Sec.56 (2)(viia)

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Mohammad Taha (Querist)

20 February 2015 Whether buy back of share by an unlisted co. is covered under sec. 56 (2)(viia),(if made at a price lower than fair value) if yes whether any case law is there.

Mohit Singla

Mohit Singla (Expert)

20 February 2015 No, in my view it will not cover the buy back of shares.
Because of the reason that the company does not receive its shares, but only cancels its share capital pursuant to the powers conferred on it under the Companies Act. In fact, the Companies Act does not permit a company to hold its own shares. Even if one were to say that a company receives its own shares on buyback or cancellation of shares, it is for the limited purpose of cancellation of those shares and therefore the company does not actually ‘receive’ any property, in the nature of shares.

Mohit Singla

Mohit Singla (Expert)

20 February 2015 And I think no case of such type has been come in view of public.

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