LW lyer's Guide to Company Directors

CONTENTS
PART I
INTRODUCTION
CHAPTER 1
INTRODUCTION
PAGE
§ 1.1 Who is a director 3
§ 1.2 Name does not matter 3
§ 1.3 Shadow Directors 4
§ 1.4 Shadow Director is an officer 4
§ 1.5 Proof for being regarded as shadow director 5
§ 1.6 De facto director and shadow director distinguished 6
§ 1.7 Statutory provisions relating to a shadow director 6
PART II
TYPE OF DIRECTORS
CHAPTER 2
APPOINTMENT OF DIRECTORS BY BOARD OF DIRECTORS
§ 2.01 Three types of Ordinary Directors 12
§ 2.02 Additional Directors 12
§ 2.03 Power in the articles 13
§ 2.04 Power to co-opt director 13
§ 2.05 Power of co-option to be exercised in bona fide interests of company 13
§ 2.06 Appointment of additional director—When act of oppression 14
§ 2.07 Board Meeting for appointment necessary 14
§ 2.08 Co-option every year—no impediment 14
§ 2.09 Maximum number not to be exceeded 14
§ 2.10 Appointment of additional director neither contract nor arrange-ment 14
§ 2.11 No restrictions under Sections 255, 258 and 259 15
§ 2.12 Consent to act as additional director not necessary 15
§ 2.13 Alternate directors appointed for additional directors 15
§ 2.14 Co-option of NRI as additional director 16
§ 2.15 Not liable under Section 454 16
§ 2.16 When vacates office 16
§ 2.17 Nomination by third party-not additional directors 16
§ 2.18 The meaning of the word ‘up to’ 17
§ 2.19 Additional Director vacates on the day of the postponed meeting 18
§ 2.20 Stay of AGM and additional directors 18
§ 2.21 Additional Directors and Section 268 18
§ 2.22 Appointment by General Meeting 18
§ 2.23 Can additional Directors be appointed even before the First AGM 19
§ 2.24 Casual directors 19
§ 2.25 What is casual vacancy? 19
§ 2.26 Power to fill vacancy only when Director appointed in general meeting 20
§ 2.27 To be filled up within reasonable time 20
§ 2.28 Vacation by director appointed in casual vacancy, there is no casual vacancy 20
§ 2.29 Articles may prescribe procedure for filling up vacancy 20
§ 2.30 Appointment at Board meeting only 21
§ 2.31 Filing of letter of consent not necessary 21
§ 2.32 Tenure of office of a Director appointed in casual vacancy 21
§ 2.33 Director appointed in casual vacancy-not a retiring director 21
§ 2.34 Casual vacancy existing before AGM can be filled up after AGM 22
§ 2.35 Bona fide exercise of the power to fill casual vacancy 22
§ 2.36 Does not apply to private companies proper 23
§ 2.37 Alternate Directors 23
§ 2.38 Tenure of office 23
§ 2.39 Alternate director vacates office when original director vacates office 23
§ 2.40 Who can appoint Alternate Directors? 23
§ 2.41 ‘State’ includes Union Territory 24
§ 2.42 Absence from the State where the registered office is situated is not relevant 24
§ 2.43 When alternate directors can be appointed ? 24
§ 2.44 What is ‘absence’ ? 25
§ 2.45 Anomaly 25
§ 2.46 No bar against holding any other office 25
§ 2.47 When the original director returns to the State, irrespective of whether he attends the Board meeting, alternate vacates office 25
§ 2.48 Can be appointed through circular resolution 26
§ 2.49 Same person can be alternate for more than one director 26
§ 2.50 Original director has no power to appoint alternates 26
§ 2.51 Alternate director is a director in all respects 26
§ 2.52 Alternate director not proxy or agent of original director 27
§ 2.53 Leave of absence need not be given to original directors 27
§ 2.54 Provisions relating to directors apply to alternates with equal force 27
§ 2.55 Directorship as an alternate need not be counted for maximum number 28
§ 2.56 Circular resolutions to be approved by alternates 28
Precedent # 2.01 Resolution—intimation to stock exchange for appoint-ment of alternate director 30
Precedent # 2.02 Resolution—intimation to stock exchange for appoint-ment of additional director 30
Precedent # 2.03 Resolution—Appointment of additional directors 31
Precedent # 2.04 Resolution—Appointment of additional director (anoth-er format) 32
Precedent # 2.05 Resolution—Re-appointment of additional director 32
Precedent # 2.06 Resolution—Filling up of casual vacancies 33
Precedent # 2.07 Resolution—Filling up of casual vacancy (another for-mat) 34
Precedent # 2.08 Resolution—appointment of alternate director 34
Precedent # 2.09 Resolution—Appointment of alternate director (another format) 35
Precedent # 2.10 Resolution—Vacation of office of alternate director 36
Precedent # 2.11 Resolution—Appointment of alternate director 36
CHAPTER 3
NOMINEE DIRECTORS
§ 3.01 Who are nominee Directors ? 38
§ 3.02 Nominee Directors become directors as soon as they are nomi-nated 39
§ 3.03 Clause in the articles for nomination to be carefully worded 39
§ 3.04 Agreement between sellers and purchasers of Shares 40
§ 3.05 Nominee directors-non-retiring directors 40
§ 3.06 Relevant provisions of IDBI Act, 1964 40
§ 3.07 Indemnity of directors 41
§ 3.08 Protection of action taken under this Act 42
§ 3.09 Nomination in respect of deposits, bonds etc. 42
§ 3.10 Act 18 of 1891 to apply in relation to Development Bank 42
§ 3.11 Act 10 of 1949 not to apply to Development Bank 42
§ 3.12 Act 43 of 1961 and Act 14 of 1963 not to apply to Development Bank 42
§ 3.13 Financial Institution nominees not exempt from Section 259 43
§ 3.14 ICICI and IFCI nominees do not enjoy exemption 43
§ 3.15 Filing of consent by proposed nominee director 44
§ 3.16 Section 264(2) to be complied with 44
§ 3.17 Policy guidelines of the Government relating to appointment of nominee directors 44
§ 3.18 Guidelines for Nominee-Directors of IDBI 46
§ 3.19 Appointment of Special Directors under ‘The Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) 46
§ 3.20 Directors vacation of office of Nominee 47
§ 3.21 Nominee director participating in take over 47
§ 3.22 Directors of Financial Institution immune from liability, SICA 1985 47
§ 3.23 Liability of nominee directors 48
§ 3.24 Nominee Directors and conflict of interest 48
§ 3.25 Nominee Directors not liable for disqualification under section 274(1)(g) of the Companies Act, 1956-Clarification 49
§ 3.26 Exemption from sec. 274(1)(g) to nominee directors, whether legally tenable 52
§ 3.27 Access to corporate information and confidentiality 54
Precedent # 3.01 Resolution—intimation to stock exchange regarding appointment of nominee director 56
Precedent # 3.02 Resolution—Director nominated by a body corporate 56
Precedent # 3.03 Resolution—Director nominated by financial institution 57
PART III
APPOINTMENT QUALIFICATION AND
RETIREMENT OF DIRECTORS
CHAPTER 4
THE BOARD OF DIRECTORS
§ 4.01 The Board of Directors 61
CHAPTER 5
STRENGTH OF THE BOARD OF DIRECTORS
§ 5.01 Minimum number of directors 63
§ 5.02 Articles can fix minimum number 64
§ 5.03 No restriction on maximum number of Directors 64
§ 5.04 Right of the company to vary the number of directors 64
§ 5.05 Maximum limit fixed by Articles not counted 65
§ 5.06 Company not bound to appoint maximum number 65
§ 5.07 Only power to increase without specific appointments 65
§ 5.08 To physically increase the number of directors by fresh appoint-ments, no resolution necessary 65
§ 5.09 Non-compliance-an irregularity which may be set right 66
§ 5.10 Power to appoint additional director not affected by Section 258 66
§ 5.11 Formal resolution not required to reduce the number of directors 66
§ 5.12 Shareholders agreement and increase in the number of directors 66
§ 5.13 Right to increase the number of directors only with the Board 66
§ 5.14 Increase of the number of directors beyond the permissible max-imum 67
§ 5.15 Central Government’s approval for increase in number of direc-tors 67
§ 5.16 No approval for reduction in number of Directors 67
§ 5.17 Companies incorporated after 21st July, 1951 68
§ 5.18 Proportionate representation on Board of Directors 68
§ 5.19 Appointment of Directors under section 408 not affected by sec-tion 259 68
§ 5.20 Not applicable to private company proper 68
§ 5.21 Government approval-Where necessary 69
§ 5.22 Government Companies exempted 69
§ 5.23 Section 25 companies exempted 69
§ 5.24 Specimen Resolutions and Statutory Forms 69
Precedent # 5.01 Resolution—Fixing the Maximum/Minimum Number of Directors 70
Precedent # 5.02 Resolution—Increase in the Number Of Directors 70
Precedent # 5.03 Resolution—Increase in Number of Directors Beyond Twelve 71
Precedent # 5.04 Resolution—Increase in the Number of Directors beyond Twelve 71
Precedent # 5.05 Resolution—Increase in the Number of Directors Beyond Twelve 72
Precedent # 5.06 Specimen Filled up Statutory Form No. 24 74
CHAPTER 6
COMPOSITION OF BOARD OF DIRECTORS
§ 6.01 Managerial personnel 78
§ 6.02 Executive and Non-executive Directors of Listed Company 78
§ 6.03 Small shareholders’ director 79
§ 6.04 Board’s power to co-opt directors 80
CHAPTER 7
ELIGIBILITY AND QUALIFICATIONS OF DIRECTOR
§ 7.01 Who can be a director 81
§ 7.02 Qualifications 82
§ 7.03 Purpose of the Section 274 83
§ 7.04 Conviction for offence involving ‘moral turpitude’ 84
§ 7.05 Offences involving moral turpitude in India or abroad 84
§ 7.06 What is moral turpitude 84
§ 7.07 Resignation on disqualification 86
§ 7.08 Disqualification of directors u/s. 274(1)(g) 86
§ 7.09 Stock Exchange Companies 93
§ 7.10 Disqualification of Director-Section 16(5) of SICA over-rides provisions of Companies Act, 1956 94
§ 7.11 Directors appointed under SICA by BIFR not to be disqualified 94
§ 7.12 Only Private companies can provide further grounds for disqualification 95
§ 7.13 Age qualification 95
§ 7.14 Minors as directors, disqualification of contractual disability 96
§ 7.15 Non-resident as director 96
§ 7.16 Section 203 96
§ 7.17 Meaning of ‘management’ for purposes of section 203 96
§ 7.18 Purpose of and principles for disqualification under section 203 97
§ 7.19 Errors, miscalculations and commercial misjudgement 99
§ 7.20 Allotment of shares to maintain control 100
§ 7.21 Violation of statutory provisions and other irregularities 100
§ 7.22 Length of disqualification 104
§ 7.23 Duties of directors in context of disqualification proceedings 106
§ 7.24 Share qualification 109
§ 7.25 Nominee directors of financial institutions and banks-exempted under provisions of section 274) (1)(g) vide Departmental Circular No. 8/2002, dt. 22-3-2002 110
Precedent # 7.01 Resolution—Disqualification of Director 111
Precedent # 7.02 Resolution—Removal of disqualifications 111
Precedent # 7.03 Resolution—Removal of disqualification for non-payment of calls 112
Precedent # 7.04 Filing of application with the Central Government for removal of disqualification of a director under sec-tion 274(2) of the Companies Act, 1956 114
CHAPTER 8
CONSENT TO ACT AS DIRECTOR
§ 8.01 Consent of directors/proposed directors 117
§ 8.02 Consent of the candidate to act as director 118
§ 8.03 Consent before appointment 118
§ 8.04 Filing consent with Registrar-a condition precedent 118
§ 8.05 Person giving notice of his candidature to the Company under section 257 need not give consent 119
§ 8.06 The meaning of the words, ‘or otherwise’ 119
§ 8.07 Nominee directors to give consent 120
§ 8.08 Exemption of Government directors, nominees of banks and financial institutions 120
§ 8.09 Fresh appointees to give consent-Amendment of Section 264(2) 121
§ 8.10 Additional, casual and alternate directors need not file consent if elected director 122
§ 8.11 Where there is an interval between retirement and re-appoint-ment—implications 122
§ 8.12 No automatic vacation of office when consent not filed 123
§ 8.13 Consent to act as director of Private Company 123
§ 8.14 Penalty on default 124
§ 8.15 Does not apply to a private company proper 124
§ 8.16 Does not apply to a wholly owned Government Company 124
§ 8.17 Does not apply to section 25 companies 124
Precedent # 8.01 Resolution—Notice giving consent 125
Precedent # 8.02 Resolution—Failure to file consent with the Registrar 125
Precedent # 8.03 Filing of Form of Consent to act as director of a compa-ny and/ or undertaking to take and pay for qualification shares under section 264(2)/266(1)(a) and 266(1)(b)(iii) 127
CHAPTER 9
SHARE QUALIFICATION
§ 9.01 What is share qualification? 130
§ 9.02 Share warrant-not qualification share 131
§ 9.03 No statutory requirement for share qualification 131
§ 9.04 Applicability to private company proper 131
§ 9.05 Qualification shares in Private company 131
§ 9.06 Acquisition of share qualification and election and appointment as director 132
§ 9.07 When does the time to acquire qualification shares start? 132
§ 9.08 Beneficial ownership not required 133
§ 9.09 Share qualification in joint names 133
§ 9.10 No bar against mortgaging qualification shares 133
§ 9.11 Share qualification not held after Insolvency notice 134
§ 9.12 Liability in respect of qualification shares 134
§ 9.13 Qualification shares and contributories 134
§ 9.14 Mode of acquisition of qualification shares 134
§ 9.15 Director need not pay for the acquired shares 135
§ 9.16 Accepting qualification shares as secret gift 135
§ 9.17 American view point 135
§ 9.18 Director resigning within the time for taking qualification shares 136
§ 9.19 Validity of acts not affected 137
§ 9.20 Raising of share qualification 137
§ 9.21 Vacation of office and penalty 137
Precedent # 9.01 Resolution—Share qualification of Directors (Amend-ment of Articles) 139
CHAPTER 10
RESTRICTIONS ON NUMBER OF DIRECTORSHIPS
§ 10.01 Ceiling on number of directorships 140
§ 10.02 Exclusion of certain directorships 141
§ 10.03 Directorship of Section 25-companies to be excluded 141
§ 10.04 Apparent inconsistency 141
§ 10.05 Directorship in a private company becoming a public company 142
§ 10.06 Further restrictions for listed companies for committee of direc-tors 142
§ 10.07 Penalty for contravention 142
CHAPTER 11
APPOINTMENT OF FIRST DIRECTORS
§ 11.01 Appointment of first directors by articles or subscribers 143
§ 11.02 Appointment by articles 143
§ 11.03 Pre-requisites for appointment by articles 144
§ 11.04 Appointment of first directors by subscribers to memorandum 144
§ 11.05 Retirement of first director 145
§ 11.06 Appointment of Director 145
§ 11.07 Subscribers deemed as directors 145
§ 11.08 No return u/s. 303 for subscribers to the memorandum 146
§ 11.09 No return u/s. 264 for subscribers to the memorandum 147
§ 11.10 Subscribers to memorandum as deemed directors, filing of parti-culars not necessary 147
§ 11.11 When Section 254 does not apply 148
§ 11.12 Position of private companies 149
Precedent # 11.01 Specimen Resolution—Appointment of First Directors being Subscribers 150
Precedent # 11.02 Resolution—Appointment of First Directors 150
CHAPTER 12
APPOINTMENT OF DIRECTORS BY SHAREHOLDERS
§ 12.01 Right to appoint directors—not a fundamental right 151
§ 12.02 Majority’s right to appoint directors for the benefit of the company 152
§ 12.03 Appointment of Directors to be Voted Individually 152
§ 12.04 Object of the Section 152
§ 12.05 Unanimous resolution to be passed 153
§ 12.06 Procedure when number of candidates exceeds number of vacan-cies 153
§ 12.07 Palmer on this procedure 153
§ 12.08 Consequences of non—compliance 154
§ 12.09 Does not apply to wholly owned Government companies 154
§ 12.10 Does not apply to Sec. 25 companies 154
§ 12.11 Presumption that directors validly elected 154
§ 12.12 Listed companies to furnish director’s particulars to shareholders 155
§ 12.13 Persons eligible for appointment or re-appointment as directors at general meeting 155
§ 12.14 Appointment of more than one Director by a single resolution 155
Precedent # 12.01 Resolution—Appointment of director in the case of a Private Company 156
Precedent # 12.02 Resolution—Alterations of articles for appointment of directors 156
Precedent # 12.03 Resolution—Appointment of Director to retire by rota-tion 157
Precedent # 12.04 Resolution—Appointment of Directors for fixed period 158
Precedent # 12.05 Resolution—Appointment of Retiring Director 158
Precedent # 12.06 Resolution—Appointment of more than one Director by a single resolution 159
Precedent # 12.07 Resolution—Appointment of two or more Directors under single resolution (Another Format) 159
Precedent # 12.08 Resolution—Appointment of directors to be voted on collectively 160
Precedent # 12.09 Resolution—Appointment of director to be voted on collectively (Another Format) 160
CHAPTER 13
POWERS OF CENTRAL GOVERNMENT TO APPOINT DIRECTORS
§ 13.01 Powers of Government to prevent oppression or mismanagement 161
§ 13.02 Strict interpretation 163
§ 13.03 “Notwithstanding anything contained in this Act” 163
§ 13.04 Scope of section 163
§ 13.05 Civil courts’ jurisdiction not ousted 164
§ 13.06 Satisfaction of Company Law Board 164
§ 13.07 Powers of Central Government to make reference 166
§ 13.08 Prejudice to public or Company’s interest and natural justice 166
§ 13.09 Mismanagement in presenti 167
§ 13.10 Future or past conduct of affairs 168
§ 13.11 Scope of judicial interference 168
§ 13.12 Appeal against appointment 169
§ 13.13 Regulation of financial schemes 169
§ 13.14 Appointment of Government directors 169
§ 13.15 Qualification shares not necessary for Government directors 171
§ 13.16 Government policy before Companies (Amendment) Act, 1988 172
§ 13.17 No change in Board of directors without confirmation 173
§ 13.18 Control of Central Government under section 408 174
§ 13.19 Company Law Board’s decision not res judicata 174
§ 13.20 Petition under S. 408 bars relief under Ss. 397 and 398 175
§ 13.21 Petition before CLB 175
Precedent # 13.01 Resolution—Appointment of Government Directors 176
Precedent # 13.02 Resolution—Appointment of Government Directors on the Order of the CLB 177
Precedent # 13.03 Petition to decide whether it is necessary to appoint Government Directors on the Board of Directors and to advise Central Government accordingly 178
Precedent # 13.04 Prevent change in Board of Directors likely to affect company prejudicially 180
CHAPTER 14
RETIREMENT OF DIRECTORS BY ROTATION
§ 14.01 Section 256 reads 186
§ 14.02 Appointment of retiring directors 187
§ 14.03 Tenure of retiring directors 188
§ 14.04 Tenure of non-retiring directors 188
§ 14.05 Composite resolution and automatic re-appointment of retiring directors 188
§ 14.06 Retirement of directors where annual general meeting not held 188
§ 14.07 When all directors retire 189
§ 14.08 Procedure for appointment 190
§ 14.09 Conditions for a retiring director to be deemed to be re-appointed 191
§ 14.10 No deemed appointment where no AGM is called or held 191
§ 14.11 Adjournment of meeting, effect of 191
§ 14.12 Adjournment of meeting for lack of quorum does not come under Section 256(4) 192
§ 14.13 In case of two directors, one should retire 192
§ 14.14 Legal restraint on appointing director other than retiring director, effect of 192
§ 14.15 Does not apply to a private company proper 193
§ 14.16 Does not apply to wholly owned Government Companies 193
§ 14.17 When directors retire if AGM not held in time 193
§ 14.18 Section applies when private company converted into public company 195
§ 14.19 Failure to retire on misreading of Articles 195
§ 14.20 Companies carrying on banking business 196
§ 14.21 Dropping of provisions from Articles of Private Companies 196
§ 14.22 On re-appointment by rotation, no change under section 303 196
§ 14.23 Additional directors are not retiring Directors 197
§ 14.24 Section 256(4) does not apply to additional directors 197
§ 14.25 Small shareholders’ director not to retire by rotation 197
Precedent # 14.01 Resolution—Refusal of re-appointment 198
Precedent # 14.02 Resolution—Re-appointment of Director retiring by rotation 198
Precedent # 14.03 Resolution—Re-appointment of a Director retiring by rotation (Another Format) 199
Precedent # 14.04 Resolution—Not appointing a retiring Director 199
Precedent # 14.05 Resolution—Retirement of a Director on failing or de-ciding not to be re-appointed 200
Precedent # 14.06 Resolution—Appointment of a Director, other than the retiring Director 200
Precedent # 14.07 Resolution—Appointment of a Director in place of one retiring (Another Format) 201
Precedent # 14.08 Resolution—Contested election of Directors 202
CHAPTER 15
RETIREMENT AND RE-APPOINTMENT OF DIRECTORS
§ 15.01 Re-appointment of retiring director 203
§ 15.02 Whether additional directors to be counted for computing the number of retiring directors 203
§ 15.03 First Directors and retirement by rotation 204
§ 15.04 Provisions regarding retirement do not apply to private compa-nies proper 205
§ 15.05 In the absence of provision in the articles of a private company directors to be appointed at general meeting 205
§ 15.06 Appointment by will 206
§ 15.07 Dispute regarding directorship—a matter of Civil Jurisdiction 206
CHAPTER 16
APPOINTMENT OF NON-RETIRING DIRECTORS AS DIRECTORS
§ 16.01 Right of persons other than retiring directors to stand for direc-torship 207
§ 16.02 Appointment of casual and additional directors at general meet-ings after their term as such, attracts Section 257 209
§ 16.03 Applies to first directors appointed by articles 209
§ 16.04 When the member fails to propose at the meeting—Consequences 209
§ 16.05 ‘Member’ does not include preference shareholders 209
§ 16.06 Section 257 not controlled by Section 173 209
§ 16.07 Fourteen-day notice, hour for filing 210
§ 16.08 Appointment at any general meeting—not alone at AGM 210
§ 16.09 Nomination need not be seconded at the meeting 210
§ 16.10 Forfeiture of deposit on non-election 211
§ 16.11 Section 257 and Section 188 are independent 211
§ 16.12 Jurisdiction of Court 212
§ 16.13 Does not apply to appointments otherwise than at general meet-ings or by private companies 212
§ 16.14 Government companies exempted 213
§ 16.15 Section 25 companies exempted 213
Precedent # 16.01 Resolution—Appointment of Director 214
Precedent # 16.02 Resolution—Candidature of Director 214
Precedent # 16.03 Resolution—Candidature for Directorship 215
Precedent # 16.04 Resolution—Notice Contesting election as a Director 215
Precedent # 16.05 Resolution—Circulation of notice for contesting election as a Director 215
Precedent # 16.06 Resolution—Right of persons other than retiring direc-tors to stand for directorship 216
Precedent # 16.07 Resolution—Individual notices for persons other than retiring directors to stand for director-ship 217
Precedent # 16.08 Resolution—Advertisement of persons other than retir-ing directors to stand for directorship 217
Precedent # 16.09 Resolution—Regular Appointment of a Director ap-pointed in a casual vacancy by Board 218
Precedent # 16.10 Resolution—Additional Director seeking appointment at General Meeting 219
Precedent # 16.11 Resolution—Filling up of casual vacancy in the office of Director 219
CHAPTER 17
APPOINTMENT OF SMALL SHAREHOLDERS’ DIRECTOR
§ 17.01 Small shareholders’ director 221
§ 17.02 Appointment of small shareholders’ director whether mandatory 221
§ 17.03 The Companies (Appointment of Small Shareholders’ Director) Rules, 2001 222
Precedent # 17.01 Resolution—Notice for convening a general meeting to elect a small shareholders’ director 224
Precedent # 17.02 Resolution—Appointment of Small Shareholders’ Di-rector 224
Precedent # 17.03 Resolution—Intimation to Stock Exchange regarding appointment of Small Shareholders’ Di-rector 224
CHAPTER 18
PROPORTIONAL REPRESENTATION FOR THE APPOINTMENT OF DIRECTORS
§ 18.01 Option to Company to adopt proportional representation for the appointment of directors 226
§ 18.02 Joint Committee Recommendation 226
§ 18.03 Proportional or cumulative voting only for election of Directors 227
§ 18.04 Directors appointed under section 265 cannot be removed under section 284 227
§ 18.05 Sachar Committee recommendation 227
§ 18.06 Cumulative Voting 228
§ 18.07 Single Transferable Vote 229
§ 18.08 Casual Vacancy 230
§ 18.09 Removal of Director 230
§ 18.10 Power of Company Law Board 230
§ 18.11 Private Companies exempted 230
§ 18.12 Government Companies exempted 230
Precedent # 18.01 Resolution—Option to adopt system of proportional representation for appointment of Direc-tors 231
CHAPTER 19
PROHIBITION OF ASSIGNMENT OF OFFICE BY DIRECTOR
§ 19.01 No assignment after death 232
§ 19.02 The implication of the word ‘his’ in Section 312 233
§ 19.03 What is not assignment ? 233
§ 19.04 Can an office of manager in a private company be assigned 233
PART IV
POWERS AND DUTIES OF DIRECTORS
CHAPTER 20
STATUS OF DIRECTORS AND THEIR
FIDUCIARY DUTIES
§ 20.01 Fiduciary relationship 237
§ 20.02 No fiduciary duties to individual shareholders 238
§ 20.03 Director—not servant or agent of individual shareholders 238
§ 20.04 Scope of duty of care 239
§ 20.05 Scope of fiduciary capacity 239
§ 20.06 Attachment of assets of a director for breaches of fiduciary duties 239
§ 20.07 Fiduciary position with regard to company’s capital 240
§ 20.08 Distinction between Director and Trustee proper 240
§ 20.09 Entire law of trust does not apply to Director 240
§ 20.10 Section 10 of Limitation Act does not apply 241
§ 20.11 Directors, both trustees and agents 241
§ 20.12 Directors-trustees of assets and not debts of the company 241
§ 20.13 Directors-trustees of monies 242
§ 20.14 Directors-trustees of company’s property 243
§ 20.15 Directors-trustees towards the company 243
§ 20.16 Duty not to make secret profits 243
§ 20.17 Directors to account for profit made to the shareholders 244
§ 20.18 No contract for personal profit 244
§ 20.19 Cannot use his position for personal benefit 245
§ 20.20 Directors—not trustees for creditors 245
§ 20.21 Can be sued for breach of trust 246
§ 20.22 Director—whether an employee 246
§ 20.23 Duty to disclose information to shareholders 247
§ 20.24 Company’s liability for acts of its directors 247
CHAPTER 21
POWERS OF THE BOARD
EXERCISABLE ONLY AT ITS MEETINGS
§ 21.01 Section 292¾Certain powers to be exercised by Board only at meeting 250
§ 21.02 Inter bank borrowings exempted 251
§ 21.03 Delegation of certain powers of the Board by resolutions at the meeting 252
§ 21.04 Borrowing powers can be delegated to non-director 252
§ 21.05 Section 372A(2) and delegation of power to invest by Board 252
§ 21.06 Resolution of Board not necessary where articles confirmed power 252
§ 21.07 Special powers under Articles cannot delegated 253
§ 21.08 Shareholders’ Resolution—internal requirement 253
§ 21.09 Power to make allotment by circular resolution 254
§ 21.10 Powers to make calls on shares and issue of debentures cannot be delegated 254
§ 21.11 Power of Borrowing Money 254
§ 21.12 One resolution for borrowing and creating charge 255
§ 21.13 Board can approve enhancement of rates of interest on deben-tures 255
§ 21.14 Express power to borrow in the memorandum for a non trading company 255
§ 21.15 Scope of delegated powers 255
§ 21.16 Presumption of powers to borrow 256
§ 21.17 Borrowing for ultra vires purposes 256
§ 21.18 Ultra vires borrowing will not bind the company 256
§ 21.19 If borrowing only is ultra vires the Board, general body may ratify the same 257
§ 21.20 The Rule in Royal British Bank v. Turquand 257
§ 21.21 Position of lenders in cases of ultra vires borrowing 257
§ 21.22 Provisions of Section 58-A regards borrowing 258
§ 21.23 Other powers of Board which are exercisable only at a meeting 258
§ 21.24 Power to authorise buy-back of shares or specified securities 259
§ 21.25 Power to invest the funds 259
§ 21.26 Inter-corporate deposits are not investments 259
§ 21.27 Whether inter corporate deposits are loans under Section 292(1)(e) 260
§ 21.28 Whether opening current account in a Bank requires Board reso-lution at a meeting 261
§ 21.29 External Commercial Borrowings 262
§ 21.30 ECB Policy 263
§ 21.31 Foreign Exchange Management (Borrowing or Lending in For-eign Exchange) Regulations, 2000 under FEMA, 1999 263
§ 21.32 Foreign currency borrowings with prior approval of RBI/Central Government 265
Precedent # 21.01 Resolution—Interest on arrears of call money 268
Precedent # 21.02 Resolution—Power to make calls (Another format) 268
Precedent # 21.03 Resolution—Power to buy-back securities 268
Precedent # 21.04 Resolution—Power to issue debentures 270
Precedent # 21.05 Resolution—Borrowing of moneys otherwise than on debentures by way of unsecured loan 271
Precedent # 21.06 Resolution—Power to borrow otherwise than on deben-tures within the limit approved by mem-bers 272
Precedent # 21.07 Resolution—Temporary accommodation from bank 273
Precedent # 21.08 Resolution—Temporary accommodation from Bank (Another format) 273
Precedent # 21.09 Resolution—Reduction of interest on overdrawn cash credit limit 274
Precedent # 21.10 Resolution—Borrowing from financial institutions 274
Precedent # 21.11 Resolution—Borrowing short-term working capital by issue of Commercial Paper 275
Precedent # 21.12 Resolution—Temporary borrowing of money 276
Precedent # 21.13 Resolution—Investment of Funds and their nature 277
Precedent # 21.14 Resolution—Investment of funds of the company 277
Precedent # 21.15 Resolution—Investment of funds (Another format) 278
Precedent # 21.16 Resolution—Investment of funds (Another format) 278
Precedent # 21.17 Resolution—Investment of funds of company in Mutual Fund 279
Precedent # 21.18 Resolution—Making of loans 280
Precedent # 21.19 Resolution—Borrowing of Moneys otherwise than on Debentures 280
Precedent # 21.20 Resolution—Power to make loans 281
Precedent # 21.21 Resolution—Power to make loans 281
Precedent # 21.22 Resolution—Advancing loan 282
Precedent # 21.23 Resolution—Making loans 283
Precedent # 21.24 Resolution—Delegation of power to borrow moneys, invest the funds of the company and to make loans 284
CHAPTER 22
DUTIES OF DIRECTORS
§ 22.01 Directors obligations 286
§ 22.02 Interests of the company 286
§ 22.03 Shareholders interests 286
§ 22.04 Creditors’ interests 287
§ 22.05 Proper purpose 288
§ 22.06 Duty of care and skill 288
§ 22.07 Cannot abrogate responsibility 290
§ 22.08 Duty to spend money only for business purposes 290
§ 22.09 Duty to take action against misappropriation of funds 291
§ 22.10 Duty to optimise investments 291
§ 22.11 Duty to enforce payment of calls 291
§ 22.12 Duty to act 291
§ 22.13 Duty to carry on business for the benefit of the company 292
§ 22.14 Duty as fiduciaries 292
§ 22.15 Duty towards individual share-holders 292
§ 22.16 Liability for negligence 293
§ 22.17 Dereliction of duties of a director 293
§ 22.18 Not liable for mere errors of judgment 294
§ 22.19 Must act honestly and reasonably 294
§ 22.20 Whether a director can compete with his company ? 295
§ 22.21 No duties towards, the subsidiary company 296
§ 22.22 Liability in respect of torts 297
§ 22.23 Liability for negligent information advice and opinion 297
§ 22.24 Directors and confidential information having a bearing on com-petition 298
CHAPTER 23
BOARD’S POWERS
§ 23.01 General Powers of Board 300
§ 23.02 Gist of the Section 301
§ 23.03 Division of Powers between Board of Directors and General Meeting 301
§ 23.04 General meeting cannot override Board’s power to carry on business 305
§ 23.05 Powers of the Board of Directors 305
§ 23.06 Construction of object clause 307
§ 23.07 Limits on power to deal with company’s assets 308
§ 23.08 Transactions ultra vires the company 309
§ 23.09 Ex gratia payments 309
§ 23.10 Gratuitous payments—ultra vires 309
§ 23.11 Donation—ultra vires the company 310
§ 23.12 Self-dealing by directors with company 312
§ 23.13 Director’s trading in company’s shares : Insider trading 313
§ 23.14 SEBI Prohibition of (Insider Trading) Regulations, 1992 as amended contain the law on the subject 315
§ 23.15 Civil liability for insider trading 316
Precedent # 23.01 Resolution—Approval and Adoption of Statement of Policies and Procedures Governing In-sider Trading 317
Precedent # 23.02 Resolution—General authorisation to Managing Direc-tor to sign and execute different docu-ments 323
Precedent # 23.03 Resolution—Delegation of Power of attorney to Manag-ing Director (Another format) 323
Precedent # 23.04 Resolution—Authorisation to Managing Director to in-cur capital expenditure 324
Precedent # 23.05 Resolution—Ratification of act of Managing Directors 324
Precedent # 23.06 Resolution—Appointment of Remuneration Committee 324
Precedent # 23.07 Resolution—Appointment of Purchase Committee 325
Precedent # 23.08 Resolution—Appointment of Technical Committee 325
Precedent # 23.09 Resolution—Adoption of Share Transfer Committee’s Report 326
Precedent # 23.10 Resolution—Authorisation to Secretary to handle legal action 326
Precedent # 23.11 Resolution—Authority to solicitors/lawyers to initiate action on behalf of company 327
Precedent # 23.12 Resolution—Reference to the solicitors for legal action 327
Precedent # 23.13 Resolution—Resolution constituting attorney for signing pleadings and representing the company in legal proceedings 328
Precedent # 23.14 Resolution—Appointment of lawyer on retainership basis 328
Precedent # 23.15 Resolution—Settlement of legal dispute 328
Precedent # 23.16 Resolution—Submission of a dispute before an arbitra-tor 329
Precedent # 23.17 Resolution—Arbitration in Government contracts 329
Precedent # 23.18 Resolution—Assigning duties to principal officer called but not really Directors 330
Precedent # 23.19 Resolution—Co-availing service of an executive 331
Precedent # 23.20 Resolution—Allotment of fractional shares in a bonus issue 331
Precedent # 23.21 Resolution—Recommendation of bonus issue 332
Precedent # 23.22 Resolution—Recommendation of bonus issue with dif-ferential voting rights 332
Precedent # 23.23 Resolution—Opening and operating bank account 333
Precedent # 23.24 Resolution—Revocation of authorisation to operate a bank account 335
Precedent # 23.25 Resolution—Recission of earlier resolution 335
Precedent # 23.26 Resolution—Approval of list of creditors 336
Precedent # 23.27 Resolution—Selling of company’s products 336
Precedent # 23.28 Resolution—Fixation of selling price: MRTP Act 336
Precedent # 23.29 Resolution—Export promotion tour 337
Precedent # 23.30 Resolution—Revaluation of fixed assets 337
Precedent # 23.31 Resolution—Performance guarantee/guarantees for ad-vance against contract 338
Precedent # 23.32 Resolution—Conversion of partly paid into fully paid shares 338
Precedent # 23.33 Resolution—Exercise of lien on shares 339
Precedent # 23.34 Resolution—Enforcement of lien by sale of shares 339
Precedent # 23.35 Resolution—Fees on registration of documents 340
Precedent # 23.36 Resolution—Insurance of company’s property 340
Precedent # 23.37 Resolution—Approving budget of the company 340
Precedent # 23.38 Resolution—Approval of Budget 341
Precedent # 23.39 Resolution—Application of reserves for meeting ex-penses 341
Precedent # 23.40 Resolution—Transfer of amount from general reserve to Profit and Loss Account 342
Precedent # 23.41 Resolution—Transfer of amount to general reserve 342
Precedent # 23.42 Resolution—Reimbursement of Travelling Expenses to Directors 342
Precedent # 23.43 Resolution—Reimbursement of Travelling and out of pocket expenses 343
Precedent # 23.44 Resolution—Agreement with the employees’ union 343
Precedent # 23.45 Resolution—Revision of salary scale pursuant to agree-ment 344
Precedent # 23.46 Resolution—Payment of salaries 344
Precedent # 23.47 Resolution—Gratuity payable to staff 344
Precedent # 23.48 Resolution—Payment of bonus to employees 345
Precedent # 23.49 Resolution—Payment of minimum bonus 346
Precedent # 23.50 Resolution—Agreement with depository for dematerialisation of shares 346
Precedent # 23.51 Resolution—External commercial borrowing of US $ 50 million under Automatic route 347
Precedent # 23.52 Resolution—External commercial borrowing of more than US $ 50 million and upto 100 mil-lion 348
Precedent # 23.53 Resolution—External commercial borrowing of more than US $ 100 million 349
Precedent # 23.54 Resolution—Dismissal of employee 350
Precedent # 23.55 Resolution—Appointment of Allotment/Share transfer committee 350
Precedent # 23.56 Resolution—Nomination of director in another Com-pany 350
Precedent # 23.57 Resolution—Resignation from the services by the Whole-time Director/ General Man-ager/Secretary 351
Precedent # 23.58 Resolution—Remuneration Committee Meeting 351
Precedent # 23.59 Resolution—Contribution to the National Defence Fund 352
Precedent # 23.60 Resolution—Contribution to National Defence Fund etc. 353

CHAPTER 24
RESTRICTIONS ON POWERS OF BOARD
§ 24.01 Advances and Temporary loans to Directors 357
§ 24.02 Board’s Powers 357
§ 24.03 Committee of Management 358
§ 24.04 Sale of shares—not sale of undertaking 358
§ 24.05 A closed unit—not an undertaking 358
§ 24.06 Sale of assets with knowledge and assent of shareholders 358
§ 24.07 Consent of Company in general meeting 359
§ 24.08 Debenture executed as security for repayment of Loan 359
§ 24.09 Right to use spare slaughterhouse 359
§ 24.10 Sale of Immovable Property 360
§ 24.11 Sale with approval of shareholders 360
§ 24.12 Only usufructuary mortgage hit by Section 293(1)(a) 360
§ 24.13 Sale of assets not sale of undertaking 361
§ 24.14 Sale of undertaking by a listed Company—approval through postal ballot 361
§ 24.15 Provision in the mortgage to take over management invalid 361
§ 24.16 Power of Remission [sub-section (1)(b)] 361
§ 24.17 Borrowing 361
§ 24.18 Free Reserves 363
§ 24.19 Capital Reserve 365
§ 24.20 Contribution to Charity, etc. 365
§ 24.21 Contributions in kind 366
§ 24.22 Contribution to political parties 366
§ 24.23 Power to give Gifts out of Company’s property 366
§ 24.24 Borrowing beyond limit 367
§ 24.25 “Invest”, “Investment” —See Notes under Chapter 21 367
§ 24.26 Private company exempted 367
§ 24.27 General Comments 368
Precedent # 24.01 Resolution—Sale of land of the company 369
Precedent # 24.02 Resolution—Sale of undertaking of the company 369
Precedent # 24.03 Resolution—Lease of undertaking of company 370
Precedent # 24.04 Resolution—Sale or lease of the undertaking (Another Format) 370
Precedent # 24.05 Resolution—Sale or disposal of undertaking 373
Precedent # 24.06 Resolution—Raising loan by mortgage of fixed assets 374
Precedent # 24.07 Resolution—Mortgaging company’s property to deben-ture trustees (Another Format) 374
Precedent # 24.08 Resolution—Mortgaging properties in favour of Lender 375
Precedent # 24.09 Resolution—Mortgaging properties in favour of Trus-tees for Debenture-holders 376
Precedent # 24.10 Resolution—Creation of mortgage to secure proposed issue of Debentures 378
Precedent # 24.11 Resolution—General Meeting under section 293 379
Precedent # 24.12 Resolution—Notice of General Meeting under section 293 (Another format) 380
Precedent # 24.13 Resolution—Extension of time for repayment of debt (Another Format) 382
Precedent # 24.14 Resolution—Extension of time for payment of debt (Another Format) 382
Precedent # 24.15 Resolution—Remission of moneys due from a Director 382
Precedent # 24.16 Resolution—Extension of time for repayment of debt 383
Precedent # 24.17 Resolution—Allowing extension of time for the repay-ment of debt 383
Precedent # 24.18 Resolution—Meeting to allow extension of time for repayment of debt 384
Precedent # 24.19 Resolution—General Meeting for allowing investment of compensation money to the Board 385
Precedent # 24.20 Resolution—Investment of compensation money other than in trustee securities 386
Precedent # 24.21 Resolution—Investment of the amount of compensa-tions 386
Precedent # 24.22 Resolution—Borrowings—by way of term loan from Bank 387
Precedent # 24.23 Resolution—Borrowing in excess of paid-up Capital and free reserves of the Company 388
Precedent # 24.24 Resolution—Offer of debentures to existing sharehold-ers 389
Precedent # 24.25 Resolution—Fresh Issue of Debentures to redeem earlier Issues 389
Precedent # 24.26 Resolution—Borrowing money for creating mortgage on the undertaking of the company 390
Precedent # 24.27 Resolution—Additional borrowing powers of the Direc-tors 391
Precedent # 24.28 Resolution—Supersession of authority for borrowing 392
Precedent # 24.29 Resolution—Borrowing by issue of debentures secured by floating charge 392
Precedent # 24.30 Resolution—Limitation on borrowings 393
Precedent # 24.31 Resolution—Increase in borrowing powers of Board 394
Precedent # 24.32 Resolution—Amendment of the ceiling on borrowing power 394
Precedent # 24.33 Resolution—Borrowing in excess of paid-up capital and free reserves 395
Precedent # 24.34 Resolution—Borrowing in excess of paid-up capital and free reserves (Another Format) 396
Precedent # 24.35 Resolution—Contribution to employees’ welfare fund 397
Precedent # 24.36 Resolution—Donation to Charitable institution 398
Precedent # 24.37 Resolution—Contribution to charitable and other funds 398
Precedent # 24.38 Resolution—Contribution to Education Institutions Abroad 399
Precedent # 24.39 Resolution—Contribution to charitable and other funds (Another Format) 400
Precedent # 24.40 Resolution—Contribution to charitable and other funds (Another Format) 400
Precedent # 24.41 Resolution—Contribution for charitable purposes 401
Precedent # 24.42 Resolution—Contribution to charitable funds in excess of the limits 402
CHAPTER 25
POWERS AND RIGHTS OF DIRECTORS
§ 25.01 Scope of Directors’ powers 403
§ 25.02 Doctrine of Internal Management 404
§ 25.03 Presumption of indoor management 405
§ 25.04 Authority through memorandum of association and articles 405
§ 25.05 Directors’ authority to act 405
§ 25.06 Powers of management—Share-holders cannot usurp this power 407
§ 25.07 Directors’ powers and shareholders’ control 407
§ 25.08 Shareholders can control directors by changing the articles or refusing to re-elect some directors 408
§ 25.09 Power to make their own judgment in the interest of the Company 408
§ 25.10 Where the articles give power to the Board to manage business 409
§ 25.11 Power to file suits 409
§ 25.12 Power to institute proceedings under authority of Board Resolution 410
§ 25.13 Power to institute of proceedings under power of attorney 410
§ 25.14 Power to institute criminal proceedings 411
§ 25.15 Power to borrow 411
§ 25.16 Power to lend 412
§ 25.17 Power to stand surety 412
§ 25.18 Power to delegate 412
§ 25.19 Delegation of duties by directors 412
§ 25.20 Power to take inspection of accounts 414
§ 25.21 Are nomination papers ‘books and paper’ 414
§ 25.22 Power to call general meetings 415
§ 25.23 Power of removal 415
§ 25.24 Power to change method of accounting 416
§ 25.25 Power to change working hours 416
§ 25.26 Limitations on the powers to create reserves 416
§ 25.27 No power to reduce capital 416
§ 25.28 No power to make certain payments 417
§ 25.29 No power to make certain arrangements with the creditors 417
§ 25.30 Power to issue further shares for the benefit of the company 417
§ 25.31 No power to issue shares with improper motive 417
§ 25.32 Instances of issue of capital for ‘other reasons’ 418
§ 25.33 Issue of capital by company with foreign financial collaboration 419
§ 25.34 Residual power with the general body 419
§ 25.35 Powers given by the Act cannot be taken away 419
§ 25.36 Director’s right to attend Board Meetings 420
§ 25.37 Director’s right to protect company’s patent rights 420
§ 25.38 Relief in respect of acts done in good faith 420
CHAPTER 26
VALIDITY OF ACTS OF DIRECTORS
§ 26.01 Object of the Section 422
§ 26.02 No protection against usurpation of authority 422
§ 26.03 Meaning of the expression—”Shown to the company to be invalid or to have terminated” 423
§ 26.04 Does not apply where there is no appointment 423
§ 26.05 No protection against known disqualification 424
§ 26.06 Does not apply to acts of Managing Director etc 424
§ 26.07 Does not apply to acts of Manager 424
§ 26.08 Does not apply to acts of persons with no authority at all 424
§ 26.09 Resolution of Board may be implied from conduct 424
PART V
MEETINGS OF DIRECTORS
CHAPTER 27
MEETINGS OF DIRECTORS
§ 27.01 Changes made by Amendment Act (LXV of 1960) 427
§ 27.02 Model Regulations as per Table A 428
§ 27.03 Directors act through Board Meetings 428
§ 27.04 Board meeting in every calendar quarter 428
§ 27.05 Meaning of month 428
§ 27.06 Clarification regarding Interval between Board Meetings 429
§ 27.07 Original meeting on a Sunday 430
§ 27.08 Board meeting on a Public holiday 430
§ 27.09 Adjourned Board meeting on public holiday 430
§ 27.10 Place and time of holding directors’ meeting 430
§ 27.11 Chance Board Meeting 431
§ 27.12 Irregularity in Board Meeting 431
§ 27.13 Excluding director from Board 431
§ 27.14 A duly elected Director if prevented by other directors to join as director, can file suit 432
§ 27.15 Meeting Through Telephone/ Video Conferencing 433
§ 27.16 Meeting through Video Conferencing 434
§ 27.17 Board Meeting Through Video Conferencing 435
§ 27.18 Meetings of the Board—Right of a member to obtain a copy of or inspect the minutes of such meetings 436
§ 27.19 Consequence of Board Meetings not being held 436
§ 27.20 Non-compliance punishable under section 629-A 437
§ 27.21 ICSI Guidance Note on Compliance Certificate (March 2001) 437
CHAPTER 28
NOTICE OF DIRECTORS’ MEETINGS
§ 28.01 Notice of Meetings 441
§ 28.02 Notice of Board Meeting 442
§ 28.03 Notice of Board Meeting to Foreign collaborator 442
§ 28.04 Notice of Board meetings to directors mostly staying abroad 442
§ 28.05 No complaint of want of notice, proceeding not invalid 443
§ 28.06 Irregularity for want of notice may be regularised 443
§ 28.07 No notice for adjourned meeting 444
§ 28.08 Form of notice 444
§ 28.09 Contents of notice 444
§ 28.10 Omission to forward agenda, effect of 444
§ 28.11 Absence of directors cannot be taken advantage of to pass resolutions 445
§ 28.12 Transaction of business not on agenda 445
§ 28.13 Substantial investment in equipments 445
§ 28.14 Increase of authorised capital to be specified in agenda 446
§ 28.15 No objection raised to transaction of business not on agenda 446
§ 28.16 Detailed for Board meeting agenda 446
§ 28.17 Contents of Agenda 447
§ 28.18 Recommendations of Kumarmangalam Birla committee 448
§ 28.19 Board resolutions binding on all 449
§ 28.20 Suit challenging validity of Board Meetings 449
§ 28.21 Only defaulting officer penalised 449
§ 28.22 Notice cancelling Board Meeting 449
§ 28.23 A notice cancelling a Board Meeting and simultaneously giving of a fresh notice for a Board Meeting is served is quite common 450
Precedent # 28.01 Resolution—Fixing a date of the Board Meeting 451
Precedent # 28.02 Resolution—Fixing time of Board Meetings (Another format) 451
Precedent # 28.03 Resolution—Board Meeting 452
Precedent # 28.04 Resolution—Board Meeting 452
Precedent # 28.05 Resolution—Notice of Board Meeting by Publication 453
Precedent # 28.06 Resolution—Cancellation of Board Meeting 453
Precedent # 28.07 Resolution—Amendment in Notice of Board Meeting 453
Precedent # 28.08 Resolution—Fresh Board Meeting 454
Precedent # 28.09 Resolution—Postponement of Board Meeting 454
Precedent # 28.10 Resolution—Notice at the instance of a director 455
Precedent # 28.11 Resolution—Consideration of unaudited quarterly fi-nancial results 455
Precedent # 28.12 Resolution—Quarterly unaudited results 456
Precedent # 28.13 Resolution—Notice of Board Meeting to consider unau-dited financial results (Another Format) 456
Precedent # 28.14 Resolution—Adjournment of Meeting 457
Precedent # 28.15 Resolution—Committee of Directors’ Meeting 457
CHAPTER 29
QUORUM FOR BOARD MEETINGS
§ 29.01 Quorum for meetings 458
§ 29.02 What is quorum ? 459
§ 29.03 Presumption of quorum 459
§ 29.04 Articles may stipulate higher number for quorum 459
§ 29.05 Quorum throughout the meeting 459
§ 29.06 Number of directors actually appointed count for quorum 460
§ 29.07 If number of directors reduced below minimum, business can be transacted if quorum present 460
§ 29.08 Quorum for meeting—Section 287: Quorum in cases where directors are interested 461
§ 29.09 Model Regulations as per Table A 461
§ 29.10 No quorum if only one disinterested director 461
§ 29.11 Board not properly constituted under section 255, cannot transact business even if quorum present 462
§ 29.12 Matter to be decided by General Meeting 462
§ 29.13 Where there is no provision for quorum, the entire Committee must meet 462
§ 29.14 Decision by majority 462
§ 29.15 Validity of Acts and irregular meeting 463
§ 29.16 Sub Directorship Company under English Law 463
§ 29.17 Contracts with third parties 464
§ 29.18 ICSI Guidance Note on Compliance Certificate (March 2001) 464
§ 29.19 Secretarial Standards on Meetings of the Board of Directors issued by the Council of ICSI (SS-1) [w.e.f. 13-12-2001] 465
CHAPTER 30
DIRECTORS’ MEETINGS ADJOURNED FOR WANT OF QUORUM
§ 30.01 Procedure where meeting adjourned for want of quorum 467
§ 30.02 Articles may have its own provisions 467
§ 30.03 Original meeting can be held on public holiday 468
§ 30.04 Where no quorum at the adjourned meeting also 468
§ 30.05 How to get over quorum problem 468
§ 30.06 Adjourned meeting for want of quorum not on a public holiday 468
§ 30.07 What is public holiday ? 468
§ 30.08 No contraventions of section 285 469
§ 30.09 Resolution at the adjourned meeting does not relate back 469
§ 30.10 Not calling adjourned meeting to avoid reappointment of Director not permitted 469
§ 30.11 Sitting fees, travelling allowances etc. for adjourned meeting 469
Precedent # 30.01 Resolution—Adjourning meeting for want of quorum 470
Precedent # 30.02 Resolution—Adjournment of board meeting 470
CHAPTER 31
CIRCULAR RESOLUTION
§ 31.01 Passing of resolutions by circulation 472
§ 31.02 Circular resolutions unless the Act or Articles specify 472
§ 31.03 Passing of Circular resolutions does not dispense with physical meetings under section 285 473
§ 31.04 Circular resolutions to find a place in the minutes book 473
§ 31.05 Matters which require sanction at Board meetings, and not by circulation 473
§ 31.06 Model Regulations as per Table A 474
§ 31.07 Secretarial Standards on Meetings of the Board of Directors issued by the Council of ICSI (SS-1) [w.e.f. 13-12-2001] 475
Precedent # 31.01 Resolution—Confirmation of resolution passed by cir-culation 477
Precedent # 31.02 Resolution—Confirmation of Directors resolution by circulation (Another format) 477
Precedent # 31.03 Resolution—Passing of Board Resolution by circulation by amending articles 478
CHAPTER 32
CHAIRMAN
§ 32.01 Chairman of the Board 480
§ 32.02 Chairman of the Board meeting 480
§ 32.03 Casting vote to be provided for 480
§ 32.04 A permanent director does not become a permanent Chairman 480
§ 32.05 Retiring director as Chairman of the Board 481
§ 32.06 Chairman has no executive powers 481
§ 32.07 Only Chairman of the Board has the casting vote 482
§ 32.08 Casting vote different from first vote 482
§ 32.09 Casting vote 482
§ 32.10 Position of Private Company for Conduct of Meetings 483
§ 32.11 Modification in relation to class meeting, etc. 483
§ 32.12 Chairman of the general meeting 483
§ 32.13 Importance of having an article like Regulation 50 of Table A 484
§ 32.14 Non-member Chairman 484
§ 32.15 Chairman’s casting vote on a poll 485
§ 32.16 Role of Chairman 485
§ 32.17 Powers under Common Law 486
§ 32.18 Duty to ensure presence of quorum 486
§ 32.19 Chairman to answer questions in general meeting 487
§ 32.20 Duty to observe strict impartiality 487
§ 32.21 Duty not to use ‘closure’ to prevent discussion 487
§ 32.22 Discussion at General Meeting 488
§ 32.23 Chairman’s decision in good faith regarding who is entitled to vote 489
§ 32.24 Chairman’s powers of expulsions 489
§ 32.25 Chairman cannot enlarge voting rights 489
§ 32.26 If articles provide, Chairman’s decision as to validity of vote conclusive 489
§ 32.27 Chairman’s power to check validity of proxies 489
§ 32.28 Decision of the chairman as to validity of proxies final 490
§ 32.29 Chairman’s power as to amendments to resolution 490
§ 32.30 Chairman’s power to withdraw resolution 490
§ 32.31 Voting on resolution en bloc 491
§ 32.32 Chairman’s declaration as to result of voting 491
§ 32.33 Chairman’s ruling resolution carried by show of hands 492
§ 32.34 Chairman’s declaration of result conclusive evidence 492
§ 32.35 To hold meetings on holidays which are not public holidays under the Act implications 493
§ 32.36 Duty not to arbitrarily adjourn meeting 493
§ 32.37 Some points to be noted about adjournments of meetings 493
§ 32.38 Powers of the Chairman vis-a-vis the conduct, validity and adjournment of meetings 495
§ 32.39 Assembly in one room not necessary for meetings 497
§ 32.40 Did the Chairman have power to adjourn the meeting 498
§ 32.41 Was the power of adjournment fairly exercised 498
§ 32.42 Decision of the Chairman at one stage binding on successors at a later stage 499
§ 32.43 Protections of statements made at general meeting 499
§ 32.44 Publication of chairman’s speech, etc., in newspapers/ magazines 500
§ 32.45 Consequences of irregular appointment of chairman 500
§ 32.46 Chairman cannot preside over his election 500
§ 32.47 Prosecution of Chairman 500
§ 32.48 Chairman’s liability for wrong decision 501
§ 32.49 Irregularities in procedure and interference by court at general meetings 501
§ 32.50 Appointment of observer instead of Chairman by CLB 501
§ 32.51 Appointment of Chairman by courts 502
§ 32.52 Removal of chairman 502
§ 32.53 Secretarial Standards on General Meetings issued by the Council of ICSI (SS-2) 503
PART VI
DIRECTORS REPORT
CHAPTER 33
DIRECTORS’ REPORT
§ 33.01 Board’s Report 508
§ 33.02 Recommendations of Company Law Committee 511
§ 33.03 Origin of requirement of Board’s Report 511
§ 33.04 Recommendations of Company Law Committee 1957 512
§ 33.05 Amendments made in section 217 between 1974 and 2001 require disclosure of particulars 513
§ 33.06 Recommendation of Working Group 513
§ 33.07 Director’s Statement of Responsibility 513
§ 33.08 Scope of section 514
§ 33.09 Corporate governance : Management discussion & Analysis Report by listed companies 514
§ 33.10 Report on corporate governance 515
§ 33.11 Contents of Board’s report 516
§ 33.12 SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999, w.e.f. 19-6-1999 517
§ 33.13 Clause 12. Disclosure in the Directors’ Report 517
§ 33.14 Clause 19. Disclosure and Accounting Policies 517
§ 33.15 Tax Implications of ESOS/Sweat Equity 518
§ 33.16 Cadbury Committee Report on Corporate Governance 519
§ 33.17 Cadbury Committee’s Recommendations as to Financial Reports 519
§ 33.18 Publication of Chairman’s speech 520
§ 33.19 “Reserve” 521
§ 33.20 Competent authority to create reserve 522
§ 33.21 Provision and reserve 522
§ 33.22 Directors’ terminology not conclusive as to description of provision as reserve 524
§ 33.23 Power to recommend dividend 524
§ 33.24 Material changes subsequent to close of financial year 525
§ 33.25 Accounting Standard 527
§ 33.26 Meaning of terms, material changes and commitments 528
§ 33.27 Disclosure of method of depreciation for wealth-tax purposes 528
§ 33.28 Disclosure in directors’ report of conservation of energy, etc. 528
§ 33.29 Board’s report to include names of certain employees 529
§ 33.30 General Circular No. 16 of 2002, dated 25-6-2002 529
§ 33.31 Lending of employees’ services 530
§ 33.32 Meaning of word ‘dependent’ for purpose of sub-clause (iii) 530
§ 33.33 Retiral benefits are not remuneration for the year 530
§ 33.34 Particulars relating to employees and meaning of ‘dependent children’ 530
§ 33.35 Department’s Clarifications 531
§ 33.36 Board’s report to include Director’s Responsibility Statement 533
§ 33.37 Annual Rateable value is the rent for company’s own buildings 533
§ 33.38 Board’s report to specify reasons for failure to complete buy-back within time 534
§ 33.39 Audit Committee 534
§ 33.40 Certificate of compliance from whole-time secretary in practice 535
§ 33.41 Directors’ explanation on qualified report of the auditors 535
§ 33.42 Views of the Institute of Chartered Accountants of India 535
§ 33.43 Date of Directors’ report 536
§ 33.44 Conversion of a deemed public company to a private limited company—Clarification regarding Directors’ Report (issued before the Companies (Amendment) Act, 2000) 536
§ 33.45 Board of directors to meet once again, if necessary, to consider reservations, qualification, etc., made in auditor’s report 537
§ 33.46 Signing of Board’s report 537
§ 33.47 Approval of Board’s report and accounts by circular resolution 538
§ 33.48 Non-banking Financial Companies (NBFCs) 538
§ 33.49 Liability for misstatements in the board’s report 539
§ 33.50 Formation of E-Corporate Business Working group to Synergise the provisions of Companies Act, 1956 with the Information Technology Act, 2000 539
§ 33.51 Non-applicability of Section 217 during winding up 539
§ 33.52 Wilful default 540
§ 33.53 Penalty for default 540
§ 33.54 Jurisdiction for complaints 540
§ 33.55 ICSI Guidance Note on Compliance Certificate (March 2001) 541
PART VII
CORPORATE GOVERNANCE
CHAPTER 34
CORPORATE GOVERNANCE
§ 34.01 Corporate Governance—An holistic approach 549
§ 34.02 The role of nominee Directors 550
§ 34.03 Optimum size of the Board 551
§ 34.04 The role of nominee Directors 551
§ 34.05 A person drawn from the field of academics 552
§ 34.06 A former Bureaucrat 552
§ 34.07 The different Committees of Directors 553
§ 34.08 Processes for Corporate Governance 554
§ 34.09 Conclusion 554
§ 34.10 Kumarmangalam Committee on Corporate Governance 554
§ 34.11 Board of Directors 556
§ 34.12 Composition of the Board of Directors 556
§ 34.13 Independent directors and the definition of independence 557
§ 34.14 Nominee directors 558
§ 34.15 Chairman of the Board 559
§ 34.16 Remuneration Committee of the Board 559
§ 34.17 Composition, Quorum etc. of the Remuneration Committee 560
§ 34.18 Disclosures of remuneration package 561
§ 34.19 Board Procedures 561
§ 34.20 Management 562
§ 34.21 Functions of the management 562
§ 34.22 Shareholders 563
§ 34.23 Responsibilities of shareholders 564
§ 34.24 Shareholders’ rights 565
§ 34.25 Institutional shareholders 566
§ 34.26 Manner of implementation 567
§ 34.27 Audit Committee 569
§ 34.28 Remuneration Committee 569
§ 34.29 Name of non-executive director heading the Committee 570
§ 34.30 General body meetings 570
§ 34.31 Disclosures 570
§ 34.32 Means of communication 570
§ 34.33 Adequacy of internal audit function 570
§ 34.34 General shareholder information 571
§ 34.35 Enforcement of corporate governance—Setting up of separate monitoring cell and listing of initial public offerings 571
§ 34.36 Corporate Governance & Listing Agreement 573
§ 34.37 Board of Directors and its Composition 586
§ 34.38 Shareholders/Investor’s Grievance Committee 588
§ 34.39 Audit Committee 589
§ 34.40 Schedule of Implementation 597
PART VIII
AUDIT COMMITTEE
CHAPTER 35
AUDIT COMMITTEE
§ 35.01 Audit Committee 601
§ 35.02 Companies (Amendment) Act, 2000 (w.e.f 13-12-2000) 602
§ 35.03 Recommendations of Parliamentary Standing Committee 602
§ 35.04 Scope of the section 603
§ 35.05 Concept of Audit Committee in India 604
§ 35.06 Working Group on the Companies Act, 1956 605
§ 35.07 Concept of Audit Committee in U.S.A. 605
§ 35.08 Oversight Board to ensure integrity of Audited Financial Statements in US 606
§ 35.09 Concept of Audit Committee in U.K. 611
§ 35.10 Hampell Committee Report, 1998 611
§ 35.11 Concept of Audit Committee in Canada 612
§ 35.12 Audit Committee of listed companies 612
§ 35.13 Audit Committee 612
§ 35.14 Companies required to constitute Audit Committee 614
§ 35.15 Constitution of Audit Committee 615
§ 35.16 Terms of reference for Audit Committee 615
§ 35.17 Chairman of the Audit Committee 615
§ 35.18 The Auditors, the internal auditor and the audit-in-charge of finance 615
§ 35.19 Scope and functions of the Audit Committee 615
§ 35.20 Recommendations of the Audit Committee 616
§ 35.21 Penalty for default 616
§ 35.22 Audit Committee of NBFC 616
§ 35.23 Secretarial Standards on General Meetings issued by the Council of ICSI (SS-2) 617
Precedent # 35.01 Resolution—Audit Committee Meeting 618
Precedent # 35.02 Resolution—Constitution of Audit Committee 618
PART IX
MANAGERIAL PERSONNEL
CHAPTER 36
MANAGING DIRECTOR
§ 36.01 Definition 625
§ 36.02 Managing Director—A Director First 626
§ 36.03 Whether enabling provision in the articles required for appointment 627
§ 36.04 Method of appointing a Managing Director 628
§ 36.05 Doctrine of ostensible authority Managing Director 629
§ 36.06 Power of attorney—Not a proper entrustment 629
§ 36.07 Conferment of powers on Managing Directors 629
§ 36.08 Entrustment of powers by resolution of Board or general meeting 630
§ 36.09 Reduction of or addition to managing director’s powers 630
§ 36.10 Managing Director as an employee 630
§ 36.11 Manager—If also a director, whether a Managing Director 632
§ 36.12 Non-applicability of Specific Relief Act 632
§ 36.13 More than one Managing Director in a Company 632
§ 36.14 Meaning of the word “substantial” 633
§ 36.15 Resignation of Managing Director—when takes effect 634
§ 36.16 Removal of Managing Director—Whether Breach of Contract 635
§ 36.17 Removal of managing director for oppression/mismanagement 636
§ 36.18 Managing Director of not more than two Companies 637
§ 36.19 Term—not more than five years 638
§ 36.20 Government approval—when refused 638
§ 36.21 Continuance in office after approval is refused [Position before Amendment Act, 1988] 639
§ 36.22 Compulsory appointment 641
§ 36.23 No Determination of appointment on upward revision in threshold limit under section 269 641
§ 36.24 Appointment of a relative of a Director as whole-time Director or Managing Director—no approval U/S 314 (1B) 641
§ 36.25 Managing Director—does not hold place or office of profit 642
§ 36.26 Government approval—implications 643
§ 36.27 Government approval 644
§ 36.28 Fit and proper person 644
§ 36.29 Guidelines on application to Central Government 645
§ 36.30 Filing of return with ROC 645
§ 36.31 Appointment of managing director without remuneration 646
§ 36.32 Change of designation of managerial personnel 646
§ 36.33 Reference by Central Government 646
§ 36.34 Need for a speaking order 648
§ 36.35 Amendment of any provision relating to Managing Director 648
§ 36.36 Insertion of a provision—not amendment 648
§ 36.37 Continuing as employee after ceasing to be Managing Director 648
§ 36.38 Removal—not amendment under section 268 649
§ 36.39 No Personal Liability 649
§ 36.40 Persons not eligible to be Managing Directors 649
§ 36.41 What is moral turpitude 650
§ 36.42 Order of conviction for moral turpitude operates immediately unless specifically stayed 650
§ 36.43 No notice of suspension necessary 651
§ 36.44 What is composition with creditors? 651
§ 36.45 Wharton Law Lexicon 651
§ 36.46 Prohibition of simultaneous appointment of a managing director and a manager 652
§ 36.47 Simultaneous appointment of managing director and whole-time director 652
§ 36.48 Director in-charge 652
§ 36.49 Executive, Assistant or Special Directors 652
§ 36.50 Presidents/Vice-Presidents 653
§ 36.51 Private Companies becoming Public Companies—effect on managerial appointment 654
§ 36.52 Tenure not more than 5 years from becoming public 655
§ 36.53 Terms of appointment to be sent to every member under section 302 655
§ 36.54 Resignation/Termination in respect of a Managing Director 655
§ 36.55 Committee of Directors are not managing directors 656
§ 36.56 Representative capacity of Managing Director 656
§ 36.57 Managing Director—not liable for company’s dues 656
§ 36.58 Power to enter into service contracts with directors—only by Board 657
§ 36.59 Disqualification not to operate where appeal or petition preferred against 657
§ 36.60 Managing Director entitled to accept notice on behalf of the company 657
§ 36.61 Service Contracts and Managing Director’s to tenure—Service contract subject to Articles 657
§ 36.62 Service contract with Managing Director—terminator theory 657
§ 36.63 Decree against company and Managing Director—Managing Director not Judgement Debtor 658
§ 36.64 Disqualification of Managing Director 658
§ 36.65 Amendment of provision relating to Managing/whole-time or non-rational Directors 658
§ 36.66 Appointment of managerial personal 659
§ 36.67 Expenses Incurred on Travelling and Transportation of Personal Effects of Managing or whole-time Director or Manager 659
§ 36.68 Section 269—Appointment or re-appointment of Managing or Whole-time Director 660
§ 36.69 Companies (Central Govt.’s) General Rules & Forms, 1956 660
§ 36.70 Managerial Appointments and Remuneration Amendments made in Schedule XIII vide Press Note 3/2000, dated 6th March, 2000 and vide GSR 36(E), dt. 26-1-2002 and vide GSR 565(E), dt. 14-8-2002 and vide GSR 670(E), dt. 30-9-2002. 662
§ 36.71 Amendments made in Schedule XIII by GSR 418(E) dt. 12-9-1996 662
§ 36.72 Amendments in Schedule XIII by GSR 565(E), dt. 14-8-2002 663
§ 36.73 Amendments in Schedule XIII by GSR 670(E), dt. 30-9-2002 663
Precedent # 36.01 Resolution—loss of office and liquidated damages 664
Precedent # 36.02 Resolution—Specimen of Managing Director’s Agree-ment 668
Precedent # 36.03 Resolution—Disqualification of Managing Director 671
Precedent # 36.04 Resolution—Disqualification of Managing Director 671
Precedent # 36.05 Resolution—Disqualification of Managing Director 672
Precedent # 36.06 Resolution—Variation of the terms of agreement with Managing Director 672
Precedent # 36.07 Resolution—Appointment of Managing Director or whole-time Director 673
Precedent # 36.08 Resolution—Appointment of Managing or Whole-Time Director or Manager who has attained the age of seventy years 676
Precedent # 36.09 Resolution—Amendment of provision relating to Man-aging/whole-time Directors 677
Precedent # 36.10 Resolution—Variation in terms of appointment of Managing Director 678
Precedent # 36.11 Resolution—Reappointment of whole-time Executive Director 678
Precedent # 36.12 Resolution—Appointment/re-appointment of managing/ whole-time Directors 679
Precedent # 36.13 Resolution—Application to the Central Government for approval to the appointment of Manag-ing Director 680
Precedent # 36.14 Resolution—Forwarding a copy of application for ap-pointment of Managing Director 681
Precedent # 36.15 Resolution—Appointment of Managing or Whole-Time Director or Manager who has not com-pleted the age of twenty five years but has attained the age of majority 681
Precedent # 36.16 Resolution—Appointing Managing Director/whole-time Director 683
Precedent # 36.17 Resolution—Appointment of Managing Director (Another format) 684
Precedent # 36.18 Resolution—Re-appointing Managing Director/Whole-time Director 685
Precedent # 36.19 Resolution—Reference to Company Law Board by Cen-tral Government for appointment made without Govt. Approval 685
Precedent # 36.20 Resolution—Appointment of a Whole-time Director 686
Precedent # 36.21 Resolution—Appointment and payment of remuneration to Managing Director 689
Precedent # 36.22 Resolution—Appointment/re-appointment of Managing/ Whole-time Director 690
Precedent # 36.23 Resolution—Re-designation of Manager as Managing Director of the company 691
Precedent # 36.24 Resolution—Appointment of Managing/Whole-time director below certain age limit 692
Precedent # 36.25 Resolution—Appointment of Managing/Whole-time Director beyond certain age limit 692
Precedent # 36.26 Resolution—Resolution sanctioning Managing Direc-tor’s remuneration 693
Precedent # 36.27 Resolution—Abstracts of variation of terms of appoint-ment 693
Precedent # 36.28 Resolution—Memorandum as to variation of interest in contract of service of Managing Director 694
Precedent # 36.29 Resolution—Memorandum of interest 695
Precedent # 36.30 Resolution—Appointment as Managing Director of more than two companies 696
Precedent # 36.31 Resolution—Appointment of Managing Director or a person who is already Managing Direc-tor of another company 697
Precedent # 36.32 Resolution—Appointment of Managing Director in more than one company 698
Precedent # 36.33 Resolution—Appointment of Managing Director for more than 5 years by a private company 698
Precedent # 36.34 Resolution—Modification in the provision of Articles for appointment of Managing Director 699
Precedent # 36.35 Resolution—Re-appointment of Managing Director 699
Precedent # 36.36 Resolution—Objection to Re-appointment of Managing Director 700
Precedent # 36.37 Resolution—Amendment of Articles relating to appoint-ment of Managing/Whole time Di-rectors 700
Precedent # 36.38 Resolution—Insertion in newspapers relating to ap-pointment of Managing/Whole time Di-rector of a company 701
Precedent # 36.39 Resolution—Appointment of a paid Managing Director/ Chairman (Whole-time) 701
Precedent # 36.40 Resolution—Intimation to Stock Exchange regarding Appointment of Managing Director 702
Precedent # 36.41 Resolution—Increase in remuneration payable to Man-aging Director 702
Precedent # 36.42 Resolution—Increase in remuneration payable to Joint Managing Director 703
Precedent # 36.43 Filing of application with the Central Government for making a complaint against the appoint-ment of the managerial personnel under section 269(7) of the Companies Act, 1956 704
Precedent # 36.44 Filing of application with the Central Government for forming an opinion with regard to pos-sessing of requisite qualification under section 309(1) proviso (b) of the Com-panies Act, 1956 706
Precedent # 36.45 Filing of application with the Central Government for waiving recovery of remuneration paid to the director under section 309(5B) of the Companies Act, 1956 708
Precedent # 36.46 Form No. 25A-Filing of application to the Central Gov-ernment for approval of appoint-ment/re-appointment and remuneration payable to managing/whole-time directors or manager under sections 198(4), 269, 309(3), 311, 387 and 388 710
Precedent # 36.47 Form No. 25B-Filing of Application with the Central Government for approval to amendment of provision relating to managing, whole-time or non-rotational directors under section 268 721
Precedent # 36.48 Form No. 25C-Filing of Return of appointment of man-aging director/whole-time director/ man-ager under section 269(2) and Schedule XIII 723
Precedent # 36.49 Filing of application with the Central Government for appointment of managing director of more than two companies under section 316(4) of the Companies Act, 1956 727
CHAPTER 37
MANAGER
§ 37.01 Who is a Manager? 730
§ 37.02 Only one Manager 731
§ 37.03 President—when not a Manager 731
§ 37.04 Body Corporate not a Manager 731
§ 37.05 Factory manager—not manager 732
§ 37.06 Site Manager 732
§ 37.07 Manager and Managing Director distinguished 732
§ 37.08 Management of the whole or substantially the whole 733
§ 37.09 Department’s Clarification 734
§ 37.10 Representative Capacity of Manager, Managing Director 734
§ 37.11 Who are disqualified to be a Manager 734
§ 37.12 Unlike a Managing Director, conviction only within the preceding five years 735
§ 37.13 Manager of not more than two companies 735
§ 37.14 Resolution at Board meeting 735
§ 37.15 Section 386 not applicable to private companies 736
§ 37.16 Term—not more than five years 736
§ 37.17 Non-applicability of Section 302 736
§ 37.18 Who can appoint a Manager 736
§ 37.19 Determination of Remuneration of Manager by the Board 737
§ 37.20 Manager and Section 314 737
§ 37.21 Government approval for appointment 737
§ 37.22 Assignment of office 737
§ 37.23 Whether enabling provision in the Articles required for appointment of manager 738
§ 37.24 Officer in default 738
§ 37.25 Filing of agreement 738
§ 37.26 Simultaneous appointment of manager and whole-time director 738
Precedent # 37.01 Filing of application with the Central Government for appointment of manager of more than two compa-nies under section 386(4) of the Companies Act, 1956 739
CHAPTER 38
WHOLE-TIME DIRECTOR
§ 38.01 Who is a whole-time Director? 742
§ 38.02 Section 314 and whole-time Director 742
§ 38.03 Tenure of more than five years 743
§ 38.04 Nature of office 743
§ 38.05 Section 302 and whole-time Director 744
§ 38.06 Government approval for appointment 745
§ 38.07 Whole-time Directors and section 316 745
Precedent # 38.01 Resolution—Appointment of whole-time Directors 747
Precedent # 38.02 Resolution—Appointment of Whole-time Director 749
Precedent # 38.03 Resolution—Re-appointment of Managing/Whole-time Director 749
PART X
MANAGERIAL REMUNERATION
CHAPTER 39
MANAGERIAL REMUNERATION
§ 39.01 Its genesis and historical back-ground 753
§ 39.02 Statutory discretion of the Company Law Board 754
§ 39.03 Mahindra & Mahindra case 755
§ 39.04 Schedule XIII—Statutory Guidelines 755
CHAPTER 40
OVERALL LIMITS ON MANAGERIAL
REMUNERATION
§ 40.01 Overall limits [Section 198] 756
§ 40.02 Changes made by Amendment Act (LXV of 1960) 757
§ 40.03 Private Companies Exempted 758
§ 40.04 Government Companies exempted 758
§ 40.05 Regulation 65 of Table A reads 758
§ 40.06 Provision in the Articles required for payment of travelling and other expenses to directors 758
§ 40.07 Monthly remuneration to managing, whole-time director or manager 759
§ 40.08 Application for Central Government approval of minimum remuneration 759
§ 40.09 Power of Central Government quasi-judicial 760
§ 40.10 Remuneration for non-managerial services of directors 760
§ 40.11 Remuneration 760
§ 40.12 Consideration paid to Director for abstaining from doing specified act 761
§ 40.13 No sitting fees to Holding’s Company’s whole-time director or Managing director receiving commission: 762
§ 40.14 Sitting fees¾whether remuneration 762
§ 40.15 Sitting fees may be paid even by a losing Company 762
§ 40.16 No lien on fees to directors 762
§ 40.17 Commission payable only after accounts are made up 763
§ 40.18 Where payment only by way of commission—no payment when there is loss 763
§ 40.19 Prescribed Form 763
§ 40.20 Department Circular 764
§ 40.21 Revision of Form 764
§ 40.22 Remuneration on ‘actual basis’ 764
§ 40.23 Employees Stock Options given to Non-Wholetime Directors, whether remuneration under the Companies Act, 1956 764
§ 40.24 Judicial interpretation of ‘expenditure’ under Income-tax Act 766
§ 40.25 ICSI Guidance Note on Compliance Certificate (March 2001) 768
CHAPTER 41
REMUNERATION TO DIRECTORS
§ 41.01 Remuneration of Directors 770
§ 41.02 Suggestions of Company Law Committee 772
§ 41.03 Does not apply to private companies 773
§ 41.04 Does not apply to Banking companies 773
§ 41.05 Government Companies Exempted 774
§ 41.06 Limits on Remuneration 774
§ 41.07 Application for Central Government approval under sub-section (3) proviso 774
§ 41.08 Excess over the limit to be refunded 775
§ 41.09 Only managerial remuneration hit 775
§ 41.10 Consideration to director for abstaining from doing an act¾not remuneration 775
§ 41.11 Scope of the changes made by the Amendment Act (XXXI of 1965) 775
§ 41.12 Directors’ Remuneration 776
§ 41.13 Determination of remuneration by articles or resolution 776
§ 41.14 ‘Whole-time director’ and ‘Director in the whole-time employment’ 776
§ 41.15 Fee for attending Board Meeting 777
§ 41.16 Remuneration of Ordinary Director 777
§ 41.17 Ordinary Foreign Directors 777
§ 41.18 Appointment and remuneration in respect of non-resident directors 778
§ 41.19 Waiver of excess remuneration 778
§ 41.20 Waiver of payment made under defective appointment 779
§ 41.21 Repairs and maintenance of whole-time directors’ or managing director’s own premises—whether Part of remuneration 779
§ 41.22 Travelling and Daily Allowance 780
§ 41.23 Quantum Meruit Remuneration 781
Precedent # 41.01 Resolution—Payment of remuneration to all Manag-ing/whole-time Director in uniform basis (Another format) 782
Precedent # 41.02 Resolution—Reimbursement of expenses to Directors 783
Precedent # 41.03 Resolution—Remuneration of Directors 784
Precedent # 41.04 Resolution—Remuneration of Directors (Another for-mat) 785
Precedent # 41.05 Resolution—Remuneration of a Whole-time Director 786
Precedent # 41.06 Resolution—Variation in the remuneration of a Whole-time Director 786
Precedent # 41.07 Resolution—Remuneration of Managing Director/ Whole-time Director 787
Precedent # 41.08 Resolution—Waiver of over payment of remuneration 788
Precedent # 41.09 Resolution—Waiver of recovery of excess remuneration (Another Format) 789
CHAPTER 42
COMMISSION TO NON-WHOLE-TIME
DIRECTORS
§ 42.01 Remuneration of Directors 790
§ 42.02 Departmental Clarification 791
§ 42.03 Section 309(4) self-sufficient code 791
§ 42.04 Commission in addition to sitting fees 792
§ 42.05 Commission first paid, then sitting fees, not hit 792
§ 42.06 No need to have enabling provision in the Articles 792
§ 42.07 General permission for payment of sitting fee, commission, remuneration, etc. to non-whole-time directors 793
Precedent # 42.01 Resolution—Payment of remuneration/Commission to Directors not in whole-time employment of Company 794
Precedent # 42.02 Resolution—Proposal to pay Commission to Directors 795
Precedent # 42.03 Resolution—Proposal for renewal of Payment of Com-mission to Directors 796
Precedent # 42.04 Resolution—Commission to Director other than Manag-ing Director/Whole-time Director 797
Precedent # 42.05 Resolution—Commission on profits to Directors 798
Precedent # 42.06 Resolution—Payment of Commission to Directors 799
CHAPTER 43
PROFESSIONAL SERVICE OF DIRECTORS AND REMUNERATION THEREFOR
§ 43.01 Who is a Professional Director ? 800
§ 43.02 Power to remunerate professional services 800
§ 43.03 No approval, only certificate from Government for payment of remuneration 801
§ 43.04 Government not to put restrictions on amount of remuneration 801
§ 43.05 Central Government cannot evade giving certificate 801
§ 43.06 What are services of professional nature ? 802
§ 43.07 Indirect remuneration also hit 803
§ 43.08 Persons in actual Professional Practices 803
§ 43.09 Restriction on Director when acting as Legal adviser 803
§ 43.10 The words ‘any such director’—not happy 804
§ 43.11 Extra remuneration for professional services 804
§ 43.12 Interest paid on loans is not remuneration 805
§ 43.13 Guarantee commission—not remuneration under section 309 805
§ 43.14 Department has issued the following circular 805
CHAPTER 44
INCREASE IN REMUNERATION
§ 44.01 Provision for increase in remuneration to require Government sanction 807
§ 44.02 Payment of Sitting Fee 808
§ 44.03 Maximum Sitting Fees 808
§ 44.04 Rule 809
§ 44.05 The Department has given the following clarification 810
§ 44.06 Wife accompanying Director on business tours 810
§ 44.07 Government approval for increase or provision for increase 811
§ 44.08 Reference to Board resolution for increase of remuneration 811
§ 44.09 Exempted increases 811
§ 44.10 Remuneration for professional services exempt 811
§ 44.11 Increase within five years when earlier resolution for remuneration is in force 812
§ 44.12 No increase when payment for the first time 812
§ 44.13 Payment of commission on profits to part time directors 813
§ 44.14 Managers 813
§ 44.15 Private Companies 813
§ 44.16 Applies to Section 4(7) private companies 813
§ 44.17 Banking Companies 813
§ 44.18 Government companies exempted 814
§ 44.19 Prescribed Form and Procedure 814
Precedent # 44.01 Resolution—Increase in remuneration without gov-ernment approval 815
Precedent # 44.02 Resolution—Increase in remuneration to Directors with Government Approval 816
Precedent # 44.03 Resolution—Increase in remuneration with Government Approval (Another Format) 817
Precedent # 44.04 Increase in sitting fee of Director for attending meeting 817
Precedent # 44.05 Resolution—Proposal for an increase of sitting fees to Directors 821
Precedent # 44.06 Resolution—Increase in sitting fee beyond limits 822
Precedent # 44.07 Resolution—Increase in sitting fees within limits 823
Precedent # 44.08 Resolution—Director to receive sitting fees from subsidiary 824
Precedent # 44.09 Resolution—Increasing sitting fee by amending Articles 824
Precedent # 44.10 Resolution—Increase in remuneration payable to whole-time Directors 825
Precedent # 44.11 Resolution—Variations/amendment regard to Remune-rations/perquisition 825
Precedent # 44.12 Form No. 26—Filing of Application with the Central Government for increase in remunera-tion of managing director or whole-time director or manager under sections 310, 311 and 388 827
CHAPTER 45
INCREASE OF REMUNERATION ON
RE-APPOINTMENT
§ 45.01 Increase in remuneration of managing director on re-appointment or appointment after Act to require Central Government sanction. 838
§ 45.02 Not applicable to ordinary directors 838
§ 45.03 Approval not necessary if increase in accordance with Schedule XIII 839
§ 45.04 Does not apply to private companies proper 839
§ 45.05 Does not apply to Banking companies 839
§ 45.06 Also applies to manager 839
§ 45.07 Company Law Department’s instructions 839
§ 45.08 Prescribed Forms 840
§ 45.09 Relevant Rules 840
§ 45.10 Government Companies Exempted 840
Precedent # 45.01 Resolution—Increase in remuneration on re-appoint-ment of Managing Director 841
Precedent # 45.02 Resolution—Increase in remuneration on re-appoint-ment of Managing Director (Another Format) 841
CHAPTER 46
DETERMINATION OF NET PROFITS FOR
MANAGERIAL REMUNERATION
§ 46.01 Determination of net profits 843
§ 46.02 Calculation of commission of officers or employees of private companies 845
§ 46.03 Does not apply to private companies proper 846
§ 46.04 Private companies can adopt own method of calculation 846
§ 46.05 Import entitlements 846
§ 46.06 Taxes on Excess Profits 846
§ 46.07 Outgoings and contributions 846
§ 46.08 Interpretation of clauses (a) and (j) of Section 349(4) of the Companies Act, 1956 847
§ 46.09 Rejection of approval by Central Government not to render appointment ineffective 849
§ 46.10 Excess of Expenditure over income 849
§ 46.11 Whether previous years’ loss to be deducted 849
§ 46.12 Contributions to political parties are outgoings 851
§ 46.13 Fixed amount amortised for lease-hold land to be deducted 852
§ 46.14 Whether arrears of depreciation to be deducted 852
§ 46.15 Payments under Voluntary Retirement Scheme not to be deducted 854
§ 46.16 Payment of wealth-tax—not out-going 854
CHAPTER 47
APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
UNDER SCHEDULE XIII
§ 47.01 Remuneration payable by companies having profits 856
§ 47.02 Remuneration payable by companies having no profits or inadequate profits 856
§ 47.03 Conditions specified in Schedule XIII required to be satisfied 866
§ 47.04 Compliances under Part III of Schedule XIII 867
§ 47.05 Conditions specified in Schedule XIII are required to be satisfied only at the time of appointment 868
§ 47.06 Appointment of managerial personnel without remuneration 868
§ 47.07 What is ‘conviction of an offence’ under Part I of Schedule XIII 868
§ 47.08 ‘Mens Rea’ is necessary 869
§ 47.09 Age criterion 869
§ 47.10 Remuneration from two companies 869
§ 47.11 Non-resident as director 869
§ 47.12 Remuneration payable by companies who have no profits or inadequate profits 870
§ 47.13 Non-applicability of the revised Part II to minimum remuneration already approved 874
§ 47.14 Payment of Managerial Remuneration by companies in Special Economic Zones (SEZ) 877
§ 47.15 List of operational and approved Special Economic Zone 877
§ 47.16 SEZ’s Approved for establishment 878
§ 47.17 Facilities in Special Economic Zones 879
§ 47.18 Indian SEZ—Salient Features and Facilities 879
§ 47.19 Definition of Effective Capital—exhaustive 881
§ 47.20 What is ‘long term-loan’ ? 881
§ 47.21 Meaning of the word ‘investments’ 881
§ 47.22 What is a Club 882
§ 47.23 Salary while on annual leave 882
§ 47.24 Medical expenses 882
§ 47.25 Use of company’s car and residential telephones 883
§ 47.26 Expenses incurred on travelling and transportation of personal effects of Managing or Whole-time Director or Manager 884
§ 47.27 Repair, maintenance of managing director’s own premises—Whether remuneration 884
§ 47.28 Relevant Form 885
§ 47.29 Application for Central Government’s approval for payment of Managerial Remuneration 885
§ 47.30 Circular II, Extracts from File No. 12/7/2000 CL.VIII, dated 27-12-2000 886
§ 47.31 Rejection of approval by Central Government not to render appointment ineffective 891
§ 47.32 Change of designation of managerial personnel 891
§ 47.33 Reference by Central Government 891
§ 47.34 Approval for Appointment of relative of managing director as whole-time director 892
§ 47.35 Powers of Central Government under section 637B(a) 893
§ 47.36 Penalties for default 893
§ 47.37 ICSI Guidance Note on Compliance Certificate (March 2001) 894
§ 47.38 Return of Appointment of Managing Director/Whole-time Director/Manager 894
§ 47.39 Appointment of managerial personnel 894
CHAPTER 48
ASCERTAINMENT OF DEPRECIATION FOR PURPOSES OF MANAGERIAL
REMUNERATION
§ 48.01 Salient features of Schedule XIV 896
§ 48.02 Department’s Clarification on Schedule XIV 900
§ 48.03 Revision of Rates of Depreciation—Schedule XIV 901
§ 48.04 Clarifications issued by the Institute of Chartered Accountants of India 902
§ 48.05 Continuous process plant 902
§ 48.06 Depreciation on low value items 903
§ 48.07 Other Departmental Clarifications on ‘Depreciation’ 904
§ 48.08 Departmental clarification 906
§ 48.09 Date of coming into force of Schedule XIV 906
§ 48.10 ‘Specified period’ definition—no change 908
—Schedule XIV 909
CHAPTER 49
COMPENSATION FOR LOSS OF OFFICE FOR MANAGERIAL PERSONNEL
§ 49.01 Compensation for loss of office is not permissible except to managing or whole-time directors or to directors who are managers 918
§ 49.02 Compensation for loss of office 919
§ 49.03 Compensation in addition to pension, damages for breach of contracts 920
§ 49.04 Payment may be made by a company only Board’s approval required 921
§ 49.05 Compensation on winding up 924
§ 49.06 Disentitlement to compensation on breach of trust, etc. 925
§ 49.07 No remuneration where removal fully justified 925
§ 49.08 Jurisdiction of company court 925
§ 49.09 Section 319 deals with payment of compensation to a director in connection with transfer of company’s undertaking or property 926
§ 49.10 Deemed to have been received 926
§ 49.11 Scope of section 927
§ 49.12 Payment of compensation to directors for loss of office, etc. 927
§ 49.13 Section 320—Payment to director for loss of office, etc., in connection with transfer of shares 928
§ 49.14 Unauthorised payment to be held by recipient in trust 930
§ 49.15 Penalty for default 930
§ 49.16 Damages for breach of contract or pension 930
Precedent # 49.01 Resolution—Compensation for loss of office 931
Precedent # 49.02 Resolution—Payment to Director for loss of office on transfer of undertaking or property 931
Precedent # 49.03 Resolution—Payment to Director for loss of office in connection with Transfer of shares 932
PART XI
CONTRACTS AND DIRECTORS INTEREST
CHAPTER 50
BOARD’S SANCTION FOR CERTAIN CONTRACTS
§ 50.01 Board’s sanction to be required for certain contracts in which particular directors are interested 937
§ 50.02 Scope of the Section 939
§ 50.03 Applicability of Section 297 939
§ 50.04 Board should have knowledge of Directors’ interest 939
§ 50.05 Consent by resolution at a meeting of Board 939
§ 50.06 Not general consent but specific consent 940
§ 50.07 Consequence of Board’s consent not obtained 940
§ 50.08 No vacation of office for contravention 940
§ 50.09 Central Government’s approval when necessary 940
§ 50.10 Whether Sub-section (3) has overriding effect 941
§ 50.11 Consequence of failure to obtain previous Central Government approval 942
§ 50.12 Delegation of Central Govt.’s powers to Regional Director 942
§ 50.13 Contracts only with specified persons require consent 943
§ 50.14 Contracts with bodies corporate not hit 943
§ 50.15 Applicability only at the time of entering into a contract 943
§ 50.16 Nature of transactions covered 944
§ 50.17 Disclosure of prices 944
§ 50.18 Meaning of service 945
§ 50.19 Lease or Licence-not contract of services 945
§ 50.20 Transactions in immovable property excluded 945
§ 50.21 Contract of tenancy excluded 946
§ 50.22 Contract of employment not hit 946
§ 50.23 Employment is contract of service and not contract for services 946
§ 50.24 Payment of Guarantee commission not hit 946
§ 50.25 Services of a legal practitioner not hit 947
§ 50.26 Company—dealer contracts not hit 947
§ 50.27 Limit of Rs. 5000 in sub-section (2) 947
§ 50.28 Cheque amounts to cash payment 948
§ 50.29 Limit in sub-section does not apply to cash transactions 948
§ 50.30 Opinion of ICAI Expert Advisory Committee 948
§ 50.31 Appointment of additional director 948
§ 50.32 Exemption in clause (a) under sub-section (2) not available for supply of services 949
§ 50.33 Multiple applications 949
§ 50.34 Consequences for non-compliance 949
§ 50.35 Compounding Offence 950
§ 50.36 Compliance with section 299 950
§ 50.37 Vacation of office 950
§ 50.38 Prescribed form 951
§ 50.39 Government Companies Exempted 951
Precedent # 50.01 Resolution—Contract with Directors 952
Precedent # 50.02 Resolution—Contract with any Director (Another for-mat) 953
Precedent # 50.03 Resolution—Contract with a private company 953
Precedent # 50.04 Form No. 24A—Filing of Application with the Central Government for obtaining approval for entering into contracts with the compa-ny under section 297(1) proviso 955
CHAPTER 51
DISCLOSURE OF INTERESTS BY DIRECTORS
§ 51.01 Disclosure of interests by director 959
§ 51.02 Recommendations of Company Law Committee 960
§ 51.03 Applies to all Companies 961
§ 51.04 Obligation of director to disclose his interest in contract 961
§ 51.05 Principle underlying disclosure requirement 961
§ 51.06 ‘Interest’ or ‘concern’ used in general sense 962
§ 51.07 Interest or concern not merely sentimental concern 962
§ 51.08 Pecuniary interest to be proved 962
§ 51.09 Conflict of personal interest with duty 962
§ 51.10 Interest of director’s relative 963
§ 51.11 Interest where there is no beneficial interest in shares 963
§ 51.12 What is direct and indirect interest ? 964
§ 51.13 Whether directorship in bodies corporate also to be disclosed 965
§ 51.14 Idea underlying Sections 297, 299, 300 965
§ 51.15 Indirect interest 966
§ 51.16 Failure to formally disclose interest common to all directors 966
§ 51.17 Board’s knowledge of director’s interest, formal disclosure not necessary 966
§ 51.18 Nominee’s disclosure 967
§ 51.19 Applicable to Government nominees 967
§ 51.20 Disclosure at Board Meeting 967
§ 51.21 Disclosure at meeting which first considered contract 967
§ 51.22 Procedure for disclosure 968
§ 51.23 General notice of interest 968
§ 51.24 General notice constitutes compliance 968
§ 51.25 General notice to be given at the meeting of the Board or to be read at the Board Meeting 969
§ 51.26 Member of a firm¾meaning 969
§ 51.27 Exclusion of certain contracts between public companies 969
§ 51.28 Collective responsibility of the Directors 970
§ 51.29 Applies to all contracts 970
§ 51.30 Contract can be struck down for breach of fiduciary duty 970
§ 51.31 Service agreements 971
§ 51.32 Counter—claim not a defence against liability 971
§ 51.33 Company can borrow from a director 971
§ 51.34 Consequence of non-compliance 971
§ 51.35 Contract voidable 972
§ 51.36 Onus to prove non-disclosure 972
§ 51.37 Specific Allegation of facts 972
§ 51.38 Criminal liability under sections 299 and 300 not absolute 973
§ 51.39 Liability under other provisions of law 973
§ 51.40 Conflict of duty and interest 973
§ 51.41 Interested director not to participate in Board proceedings or vote thereon 975
§ 51.42 Suggestions of the Company Law Committee 976
§ 51.43 Irregularity cannot be cured 977
§ 51.44 Difference under the present Act 977
§ 51.45 Applies only to existing contracts 978
§ 51.46 A prohibitory Section 978
§ 51.47 Foreign company not included 978
§ 51.48 Interest means personal Interest 978
§ 51.49 Interest out of fiduciary duties 979
§ 51.50 Interest conflicting with duty 979
§ 51.51 Interest—beneficial or otherwise 979
§ 51.52 Non-disclosure of interest entails disclosure of secret profits 979
§ 51.53 Where there is no specific interest of directors, no voidability 979
§ 51.54 Interested Director, even after disclosure, cannot vote 980
§ 51.55 Interested director cannot discuss or vote at Board Meeting 980
§ 51.56 Interested Director can vote at the general meeting 980
§ 51.57 When all directors interested, general meeting approval 980
§ 51.58 Two per cent holding 980
§ 51.59 ‘Arrangement’ 981
§ 51.60 Appointments are arrangements 981
§ 51.61 Approval of registration of transfer of shares/debentures 983
§ 51.62 Transfer of shares to directors 983
§ 51.63 Even if interested directors exceed non-interested directors, Section 300 cannot be disregarded 983
§ 51.64 If no disinterested quorum, increase the Board strength 984
§ 51.65 Fixing sitting fees not hit 984
§ 51.66 Penalty for default 984
§ 51.67 Register of contracts, companies and firms in which directors are interested 984
§ 51.68 Company Law Committee’s recommendation 986
§ 51.69 Register at the registered office 986
§ 51.70 Maintenance of register¾statutory obligation 986
§ 51.71 Register even if Section 297 not attracted 986
§ 51.72 Directors’ meeting whether to be held only at the Registered Office 987
§ 51.73 Section 25 Companies exempted 988
§ 51.74 Penalty for default 988
§ 51.75 ICSI Guidance Note on Compliance Certificate (March 2001) 988
§ 51.76 Accounting Standard-18 in respect of related party transactions 989
Precedent # 51.01 Resolution—Interested Director 995
Precedent # 51.02 Resolution—Fresh General notice of interest 995
Precedent # 51.03 Resolution—General notice of interest 996
Precedent # 51.04 Resolution—Disclosure of interest by Directors 997
Precedent # 51.05 Resolution—Entering into contracts in which a Director is interested other than contracts covered by section 297 998
Precedent # 51.06 Resolution—Disclosure of interest by Director (Another format) 998
Precedent # 51.07 Resolution—Interested Director not to participate or vote in the Board’s proceedings 999
Precedent # 51.08 Resolution—Register of Contract 1000
Precedent # 51.09 Form No. 24AA—Filing of Notice by the interested directors under section 299 1001
Precedent # 51.10 Filing of application with the Central Government under section 300(3) for exempting the company from the provisions of sub-section (1) of section 300 of the Com-panies Act, 1956 1002
PART XII
LOANS TO DIRECTORS
CHAPTER 52
LOANS TO DIRECTORS
§ 52.01 Central Government’s approval for certain loan transactions 1007
§ 52.02 Book debts as loan or advance 1009
§ 52.03 What is a book debt 1009
§ 52.04 Loan Definition 1010
§ 52.05 Loan and deposit : Distinction 1010
§ 52.06 Department’s Clarification 1011
§ 52.07 Nature of loan 1011
§ 52.08 The word ‘indirectly’ cannot convert what is not a loan into a loan 1012
§ 52.09 The word ‘indirectly’ would mean through intermediaries 1012
§ 52.10 Quasi—Loan 1012
§ 52.11 What is an advance ? 1012
§ 52.12 Advance in the nature of loan 1013
§ 52.13 Prohibition against making loan only to specified persons 1013
§ 52.14 Contravention of Clause (d) or (e) of Sub-section (1) of section 295 1013
§ 52.15 Lease /Hire-Purchase transactions—not hit 1013
§ 52.16 Debentures—not hit 1014
§ 52.17 Only Loan of Money hit 1014
§ 52.18 Loans by or to a Holding Company 1014
§ 52.19 Loans to a Trust 1014
§ 52.20 Advance payment of salary 1014
§ 52.21 Giving of Loan—not service 1015
§ 52.22 Investment in acquiring residential accommodation for director whether loan 1015
§ 52.23 Penalty provision 1015
§ 52.24 Punishable jointly and severally 1016
§ 52.25 Knowledge of contravention necessary for punishment (sub-section 6) 1016
§ 52.26 Vacation of Director’s office for contravention 1016
§ 52.27 Continuance of Loan after the exemption ceases 1016
§ 52.28 If the director causes the company stand surety for a transaction unconnected to the company, director personally liable 1017
§ 52.29 Departmental instructions for applying for approval of Central Government 1017
§ 52.30 Guidelines for the grant of loan by the Public Limited Companies to their directors for house building 1019
§ 52.31 House Building Loans to Managing/Whole-time Directors-when approval not required 1019
§ 52.32 Government Companies Exempted 1020
§ 52.33 Guidelines for company loans to directors and their relatives 1020
§ 52.34 Department of Company Affairs Check List under sections 295 and 372A of Companies Act 1022
§ 52.35 ICSI Guidance Note on Compliance Certificate (March 2001) 1025
Precedent # 52.01 Resolution—Sanction of loan to a Director 1026
Precedent # 52.02 Resolution—Loans to Directors 1026
Precedent # 52.03 Filing of application with the Central Government for giving of loan to a private company in which a director of the company is also a director under section 295(1) of the Companies Act, 1956 1028
PART XIII
RESTRICTIONS ON HOLDING OFFICE OR
PLACE OF PROFIT
CHAPTER 53
RESTRICTIONS ON DIRECTORS HOLDING
OFFICE OR PLACE OF PROFIT
§ 53.01 Director not to hold office or place of profit 1036
§ 53.02 Recommendations of Company Law Committee 1038
§ 53.03 Changes made by Amendment Act, 1965 1039
§ 53.04 Applies to all companies 1040
§ 53.05 Prohibition absolute 1040
§ 53.06 Persons not in the prohibitory category 1040
§ 53.07 Managing Director not hit 1040
§ 53.08 Appointment of relative of managing director as whole-time director 1041
§ 53.09 Commission to ordinary director u/s 309 not hit 1042
§ 53.10 Payment of pension 1043
§ 53.11 The meaning of the words ‘such director’ 1043
§ 53.12 Director of the subsidiary holding an office in the holding company 1043
§ 53.13 Director of holding company also director of subsidiary 1043
§ 53.14 Deemed directors are not relevant 1044
§ 53.15 Appointment of a director as secretary hit 1044
§ 53.16 What is office or place of profit 1044
§ 53.17 Contractual arrangement not enough 1045
§ 53.18 Prescribed remuneration under sub-sections (1)(b) and (1B) [Rule 10C] w.e.f. 1-3-1994 1045
§ 53.19 Remuneration 1045
§ 53.20 Perquisites 1046
§ 53.21 Computation of monthly remuneration 1046
§ 53.22 Receipts of intermittent nature 1046
§ 53.23 Scope of sub-section (1-B) 1046
§ 53.24 Specified persons appointed as managerial personnel not hit by section 314 1047
§ 53.25 Position of manager 1048
§ 53.26 Department’s clarification 1048
§ 53.27 No exemption for technical/legal adviser 1050
§ 53.28 Technical adviser—meaning 1050
§ 53.29 Services of a Professional Nature 1050
§ 53.30 Professional Services of an Advocate 1050
§ 53.31 Appointment of sole selling agents 1051
§ 53.32 Agency for sale of products is an office or place of profit 1051
§ 53.33 Consent in general meeting after appointment 1051
§ 53.34 What is ‘Subsequent appointment’? 1052
§ 53.35 Central Government’s approval: Effect of sub-section (1-B) of this section and section 297(1) proviso 1052
§ 53.36 Conditional approval by Central Government 1052
§ 53.37 Appointment without approval 1052
§ 53.38 Contravention does not entail vacation of office of director 1053
§ 53.39 Right of Company to recover remuneration 1053
§ 53.40 If a director is in receipt of income not coming u/s 309 the same to be refunded 1054
§ 53.41 Removal of a specified person from a place or office of profit 1054
§ 53.42 Prescribed Form 1054
§ 53.43 Consent of the company by special resolution 1054
§ 53.44 No omnibus resolution 1056
§ 53.45 ICSI Guidance Note on Compliance Certificate (March 2001) 1056
Precedent # 53.01 Resolution—Appointment of a firm of consultants of which a Director of the company is a partner of the said consultant firm 1057
Precedent # 53.02 Resolution—Holding of office or place of profit 1058
Precedent # 53.03 Resolution—Remuneration of a relative of a Director 1059
Precedent # 53.04 Resolution—Holding of office or place of profit by Di-rector 1060
Precedent # 53.05 Resolution—Appointment of Director as a consultant 1062
Precedent # 53.06 Resolution—Appointment of a Director as a consultant (Another Format) 1062
Precedent # 53.07 Resolution—Appointment of relative of a Director to an office or place of profit (Another For-mat) 1063
Precedent # 53.08 Resolution—Appointment of relative of a Director to an office or place of profit (Another For-mat) 1063
Precedent # 53.09 Resolution—Increase in salary etc. to a relative of a Director 1064
Precedent # 53.10 Resolution—Appointment of an employee as a Director 1064
Precedent # 53.11 Resolution—Appointment of a relative of a director to office or place 1065
Precedent # 53.12 Resolution—Declaration about appointment to a place of profit 1066
Precedent # 53.13 Form No. 24B—Filing of application to the Central Government for holding office or place of profit in a company under section 314(1B) 1067
Precedent # 53.14 Filing of application with the Central Government for waiving recovery of sum paid to the director under section 314(2)(b) of the Companies Act, 1956 1072
Precedent # 53.15 Filing of application with the Central Government for waiving recovery of sum paid to the director under section 314(2D) of the Companies Act, 1956 1074
PART XIV
REGISTER IN RESPECT OF DIRECTORS
CHAPTER 54
REGISTER OF DIRECTORS
§ 54.01 Register of directors 1079
§ 54.02 Companies (Amendment) Act, 1960 1081
§ 54.03 Changes made by Amendment Act, 1965 1081
§ 54.04 Change among the Directors [Sub-section (2)] 1081
§ 54.05 Subscribers to memorandum as deemed directors, filing of particulars not necessary 1082
§ 54.06 Appointment of additional director as director is a change 1083
§ 54.07 Retiring Directors re-appointed—no change 1083
§ 54.08 Meaning of the word ‘Year’ 1084
§ 54.09 Notifying change is a statutory duty 1084
§ 54.10 Responsibility to communicate resignation 1084
§ 54.11 Trusteeship of U.T.I./membership of S.B.I. Board whether directorship 1085
§ 54.12 Directors of Government companies 1085
§ 54.13 Requirement under the Listing Agreement 1086
§ 54.14 Register in loose leaf 1086
§ 54.15 Prescribed Form 1086
§ 54.16 Sec. 303: Returns filed by two rival parties 1087
§ 54.17 Inspection of Register 1088
§ 54.18 Scope of section 1088
§ 54.19 Petition before CLB for ordering inspection 1089
§ 54.20 Penalty for default [Sub-section (2)(a)] Companies (Amendment) Act, 2000 (w.e.f. 13-12-2000) 1089
§ 54.21 ICSI Guidance Note on Compliance Certificate (March 2001) 1089
§ 54.22 Register of Directors, Managing Director, Manager and Secretary under Section 303 1090
Precedent # 54.01 Resolution—Notification of any change in the name of the body corporate 1091
Precedent # 54.02 Resolution—Resignation or retirement 1091
Precedent # 54.03 Resolution—Change in the Register of Directors 1092
Precedent # 54.04 Resolution—Change in the Register of Directors (Another format) 1092
Precedent # 54.05 Resolution—Notice of appointment and relinquishment 1093
Precedent # 54.06 Form No. 32—Filing of Particulars of appointment of directors and manager and changes among them under section 303(2) 1094
Precedent # 54.07 Petition to pass an order directing immediate inspection of register maintained under the section 1098

CHAPTER 55
DUTY OF DIRECTORS TO MAKE DISCLOSURE
§ 55.01 Duty of directors, etc., to make disclosure 1101
§ 55.02 Company Law Committee Recommendation 1101
§ 55.03 Changes made by Amending Act (XLV of 1960) 1102
§ 55.04 Not applicable to subscribers to memorandum 1102
§ 55.05 Communication of reconstitution of Board of Directors 1102
§ 55.06 Register to be kept by Registrar and inspection thereof 1103
§ 55.07 Returns by Rival parties 1103
§ 55.08 Prescribed Form 1104
§ 55.09 Penalty for default [Sub-section (1)] 1104
§ 55.10 Compoundable Offence 1104
§ 55.11 Further requirements in respect of committee of directors for listed companies 1104
Precedent # 55.01 Resolution—Intimation consequent to change in interest 1105
Precedent # 55.02 Resolution—Relinquishment of office 1105
Precedent # 55.03 Resolution—Change in Designation of a director 1105
Precedent # 55.04 Resolution—Duty of Directors to make disclosure 1106
Precedent # 55.05 Form No. 34—Filing of Form of Register of directors, managing directors, manager and secre-tary, etc. under section 306 1107
CHAPTER 56
REGISTER OF DIRECTORS’ SHAREHOLDINGS
§ 56.01 Register of directors’ shareholding, etc. 1111
§ 56.02 Object of the Section 1113
§ 56.03 Observations of Millin Commission 1114
§ 56.04 Section applies to all directors including deemed directors and managers 1115
§ 56.05 Interest or right in or over any shares or debentures 1115
§ 56.06 Holding of bodies Corporate controlled by a director to be given 1115
§ 56.07 Disclosure of beneficial interest—not affected by Section 153 1115
§ 56.08 Interest of a joint trustee of a trust 1116
§ 56.09 No time limit for entry in register 1116
§ 56.10 Government Companies Exempted 1116
§ 56.11 Minutes of AGM need not mention production of register thereat 1116
§ 56.12 Penalty for default 1117
§ 56.13 Compoundable Offence 1117
§ 56.14 Petition before CLB 1117
§ 56.15 Duty of directors and persons deemed to be directors to make disclosure of shareholdings 1117
§ 56.16 Defect in Section 308 1118
§ 56.17 ICSI Guidance Note on Compliance Certificate (March 2001) 1118
§ 56.18 Register of Directors’ Shareholdings under Section 307 1118
Precedent # 56.01 Resolution—Disclosure of Director’s Shareholding 1120
Precedent # 56.02 Resolution—Inspection of Register of Directors’ share-holdings 1120
Precedent # 56.03 Resolution—Disclosure of Directors’ shareholdings 1121
Precedent # 56.04 Petition to pass an order directing immediate inspection of register maintained under the section 1122
PART XV
RESIGNATION, REMOVAL AND VACATION OF COMPANY DIRECTORS
CHAPTER 57
RESIGNATION OF A DIRECTOR
§ 57.01 No express provision on resignation 1127
§ 57.02 Rules of common law 1127
§ 57.03 No acceptance of resignation necessary 1128
§ 57.04 Director can resign any time 1128
§ 57.05 Withdrawal of resignation 1128
§ 57.06 Resignation by word of mouth 1128
§ 57.07 Resignation takes effect when intention made clear 1129
§ 57.08 Even resignation by Managing Director is not subject to acceptance 1129
§ 57.09 Implied resignation 1129
§ 57.10 Acceptance not necessary unless stated in the resignation letter 1130
§ 57.11 Resignation cannot be refused by the Board 1130
§ 57.12 Resignation of proposed director before in corporation of a company 1130
§ 57.13 Duty of a resigning director 1131
§ 57.14 Notice of resignation sent not to company 1131
§ 57.15 Resignation by a Director : Departmental instructions 1131
§ 57.16 Notice to ROC not necessary 1131
§ 57.17 Right of resignation available even when appointed by the President of India 1131
§ 57.18 Resignation and Service Contract 1131
§ 57.19 Resignation of director—chairman 1132
§ 57.20 Personal Insolvency 1132
§ 57.21 Jurisdiction of Court 1132
Precedent # 57.01 Resolution—Resignation of a Director 1134
Precedent # 57.02 Resolution—Dismissal of a Managing Director 1134
CHAPTER 58
POWERS OF THE CENTRAL GOVERNMENT TO REMOVE MANAGERIAL PERSONEL
FROM OFFICE ON THE RECOMMEN-
DATION OF THE COMPANY LAW BOARD
§ 58.01 Powers of Central Government to Remove Managerial Personnel 1136
§ 58.02 Circumstances under which Central Government can remove managerial personnel 1137
§ 58.03 Do not apply to bodies corporate 1138
§ 58.04 Apply to those in management at relevant period 1138
§ 58.05 Resignation by officer charged 1138
§ 58.06 Not limited to managerial personnel under Section 197A 1139
§ 58.07 Applies to Ordinary Directors also 1139
§ 58.08 May not apply to Vice-Presidents, General Managers 1139
§ 58.09 Persistent negligence required 1139
§ 58.10 Meaning of sound business 1140
§ 58.11 Interim orders 1140
§ 58.12 Appointee being public servant—consequences 1140
§ 58.13 Constitutional validity 1141
§ 58.14 Delay and acquiescence vitiate reference 1141
Precedent # 58.01 Resolution—Removal of the General Manager on the basis of High Court findings 1142
Precedent # 58.02 Filing of application with the Central Government for removal of managerial personnel from the company under section 388B of the Companies Act, 1956 1143
CHAPTER 59
REMOVAL OF DIRECTORS BY SHAREHOLDERS
§ 59.01 Removal of Directors 1146
§ 59.02 Company Law Committee’s recommendation 1148
§ 59.03 Provisions of section 284 are in addition to any other power that may exist for removal 1148
§ 59.04 Directors not liable to be removed 1149
§ 59.05 Removal of Life directors of private company under articles 1149
§ 59.06 En bloc replacement of Board by CLB 1149
§ 59.07 Permanent Directors 1149
§ 59.08 Institutional Directors 1150
§ 59.09 Directors appointed in accordance with proportional representa-tion cannot be removed under section 284 1150
§ 59.10 Manager not hit by Section 284 1150
§ 59.11 Statutory right of removal 1150
§ 59.12 Special notice 1151
§ 59.13 What is reasonable cause ? 1151
§ 59.14 Grounds for removal of director 1152
§ 59.15 Grounds for removal of Director to be given 1153
§ 59.16 Incomplete notice of resolution to remove director 1153
§ 59.17 Director made misleading complaints to Government 1153
§ 59.18 Director’s right of representation against removal 1154
§ 59.19 Attempts to avoid removal 1154
§ 59.20 Proper meeting to be called 1154
§ 59.21 Claim for compensation on removal 1154
§ 59.22 Action for damages on Removal involving breach of contract 1155
§ 59.23 Breach of contract by changing Articles 1155
§ 59.24 Filling the vacancy whether procedure under section 257 need to be followed ? 1155
§ 59.25 Filling of casual vacancy 1155
§ 59.26 ICSI Guidance Note on Compliance Certificate (March 2001) 1156
Precedent # 59.01 Resolution—Removal of Director 1157
Precedent # 59.02 Resolution—Removal of Director by Shareholder 1157
Precedent # 59.03 Resolution—Resolution for Removal of Director (Another format) 1158
Precedent # 59.04 Resolution—Circulation of Members Resolution 1158
Precedent # 59.05 Resolution—Removal of Directors 1158
Precedent # 59.06 Resolution—Removal of Director and appointment of new Director 1159
Precedent # 59.07 Resolution—Intimation to Stock Exchange about Re-moval of Director (Another format) 1159
Precedent # 59.08 Resolution—Vacancy of removed director to be filled up as casual vacancy 1160
Precedent # 59.09 Resolution—Proposal to remove Director in the agenda for the next General Meeting 1160
Precedent # 59.10 Resolution—Removal of Director 1161
Precedent # 59.11 Resolution—Removal of Director (Another Format) 1162
Precedent # 59.12 Petition to decide as to whether the right of a director to get his representation circulated and read out at meet-ing is being abused to secure needless publicity for defamatory matter and to order company’s costs on application to be paid in whole or in part by such di-rector 1163

CHAPTER 60
VACATION OF OFFICE BY DIRECTOR
§ 60.01 Secretaries and treasurers not to sell goods or articles produced by company, etc., unless authorised by Board 1167
§ 60.02 Section 283 applies to all companies 1168
§ 60.03 Disqualification only during tenure of office of director 1168
§ 60.04 Director vacates office on happening of any of the events 1168
§ 60.05 No waiver of disqualification 1169
§ 60.06 Grounds on which a trustee can be removed do not apply 1169
§ 60.07 A life director also hit 1169
§ 60.08 Nominee Directors not subject to automatic vacation 1169
§ 60.09 An alternate Director vacates once the original Director returns 1169
§ 60.10 Additional Director vacates on the date of the AGM 1169
§ 60.11 Public company cannot have additional grounds 1169
§ 60.12 A private company proper can have additional grounds 1170
§ 60.13 Vacation of office 1170
§ 60.14 Vacation and removal are different 1171
§ 60.15 Additional statutory grounds for vacating office 1171
§ 60.16 Holding of office of profit 1171
§ 60.17 Inspection of books of account 1172
§ 60.18 Violation of Section 297 does not entail vacation 1172
§ 60.19 Failure to hold qualification shares 1172
§ 60.20 Insolvency of director 1172
§ 60.21 Discharge from Insolvency 1173
§ 60.22 Offence involving moral turpitude 1173
§ 60.23 Disability for non-payment of call 1173
§ 60.24 Absence from Board meetings 1174
§ 60.25 Leave of absence of Directors 1174
§ 60.26 When absence to be counted 1175
§ 60.27 Notice at wrong address does not entail vacation office 1175
§ 60.28 Notice to director abroad 1175
§ 60.29 No hearing need be given to absentee director 1176
§ 60.30 Involuntary absence not covered 1176
§ 60.31 Absence with leave 1176
§ 60.32 Absence without formal request 1176
§ 60.33 Company to prove holding of meetings 1177
§ 60.34 Acceptance of loan in contravention of section 295 1177
§ 60.35 Failure to disclose director’s interest in contract 1177
§ 60.36 Persons unfit for management 1177
§ 60.37 Director’s removal 1178
§ 60.38 Vacation of office by ex-officio Director 1178
§ 60.39 Civil Court jurisdiction 1178
§ 60.40 ICSI Guidance Note on Compliance Certificate (March 2001) 1178
Precedent # 60.01 Resolution—Director’s vacation of office on any ground 1179
Precedent # 60.02 Resolution—Vacation of office for failing to obtain share qualification 1179
Precedent # 60.03 Resolution—Vacation of office due to unsound mind 1180
Precedent # 60.04 Resolution—Director adjudicated as insolvent 1180
Precedent # 60.05 Resolution—Vacation of office of Director for insolvency 1181
Precedent # 60.06 Resolution—Committing an offence by Director 1182
Precedent # 60.07 Resolution—Vacation of Office for being convicted of an offence of moral turpitude 1182
Precedent # 60.08 Resolution—Vacation of office for failure to pay call money 1183
Precedent # 60.09 Resolution—Director’s vacation of office 1183
Precedent # 60.10 Resolution—Leave of absence to Director 1184
Precedent # 60.11 Resolution—Leave of absence (Another format) 1184
Precedent # 60.12 Resolution—Vacation of office due to absence (Another format) 1185
Precedent # 60.13 Resolution—Leave of absence of Directors (Another format) 1186
Precedent # 60.14 Resolution—Vacation of office for accepting loan in contravention of section 295 1187
Precedent # 60.15 Resolution—Vacation of office for non-disclosure of interest in contract entered into by com-pany 1187
Precedent # 60.16 Resolution—Vacation of office being disqualified under section 283 1188
Precedent # 60.17 Resolution—Vacation of office being removal from Directorship 1189
Precedent # 60.18 Resolution—Vacation of office for ceasing to be in the employment 1189
Precedent # 60.19 Resolution—Vacation of office by Director due to dis-qualification 1190
PART XVI
DIRECTORS LIABILITY AND RELIEF
CHAPTER 61
PERSONAL LIABILITY OF DIRECTORS
§ 61.01 Personal liability of Directors (Sections 46 and 47) 1193
§ 61.02 Acting beyond powers without ratification by company 1193
§ 61.03 Ratification of unauthorised acts 1194
§ 61.04 Liability for breach of warranty of authority 1194
§ 61.05 Contravention of section 77 1195
§ 61.06 Directors incur no personal liability 1195
§ 61.07 Authority to act on behalf of Company 1195
§ 61.08 Disclosure that contract on behalf of the company 1196
§ 61.09 Non-disclosure of company’s existence 1196
§ 61.10 Fraudulent or tortious acts 1197
§ 61.11 Liability under Torts 1197
§ 61.12 M.D. not personally liable for company’s debts 1198
§ 61.13 Personal liability of director because of personal commitment 1198
§ 61.14 Assumption of liability 1198
§ 61.15 Criminal liability for dishonoured cheque 1198
§ 61.16 Ultra vires Acts 1199
§ 61.17 Acts beyond the delegated powers 1199
§ 61.18 Liability under Pollution and other laws 1200
§ 61.19 Vicarious liability of directors 1200
§ 61.20 Directors¾prosecution under Prevention of Food Adulteration Act, 1954 1200
§ 61.21 Bona fide belief of the directors not a defence 1201
§ 61.22 Damages for breach of service contract 1201
§ 61.23 Liability for personal profits 1201
§ 61.24 Directors are not liable for incidental profits 1201
§ 61.25 Diversion of Company’s business 1202
§ 61.26 Liabilities after ceasing to be a director 1202
§ 61.27 Joint and several liability 1203
§ 61.28 Check list on proof of personal liability 1204
§ 61.29 Checklist of criteria for imposing personal liability 1205
§ 61.30 Checklist of criteria for individual liability for injuries 1205
§ 61.31 Misstatement in prospectus 1206
§ 61.32 Onus of proof 1207
§ 61.33 SEBI (Disclosure and Investor Protection) Guidelines, 2000 1208
§ 61.34 Misrepresentation as to financial condition: Checklist of ele-ments of proof 1208
CHAPTER 62
UNLIMITED LIABILITY FOR DIRECTORS AND MANAGERS
§ 62.01 Directors, etc., with unlimited liability in limited company 1210
§ 62.02 Special resolution of limited company making liability of directors, etc. unlimited. 1211
§ 62.03 It is an alteration u/s. 16(2) 1211
§ 62.04 Only when provided in the memorandum 1211
§ 62.05 No confirmation of Company Law Board 1211
§ 62.06 Penalty for failure to give notice to directors of unlimited liability 1211
§ 62.07 Compoundable Offence 1212
Precedent # 62.01 Resolution—Unlimited liability of Directors 1213
Precedent # 62.02 Resolution—Making liability of Directors Unlimited 1213
Precedent # 62.03 Resolution—Making liability of the Directors unlimited 1214
Precedent # 62.04 Resolution—Unlimited liability of Directors (Another Format) 1215
CHAPTER 63
POWER OF COURT TO GRANT RELIEF IN CERTAIN CASES
§ 63.01 Power of Court to grant relief in certain cases 1217
§ 63.02 Report of Joint Committee 1217
§ 63.03 Relief only to officers and not to company 1217
§ 63.04 Who is an officer ? 1218
§ 63.05 Debenture trustee 1218
§ 63.06 Officer includes the liquidator 1218
§ 63.07 Applies to auditors 1218
§ 63.08 Relief to Administrators 1218
§ 63.09 Relief to part-time directors 1219
§ 63.10 Part-time Directors exonerated when no evidence of their control established 1219
§ 63.11 Granting of relief is discretionary 1220
§ 63.12 Principles for granting relief 1220
§ 63.13 High Court to use the power sparingly 1220
§ 63.14 For apprehended proceedings, application only to the High Court 1221
§ 63.15 Power to grant relief against possible criminal prosecution 1221
§ 63.16 Whether the petitioner has acted honestly and reasonably 1222
§ 63.17 When deposits received in excess of limit 1222
§ 63.18 Relief for both civil and criminal liability 1222
§ 63.19 Relief only against prosecutions under Companies Act 1222
§ 63.20 Criminal proceedings under other Acts 1224
§ 63.21 Does not apply to a claim by a stranger to enforce civil liability 1225
§ 63.22 Conditions of relief 1225
§ 63.23 Acting honestly 1225
§ 63.24 Prayer for relief only when acted honestly 1225
§ 63.25 Relief against acts wholly ultra vires the company 1226
§ 63.26 Relief against undue hardship 1226
§ 63.27 What is acting reasonably ? 1226
§ 63.28 No relief against statutory cessation of office 1228
§ 63.29 Not in office when violation took place 1228
§ 63.30 No relief against default in complying with Court Directions 1229
§ 63.31 No relief when no ordinary care and caution taken 1229
§ 63.32 Notice to ‘such other person’ 1229
§ 63.33 Rectifying the default before issuance of show cause notice 1229
§ 63.34 Exonerated because not officer in default 1230
§ 63.35 Deposit of surplus funds 1230
§ 63.36 Default in filing Annual Accounts and holding of AGM 1230
§ 63.37 Failure in complying with order of cost audit 1231
§ 63.38 Relief in cases of Sick Industrial Companies 1232
§ 63.39 Violation of Act, whether bona fide mistake 1232
§ 63.40 Failure in filing accounts because of intervention of BIFR 1232
§ 63.41 When relief can be pleaded 1232
§ 63.42 Power to grant relief includes power to extend time to redeem the default 1233
§ 63.43 Code of Criminal Procedure, 1973 to be followed 1233
§ 63.44 Period of limitation for filing a complaint 1233
§ 63.45 Delay and period of limitation in filing complaint 1233
§ 63.46 Application for relief after commencement of proceedings 1234
§ 63.47 Prosecution when to be started 1234
§ 63.48 Court’s Jurisdiction 1234
§ 63.49 Only the Court before which proceedings are pending, can grant relief 1235
§ 63.50 Court has no jurisdiction to give directions to the Police for al-leged offences under the Penal Code 1235
§ 63.51 Indemnification against liability 1235
CHAPTER 64
OFFICER IN DEFAULT
§ 64.01 Director as officer in default and his obligations 1237
§ 64.02 Position prior to Amendment Act, 1988 1238
§ 64.03 Changes made by Amendment Act, 1988 1239
§ 64.04 Applies to both public and private companies 1240
§ 64.05 ‘Mens rea’ not necessary 1240
§ 64.06 Does not apply to all offences under Companies Act, 1956 1240
§ 64.07 Does not apply to a Company 1241
§ 64.08 Default 1241
§ 64.09 Prima facie case of default—enough to proceed against 1241
§ 64.10 Complaint for failure to file Balance-Sheet not to be quashed without facts established at trial 1242
§ 64.11 Officers in default—meaning of 1242
§ 64.12 Balance of probability 1242
§ 64.13 Department’s norms for prosecuting officers 1243
§ 64.14 Department’s Circular 1243
§ 64.15 Prosecution of officers other than managing, whole-time director or manager 1243
§ 64.16 Default during tenure 1244
§ 64.17 Labour laws 1244
§ 64.18 Pollution Laws 1246
§ 64.19 Occupier 1247
§ 64.20 Insecticides Act 1247
§ 64.21 Health and safety legislation 1248
§ 64.22 Drugs and Cosmetics Act, 1940 1249
§ 64.23 Regulation of fishing by foreign vessels 1249
§ 64.24 Motor Vehicles Act 1249
§ 64.25 Negotiable Instruments Act 1250
§ 64.26 Defence and burden of proof 1251
§ 64.27 Averment of being incharge 1255
§ 64.28 Prosecution of accountant 1258
§ 64.29 Absence of signature and company seal 1258
§ 64.30 Issue of process 1258
§ 64.31 Employee’s personal cheque 1258
§ 64.32 Income-tax Act 1258
§ 64.33 False averment in plaint 1259
§ 64.34 Exemption from personal attendance 1259
§ 64.35 Jurisdiction for complaint 1259
§ 64.36 Representation of company in proceedings 1259
§ 64.37 Effect of winding up 1260
§ 64.38 Effect of non—service of notice 1260
§ 64.39 Consumer Protection Act 1260
§ 64.40 Central Excise and Salt Act, 1944 1260
§ 64.41 Knowingly and wilfully 1261
§ 64.42 False trade descriptions 1261
§ 64.43 Deposits 1261
§ 64.44 Applicable to private and public companies 1262
§ 64.45 Offences covered by section 5 1262
§ 64.46 Offences not covered by section 5 1263
§ 64.47 Relief under Section 633 1266
§ 64.48 Position of institutional nominee directors 1266
§ 64.49 ICSI Guidance Note on Compliance Certificate (March 2001) 1267
Precedent # 64.01 Resolution—Consent of the Director to be charged by the Board with the responsibility of complying with provisions of the Act 1268
Precedent # 64.02 Companies (Central Govt.’s) General Rules & Forms 1268
Precedent # 64.03 Form No. 1AA—Filing of Particulars of per-son(s)/director(s)/charged/specified for the purpose of clause (f)/(g) of section 5 1270
Precedent # 64.04 Form No. 1AB—Filing of Consent of the person charged by the Board with the responsi-bility of complying with the provisions of the Act under section 5(f) proviso 1273
Precedent # 64.05 Form No. 1AC—Filing of Particulars of person(s)/dire-ctor(s)/charged/specified for the purpose of clause (f)/(g) of section 5 1274
PART XVII
APPENDICES
APP. I SCHEDULE I—REGULATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES 1279
APP. II SCHEDULE IA—LIST OF RELATIVES 1327
APP. III SCHEDULE X—TABLE OF FEES TO BE PAID TO THE REGISTRAR 1328
APP. IV TABLE OF OFFENCES (S. 621A) 1333
APP. V THE COMPANIES (FEES ON APPLICATIONS) RULES, 1999 1349
SUBJECT INDEX 1351