Provision of common seal

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Common Seal

Common seal is the signature of the Company. Since Company is a legal person, it should have its own signature. The Companies Act, 1956 does not defines “common seal” or “seal”. However, Article 84 of Table A provides for safe custody and restricted use of common seal. Common seal may affix in share certificates, debenture certificates and power of attorney. Adoption of common seal is one of the important items in first Board Meetings of Companies.

Section 147 (b) of the Act insists that a Company should have a seal in which its name should be engraved in legible characters. Section 147(3) imposes punishment for the contravention of Section 147(b). Further Section 147(4) makes liable for a fine for the use or authorizes the use of any seal purporting to be a seal of the Company in which its name is not engraved legibly. But this is only a seal, not the common seal because Section 34, 48, 84 etc. clearly and specifically saying “common seal”. But read with Article 84 of Table A, seal means common seal.

As the Act fails to define the term “common seal” and “seal”, it is possible to use these terms interchangeably.

The provisions for keep in safe custody, use only on the authority of Board resolution and use only in the presence of two directors and secretary etc. gave to Common Seal predominance position in company matters. These provisions distinguish an ordinary rubberstamp from Common Seal. Now it is custom to make common seal in metals with name of the Company and the name of the state in which the Registered Office of the Company is situated is engraved in it.

The concept “common seal” very much helped to make a sense of feeling that on affixing it, there is a legal obligation for both directors and Company. Affixing an ordinary seal never make such feelings, because any employee can use it. Moreover, Companies are maintaining a register as “register for sealed documents” for keeping a record of the use of Common Seal. This again shows the importance of common seal. However, this is not a statutory register under the Companies Act.

Institute of Company Secretaries of India published secretarial Standard on “Common Seal” in November 2008.

The Companies Act, 1956 does not allow to take the common seal outside India. Section 50 provides that if authorised by the articles, a Company can use in any territory, district or place not situate in India an official seal which shall be a facsimile of the common seal of the company. This Section further provides that A deed or other document to which an official seal is duly affixed shall bind the company as if it had been sealed with the common seal of the company (Section 50(5)).

It is true that Common Seal has its own importance in Company matters. But the failure to affix the common seal on any deed or document will not absolve the liability of the directors. Failure to affix the common seal cannot be a ground on which the company can escape its obligations.