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(8) The provisions of this section shall apply mutatis mutandis to documents which a liquidator, or a foreign company within the meaning of section 591, is required to file under this Act. 234A Seizure of documents by Registrar.
1[234A. Seizure of documents by Registrar. (1) Where, upon information in his possession or other wise, the Registrar has reasonable ground to believe that books and papers of, or relating to, any company or other body corporate, or any managing agent or secretaries and treasurers or managing director or manager of such company or other body corporate, or any associate of such managing agent or secretaries and treasurers, may be destroyed, mutilated, altered, falsified or secreted, the Registrar may make an application 2* * * to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate having jurisdiction for an order for the seizure of such books and papers.
(2) After considering the application and hearing the Registrar, if necessary, the 3[Magistrate] may, by order, authorise the Regis- trar- (a) to enter, with such assistance as may be required, the place or places where such books and papers are kept; (b) to search that place or those places in the manner specified in the order; and (c) to seize such books and papers as he considers necessary.
(3) The Registrar shall return the books and papers seized under this section as soon as may be, and in any case not later than the thirtieth day, after such seizure, to the company or the other body corporate or, as the case may be, to the managing agent or the secre- taries and treasurers or the associate of such managing agent or secretaries and treasurers or the managing director or the manager or any other person, from whose custody or power they were seized and inform the 3[Magistrate] of such return: Provided that the Registrar may, before returning such books and papers as aforesaid, take copies of, or extracts from the 4[or place identification marks on them or any part thereof] or deal with the same in such other manner as he considers necessary. ———————————————————————- 1 Ins. by Act 65 of 1960, s. 73. 2 The words “to the Tribunal or” omitted by Act 17 of 1967, s. 4 and Sch. (w.e.f. 1-7-1967). 3 Subs. by s. 4 and Sch., ibid., for “Tribunal or Magistrate, as the case may be,” (w.e.f. 1-7-1967). 4 Ins. by Act 31 of 1965, s. 24 (w.e.f. 15-10-1965). ———————————————————————- 226D
(4) Save as otherwise provided in this section, every search 1[or seizure] made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searches 1[or seizures] made under that Code.] Investigation
Investigation of the affairs of a company.
2[235.Investigation of the affairs of a company. (1) The Central Government may, where a report has been made by the Registrar under
sub-section (6) of section 234, or under sub-section (7) of that
section, read with sub-section (6) thereof, appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct.
(2) Where- (a) in the case of a company having a share capital, an ap- plication has been received from not less than two hundred members or from members holding not less than one-tenth of the total voting power therein, and (b) in the case of a company having no share capital, an application has been received from not less than one-fifth of persons on the company’s register of members, the Company Law Board may, after giving the parties an opportunity of being heard, by order, declare that the affairs of the company ought to be investigated by an inspector or inspectors, and on such a declaration being made, the Central Government shall appoint one or more competent persons as inspectors to investigate the affairs of the company and to report thereon in such manner as the Central Government may direct.] ——————————————————————— 1 Ins. by Act 31 of 1965, s. 24 (w.e.f 15-10. 1965). 2 Subs. by Act 31 of 1988, s. 36 (w.e.f. 31-5-1991). ——————————————————————— 227
Application by members to be supported by evidence and power to callfor security. 236.Application by members to be supported by evidence and power to call for security. An application by members of a company 1[under
sub-section (2) of section 235] shall be supported by such evidence as the 1[Company Law Board may require] for the purpose of showing that the applicants have good reason for requiring the investigation; and the Central Government may, before appointing an inspector, require the applicants to give security, for such amount not exceeding one thousand rupees as it may think fit, for payment of the costs of the investigation.
Investigation of company’s affairs in other cases. 237.Investigation of company’s affairs in other cases. Without prejudice to its powers under section 235, the Central Government- (a) shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct, if- (i) the company, by special resolution; or (ii) the Court, by order, declares that the affairs of the company ought to be investigated by an inspector appointed by the Central Government; and (b) may do so if, in the opinion of the 2[Company Law Board] there are circumstances suggesting– (i)that the business of the company is being conducted with intent to defraud its creditors, members or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members, or that the company was formed for any fraudulent or unlawful purpose; (ii)that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or ——————————————————————— 1 Subs. by Act 31 of 1988, s.37 (w.e.f. 31.5.1991). 2 Subs. by s. 38, ibid. (w.e.f. 31.5.1991) ———————————————————————- 228 (iii)that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, 1* * * or the manager, of the company.
Firm body corporate or association not to be appointed as inspector. 238.Firm body corporate or association not to be appointed as inspector. No firm, body corporate or other association shall be appointed as an inspector under section 235 or 237.
Power of inspectors to carry investigation into affairs of relatedcompanies or of managing agent or associate, etc. 2[239.Power of inspectors to carry investigation into affairs of
related companies or of managing agent or associate, etc. (1) If an inspector appointed under section 235 or 237 to investigate the affairs of a company thinks it necessary for the purposes of his investigation to investigate also the affairs of- (a) any other body corporate which is, or has at any relevant time been the company’s subsidiary or holding company, or a subsidiary of its holding company, or a holding company of its subsidiary; (b) any other body corporate which is, or has at any relevant time been, managed- (i)by any person as managing agent or as secretaries and treasurers or as managing director or as manager, who is, or was at the relevant time, either the managing agent or the secretaries and treasurers or the managing director or the manager of the company; or (ii)by any person who is, or was at the relevant time, an associate of the managing agent, or secretaries and treasurers of the company ; or (iii) by any person of whom the managing agent or secretaries and treasurers of the company is, or was at the relevant time, an associate; (c) any other body corporate which is, or has at any relevant time been, managed by the company or whose Board of directors comprises of nominees of the company or is accustomed to act in accordance with the directions or instructions of- (i) the company, or (ii) any of the directors of the company, or ——————————————————————— 1 Omitted by Act 31 of 1988, S. 38 (w.e.f. 31.5.1991). 2 Subs. by Act 65 of 1960, s. 74 for s. 239. ——————————————————————— 229 (iii)any company any of whose directorships is held by the employees or nominees of those having the control and management of the first-mentioned company ; or (d) any person who is or has at any relevant time been the company’s managing agent or secretaries and treasurers or managing director or manager or an associate of such managing agent or secretaries and treasurers,
the inspector shall, subject to the provisions of sub-section (2), have power so to do and shall report on the affairs of the other body corporate or of the managing agent, secretaries and treasurers, managing director, manager or associate of the managing agent or secretaries and treasurers, so far as he thinks that the results of his investigation thereof are relevant to the investigation of the affairs of the first-mentioned company.
(2) In the case of any body corporate or person referred to in
clause (b) (ii), (b) (iii), (c) or (d) of sub-section (1), the inspector shall not exercise his power of investigating into, and reporting on, its or his affairs without first having obtained the prior approval of the Central Government thereto: Provided that before according approval under this sub-section, the Central Government shall give the body corporate or person a reasonable opportunity to show cause why such approval should not be accorded.]
Production of documents and evidence.
240.Production of documents and evidence. (1) It shall be the duty of 1[all officers and other employees] and agents of the company, and where the company is or was managed by a managing agent or secretaries and treasurers, of 1[all officers and other employees] and agents of the managing agent or secretaries and treasurers, and where the affairs of any other body corporate, or of a managing agent or secretaries and treasurers, or of- an associate of a managing agent or secretaries and treasurers, are investigated by virtue of section 239, of 1[all officers and other employees] and agents of such body corporate, managing agent, secretaries and treasurers, or associate, and where such managing agent, secretaries and treasurers or associate is or was a firm, of all partners in the firm- (a) 2[to preserve and to produce to an inspector or any person authorised by him in this behalf with the previous ———————————————————————- 1 Subs. by Act 65 of 1960, s. 75, for “all officers” 2 Subs. by Act 31 of 1965, s. 25, for “to produce to an inspector” (w.e.f. 15-10-1965). ———————————————————————— 230 approval of the Central Government,] all books and papers of, or relating to, the company or, as the case may be, of or relating to the other body corporate, managing agent, secretaries and treasurers or associate, which are in their custody or power; and (b) otherwise to give to the inspector all assistance in connection with the investigation which they are reasonably able to give. 1[(1A) The inspector may, with the previous approval of the Central Government, require any body corporate [other than a body
corporate referred to in sub-section (1)] to furnish such information to, or produce such books and papers before, him or any person autho- rised by him in this behalf 2 [with the previous approval of that Government] as he may consider necessary if the furnishing of such information or the production of such books and papers is relevant or necessary for the purposes of his investigation. (1B) The inspector may keep in his custody any books and papers
produced under sub-section (1) or sub-section (lA) for six months and thereafter shall return the same to the company, body corporate, firm or individual by whom or on whose behalf the books and papers are produced: Provided that the inspector may call for the books and papers if they are needed again: Provided further that if certified copies of the books and papers produced under sub-section (lA) are furnished to the inspector, he shall return those books and papers to the body corporate concerned.]
3[(2) An inspector may examine on oath-
(a) any of the persons referred to in sub-section (1) ; and (b) with the previous approval of the Central Government, any other person, in relation to the affairs of the company, other body corporate, managing agent, secretaries and treasurers or associate, as the case may be; and may administer an oath accordingly and for that purpose may require any of those persons to appear before him personally. ———————————————————————— 1 Ins. by Act 31 of 1965, s. 25 (w.e.f. 15-10-1965). 2 Ins. by Act 34 of 1966, s. 2 (w.e.f. 1-4-1966).
3 Subs. by Act 31 of 1965, s. 25, for sub-sections (2), (3), (3A)
and (4) (w.e.f 15-10-1965). ———————————————————————— 231
(3) If any person fails without reasonable cause or refuses- (a) to produce to an inspector or any person authorised by him in this behalf with the previous approval of the Central Government any book or paper which it is his duty under sub-
section (1) or sub-section (1A) to produce ; or (b) to furnish any information which it is his duty under sub-section (1A) to furnish ; or (c) to appear before the inspector personally when required
to do so under sub-section (2) or to answer any question which is put to him by the inspector in pursuance of that sub-section ; or (d) to sign the notes of any examination referred to in
sub-section (5), he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to two thousand rupees, or with both, and also with a further fine which may extend to two hundred rupees for every day after the first during which the failure or refusal continues.] 1 * * * * *
(5) Notes of any examination under sub-section (2) 2* * * shall be taken down in writing and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him.
(6) In this section- (a) the expression “officers “, in relation to any company or body corporate, includes any trustee for the debenture holders of such company or body corporate; (b) the expression ” agent “, in relation to any company, body corporate or person, means any one acting or purporting to act for or on behalf of such company, body corporate or person, and includes the bankers and legal advisers of, and persons employed as auditors by, such company, body corporates or person ; and (c) any referenceto 3[officers and other employees], agents or partners shall be construed as a reference to past as well as present 3[officers and other employees], agents or partners, as the case may be. ———————————————————————
1 Omitted as a result of substitution of sub-sections (2),(3),
(3A) and (4) by Act 31 of 1965, s.25 (w.e.f. 15-10-1965).
2 The word, brackets and figure “or (4)” omitted by s.25, ibid (w.e.f. 15-10-1965). 3 Subs. by Act 65 of 1960, s. 75, for ” officers” ———————————————————————- 232 240A Seizure of documents by inspector.
1[240A. Seizure of documents by inspector. (1) Where in the course of investigation under section 235 or section 237 or section 239 or section 247, the inspector has reasonable ground to believe that the books and papers of, or relating to, any company or other body corporate or any managing agent or secretaries and treasurers or managing director or manager of such company or other body corporate, or any associate of such managing agent or secretaries and treasurers may be destroyed, mutilated, altered, falsified or secreted, the inspector may make an application 2* * * to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate, having jurisdiction for an order for the seizure of such books and papers.
(2) After considering the application and hearing the inspector, if necessary, the 3[Magistrate] may by order authorise the inspector– (a) to enter, with such assistance, as may be required, the place or places where such books and papers are kept ; (b) to search that place or those places in the manner specified in the order ; and (c) to seize books and papers he considers necessary for the purposes of his investigation.
(3) The inspector shall keep in his custody the books and papers seized under this section for such period not later than the conclu- sion of the investigation as he considers necessary and thereafter shall return the same to the company or the other body corporate, or, as the case may be, to the managing agent, or the secretaries and treasurers or the associate of such managing agent or secretaries and treasurers or the managing director or the manager or any other person, from whose custody or power they were seized and inform the 3[Magistrate] of such return: 4[Provided that the inspector may, before returning such books and papers as aforesaid, place identification marks on them or any part thereof.]
(4) Save as otherwise provided in this section, every search 4[or seizure] made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898(5 of 1898), relating to searches 4[or seizures] made under that Code.] ———————————————————————- 1 Ins. by Act 65 of 1960, s. 76. 2 The words ” to the Tribunal or ” omitted by Act 17 of 1967, s. 4 and Sch. (w.e.f. 1-7-1967). 3 Subs. by s. 4 and Sch., ibid., for ” Tribunal or Magistrate, as the case may be,” (w.e.f. 1-7-1967). 4 Ins. by Act 31 of 1965, s. 26 (w.e.f. 15-10-1965). ———————————————————————– 232A
Inspectors’ report.
241.Inspectors’ report. (1) The inspectors may, and if so directed by the Central Government shall, make interim reports to that Government, and on the conclusion of the investigation, shall make a final report to the Central Government. Any such report shall be written or printed, as the Central Gov- ernment may direct. 233
(2) The Central Government- (a) shall forward a copy of any report 1[(other than an interim report)] made by the inspectors to the company at its registered office, and also to any body corporate, managing agent, secretaries and treasurers or associate dealt with in the report by virtue of section 239; (b) may, if it thinks fit, furnish a copy thereof, on request and on payment of the prescribed fee, to any person- (i)who is a member of the company or other body corporate (including a managing agent, secretaries and treasurers, or an associate of a managing agent or secretaries and treasurers, where such managing agent, secretaries and treasurers or associate is a body cor- porate) dealt with in the report by virtue of section 239 ; (ii)who is a partner in the firm, where such managing agent, secretaries and treasurers or associate is a firm; or (iii)whose interests as a creditor of the company, other body corporate, managing agent, secretaries and treasurers or associate aforesaid appear to the Central Government to be affected; (c) shall, where the inspectors are appointed 2[in
pursuance of the provisions of sub-section (2)] of section 235, furnish, at the request of the applicants for the investigation, a copy of the report to them; (d) shall, where the inspectors are appointed under section 237 in pursuance of an order of the Court, furnish a copy of the report to the Court 3 * * *; 4[(dd) shall where the inspectors are appointed in pursuance
of the provisions of sub-section (2) of section 235, furnish a copy of the report to the Company Law Board; and] (e) may also cause the report to be published.
Prosecution.
242.Prosecution. (1) If, from any report made under section 241, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate, managing agent, secretaries and treasurers or associate of a managing agent or secretaries and treasurers, whose affairs have been investigated by virtue of section 239, been guilty of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person for the offence ; and it shall be the duty of 5[all offices and other employees] and agents of the —————————————————————— 1 Ins. by Act 31 of 1965, S. 27 (w.e.f. 15-10-1965). 2 Subs. by Act 31 of 1988, s.39 (w.e.f. 31-5-1991). 3 Omitted by s.39, ibid (w.e.f. 31-5-1991). 4 Ins. by s.39, ibid (w.e.f. 31-5-1991). 5 Subs. by Act 65 of 1960, 77, for ” all officers”. ——————————————————————— 234 company, body corporate, managing agent, secretaries and treasurers, or associate, as the case may be (other than the accused in the pro- ceedings), to give the Central Government all assistance in connec- tion with the prosecution which they are reasonably able to give.
(2) Sub-section (6) of section 240 shall apply for the purposes of this section, as it applies for the purposes of that section.
Application for winding up of company or an order under section 397 or398. 243.Application for winding up of company or an order under section 397 or 298. If any such company or other body corporate, or any such managing agent, secretaries and treasurers, or associate, being a body corporate, is liable to be wound up under this Act and it appears to the Central Government from any such report as aforesaid that it is expedient so to do by reason of any such circumstances as are referred to in sub-clause (i) or (ii) of clause (b) of section 237, the Central Government may, unless the company, body corporate, managing agent, secretaries and treasurers or associate is already being wound up by the Court, cause to be presented to the Court by any person authorised by the Central Government in this behalf- (a) a petition for the winding up of the company, body corporate, managing agent, secretaries and treasurers, or associate, on the ground that it is just and equitable that it should be wound up; (b) an application for an order under section 397 or 398 ; or (c) both a petition and an application as aforesaid.
Proceedings for recovery of damages or property.
244.Proceedings for recovery of damages or property. (1) If from any such report as aforesaid, it appears to the Central Government that proceedings ought, in the public interest, to be brought by the company or any body corporate whose affairs have been investigated in pursuance of clause (a), (b) or (c) of section 239,- (a) for the recovery of damages in respect of any fraud, misfeasance or other misconduct in connection with the pro- motion or formation, or the management of the affairs, of such company or body corporate; or (b) for the recovery of any property of such company, or body corporate, which has been misapplied or wrongfully retained ; the Central Government may itself bring proceedings for that purpose in the name of such company or body corporate.
(2) The Central Government shall indemnify such company or body corporate against any costs or express incurred by it in, or in 235
connection with, any proceedings brought by virtue of sub-section (1).
Expenses of investigation.
245.Expenses of investigation. (1) The expenses of and incidental to an investigation by an inspector appointed by the Central Government under section 235 or 237 shall be defrayed in the first instance by the Central Government; but the following persons shall, to the extent mentioned below, be liable to reimburse the Central Government in respect of such expenses:- (a) any person who is convicted on a prosecution instituted in pursuance of section 242, or who is ordered to pay damages or restore any property in proceedings brought by virtue of section 244, may, in the same proceedings, be ordered to pay the said expenses to such extent as may be specified by the Court convicting such person, or ordering him to pay such damages or restore such property, as the case may be ; (b) any company or body corporate in whose name proceedings are brought as aforesaid shall be liable, to the extent of the amount or value of any sums or property recovered by it as a result of the proceedings ; and (c) unless, as a result of the investigation, a prosecution is instituted in pursuance of section 242,- 1[(i) any company, body corporate, managing agent, secretaries and treasurers, associate, managing director or manager dealt with by the report of the inspector shall be liable to reimburse the Central Government in respect of the whole of the expenses, unless and except in so far as, the Central Government otherwise directs ; and] (ii) the applicants for the investigation, where the inspector was appointed 2[in pursuance of the provisions
of sub-section (2) ] of section 235, shall be liable to such extent, if any, as the Central Government may direct.
(2) Any amount for, which a company or body corporate is liable
by virtue of clause (b) of sub-section (1) shall be a first charge on the sums or property mentioned in that clause. ———————————————————————- 1 Subs. by Act 65 of 1960, s. 78, for sub-clause (i). 2 Subs. by Act 31 of 1988, s.40 (w.e.f. 31.5.1991). ——————————————————————— 236
1[(3) The amount of expenses in respect of which any company, body corporate, managing agent, secretaries and treasurers, associate, managing director or manager is liable under sub-clause (i) of clause
(c) of sub-section (1) to reimburse the Central Government shall be recoverable from that company, body corporate, managing agent, secretaries and treasurers, associate, managing director or manager, as an arrear of land revenue.]
(4) For the purposes of this section, any costs or expenses incurred by the Central Government in or in connection with proceedings brought by virtue of section 244 (including expenses
incurred by virtue of sub-section (2) thereof) shall be treated as expenses of the investigation giving rise to the proceedings.
(5) (a) Any liability to reimburse the Central Government impos-
ed by clauses (a) and (b) of sub-section (1) shall, subject to satis- faction of the right of the Central Government to reimbursement, be a liability also to indemnify all persons against liability under clause (c) of that sub-section. (b) Any such liability imposed by the said clause (a) shall, subject as aforesaid, be a liability also to indemnify all persons against liability under the said clause (b). (c) Any person liable under the said clause (a) or (b) or sub-clause (i) or (ii) of the said clause (c) shall be entitled to contribution from any other persons liable under the same clause or sub-clause, as the case may be, according to the amount of their res- pective liabilities thereunder.
(6) In so far as the expenses to be defrayed by the Central Government under this section are not recovered thereunder, they shall be paid out of moneys provided by Parliament.
Inspectors’ report to be evidence. 246.Inspectors’ report to be evidence. A copy of any report of any inspector or inspectors appointed under section 235 or 237 authenticated in such manner, if any, as may be prescribed, shall be admissible in any legal proceeding as evidence of the opinion of the inspector or inspectors in relation to any matter contained in the report.
Investigation of ownership of company.
247. (1)Investigation of ownership of company. Where it appears to the- Central Government that there is good reason so to do, it may appoint one or more inspectors to investigate and report on the membership of any company and other ——————————————————————-
1 Subs. by Act 65 of 1960, s. 78, for sub-section (3). ——————————————————————— 237 matters relating to the company, for the purpose of determining the true persons- (a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or (b) who are or have been able to control or materially to influence the policy of the company. 1 [(1A) Without prejudice to its powers under this section, the Central Government shall appoint one or more, inspectors under sub-
section (1), if the Company Law Board, in the course of any proceedings before it, declares by an order that the affairs of the company ought to be investigated as regards the membership of the company and other matters relating to the company, for the purpose of determining the true persons- (a) who are or have been financially interested in the success or failure, whether real or apparent, of the company; or (b) who are or have been able to control or materially to influence the policy of the company.]
(2) When appointing an inspector under sub-section (1), the Cent- ral Government may define the scope of his investigation, whether as respects the matter or the period to which it is to extend or otherwise, and in particular, may limit the investigation to matters connected with particular shares or debuntures.
(3)Subject to the terms of an inspector’s appointment, his powers shall extend to the investigation of any circumstances suggesting the existence of any arrangement or understanding which, though hot legally binding, is or was observed or is likely to be observed in practice and which is relevant to the purposes of his investigation.
(4)Subject as aforesaid, the powers of the inspector shall also extend, where the company has or at any time had a managing agent or secretaries and treasurers,- (a) in case such managing agent or secretaries and treasurers are or were a body corporate, to the investigation of the ownership of the shares of such body corporate, and of who the persons are or were who control or, manage or controlled managed its affairs or; (b) in case such managing agent or secretaries and treasurers are or were a firm, to the investigation of who the persons are or were who control or manage or controlled or managed its affairs as partners in the firm or otherwise and of the respective interests therein of the partners; and (c)in all cases, to the investigation of who the persons are or were who are or were entitled to any share of, or any amount forming part of, the remuneration of such managing agent or secretaries and treasurers.
(5) For the purposes of any investigation under this section, sections 239, 240 and 241 shall apply with the necessary modifications of references to the affairs of the company or to those of any other ———————————————————————- 1 Ins. by Act 31 of 1988, s.41 (w.e.f. 31.5.1991). ———————————————————————– 238 body corporate or of any managing agent, secretaries and treasurers, or associate : Provided that the said sections shall apply in relation to all persons (including persons concerned only on behalf of others) who are or have been, or whom the inspector has reasonable cause to believe to be or to have been,- (i) financially interested in the success or failure, or the apparent success or failure, of the company, or of any other body corporate, managing agent, secretaries and treasurers or associate whose membership or constitution is investigated with that of the company; or (ii) able to control or materially to influence the policy of such company, body corporate, managing agent, secretaries and treasurers or associate; as they apply in relation to 1[officers and other employees and agents] of the company, of the other body corporate, or of the managing agent, secretaries and treasurers or associate, as the case may be : Provided further that the-Central Government shall not be bound to furnish the company or any other person with a copy of any report by an inspector appointed under this section or with a complete copy thereof, if it is of opinion that there is good reason for not divulging the contents of the report or of parts thereof ; but in such a case, the Central Government shall cause to be kept by the Registrar a copy of any such report, or as the case may be, of the parts thereof, as respects which it is not of that opinion.
(6) The expenses of any investigation under this section shall be defrayed by the Central Government out of money provided by Parliament, unless the Central Government directs that the expenses or any part thereof should be paid by the persons on whose application the investigation was ordered.
Information regarding persons having an interest in company or in bodycorporate or firm acting as managing agent thereof. 248 Information regarding persons having an interest in company
or in body corporate or firm acting as managing agent thereof. (1) 2 [Where it appears to the Central Government or to the Company Law Board in any proceedings before it] that there is good reason to investigate the ownership of any shares in or debentures of a company, or of a body corporate which acts or has acted as the managing agent or secretaries and treasures of a company, and that it is unnecessary to appoint an inspector for the purpose, 2 [the Central Government or the Company Law Board, as the case may be, may require] any person whom it has reasonable cause to believe- (a) to be, or to have been, interested in those shares or debentures; or ———————————————————————- 1 Subs. by Act 65 of 1960, s, 79, for ” officers and agents”. 2 Subs. by Act 31 of 1988, s. 42 (w.e.f. 31.5.1991). ——————————————————————— 239 (b) to act, or to have acted, in relation to those shares or debentures, as the legal adviser or agent of someone interested therein ; 1 [to give the Central Government or the Company Law Board, as the case may be, ] any information which he has, or can reasonably be expected to obtain, as to the present and past interests in those shares or debentures, and the names and addresses of the persons interested and of any persons who act or have acted on their behalf in relation to the shares or debentures.
(2) For the purposes of sub-section (1), a person shall be deemed to have an interest in a share or debenture- (a) if he has any right to acquire or dispose of the share or debenture or any interest therein or to vote in respect thereof; (b) if his consent is necessary for the exercise of any of the rights of other persons interested therein ; or (c) if other persons interested therein can be required, or are accustomed, to exercise their rights in accordance with his directions or instructions.
(3) Where it appears to the Central Government that there is good reason to investigate the ownership of any interest in a firm which acts or has acted as managing agent or as secretaries and treasurers of any company, and that it is unnecessary to appoint an inspector for the purpose, the Central Government may require any person whom it has reasonable cause to believe- (a) to have, or to have had, any interest in the firm ; or (b) to act, or to have acted, in relation to any such interest, as the legal adviser or agent of someone interested therein ; to give the Central Government any information which he has, or can reasonably be expected to obtain, as to the present and past interests held in the firm, and the names and addresses of the persons interested and of any persons who act or have acted on their behalf in relation to any such interest.
(4) Any person- (a) who fails to give any information required of him under this section ; or (b) who, in giving any such information, makes any statement which he knows to be false in a material particular, ——————————————————————— 1 Subs. by Act 31 of 1988, s. 42 (w.e.f. 31.5.1991). ———————————————————————– 240 or recklessly makes any statement which is false in a material particular ; shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.
Investigation of associateship with managing agent, etc.
249.Investigation of associateship with managing agent, etc. (1) Where any question arises as to whether any body corporate, firm, or individual is or is not, or was or was not, an associate of the managing agent or secretaries and treasurers of a company and it appears to the Central Government that there is good reason to investigate such question, it may either- (a) appoint an inspector for the purpose of making the investigation; or (b) if it considers it unnecessary to appoint an inspector as aforesaid, require any person whom it has reasonable cause to believe to be in a position to give relevant information in regard to the question, to furnish the Central Government with information on such matters as may be specified by it.
(2) The provisions of section 247 shall apply mutatis mutandis
to cases falling under clause (a) of sub-section (1) and those of section 248 to cases falling under clause (b) of that sub-section.
Imposition of restrictions upon shares and debentures and prohibitionof transfer of shares or debentures in certain cases. [250.Imposition of restrictions upon shares and debentures and
prohibition of transfer of shares or debentures in certain cases. (1) 1[Where it appears to the Company Law Board, whether on a reference made to it by the Central Government in connection with any investigation under section 247, 248 or 249 or on a complaint made by any person in this behalf], that there is good reason to find out the relevant facts about any shares (whether issued or to be issued) and the 1[Company Law Board] is of the opinion that such facts cannot be
found out unless the restrictions specified in sub-section (2) are imposed the 1[Company Law Board] may, by order, direct that the shares
shall be subject to the restrictions imposed by sub-section (2) for such period not exceeding three years as may be specified in the order.
(2) So long as any shares are directed to be subject to the restrictions imposed by this sub-section- (a) any transfer of those shares shall be void; (b) where those shares are to be issued, they shall not be issued; and any issue thereof or any transfer of the right to be issued therewith, shall be void; ———————————————————————- 1 Subs. by Act 31 of 1988, s. 43 (w.e.f. 31.5.1991). ———————————————————————- 241 (c) no voting right shall be exercisable in respect of those shares ; (d) no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof ; and any issue of such shares or any transfer of the right to be issued therewith, shall be void; and (e) except in a liquidation, no payment shall be made of any sums due from the company on those shares, whether in respect of dividend, capital or otherwise.
1[(3) Where a transfer of shares in a company has taken place and as a result there of a change in the composition of the Board of directors of the company is likely to take place and the Company Law Board is of the opinion that any such change would. be prejudicial to the public interest, it may, by order, direct that- (a)the voting rights in respect of those shares shall not be exercisable for such period not exceeding three years as may be specified in the order; (b)no resolution passed or action taken to effect a change in the composition of the Board of directors before the date of the order shall have effect unless confirmed by the Company Law Board.
(4)Where the Company Law Board has reasonable ground to believe that a transfer of shares in a company is likely to take place whereby a change in the composition of the Board of directors of the company is likely to take place and the Company Law Board is of the- opinion that any such change would be prejudicial to the public interest, the Company Law Board may, by order, direct that any transfer of shares In the company during such period not exceeding three years as may be specified in the order, shall be void] ——————————————————————– 1 Subs. by Act 31 of 1988, s. 43 (w.e.f. 31.5.1991). ——————————————————————– 242
(5) The 1[Company Law Board] may, be order at any time, vary or
rescind any order made by it under sub-section (1) or sub-section (3)
or sub-section (4). 2* * * * *
(8), Any order made by the 1[Company Law Board] under sub-section
(5) shall be served on the company within fourteen days of the making of the order.
(9) Any person who- (a) exercises or purports to exercise any right to dispose of any shares or of any right to be issued with any such shares when to his knowledge he is not entitled to do so by reason of any of the said restrictions applicable to the case
section (2) ; or (b) votes in respect of any shares whether as holder or proxy, or appoints a proxy to vote in respect thereof, when to his knowledge entitled to do so by reason of any of the said restrictions applicable to the case under sub-
section (2) or by reason of any order made under sub-section
(3) ; or (c) transfers any shares in contravention of any order made
under sub-section (4) ; or (d) being the holder of any shares in respect of which an
order under sub-section (2) or sub-section (3) has been made, ——————————————————————— 1 Subs. by Act 31 of 1988, s. 43 (w.e.f. 31.5.1991). 2 Omitted by s.43, ibid. ——————————————————————— 243 fails to give notice of the fact of their being subject to any such order to any person whom he does not-know to be aware of that fact but whom. he knows to be otherwise entitled to vote in respect of those shares, whether as holder or as proxy, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.
(10)Where shares in any company are issued in contravention of such ofthe restrictions as may be applicable to the case under sub-
section(2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.
(11) A prosecution shall not be instituted under this section except by, or with the consent of, the Central Government.
(12) This section shall apply in relation to debentures as it applies in relation to shares.] 250A Voluntary winding up of company, etc., not to stop investigation proc-eedings. 1[250A. Voluntary winding up of company, etc., not to stop investigation proceedings. An investigation may be initiated under section 235, 237, 239, 247. 248 or 249 notwithstanding that- (a) an application has been made for an order under section 397 or section 398 ; or (b) the company has passed a special resolution for voluntary winding up, and no investigation so initiated shall be stopped or suspended by reason only of the fact that an application referred to in clause (a) has been made or a special resolution referred to in clause (b) has been passed.]
Saving for legal advisers and bankers. 251. Saving for legal advisers and bankers. Nothing in sections 234 to 250 shall require the disclosure to 2[Company Law Board or to the Central Government or to the Registrar or to an inspector appointed by Central Government]- (a) by a legal adviser, of any privileged communication made to him in that capacity, except as respects the name and address of his client ; or (b) by the bankers of any company, body corporate, managing agent, secretaries and treasurers or other person, referred to in the sections aforesaid, as such bankers, of any ———————————————————————- 1 Ins. by Act 31 of 1965, s. 38 (w.e.f. 15.10.1965). 2 Subs. by Act 31 of 1988, s. 44 (w.e.f. 31.5.1991). ———————————————————————– 244 information as to the affairs of any of their customers other than such company, body corporate, managing agent, secretaries and treasurers or person. CHAP Constitution of Board of Directors CHAPTER II.-DIRECTORS Constitution of Board of Directors
Minimum number of directors.
252.Minimum number of directors. (1) Every 1[public company (other than a public company which has become such by virtue of section 43A)]2* * * shall have at least three directors.
(2) Every 3[other] company 4* * * shall have at least two directors.
(3) The directors of a company collectively are referred to in this Act as the ” Board of directors ” or ” Board “.
Only individuals to be directors. 253 Only individuals to be directors. No body corporate, association or firm shall be appointed director of a 5 * * * com- pany, and only an individual shall be so appointed.
Subscribers of memorandum deemed to be directors. 254.Subscribers of memorandum deemed to be directors. In default of and subject to any regulations in the articles of a company, subscribers of the memorandum who are individuals, shall be deemed to be the directors of the company, until the directors are duly appointed in accordance with section 255.
Appointment of directors and proportion of those who are to retire byrotation. 255.Appointment of directors and proportion of those who are to
retire by rotation. (1) 6[Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds] of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall- (a) be persons whose period of office is liable to determination by retirement of directors by rotation; and (b) save as otherwise expressly provided in this Act, be appointed by the company in general meeting. ———————————————————————– 1 Subs. by Act 31 of 1965, s. 29, for “public company” (w.e.f. 15-10-1965). 2 The words ” and every private company which is a subsidiary of a public company” omitted by Act 65 of 1960, s. 81. 3 Subs. by Act 31 of 1965, s. 29, for “private” (w.e.f. 15-10- 1965). 4 The words “which is not a subsidiary of a public company” omitted by Act 65 of 1960, s. 81. 5 The words ” public or private ” omitted by s. 82, ibid. 6 Subs. by s. 83, ibid., for “Not less than two-thirds”. ———————————————————————— 245
(2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company, also be appointed by the company in general meeting,
Ascertainment of directors retiring by rotation and filling ofvacancies. 256.Ascertainment of directors retiring by rotation and filling
of vacancies. (1) At the first annual general meeting of a public company, or a private company which is a subsidiary of a public company, held next after the date of the general meeting at which the first directors are appointed in accordance with section 255 and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation, or if their number is not three or a multiple of three, then, the number nearest to one-third, shall retire from office.
(2) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.
(3) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto.
(4) (a) If the place of the retiring director is not so filled up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place. (b) If at the adjourned meeting also, the place of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been reappointed at the adjourned meeting, unless- (i) at that meeting or at the previous meeting a resolution for the reappointment of such director has been put to the meeting and lost; (ii) the retiring director has, by a notice in writing addressed to the company. or its Board of directors, expressed his unwillingness to be so reappointed; (iii)he is not qualified or is disqualified for appointment; 246 (iv) a resolution, whether special or ordinary, is required for his appointment or re-appointment in virtue of any pro- visions of this Act ; or
(v) the proviso to sub-section (2) of section 263 1* * * is applicable to the case. 2* * * * 3 [Explanation.-In this section and in section 257, the expression ” retiring director ” means a director retiring by rotation.]
Right of persons other than retiring directors to stand fordirectorship. 257.Right of persons other than retiring directors to stand for
directorship. (1) A person who is not a retiring director shall, sub- ject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member inte- nding to propose him, has not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be 4[along with a deposit of five hundred rupees which shall be refunded to such person or, as the case may be, to such member, if the person succeeds in getting elected as a director. ] 5[(1A) The company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting: Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place.]
(2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company.
Right of company to increase or reduce the number of directors. 258.Right of company to increase or reduce the number of directors. 6* * * Subject to the provisions of sections 252, 255 and 259, a company in general meeting may, by ordinary resolution, increase or reduce the number of its directors within the limits fixed in that behalf by its articles. ———————————————————————-
1 The words, brackets and figures “or sub-section (3) of section 280” omitted by Act 31 of 1965, s. 3o (w.e.f. 15-10-1965).
2 Sub-section (5) omitted by s. 30, ibid. (w.e.f. 15-10-1965), 3 Ins. by Act 65 of 1960, s. 84. 4 Added by Act 31 of 1988, s.45 (w.e.f. 31-5-1988). 5 Ins. by Act 65 of 1960, s.85. 6 The brackets and figure “(I)” omitted by Act 36 of 1957, s. 3 and Sch. II. ———————————————————————– 247
Increase in number of directors to require Government sanction. 259.Increase in number of directors to require Government sanction. In the case of a public company or a private company which is a subsidiary of a public company, any increase in the number of its directors, except- (a) in the case of a company which was in existence on the 21st day of July, 1951, an increase which was within the permissible maximum under its articles as in force on that date, and (b) in the case of a company which came or may come into existence after that date, an increase which is within the permissible maximum under its articles as first registered, shall not have any effect unless approved by the Central Government; and shall become void if, and in so far as, it is disapproved by that Government: 1 [Provided that where such. permissible maximum is twelve or less than twelve, no approval of the Central Government shall be required if the increase in the number of its directors does not make the total number of its directors more than twelve.]
Additional directors. 260.Additional directors. Nothing in section 255, 258 or 259 shall affect any power conferred on the Board of directors by the articles to appoint additional directors: Provided that such additional directors shall hold office only to the date of the next annual general meeting of the company: Provided further that the number of the directors and additional directors together shall not exceed the maximum strength fixed for the Board by the articles.
Certain persons not to be appointed directors, except by specialresolution. 261.Certain persons not to be appointed directors, except by
special resolution. (1) If a public company, or a private company which is a subsidiary of a public company, has a managing agent and such managing agent is authorized by the articles or by an agreement to appoint any director to the Board, 2[none of the following persons shall be appointed– (i) as a director of the company whose period of office is liable to determination by retirement of directors by rotation, or (ii) to fill a casual vacancy in the office of a director under section 262, or ——————————————————————— 1 Added by Act 31 of 1965, s. 31 (w.e.f. 15-10-1965). 2 Subs. by Act 65 of 1960, s. 86, for certain words. ——————————————————————— 248 (iii)as an additional director under section 260, or (iv) as an alternate director under section 313, except by a special resolution passed by the company:-] (a) any person who is an officer or employee of, or who holds any office or place of profit under, the company or any subsidiary thereof : Provided that nothing in this clause shall apply to the director of such company or subsidiary, or to the holder of any office or place of profit under such company or subsidiary which may be held by a director of the company by virtue of section 314 ; (b) where any office or place of profit which would disqualify a person under clause (a), read with the proviso thereto. is held by any firm, any partner in, or employee of, the firm; (c) where any such office or place of profit is held by a private company, any member, officer or employee of such com- pany; (d) where any such office or place of profit is held by a body corporate, any officer or employee of such body cor- porate; (e) any person who is entitled, by virtue of any agreement, to any share of, or any amount out of, the remuneration received by the managing agent; any associate, or officer or employee, of the managing agent; or (g) any person who is an officer or employee of, or who holds any office or place of profit under, any body corporate under the management of the managing agent or any subsidiary of such body corporate: Provided that nothing in clause (g) shall apply to the director of such body corporate or subsidiary or to the holder of any office or place of profit under such body corporate or subsidiary which may be held by a director of such body corporate by virtue of section 314.
(2) Special notice shall be required of any resolution appointing, or approving the appointment of, any person referred to in clauses (a) to
(g) of sub-section (1), 1[as director or an additional or ———————————————————————- 1 Subs. by Act 65 of 1960, s. 86, for “as a director of the company”. ———————————————————————– 249 alternate director of the company or to fill a casual vacancy in the office of a director under section 262].
(3)The notice given to the company, of any such resolution, and the notice thereof given by the company to its members, shall set out the reasons which make the resolution necessary.
(4)Nothing in this section shall be deemed to prevent any director holding any office immediately before the commencement of this Act from continuing to hold that office up to the next annual general meeting of the company.
Filling of casual vacancies among directors.
262.Filling of casual vacancies among directors. (1) In the case of a public company or a private company which is a subsidiary of a public company, if the office of any director appointed by the company in general meeting is vacated before his term of office will expire in the normal course, the resulting casual vacancy may, in default of and subject to any regulations in the articles of the company, be filled by the Board of directors at a meeting of the Board.
(2)Any person so appointed shall hold office only up to the date up to which the director in whose place he is appointed would have held office if it had not been vacated as aforesaid.
Appointment of directors to be voted on individually.
263.Appointment of directors to be voted on individually. (1) At a general meeting of a public company or of a private company which is a subsidiary of a public company, a motion shall not be made for the appointment of two or more persons as directors of the company by a single resolution, unless a resolution that it shall be so made has first been agreed to by the meeting without any vote being given against it.
(2)A resolution moved in contravention of sub-section (1) shall be void, whether or not objection was taken at the time to its being so moved: Provided that where a resolution so moved is passed, no provision for the automatic reappointment of 1[the director retiring by rota- tion] in default of another appointment shall apply.
(3)For the purposes of this section a motion for approving a persons appointment, or for nominating a person for appointment, shall be treated as a motion for his appointment. 263A Sections 177, 255, 256 and 263 not to apply in relation to companiesnot carrying business for profit, etc. 2[263A. Sections 177, 255, 256 and 263 not to apply in relation to companies not carrying business for profit, etc. Nothing contained in sections 177, 255, 256 and 263 shall affect any provision in the articles of a company for the ———————————————————————- 1 Subs. by Act 65 of 1960, s 87 for “retiring directors”. 2 Ins. by s. 88, ibid. ———————————————————————– 250 election by ballot of all its directors at each annual general meeting if such company does not carry on business for profit or prohibits the payment of a dividend to its members.]
Consent of candidate for directorship to be filed with the company andconsent to act as director to be filed with the Registrar. 1[264.Consent of candidate for directorship to be filed with the company and consent to act as director to be filed with the Registrar.
(1) Every person (2[other than a director retiring by rotation or otherwise or a person] who has left at the office of the company a notice under section 257 signifying his candidature for the office of a director) proposed as a candidate for the office of a director shall sign, and file with the company, his consent in writing to act as a director, if appointed.
3[(2) A person other than- (a) a director re-appointed after retirement by rotation or immediately on the expiry of his term of office, or (b) an additional or alternate director, or a person filling a casual vacancy in the office of a director under section 262, appointed as a director or re-appointed as an additional or alternate director, immediately on the expiry of his term of office, or (c) a person named as a director of the company under its articles as first registered, shall not act as a director of the company unless he has within thirty days of his appointment signed and filed with the Registrar his con- sent in writing to act as such director.]
(3)This section shall not apply to a private company unless it is a subsidiary of a public company.]
Option to company to adopt proportional representation for theappointment of directors. 265.Option to company to adopt proportional representation for the appointment of directors. Notwithstanding anything contained in this Act, the articles of a company may provide for the appointment of not less than two-thirds of the total number of the directors of a public company or of a private company which is a subsidiary of a public company, according to the principle of proportional representation, whether by the single transferable vote or by a system of cumulative voting or otherwise, the appointments being made once in every three years and interim casual vacancies being filled in accordance with the provisions, mutatis mutandis, of section 262.
Restrictions on appointment or advertisement of director.
266.Restrictions on appointment or advertisement of director. (1) A person shall not be capable of being appointed director of a company by the articles, and shall not be named as a director ———————————————————————- 1 Subs by Act 65 of 1960, s. 89, for s. 264. 2 Subs. by Act 31 of 1965, s. 32, for ” other than a person ” (w.e.f. 15-10-1965),
3 Subs. by s. 32, ibid., for sub-section (2) (w.e.f. 15-10-1965). ———————————————————————- 251 or proposed director of a company in a prospectus issued by or on behalf of the company, or as proposed director of an intended company in a prospectus issued in relation to that intended company, or in a statement in lieu of prospectus filed with the Registrar by or on behalf of a company, unless, before the registration of the articles. the publication of the prospectus, or the filing of the statement in lieu of prospectus, as the case may be, he has, by himself or by his agent authorised in writing,- (a) signed and filed with the Registrar a consent in writing to act as such director; and (b) either- (i)signed the memorandum for shares not being less in number or value than that of his qualification shares, if any; or (ii)taken his qualification shares, if any, from the company and paid or agreed to pay for them; or (iii)signed and filed with the Registrar an undertaking in writing to take from the company his qualification shares if any, and pay for them; or (iv)made and filed with the Registrar an affidavit to the effect that shares, not being less in number or value than that of his qualification shares, if any, are registered in his name.
(2) Where a person has signed and filed as aforesaid an under- taking to take and pay for his qualification shares, he shall, as regards those shares, be in the same position as if he had signed the memorandum for shares of that number or value.
(3) References in this section to the share qualification of a director or proposed director shall be construed as including only a share qualification required within a period determined by reference to the time of appointment, and references therein to, qualification shares shall be construed accordingly. 1 * * * * * ———————————————————————–
1 Sub-section (4) omitted by Act 31 of 1965, s. 33 (w.e.f. 15-10- 1965). ———————————————————————– 252
(5) This section shall not apply to- (a) a company not having a share capital; (b) a private company; (c) a company which was a private company before becoming a public company; or (d) a prospectus issued by or on behalf of a company after the expiry of one year from the date on which the company was entitled to commence business. Managing Directors, etc.
Certain persons not to be appointed managing directors. 267.Certain persons not to be appointed managing directors. No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its managing or whole-time director who- (a) is an undischarged insolvent, or has at any time been adjudged an insolvent; (b) suspends, or has at any time suspended, payment to his creditors, or makes, or has at any time made, a composition with them; or (c) is or has at any time been, convicted by a Court 1* * * of an offence involving moral turpitude.
Amendment of provision relating to managing, whole time or non-rotational directors to require Government approval. 268.Amendment of provision relating to managing, whole time or non-rotational directors to require Government approval. In the case of a public company or a private company which is a subsidiary of a public company, an amendment of any provision relating to the appointment or re-appointment of a managing or whole-time director or of a director not liable to retire by rotation, whether, that provision be contained in the company’s memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or by its Board of directors, shall not have any effect unless approved by the Central Government; and the amendment shall become void if, and in so far as, it is disapproved by that Government. ———————————————————————- 1 The words “in India” omitted by Act 65 of 1960, s. 90. ———————————————————————- 253
Appointment of managing or whole-time director or manager to requireGovernment approval only in certain cases. 4[269. Appointment of managing or whole-time director or manager
to require Government approval only in certain cases. (1) On and from the commencement of the Companies (Amendment) Act, 1988, every public company, or a private company which is a subsidiary of a public company, having a paid up share capital of such sum as may be prescribed, shall have a managing or whole-time director or a manager.
(2) On and from the commencement of the Companies (Amendment) Act, 1988, no appointment of a person as a managing or whole-time director or a manager in a public company or a private company which is a subsidiary of a public company shall be made except with the approval of the Central Government unless such appointment is made in accordance with the conditions specified in Parts I and II of Schedule XIII (the said Parts being subject to the provisions of Part III of that Schedule) and a return in the prescribed form is filed within ninety days from the date of such appointment.
(3)Every application seeking approval to the appointment of a managing or whole-time director or a manager shall be made to the CentralGovernment within a period of ninety days from the date of such appointment.
(4) The Central Government shall not accord its approval to an
application made under sub-section (3), if it is satisfied that- (a)the managing or whole-time director or the manager appointed is, in its opinion, not a fit and proper person to be appointed as such or such appointment is not in the public interest; or (b)the terms and conditions of the appointment of managing or whole time director or the manager are not fair and :reasonable.
(5)It shall be competent for the Central Government while
according approval to an appointment under sub-section (3) to accord approval for a period lesser than the period for which the appointment is proposed to be made.
(6)If the appointment of a person as a managing or wholetime director or a manager is not approved by the Central Government under
sub-section (4), the person so appointed shall vacate his office as such managing or whole-time director or manager on the date on which the decision of the Central Government is communicated to the company, and if he omits or fails to do so, he shall be punishable with fine which may extend to five hundred rupees for every day during which he omits or fails to vacate such office.
(7)Where the Central Government suo motu or on any information received by it is, prima facie, of the opinion that any appointment
made under sub-section (2) without the approval of the Central Government has been made in contravention of the requirements of Schedule XIII, it shall be competent for the Central Government to refer the matter to the Company Law Board for decision.
(8)The Company Law Board shall, on receipt of a reference under
sub-section (7), issue a notice to the company, the managing or whole- time director or the manager, as the case may be, and the director or other officer responsible for complying with the requirements of Schedule XIII, to show cause as to why such appointment shall not be
terminated and the penalties provided under sub-section (10) shall not be imposed.
(9)The Company Law Board shall, if, after giving a reasonable opportunity to the company, the managing or whole-time director or the manager, or the officer who is in default, as the case may be, comes to the conclusion that the appointment has been made in contravention of the requirements of Schedule XIII, make an order declaring that a contravention of the requirements of Schedule XIII has taken place.
(10) On the making of an order by the Company Law Board under
sub-section (9),- (a) the company shall be liable to a fine which may extend to five thousand rupees; (b) every officer of the company who is in default shall be liable to a fine of ten thousand rupees; and (c)the appointment of the managing or whole-time director or manager, as the case may be, shall be deemed to have come to an end and the person so appointed shall, in addition to being liable to pay a fine of ten thousand rupees, refund to the company the entire amount of salaries, commissions and perquisites received or enjoyed by him between the date of his appointment and the passing of such order.
(11) If a company contravenes the provisions of sub-section (10) or any direction given by the Company Law Board under that sub- section, every officer of the company who is in default and the managing or whole-time director or the manager, as the case may be, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to a fine which may extend to fifty rupees for every day of default.
(12)All acts, done by a managing or whole-time director or a manager, as the case may be, purporting to act in such capacity and whose appointment has been found to be in contravention of Schedule XIII, shall, if the acts so done are valid otherwise be valid notwithstanding any order made by the Company Law Board under sub-
section (9). Explanation.-In this section “appointment” includes reappointment and “whole-time director” includes a director in the ‘whole-time employment of the company] ———————————————————————– 1 Subs. by Act 31 of 1988, s. 46 (w.e.f. 15.6.1988). ———————————————————————– 254 Share qualifications
Time within which share qualification is to be obtained and maximumamount thereof. 270.Time within which share qualification is to be obtained and
maximum amount thereof. (1) Without prejudice to the restrictions imposed by section 266, it shall be the duty of every director who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect, to obtain his qualification within two months after his appointment as director.
(2)Any provision in the articles of the company (whether made before or after the commencement of this Act) shall be void in so far as it requires a person to hold the qualification shares before his appointment as a director or to obtain them within a shorter time than two months after his appointment as such.
(3)The nominal value of the qualification shares shall not exceed five thousand rupees, or the nominal value of one share where it exceeds five thousand rupees.
(4)For the purpose of any provision in the articles requiring a director to hold a specified share qualification, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant.
[Filing of declaration of share qualification by director.] 271.[Filing of declaration of share qualification by director.] Rep. bythe Companies (Amendment) Act, 1965 (31 of 1965), s. 34 (w.e.f.15-10-1965). 254A
Penalty. 272. Penalty. If, after the expiry of the said period of two months, any person acts as a director of the company when he does not hold the qualification shares referred to in section 270, he shall be punishable with fine which may extend to fifty rupees for every day between such expiry and the last day on which he acted as a director.
Saving. 273. Saving. Sections 270 1[and 272] shall not apply to a private company, unless it is a subsidiary of a public company. Disqualifications of Directors
Disqualifications of directors.
274.Disqualifications of directors. (1) A person shall not be capable of being appointed director of a company, if- (a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force; (b) he is an undischarged insolvent; (c) he has applied to be adjudicated as an insolvent and his application is pending; (d) he has been convicted by a Court 2* * * of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence: (e) he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or (f) an order disqualifying him for appointment as director has been passed by a Court in pursuance of section 203 and is in force, unless the leave of the Court has been obtained for his appointment in pursuance of that section.
(2) The Central Government may, by notification in the Official Gazette, remove- (a) the disqualification incurred by any person in virtue
of clause (d) of sub-section (1), either generally or in ———————————————————————– 1 Subs. by Act 31 of 1965, s. 35. for “to 272” (w.e.f. 15-10- 1965). 2 The words “in India” omitted by Act 65 of 1960, s. 93. ———————————————————————- 254B relation to any company or companies specified in the notification; or (b) the disqualification incurred by any person in virtue
of clause (e) of sub-section (1).
(3) A private company which is not a subsidiary of a public com- pany may, by its articles, provide that a person shall be disqualified for appointment as a director on any grounds in addition to those
specified in sub-section (1). 255 Restrictions on number of directorships
No person to be a director of more than twenty companies. 275.No person to be a director of more than twenty companies. After the commencement of this Act, no person shall, save as otherwise provided in section 276, hold office at the same time as director in more than twenty companies.
Choice to be made by director of more than twenty companies atcommencement of Act. 276.Choice to be made by director of more than twenty companies
at commencement of Act. (1) Any person holding office as director in more than twenty companies immediately before the commencement of this Act shall, within two months from such commencement,- (a) choose not more than twenty of those companies, as companies in which he wishes to continue to hold the office of director; (b) resign his office as director in the other companies; and (c) intimate the choice made by him under clause (a) to each of the companies in which he was holding the office of director before such commencement, to the Registrar having jurisdiction in respect of each such company, and also to the Central Government.
(2) Any resignation made in pursuance of clause (b) of sub-
section (1) shall become effective immediately on the despatch thereof to the company concerned.
(3) No such person shall act as director- (a) in more than twenty companies, after the expiry of two months from the commencement of this Act; or (b) of any company after despatching the resignation of his office as director thereof, in pursuance of clause (b) of
sub-section (1).
Choice by person becoming director of more than twenty companies aftercommencement of Act. 277.Choice by person becoming director of more than twenty
companies after commencement of Act. (1) Where a person already holding the office of director in twenty companies is appointed, after the commencement of this Act, as a director of any other company, the appointment- (a)shall not take effect unless such person has, within fifteen days thereof, effectively vacated his office as director in any of the Companies in which he was already a director; and (b) shall become void immediately on the expiry of the fifteen days if he has not, before such expiry, effectively vacated his office as director in any of the other companies aforesaid. 256
(2) Where a person already holding the office of director in nineteen companies or less is appointed, after the commencement of this Act, as a director of other companies, making the total number of his directorships more than twenty, he shall choose the directorships which he wishes to continue to hold or to accept, so however that the total number of the directorships, old and new, held by him shall not exceed twenty. None of the new appointments of director shall take effect until such choice is made; and all the new appointments shall become void if the choice is not made within fifteen days of the day on which the last of them was made.
Exclusion of certain directorships for the purposes of sections 275,276 and
278.Exclusion of certain directorships for the purposes of
sections 275, 276 and 277. (1) In calculating, for the purposes of sections 275, 276 and 277, the number of companies of which a person may be a director, the following companies shall be excluded, namely:- (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) an unlimited company; (c) an association not carrying on business for profit or which prohibits the payment of a dividend; (d) a company in which such person is only an alternate director, that is to say, a director who is only qualified to act as such during the absence or incapacity of some other director.
(2) in making the calculation aforesaid, any company referred to
in clauses (a), (b) and (c) of sub-section (1) shall be excluded for a period of three months from the date on which the company ceases to fall within the purview of those clauses.
Penalty. 279. Penalty. Any person who holds office, or acts, as a director of more than twenty companies in contravention of the foregoing provisions shall be punishable with fine which may extend to five thousand rupees in respect of each of those companies after the first twenty. Retiring age of Directors
[Age limit.] 280, [Age limit.] Rep. by the Companies (Amendment) Act, 1965 (31 of 1965), s. 36 (w.e.f. 15-10-1965).
[Age limit not to apply if Company so resolves.] 281. [Age limit not to apply if Company so resolves.] Rep. by s. 37, ibid. (w.e.f. 15-10-1965). 257-258
[Duty of director to disclose age.] 282.(Duty of director to disclose age.] Rep. by the Companies amendment) Act, 1965 (31 of 1965), s. 38 (w.e.f. 15-10-1965). Vacation of Office by Directors
Vacation of office by directors.
283.Vacation of office by directors. (1) 1[The office of a director shall become vacant if-] (a) he fails to obtain within the time specified in sub-
section (1) of section 270, or at any time thereafter ceases to hold, the share qualification, if any, required of him by the articles of the company; (b) he is found to be of unsound mind by a Court of competent jurisdiction ; (c) he applies to be adjudicated an insolvent; (d) he is adjudged an insolvent; 2[(e) he is convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months;] (f) he fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call 3 [unless the Central Government has, by notification in the Official Gazette, removed the disquali- fication incurred by such failure] ; (g) he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board; (h) 4[he (whether by himself or by any person for his benefit or on his account), or any firm in which] he is a partner or any private company of which he is a director, accepts a loan, or any guarantee or security for a loan, from the company in contravention of section 295; (i) he acts in contravention of section 299; ———————————————————————- 1 Subs. by Act 65 of 1960, s. 95, for certain words. 2 Subs. by s. 95, ibid., for cl. (e). 3 ins. by s. 95, ibid. 4 Subs, by s. 95, ibid., for “he, or any firm in which”. ———————————————————————— 259 (j) he becomes disqualified by an order of Court under section 203; 1* * * (k) he is removed in pursuance of section 284 ; 2[or (l) having been appointed a director by virtue of his holding any office or other employment in the company, or as a nominee of the managing agent of the company, he ceases to hold such office or other employment in the company or, as the case may be, the managing agency comes to an end.]
(2) Notwithstanding anything in clauses (d), (e) and (j) of sub-
section (1), the disqualification referred to in those clauses shall not take effect- (a) for thirty days from the date of the adjudication, sentence or order ; (b) where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of ; or (c) where within seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disquali- fication, until such further appeal or petition is disposed of.
2 [(2A) Subject to the provisions of sub-sections (1) and (2), if a person functions as a director when he knows that the office of director held by him has become vacant on account of any of the disqualifications, specified in the several clauses of sub-section
(1), he shall be punishable with fine which may extend to five hundred rupees for each day on which he so functions as a director.]
(3) A private company which is not a subsidiary of a public com- pany may, by its articles, provide, that the office of director shall be vacated on any grounds in addition to those specified in sub-section
(1). ———————————————————————- 1 The word “or” omitted by Act 65 of 1960, s. 95. 2 Ins. by. s. 95, ibid. ———————————————————————- 260
Removal of directors.
284.Removal of directors. (1) A company may, by ordinary resolution, remove a director (not being a director appointed by the Central Government in pursuance of section 408) before the expiry of his period of office : Provided that this sub-section shall not, in the case of a private company, authorise the removal of a director holding office for life on the 1st day of April, 1952, whether or not he is subject to retirement under an age limit by virtue of the articles or otherwise: Provided further that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 265 to appoint not less than two-thirds of the total number of directors according to the principle of proportional re- presentation.
(2)Special notice shall be required of any resolution to remove a director under this section, or to appoint somebody instead of a director so removed at the meeting at which he is removed.
(3)On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall- be entitled to be heard on the resolution at the meeting.
(4)Where notice is given of a resolution to remove a director under this section and the director concerned makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so,- (a) in any notice of the resolution given to members of the company state the fact of the representations having been made; and (b) send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company) ; and if a copy of the representations is not sent as aforesaid because they were received too late or because of the company’s default, the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting: Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on 261 the application either of the company or of any other person who claims to be aggrieved, the 1[Company Law Board] is satisfied that the right conferred by this sub-section are being abused to secure nee- dless publicity for defamatory matter; and 1[Company Law Board] may order the company’s costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.
(5)A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board in pursuance of section 262, be filled by the appointment of another director in his stead by the meeting at which he is removed, provided special notice of the intended appointment has
been given under sub-section (2). A director so appointed shall hold office until the date up to which his predecessor would have held office if he had not been removed as aforesaid.
(6)If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance with the provisions, so far as they may be applicable, of section 262, and all the provisions of that section shall apply accordingly: Provided that the director who was removed from office shall not be re-appointed as a director by the Board of directors.
(7) Nothing in this section shall be taken- (a) as depriving a person removed thereunder of any compensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as director; or (b) as derogating from any power to remove a director which may exist apart from this section. Meetings of Board
Board to meet at least once in every three calendar months. 1[285.Board to meet at least once in every three calendar months. In the case of every company, a meeting of its Board of directors shall be held at least once in every 3[three months and atleast four such meetings shall be held in every year] Provided that the Central Government may, by notification in the Official Gazette, direct that the provisions of this section shall not apply in relation to any class of companies or shall apply in relation thereto subject to such exceptions, modifications or conditions as may be specified in the notification.] ——————————————————————— 1 Subs. by Act 31 of 1988, s.67 (w.e.f. 31.5.1991). 2 Subs. by Act 65 of 1960, s. 96, for s. 285. 3 Subs. by Act 31 of 1965 s. 39 for certain in words ——————————————————————— 262
Notice of meetings.
286.Notice of meetings. (1) Notice of every meeting of the Board of directors of a company shall be given in writing to every director for the time being in India, and at his usual address in India to every other director.
(2) Every officer of the company whose duty it is to give notice as aforesaid and who fails to do so shall be punishable with fine which may extend to one hundred rupees.
Quorum for meetings.
287.Quorum for meetings. (1) In this section- (a) ” total strength ” means the total strength of the Board of directors of a company as determined in pursuance of this Act, after deducting therefrom the number of the directors, if any, whose places may be vacant at the time; and (b) ” interested director ” means any director whose presence cannot, by reason of section 300, count for the purpose of forming a quorum at a meeting of the Board, at the time of the discussion or vote on any matter.
(2) The quorum for a meeting of the Board of directors of a company shall be one-third of its total strength (any fraction con- tained in that one-third being rounded off as one), or two directors, whichever is higher: Provided that where at any time the number of interested directors exceeds or is equal to two-thirds of the total strength, the number of the remaining directors, that is to say, the number of the directors who are not interested, I [present at the meeting being not less than two], shall be the quorum during such time.
Procedure where meeting adjourned for want of quorum.
288.Procedure where meeting adjourned for want of quorum. (1) If a meeting of the Board could not be held for want of quorum, then, unless the articles otherwise provide, the meeting shall automatically stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place.
(2) The provisions of section 285 shall not be deemed to have been contravened merely by reason of the fact that a meeting of the ———————————————————————- 1 Ins. by Act 65 of 1960, s. 97. ———————————————————————– 263 Board which had been called in compliance with the terms of that section could not be held for want of a quorum.
Passing of resolutions by circulation. 289.Passing of resolutions by circulation. No resolution shall be deemed to have been duly passed by the Board or by a committee thereof by circulation, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the directors, or to all the members of the committee, then in India (not being less in number than the quorum fixed for a meeting of the Board or committee, as the case may be), and to all other directors or members at their usual address in India, and has been approved by such of the directors as are then in India, or by a majority of such of them, as are entitled to vote on the Resolution.
Validity of acts of directors. 290.Validity of acts of directors. Acts done by a person as a director shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in this Act or in the articles: Provided that nothing in this section shall be deemed to give validity to acts done by a director after his appointment has been shown to the company to be invalid or to have terminated. Board’s powers and restrictions thereon
General powers of Board.
291.General powers of Board. (1)Subject to the provisions of this Act, the Board of directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do: Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by this or any other Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting: Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions con- tained in that behalf in this or any other Act, or in the memorandum or articles of the company, or in any regulations not inconsistent therewith and duly made thereunder, including regulation made by the company in general meeting.
(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made. 264
Certain powers to be exercised by Board only at meeting.
292.Certain powers to be exercised by Board only at meeting. (1) The Board of directors of a company shall exercise the following powers on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the Board:- (a) the power to make calls on shareholders in respect of money unpaid on their shares; (b) the power to issue debentures; (c) the power to borrow moneys otherwise than on debentures; (d) the power to invest the funds of the company; and (e) the power to make loans: 1[Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the managing agent, secretaries and treasurers, the manager or any other principal officer of the company or in the case of a branch office of the company, a principal officer of the branch office, the powers specified in clauses (c), (d) and (e) to the extent specified in sub-
sections (2), (3) and (4) respectively, on such conditions as the Board may prescribe: Provided further that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of moneys on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of moneys or, as the case may be, a making of loans by a banking company within the meaning of this section.
Explanation I. Nothing in clause (c) of sub-section (1) shall apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act. Explanation II.-In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause
(c) of sub-section (1) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day to day ———————————————————————– 1 Subs. by Act 65 of 1960, a. 98, for the proviso. ———————————————————————– 265 operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of.]
(2) Every resolution delegating the power referred to in clause
(c) of sub-section (1) shall specify the total amount 1[outstanding at any one time] up to which moneys may be borrowed by the delegate.
(3) Every resolution delegating the power referred to in clause
(d) of subsection (1) shall specify the total amount up to which the funds may be invested, and the nature of the investments which may be made, by the delegate.
(4) Every resolution delegating the power referred to in clause
(e) of sub-section (1) shall specify the total amount up to which loans may be made by the delegate, the purposes for which the loans may be made, and the maximum amount of loans which may be made for each such purpose in individual cases.
(5) Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified
in subsection (1).
Restrictions on powers of Board.
293. Restrictions on powers of Board. (1) The Board of directors of a public company, or of a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting,- (a) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking; (b) remit, or give time for the re-payment of, any debt due by a director 2[except in the case of renewal or continuance of an advance made by a banking company to its director in the ordinary course of business]; (c) invest, otherwise than in trust securities, 3 [the amount of compensation received by the company in respect of the compulsory acquisition, after the commencement of this Act], of any such undertaking as is referred to in clause ———————————————————————– 1 Ins. by Act 65 of 1960, s. 98. 2 Ins. by s. 99, ibid. 3 Subs. by s. 99, ibid., for certain words. ———————————————————————– 266 (a),or of any premises or properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time; (d) borrow moneys after the commencement of this Act, where the moneys to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans obtained from the company’s bankers in the ordinary course of business), will exceed the aggregate of the paid-up capital of the company and its free reserves, that is to say, reserves not set apart for any specific purpose; or (e) contribute, after the commencement of this Act, to charitable and other funds not directly relating to the business of the company or the welfare of its employees, any amounts the aggregate of which will, in any financial year, exceed 1[fifty thousand rupees] or five per cent. of its average net profits as determined in accordance with the provisions of sections 349 and 350 during the three financial years immediately preceding, whichever is greater. 2[Explanation I. Every resolution passed by the company in general meeting in relation to the exercise of the power referred to in clause (d) or in clause (e) shall specify the total amount up to which moneys may be borrowed by the Board of directors under clause (d) or as the case may be, the total amount which may be contributed to charitable and other funds in any financial year under clause (e). Explanation II.-The expression “temporary loans” in clause (d) means loans repayable on demand or within six months from the date of the loan such as short term, cash credit arrangements, the discounting of bills and the issue of other short term loans of a seasonal character, but does not include loans raised for the purpose of financing expenditure of a capital nature.] Explanation 3[III].-Where a portion of a financial year of ,he company falls before the commencement of this Act, and a portion falls after such commencement, the latter portion shall be deemed to ———————————————————————— 1 Subs. by Act 46 of 1977, s.6, for the words “twenty-five thousand rupees”. 2 Ins. by Act 65 of 1960, s. 99. 3 Former Explanation I re-numbered as Explanation III by s. 99, ibid. ———————————————————————- 267 be financial year within the meaning, and for the purposes, of clause (e).
(2) Nothing contained in clause (a) of sub-section (1) shall affect- (a) the title of a buyer or other person who buys or takes a lease of any such undertaking as is referred to in that clause, in good faith and after exercising due care and caution: or (b) the selling or leasing of any property of the company where the ordinary business of the company consists of, or comprises, such selling or leasing.
(3) Any resolution passed by the company permitting any
transaction such as is referred to in clause (a) of sub-section(1) may attach such conditions to the permission as may be specified in the resolution, including conditions regarding the use, disposal or inves- tment of the sale proceeds which may result from the transaction : Provided that this sub-section shall not be deemed to authorise the effect any reduction in its capital except in accordance with the provisions contained in that behalf in this Act.
(4) The acceptance by a banking company, in the ordinary course of its business, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise, shall not be deemed to be a borrowing of moneys by the
banking company within the meaning of clause (d) of sub-section (1).
(5) No debt incurred by the company in excess of the limit
imposed by clause (d) of sub-section (1) shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and without knowledge that the limit imposed by that clause had been exceeded. 1[Political contributions 293A Prohibitions and restrictions regarding political contributions. 293A.Prohibitions and restrictions regarding political
contributions. (1) Notwithstanding anything contained in any other provision of this Act,- (a) no Government company; and (b) no other company which has been in existence for less than three financial years, shall contribute any amount or amounts, directly or indirectly,- (i) to any political party; or (ii) for any political purpose to any person.
(2) A company, not being a company referred to in clause (a) or
clause (b) of sub-section (1), may contribute any amount or amounts, directly or indirectly,- (a) to any political party, or (b) for any political purpose to any person: Provided that the amount or, as the case may be, the aggregate of the amounts which may be so contributed by a company in any financial year shall not exceed five per cent. of its average net profits determined in accordance with the provisions of sections 349 and 350 during the three immediately preceding financial years. Explanation.-Where a portion of a financial year of the company falls before, the commencement of the Companies (Amendment) Act, 1985, and a portion falls after such commencement, the latter portion shall be deemed to be a financial year within the meaning, and for the purposes, of this sub-section: Provided further that no such contribution shall be made by a company unless a resolution authorising the making of such contribution is passed at a meeting of the Board of Directors and such resolution shall, subject to the other provisions of this section, be deemed to be justification in law for the making and the acceptance of the contribution authorised by it.
(3) Without prejudice to the generality of the provisions of
sub-sections (1) and (2),- (a) a donation or subscription or payment caused to be given by a company on its behalf or on its account to a person who, to its knowledge, is carrying on any activity which, at the time at which such donation or subscription or payment was given or made, can reasonably be regarded as likely to effect public support for a political party shall also be deemed to be contribution of the amount of such donation, subscription or payment to such person for a political purpose; (b) the amount of expenditure incurred, directly or indirectly, by a company on advertisement in any publication (being a publication in the nature of a souvenir, brochure, tract, pamphlet or the like) by or on behalf of a political party or for its advantage shall also be deemed,- (i) where such publication is by or on behalf of a political party, to be a contribution of such amount to such political party, and (ii) where such publication is not by or on behalf of but for the advantage of a political party, to be a contribution for a political purpose to the person publishing it.
(4) Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any political party or for any political purpose to any person during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party or person to which or to whom such amount has been contributed.
(5) If a company makes any contribution in contravention of the provisions of this section,- (a) the company shall be punishable with fine which may extend to three times the amount so contributed; and (b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.] ———————————————————————- 1 Subs. by Act 35 of 1985, s.2 ———————————————————————– 268 293B Power of Board and other persons to make contributions to the NationalDefence Fund, etc. 1[293B.Power of Board and other persons to make contributions to
the National Defence Fund, etc. (1) The Board of directors of any company or any person or authority exercising the powers of the Board of directors of a company, or of the company in general meeting, may, notwithstanding anything contained in sections 293 and 293A or any other provision of this Act or in the memorandum, articles or any other instrument relating to the company, contribute such amount as it thinks fit to the National Defence Fund or any other Fund approved by the Central Government for the purpose of national defence.
(2) Every company shall disclose in its profits and loss account the total amount or amounts contributed by it to the Fund referred to
in sub-section (1) during the financial year to which the amount relates.] 2[Appointment of sole selling agents
Appointment of sole selling agents to require approval of company ingeneral meeting. 294 Appointment of sole selling agents to require approval of
company in general meeting. (1) No company shall, after the commencement of’ the Companies (Amendment) Act 1960 (65 of 1960), app- oint a sole selling agent for any area for a term exceeding five years at a time: Provided that nothing in this sub-section shall be deemed to prohibit the re-appointment, or the extension of the term of office, of any sole selling agent by further periods not exceeding five years on each occasion.
(2)After the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), the Board of directors of a company shall not appoint a sole selling agent for any area except subject to tie condition that the appointment shall cease to be valid if it is not approved by the company in the first general meeting held after the date on which the appointment is made. (2A) If the company in general meeting as aforesaid disapproves the appointment, it shall cease to be valid with effect from the date of that general meeting.]
(3) Where before the commencement of this Act, a company has appointed a sole selling agent for any area for a period of not less ——————————————————————— 1 Ins. by Act 80 of 1971. s. 2 (w.e.f. 3-12-1971)
2 Subs. by Act 65 of 1960, s. 101, for sub-sections (1) and (2). ———————————————————————— 269 than five years, the appointment shall be placed before the company in general meeting within a period of six months from such commencement; and the company in general meeting may, by resolution,- (a) if the appointment was made on or after the 15th day of February, 1955, terminate the appointment forthwith or with effect from such later date as may be specified in the resolution ; and (b) if the appointment was made before the date specified in clause (a), terminate the appointment with effect from such date as may be specified in the resolution, not being earlier than five years from the date on which the appoint- ment was made, or the expiry of one year from the commencement of this Act, whichever is later.
1[[(4) Notwithstanding anything contained in the foregoing pro visions of this section- (a) where at an time during the period beginning on the 1st day of April, 1956 and ending on the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) a managing agent has ceased to hold office as such and has been appointed as the sole selling agent of the company whose managing agent he was, the sole selling agency agreement whether taken in his own name or in association with, or in the name of, any other person for his benefit or on his own account, shall unless approved by the Central Government within a period of six months from such commencement, become void and inoperative and the appointment as sole selling agent shall, unless it has terminated by efflux of time, come to an end on the expiry of that period; (b) no managing agent- (i) who has ceased to hold office as such before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) but has not been appointed before such commencement as the sole selling agent of the company whose managing agent he was, or (ii) who has ceased to hold office as such after the commencement of the Companies (Amendment) Act, 1960, (63 of 1960.) ———————————————————————– 1 Ins. by Act 65 of 1960, s. 101, ———————————————————————— 270 shall be appointed after such commencement during a period of three years from the date of such cesser as the sole selling agent of the company whose managing agent he was except with the approval of the Central Government obtained in this behalf.
(5) (a) Where a company has a sole selling agent (by whatever name called) for any are and it appears to the Central Government that there is good reason so to do, the Central Government may require the company to furnish to it such information regarding the terms and conditions of the appointment of the sole selling agent as it considers necessary for the purpose of determining whether or not such terms and conditions are prejudicial to the interests of the company; (b) if the company refuses or neglects to furnish any such information, the Central Government may appoint a suitable person on to investigate and report on the terms and conditions of appointment of the sole selling agent; (c) if after perusal of the information furnished by the company or, as the case may be, the report submitted by the person appointed under clause (b), the Central Government is of the opinion that the terms and conditions of appointment of the sole selling agent are prejudicial to the interests of the company, the Central Government may, by order, make such variations in those terms and conditions as would in its opinion make them no longer prejudicial to the interests of the company; (d) as from such date as may be specified by the Central Govern- ment in the order aforesaid, the appointment of the sole selling agent shall be regulated by the terms and conditions as varied by the Central Government.
(6) (a) Where a company has more selling agents than one (by whatever name called) in any area or areas and it appears to the Central Government that there is good reason so to do, the Central Government may require the company to furnish to it such information regarding the terms and conditions of appointment of all the selling agents as it considers necessary for the purpose of determining whether any of those selling agents should be declared to be the sole selling agent for such area or any of such areas; (b) if the company refuses or neglects to furnish any such information, the Central Government may appoint a suitable person to investigate and report on the terms and conditions of appointment of all the selling agents; 271 (c) if after perusal of the information furnished by the company or, as the case may be, the report submitted by the person appointed under clause (b), the Central Government is of the opinion that having regard to the terms and conditions of appointment of any of the selling agents and to any other relevant factors, that selling agent is to all intents and purposes the sole selling agent for such area, although there may be one or more other selling agents of the company operating in that area, the Central Government may by order declare that selling agent to be the sole selling agent of the company for that area with effect from such date as may be specified in the order and may make suitable variations in such of the terms and conditions of appointment of that selling agent as are in the opinion of the Central Government prejudicial to the interests of the company; (d) as from the date specified in clause (c)the appointment of the selling agent declared to be the sole selling agent shall be regulated by the terms and conditions as varied by the Central Government.
(7) It shall be the duty of the company- (a) to produce to the person appointed under clause (b) of
sub-section (5) or clause (b) of sub-section (6), all books and papers of, or relating to, the company which are in its custody or power; and (b) otherwise to give to that person all assistance in connection with the investigation which the company is reasonably able to give.
(8) If a company refuses or neglects- (a) to furnish the information required by the Central
Government under clause (a) of sub-section (5) or clause (a)
of sub-section (6), or (b) to produce to the person appointed under clause (b)
of sub- section (5) or clause (b) of sub-section (6) any books and papers which are in its custody or power or otherwise to give to that person any assistance which it is reasonably able to give, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and with a further fine of not less than fifty rupees for every day after the first during which such refusal or neglect continues.] 272 294A Prohibition of payment of compensation to sole selling agents forloss of office in certain cases. 1[294A. Prohibition of payment of compensation to sole selling
agents for loss of office in certain cases. (1) A company shall not pay or be liable to pay to its sole selling agent any compensation for the loss of his office in the following cases :- (a) where the appointment of the sole selling agent ceases to be valid by virtue of sub-section (2A) of section 294; (b) where the sole selling agent resigns his office in view of the reconstruction of the company or of its amalgamation with any other body corporate or bodies corporate and is appointed as the sole selling agent of the reconstructed company or of the body corporate resulting from the amalgamation; (c) where the sole selling agent resigns his office, otherwise than on the reconstruction of, the company or its amalgamation as aforesaid; (d) where the sole selling agent has been guilty of fraud or breach of trust in relation to, or of gross negligence in, the conduct of his duty as the sole selling agent; (e) where the sole selling agent has instigated, or has taken part directly or indirectly in bringing about, the termination of the sole selling agency.
(2) The compensation which may be paid by a company to its sole selling agent for loss of office shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term, or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which his office ceased or was terminated, or where he held his office for a lesser period than three years, during such period.] 294A Power of Central Government to prohibit the appointment of soleselling agents in certain cases. 2[294AA. Power of Central Government to prohibit the appointment
of sole selling agents in certain cases. (1) Where the Central Government is of opinion that the demand for goods of any category, to be specified by that Government, is substantially in excess of the production or supply of such goods and that the services of sole selling agents will not be necessary to create a market for such goods, the Central Government may, by notification in the Official Gazette, declare that sole selling agents shall not be appointed by a company for the sale of such goods for such period as may be specified in the declaration. ———————————————————————– 1 Ins. by Act 31 of 1965, s. 40 (w.e.f. 15-10-1965). 2 Ins. by Act 41 of 1974, s. 27 (w.e.f. 1-2-1975). ———————————————————————- 273
(2) No company shall appoint any individual, firm or body cor- porate, who or which has a substantial interest in the company, as sole selling agent of that company unless such appointment has been previously approved by the Central Government.
(3) No company having a paid-up share capital of rupees fifty lakhs or more shall appoint a sole selling agent except with the con- sent of the company accorded by a special resolution and the approval of the Central Government.
(4) The provisions of sub-sections (5), (6) and (7) of section 294 shall, so far as may be, apply to the sole selling, or the sole purchasing or buying, agents of a company.
(5) A company seeking approval under this section shall furnish such particulars as may be prescribed.
(6) Where an appointment has been made of a sole selling agent by a company before the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) and the appointment is such that it could not have been made except on the authority of a special resolution passed by the company and the approval of the Central Government, if sub-section
(2), sub-section (3) and sub-section (8), were in force at the time of such appointment, the company shall obtain s authority and approval within six months from such commencement. and if such authority and approval are not so obtained, the appointment of the sole selling agent shall stand terminated on the expiry of six months from such commencement.
(7) If the company in general meeting disapproves the appoint-
ment referred to in sub-section (3), such appointment shall, not-
withstanding anything contained in sub-section (6), cease to have effect from the date of the general meeting.
(8) The provisions of this section except those of sub-section
(1), shall apply so far as may be to the appointment by a company of a sole agent for the buying or purchasing of goods on behalf the company. Explanation.- In this section,- (a) “appointment” includes “re-appointment”, 274 (b) “substantial interest”- (i) in relation to an individual, means the beneficial interest held by such individual or any of his relatives, whether singly or taken together, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent. of the paid up share capital of the company, whichever is the lesser; (ii) in relation to a firm, means the beneficial inte- rest held by one or more partners of the firm or any relative of such partner, whether singly or taken toge- ther, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent. of the paid-up share capital of the company whichever is the lesser; (iii) in relation to a body corporate, means the beneficial interest held by such body corporate or one or more of its directors or any relative of such director, whether singly or taken together, in the shares of the company, the aggregate amount paid-up on which exceeds five lakhs of rupees or five per cent. of the paid up share capital of the company, whichever is the lesser.]
Loans to directors, etc.
295.Loans to directors, etc. (1) Save as otherwise provided in
sub-section (2), no company (hereinafter in this section referred to as “the lending company”) 1[without obtaining the previous approval of the Central Government in that behalf shall directly or indirectly,] make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by,- (a) any director of the lending company or of a company which is its holding company or any partner or relative of any such director; ———————————————————————- 1 Subs. by Act 65 of 1960, s. 102, for certain words. ———————————————————————- 274A (b) any firm in which any such director or relative is a partner; (c) any private company of which any such director is a director or member; (d) any body corporate at a general meeting of which not less than twenty-five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such directors together; or (e) any body corporate, the Board of directors, managing director, managing agent, secretaries and treasurers, or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.
1[(2) Sub-section (1) shall not apply to- (a) any loan made, guarantee given or security provided- (i) by a private company unless it is a subsidiary of a public company, or (ii) by a banking company; (b) any loan made- (i) by a holding company to its subsidiary,or (ii) by a company which is the managing agent or secretaries and treasurers of another company to that other company; (c) any guaranty given or security provided- (i) by a holding company in respect of any loan made to its subsidiary, or (ii) by a company which is the managing agent or secretaries and treasurers of another company in respect of any loan made to that other company.]
(3) Where any loan made, guarantee given or security provided by a lending company and outstanding at the commencement of this Act could not have been made, given or provided, without the previous approval of the Central Government, if this section had then been in force, the lending company shall, within six months from the commencement of this Act or such further time not exceeding six months as the Central Government may grant for that, purpose, ——————————————————————–
1 Subs. by Act 65 of 1960, s.102, for sub-section (2). ——————————————————————— 274B either obtain the approval of the Central Government to the trans- action or enforce the repayment of the loan made, or in connection with which the guarantee was given or the security was provided, notwithstanding any agreement to the contrary.
(4) Every person who is knowingly a party to any contravention
of sub-section (1) or (3), including in particular any person to whom the loan is made or who has taken the loan in respect of which the guarantee is given or the security is provided, shall be punishable either with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months: Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been repaid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.
(5) All persons who are knowingly parties to any contravention
of sub-section (1) or (3) shall be liable, jointly and severally, to the lending company for the repayment of the loan or for making good the sum which the lending company may have been called upon the pay in virtue of the guarantee given or the security provided by such company.
(6) No officer of the lending company or of the borrowing body
corporate shall be punishable under sub-section (4) or shall incur the
liability referred to in sub-section (5) in respect of any loan made, guarantee given or security provided 1[after the 1st day of April
1956] in contravention of clause (d) or (e) of sub-section (1), unless at the time when the loan was made, the guarantee was given or the security was provided by the lending company, he knew or had express notice that that clause was being contravened thereby.
Application of section 295 to book debts in certain cases. 2[296.Application of section 295 to book debts in certain cases. Section 295 shall apply to any transaction represented by a book debt which was from its inception in the nature of a loan or an advance.] ———————————————————————– 1 Ins. by Act 65 of 1960, S. 102. 2 Subs. by s. 103, ibid., for s. 296. ———————————————————————– 274C
Board’s sanction to be required for certain contracts in whichparticular directors are interested. 297.Board’s sanction to be required for certain contracts in
which particular directors are interested. (1) Except with the consent of the Board of directors of a company, a director of the company or his relative, a firm in which such a director or relative is a partner, any other partner in such a firm, or a private company of which the director is a member or director, shall not enter into any contract with the company- (a) for the sale, purchase or supply of any goods, materials or services; or (b) after the commencement of this Act, for underwriting the subscription of any shares in, or debentures of, the company: 1 [Provided that in the case of a company having a paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government.]
2[(2) Nothing contained in clause (a) of sub-section (1) shall affect- (a) the purchase of goods and materials from the company or the sale of goods and materials to the company, by any director, relative, firm, partner or private company as aforesaid for cash at prevailing market prices; or (b) any contract or contracts between the company on one side and any such director, relative, firm, partner or private company on the other for sale, purchase or supply of an goods, materials and services in which either the company, or the director, relative, firm, partner or private company, as the case may be, regularly trades or does business : Provided that such contract or contracts do not relate to goods and materials the value of which, or services the cost which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts; or (c) in the case of a banking or insurance company any tran- saction in the ordinary course of business of such ———————————————————————– 1 Ins. Act 41 of 1974, s. 28 (w.e.f.1-2-1975).
2 Subs. by Act 65 of 1960, s. 104, for subsection (2) to (5). ——————————————————————— 275 company with any director, relative, firm, partner or private company as aforesaid.
(3) Notwithstanding anything contained in sub-sections (1) and
(2), a director, relative, firm, partner or private company as aforesaid may, in circumstances of urgent necessity, enter, without obtaining the consent of the Board, into any contract with the company for the sale, purchase or supply of any goods, materials or services even if the value of such goods or cost of such services exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract ; but in, such a case, the consent of the Board shall be obtained at a meeting within three months of the date on which the contract was entered into.
(4) Every consent of the Board required under this section shall be accorded by a resolution passed at a meeting of the Board and not
otherwise; and the consent of the Board required under sub-section (1) shall not be deemed to have been given within the meaning of that sub- section unless the consent is accorded before the contract is entered into within three months of the date on which if was entered into.
(5) If consent is not accorded to any contract under this section, anything done in pursuance of the contract shall be voidable at the option of the Board.
(6) Nothing in this section shall apply to any case where the consent has been accorded to the contract before the commencement of the Companies Amendment) Act 1960.] (65 of 1960.)
Power of directors to carry on business when managing agent orsecretaries and treasurers are deemed to have vacated office, etc. 298.Power of directors to carry on business when managing agent or secretaries and treasurers are deemed to have vacated office, etc. Where in pursuance of any provisions contained in this Act, the managing agent or secretaries and treasurers of a company are deemed to have vacated or to have been suspended from office, or are removed or suspended from office, or cease to act or to be entitled to act as managing agent or secretaries and treasurers, or where a permanent or temporary vacancy has otherwise occurred in the office of managing agent or secretaries and treasurers, then 1* * * the Board of directors shall have power to carry on, or arrange for the carrying on of, the affairs of the company until the managing agent or secretaries and treasurers again become entitled to act as such, or until the company in general meeting resolves otherwise. ——————————————————————— 1 The words “notwithstanding anything contained in this Act” omitted by Act 65 of 1960, s. 105. ———————————————————————- 276 Procedure, etc., where Director interested
Disclosure of interests by director.
299.Disclosure of interests by director. (1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board of directors.
(2) (a) In the case of a proposed contract or arrangement,the
disclosure required to be made by a director under sub-section (1) shall be made at-the meeting of the Board at which the question of entering into the contract or arrangement is first taken into consideration, or if the director was not, at the date of that meeting, concerned or interested in the proposed contract or arrangement, at the first meeting of the Board held after he becomes so concerned or interested. (b) In the case of any other contract or arrangement, the required disclosure shall be made at the first meeting of the Board held after the director becomes concerned or interested in the contract or arrangement.
(3)(a) For the purposes of sub-sections (1) and (2), a general notice given to the Board by a director, to the effect that he is a director or a member of a specified body corporate or is a member of a specified firm and is to be regarded as concerned or interested in any contract or arrangement which may, after the date of the notice, be entered into with that body corporate or firm, shall be deemed to be a sufficient disclosure of concern or interest in relation to any contract or arrangement so made. (b) Any such general notice shall expire at the end of the financial year in which it is given, but may be renewed for further periods of one financial year at a time, by a fresh notice given in the last month of the financial year in which it would otherwise expire. (c) No such general notice, and no renewal thereof, shall be of effect unless either it is given at a meeting of the Board, or the director concerned takes reasonable steps to secure that it is brought upon and read at the first meeting of the Board after it is given.
(4) Every director who fails to comply with sub-section (1) or
(2) shall be punishable with fine which may extend to five thousand rupees. 277
(5) Nothing in this section shall be taken to prejudice the operation of any rule of law restricting a director of a company from having any concern or interest in any contracts or arrangements with the company.
1[(6) Nothing in this section shall apply to any contract or arrangement entered into or to be entered into between two companies where any of the directors of the one company or two or more of them together holds or hold not more than two per cent. of the paid-up share capital in the other company.]
Interested director not to participate or vote in Board’s proceedings. 300.Interested director not to participate or vote in Board’s
proceedings. (1) No director of a company shall, as a director, take any part in the discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement ; nor shall his presence count for the purpose oF forming a quorum at the time of any such discussion or vote ; and if he does vote, his vote shall be void.
(2) Sub-section (1) shall not apply to- (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) a private company which is a subsidiary of a public company, in respect of any contract or arrangement entered into or to be entered into, by the private company with the holding company thereof ; (c) any contract of indemnity against any loss which the directors, or any one or more of them, may suffer by reason of becoming or being sureties or a surety for the company; (d) any contract or arrangement entered into or to be entered into with a public company, or a private company which is a subsidiary of a public company, in which the interest of the director aforesaid 2[consists solely- (i) in his being a director of such company and the holder of not more than shares of such number or value therein as is requisite to qualify him for appointment as a director thereof, he having been nominated as such ———————————————————————– 1 Ins. by Act 65 of 1960, s. 106. 2 Subs. by s. 107, ibid., for certain words. ———————————————————————– 278 .lm15
director by the company referred to in sub-section (1), or (ii) in his being a member holding not more than two per cent. of its paid-up share capital.] (e) a public company, or a private company which is a subsidiary of a public company, in respect of which a noti-
fication is issued under sub-section (3), to the extent specified in the notification.
(3) In the case of a public company or a private company which is a subsidiary of a public company, if the Central Government is of opinion that having, regard to the desirability of establishing or promoting any industry, business or trade, it would not be in the public interest to apply all or any of the prohibitions contained in
sub-section (1) to the company, the Central Government may, by notification in the Official Gazette, direct that that sub-section shall not apply to such company , or shall apply thereto subject to such exceptions, modifications and conditions as may be specified in the notification.
(4) Every director who knowingly contravenes the provisions of this section shall be punishable with fine which may extend to five thousand rupees.
Register of contracts, companies and firms in which directors areinterested. 301.Register of contracts, companies and firms in which directors
are interested. 1[(1) Every company shall keep one or more registers in which shall be entered separately particulars of all contracts or arrangements to which section 297 or section 299 applies, including the following particulars to the extent they are applicable in each case, namely: – (a) the date of the contract or arrangement; (b) the names of the parties thereto; (c) the principal terms and conditions thereof; (d) in the case of a contract to which section 297 applies or in the case of a contract or arrangement to which sub-
section (2) of section 299 applies, the date on which it was placed before the Board; (e) the names of the directors voting for and against the contract or arrangement and the names of those remaining neutral. ———————————————————————
1 Subs. by Act 65 of 1960, s. 108, for sub-section (1), (2) and (3). ——————————————————————— 279
(2) Particulars of every such contract or arrangement to which
section 297 or, as the case may be, sub-section (2) of section 299 applies, shall be entered in the relevant register aforesaid- (a) in the case of a contract or arrangement requiring the Board’s approval, within seven days (exclusive of public holidays) of the meeting of the Board at which the contract or arrangement is approved, (b) in the case of any other contract or arrangement, within seven days of the receipt at the registered office of the company of the particulars of such other contract or arrangement or within thirty days of the date of such other contract or arrangement whichever is later; and the register shall be placed before the next meeting of the Board and shall then be signed by all the directors present at the meeting.
(3) The register aforesaid shall also specify, in relation to each director of the company, the names of the firms and bodies corporate of which notice has been given by him under sub-section
(3) of section 299.
(3A) Nothing in sub-sections (1), (2) and (3) shall apply- (a) to any contract or arrangement for the sale, purchase or supply of any goods, materials or services if the value of such goods and materials or the cost of such services does not exceed one thousand rupees in the aggregate in any year; or (b) to any contract or arrangement (to which section 297 or, as the case may be, section 299 applies) by a banking company for the collection of bills in the ordinary course of its business or to any transaction referred to in clause
(c) of sub- section (2) of section 297.]
(4) If default is made in complying with the provisions of sub-
section (1), (2) or (3), the company, and every officer of the company who is in default, shall, in respect of each default, be punishable with fine which may extend to five hundred rupees.
(5) The register aforesaid shall be kept at the registered office of the company ; and it shall be open to inspection at such office and extracts may be taken therefrom and copies thereof may be required, by any member of the company to the same extent, in the same manner, and on payment of the same fee, as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly. 280
Disclosure to members of director’s interest in contract appointingmanager, managing director, managing agent or secretaries andtreasurers. 302.Disclosure to members of director’s interest in contract appointing manager, managing director, managing agent or secretaries
and treasurers. (1) Where a company- (a) enters into a contract for the appointment of a manager of the company, in which contract any director of the company is in any way, whether directly or indirectly, concerned or interested; or (b) varies any such contract already in existence and in which a director is concerned or interested as aforesaid; the company shall, within twenty-one days from the date of entering into the contract or of the varying of the contract, as the case may be, send to every member of the company an abstract of the terms of the contract or variation, together with a memorandum clearly specifying the nature of the concern or interest of the director in such contract or variation.
(2) Where a company enters into a contract for the appointment of a managing director of the company, or varies any such contract which is already in existence, the company shall send an abstract of the terms of the contract or variation to every member of the company
within the time specified in sub-section (1); and if any other director of the company is concerned or interested in the contract or variation, a memorandum clearly specifying the nature of the concern or interest of such other director in the contract or variation shall also be sent to every member of the company with the abstract aforesaid.
(3) Where a company proposes to enter into a contract for the appointment of a managing agent or of secretaries and treasurers, in which contract any director of the company is concerned or interested as aforesaid, or proposes to vary any such contract already in existence in which a director is concerned or interested as afore- said, the company shall send the abstract and memorandum referred to
in sub-section (2) to every member of the company, in sufficient time before the general meeting of the company at which the proposal is to be considered.
(4) Where a director becomes concerned or interested as afore-
said in any such contract as is referred to in sub-section (1), (2)
or (3) after it is made, the abstract and the memorandum, if any, referred to in the said sub-section shall be sent to every member of the company within twenty-one days from the date on which the director becomes so concerned or interested.
(5) If default is made in complying with the foregoing provisions of this section, the company, and every officer of the company who 281 is in default, shall be punishable with fine which may extend to one thousand rupees.
(6) All contracts entered into by a company for the appointment of a manager, managing director, managing agent or secretaries and treasurers, shall be kept at the registered office of the company ; and shall be open to the inspection of any member of the company at such office ; and extracts may be taken therefrom and copies thereof may be required by any such member, to the same extent, in the same manner and on payment of the same fee, as in the case of the register of members of the company ; and the provisions of section 163 shall apply accordingly.
(7) The provisions of this section shall apply in relation to any resolution 1* * * of the Board of directors of a company appoint- ing, a manager or a managing or whole-time director, or varying any previous contract or resolution of the company relating to the appointment of a manager or a managing or whole time director, as they apply in relation to any contract 2* * * for the like purpose. Register of Directors, etc.
Register of directors, managing agents, secretaries and treasurers,etc. 303.Register of directors, managing agents, secretaries and
treasurers, etc. (1) Every company shall keep at its registered office a register of its directors, managing director, managing agent, secretaries and treasurers, manager and secretary, containing with respect to each of them the following particulars, that is to say :- (a) in the case of an individual, his present name and surname in full; any former name or surname in full; 3[his father’s name and surname in full or where the individual is a married woman, the husband’s name and surname in full] his usual residential address; his nationality ; and, if that nationality is not the nationality of origin, his nationality of origin ; his business occupation, if any; if he holds the office of director, managing director, managing agent, manager or secretary in any other body, corporate, the particulars of each such office held by him ; and except in the case of a private company which is not a subsidiary of a public company, the date of his birth; (b) in the case of a body corporate, its corporate name and registered or principal office ; and the full name, address, ———————————————————————- 1 The words ” or proposed resolution” omitted by Act 65 of 1960, s. 109. 2 The words “or proposed contract” omitted by s. 109, ibid. 3 Ins. by s. 110 ibid. ———————————————————————- 282 nationality, and nationality of origin,if different from that nationality 1[the father’s name or where a director is a married woman, the husband’s name] of each of its directors; and if it holds the office of managing agent, secretaries and treasurers, manager or secretary in any other body corporate, the particulars of each such office ; (c) in the case of a firm, the name of the firm, the full name, address, nationality, and nationality of origin, if different from that nationality 1[the father’s name or where a partner is a married woman, the husband’s name] of each partner; and the date on which each became a partner; and if the, firm holds the office of managing agent, secretaries and treasurers, manager or secretary in any other body corporate, the particulars of each such office; (d) if any director or directors have been nominated by a body corporate, its corporate name ; all the particulars referred to in clause (a) in respect of each director so nominated, and also all the particulars referred to in clause (b) in respect of the body corporate; (e) if any director or directors have been nominated by a firm, the name of the firm, all the particulars referred to in clause (a) in respect of each director so nominated, and also all the particulars referred to in clause (c) in respect of the firm. Explanation.-For the purposes of this sub-section-
(1) any person in accordance with 2 [whose directions or instructions], the Board of directors of a company is accustomed to act shall be deemed to be a director of the company;
(2) in the case of a person usually known by a title different from his surname, the expression ” surname” means that title ; and
(3) references to a former name or surname do not include- (i) in the case of a person usually known by an Indian title different from his surname, the name by ———————————————————————– 1 Ins. by Act 65 of 1960, s. 110. 2 Subs. by s. 110, ibid. for “whose instructions”. ———————————————————————– 283 which he was known previous to the adoption of, or .succession to, the title; (ii) in the case of any person, a former name or sur- name, where that name or surname was changed or disused before the person bearing the name attained the age of eighteen years, or has been changed or disused for a period of not less than twenty years ; and (iii) in the case of a married woman, the name or surname by which she was known previous to the marriage.
(2) The company shall, within the periods respectively mentioned in this sub-section, send to the Registrar 1[a return in duplicate in the prescribed form] containing the particulars specified in the said register and 2 [a notification in duplicate in the prescribed form] of any change among its directors, managing directors, managing agents, secretaries 3* * * and treasurers, managers or secretaries specifying the date of the change. The period within which the said return is to be sent shall be a period of 4[thirty] days from the appointment of the first directors of the company and the period within which the said notification of a change is to be sent shall be 4 [thirty] days from the happening thereof: 5* * * * *
(3)If default is made in complying with sub-section (1) or (2),the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.
Inspection of the register.
304.Inspection of the register. (1) The register kept under section 303 shall be open to the inspection of any member of the company without charge and of any other person on payment of one rupee for each inspection during business hours subject to such reasonable restrictions as the company may by its articles or in general meeting impose, so that not less than two hours in each day are allowed for inspection. ———————————————————————- 1 Subs. by Act 65 of 1960, s. 110, for ” a return in the prescribed form”. 2 Subs. by s.110, ibid for “a notification in the prescribed form” 3 The words ” or in any of the particulars contained in the register ” omitted by Act 31 of 1965, s. 41 (w.e.f. 15-10-1965). 4 Subs. by s. 62 and Sch., ibid., for “twenty-eight” (w.e.f. 15- 10-1965). 5 Proviso omitted by s. 41, ibid. (w.e.f. 15-10-1965). ———————————————————————— 284
(2) If any inspection required under sub-section (1) is refused,- (a) the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees ; and (b) the 1[Company Law Board] may, by order, compel an immediate inspection of the register.
Duty of directors. etc., to make disclosure.
2[305.Duty of directors. etc., to make disclosure. (1) Every director, managing director, managing agent, secretaries and treasurers, manager or secretary of any company, who is appointed to, or relinquishes, the office of director, managing director, managing agent, secretaries and treasurers, manager or secretary of any other body corporate, shall, within twenty days of his appointment to, or as the case may be, relinquishment of, such office, disclose to the company aforesaid the particulars relating to the office in the other
body corporate which are required to be specified under sub-section (1) of section 303 ; and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees.
(2) The provisions of sub-section (1) shall also apply to a person deemed to be a director of the company by virtue of the
Explanation to sub-section (1) of section 303 when such person is appointed to, or relinquishes, any of the offices in the other body
corporate referred to in sub-section (1).]
Register to be kept by Registrar and inspection thereof.
306.Register to be kept by Registrar and inspection thereof. (1) The Registrar shall keep a separate register or registers in which there shall be entered the particulars received by him under sub-
section (2) of section 303 in respect of companies, so however that all entries in respect of each such company shall be together.
(2) The register or registers aforesaid shall be open to inspection by any member of the public at any time during office hours, on payment of the prescribed fee. Register of Directors’ Shareholdings
Register of directors’, share holdings, etc.
307.Register of directors’, share holdings, etc. (1) Every company shall keep a register showing, as respects each director of the company, the number, description and amount of any shares in, or debentures of, the company or any other body corporate, being the company’s subsidiary or holding company, or a subsidiary of the company’s holding company, which are held by him or in trust for him, or of Which he has any right to become the holder whether on payment or not. ——————————————————————— 1 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31.5.1991). 2 Subs. by Act 65 of 1960, s. 111, for s. 305. ———————————————————————- 285
(2) Where any shares or debentures have to be recorded in the said register or to be omitted therefrom, in relation to any director, by reason of a transaction entered into after the commencement of, this Act and while he is a director, the register shall also show the date of, and the price or other consideration for, the transaction: Provided that where there is an interval between the agreement for any such transaction and the completion thereof, the date so shown shall be that of the agreement.
(3) The nature and extent of any interest or right in or over any shares or debentures recorded in relation to a director in the said register shall, if he so requires, be indicated in the register.
(4) The company shall not, by virtue of anything done for the purposes of this section, be affected with notice of, or be put upon inquiry as to, the rights of any person in relation to any shares or debentures.
(5) The said register shall, subject to the provisions of this section, be kept at the registered office of the company, and shall be open to inspection during business hours (subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose, so that not less than two hours in each day are allowed for inspection) as follows:- (a) during the period beginning fourteen days before the date of the company’s annual general meeting and ending three days after the date of its conclusion, it shall be open to the inspection of any member or holder of debentures of the company; and (b) during that or any other period, it shall be open to the inspection of any person acting on behalf of the Central Government or of the Registrar. In computing the fourteen days and the three days mentioned in this sub-section, any day which is a Saturday, a Sunday or a public holiday shall be disregarded.
(6) Without prejudice to the rights conferred by sub-section
(5), the Central Government or the Registrar may, at any time require a copy of the said register, or any part thereof.
(7) The said register shall also be produced at the commencement of every annual general meeting of the company and shall remain open and accessible during the continuance of the meeting to any person having the right to attend the meeting. 286 If default is made in complying with this sub-section the company, and every officer of the company who is in default, shall be punish- able with fine which may extend to five hundred rupees.
(8)If default is made in complying with sub-section(1) or (2), or if any inspection required under this section is refused, or if any copy required thereunder is not sent within a reasonable time, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees and also with a further fine which may extend to twenty rupees for every day during which the default continues.
(9) In the case of any such refusal, the 1[Company Law Board] may also, by order, compel an immediate inspection of the register.
(10) For the purposes of this section- (a) any person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act, shall be deemed to be a director of the company ; and (b) a director of a company shall be deemed to hold, or to have an interest or a right in or over, any shares or debentures, if a body corporate other than the company holds them or has that interest or right in or over them, and either- (i) that body corporate or its Board of directors is accustomed to act in accordance with his directions or instructions; or (ii) he is entitled to exercise or control the exercise of one-third or more of the total voting power exercis- able at any general meeting of that body corporate.
2[(11) The provisions of this section and section 308 shall apply to managing agents, secretaries and treasurers and managers as they apply to directors.]
Duty of directors and persons deemed to be directors to makedisclosure of share holdings. 308.Duty of directors and persons deemed to be directors to make
disclosure of share holdings. (1) Every director of a company, and every person deemed to be a director of the company by virtue of sub-
section (10) of section 307, shall give notice to the company of such matters relating to himself as may be necessary for the purpose of enabling the company to comply with the provisions of that section.
(2) Any such notice shall be given in writing, and if it is not given at a meeting of the Board, the person giving the notice shall ———————————————————————- 1 Subs. by Act 31 of 1988, s. 67 (w.e.f. 31-5-1991). 2 Ins. by Act 65 of 1960, s.112. ——————————————————————— 287 take all reasonable steps to secure that it is brought up and read at the meeting of the Board next after it is given.
(3) Any person who fails to comply with sub-section (1) or (2) shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both. Remuneration of Directors
Remuneration of directors.
309.Remuneration of directors. (1) The remuneration payable to the directors of a company, including any managing or whole-time director, shall be determined, in accordance with and subject to the provisions of section 198 and this section, either by the articles of the company, or by a resolution or, if the articles so require, by a special resolution, passed by the company in general meeting 1[and the remuneration payable to any such director determined as aforesaid shall be inclusive of the remuneration payable to such director for services rendered by him in any other capacity: Provided that any remuneration for services rendered by any such director in any other capacity shall not be so included if- (a) the services rendered are of a professional nature, and (b) in the opinion of the Central Government, the director possesses the requisite qualifications for the practice of, the profession].
2[(2) A director may receive remuneration by way of a fee for each meeting of the Board, or a committee thereof, attended by him: Provided that where immediately before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) fees for meetings of the Board and any committee thereof, attended by a director are paid on a monthly basis, such fees may continue to be paid on that basis for a period of two years after such commencement or for the remainder of the term of office of such director, whichever is less, but no longer.
(3) A director who is either in the whole-time employment of the company or a managing director may be paid remuneration either by way of a monthly payment or at a specified percentage of the net profits of the company or partly by one way and partly by the other: Provided that except with the approval of the Central Government such remuneration shall not exceed five per cent. of the net profits ———————————————————————- 1 Ins. by Act 31 of 1965, s. 42 (w.e.f. 15-10-1965).
2 Subs. by Act 65 of 1960, s. 113, for sub-sections (2) and (3). ———————————————————————– 288 for one such director, and if there is more than one such director, ten per cent. for all of them together.]
1[(4) A director who is neither in the whole-time employment of the company nor a managing director may be paid remuneration- either (a) by way of a monthly, quarterly or annual payment with the approval of the Central Government; or (b) by way of commission if the company by special resolution authorises such payment: Provided that the remuneration paid to such director, or where there is more than one such director, to all of them together, shall not exceed- (i) one per cent. of the net profits of the company, if the company has a managing or whole-time director, a managing agent or secretaries and treasurers or a manager; (ii) three per cent. of the net profits of the company, in any other case: Provided further that the company in general meeting may, with the approval of the Central Government, authorise the payment of such remuneration at a rate exceeding one per cent. or, as the case may be, three per cent of its net profits.]
(5) The net profits referred to in sub-sections (3) and (4) shall be computed in the manner referred to in section 198, sub-
section (1). 2[(5A) If any director draws or receives, directly or indirectly, by way of remuneration any such sums in excess of the limit prescribed by this section or without the prior sanction of the Central Government, where it is required, he shall refund such sums to the company and until such sum is refunded, hold it in trust for the company. (5B) The company shall not waive the recovery of any sum refund- able to it under sub-section (5A) unless permitted by the Central Government.]
(6) No director of a company who is in receipt of any commission from the company and who is either in the whole-time employment ———————————————————————-
1 Subs. by Act 31 of 1965, s. 42, for sub-section (4) (w.e.f. 15- 10-1965). 2 Ins. by Act 65 of 1960, S. 113. ———————————————————————- 289 of the company or a managing director shall be entitled to receive any commission or other remuneration from any subsidiary of such company.
(7) The special resolution referred to in sub-section (4) shall not remain in force for a period of more than five years; but may be renewed, from time to time, by special resolution for further periods of not more than five years at a time: Provided that no renewal shall be effected earlier than one year from the date on which it is to come into force.
(8) The provisions of this section shall come into force imme- diately on the commencement of this Act or, where such commencement does not coincide with the end of a financial year of the company, with effect from the expiry of the financial year immediately succeeding such commencement.
(9) The provisions of this section shall not apply to a private company unless it is a subsidiary of a public company.
Provision for increase in remuneration to require Government sanction. 310.Provision for increase in remuneration to require Government sanction. 1[In the case of a public company, or a private company which is a subsidiary of a public company, any provision relating to the remuneration of any director including a managing or wholetime director, or any amendment thereof, which purports to increase or has the effect of increasing, whether directly or indirectly, the amount thereof, whether that provision be contained in the company’s memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or by its Board of director, 2[shall not have any effect– (a) in case where Schedule XIII is applicable, unless such increase is in accordance with the conditions specified in that Schedule; and (b) in any other case, unless it is approved by the Central Government.] and the amendment shall become void if, and in so far as, it is disapproved by that Government.] 3[Provided that the approval of the Central Government shall not be required where any such provision or any amendment thereof purports to increase, or has the effect of increasing, the amount of such remuneration only by way of a fee for each meeting of the Board or a committee thereof attended by any such director and the amount of such fee after such increase does not exceed 2[such sum as may be prescri- bed: 4 [Provided further that where in the case of any private company which converts itself into a public company or becomes a public company under the provisions of section 43A, any provisions relating to the remuneration of any director including a managing or whole- time director as contained in its memorandum or articles or in any agreement entered into by it or in any resolution passed by it in general meeting or by its Board of directors includes a provisions for the payment of fee for each meeting of the Board or a Committee thereof attended by any such director which is in excess of the sum specified under the first proviso, such provision shall be deemed to be an increase in the remuneration of such director and shall not, after it ceases to be a private company, or as the case may be, becomes a public company, have any effect unless approved by the Central Government.] ———————————————————————– 1 Subs. by Act 65 of 1960, s. 114, for certain words. 2 Subs. by Act 31 of 1988, s.47 (w.e.f. 15-6-1988). 3 Added by Act 31 of 1965, s. 43 (w.e.f. 15-10-1965). 4 Ins. by Act 31 of 1988, s. 47 (w.e.f. 15.6.1988). ———————————————————————- 290
Increase in remuneration of managing director on re-appointment orappointment after Act to require Government sanction. 311.Increase in remuneration of managing director on re- appointment or appointment after Act to require Government sanction. In the case of a public company, or a private company which is a subsidiary of a public company, if the terms of any re-appointment or appointment of a managing or whole-time director, made after the commencement of this Act, purport to increase or have the effect of increasing, whether directly or indirectly, the remuneration which the managing or whole-time director or the previous managing or whole-time director, as the case may be, was receiving immediately before such re-appointment or appointment, the re-appointment or appointment 1[shall not have any effect– (a) in cases where Schedule XIII is applicable, unless such increase is in accordance with the conditions specified in that Schedule; and (b) in any other case, unless it is approved by the Central Government;] and shall become void if, and in so far as, it is disapproved by that Government. Miscellaneous Provisions
Prohibition of assignment of office by directors. 312. Prohibition of assignment of office by directors. Any assignment of his office made after the commencement of this Act by any director of a company shall be void.
Appointment and term of office of alternate directors.
313.Appointment and term of office of alternate directors. (1) The Board of directors of a company may. it so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called “the original director”) during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.
2[(2) An alternate director appointed under sub-section (1) shall not hold office as such for a period longer than that permissible to the original director in whose place he has been appointed and shall vacate office if and when the original director returns to the State in which meetings of the Board are ordinarily held.]
(3) If the term of office of the original director is determined before he so returns to the State aforesaid, any provision for the automatic re-appointment of retiring directors in default of another appointment shall apply to the original, and not to the alternate, director. ——————————————————————- 1 Subs. by Act 31 of 1988, s. 48 (w.e.f. 15.6.1988).
2 Subs. by Act 65 of 1960, s. 115, for sub-section(2). ——————————————————————— 291
Director, etc., not to hold office or place of profit.
314.Director, etc., not to hold office or place of profit. 1[(1) Except with the 2[consent] of the company accorded by a special resolution,- (a) no director of a company shall hold any office or place of profit, and (b) 3[no partner or relative of such a director, no firm in which such director, or a relative of such director, is a partner, no private company of which such director is a director or member, and no director or manager of such a private company, shall hold any office or place of profit carrying a total monthly remuneration of 4[such sum as may be prescribed], except that of managing director or manager,] banker or trustee for the holders of debentures of the company,- (i) under the company; or (ii) under any subsidiary of the company, unless the remuneration received from such subsidiary in respect of such office or place of profit is paid over to the company or its holding company: 5[Provided that it shall be sufficient if the special resolution according the consent of the company is passed at the general meeting of the company held for the first time after the holding of such office or place of profit: Provided further that where a relative of a director or a firm in which such relative is a partner, is appointed to an office or place of profit under the company or a subsidiary thereof without the knowledge of the director, the consent of the company may be obtained either in the general meeting aforesaid or within three months from the date of the appointment, whichever is later.] Explanation.-For the purpose of this sub-section, a special reso- lution according consent shall be necessary for every appointment in the first instance to an office or place of profit and to every subse- quent appointment to such office or place of profit on a higher ———————————————————————-
1 Subs. by Act 65 of 1960, s. 116, for sub-section (1). 2 Subs. by Act 31 of 1965, s. 44, for “previous consent” (w.e.f. 15-10-1965). 3 Subs, by Act 41 of 1974, s. 29, for certain words (w.e.f. 1-2- 1975). 4 Subs. by Act 31 of 1988, s. 49 (w.e.f. 15.6.1988). 5 Subs. by Act 31 of 1965, s. 44, for proviso (w.e.f. 15-10- 1965). ———————————————————————- 292 remuneration not covered by the special resolution, except where an appointment on a time scale has already been approved, by the special resolution.
(1A) Nothing in sub-section (1) shall apply where a relative of a director or a firm in which such relative is a partner holds any office or place of profit under the company or a subsidiary thereof having been appointed to such office or place before such director becomes a director of the company.]
1[(1B) Notwithstanding anything contained in subsection (1),– (a) no partner or relative of a director or manager, (b) no firm in which such director or manager, or, relative of either, is a partner, (c) no private company of which such a director or manager. or relative of either, is a director or member, shall hold any office or place of profit in the company which carries a total monthly remuneration of not less than 2[such as may be prescribed] except with the prior consent of the company by a special resolution and the approval of the Central Government; 3* * * * *
4[(2) 5[(a)] If any office or place of profit is held in
contravention of the provisions of sub-section (1) the director, partner, relative, firm, private company, managing agent, secretaries and treasurers or the manager, concerned, shall be deemed to have vacated his or its office as such on and from the date next following the date of the general meeting of the company referred to in the first proviso or, as the case may be, the date of the expiry of the period of three months referred to in the second proviso to that sub-section, and shall also ———————————————————————- 1 Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975). 2 Subs. by Act 31 of 1988, s.49 (w.e.f. 15-6-1988). 3 Omitted by s.49, ibid.
4 Subs. by Act 31 of 1965, s. 44, for sub-section (2) (w.e.f. 15- 10-1965).
5 Sub-section (2) relettered at cl. (a) by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975), ———————————————————————— 292A be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place of profit.] 1[(b) The company shall not waive the recovery of any sum refundable to it under clause (a) unless permitted to do so by the Central Government.] 2[(2A) Every individual, firm, private company or other body corporate proposed to be appointed to any office or place of profit to which this section applies shall, before or at the time of such appointment, declare in writing whether he or it is or is not connected with a director of the company in any of the ways referred
to in subsection (1).] 1[(2B) If, after the commencement of the Companies (Amendment) Act, 1974, (41 of 1974.) any office or place of profit is held, without the prior consent of the company by a special resolution and the approval of the Central Government, the partner, relative, firm or private company appointed to such office or place of profit shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him on and from the date on which the office was so held by him. (2C) If any office or place of profit is held in contravention of the provisions of the proviso to sub-section (1B), the director, partner, relative, firm, private company or manager concerned shall be deemed to have vacated his or its office as such on and from the expiry of six months from the commencement of the Companies (Amend- ment) Act, 1974, (41 of 1974.) or the date next following the date of the general meeting of the company referred to in the said proviso, whichever is earlier, and shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place of profit. (2D) The company shall not waive the recovery of any sum refundable to it under sub-section (2B) 3* * * unless permitted to do so by the Central Government.] ———————————————————————– 1 Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975). 2 Ins. by Act 65 of 1960, s. 116. 3 Omitted by Act 31 of 1988, s.49 (w.e.f. 15.6.1988). ——————————————————————— 292B
(3) Any office or place 1* * * shall be deemed to be an office or place of profit under the company 2[within the meaning of this section],- (a) in case the office or place is held by a director, if the director holding it 3[obtains from the company anything] by way of remuneration over and above the re- muneration to which he is entitled as such director whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise; (b) in case the office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it 3[obtains from the company anything] by way of remuneration whether as salary fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise.
4[(4) Nothing in this section shall apply to a person, who being the holder of any office of profit in the company, is appointed by the Central Government, under section 408, as a director of the company.] Restrictions on appointment of managing directors
[Application of sections 316 and 317.] 315. [Application of sections 316 and 317.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 117. ———————————————————————- 1 The words “in a company” omitted by Act 65 of 1960, s. 116. 2 Subs. by Act 41 of 1974, s. 29, for certain words (w.e.f. 1-2- 1975). 3 Subs. by Act 65 of 1960, s. 116, for “obtains anything”. 4 Ins. by Act 41 of 1974, s. 29 (w.e.f. 1-2-1975). ——————————————————————— 293
Number of companies of which one person may be appointed managingdirector. 316.Number of companies of which one person may be appointed
managing director. (1) 1[No public company and no private company which is a subsidiary of a public company] shall, after the commencement of this Act, appoint or employ any person as managing director, if he is either the managing director or the manager of 2[any other company (including a private company which is not a subsidiary of a public company)], except as provided in sub-section
(2).
(2) 3[A public company or a private company which is a subsidiary of a public company] may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one , 4 [other company (including a private company which is not a subsidiary of a public company) ] : Provided that such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.
(3)Where, at the commencement of this Act, any person is holding the office either of managing director or of manager in more than 5[two companies of which each one or at least one is a public company or a private company which is a subsidiary of a public company], he shall, within one year from the commencement of 6[the Companies (Amendment) Act, 1960], (65 of 1960.) choose not more than two of those companies as companies in which he wishes to continue to hold the office of managing director or manager, as the case may be; and
the provisions of clauses (b) and (c) of sub-section (1) and of sub-
sections (2) and (3) of section 276 shall apply mutatis mutandis in relation to this case, as those provisions apply in relation to the case of a director.
(4) Notwithstanding anything contained in sub-sections (1) to
(3), the Central Government may, by order, permit any person to be appointed as a managing director of more than two companies if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common managing director. ———————————————————————– 1 Subs. by Act 65 of 1960, s. 118, for “No company”. 2 Subs. by s. 118, ibid., for “any other company”. 3 Subs. by s. 118, ibid., for “A company”. 4 Subs. by s. 118, ibid., for ” other company”. 5 Subs. by s. 118, ibid., for “two companies”. 6 Subs. by s. 118, ibid., for “this Act”. ———————————————————————– 294
Managing director not to be appointed for more than five years at atime. 317 Managing director not to be appointed for more than five
years at a time. (1) No company shall, after the commencement of this Act, appoint or employ any individual as its managing director for a term exceeding five years at a time.
(2) Any individual holding at the commencement of this Act the office of managing director in a company shall, unless his term expires earlier, be deemed to have vacated his office immediately on the expiry of five years from the commencement of this Act.
(3) Nothing contained in sub-section (1) shall be deemed to prohibit the re-appointment, re-employment, or the extension of the term of office, of any person by further periods not exceeding five years on each occasion: Provided that any such re-appointment, re-employment or extension shall not be sanctioned earlier than two years from the date on which it is to come into force.
1[(4) This section shall not apply to a private company unless it is a subsidiary of a public company.] Compensation for loss of office
Compensation for loss of office not permissible except to managing orwhole-time directors or to directors who are managers. 318. Compensation for loss of office not permissible except to
managing or whole-time directors or to directors who are managers. (1) Payment may be made by a company, except in the cases specified in
sub-section (3) and subject to the limit specified in sub-section (4), to a managing director, or a director holding the office of manager or in the whole-time employment of the company, by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement.
(2) No such payment shall be made by the company to any other director.
(3) No payment shall be made to a managing or other director in
pursuance of sub-section (1), in the following cases, namely:- (a) where the director resigns his office in view of the reconstruction of the company, or of its amalgamation with any other body corporate or bodies corporate, and is appointed as the managing director, managing agent, 2* * * manager or other officer of the reconstructed company or of the body corporate resulting from the amalgamation; (b) where the director resigns his office otherwise than on the reconstruction of the company or its amalgamation as aforesaid; ———————————————————————— 1 Ins. by Act 65 of 1960, s. 119. 2 The words ” secretaries and treasurers ” omitted by s. 120, ibid. ———————————————————————– 295 (c) where the office of the director is vacated by virtue of section 203, 1* * * or any of the clauses (a) to 2[(l)],
of sub-section (1) of section 283 ; (d) where the company is being wound up, whether by or subject to the supervision of the Court or voluntarily, provided the winding up was due to the negligence or default of the director; (e) where the director has been guilty of fraud or breach of trust in relation to, or of gross negligence in or gross mismanagement of, the conduct of the affairs of the company or any subsidiary or holding company thereof ; (f) where the director has instigated, or has taken part directly or indirectly in bringing about, the termination of his office.
(4) Any payment made to a managing or other director in pur-
suance of sub-section (1) shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which he ceased to hold the office, or where he held the office for a lesser period than three years, during such period: Provided that no such payment shall be made to the director in the event of the commencement of the winding up of the company, whether before, or at any time within twelve months after, the date on which he ceased to hold office, if the assets of the company on the winding up, after deducting the expenses thereof, are not sufficient to repay to the shareholders the share capital (including the pre- miums, if any,) contributed by them.
(5) Nothing in this section shall be deemed to prohibit the pay- ment to a managing director, or a director holding the office of manager, of any remuneration for services rendered by him to the company in any other capacity.
Payment to director, etc., for loss of office, etc., in connectionwith transfer of undertaking or property. 319. Payment to director, etc., for loss of office, etc., in
connection with transfer of undertaking or property. (1) No director of a company shall, in connection with the transfer of the whole or any part of any undertaking or property of the company, receive any payment, by way of compensation for loss ——————————————————————- 1 The word and figures “section 280 “omitted by Act 31 of 1965, s. 45 (w.e.f. 15-10-1965). 2 Subs. by Act 65 of 1960, s. 120, for “(k),”. ———————————————————————- 296 of office, or as consideration for retirement from office, or in connection with such loss or retirement- (a) from such company; or (b) from the transferee of such undertaking or property or from any other person (not being such company), unless particulars with respect to the payment proposed to be made by such transferee or person (including the amount thereof) have been disclosed to the members of the company and the proposal has been approved by the company in general meeting.
(2) Where a director of a company receives payment of any amount
in, contravention of sub-section (1), the amount shall be deemed to have been received by him in trust for the company.
(3) Sub-sections (1) and (2) shall not affect in any manner the operation of section 318.
Payment to director for loss of office, etc., in connection withtransfer of shares. 320. Payment to director for loss of office, etc., in connection
with transfer of shares. (1) No director of a company shall, in connection with the transfer to any persons of all or any of the shares in a company, being a transfer resulting from- (i) an offer made to the general body of shareholders; (ii) an offer made by or on behalf of some other body corporate with a view to the company becoming a subsidiary of such body corporate or a subsidiary of its holding company; (iii) an offer made by or on behalf of an individual with a view to his obtaining the right to exercise, or control the exercise of, not less than one-third of the total voting power at any general meeting of the company; or (iv) any other offer which is conditional on acceptance to a given extent; receive any payment by way of compensation for loss of office, or as consideration for retirement from office, or in connection with such loss or retirement,- (a) from such company; or (b) except as otherwise provided in this section, from the transferees of the shares or from any other person (not being such company).
(2) In the case referred to in clause (b) of sub-section (1), It shall be the duty of the director concerned to take all reasonable steps to 296A secure that particulars with respect to the payment proposed to be made by the transferees or other person (including the amount thereof) are included in, or sent with, any notice of the offer made for their shares which is given to any shareholders.
(3) If- (a) any such director fails to take reasonable steps as aforesaid; or (b) any person who has been properly required by any such director to include the said particulars in, or send them with, any such notice as aforesaid fails so to do; he shall be punishable with fine which may extend to two hundred and fifty rupees.
(4) If-
(a) the requirements of sub-section (2) are not complied with in relation to any such payment as is governed by clause
(b) of sub-section (1) ; or (b) the making of the proposed payment is not, before the transfer of any shares in pursuance of the offer, approved by a meeting, called for the purpose, of the holders of the shares to which the offer relates and other holders of shares of the same class (other than shares already held at the date of the offer by, or by a nominee for, the offeror, or where the offeror is a company, by, or by a nominee for, any subsidiary thereof) as any of the said shares; any sum received by the director on account of the payment shall be deemed to have been received by him in trust for any persons who have sold their shares as a result of the offer made, and the expenses incurred by him in distributing that sum amongst those persons shall be borne by him and not retained out of that sum. 297
(5) If at a meeting called for the purpose of approving any pay-
ment as required by clause (b) of sub-section (4), a quorum is not present and, after the meeting has been adjourned to a later date, a quorum is again not present, the payment shall, for the purposes of that sub-section, be deemed to have been approved.
Provisions supplementary to section 318, 319 and 320. 321. Provisions
supplementary to section 318, 319 and 320. (1)Where in proceedings for the recovery of any payment as having, byvirtue
Directors, etc., with unlimited liability in limited company. 322. Directors, etc., with unlimited liability in limited
company. (1) In a limited company, the liability of the directors or of any director or of the managing agent, secretaries and treasurers or manager may, if so provided by the memorandum be unlimited.
(2) In a limited company in which the liability of a director, managing agent, secretaries and treasurers or manager is unlimited, the directors, the managing agent, secretaries and treasurers and the manager of the company, and the member who proposes a person for appointment to the office of director, managing agent, secretaries and treasurers or manager, shall add to that proposal a statement that the liability of the person holding that office will be unlimited; and before the person accepts the office or acts therein, notice in writing that his liability will be unlimited, shall be given to him by the following or one of the following persons, namely, the promoters of the company, its directors, its managing agent, secretaries and treasurers or manager, if any, and its officers.
(3) If any director, managing agent, secretaries and treasurers, manager or proposer makes default in adding such a statement, or if any promoter, director, managing agent, secretaries and treasurers, manager or officer of the company makes default in giving such a notice, he shall be punishable with fine which may extend to one thousand rupees and shall also be liable for any damage which the person so appointed may sustain from the default; but the liability of the person appointed shall not be affected by the default.
Special resolution of limited company making liability of directors,etc., unlimited. 323. Special resolution of limited company making liability of
directors, etc., unlimited. (1) A limited company may, if so authorised by its articles, by special resolution, alter its memorandum so as to render unlimited the liability of its directors or of any director or of its managing agent, secretaries and treasurers or manager.
(2) Upon the passing of any such special resolution, the provisions thereof shall be as valid as if they had been originally contained in the memorandum: Provided that no alteration of the memorandum making the
liability of any of the officers referred to in sub-section (1) unlimited shall apply to such officer, if he was holding the office from before the date of the alteration, until the expiry of his then term, unless he has accorded his consent to his liability becoming unlimited.
CHAP Prohibition of appointment of managing agent in certain cases CHAPTER III.-MANAGING AGENTS Prohibition of appointment of managing agent in certain cases
Power of Central Government to notify that companies engaged inspecified classes of industry or business shall not have managingagents. 324. Power of Central Government to notify that companies engaged in specified classes of industry or business shall not have managing
agents. (1) Subject to such rules as may be prescribed in this behalf, the Central Government may, by notification in the Official Gazette, declare that, as from such date as may be specified in the
notification, the provisions of sub-section (2) shall apply to all companies, whether incorporated before or after the commencement of this Act, which are engaged on that date or may thereafter be engaged, wholly or in part, in such class or description of industry or business as may be specified in the notification.
(2) Thereupon,– (a) where any such company has a managing agent on the specified date, the term of office of that managing agent shall, if it does not expire earlier, expire at the end of three years from the specified date, or on the 15th day of August, 1960, whichever is later; and the company shall not re-appoint or appoint the same or any other managing agent; and (b) where any such company has no managing agent on the specified date, or where it is incorporated on or after that date, it shall not appoint a managing agent.
(3) Copies of all rules prescribed under sub-section (1) shall, as soon as may be after they have been prescribed, be laid before both Houses of Parliament.
(4) A copy of every notification proposed to be issued under
sub-section (1) shall be laid in draft before both Houses of Parliament for a period of not less than thirty days while they are in session; and if, within that period, either House disapproves of the issue of the notification or approves of such issue only with modifications, the notification shall not be issued or, as the case may require, shall be issued only with such modifications as may be agreed on by both the Houses. 324A Abolition of managing agencies and secretaries and treasurers. 1[324A. Abolition of managing agencies and secretaries and
treasurers. (1) Notwithstanding anything contained in any other provision of this Act or in the memorandum or articles of association or in any contract to the contrary, where any company has, on the 3rd day of April, 1970, a managing agent or secretaries and treasurers, the term of office of such managing agent or, as the case may be, the secretaries and treasurers shall expire, if it does not expire earlier, on that date.
(2) No company shall appoint or re-appoint any managing agent or secretaries and treasurers on or after the 3rd day of April, 1970.] ———————————————————————- 1 Ins. by Act 17 of 1969, s. 4. ———————————————————————- 300
Managing agency company not to have managing agent.
325. Managing agency company not to have managing agent. (1) No company acting as the managing agent of any other company shall, after the commencement of this Act, appoint a managing agent for itself, whether it transacts any other kind of business in addition or not.
(2) No company having a managing agent shall, after the commencement of this Act, be appointed as the managing agent of any other company.
(3) Any appointment of managing agent made in contravention of
sub-section (1) or (2) shall be void.
(4) Where at the commencement of this Act a company having a managing agent is itself acting as a managing agent of any other company, the term of office of the company first-mentioned as managing agent of the other company shall, if it does not expire earlier in accordance- with the provisions applicable thereto immediately before such commencement (including any provisions contained in the Indian Companies Act, 1913 (7 of 1913), expire on the 15th day of August,
325A Subsidiary of a body corporate not to be appointed as managing agent. 1[325A. Subsidiary of a body corporate not to be appointed as managing agent. After the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) no company shall appoint as its managing agent any body corporate which is a subsidiary either of itself or of any other body corporate unless immediately before such commencement the company has any such subsidiary as its managing agent.] Appointment and term of office
Central Government to approve of appointment etc., of managing agent;and circumstances in which approval may be accorded. 326. Central Government to approve of appointment etc., of managing agent; and circumstances in which approval may be accorded.
(1) In respect of any company to which neither the prohibition specified in section 324 nor that specified in section 325 applies, a managing agent shall not be appointed or re-appointed,- (a) except by the company in general meeting; and (b) unless the approval of the Central Government has been obtained for such appointment or re-appointment.
(2) The Central Government shall not accord its approval under
subsection (1) in any case, unless it is satisfied- (a) that it is not against the public interest to allow the company to have a managing agent; ———————————————————————- 1 Ins. by Act 65 of 1960, s. 121. ———————————————————————– 300A. (b) that the managing agent proposed is, in its opinion, a fit and proper person to be appointed or re-appointed as such, and that the conditions of the managing agency agreement proposed are fair and reasonable; and (c) that the managing agent proposed has fulfilled any conditions which the Central Government requires him to fulfil.
Application of sections 328 to 331. 327. Application of sections 328 to 331. The provisions of sections 328 to 331 shall apply to- (a) a public company; (b) a private company which is a subsidiary of a public company; and 301 (c) a private company which is not a subsidiary of a public company, unless the Central Government, by general or special order, specifically exempts the private company.
Term of office of managing agent.
328.Term of office of managing agent. (1)After the commencement of this Act, no company shall- (a) in case it appoints a managing agent for the first time (that is to say, in case the company has had no managing agent at any time since its formation), make the appointment for a term exceeding fifteen years; (b) in any other case, re-appoint or appoint a managing agent for a term exceeding ten years at a time; (c) re-appoint a managing agent for a fresh term, when the existing term of the managing agent has two years or more to run: Provided that the Central Government may, if satisfied that it is in the interest of the company so to do, permit the re-appointment of a managing agent at an earlier time than that specified in clause (c).
(2) For the purpose of sub-section (1), re-appointment does not include the re-appointment of any person on fresh, additional or changed conditions for any period not extending beyond his existing term, but otherwise includes- (a) the renewal, or the extension of the term, of a previous appointment ;and (b) the appointment of any person or persons having an interest in the previous managing agency.
(3) Any appointment or reappointment of a managing agent, made
in contravention of the provisions of sub-sections (1) and (2) shall be void in respect of the entire term for which the appointment or re-appointment is made. Variation of Managing Agency Agreement
Variation of managing agency agreement. 329.Variation of managing agency agreement. A resolution of the company in general meeting shall be required for varying the terms of a managing agency agreement; and before such a resolution is passed, the previous sanction of the Central Government shall be obtained therefor. Special provisions regarding existing managing agents
Term of office of existing managing agents to terminate on 15thAugust,
330.Term of office of existing managing agents to terminate on 15th August, 1960. Where a company has a managing agent at the commencement of this Act, the term of office of such managing agent shall, 302 if it does not expire earlier in accordance with the provisions appli- cable thereto immediately before such commencement [including any provisions contained in the Indian Companies Act, 1913], (7 of 1913.) expire on the 15th day of August, 1960, unless before that date he is reappointed for a fresh term in accordance with any provision con- tained in this Act.
Application of Act to existing managing agents. 331. Application of Act to existing managing agents. All provisions of this Act, other than those relating to the term for which the office can be held, shall apply to every managing agent holding office at the commencement of this Act, with effect from such commencement. Restrictions on Number of Managing Agencies
No person to be managing agent of more than ten companies after 15thAugust,
332. No person to be managing agent of more than ten companies
after 15th August, 1960. (1) After the 15th day of August, 1960, no person shall, at the same time, hold office as managing agent in more than ten companies.
(2) Where a person holding office as managing agent in more than
ten companies before that date fails to comply with sub-section (1), the Central Government may permit him to hold office as managing agent with effect from that date in respect of such of those companies, not exceeding ten in number, as it may determine.
(3) In calculating the number of companies of which a person may be a managing agent in pursuance of this section, the following companies shall be excluded, namely:- (a) a private company which is neither a subsidiary nor a holding company of a public company; (b) an unlimited company; (c) an association which does not carry on business for profit, or which prohibits the payment of a dividend.
(4) For the purposes of this section, each of the following persons shall also be deemed to hold office as managing agent of the company :- (a) where the managing agent of the company is a firm, every partner in the firm; 1[(b) where the managing agent of the company is itself a company, every person who is a director, the secretaries and treasurers or a manager of the latter company, and where the latter company is a public company, every member who is entitled to exercise not less than ten per ——————————————————————— 1 Subs. by Act 65 of 1960, s. 122, for cl. (b). ———————————————————————– 303 cent. of the total voting power therein and, where the latter company is a private company, every member thereof who is entitled to exercise not less than five per cent. of the total voting power therein.] 1[(4A) A director or member referred to in clause (b) of sub-
section (4) shall include any person in accordance with whose direc- tions or instructions any director or, as the case may be, any member is in the opinion of the Central Government accustomed to act.]
(5) Any person who acts as a managing agent of more than ten companies in contravention of this section shall be punishable with fine which may extend to one thousand rupees in respect of each of those companies in excess of ten, for each day on which he so acts. Right to charge on assets
Right of managing agent to charge on company’s assets. 333. Right of managing agent to charge on company’s assets. A managing agent whose office stands terminated under section 324 or 332 shall be entitled to a charge on the assets of the company in respect of all moneys which are due to him from the company at the date of such termination, or which he may have to pay after that date in respect of any liability or obligation properly incurred by him on behalf of the company before such date, subject to all existing charges and incumbrances, if any, on such assets. Vacation of Office, Removal and Resignation
Vacation of office on insolvency, dissolution or winding up, etc. 334. Vacation of office on insolvency, dissolution or winding up, etc. Subject to the provisions of section 340, the managing agent of a company shall be deemed to have vacated his office as such-, (a) in case the managing agent is an individual, if he is adjudged an insolvent; (b) in the same case, if the managing agent applies to be adjudicated an insolvent; (c) In case the managing agent is a firm, on its dissolution from any cause whatsoever, including the insolvency of a partner in the firm; (d) in case the managing agent is a body corporate, on the commencement of its winding up whether by or subject to the supervision of the Court, or voluntarily ; (e) in all cases, on the commencement of the winding up of the company managed by the managing agent, whether by or subject to the supervision of the Court or voluntarily. ———————————————————————– 1 Ins. by Act 65 of 1960, s. 122. ———————————————————————-
Suspension from office where receiver appointed.
