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SEC.274(1)(g)

Ashish M (Chartered Accountant) (2731 Points)

25 August 2009

.......In section 274(1)(g), a director of a defaulting public company is not allowed to be a director of the another public company for the period of 5 yrs......

Pls tell whether the director is allowed to be re-appointed in the same defaulting public company??

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8 Replies

Manmohan ACA, CS (Chartered Accountant ) (14243 Points)
Replied 25 August 2009

(ii) For applicability of Section 274(1) to re-appointment of Directors

(a) Firstly Rule 2(b) of Companies(Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003 the Definition of “Appointing Company” is the Company in which an individual is seeking appointment as a director, including re-appointment as director.

(b) Secondly second proviso to Rule 3(b) of Companies(Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003, states that that disqualification on account of the reasons cited under this rule shall also apply to the reappointment as director.

N.Naveena Maheswara Rao (Assistant manager for accounts) (1096 Points)
Replied 25 August 2009

No. but he can be a director of Private company.

Ashish M (Chartered Accountant) (2731 Points)
Replied 25 August 2009

THANXS, BUT I SAW DIFFERENT ANSWERS IN DIFFERENT BOOKS......IN MUNISH BHANDARI, HE SAYS HE CAN'T BE RE-APPOINTED AS A DIRECTOR IN THE DEFAULTING COMPANY, BUT SOME OTHER TEACHER LIKE DEEPAK GAJRANI, SAYS IT CAN BE APPOINTED.........WHOM TO BELIEVE..........

Ratti Wahal (Company Secretary) (139 Points)
Replied 25 August 2009

Dear Ashish,

In my opinion, the director who was disqualified by virtue of Section 274 (1)(g) of the Companies Act, 1956 will be allowed to be re-appointed as director in the same public company provided the default is being made good by the concerned company. Once the default is being made good the status of the company will no longer will be the disqualifying Company (Disqualifying Company is defined in Companies (Disqualification of Directors under Section 274 (1)(g) of the Companies Act,1956) Rules, 2003 as the Company in which the default has occured on account of which a director stands disqualified. Therefore, in my opinion, when the there will be no default then the director can be re-appointed in the same company.

Further, the restriction specified in proviso of Section 274 (1)(g) is pertaining to appointment of Director, who was disqualified, in any other Public Company.

I hope you would find the above in order.

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 25 August 2009

Dear Ashish,

Undoubtedly he can be re-appointed. Go for the interpretation of Mr. Deepak Gajrani.

He is far ahead from Mr. Munish Bhandari as far as interpretation of law is concerned.

I am one of Deepak Gajrani's favourite students and i gave all the credit of my Corporate Law knowledge to him.

Regards

vipin kumar CA (CA) (194 Points)
Replied 25 August 2009

I ALSO SEE THERE IS DIFFERENT OPINON OF DIFFERENT WRITER, BUT ACCORDING TO OUR INSTITUTE HE CAN BE APPOINTED IN SAME COMPANY

CA Abhiram Bharat. (Assistant Manager Taxation) (508 Points)
Replied 25 August 2009

dear, the director of defaulting co. can be reappointed as a director of another public co. (the co. other than the co. on default) but as the law says... u/s 274(1)g --- the director of defaulting co. cant be reappointed as a director of the another public co. means he can be reappointed as a director of the public co. (whether the co. on default or other plc) of which he was a director. however the proviso to the said section provides that he can also be aaponted as a director of some another plc if he vacates the office before the commencement of the default. since, the law is silent regarding the automatic vacation in event of default by the director. so, in a nutshell, i would like to conclude that he can be reappointed as the director of the same plc but cant be appointed as a director of some other plc if he was a director at the time of commencement of the default for the period of 5 years. but u shud noyify that the law is liberal in terms of its provisions contained therein & the explanations contained therein. regards abhiram