Section 94 of Companies Act. Place of keeping and inspection of registers, returns, etc.

“(1) The registers required to be kept and maintained by a company under section 88 and copies of the annual return filed under section 92 shall be kept at the registered office of the company…

…

…(5) The Central Government may also, by order, direct an immediate inspection of the document, or direct that the extract required shall forthwith be allowed to be taken by the person requiring it.”

Analysis of Section 94 of Companies Act

That to comply with section 88 i.e. register of members, that every company shall make entry for their members and with copies of annual return that to be filed in section 92 of this act, every company shall maintain a register for both respectively and make proper update time to time.

And that register maintained by the company shall be kept at the registered office of the company, that at the time of registration the company entered the address as the registered office address at that same address the register maintains by the company to comply with the section 88 of this act and copies of the annual return the register shall be kept at that registered office.

That if the company desires to keep the registered maintain from the purpose of serving compliance with the section 88 of this act and copies of annual return then the company can keep the register in India where the one-tenth of the members of the company are residing at that place or their sub-branch the company can kept the register.

But for that purpose, the board shall conduct a general meeting of the company where a special resolution by simple majority to be passed for changing the location of the maintained register from its registered office to the other branch which shall be located where there is one-tenth of the members of the company are residing.

Any such member, holder of a debenture, other security holder, beneficial owner, or other person may request a copy of any such register, entries therein, or return for the payment of any fees that may be required, or they may take extracts from such register, index, or return without paying any fees. With the caveat that information from the register, index, or return that may be required will not be accessible for copying or inspection under this subsection or for inspection under subsection (2).

Precedent on Section 94 of Companies Act: Somnath Chatterjee & Anrs. Vs. Sharmila Shetty:

Anirudha Roy, Mr. Ratnesh Raj, Mr. Anu joy Basu, M. Mr. Srinjoy Bhattacharya… on behalf of the appellant Sakhya Sen, Mr. Regards, Mr. Ishaan Saha Mr. Joydeep Mukhopadhyay… on behalf of the other side The erudite 5th Bench of the City Civil Court, Calcutta, passed order No. 37 on March 17, 2017, in T. S. No. 306/2014, which infuriates the revisionist.

The defendant in the case, who is the revisionist before this court, submitted an application under ruling VII Rule 10 of the Code, but the learned court below denied it by the contested ruling.
Revisionists would contend that, in light of Section 94 of the Companies Act of 2013, the City Civil Court in Kolkata does not have territorial jurisdiction.

The proviso is the only distinction between Section 163 of the 1956 Act and Section 94 of the 2013 Act that is pertinent to this instance. The proviso gives a company the authority to keep its registers and other records, which are typically kept at the company’s cites, or registered office, as well as any other location within the same city (as required by the 1956 Act) or anywhere in India (as permitted by the 2013 Act), provided that the Board of Directors has authorized it to do so. In this regard, there are other conditions that must also be met.

The court has a pleading regarding the company’s shares being kept at its corporate office in Calcutta. The Supreme Court has settled on principles for applying Order VII Rule 10 and 11 of the Code, and there is a presumption of resolution. However, this presumption can only be rebutted during the trial. The court does not interfere with the City Civil Court’s findings to retain the suit. The revisionist’s counsel argues that Section 430 of the Companies Act, 2013 bars civil courts from entertaining suits for cause of action under the Act. The court does not interfere with the order and does not issue a cost order.

Anil Kumar Poddar vs. Bonanza Ind. Ltd. (the rights of shareholder to inspect the company register and documents):

Section 94 of the Companies Act, 2013, which corresponds to Section 163 of the Companies Act, 1956, allows members and debenture holders of a company the right to copies of its documents and registers, including annual returns. In the case of Anil Kumar Poddar v. Bonanza Industries Ltd., the Mumbai Bench of the Company Law Board dismissed an application made by a shareholder who demanded the copies of the company’s registers and records for inspection. The applicant argued that the respondent company had made false allegations against him and that the applicant’s actions were of vexatious nature and his intention was to extract money from them.

The respondent company claimed that the applicant was a professional investor who acquired small shareholdings of various listed companies to create nuisance and frighten directors with criminal liability and illegally extract money. The applicant had only acquired 10 shares of the respondent company in June 2013 and had been repeatedly demanding copies of the registers and documents. The Mumbai Bench acknowledged that approximately 150 applications pending were made against various companies by the applicant and found that the information could have been easily obtained from the Ministry of Corporate Affairs portal.

The Company Law Board found the intention of the applicant to be mala fide and dismissed the application on April 16, 2015. The Calcutta High Court also observed that the rights of inspection of document should be exercised in good faith, taking into consideration the company’s best interests.

The Kolkata High Court has restraining applicants from exercising their rights as shareholders, leading to a shift from Kolkata to Mumbai. This decision is a result of previous judgments by the Company Law Board, which barred Anil Kumar Poddar from harassing listed companies in India. Shareholders own the corporation, including all records and property, while the corporation acts as their agent. The intention was to facilitate transparency and good interest, but some individuals take advantage of this right, demanding registers, documents, and costly gifts. Companies face difficulties in accepting vexatious claims, as shareholders have rights while companies have no rights. Companies can follow the Anil Kumar Poddar v. Bonanza Industries case and ask shareholders to obtain necessary information from their company website or MCA website. The decision sends a strong message of good corporate governance and serves as a warning to shareholders who harass companies with mala fide intent.

The Kolkata High Court has restraining applicants from exercising their rights as shareholders, leading to a shift from Kolkata to Mumbai. This decision is reminiscent of previous judgments by the Company Law Board, which barred Anil Kumar Poddar from harassing listed companies in India. Shareholders own the corporation and have the right to information about its management, while the corporation acts as their agent. However, some individuals take advantage of this right, demanding registers and documents, disrupting meetings, and demanding costly gifts or money. Companies often accept these requests and act upon them, as shareholders are vested with such rights while companies have no rights.

To avoid such vexatious shareholders, companies should digitize records and use e-governance to access information on company websites. Companies should also investigate the motives of shareholders seeking inspections and copies of records and seek clarification from the Company Law Board if an ulterior motive appears. The Companies Act, 2013 should have added a definition for shareholders with a minimum number of shares before exercising the right to inspect documents.

The judgment has the potential to impact corporate governance by deterring frivolous and mala fide applicants and ensuring that inspections of physical records and registers are only used in exceptional circumstances where the MCA and company’s website do not provide all necessary information. By doing so, companies can avoid wastage of time and ensure good corporate governance.

Conclusion

During any inspection or making the extract or requiring the copies or documents under this section if refused, then the company and such officer of the company shall be liable for default occurs due to them, with the penalty of 1000 rupees per day which maximum up to 1 lakh rupees during which the default continues.

And at any time if the central government required to conduct the inspection to check the compliance of the company under this section, then the central government can conduct such inspection or order that the person in need of the extract be permitted to consume it immediately.

FAQs

1. What’s Section 94 of Companies Act, 2013?

The section 94 of this act states the place to keep the register maintained by the company under section 88 of this act and copies of annual return.

2. Where the company shall keep the register under section 94?

The company shall keep the register at the registered office or where 1/10^th of the members resides in India.

3. Who can give orders of inspection of register under this section?

Central government may order direct to immediate inspection of documents

4. Who else except central government can inspect the register and documents?

As per sub-section (2) of section 94 of this act, they can inspect by any member, debenture-holder, other security holder or beneficial owner.

5. How can the place for keeping the register be changed from registered office?

By passing a special resolution in general board meeting the place for keeping the register at registered office can be changed to the place where minimum 1/10^th of the members of the company resides.

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Section 94 of Companies Act 2013

Vaibhav Bhatt

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