SECTION 464 OF COMPANIES ACT 2013
By Sushma gowda
SECTION 464 OF COMPANIES ACT 2013
No association and partnership consisting of more than 100 person shall be formed unless it is registered. If it is not incorporated than it will be considered as illegal association of members under companies act 2013.
They should not form a group of more than such number for business activities or profit making purposes.
It restricts formation of such kind of association or partnership other than limited liability partnership without getting registered if it is more than 50 persons under Rule 10
MAXIMUM NUMBER OF MEMBERS
Any unregistered association or partnership shall not be formed with more than 50 members under Rule 10 of Companies(miscellaneous) Rules,2014 as Notified on 1st April 2014.
SAME PRINCIPLE IS APPLICABLE IN BANKING COMPANIES
As per companies act 2013 no separate limit is specified for banking and business in case of Banking it is 10 and in case of 20 Business.
EXCEPTIONS UNDER SECTION 464 OF COMPANIES ACT 2013
Section 464(1) of Companies Act 2013 is not applicable in the case of:-
1) Hindu undivided Family or
However as per the Rule 10 of Companies(miscellaneous) Rules,2014 if 2 or more Hindu family firms carry on business if their association is more than 50 then it will considered as illegal.
While calculating the members under Hindu Family Firms as per the law ignore the Minor members from such family, but if they attain the majority they will be considered as Member.
2) An Association or Partnership formed by Professionals who are governed by special acts like Limited Liability Partnership.
Such as:
The Institute of Company Secretaries of India,
The Institute of Chartered Accountants of India, &
The Institute of Cost Accountants of India.
IF THE ASSOCIATION IS MORE THAN PRESCRIBED LIMIT WHAT CONSEQUENCES WILL BE FACED?
1) Such Association cannot enter the Contract, nor such association or partnership can sue any member or Sued by outsiders even if it is subsequently got registered.
2) They cannot be sued for the recovery of debt, It cannot be wound up by the tribunal.
3) Such Associations are unregistered it will never be entertained by the tribunal to wound up.
CASE
KUMARA SWAMY CHATTIAR VS. INCOME TAX OFFICER(1957)
An illegal Association is liable to be taxed under Income Tax Return.
The Members of an illegal association are individually liable in respect of all acts or contracts made on behalf of the association; they cannot either individual or collectively, bring an action to enforce any contract so made, or to recover any debt due to the association.
PENALTY FOR CONTRAVENTION OF THE GIVEN SECTION.
In case of illegal association every member who are involved shall be punishable with a fine which may extend to 1 lakh rupees.
And shall also be personally liable for all liabilities.
CONCLUSION
For registered Association and partnerships except Limited Liability Partnership this Section will not be applicable. As they complied with the Laws, rules, regulation, guidelines, circular, notices issued by Ministry of Corporate Affairs Under Companies Act 2013.
REFERENCE
