INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO
[Sections 3 to 22]
Provisions of the Companies Act, 2013:
Section 22: Execution of bills of exchange. etc.
For this provision, no rules are prescribed the Companies Rules, 2013.
[Section 22 is brought to force with effect from September 12, 2013.]
Corresponding provisions of the Companies Act, 1956:
Sections 47 and 48.
Corresponding provisions of the English Companies Act, 2006:
Sections 47 and 52.
This section is applicable to all companies.
Execution of bill of exchange, hundi or promissory note for and on behalf of company:
Where a bill of exchange, hundi or promissory note is made, accepted, drawn, or endorsed in the name of the company, or on behalf (or on account) of the company, by any person acting under its authority, then it shall bind the company. The person so executing bill of exchange, hundi or promissory note may have authority of company expressly, i.e. by resolution of its Board of Directors or by delegated authority of officers (generally managing director or CFO). Even implied authority given to a person so executing bill of exchange, hundi or promissory note shall bind the company. Implied here means by necessary implication, which can be judged from actions of such person and acceptance / honour by the company of such action done from time to time.
Execution of contract for and on behalf of company:
A company may authorise any person as its attorney to execute deeds (other than bill of exchange, hundi or promissory note) on its behalf, in any place either in or outside India. Further, such authorisation by a company may relate to specific subject matter, as in case of a specific or special power of attorney or it may be given generally, as in case of general power of attorney. A person in whose favour authority is given by a company can be any person and need not be officer of the company. However, such authorisation given by a company to its attorney shall be in writing and under its common seal.
Use of words ‘other deeds’ in sub-section (2) suggests deeds other than bill of exchange, hundi or promissory note referred in sub-section (1).
Use of word ‘may’ suggests that this procedure is optional. And a company may follow its own or other procedure than prescribed under section 22. However, a memorandum or an articles of association of a company shall contain such other procedure.
Where a company follows the aforesaid procedure, i.e., it authorises any person as its attorney, in writing and under its common seal, to execute deeds (other than bill of exchange, hundi or promissory note) on its behalf, then execution of any deed by such attorney for and on behalf of the company, shall bind the company and have the effect as if it were made under its common seal (though attorney might not have affixed its common seal on deed so executed).