Section 274(1)(g)

In my view such a director would be eligible for reappointment. Its only that such a case should be reported by the auditor in his report as required under CARO, 2003.

Expert views are always recommended for this.

Hi

You can reappoint the retiring director in the same company, but in case of default, the director of defaulting company cannot reappoint in other company. The provision of appointment or reappointment will not apply for the same company.

Regards

CS Ajay Mishra 

As per my view the director can be reappointed in same defaulted public company but he shall not be appointed as director in any other public company

Hi,

Yes I agree with Ajay Mishra that a defaulting director can continue his directorship in defaulting company.

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.

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}.

However during my analysis of Disqualification of Director Rules, 2003 with section 274, I found that there is a contradiction regarding re-appointment in the same defaulting company.

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. But here I would like to add that a rule cannot 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.

Hope that the discussion would be off some help to you.

Best Regards

Ankur Garg

Thanks Ankur for such a wonderful explanation.

Reading this, one thought is striking in my mind that if director of a defaulting public company are not elgible for reappointment in such public company on his retirement while the default continues then the directorship of that public company will be practically zero at the time of default. Hence in my opinion if defaulting directors are not reappointed in the defaulting company then its directorship will fall to zero which is not possible under Companies Act.

Regards,

Neha

thanks for the interesting article !

Originally posted by : Ajay Mishra
	Hi You can reappoint the retiring director in the same company, but in case of default, the director of defaulting company cannot reappoint in other company. The provision of appointment or reappointment will not apply for the same company. Regards CS Ajay Mishra

I ALSO AGREE

I agree with Ajay Sir. 

As per my view , the section restricts appointments in other public companies , but the director can continue in the defaulting company as a Director. He is not required to vacate the office. Retirement itself vacates the office. 

The section is confined to continuance in the office & not for reappoinment.