The Corporate Affairs Ministry (MCA) has issued a circular that seeks to protect the validity of the resolutions passed under the erstwhile Company Law.
But the circular comes loaded with several riders to the result that it may be prone to challenge in courts, say legal experts. It says resolutions passed by companies under the old Act during September 1, 2013 to March 31, 2014 can be implemented so long as certain conditions are met. This transitional arrangement will be available for one year from the passing of the resolution or six months from the commencement of the corresponding provision in the new Company Law, whichever is later.
Some legal experts contend that the MCA circular practically seeks to rewrite the law and has laid down several limitations for the clarification to take effect. Also, no clarity has been provided on the status of resolutions passed prior to September 1, 2013.
“This circular is against the spirit and intention of Section 465 (yet to be notified), which protects the resolutions passed under the companies Act,” Lalit Kumar, Partner at law firm J Sagar Associates, told BusinessLine. “Therefore, the circular is in conflict with Section 465 and is not within MCA's power against the Act passed by Parliament. This can be challenged in courts,” he added.