Sec. 374(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.

CS Bijoy

CS Bijoy (Expert)
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27 August 2011 First need to define the place of profit.....so post of the manager is a place of profit so section 314 is applicable if other condition is fulfilled.

CA Sahil Singla..

CA Sahil Singla.. (Querist)
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27 August 2011 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)

Aashok Kumar Sharma online

Aashok Kumar Sharma online

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23 July 2025 ### **Section 314(1) of the Companies Act, 1956**

**Section 314(1)** of the Companies Act, 1956 regulates the appointment of **relatives of directors** to certain offices in a company, including the **managerial positions**. It prescribes restrictions on the remuneration that can be paid to a person in such a capacity, particularly when a **relative of a director** is appointed to a managerial position, such as **manager**, **secretary**, or **any other place of profit** in the company.

### **Applicability of Section 314(1):**

Section 314(1) applies when the company proposes to appoint a **relative of a director** to any office or place of profit (like manager) in the company and provides certain conditions under which such appointments can be made.

However, **Section 314(1) does not apply to**:

1. **Managing Director (MD)**
2. **Manager**
3. **Trustee of Debenture holders**
4. **Bankers of the Company**

### **Key Point: Exemptions under Section 314(1)**

As per **Section 314(1)**, appointments of a **Manager** are **exempt from its provisions**.

1. **Manager** is specifically **exempt** under **Section 314(1)**, so when a person is appointed as a **manager** (even if they are a relative of a director), the provisions of **Section 314(1)** do not apply.
2. The **managerial position** is not treated as a "place of profit" under **Section 314(1)**, as the term **place of profit** excludes persons holding the posts of **Managing Director (MD)**, **Manager**, or **Bankers**.

Thus, the **appointment of a manager** is **not governed by Section 314(1)**, even if the manager is a relative of a director.

### **What Does "Place of Profit" Mean?**

* A **place of profit** generally refers to a position in a company where a person derives a remuneration (salary, bonus, commission, etc.) above a specified amount and is given a certain amount of responsibility or authority in the company.
* However, the **manager** and **MD** are **excluded** from the definition of "place of profit" in Section 314(1), meaning their appointments are not subject to the restrictions of Section 314(1), even if they are **relatives of directors**.

### **Clarification on ICAI's Suggested Answer:**

* It’s important to note that while the **ICAI** may have discussed the concept in their **suggested answers**, they might have done so in the context of understanding the legal nuances of **"place of profit"**.
* The **manager** is still a person holding a "place of profit," but the specific exemption under Section 314(1) means that **relatives of directors can be appointed as manager** without triggering the restrictions that Section 314(1) would otherwise impose.

### **In Conclusion:**

* The **manager** role is explicitly **exempted from Section 314(1)** of the Companies Act, 1956.
* Therefore, **relatives of directors can be appointed as a manager** in a company without the need for approval or restrictions under Section 314(1).
* While the **manager** is still in a "place of profit" under the broader context of the Act, the section itself **does not impose restrictions** on managerial appointments.

Let me know if you need further clarification!

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