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Q.1 Explain the deductions which are authorized under the payment of wages Act, 1936.
According to section 7(1) every payment made by the employed person to the employer or his agent
shall be deemed to be a deduction from wages. Deductions authorized as per section 7(2) can be
made from the wages. The list of the deduction are as under –
a) Fines
b) Deduction for absence from duty
c) Deduction for damage to or loss of goods or loss of money
d) Deduction for house accommodation
e) Deduction for the amenities and services
f) Deduction for recovery of advances
g) Deduction for recovery of loans
h) Deduction for income tax
i) Deduction under the order of a Court of authority
j) Deduction in respect of provident fund
k) Deduction for payment to company-operative societies.
l) Deduction for payment to a Scheme of Insurance of a Post office
m) Deduction for payment of Life Insurance Premium.
n) Deduction for the purchase of Government Securities.
o) Deduction for payment to post office saving bank.
p) Deduction for payment of contribution to certain funds.
q) Deduction for payment of certain fees
r) Deduction in respect of fidelity guarantee bond.
s) Deduction for certain losses incase of railway administration
t) Deductions for payment to Prime Minister’s National relief fund or any other fund
u) Deductions for contribution to insurance scheme.
The total amount of all categories of deduction from the wages of any employed person, in any wage
period, should not exceed the following limits prescribed by section 7(3).
1) 75% of the wages payable in case where such deductions are wholly or partly made for payments
to company-operative societies under section 7(2)(i) of the Act.
2) 50% of the wages payable in any other case-
provided that where the total deductions authorized exceed 75% or as the case may be, 50% of
the wages the excess may be recovered in such manner as may be prescribed.
l) Deductions for payments to a scheme of insurance maintained by the Indian post office, is allowed
under Section 7(2) (j), provided deductions are made subject to such conditions as the State
Government may impose under section 13.
m) Deductions can be made for payment of any premium to the life insurance corporation of India, on
the life insurance policy of the employed person. But the deduction is subject to following
conditions
i) It shall be made only after obtaining written authorization of the employed person.
ii) If the state Government has imposed any condition, no conditions can be made unless these
conditions are complied with (section 13).
n) Deductions are allowed for the purchase of securities of:
i) The Government of India, or
ii) Any state Government
o) Section 7(2) authorizes deduction for being deposited in any post office saving bank in furtherance
of any savings scheme of central or any State Government.
p) Deductions for payment of contribution to certain funds – Deductions can be made with the written
authorization of the employed person, for the payment of his contribution to any fund constituted
by the employer or a trade union registered under the Trade Union Act, 1926 for the welfare of the
employed persons or the members of their families or both, and approved by the State
Government or any officer specified by it in this behalf, during the continuance of such approval.
q) Deductions for payment of certain fees – Deductions can be made, with the written authorization
of the employed person, for payment of the fees payable by him for membership of any trade
union registered under the Trade Union Act, 1926.
r) Deductions in respect of Fidelity Guaranteed Bond – Any payment of Insurance premium of fidelity
Guarantee Bond can be deducted from the wages of an employed person.
s) Deductions can be made from the wages of a person employed in a railway administration for the
recovery of losses sustained by a railway administration.
t) Deductions can be made with the written authorization of the employed person, for contribution to
the Prime Minister’s National Relief Fund or to such other fund as the Central Government may,
by notification in the official gazette, specify.
u) Deductions for contributions to Insurance scheme – Deductions can be made for contributions to
any insurance scheme framed by the Central Government by the benefit of its employees.
Q.2 Define an “Accident” as given in the workmen’s Compensation Act, 1923. When it is
said to arise out of and in the course of an employment?
Ans ACCIDENT
The word Accident has not been defined in the Act. It means any unexpected mishap, untoward event
or consequences brought about by an unanticipated act which could not be provided against. Whether
particular occurrence is accident or not it must be looked upon not only from the point of view of the
person who cause it but also from the point of view of the person who suffers it.
In State of Rajasthan V Ram Prasad and another the workman died due to natural lightening while
working at the site. It was held by the Supreme Court that in order that workman may succeed in his
claim for compensation, it is no doubt true that the accident must have casual connection with the
employment and arise out of it but if the workman is injured as a result of natural force of lightening
though it in itself has no connection with employment of deceased Smt. Gita, the employer can still be
held liable if the claimant shows that the employment exposed the deceased to such injury. In the
present case the deceased was working on the site and would not have been exposed to such hazard
of lightening had she not been working so. Therefore the appellant was held liable to pay
compensation.
Q.5.
a) Gratuity when becomes payable?
b) Who are entitled for payment of Gratuity?
Ans
a) When is Gratuity payable? :
By Virtue of Section 4(1), Gratuity shall be payable to an employee on the termination of his
employment after he has rendered continuous service for not less than five years-
i) On his superannuation or
ii) On his retirement or resignation or
iii) On his death or disablement due to accident or disease
It has been provided that the completion of continuous service of five years shall not be necessary
where the termination of the employment of any employee is due to death or disablement.
Q.4 What is procedure for determination and recovery of dues from employer under the
employee’s provident fund and miscellaneous provision act?
Ans MODE OF RECOVERY OF MONEY’S DUE FROM EMPLOYERS
To invoke section 8 of the Act, the employer must be under a legal liability to transfer the assets. An
amount due may, if the amount is in arrear, be recovered in the manner specified in Section 8-B to 8-
G. Recovery may be made from the employer in relation to an establishment to which any scheme or,
the Insurance scheme applies of any amount lying in arrear in respect of the following:
1) Any contribution payable to the fund or as the case may be, the Insurance Fund; or
2) Accumulations in any provident fund standing to the credit of the employees who become
members of the Fund or, as the case may be the Insurance fund established under the Scheme
or, the Insurance Scheme; or
3) Accumulations to the credit of an employee exempted under section 17(1), 17(1-A) and 17(2) of
the Act; or
4) Damages recoverable under Section 14-B; i.e., for default in the payment of any contribution to
the fund, family pension fund or the insurance fund or in the transfer of accumulation in any
provident fund or in the transfer of accumulations to the credit of an employee exempted under
section 17(1), 17(1-A) and 17(2) of the Act; or
5) Damages recoverable under section 14-B for default in the payment of any charges payable under
other provision of this Act or the scheme or the Insurance Scheme or under any of the conditions
specified under section 17 of the Act.
6) Any charges payable by the employer under any other provisions of the Act or scheme or the
Insurance Scheme.
Similarly recovery may also be made, in the manner specified in Section 8-B to 8-G from an employer
in relation to an exempted establishment, of any amount remaining in arrear in respect of the
following:
1) Damages recoverable under section14-B, as stated above in paras 4 and 5 of this section.
2) Any charges payable by the employer to the Appropriate Government under any provisions of this
Act or under any of the conditions specified under section 17 or in respect of the contribution
payable by him towards the Family Pension Scheme under the said Section 17.
But for the collection of any arrears the Provident Fund Commissioner must send the recovery
certificate to the collector of the district or the place where his office is situated. The collector and not
the Provident Fund Commissioner shall send the recovery certificate to the collector of another
district. In a proceeding to recover the employer’s contribution, the property of the employer attached
by the court, subject only to the burden of the entire mortgage held by the Bank, notwithstanding the
fact that the demand in respect of the employer’s contribution amount of the employer’s contribution
has not been determined, no proceedings for recovery can be taken under this section.
Q.6. What are the different kinds of benefits provided under the employee’s State Insurance
Act, 1948, discuss in brief.
Ans BENEFITS
Section 46 lays down the following benefits admissible to the insured persons on their dependents on
other persons as mentioned.
a) Sickness benefits –
b) Maternity benefits –
c) Disablement benefits –
d) Dependents benefits –
e) Medical benefits –
f) Funeral Expenses –
b) Maternity Benefit:
In terms of Section 46(1) (b), it includes periodical payment to an insured woman in case of
confinement or miscarriage or sickness arising out of pregnancy, confinement, premature birth of
child or miscarriage. Such women will be certified to be eligible for such payment by an authority
specified in this behalf by the regulations.
c) Disablement Benefit:
Sec 46 (1) (c) includes periodical payment to an insured person suffering from disablement as a
result of an employment injury, sustained as an employee under this act and certified to be eligible
for such payments by an authority specified in this behalf by the regulations. A person shall be
qualified to claim benefits for temporary disablement for not less than 3 days (excluding the day of
accident) for the period of such disablement sustained as an employee under the act. A person
shall be qualified to claim periodical payment for permanent disablement sustained as an
employee under the Act, whether total or partial for such disablement. Sec 51, 51 A, 51 B, 51 C,
51 D and 52 A deal with the disablement benefits.
d) Dependent Benefits:
In terms of Sec 46 (1)(d), it includes periodical payments to such dependent of an insured person
who dies as a result of an employment injury sustained as an employee under this act. Section 52
provides for the payment of these benefit to the dependent of the deceased person, if an insured
person dies as a result of an employment injury, sustained as an employee under this act.
e) Medical Benefits:
In terms of Sec 46(1)(e), it includes medical treatment for insured person or his dependents. Sec
56 provides that an insure person or a member of his family, whose conditions requires medical
treatment and attendance shall be entitled to receive medical benefits. Such medical benefit may
be given either in the form of out patient treatment and attendance in a hospital or dispensary,
clinic or other institutions or by visits to home of the insure person or treatment as in-patient in
hospital or other institutions.
f) Funeral Expenses:
Sec 46(1)(f) provides for funeral benefits to the eldest surviving member of the family of an
insured person, who had died, towards the expenditure on the funeral of the diseased insured
person or where the insured person did not have a family or was not living with his family at the
time of his death to the person who actually incurs the expenditure on the funeral of the diseased
insured person, provided that the amount of such payments shall not exceed Rs. 2500 and the
claim for such payment shall be made within three months of death of the insured person or with
such extended period as the corporation or any officer, or authority authorized by it in this behalf
may allow.
PART – II
Q.1. What is the procedure for the incorporation of the company?
1) The promoters of the company have to prepare Memorandum of Association and Articles of
association of the company. In the memorandum of Association of the company the object clauses
of the company are divided into three categories;
a) Main object to be pursued by the company on its incorporation
b) Object incidental or ancillary to the attainment of main object
c) Other objects
In the MOA the company has to state that the liability of the members is limited and has to
mention the Authorised capita of the company and the division of the Authorised capital. The MOA
spells out the activities, which the company is Authorised, to do and the company cannot start any
activity, which is outside the scope of MOA.
3) At the time incorporation of the company the promoter of the company has to submit two printed
copies of MOA and AOA duly signed and stamped by the subscribers along with Form 1, 18, 32
and 29 in case of public company.
Q.2 What are the requirements for holding Annual General Meeting and Extra Ordinary
Annual General Meeting?
Ans Annual General Meeting: Every company has to hold in each year a general meeting called
Annual General Meeting of the shareholders in addition to other meetings. There should not be a gap
of more than 15 months between two Annual General Meeting and the Annual General Meeting must
be convened on a working day and during the business hours of the company. It should be held within
6 months from the closure of the financial year.
The first Annual General Meeting of the company should be held within 18 months from the date of
incorporation of the company and within 9 months from the closure of the financial year.
Annual General Meeting is considered for transacting the following ordinary business:
a. To receive, consider and adopt the accounts of the company and the directors report and auditors
report theron.
b. Declaration of dividend if any.
c. Re-appointment of directors retiring by rotation.
d. Appointment of auditor and to fix their remuneration.
Any other business to be transacted at the Annual General Meeting is called a special business and
the company has to give explanatory statement for passing special business. Annual General Meeting
should be held within the city, town or village where the registered office of the company is situated
and should be held within municipal limit or postal limit whichever is greater.
If default is made in holding a Annual General Meeting the company and every officer of the company
who is in default shall be punishable with a fine, which may extend to Rs. 50,000 and in case of
continuing default with a further fine which may extend to Rs. 2,500 for every day after the first during
which such default continues.
If the company has received a requisition from the shareholders for calling Extra Ordinary Annual
General Meeting to transact certain business, the Board of Directors of the company has to convene
the meeting for transacting the business as per the requisition within twenty-one days from the date of
requisition. If the Board of Directors fails to convene the Extra Ordinary Annual General Meeting within
forty-five days from the date of requisition and are entitled to be reimbursed the expenses incurred for
calling Extra Ordinary Annual General Meeting.
Q.7 What are the committees required to be formed under Corporate Governance and their
functions?
Ans
1. Audit Committee: Every company shall have a qualified and independent audit committee and
shall comply the following:
a) The Audit committee shall have minimum three members and all the members shall be non-
executive director with the majority of them being independent.
b) All the members of the audit committee shall be financially literate and atleast one member
shall have accounting or related financial management expertise. The financially literate
means ability to read and understand basic financial statement i.e. balance sheet, profit and
loss account and cash flow statement.
A member shall be considered to have accounting or related financial management expertise if
he or she possesses experience in finance or accounting, or requisite professional certification
in accounting, or any other comparable experience or background which results in the
individual’s financial sophistication, including being or having been a chief executive officer,
chief financial officer or other senior officer with financial oversight responsibilities.
d) Reviewing with the management, external and internal auditors, the adequacy of internal control
systems.
e) Reviewing the adequacy of internal audit function, including the structure jof the internal audit
department, staffing and ip; olikkiosleniority of the official heading the department, reporting
structure coverage and frequency of internal audit.
f) Discussion with internal auditors any significant findings and follow up thereon.
g) Reviewing the findings of any internal investigations by the internal auditors in to matters where
there is suspected fraud or irregularity or a failure of internal control systems of a material nature
and reporting the matter to the board.
h) Discussion with external auditors before the audit commences about nature and scope of audit as
well as post-audit discussion to ascertain any area of concern.
i) Reviewing the company’s financial and risk management policies.
j) To look in to the reasons for substantial defaults in the payment to the depositors, debenture
holders, shareholders and creditors.
2. Shareholders Committee:
Name of non-executive director heading the committee.
Name and designation of compliance officer.
Number of shareholders complaints received so far.
Number not solved to the satisfaction of shareholders.
Number of pending share transfers.
3. Remuneration Committee:
Brief description of terms of reference
Composition, name of members and Chairperson
Attendance during the year.
Remuneration policy.
Details of remuneration to all the directors as per format in main report.
Q.6 Whether charge is to be registered with the Registrar of Companies of loan granted to
the company? And if the charge is not registered, what is the position of the lender?
Ans REGISTRATION OF CHARGES
Every company taking loan from the banks or financial institutions has to create a charge on the
assets of the company in favour of the banks or the lending institute. The necessary Form 8 & 13 for
creation of charge along with the certified copy of the charged document i.e. Hypothecation Deed or
Term Loan Agreement should be signed by both the company and the chargeholder/lender and filed
with Registrar of Companies. The form should be filed within 30 days from the date of execution of the
document with registrar of companies. However with additional fees the Registrar of Companies has
power to accept the Form within further period of 30 days. This forms 8 & 13 should be filed in
triplicate.
After receipt of this form the Registrar of Companies take on record and register the charges and
return 2 (two) copies of the same form one for the company and other for the chargeholder.
If there is any delay in filing Form 8 & 13 beyond 60 days from the execution of domument for creation
of charge, the company has to make a petition to the company law board for condonation of delay.
Usually when a Form is filed by the company with Registrar of companies after 60 ddays from the
date jof execution of the document the Registrar of companies issues a notice to the company
requesting to make a petition to the company law board for condonation of delay in filing the form. The
company law board after hearing the petiton passes an order in regard to condonation of delay.
Q.5 Who can apply to the High Court for oppression and mismanagement of the company
and what steps he has to take before filing petition before the High Court?
Ans Application to Company law Board for relief in cases of oppression:
Any member of the company who complain that the affairs of the company are being conducted in a
manner prejudicial to public interest or in any manner oppressive to any member or members may
apply to the company law board for an order provided such members have right to apply.
2) If on any application the company law board is of the opinion that the affairs of the company are
being conducted as aforesaid any, with a view to bringing to an end or preventing the matters
complained of, make such order as it thinks fit.
Right to apply
A member of the company shall have right to apply to the company law board for oppression and
mismanagement of the company provided application is made by members not less than 100 or by
the members holding not les than one tenth of the total number of share in the share capital of the
company and in the case fof a company not having share capital not less than one tenth of the total
number of its member and the application can be made by any one or more of its members having
obtained consent in writing of the rest to make an application on their behalf and for their benefit.
On the receipt of application the company law board hears both the companies as well as petitioner
and gives the suitable order to the company on the issue of oppression and mismanagement of the
company. In the case of urgency the company law board passes an interim order before passing final
order for regularizing the conduct of the company’s affairs upon such terms and conditions.
The Central Government may appoint such number of persons as the company law board may by
order in writing specify as be necessary to effectively safeguard the interest of the company or its
shareholders or the public interest to hold office as directors thereof for such period not exceeding 3
years on any occasion as it may think fit.
Q.3 What are the limits for inter-corporate investments and loans and upto what extent
board has power to make investments and grant loans?
Ans Inter-Corporate Investments And Loans
No company shall, directly or indirectly;
a) make any loan to any other body corporate
b) give any guarantee, or provide security, in connection with a loan made by any other person to, or
to any other person, by any body corporate and
c) acquire by way of subscription, purchase or otherwise the securities of any other body corporate,
exceeding sixty percent of its paid-up share capital and free reserves, or hundred percent of it’s
free reserves, whichever is more.
Provided that where the aggregate of the loans and investments so far made, the amounts for which
guarantee or security so far provided to or in all other bodies corporate, along with the investment,
loan, guarantee or security proposed to be made or given by the board, exceeds the aforesaid limits,
no investment or loan shall be made or guarantee shall be given or security shall be provided unless
previously authorized by a special resolution passed in a general meeting.
No loan or investment shall be made or guarantee given by the company unless the resolution is
passed at the meeting by the board with the consent of all the directors present at the meeting and if
there is any term loan subsisting with the prior approval of the financial institution.
The loan to any body corporate shall be made at the rate of interest not less than that prevailing bank
rate as may be prescribed by the Reserve Bank of India from time to time. If the company has made
default for the payment of interest or repayment of deposit to the deposit holder then it cannot give
loan to anybody corporate or give guarantee or provide security to any person or to make investment
in the shares of any other company. Every company shall keep a register showing the following
particulars in respect of every investment or loan made, guarantee given or security provided.