(1) Where it is proved to the
satisfaction of the Central Government that a person or an association of persons proposed to be
registered under this Act as a limited company— (a) has in its objects the promotion of commerce, art, science, sports, education, research, social
welfare, religion, charity, protection of environment or any such other object;
(b) intends to apply its profits, if any, or other income in promoting its objects; and
(c) intends to prohibit the payment of any dividend to its members,
the Central Government may, by licence issued in such manner as may be prescribed, and on such
conditions as it deems fit, allow that person or association of persons to be registered as a limited
company under this section without the addition to its name of the word ?Limited?, or as the case may be,
the words ?Private Limited? , and thereupon the Registrar shall, on application, in the prescribed form,
register such person or association of persons as a company under this section.
(2) The company registered under this section shall enjoy all the privileges and be subject to all the
obligations of limited companies.
(3) A firm may be a member of the company registered under this section.
(4) (i) A company registered under this section shall not alter the provisions of its memorandum or
articles except with the previous approval of the Central Government.
(ii) A company registered under this section may convert itself into company of any other kind only
after complying with such conditions as may be prescribed.
(5) Where it is proved to the satisfaction of the Central Government that a limited company registered
under this Act or under any previous company law has been formed with any of the objects specified in
clause
(a) of sub-section (1) and with the restrictions and prohibitions as mentioned respectively in
clauses
(b) and (c) of that sub-section, it may, by licence, allow the company to be registered under this
section subject to such conditions as the Central Government deems fit and to change its name by
omitting the word ?Limited?, or as the case may be, the words ?Private Limited? from its name and
thereupon the Registrar shall, on application, in the prescribed form, register such company under this
section and all the provisions of this section shall apply to that company.
(6) The Central Government may, by order, revoke the licence granted to a company registered under
this section if the company contravenes any of the requirements of this section or any of the conditions
subject to which a licence is issued or the affairs of the company are conducted fraudulently or in a
manner violative of the objects of the company or prejudicial to public interest, and without prejudice to
any other action against the company under this Act, direct the company to convert its status and change
its name to add the word ?Limited? or the words ?Private Limited?, as the case may be, to its name and
29
thereupon the Registrar shall, without prejudice to any action that may be taken under sub-section (7), on
application, in the prescribed form, register the company accordingly:
Provided that no such order shall be made unless the company is given a reasonable opportunity of
being heard:
Provided further that a copy of every such order shall be given to the Registrar.
(7) Where a licence is revoked under sub-section (6), the Central Government may, by order, if it is
satisfied that it is essential in the public interest, direct that the company be wound up under this Act or
amalgamated with another company registered under this section:
Provided that no such order shall be made unless the company is given a reasonable opportunity of
being heard.
(8) Where a licence is revoked under sub-section (6) and where the Central Government is satisfied
that it is essential in the public interest that the company registered under this section should be
amalgamated with another company registered under this section and having similar objects, then,
notwithstanding anything to the contrary contained in this Act, the Central Government may, by order,
provide for such amalgamation to form a single company with such constitution, properties, powers,
rights, interest, authorities and privileges and with such liabilities, duties and obligations as may be
specified in the order.
(9) If on the winding up or dissolution of a company registered under this section, there remains, after
the satisfaction of its debts and liabilities, any asset, they may be transferred to another company
registered under this section and having similar objects, subject to such conditions as the Tribunal may
impose, or may be sold and proceeds thereof credited to the Rehabilitation and Insolvency Fund formed
under section 269.
(10) A company registered under this section shall amalgamate only with another company registered
under this section and having similar objects.
(11) If a company makes any default in complying with any of the requirements laid down in this
section, the company shall, without prejudice to any other action under the provisions of this section, be
punishable with fine which shall not be less than ten lakh rupees but which may extend to one crore
rupees and the directors and every officer of the company who is in default shall be punishable with
imprisonment for a term which may extend to three years or with fine which shall not be less than twentyfive thousand rupees but which may extend to twenty-five lakh rupees, or with both:
Provided that when it is proved that the affairs of the company were conducted fraudulently, every
officer in default shall be liable for action under section 447.