RTP Law May 12 CA Finals

Dear All,

According to me the answer to question no. 5 in the RTP is 100% correct. Please read the provisions of Sec. 274(1)(g) carefully. After Clause A & B of of Sec 274(1)(g), the Act says that

"Provided that such person shall not be eligible to be appointed as a director of any other public company for a period of 5 years........"

The text I have highlighted above clearly states that he cannot be appointed in any company other than Defaulting company. There is no problem in re-appointing the director's in the defaulting company.

I agree

But Examiners are instructed by the icai which is responisble for preparing RTP and suggested answers.

ICAI cant provide different answers in the "model answers " and in the icai materials.

Examiners qualifications and general knowledge has got nothing to do with the corrections of answersheets.

They will have to blindly follow the icai's instructions. 

Hi everyone,

It would be a bit difficult to comment/guide without going through question no. 5.

Yes Private Companies are outside the scope of Section-274(1)(g).

As we all know a person who is disqualified to become a director of a public company under section 274(1)(g) does not automatically vacates his office as section-283 is silent in this regard. So in my opinion he can continue to act as a director in all Public Companies (including the defaulting company) until the expiry of his respective term in each company.

Kindly note that he will not be eligible to be freshly appointed as a director of any other Public company.

Now observe carefully: However, the same does not apply in case of the defaulting company as the words used in section 274(1)(g) are:   “such person shall not be eligible to be appointed as a Director of any other public company”  Hence to conclude I would say he will be eligible to be re-appointed as a director of the defaulting company or any other public company of which he was a director.

In other words or may be other interpretation:

He may be appointed in the same defaulting company. Reason being he is no more a director of the same company. Law says he cannot be appointed as a director of any 'other PLC'. 

However, if you go by the literal interpretation of the proviso to section 274(1)(g) then you’ll be surprised to know he may be appointed as a director of any other PLC if he leave the defaulting Co. before the default commence. Reason being it is mentioned in the proviso that such person shall not be allowed to appoint in other PLC for 5 years if he is still a director of a defaulting Co. (i.e. still working in the defaulting co. {Present tense}.

In simple words if he leave the company before default then there will be no question of application of the proviso.

Further note that proviso to Rule 3(b) of Disqualification of Director Rules, 2003 provides that both the disqualifications as mentioned in Section 274(1)(g)(A) & (B) would apply to the re-appointment of a director also. Here I would like to add that a rule can not provide a more stringent condition than under the Act and as such this rule is ultra-vires the powers of Government and Act and is bad in law.

Best Regards

Another interpretation regarding section 274(1)(g) regarding applicability of section-274(1)(g)

QUERY:

ANSWER:

As per my view above interpretation is very true because if we go by the general language of section 274 we have to read all the clauses of section-274 in conjunction with the opening line of section-274 including clause (g), which means if a director is disqualified u/s 274(1)(g) then he is not eligible to be appointed in public companies as well as in private company.

But at the same time we must appreciate and give some respect to the intention of law. According to Mr. Rammiya and various other eminent experts the intention of law behind introduction of clause (g) was to disqualify certain persons from directorship in Public companies as also mentioned in proviso to section-274(1)(g). In fact the whole clause (g) talks about Public company only.

Further, Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003 also talks about Public companies only. You may check Rule 1(3) of the said rule as mentioned below for your ready reference.

 1. Short title, commencement and extent.-

(1) These rules may be called the Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003.

(2) These rules shall come into force from the date of their notification in the Official Gazette.

(3) These rules shall apply to all public limited companies registered under the Companies Act, 1956.

Now on the basis of the above discussion we may interpret what should be the final interpretation regarding applicability of section-274(1)(g).

Best Regards

Ankur Garg

Originally posted by : Future CA CS
	No,its correct,Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003  have made distinction between ‘disqualifying company’ and ‘appointing company’. A Director is disqualified from being appointed or reappointed in appointing company but he can be reappointed in disqualifying company.

Totally agree with the interpretation as defaulting director can be re-appointed in the defaulting company without any problem. Reason being Law restricts the appointment of defaulting director in any other public company.

Regards

Thank u so much for detailed reply.........

but sir now am confused .....bez of these lines

“such person shall not be eligible to be appointed as a Director of any other public company” Hence to conclude I would say he will be eligible to be re-appointed as a director of the defaulting company or any other public company of which he was a director.llows

As per Munish bhandari law book it says as follows

A direcotr of defaulting company is not eligible for appointment in any other public company

or

is not elgible for reapoointment in any other public company in which he is already a director.

please clarify.

Brothers and Sisters ,

Mere hisab se , agar tum 274/1/g me disqualified hote ho , to 5 sal k liye aap kisi v Public Co. k director nei ban sakte ho........agar ,  koi kahe ki wo to defaulting co k director ban sakta hai - to aab muje batawo , KOUN SA BEWAKUF Co. jan buj kar kisi director k appoint karega jo pahele se 274/1/g me fasa hua hai ???

Originally posted by : Akash Kangsa Banik
	Brothers and Sisters , Mere hisab se , agar tum 274/1/g me disqualified hote ho , to 5 sal k liye aap kisi v Public Co. k director nei ban sakte ho........agar ,  koi kahe ki wo to defaulting co k director ban sakta hai - to aab muje batawo , KOUN SA BEWAKUF Co. jan buj kar kisi director k appoint karega jo pahele se 274/1/g me fasa hua hai ???

Very funny observation….

Akash ji….come on….you are in CA Final…yahi likh kar aayoga kya exam main??????

Bhaiya aisa nahi hoti law ki padai……workout on your law understanding….

Plz bura mat man na…i don't want to hurt you but it's a bit serious...