Related party

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

16 December 2013 Sec 188 of the CA'13 : related parties transaction prohibits leasing of property of any kind. Which hitherto is permitted.

the question arise is wether all leave and license transactions are treated as lease. Legally speaking lease and leave & license differes with each other.

Whether Leave and License transactoins will be covered by sec. 188?

Can a pvt. ltd. co. as the license holder give on license certain premises to a public ltd. co. on L & L basis, for a period of 99 yrs. the agreement will be made before the new act come into effect. Only the compensation (rent) part will be kept open for the the parties to decided mutually, from time to time.

Can this type of arrangement valid in law? will it attract the provisions of sec. 188?

Hitendra Jain

Hitendra Jain (Expert)
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17 December 2013 Section 188 starts with
"Except with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as may be prescribed.........."

Sec 188 is not yet commenced.
Link
http://www.mca.gov.in/Ministry/pdf/CommencementNotificationOfCA2013.pdf

Even if it were commenced Board resolution and compliance of conditions to be prescribe are sufficient.

Meaning thereby you might would face problem without board resolution or any of the condition/s tailored against your situation.

Term "Property of any kind" reveal that all leave and license transactions will be covered. Substance / Subject matter is the property.

Sec 6 (a) reads:

the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act;