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Research Memorandum on Common Seal

Introduction: There is no definition prescribed under the Companies Act, 1956 and
Companies Act, 2013
However by the general understanding one can understand it as, the metallic seal of a
company which can be affixed only with the approval of the Board of Directors of the
Company. Board of Directors sign various Contracts/Agreements, on behalf of the Company,
with the help of Common Seal. The Common Seal is the official signature of the Company. It
is signet on which, the name of the Company is engraved. It is affixed to a document to prove
its authenticity. A Company can have a Common Seal on its incorporation/registration with
the Registrar of Companies. It is to be used in the manner prescribed in the Articles of
Association and the Companies Act, 2013. Any document, on which the companys seal is
affixed and is duly signed by the authorized official of the company becomes binding on the
company.
Approval: The Common Seal should be adopted by a resolution of the Board. The Common
Seal is generally adopted at the first Board meeting. The impression of the Common Seal
should be made part of the minutes of the meeting in which it is adopted.
Form and Content: Under the provisions of the Companies Act, 1956 the Common Seal
should be made of metal and capable of being manually operated. On the other hand, there is
no compulsion under the Companies Act, 2013 that the Common Seal should be made of
metal or any other material. The Common Seal should have the name of the company and
state in which the registered office is situated engraved in legible characters.

Affixing of Common Seal under the Act 1956:

Section 34 Effect of Registration:


Registration of Memorandum of Association of the Company with Registrar of Companies
enables a Company to have its Common Seal.

Section 147 Publication of name by Company:


Section 147(1) (b) provides that every Company shall have its name engraved in legible
characters on its seal.

To engrave means inscribe, cut, or carve (a text or design), on a hard surface, to incise
(letters, designs, etc.) on a hard surface, as of metal, stone, or the end grain of wood. It is
desirable to have a common seal of a metallic substance.

Section 48 Execution of Deeds:


A Company may, by writing under its common seal, empower any person either generally or
specifically as its attorney, to execute deeds on its behalf in any place either in or outside
India. That is, the Power of Attorney or the Board Resolution, authorizing a person to execute
the deeds on behalf of the Company, should necessarily bear Common Seal.

Section 50 -Power for company to have official seal for use outside India:
To transact any business outside India, if authorised by its articles, a company can use a seal
which shall be a facsimile of the common seal of the company, with the addition on its face
of the name of the territory, district or place where it is to be used. A deed or other document
to which an official seal is duly affixed shall bind the company as if it had been sealed with
the common seal of the company.

Section 84(1) Certificate of Shares:


A certificate, under the common seal of the company, specifying any shares held by any
member, shall be prima facie evidence of the title of the member to such shares.
Rule 6 of Companies (Issue of Share Certificates) Rules, 1960 regulates
Every share certificate shall be issued under the seal of the company, which shall be affixed
in the presence of (i) two directors or persons acting on behalf of the directors under a duly
registered power of attorney and (ii) the secretary or some other person appointed by the
board for the purpose. The two directors or their attorneys and the secretary or other person
shall sign the share certificate.

Section 114: Issue and effect of share warrants to bearer.


A public company limited by shares, if so authorized by its articles, may, with the previous
approval of the Central Government, with respect to any fully paid-up shares, issue under
its common seal a warrant stating that the bearer of the warrant is entitled to the shares
therein specified, and may provide, by coupons or otherwise, for the payment of the future
dividends on the shares specified in the warrant.

Section 176 (5)(b) Proxies:


The instrument appointing a proxy shall-

1.

be in writing; and

2.

be signed by the appointer or his attorney duly authorised in writing or, if the
appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly
authorised by it.
Documents on which common seal is mandatory under the Companies Act, 1956:
o A certificate of shares or stock;
o A share warrant;
o A power of attorney for execution of deeds;
o A power of attorney authorising a person to use its official seal at a place outside
India;
o An instrument of proxy executed by a body corporate.

Affixing of Common Seal under Companies Act, 2013

Section 9 Effect of Registration:


Registration of Memorandum of Association of the Company with Registrar of Companies
enables the Company to exercise all the functions of as incorporated company and have a
perpetual succession and Common Seal with the power to acquire, hold and dispose of
property, movable and immovable, tangible and intangible, to contract and to sue and be
sued, by its name.

Section 12 Registered office of company:


Section 12(3)(b) provides that every company shall have its name engraven in legible
characters on its seal.

Section 22 (1) Execution of bills of exchange, etc.


A bill of exchange, hundi or promissory note shall be deemed to have been made, accepted,
drawn or endorsed on behalf of a company if made, accepted, drawn, or endorsed in the name
of, or on behalf of or on account of, the company by any person acting under its authority,
express or implied.

(2) A company may, by writing under its common seal, authorise any person, either generally
or in respect of any specified matters, as its attorney to execute other deeds on its behalf in
any place either in or outside India.
(3) A deed signed by such an attorney on behalf of the company and under his seal shall bind
the company and have the effect as if it were made under its common seal.
Certificate of shares
A certificate, under the common seal of the company, specifying any shares held by any
member, shall be prima facie evidence of the title of the member to such shares.
Rule 5(3) of Companies (Share Capital and Debentures) Rules, 2014 regulates
Every share certificate shall be issued under the seal of the company, which shall be affixed
in the presence of, and signed by- (i) two directors duly authorized by the Board of Directors
of the company for the purpose or the committee of the Board, if so authorized by the Board;
and and (b) the secretary or any other person authorised by the Board for the purpose.

Section 46. (1)


A certificate, issued under the common seal of the company, specifying the shares held by
any person, shall be prima facie evidence of the title of the person to such shares.

Section 105 Proxies


The instrument appointing a proxy shall
(a) be in writing; and
(b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is
a body corporate, be under its seal or be signed by an officer or an attorney duly authorised
by it.

Section 223 Inspectors report.


The report of any inspector shall be authenticated either

(a) by the seal of the company whose affairs have been investigated; or
(b) by a certificate of a public officer having the custody of the report, as provided under
section 76 of the Indian Evidence Act, 1872 (1 of 1872), and such report shall be admissible
in any legal proceeding as evidence in relation to any matter contained in the report.

Section 290 Powers and duties of Company Liquidator.


The liquidator has been granted a power to use the common seal of the company wherever
necessary in case of winding up of the Company.
(1) Subject to directions by the Tribunal, if any, the Company Liquidator, in a winding up of
a company by the Tribunal, shall have the power to do all acts and to execute, in the name
and on behalf of the company, all deeds, receipts and other documents, and for that purpose,
to use, when necessary, the companys seal;
Documents on which common seal is mandatory under the Companies Act, 1956:
o A certificate of shares or stock;
o A power of attorney for execution of deeds;
o A power of attorney authorizing a person to use its official seal at a place outside
India;
o An instrument of proxy executed by a body corporate;
o A report of the Inspector under Section 223 of the Companies Act 2013;
o Any document as required by Liquidator in the event of winding up.
o Every company should maintain a register containing particulars of documents on
which the official seal of the company has been affixed.

Effect of Companies Amendment Bill, 2014:


The Bill proposes to do away with the mandatory requirement to have a common seal and
proposes to make it optional for companies to have a common seal. It is accordingly proposed

to make necessary amendments in Sections 9, 12, 22, 46, 105 and 223 of the 2013 Act. The
main reason behind proposed amendment is to reduce time in procedural issues and for ease
of business.

Cases:
Panchanan Dhara & Others vs Monmatha Nath Maity (Decd.) thru L.RS1.
The Supreme Court observed that, Even in absence of a seal, the company may still be
held to be liable having regard to the nature of a transaction and the authority of those who
had executed it. If the act of the directors is not ultra vires or no public policy is involved,
the parties acting thereupon cannot be left at large.
ICICI Bank Ltd. vs Maikaal Fibres Limited and Ors2.
Calcutta High Court observed that the document of guarantee was sealed with the common
seal and on the authority of the Board of Directors signed and such use of such common
seal conclusively binds the company under Sub-section (2) of Section 48. Result is that
there the Court shall ordinarily hold in favour of its existence and denial of guarantee given
by the Company is false.
Probodh Chandra v. Roadoils (India) Ltd3.
A departure from the provisions of a companys articles in respect of affixing the seal on a
document and signing it may still leave the company liable depending upon the nature of
transaction and the authority of those who executed it. Thus, where the articles of a
company required money to be borrowed on behalf of the company under the company seal
and sign of two directors, a loan on equitable mortgage taken under the seal of the company
and under the signature of only one director was held to be sufficient to bind the company.
Dehradun Mussorie Electric Tramway Co. Ltd v. J. Das4
It was held that if a document under the seal is not necessary then a mere defect in the
manned of affixing the seal will not render the document invalid.
Rajendra Nath Dutta v. Shibendra Nath Mujherjee5

1 [2006] 131 Comp Cas 577 (SC)


2 2006 (3) CHN 365
3 AIR 1930 Cal 782
4 (1931) 1 Com Cases 227 (All)

Execution of lease by the managing director without affixing the common seal of the
company which was in contravention of Article 42 of the Articles of Association and was
accordingly unauthorised. It could not be validated by subsequent resolution.

5 (1982) 52 Com Cases 293 (Cal)