Hey frds dont u think Q.5 on sec 274(1)(g) is wrong
director can not be reappointed in both default n any other public co.
24 Replies
$ Pillu $
(**Love - Live**)
(467 Points)
Replied 04 April 2012
Director disqualified u/s 274 1(g) is not eligible to be reappointed in the defaulting company also.
But the suggested answers of icai published by icai state that a director disqualified u/s274 (1) g shall not be disqualifed for reappointment in the defaulting company.
So better to go as per RTP/ suggested answers.
Moreover apun ko kya karna hai...we are interested in marks...
sneha lakhotia
(23)
(252 Points)
Replied 04 April 2012
k so u mean to say go as per rtp.... ithink its wrong... want go go with d act...
Joey Tribbiani
(fdg)
(2010 Points)
Replied 04 April 2012
No,its correct,Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003 have made distinction between ‘disqualifying company’ and ‘appointing company’. A Director is disqualified from being appointed or reappointed in appointing company but he can be reappointed in disqualifying company.
sneha lakhotia
(23)
(252 Points)
Replied 04 April 2012
effect of disqualification:
no director can be'
>appointed in any pub co
>reapp any pub co
>reapp defaulting co...
here lotus ltd is defaulti co, sohow can it be reapp
Joey Tribbiani
(fdg)
(2010 Points)
Replied 04 April 2012
I have quoted the rules, I have not interpreted them. This is what the rules say
Joey Tribbiani
(fdg)
(2010 Points)
Replied 04 April 2012
$ Pillu $
(**Love - Live**)
(467 Points)
Replied 04 April 2012
Well,
I have not gone through the same section in the act.....
But what i think may be its clashing with the descripttion given in the act....
but Since we are going to apply this in our exams......so better to go as per icai and not as per act.....
then only we will get marks....
And when it comes to advising our clients we must go as per the act and not as per the icai....
Joey Tribbiani
(fdg)
(2010 Points)
Replied 04 April 2012
Yup,I got confused too and we have to follow these rules now.
https://www.nehasinghi.com/archives/disqualification-of-directors-us-2741g
$ Pillu $
(**Love - Live**)
(467 Points)
Replied 04 April 2012
I would like to invite our cci expert member Mr.Ankur garg(sir), the renowned Company secretary to address this issue ASAP.
Rakesh Rao
(CA Final Student)
(408 Points)
Replied 04 April 2012
Dear All,
According to me the answer to question no. 5 in the RTP is 100% correct. Please read the provisions of Sec. 274(1)(g) carefully. After Clause A & B of of Sec 274(1)(g), the Act says that
"Provided that such person shall not be eligible to be appointed as a director of any other public company for a period of 5 years........"
The text I have highlighted above clearly states that he cannot be appointed in any company other than Defaulting company. There is no problem in re-appointing the director's in the defaulting company.
Rakesh Rao
(CA Final Student)
(408 Points)
Replied 04 April 2012
Another point I would suggest to students is that do not make deliberate mistakes only because the same is given in RTP or Suggested Answers. I agree that mistakes do occur, but I don't think RTPs and Suggested Answers are referred by the Examiners. They go through the Model answers given to them at the time of correction, also they are qualified enough to know what is right and what is wrong.
So I request u to not make mistakes inspite of knowing the correct answers only because it is given in suggested answers or RTP. You might end up loosing marks. Beware!!!
$ Pillu $
(**Love - Live**)
(467 Points)
Replied 04 April 2012
I agree
But Examiners are instructed by the icai which is responisble for preparing RTP and suggested answers.
ICAI cant provide different answers in the "model answers " and in the icai materials.
Examiners qualifications and general knowledge has got nothing to do with the corrections of answersheets.
They will have to blindly follow the icai's instructions.
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 05 April 2012
Hi everyone,
It would be a bit difficult to comment/guide without going through question no. 5.
|
However here I am sharing one my interpretation of section 274(1)(g). Hope it will help you to interpret the section in better way resulting into better handling on practical query in exam. |
Yes Private Companies are outside the scope of Section-274(1)(g).
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.
Kindly note that he will not be eligible to be freshly appointed as a director of any other Public company.
Now observe carefully: However, the same does not apply in case of the defaulting company as the words used in section 274(1)(g) are: “such person shall not be eligible to be appointed as a Director of any other public company” Hence to conclude I would say he will be eligible to be re-appointed as a director of the defaulting company or any other public company of which he was a director.
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}.
In simple words if he leave the company before default then there will be no question of application of the proviso.
Further note that 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. Here I would like to add that a rule can not 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.
Best Regards
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 05 April 2012
Another interpretation regarding section 274(1)(g) regarding applicability of section-274(1)(g)
QUERY:
|
Sec 274(1) starts with the opening statement that "A person shall not be capable of being appointed director of a company, if - ..." It does not distinguish between a Pvt co and a Public co. Will it means if a director is disqualified u/s 274(1)(g) not eligible to be appointed in public companies as well as in private company ??? |
ANSWER:
As per my view above interpretation is very true because if we go by the general language of section 274 we have to read all the clauses of section-274 in conjunction with the opening line of section-274 including clause (g), which means if a director is disqualified u/s 274(1)(g) then he is not eligible to be appointed in public companies as well as in private company.
But at the same time we must appreciate and give some respect to the intention of law. According to Mr. Rammiya and various other eminent experts the intention of law behind introduction of clause (g) was to disqualify certain persons from directorship in Public companies as also mentioned in proviso to section-274(1)(g). In fact the whole clause (g) talks about Public company only.
Further, Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003 also talks about Public companies only. You may check Rule 1(3) of the said rule as mentioned below for your ready reference.
1. Short title, commencement and extent.-
(1) These rules may be called the Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003.
(2) These rules shall come into force from the date of their notification in the Official Gazette.
(3) These rules shall apply to all public limited companies registered under the Companies Act, 1956.
Now on the basis of the above discussion we may interpret what should be the final interpretation regarding applicability of section-274(1)(g).
Best Regards
Ankur Garg
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