SAOL's reported violation of Sec 591; Companies Act, 1956

Dear Speak Asians,

Certain sections of Media have reported that SAOL has violated Sec 591 of The Companies Act, 1956. This is not the time for us to panic rather to understand the following facts about this section and implication of its violation by any company of foreign origin:

Companies Act 1956-Part XI, Companies incorporated outside India (Section 591-608 ) 591 Application of sections 592 to 602 to foreign companies.

Sections 592 to 602, both inclusive, shall apply to all foreign companies, that is to say, companies falling under the following two classes, namely:-

a). companies incorporated outside India which, after the commencement of this Act, establishes a place of business within India; and

b). companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act.

To Read Section 592 to 597 and again from Section 599 to 602 please click here. These are various sections which are included in Sec 591.

Our major focus is on Section 598 and Section 599 which deals with penalty for violation.

• 598 Penalties.

If any foreign company fails to comply with any of the foregoing provisions of this Part, the company, and every officer or agent of the company who is in default, shall be punishable with fine which may extend to ten thousand rupees, and in the case of a continuing offence, with an additional fine which may extend to one thousand rupees for every day during which the default continues.

• 599 Company's failure to comply with Part not to affect Its liability under contracts, etc.

Any failure by a foreign company to comply with any of the foregoing provisions of this Part shall not affect the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in respect thereof; but the company shall not be entitled to bring any suit, claim any set off, make any counter-claim or institute any legal proceeding in respect of any such contract, dealing or transaction, until it has complied with the provisions of this Part.

NOTE: After going through sec 598 and sec 599 it is understandable clearly that there is nothing to be worried about as far as the Permanent Establishment(PE) of SAOL is concerned for which the Company is putting an unprecedented fight. We are not sure whether the Company has violated this section or not, but even if any foreign Company violates this section, the penalty is only in terms of fine (sec 598) and other contract related (covered by sec 599). If we see the penalties in relation with the PE of Speak Asia, it seems that it is not going to be hampered. So let us not draw any conclusion and wait for the final nod from Govt. Of India.