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Question 4 (a) Based on the applicable provisions of the Companies Act, 2013, define the term "foreign company" and identify which among the following companies can be categorized as a foreign company: SI. No. Place of Incorporation Registered Additional information 1 Singapore Singapore Developed patient's database for a hospital in Mumbai, India, server in Singapore. 2 UAE UAE No place of business in India but employs agents in India. 3 Cape Town Cape Town Board Meeting held in Leh, India. 4 Germany Germany 49% of the shares held by an Indian company. (b) NS & Associates LLP was formed in the year 2020 and it was engaged in the business of manufacturing of plastic parts for automobiles. It constituted of Mr. Naveen and Mr. Suresh as designated partners who were responsible for obtaining contracts from various automobile manufacturers across the country for supply of spare parts for vehicles. In the year 2021 an investigation was ordered by the Tribunal against the LLP in connection with a financial fraud worth ` 50,25,000. Mr. J one the Accounts Manager and employee of the LLP was accused by the complainant, as one of the perpetrators to the fraud. The Tribunal levied a penalty of ` 1,25,000 to be paid by Mr. J on his conviction. Mr. J approached the Tribunal and provided vital information about the other black sheep involved in the fraud thus aiding in the investigation process. The Tribunal is considering of providing some relief in the penal action taken against him, while the LLP is planning to suspend Mr. J from service for this act. Considering the provisions of Limited Liability Partnership Act, 2008: (i) Decide whether the Tribunal can waive off or reduce the penalty imposed by it on Mr. J? (ii) Can the LLP suspend Mr. J from service for commission of the act, of revealing the name of the other accused involved in the fraud? (b) What do you mean by the rule "Ejusdem Generis"? State any three situations when the Rule of "Ejusdem Generis" is not applied by the courts.

Options

A
B
C
D
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Correct Answer

✅ Option descriptive — Correct Option

All Options:

  • A
  • B
  • C
  • D

Detailed Solution & Explanation

(a) As per section 2(42) of the Companies Act, 2013 (the Act), “Foreign Company” means any company or body corporate incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode; and conducts any business activity in India in any other manner. So, as per the definition, we can conclude: Case 1: Place of Incorporation – Singapore. Developed patient’s database for a Hospital in Mumbai – Server at Singapore. It is a Foreign Company. Though incorporated outside India, it is involved in transacting business in India and having place of business through electronic mode. Hence, it is a foreign company. Case 2: Place of Incorporation – UAE. No place of business in India, but employs agents in India. It is not a foreign company. Since the company, though employed agents in India, but has no place of business in India. Hence, it is not a foreign company. CORPORATE AND OTHER LAWS Case 3: Place of Incorporation and Registered Office – Cape Town; Board Meeting held in Leh, India. It is not a foreign company. Mere holding of meetings in India cannot be termed as conducting business activity in India. Hence, it is not a foreign company. Case 4: Place of Incorporation and Registered Office – Germany; 49% shares are held by an Indian Company. As per the question, the company is registered in Germany and no information is available about any business(es) being carried on by the company in India which is a basic condition to be fulfilled for being called a foreign company. Under the circumstances, it is just a company incorporated outside India and shall not be considered as a foreign company. Alternate Answer Applying the provisions of section 379 (2) of the Companies Act, 2013, if not less than 50% of the shareholding of a foreign company is held by an Indian Company; it is treated as an Indian Company, on which provisions of Chapter XXII of the Companies Act, 2013 applies. Here, only 49 % is held by Indian Company. Hence it is a foreign company. (b) **Section 31** of the Limited Liability Partnership Act, 2008 provides that: (1) The Court or Tribunal may reduce or waive any penalty leviable against any partner or employee of a LLP, if it is satisfied that: - such partner or employee of an LLP has provided useful information during investigation of such LLP; or when any information given by any partner or - when any information given by any partner or employee (whether or not during investigation) leads to LLP or any partner or employee of such LLP being convicted under this Act or any other Act. On the basis of the above provisions, the question can be answered as under: (i) Whether the Tribunal can waive off or reduce the penalty imposed by it on Mr. J? Yes, the Tribunal has the power to waive or reduce the penalty of ₹1,25,000\displaystyle \text{₹}1,25,000 being imposed on Mr. J as he has provided useful information that is helpful towards investigations in the case of fraud by the LLP. (ii) Can the LLP suspend Mr. J? **Section 31(2)** of the LLP Act, 2008 further provides that: No partner or employee of any limited liability partnership may be discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against the terms and conditions of his limited liability partnership or employment merely because of his providing information or causing information to be provided pursuant to sub-section (1). Hence, Mr. J cannot be suspended from the job by the LLP on the grounds of having provided vital information regarding the fraud to the Tribunal. (c) The term ‘Ejusdem Generis’ means of the same kind or species. Where specific words pertaining to a class or category or genus are followed by general words, the general words shall be construed as limited to the things of the same kind as those specified. The rule of ejusdem generis is not an absolute rule of law but only a part of a wider principle of construction and therefore this rule has no application where the intention of the legislature is clear. Situations when the Rule of Ejusdem Generis is not applied by the Courts: In the following situations, the term “Ejusdem Generis" is not applied by the Courts. 1. If the preceding term is general, as well as that which follows this rule cannot be applied. 2. Where the particular words exhaust the whole genus. 3. Where the specific objects enumerated are essentially diverse in character. 4. Where there is an express intention of legislature that the general term shall not be read ejusdem generis the specific terms. CORPORATE AND OTHER LAWS

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