Introduction
There are several sections in the Companies Act, 1956 which give rights to members, debenture holders, creditors and directors. Many are ignorant of these rights as they are not appearing at one place but are appearing in different Sections. For example, Shareholders have important rights such as right to copies of Memorandum of association(Section 39) right to inspect register of charges/copies of instruments creating charges(Section144), right to inspect minutes of General meeting and ask for extracts(Section 196), right to receive Notice of General meetings(Section 173), copies of Annual reports, right to vote, dividend etc.
This article analyses the provisions of Section 163 and especially the rights of members/debenture holders or any other persons to inspect the register of members/ debenture holders /annual returns and to make copies / extracts or seek copies/extracts of these registers or documents.
Can a company refuse requests for extracts/copies of Members register?
It is quite common for the companies to receive requests from share brokers /persons with vested interests, who ask for copies of the members register without inspecting the members register. After collecting the members details, these brokers/persons write letters to those members and induce them to sell their shares to make some gains. These brokers/interested parties sometimes remit a fixed amount to companies and demand copies to put pressure on the company. Companies can refuse to provide extracts to such brokers on the ground that inspection of the members register is a pre requisite and the person must identify the pages or parts of the documents and there after only they can demand for extracts that too on payment of prescribed charges as per the Act. This will be obvious from the following analysis of Section 163.
Analysis of Section 163
Section 163(1) provides that register of members, debenture holders and index of both members and debenture holders (in case the number exceeds 50),copies of all annual returns together with all annexures shall be kept at the Registered office of the company.
It also states that these registers/documents can be kept at any other place within the city, town or village in which registered office is situate provided a special resolution is passed in General meeting and Registrar of companies has been given a copy of the proposed resolution in advance.
163(2) provides that the Register of members, debenture holders together with indexes, annual returns and annexures shall be open for inspection during the business hours of the company. The company however is allowed to impose a reasonable restriction in this regard but must ensure that at least not less than 2 hours of time in each day is allowed for inspection.
The Members/Debenture holders can inspect without payment any fee. However any other person on payment prescribed fee. At present ten rupees is payable for each inspection by any person who is not a member or debenture holder.
Readers may pay attention to the wordings of 163(3) which reads as under:-
Section 163(3)
Any such member, debenture holder or other person may -
a) Make extracts from any register, index, or copy referred to in sub - section (1) without fee or additional fee, as the case may be; or
b) Require a copy of any such register, index or copy or of any part thereof, on payment of such sum as may be prescribed for every one hundred words or fractional part thereof required to be copied.
Readers must pay special attention to the starting words of 163(3) which starts with “Any such member, debenture holder or other person”. A conjoint reading of 163 (2) and 163(3) make it clear why the words “any such member” is used in 163(3).
“Any such member” means a member/debenture holder/other person, who has inspected the books of account*. In other words only after inspection any member /debenture holder/other person may make extracts or copy from registers without any fee or additional fee. However if they require copy of any such register, index, they have to make payment of prescribed fee.
Before demanding copies or extracts, the person inspecting the records has to identify the extracts which he desires and must make payment at the prescribed rate.
What is the prescribed fee for inspection and for copies/extracts?
At present Rule 21 A of Companies (Central Government) General Rules and Forms prescribed a fee of ten rupees for inspection by a person other than members/debenture holders. For seeking copies/extracts prescribed fee is one rupee for every one hundred words or fractional part there.
What is the time limit for compliance of the request for extracts/copies?
The company is under obligation to provide copies/extracts sought by the inspecting member/debenture holder/any other person, within a period of 10 days from the next day of receiving the request. For example if a request is received on 1st May 2012, the period of 10 days will start from 2nd may and end on 11th May. In this count of 10 days, non working days falling after the date of request are excluded. { Section 163(4)}
What is the penalty for refusal or non compliance of the request?
As per Section 163(5) the company and every defaulting officer shall be punishable with a fine which may extend to Rs.500 for every day during which the default continues.
What is the Remedy if inspection /providing extracts is refused?
Any aggrieved person may approach the Tribunal(National company Law Tribunal) /Companies Law Board) which may by order, compel the defaulting company to allow an immediate inspection of the register/document or direct the company to provide the copies / extracts sought by the petitioner as the case may be.{Section 163(6)}
Can the company limit the request for copies for physical members only?
Yes. Section 150 requires that the members register should contain the names of registered members. Once members of physical shares dematerialize their holding, the name of the Depository(NSDL/CDSL) is substituted in the members register for in their place. Thus the total registered members will include NSDL and CDSL. Although NSDL/CDSL are apparent owners in the case of electronic holdings, the real beneficial owners will be registered with depository as per Depositories Act. BENPOS will be provided to the companies periodically by the Depositories. Section 163 does not refer to members in electronic form. Therefore providing details of physical shareholders will be sufficient requirement u/s 163(3)(b). Although members register is maintained in soft form nowadays by many companies, request for extracts in soft copies by CDs, Pen drives etc need not be complied with as the section does not provide for this kind of requirement.
Conclusion: Companies Bill 2011 also contains similar provisions but it may be noted that it additionally covers the beneficial owners in depository as members. It also imposes a minimum fine of 50,000/- which can extend upto 3 lakh and for continuing default a further fine of Rs.1,000/- per day for continuing default.
G.S Rao, Chief Manager(Legal),OCL India Limited
Source: 1 Companies Act,1956 and company cases referred below
*Readers may refer to the following case laws:
1. Macknam Investments Ltd, in re{1996}87 Comp.cases 689(Cal)
2. HBstock holdings Limited Vs Jaipraksh Industries Ltd. Comp. Cases Vol II 6 2003 PAGE 29 Decided on 30.01.2003
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