No duplicate certificate can be issued unless the Board of Directors

No duplicate certificate can be issued unless the Board of Directors have passed a resolution to that effect. A nominal fee is usually charged for such

certificate. When a duplicate certificate is issued the words, “Duplicate issued in

lieu of share certificate No “ may eitiler be mbber stamped or punched on its face.

The surrendered mutilated, defaced or torn certificates shall be defaced by a ‘Cancellation’ mark and destroyed after three years with the authority of the

Board. Pcnnlt)’. If a company with intent to defraud renews a certificate or issues a duplicate certificate, the company shall be punishable with fine which

may extend to Rs. 1,00.000 and every defaulting officer shall bf’ punishable with imprisonment up to 6 months or fine up to Rs. 1.00,000 or with both.

[Section 84(3)]. .

If any person impersonates or obtains a duplicate share certificate fraudulently. he may be liable for imprisonment upto three years and also pay fine

Loss of Right of Rescission

Loss of Right of Rescission. However, the right to rescind the contract is lost in the following circumstances:

(i) If the allottee does not take steps to set aside the contract within a reasonable time after he comes to know ofthe misrepresentation. (Shir011lni Sugar Mills Ltd. Vs. Debi Prasad).

(ii) Where the allottee affirms after he discovers the misrepresentation. Examples of such affinnation are executing a transfer for selling shares. voting at a general meeting, accepting dividends, payment of calls etc.

(iii) If the company goes into liquidation before he has started the proceedings to rescind the contract. In such a case, if repayment is allowed. it will injure the interest of creditors and the law always favours creditors at the expenses of members.2. Claiming Damages’ for Fraud. The subscriber is also entitled to sue the company for damages. But in order to succeed, fraudulent misrepresentation must be proved. If the subscriber wishes to claim damages, he must surrender the share to the company. He cannot both retain the shares and claim damages. The damages may be claimed by way of interest.

This right of damages shall also be lost under the same circumstances in which the right of rescission is lost.

security to the investors and creditors of the company

The doctrine of ultra vires has been established to provide security to the investors and creditors of the company for it provides that ultra vires activities
shall not be financed out of their money. Their money shall be utilized in specified areas only and curiously: it reveals the' risk their
investment faces. In the words ofL.C.B. Gower, the purpose of the doctrine is to ensure ,.that the investor in gold mining company does not find himself
holding shares in a fried fish shop and to give to those who allow credit to a limited company some assurance that its assets would not be dissipated in
unauthorized enterprises".Effects of Ultra Vires Transactions. The effects of a transaction which is ultra vires the company arc as follows:
1. Injunction. Any member of the company can apply to the Court. praying for issue of an injunction order restraining the company from proceeding with
an ultra vires act. Thus, he can indirectly force the company to adhere to the objects stated in the memorandum only.
2. Personal Liability of the Directors. Directors can be held personally liable to the company for an ultra vires transaction. It is the duty oftlle directors to see that the company's funds are utilized for the legitimate objectives of the company. If company's money is used for other purpose which is not connected with company's objects, directors shall be personally liable to make up the loss to the company. However, if the persons receiving the payment knows that

the act is ultra-vires, the directors can recover the money from them.
3. Breach of Warranty of Authority. It is the duty of an agent to act within the scope of his authority. For if he goes beyond it, he will be personally liable to the third party for breach of warranty of authority. The directors of a company are its agents. As such it is their duty to keep within the limits of the
company's powers. If they induce, however innocently, an outsider to enter into a contract which is ultra vires the company, they will be personally liable to the third party fo his loss for breach of warranty of authority. '.
4. Ultra Vires Contracts. A contract ultra-vires the company is wholly void and unenforceable in a court of law. It does not bind the company nor can the company take advantage of any such contract (Asbury contract,

has no contracting capacity. Such acts cannot subsequently be ratified.
5. Ultra Vires Acquired Property. If a company's money has been spent ultra vires in purchasing some property, the company's right over that property must be held secured. For, that asset, slough wrongly acquired, represents tlle corporate capital. The position of the company in such a case. is similar to that of a minor. If a property has been legally acquired by the company, it ,..ill be duly vested in such corporation, even though the corporation is not empowered to acquire that property.
6. Ultra Vires Torts. A company will be liable for any tort of its employees if (a) the tort is committed in pursuance of its stated objects; and (b) it is committed by employees within the course of their employment.

shares and debentures prohibiting the invitation or acceptance of deposits from the public

In order to convert a public company into a private company, the following steps are essential: .
1. A public company shall pass a special resolution to alter its articles
so a to include in it the provisions relating to .a private company such as limiting the number of members to fifty, restricting the transfer of shares and
prohibiting invitation to the public to purchase its shares and debentures prohibiting the invitation or acceptance of deposits from the public.
Such a resolution Shan be binding on dissenting shareholders only
(i) it is bondable,
(ii) it is in the interest of the company as a whole,
(iii) it is consistent with the objects in the Memorandum of Association.
2. Take the approval of the Central Government. This approval must
be sought within 3 months fife)m the date of the special resolution.
3. Amend the Memorandum of Association to change its name by adding the word 'private' by passing a special resolution. No approval is necessary in
this regard.
4. A copy of the altered Articles (freshly printed) and of Government approved should be fIled with the Registrar of Companies within one month from the
date of approval.
5. After approval, the Registrar will issue a fresh certificate of incorporation. .
This is complete process of conversion of a public company into a privatecompany.
Problem 1. An association of 12 persons starts a banking business without being registered. Foul' members retire and thereafter' a suit is instituted hy one


of the continuing members fill' the mutation of assets of the business. Is the suit competent?
SoL The suit is not competent as the association is an illegal one within the cloning of Sec. 1]. The illegality of such an association cannot be cured even
by a subsequent reduction in the number o' its members (Madama Vs. Jallki Prasad).
cent of the paid-up share capitol of company A is held by the Centl"al Govemmcnt and eleven peel' cent by public institutions like the Life Insurance Is A a
government company?
SoL No, to constitute a government company, fifty one per cent of the paid up share capital must be held by the Central or State Government. The Life
Insurance Corporation of India and the Unit Trust offended are statutory corporations, but not the governments, or their departments and, therefore, eleven
per cent shares held by these institutions cannot be taken as held by the Central Government. (Sec. 617 and 619).
Problem 3, Company’s, its Managing DiI'ectOl' and another poison hold I'cspr.ctively one-thud of the number' of shares in another' Company Y. Is .
Company Y a subsidies)' of Company X ?
Sol. No, as Company X does not hold more than half in nominal value of equity share capital of Company Y Sec. 4 (1)].