(a) (i) Disclosure on the face of Prospectus [**Section 26(6)**]
The prospectus issued as per **Section 26(1)** of the Companies Act,
2013 (the Act) shall, on the face of it, state/specify:
a. That a copy has been delivered for filing to the Registrar
b. Documents required by this section to be attached to the copy so
delivered or refer to statements included in the prospectus which
specify these documents.
(ii) Conditions in regard to Experts’ Statement [**Section 26(5)**]
A prospectus issued under **Section 26(1)** of the Act shall not include a
statement purporting to be made by an expert, if any of following
condition met:
a. If he is engaged or interested in the formation or promotion or
management of the company, or
b. If the expert has not given written consent to the issue of the
prospectus, or
c. If he has withdrawn the consent before the delivery of a copy of
the prospectus to the Registrar for filing.
A statement to that effect (non-existence of conditions, if expert’s
statement is included) shall also be included in the prospectus.
(iii) Date of Publication of Prospectus [Explanation to Sub-**Section 3**]
The date indicated in the prospectus shall be deemed to be the date
of its publication.
(b) Registration by the Company creating a Charge
According to **Section 77** of the Companies Act, 2013, it shall be the duty
of every company creating a charge within or outside India, on its
property or assets or any of its undertakings, whether tangible or
otherwise, and situated in or outside India, to register the particulars of
the charge signed by the company and the charge-holder together with
the instruments, if any, creating such charge in such form, on payment of
such fees and in such manner as may be prescribed, with the Registrar
within thirty days of its creation.
CORPORATE AND OTHER LAWS
In the given question, Vital Pharmacy has raised funds by creating charge
on its stock and patent rights in Germany. As per the provisions of the
Companies Act, 2013, the company is required to register charge on its
tangible as well as intangible assets, and situated in or outside India.
However, in the given question, the company has registered charge on its
stock but not on the patents (being outside India and intangible in
nature).
In the light of the provisions of the Act and facts of the question, the
contention of the company is incorrect, as it is the duty of the company to
register the charge on its tangible as well as intangible assets, and
situated in or outside India.
OR
(b) Floating Charge
A ‘Floating Charge’ is created on assets or a class of assets which are of
fluctuating or changing in nature- like raw material, stock-in-trade,
debtors, etc. It is a charge upon assets both present and future.
The assets under floating charge keep on changing because the
borrowing company is permitted to use them for trading or producing
final goods for sale. Thus, a floating charge is a charge that floats above
ever-changing assets.
Conversion - Crystallization of a Floating Charge
When the creditor enforces the security due to the breach of terms and
conditions of floating charge or the company goes into liquidation, the
floating charge will become a fixed charge on all the assets available on
that date. This is called crystallization of a floating charge.
A floating charge remains dormant until it becomes fixed or crystallizes.
On crystallization of charge, the security (i.e. raw material, stock-in-trade,
etc.) becomes fixed and is available for realization by the lender so that
borrowed money is repaid.
Crystallization of floating charge may occur when the terms and
conditions of floating charge are violated or the company ceases to
continue its business or the company goes into liquidation or the
creditors enforce the security covered by the floating charge.
(c) Noscitur a Sociis means that when two or more words that are
susceptible of analogous meaning, are coupled together they are
understood to be used in their cognate sense. They take, as it were, their
colour from each other, that is the meaning of the more general word
being restricted to a sense analogous to that of the less general.
Examples of the principal of Noscitur a Sociis are as follows:
Fresh orange juice is not a fruit juice
While dealing with a Purchase Tax Act, which used the expression
“manufactured beverages including fruit-juices and bottled waters and
syrups”.
It was held that the description ‘fruit juices’ as occurring therein should be
construed in the context of the preceding words and that orange-juice
unsweetened and freshly pressed was not within the description.
(Commissioners. v. Savoy Hotel, (1966) 2 All. E.R. 299)
Private Dispensary of a doctor is not a commercial establishment
In dealing with the definition of commercial establishment in **Section 2** (4)
of the Bombay Shops and Establishments Act, 1948, which reads,
“commercial establishment means an establishment which carries on any
business, trade or profession”, the word ‘profession’ was construed with
the associated words ‘businesses and ‘trade’ and it was held that a private
dispensary of a doctor was not within the definition. (Dr. Devendra M.
Surti v. State of Gujrat, A.I.R. 1969 SC 63).