rs. 87,500 can be paid. However, these restrictions do not apply on a private company.
15. Retirement of Directors: In a private company, the directors are not required to retire by rotation. The directors can be permanent. Whereas, in a public company 2/3rd of the total number of directors must retire by rotation.
The Companies Act provides for a variety of companies that may be promoted and registered under the Act. However, two basic types of companies which may be registered under the Act are “private” and “public” companies. As it can be seen, there are multifarious differences between a private company and a public company. These are important to understand in order to appreciate the functioning of these entities in the corporate world. However, there are certain grey areas in the realm of private and public company where the distinction between the two gets blurred.
Corporates in India are governed by various statutes (corporate law in India) which are regulated by different Government / Regulatory Agencies.
Companies in India, are governed by statutes and agencies depending on the activities carried out by that company. In spite of the fact that a plethora of statutes are applicable to a Company, Companies Act remains the base act which all Companies incorporated in India are mandated to follow and abide. It’s important to note that corporate law in India is more than merely company law and it involves various other statues.
Corporate Law in India has evolved over a period of years. From Indian Companies Act, 1913 to Companies Act, 1956 and now Companies Act, 2013. Depending on the need of the industry and opening up of the Indian economy, the Companies Act too has kept pace with the changing times. There is no doubt that corporate law in India means more than company law, however the company law remains the foundation of corporate law in India.
There are various types of companies in India and there is a difference between private and public company under companies act 2013. At present Companies Act, 2013 is in force and Section 1(4) of the Act states as under:
“(4) The provisions of this Act shall apply to:
(a) companies incorporated under this Act or under any previous company law;
(b) insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 (4 of 1938) or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(c) banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949 (10 of 1949);
(d) companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity Act, 2003 (36 of 2003);
(e) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and
(f) such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions, modifications or adaptation, as may be specified in the notification.”
From the above we can infer that Companies Act is applicable to all types of Companies existing and to be incorporated in India and there are various types of companies in India.
However, in addition to the above, Special Acts of the Parliament or the State Legislature may provide for incorporation of Companies to which the Companies Act, 2013 would not apply. The types of companies in India falling in those categories, to name a few, are as under:
The types of Companies in India may broadly be classified based on the extent of liability of the Member.
Section 2(92) of Companies Act, 2013 Defines Unlimited Company.
“Unlimited Company means a company not having any limit on the liability of its members.”
In this type of Company, Members are liable for the debts or losses of the company, even to the extent of their personal property.
Section 2(21) of Companies Act, 2013 Defines Company Limited by Guarantee.
“Company limited by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up.”
In this type of company in India, the person who has guaranteed to pay the company’s debt is liable to pay debts only when the company is winding up and has incurred losses.
Section 2(22) of Companies Act, 2013 Defines Company Limited by Shares.
“Company limited by shares means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them.”
In these types of companies, members are liable to pay the amount only up to the value of unpaid shares held by them.
Companies Limited by Shares can further be classified as
Section 2(71) Defines a Public Company as:
Public company means a company which
(a) is not a private company;
(b) has a minimum paid-up share capital as may be prescribed:
Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles ;
Section 2(68) Defines a Private Company as:
Private company means a company having a minimum paid-up share capital as may be prescribed, and which by its articles —
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and (iii) prohibits any invitation to the public to subscribe for any securities of the company.
Section 2(62) Defines a One Person Company (“OPC”) as:
One Person Company means a company which has only one person as a member.
OPC was introduced to encourage corporatization for small businesses.
Other Forms/Types of Companies in India
Other forms/types of companies in India that are in existence are:
In the year 2000, the Eradi Committee, Chaired by Shri Justice V. Balakrishna Eradi, was constituted by the Central Government, comprising of experts, to examine the law prevalent at that time, relating to winding up proceedings of companies and to remodel it in line with the latest developments and innovations in corporate law and governance and to suggest reforms in the procedure at various stages followed in the insolvency proceedings of companies to avoid unnecessary delays in line with the international practice in this field.
Based on the recommendations of this Expert Committee, Chapter XXVII was incorporated in Companies Act, 2013. NCLT in the Company law is a quasi-judicial body meant to adjudicate the corporate and civil dispute arising under the Company law. The NCLT full form being National Company Law Tribunal, it has huge importance in company law matters. The forum provides for an expedient delivery of dispute resolution with regards to Companies Act, 2013. The significance of the NCLT in company law can be equated with the ITAT in income tax law, both established under the Companies Act, 2013 and Income Tax Act, 1961 respectively. NCLT and NCLAT were constituted keeping in mind the expert committee report. However, there is considerable difference between NCLT and NCLAT.
NCLT in Company Law is provided under Section 408 of the Companies Act, 2013, which reads as under:
408. Constitution of National Company Law Tribunal
The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a President and such number of Judicial and Technical members, as the Central Government may deem necessary, to be appointed by it by notification, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.
The need to incorporate a separate body to adjudicate matters relating to insolvency and winding up of companies was necessitated and consequently the Central Government vide Notification No. S.O. 1932 (E) dated June 1, 2016, constituted the National Company Law Tribunal (“NCLT”) to exercise and discharge the powers and functions as conferred by or under the Act.
The NCLT was formed as a quasi-judicial body to adjudicate matters concerning corporate disputes that were of civil nature arising under the Companies Act, 2013.
The NCLT has a Principal Bench at New Delhi. The Ministry of Corporate Affairs have set up Benches across India in a phased manner.
Each bench of NCLT is headed by a President and comprises of Judicial Members and Technical Members.
The provision to move the NCLT (National Company Law Tribunal) in company law matters has reduced the burden of the regular courts considerably. Litigants move the NCLT in company law matters for the resolution of complex disputes involving company and corporate matter.
The NCLT can take matters pertaining to:
The National Company Law Appellate Tribunal (“NCLAT”) was formed by the Government under Section 410 of Companies Act, 2013, which reads as under:
410. Constitution of Appellate Tribunal
The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, an Appellate Tribunal to be known as the National Company Law Appellate Tribunal consisting of a chairperson and such number of Judicial and Technical Members, not exceeding eleven, as the Central Government may deem fit, to be appointed by it by notification, for hearing appeals against the orders of the Tribunal.
The decisions of the NCALT can be appealed to the Supreme Court of India, on a point of law.
There are at present, a Principal Bench of NCLAT at New Delhi and another Bench at Chennai.
Thus, it is quite obvious that there is difference between NCLT and NCLAT. As far as NCLT is concerned it is the primary body where parties in dispute agitate, whereas NCLAT is an Appellate body where decisions of NCLT is challenged by the aggrieved party.
The National Company Law Tribunal Rules, 2016 were notified on July 21, 2016. (NCLT Rules 2016).
The NCLT Rules 2016 defines the Powers and Functions of the President, registrar and Secretary of NCLT. It also details the procedure to be followed for institution of proceedings, petitions and appeals and issuance of orders and disposal of cases and matters incidental thereto. The Rules also describe the procedures in respect of matters earlier dealt by quasi-judicial bodies, courts and tribunals.
There are a few difference between NCLT and NCLAT. Here they are:
NCLT was constituted pursuant to Section 408 of Companies Act, 2013 whereas NCLAT was constituted as per Section 410 of Companies Act, 2013.
NCLT has 16 Benches across India where NCLAT has only 2 benches in India, one principal bench at New Delhi and other in Chennai.
NCLT has Original Jurisdiction whereas NCLAT has Appellate Jurisdiction.
NCLT does not deal in cases involving Competition Law or appeals from the National Financial Reporting Authority (“NFRA”). NCLAT is designated as appellate forum for orders passed by NFRA and Competition Commission of India as per powers granted to it under Companies Act, 2013. NCLAT has replaced the Competition Appellate Tribunal.
The above briefly explains the formation, functions, jurisdiction and working of the NCLT and NCLAT. These two quasi-judicial bodies have been doing their bit to get speedy redressal for corporate disputes which would otherwise have had not been possible before. It would be great to see if such separate regulatory bodies are able to deliver quick response to corporates which will foster investors’ confidence and create an ecosystem where justice will be delivered adequately and, in a time, bound manner.
NCLT: What are its merits and demerits?
It is always better to gain complete knowledge about the advantages and disadvantages of NCLT prior to moving before the legal authority. Obviously, the quasi-judicial authority has numerous branches throughout the country that enables the petitioners to seek legal remedy within their local jurisdiction. The body ensures speedy disposal of company matters and help reduce the heap of cases. There are no specific disadvantages of NCLT. So, you can approach before the authority for your company related issues unhesitant.
However, professional advocates can guide you to the best legal solution when dealing with a corporate-related issue. So, visit your nearby lawyer to seek necessary advice, to represent you or to even find an alternative resolution with respect to your NCLT case status.
A business lawyer can help in various types of matters ranging from establishing the business to handling the affairs amounting to insolvency. The term insolvency means inability of a business to clear the debt and liquidate the business in various ways to get respite from the debtors. Here are some of the important acts of insolvency that a failing business need to perform.
Insolvency is a bad phase. It is better to follow the safe and sound business practices to avoid such situation. Follow the tax rules, the Company Law, etc. and remain in good books always.
The content of this document do not necessarily reflect the views / position of RKS Associate, but remains a probable view. For any further queries or follow up please contact RKS Associate at [email protected]