Sec 314(1) of co. act

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CA Sahil Singla.. (Querist)
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27 August 2011
Whether Sec. 314(1) of Co. Act is applicable in case a person is appointed as a manager ? It clearly says that it's not applicable but most of the answers r not considering this exemption. Even ICAI's suggested of CA Final Nov 2010 Exam says that appointment of manager is regarded as a appontment to place of profit in Co.

Sec 314(1) specifically Exempts follwing persons from it's scope-

1. MD
2. Manager
3. Trustees of debenture
4. Banker of CO.

THen how is manager covered under 314(1)

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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28 August 2011 A director can be appointed as MD, Manager, trustee or baker with out attracting section 314(1).
But if a relative of a director is appointed as manager etc., section 314(1-B) attracts.

CA Sahil Singla..

CA Sahil Singla.. (Querist)
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28 August 2011 Agreed Sir

But In Book of Munish Bhandari it is written in every answer that Sec 314(1) is applicable when the relative of director is appointed as a manager on a Remuneration of Rs. 30000 monthly

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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23 July 2025 ### **Understanding Section 314(1) of the Companies Act, 1956** (now replaced by the Companies Act, 2013)

Section **314(1)** of the **Companies Act, 1956** (now applicable under **Section 188** of the **Companies Act, 2013**) relates to the **appointment of persons to positions of profit** in a company. It focuses on whether the appointment of certain individuals, like relatives of directors, as managers or employees of the company will attract certain conditions and restrictions. Here's a detailed look at the provisions and exemptions:

### **Key Provisions of Section 314(1) and its Applicability:**

1. **Section 314(1)** specifically governs appointments made to places of profit in a company. It applies when a **director** or their **relative** is appointed to certain managerial positions, such as a **manager**, at a **remuneration exceeding ₹30,000 per month**.

2. The **remuneration threshold of ₹30,000** per month is the key factor here. If the remuneration is **₹30,000 or more per month**, the **appointment of a relative of a director** to a managerial or high-paying role would require approval in accordance with the provisions of Section 314.

3. **Exemptions under Section 314(1)**:

* **Managing Director (MD)**: Appointment of an MD is **not covered** under Section 314(1). This means, if the person appointed is designated as the MD of the company, the provisions of Section 314(1) will not apply, regardless of the amount of remuneration.
* **Manager**: This is the point of confusion. **A manager** (in the true sense of the term) does not come under Section 314(1), since it is exempt. The **manager** can be appointed without attracting the provisions of Section 314(1), as long as they are not a **relative of a director**.
* **Trustees of Debenture Holders** and **Bankers**: Also exempt from the provisions of Section 314(1).

4. **Section 314(1-B)**: This section specifically applies to the **appointment of a relative of a director** as a **manager** or holding a position of profit, where the **remuneration exceeds ₹30,000** per month. In this case, prior approval from the **company's shareholders** (through a special resolution) is necessary.

### **Important Clarification**:

* **Section 314(1)** does **not apply** if a **manager** (not a relative of a director) is appointed, even if the remuneration exceeds ₹30,000 per month.
* However, **if a relative of a director** is appointed as **manager** or any other role with **remuneration over ₹30,000 per month**, **Section 314(1-B)** will apply, and **shareholder approval** must be obtained.

### **Addressing Your Query:**

You’re correct in pointing out that **Section 314(1)** does not apply in the case of a **manager** being appointed, since it is explicitly exempt under the law. However, if the **manager** is a **relative of a director**, then **Section 314(1-B)** kicks in, and the company needs to obtain the **approval of shareholders** via a **special resolution** for the **appointment**.

#### **Summary of Key Points:**

1. **Section 314(1) does not apply** if:

* The person is appointed as a **Managing Director (MD)**.
* The person is appointed as a **manager** (provided they are **not a relative of a director**).

2. **Section 314(1-B)** applies when:

* A **relative of a director** is appointed as a **manager** or other similar position, and **remuneration exceeds ₹30,000 per month**.

3. **Special Resolution Approval**: If Section 314(1-B) applies, the company must pass a **special resolution** to appoint the relative of a director as a **manager**.

So, if you see that **Munish Bhandari's book** suggests that Section 314(1) is applicable when a **relative of a director** is appointed as a **manager** with remuneration exceeding ₹30,000 per month, that is **correct** in the context of **Section 314(1-B)**. However, it is important to differentiate between the general manager's appointment and the specific exemption for managing directors and other managerial positions.

Let me know if you need further clarifications!

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