Company law in India draws from a variety of legal and regulatory Sources of Company Law that collectively govern the formation, regulation, operation, and dissolution of companies. These sources provide both the statutory framework and interpretative guidance necessary for the functioning of corporate entities.
1. Statutory Law (Sources of Company Law)
a. Companies Act, 2013
- Primary legislation governing all companies in India.
- Replaces the Companies Act, 1956 (though some provisions of the 1956 Act still apply in special contexts).
- Covers aspects such as incorporation, management, compliance, audit, meetings, winding up, etc.
- Amended from time to time by the Government to address emerging challenges and ease of doing business.
b. Allied Laws
Company law also interacts with other legislations such as:
- Indian Contract Act, 1872 (contracts entered by companies)
- The Securities Contracts (Regulation) Act, 1956
- The SEBI Act, 1992 (for listed companies)
- The Foreign Exchange Management Act (FEMA), 1999
- The Competition Act, 2002
- The Insolvency and Bankruptcy Code (IBC), 2016
2. Rules, Regulations & Notifications
- Issued by the Ministry of Corporate Affairs (MCA) under powers conferred by the Companies Act.
- Include:
- Companies Rules (e.g., Companies (Incorporation) Rules, 2014)
- Circulars and Clarifications by MCA
- SEBI Regulations for listed companies (e.g., SEBI (LODR), Takeover Code)
These subordinate legislations provide procedural and compliance-related details.
3. Judicial Decisions
- Judgments of Supreme Court, High Courts, and National Company Law Tribunal (NCLT) interpret the law and clarify ambiguities.
- Landmark case:
Salomon v. Salomon & Co. Ltd. (1897) — Established the doctrine of corporate personality. - Indian cases:
- Daimler Co. Ltd. v. Continental Tyre & Rubber Co.
- Needle Industries v. Needle Industries Newey (India) Ltd.
These decisions form part of the common law system and are binding precedents.
4. Doctrines and Principles of Common Law
Indian company law is also influenced by English Common Law, particularly in areas not expressly covered by statutes. Some key doctrines include:
- Doctrine of Lifting the Corporate Veil
- Doctrine of Indoor Management
- Doctrine of Constructive Notice
These principles fill in legal gaps and guide judicial reasoning.
5. Constitutional Provisions
- The right to form associations is a fundamental right under Article 19(1)(c) of the Constitution.
- The Union Government has exclusive power to legislate on incorporation and regulation of companies under Entry 43, List I (Union List) of the Constitution.
6. International Instruments and Standards
Though not binding, India draws guidance from:
- OECD Principles of Corporate Governance
- IFRS (International Financial Reporting Standards)
- UN Guidelines on Business and Human Rights
These influence domestic reforms, especially in the context of global business and foreign investment.
7. Professional Guidelines
- Guidelines and accounting standards issued by:
- Institute of Chartered Accountants of India (ICAI)
- Institute of Company Secretaries of India (ICSI)
- These provide technical guidance on financial reporting, compliance, secretarial standards, and more.
Conclusion
The sources of company law in India reflect a complex interplay of statutes, rules, judicial interpretations, professional standards, and international practices. This multi-source system ensures a comprehensive and evolving legal framework for regulating corporate entities in the country.