Page 167 - DCOM106_COMPANY_LAW

Company Law

Notes For the aforesaid appointment of a director or his associates, special resolution shall not
only be necessary at the time of first appointment but also for every subsequent appointment
on a higher remuneration not covered by the special resolution except where an
appointment on a time-scale has already been approved by the special resolution.
It may be noted that the aforesaid restrictions do not apply where a relative of a director
or a firm in which such relative is a partner holds any office or place of profit under the
company or a subsidiary thereof having been appointed to such office or place before such
director became a director of this company [s. 314(1A)].
3. Section 314(1)(B): (i) no partner or relative of a director or manager; (ii) no firm in which
such director or manager, or relative of either is a partner; (iii) no private company of
which such a director or manager, or relative of either, is a director or member, shall hold
an office or place of profit in the company carrying a total monthly remuneration of not
less than such sum as may be prescribed (presently, 50,000 per month) except by passing
a special resolution and the approval of the Central Government.
4. Section 314(2)(C): If any director or his associate holds an office or place of profit in
contravention of the aforesaid provisions, then: (i) he shall be deemed to have vacated
such office or place of profits as such on and from the date next following the date of the
general meeting; (ii) he shall be liable to refund to the company any remuneration received
or the monetary equivalent of the perquisites or advantage enjoyed by him. The company
cannot waive the recovery of any sum refundable to it as above unless, permitted to do so
by the Central Government.
These provisions will neither affect the director’s office as such nor shall he be liable to refund
remuneration received in the capacity of a director, e.g; if some commission or monthly
remuneration is payable to all the directors, the same will not be refundable, but if a director
receives something in addition to other directors that he will be bound to pay to the company.
Thus, for the purposes of this section, an office and place of profit is to be deemed to be one of
profit if in case it is held by a director, such director over and above his remuneration as a
director, and in case it is held by any other person, firm or private company or a body corporate,
obtains anything from the company by way of remuneration, whether as salary, fees,
commission, or perquisites, right to occupy any premises rent-free as a place of residence or
otherwise.
Section 629 (A) also provides for a fine of 5,000 and a further fine of 500 for every day during
the period in which contravention continues.

Section 314 (2A) makes it obligatory for every individual, firm, private company, or other body
corporate proposed to be appointed to any office or place of profit to which this section applies
to declare in writing before or at the time of appointment, whether he or it is or is not connected
with any director of the company in any of the ways referred to in s.314 (1).
The aforesaid restrictions do not apply to a person who being the holder of any office of profit
in the company is appointed by the Central Government, under s.408, as a director of the
company. [s. 314(4)].

10.10 Removal of Directors

A director may be removed by:
1. Shareholders
2. Central Government
3. CLB

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