sec.290

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parveen

parveen (Querist)

10 April 2011 whether act of managing director u/s 290 is valid?

Jayashree S Iyer

Jayashree S Iyer (Expert)

11 April 2011 Managing Director is a director entrusted with substantial powers of management. So MD is a director in the first instance.

In my opinion, the acts of MD is also covered under section 290 and his acts will be valid.

Harsh Karan Singh

Harsh Karan Singh (Expert)

11 April 2011 Hi, first of all, the essence of Sec. 290 is to give protection to bona fide acts of de facto directors. As per Sec. 290, acts done by a Director are valid even though subsequently it may be discovered that the Director's appointment was invalid or already terminated. Hence, the section seeks to validate irregular exercise of power.

However, acts done by a MD are not validated u/s 290. (Refer Case Law: Varkey Souriar v. Keraleeya Banking Co. Ltd., AIR 1957, Ker 97). If a MD has ceased to hold his office, all his subsequent acts shall be invalid, this is not exercise of irregular power but exercise of power by a person who had no authority at all.

However, protection is given by Sec. 269 to MD. If appointment of MD is in contravention of Schedule XIII, then also, per Sec 269, all prior acts shall be valid.

Happy to help, Harsh

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