About Managing Agents – Changes in Constitution of Firms and Corporations – Vacation of Office, Removal and Resignation of office by managing agent

Companies Act – CHAPTER III
MANAGING AGENTS
Prohibition of appointment of managing agent in certain cases

324. Power of Central Government to notify that companies engaged in specified classes of industry or business shall not have managing agents.
(1) Subject to such rules as may be prescribed in this behalf, the Central Government may, by notification in the Official Gazette, declare that, as from such date as may be specified in the notification, the provisions of sub-section (2) shall apply to all companies, whether incorporated before or after the commencement of this Act, which are engaged on that date or may thereafter be engaged, wholly or in part, in such class or description of industry or business as may be specified in the notification.
(2) Thereupon –
(a) where any such company has a managing agent on the specified date, the term of office of that managing agent shall, if it does not expire earlier, expire at the end of three years from the specified date, or on the 15th day of August, 1960, whichever is later; and the company shall not re-appoint or appoint the same or any other managing agent; and
(b) where any such company has no managing agent on the specified date, or where it is incorporated on or after that date, it shall not appoint a managing agent.
(3) Copies of all rules prescribed under sub-section (1) shall, as soon as may be after they have been prescribed, be laid before both Houses of Parliament.
(4) A copy of every notification proposed to be issued under sub-section (1) shall be laid in draft before both Houses of Parliament for a period of not less than thirty days while they are in session; and if, within that period, either House disapproves of the issue of the notification or approves of such issue only with modifications, the notification shall not be issued or, as the case may require, shall be issued only with such modifications as may be agreed on by both the Houses.

324A. Abolition of managing agencies and secretaries and treasurers.
(1) Notwithstanding anything contained in any other provision of this Act or in the memorandum or articles of association or in any contract to the contrary, where any company has, on the 3rd day of April, 1970, a managing agent or secretaries and treasurers, the term of office of such managing agent or, as the case may be, the secretaries and treasurers shall expire, ifit does not expire earlier, on that date.
(2) No company shall appoint or re-appoint any managing agent or secretaries and treasurers on or after the 3rd day of April, 1970.]
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1. Ins. by Act 17 of 1969, s. 4.
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325. Managing agency company not to have managing agent.
(1) No company acting as the managing agent of any other company shall, after the commencement of this Act, appoint a managing agent for itself, whether it transacts any other kind of business in addition or not.
(2) No company having a managing agent shall, after the commencement of this Act, be appointed as the managing agent of any other company.
(3) Any appointment of managing agent made in contravention of sub-section (1) or (2) shall be void.
(4) Where at the commencement of this Act a company having a managing agent is itself acting as a managing agent of any other company, the term of office of the company first-mentioned as managing agent of the other company shall, if it does not expire earlier in accordance- with the provisions applicable thereto immediately before such commencement (including any provisions contained in the Indian Companies Act, 1913 (7 of 1913), expire on the 15th day of August, 1956.

325A. Subsidiary of a body corporate not to be appointed as managing agent.
After the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) no company shall appoint as its managing agent any body corporate which is a subsidiary either of itself or of any other body corporate unless immediately before such commencement the company has any such subsidiary as its managing agent.]

326. Appointment and term of office
Central Government to approve of appointment etc., of managing agent; and circumstances in which approval may be accorded.
(1) In respect of any company to which neither the prohibition specified in section 324 nor that specified in section 325 applies, a managing agent shall not be appointed or re-appointed –
(a) except by the company in general meeting; and
(b) unless the approval of the Central Government has been obtained for such appointment or re-appointment.
(2) The Central Government shall not accord its approval under sub-section (1) in any case, unless it is satisfied –
(a) that it is not against the public interest to allow the company to have a managing agent;
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1. Ins. by Act 65 of 1960, s. 121.
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(b) that the managing agent proposed is, in its opinion, a fit and proper person to be appointed or re-appointed as such, and that the conditions of the managingagency agreement proposed are fair and reasonable; and
(c) that the managing agent proposed has fulfilled any conditions whichthe Central Government requires him to fulfill.
327. Application of sections 328 to 331.
The provisions of sections 328 to 331 shall apply to –
(a) a public company;
(b) a private company which is a subsidiary of a public company; and
(c) a private company which is not a subsidiary of a public company, unless the Central Government, by general or special order, specifically exempts the private company.
328. Term of office of managing agent.
(1) After the commencement of this Act, no company shall –
(a) in case it appoints a managing agent for the first time (that is to say, in case the company has had no managing agent at any time since its formation), make theappointment for a term exceeding fifteen years;
(b) in any other case re-appoint or appoint a managing agent for a term exceeding ten years at a time;
(c) re-appoint a managing agent for a fresh term, when the existing term of the managing agent has two years or more to run:
Provided that the Central Government may, if satisfied that it is in the interest of the company so to do, permit the re-appointment of a managing agent at an earlier time than that specified in clause (c).
(2) For the purpose of sub-section (1), re-appointment does not include the re-appointment of any person on fresh, additional or changed conditions for any period not extending beyond his existing term, but otherwise includes –
(a) the renewal, or the extension of the term, of a previous appointment ;and
(b) the appointment of any person or persons having an interest in the previous managing agency.
(3) Any appointment or reappointment of a managing agent, made in contravention of the provisions of sub-sections (1) and (2) shall be void in respect of the entire term for which the appointment or re-appointment is made.
329. Variation of managing agency agreement.
A resolution of the company in general meeting shall be required for varying the terms of a managing agency agreement; and before such a resolution is passed, the previous sanction of the Central Government shall be obtained therefore.
Special provisions regarding existing managing agents
330. Term of office of existing managing agents to terminate on 15th August, 1960.
Where a company has a managing agent at the commencement of this Act, the termof office of such managing agent shall, if it does not expire earlier in accordance with the provisions applicable thereto immediately before such commencement [including any provisions contained in the Indian Companies Act, 1913], (7 of 1913.) expire on the 15th day of August, 1960, unless before that date he is reappointed for a fresh term in accordance with any provisioncontained in this Act.
331. Application of Act to existing managing agents.
All provisions of this Act, other than those relating to the term for which the office can be held, shall apply to every managing agent holding office at the commencement of this Act, with effect from such commencement.
Restrictions on Number of Managing Agencies
332. No person to be managing agent of more than ten companies after 15th August, 1960.
(1) After the 15th day of August, 1960, no person shall, at the same time, hold office as managing agent in more than ten companies.
(2) Where a person holding office as managing agent in more than ten companies before that date fails to comply with sub-section (1), the Central Government may permit him to hold office as managing agent with effect from that date in respect of such of those companies, not exceeding ten in number, as it may determine.
(3) In calculating the number of companies of which a person may be a managing agent in pursuance of this section, the following companies shall be excluded, namely –
(a) a private company which is neither a subsidiary nor a holding company of a public company;
(b) an unlimited company;
(c) an association which does not carry on business for profit, or which prohibits the payment of a dividend.
(4) For the purposes of this section, each of the following persons shall also be deemed to hold office as managing agent of the company –
(a) where the managing agent of the company is a firm, every partner in the firm;
1[(b) where the managing agent of the company is itself a company, every person who is a director, the secretaries and treasurers or a manager of the latter company, and where the latter company is a public company, every member who is entitled to exercise not less than ten per cent. of the total voting power therein and, where the latter company is a private company, every member thereof who is entitled to exercise not less than five per cent of the total voting power therein.]
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1. Subs. by Act 65 of 1960, s. 122, for cl. (b).
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1[(4A) A director or member referred to in clause (b) of sub-section (4) shall include any person in accordance with whose directions or instructions any director or, as the case may be, any member is in the opinion of the Central Government accustomed to act.]
(5) Any person who acts as a managing agent of more than ten companies in contravention of this section shall be punishable with fine which may extend to one thousand rupees in respect of each of those companies in excess of ten, for each day on which he so acts.
Right to charge on assets
333. Right of managing agent to charge on company’s assets.
A managing agent whose office stands terminated under section 324 or 332 shall be entitled to a charge on the assets of the company in respect of all moneys which are due to him from the company at the date of such termination, or which he may have to pay after that datein respect of any liability or obligation properly incurred by him on behalf of the company before such date, subject to all existing charges and incumbrances, if any, on such assets.
Vacation of Office, Removal and Resignation
334. Vacation of office on insolvency, dissolution or winding up, etc.
Subject to the provisions of section 340, the managing agent of a company shall be deemed to have vacated his office as such –
(a) in case the managing agent is an individual, if he is adjudged an insolvent;
(b) in the same case, if the managing agent applies to be adjudicated an insolvent;
(c) In case the managing agent is a firm on its dissolution from any cause whatsoever, including the insolvency of a partner in the firm;
(d) in case the managing agent is a body corporate, on the commencement of its winding up whether by or subject to the supervision of the Court, or voluntarily;
(e) in all cases, on the commencement of the winding up of the company managed by the managing agent, whether by or subject to the supervision of the Court or voluntarily.
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1. Ins. by Act 65 of 1960, s. 122.
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335. Suspension from office where receiver appointed.
(1) The managing agent of a company shall be deemed to have been suspended from his office as such, if a receiver is appointed for his property –
(a) by a Court, or
(b) by or on behalf of the creditors of the managing agent, including the holders of debentures issued by the managing agent, in pursuance of any power conferred by an instrument executed by the managing agent:
Provided that the Court which appointed the receiver, or which will have jurisdiction to wind up the managed company, as the case may be, may, by order, direct that the managing agent shall continue to act as such for such period and subject to such restrictions and conditions, if any, as may be specified in the order.
(2) The Court may, at any time, cancel or vary any order passed by it under the proviso to sub-section (1).
336. Vacation of office on conviction in certain cases.
Subject to the provisions of sections 340 and 341, the managing agent of a company shall also be deemed to have vacated his office as such, if –
(a) the managing agent;
(b) in case the managing agent is a firm, any partner in the firm; or
(c) in case the managing agent is a body corporate, any director of, or any officer holding a general power of attorney from, such body corporate; is convicted by a Court in India, after the commencement of this Act, of any offence, and sentenced therefore to imprisonment for a period of not less than six months.
337. Removal for fraud or breach of trust.
A company in general meeting may, by ordinary resolution, remove its managing agent from office –
(i) for fraud or breach of trust in relation to the affairs of the company or of anysubsidiary or holding company thereof, whether committed before or after the commencement of this Act;
(ii) for fraud or breach of trust, whether committed before or after such commencement, in relation to the affairs of any other body corporate, if a Court of Law,whether in or outside India, finds such fraud or breach of trust to have been duly established; or
(iii) subject to the provisions of sections 340 and, where the managing agent is a firm or body corporate, if any partner in the firm, or any director of, or any officer holding a general power of attorney from, the body corporate is guilty of any such fraud or breach of trust as is referred to in clause (i).
338. Removal for gross negligence or mismanagement.
A company in general meeting may, by special resolution,, remove its managing agent from office for gross negligence in, or for gross mismanagement of, the affairs of the company or of any subsidiary thereof.
339. Power to call meetings for the purposes of sections 337 and 338 and procedure.
(1) Without prejudice to any other provision contained in this Act or in the articles of the company for the calling of meetings, any two directors of the company may call a general meeting of the company for the purpose of considering any resolution of the nature referred to in section 337 or 338.
(2) On receipt of notice of any such resolution, a copy of the resolution shall be sent forthwith to the managing agent by the company.
(3) The managing agent shall have, in relation to any such resolution, all the rights which a director of the company has under section 284 in relation to any resolution forremoving him from office, including, in particular, the right to make representations to thecompany in writing, to have such representations sent to members of the company and to have them read out at the meeting and also the right to be heard on the resolution at the meeting.
Time when certain in disqualifications will take effect
340. Time when certain in disqualifications will take effect.
(1) The disqualifications imposed by clause (a) of section 334, by sub- section (1) of section 335, by section 336, and by any resolution passed in pursuance of clause (ii) of section 337, shall not take effect –
(a) for thirty days from the date of the order of adjudication, appointment of the receiver, sentence, or finding of the Court as the case may be, or
(b) where any appeal or petition is preferred within the thirty daysaforesaid against the order, appointment, sentence or conviction resulting in the sentence, or finding, until the expiry of seven days from the date on which such appeal or petition is disposed of, or
(c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of the order, appointment, sentence, conviction or finding, as the casemay be, and the appeal or petition, if allowed, would result in the removal of the disqualification, or in making the resolution inapplicable, as the case may be, until such further appeal or petition is disposed of.
(2) In the cases referred to in sub-section (1), the Board may suspend the managing agent from office immediately on, or at any time after, the adjudication, appointment, sentence or finding referred to in clause (a) of that sub-section and until the disposal of the appeals andpetitions, if any, referred to in clauses (b) and (c) thereof, or until the convicted partner,director or officer is expelled or dismissed in pursuance of section 341, as the case may be.
341. Conviction not to operate as disqualification if convicted partner, director, etc., is expelled.
(1) In the cases referred to in clauses (b) and (c) of section 336, it shall be open to the managing agent, notwithstanding anything to the contrary in any other law or agreement, for the time being in force, to expel or dismiss the convicted partner, director or officer, within thirty days from the date of his sentence and in that event, the disqualifications imposed by the clauses aforesaid shall cease to apply.
(2) Sub-section (1) shall not affect the operation of section 346 in any case to which that section would otherwise apply.
342. Resignation of office by managing agent.
(1) Unless the managing agency agreement otherwise provides, a managing agent may, by notice to the Board, 1[resign his office as from such date as may be specified in the notice but such resignation shall not be effective until it is accepted by the company under sub-section (7)].
(2) The managing agent shall cease to act as such with effect from the date so specified or from such later date, if any, as may be mutually agreed on between him and the Board; 2[but the managing agent shall not be absolved from liability to the company for hisacts whether of commission or omission, during the period of his managing agency].
3[(3) When notice of resignation is given as aforesaid, the Board shall require the managing agent within such time as may be fixed by it or such further time as may be allowed by it, to prepare, and the managing agent shall prepare, a report on the state of affairs of the company as on the date specified in the notice of resignation or such subsequent date as the Board may think suitable, not being later than that on which the. managing agent ceases to act as such under sub-section (2), together with a balance-sheet made out as on that date and a profit and loss account for the period commencing from the date up to which the last such account was prepared and ending with the date on which the managing agent ceases to act as such.
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1. Subs. by Act 65 of 1960, s. 123, for “resign his office with effect from such date as may be specified in the notice”.
2. Subs. by s. 123, ibid., or “but his resignation shall not be effective until it is considered as provided in sub-section (3)”.
3. Subs. by s. 123, ibid.,for sub-sections (3), (4) and (5).
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(4) In case of default by the managing agent in complying with the requisition of the Board under sub-section (3), the Board shall itself cause a report on the state of affairs of the company as on the date specified in the notice of resignation or such subsequent date as the Board may think suitable, not being later than that on which the managing agent ceases to act as such under sub-section (2), together with a balance-sheet made out as on that date and a profit and loss account for the period specified in sub-section (3), to be prepared.
(5) The Board shall also obtain a report from the auditors of the company on such balance-sheet and profit and loss account in accordance with sections 227,228 and 229 and place the managing agents resignation together with the report on the state of the company’s affairs, balance sheet, profit and loss account and auditors’ report mentioned above, before the company in general meeting.
(6) In relation to any report made by the auditors as aforesaid, sections 230 to 233 shall apply in like manner as they apply in relation to auditors’ report referred to therein.
(7) The company in general meeting may, by a resolution, accept the resignation or take such other action with reference thereto as it may deem fit.]
Transfers of, and Succession to, Office
343. Transfer of office by managing agent.
(1) The managing agent of a company shall not transfer his office to another person or enter into any agreement or arrangement with another person by or under which the managing agent parts with, or which has the effect of transferring, his right to manage the whole or substantially the whole of the affairs of the company in favour of or to that other person unless approval of the company in general meeting and also of the Central Government has been accorded to such transfer, agreement or arrangement.
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1. Subs. by Act 65 of 1960, s. 124, for s.343.
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(2) If the other person and the managing agent referred to in sub-section (1) contravene the provisions of that sub-section, that other person and the managing agent, and where the managing agent is a firm, every partner in the firm and where the managing agent is a body corporate, every director of the body corporate, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.
344. Managing agency not to be heritable after commencement of Act.
Any agreement made by a company other than a private company which is not a subsidiary of a public company, with its managing agent after the commencement of this Act shall be void in so far as it provides for succession to the office by inheritance or devise.
345. Succession to managing agency by inheritance or devise under agreement before commencement of Act to be subject to Central Government’s approval.
(1) Where the office of the managing agent of a company is held by an individual at the commencement of this Act and the managing agency agreement provides for succession to the office by inheritance or devise, no person shall succeed to the office on the death of the holder thereof, unless the succession of such person thereto is a proved by the Central Government; and that Government shall not accord such approval unless, in its opinion, such person is a fit and proper person to hold the office of managing agent of the company.
(2) The provisions of sub-section (1) shall not apply to a private company which is not a subsidiary of a public company.
Changes in Constitution of Firms and Corporations
346. Change in constitution of managing agency firm or corporation to be approved by Central Government.
(1) Notwithstanding anything to the contrary contained in any other provision of this Act, where the managing agent of a public company, or of a private company which is a subsidiary of a public company, is a firm or body corporate and any change takes place in the constitution of the firm or body corporate, the managing agent shall cease to act as such on the expiry of six months from the date on which the charge takes place or such further time as the Central Government may (whether before or after the expiry of the six months) allow in that behalf,unless the approval of the Central Government has been accorded 1[before the expiry of six months aforesaid or where further time has been allowed by the Central Government, before the expiry of that time] to the changed constitution of the firm or body corporate.
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1. Subs. by Act 65, of 1960, s. 125, for “before such expiry”.
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Explanation.-For the purposes aforesaid, a change in the constitution of a body corporate means –
(a) its conversion from a private to a public company, or from a public to a private company;
(b) any change among the directors or managers of the corporation, whether caused by the death or retirement of a director or manager, the appointment of a newdirector or manager, or otherwise;
(c) any change in the ownership of shares in the body corporate or in the case of a body corporate not having a share capital, any change in its membership;
1[and where the managing agent, being a body corporate is a subsidiary of another body corporate, includes a change in the constitution of that other body corporate within the meaning of clause (a), clause (b) or clause (c)].
2[(2) Where the managing agent is a body corporate (whether or not it is a subsidiary of another body corporate) and its shares are for the time being dealt in, or quoted on, a recognised stock exchange, a change in the ownership of its shares, or
where a managing agent being a body corporate is a subsidiary of another body corporate and the shares of the other body corporate are for the time being dealt in, or quoted on, a recognised stock exchange, a change in the ownership of the shares of the otherbody corporate, shall not be deemed to be a change in the constitution of the managing agent within the meaning and for the purposes of sub-section (1), unless the Central Government, by notification in the Official Gazette, otherwise directs:
Provided that no such notification shall be issued in respect of any such, or such other, body corporate as aforesaid, unless the Central Government is of the opinion that any change in the ownership of its shares has taken place or is likely to take place, which hasaffected or is likely to affect prejudicially the affairs of any company which is being managed by the managing agent.]
Application of Schedule VIII to certain managing agents
347. Application of Schedule VIII to certain managing agents.
(1) The provisions of Schedule VIII shall apply –
(a) to every firm or private company which acts as the managing agent of any company, whether public or private; and
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1. Ins. by Act 65 of 1960, s. 125.
2. Subs. by s. 125, ibid., for sub-section (2).
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(b) save as provided in sub-section (2), to every other body corporate (not being a private company) which acts as the managing agent of any company, whether public or private.
(2) A body corporate (not being a private company) acting as managing agent shall, if and so long as its shares are dealt in, or quoted on, any recognised stock exchange, be exempt from the operation of sub-section (1), unless the Central Government, by notification in the Official Gazette, otherwise directs:
Provided that the Central Government may, by order, modify or limit the operation of this sub-section in relation to any body corporate in such manner as that Government thinks fit.
(3) If default is made by a managing agent to which Schedule VIII applies in complying with the provisions thereof –
(a) if the managing agent is a firm, every partner therein who is in default, and
(b) if the managing agent is a body corporate, the body corporate, and every director or other officer thereof who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.
Remuneration of managing agents
348. Remuneration of managing agent ordinarily not to exceed 10 per cent of net profits.
1[(1)] 2* * * A company shall not pay to its managing agent, in respect of any financial year beginning at or after the commencement of this Act, by way of remuneration, whether in respect of his services as managing agent or any other capacity, any sum in excess of ten per cent. of the net profits of the company for that financial year.
3[(2) For the purposes of this section, any payment made by way of remuneration to any of the following persons shall be deemed to be included in the remuneration of the managing agent –
(a) where the managing agent of the company is a firm, every partner in the firm;
(b) where the managing agent of the company is a public company, every director of that public company;
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1. S. 348 renumbered as sub-section (1) of that section by Act 65 of 1960, s. 126.
2. The words “Save as otherwise expressly provided in this Act,” omitted by s. 126, ibid.
3. Ins. by s. 126, ibid.
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(c) where the managing agent of the company is a private company, every director and member of that private company.
(3) Nothing contained in sub-section (1) or sub-section (2) shall be deemed to affect the operation of sections 352, 354 and 356 to 360.]
349. Determination of net profits.
(1) In computing for the purpose of section 348, the net profits of a company in any financial year –
(a) credit shall be given for the sums specified in sub-section (2), and credit shall not be given for those specified in sub-section (3); and
(b) the sums specified in sub-section (4) shall be deducted, and those specified in sub-section (5) shall not be deducted.
(2) In making the computation aforesaid, credit shall be given for the following sums –
bounties and subsidies received from any Government, or any public authorityconstituted or authorized in this behalf, by any Government unless and except in so far as the Central Government otherwise directs.
(3) In making the computation aforesaid, credit shall not be given for the following sums –
(a) profits, by way of premium, on shares or debentures of the company, which are issued or sold by the company;
(b) profits on sales by the company of forfeited shares;
(c) 1[profits of a capital nature including profits from the sale] of the undertaking or any of the undertakings of the company or of any part thereof;
(d) profits from the sale of any immovable property or fixed assets of a capital nature comprised in the undertaking or any of the undertakings of the company, unless the business of the company consists, whether wholly or partly, of buying and selling any such property or assets:
2 [Provided that where the amount for which any fixed asset is soldexceeds the written-down value thereof referred to in section 350, credit shall be given for so much of the excess as is not higher than the difference between the original cost of that fixed asset and its written-down value.]
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1. Subs. by Act 65 of 1960, s. 127, for “profits from the sale”.
2. Ins. by s. 127, ibid.
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(4) In making the computation aforesaid, the following sums shall be deducted –
(a) all the usual working charges;
(b) directors’ remuneration;
(c) bonus or commission paid or payable to any member of the company’s staff, or to any engineer, technician or person employed or engaged by the company, whether on a whole-time or on a part-time basis;
(d) any tax notified by the Central Government as being in the nature of a tax on excess or abnormal profits;
(e) any tax on business profits imposed for special reasons or in specialcircumstances and notified by the Central Government in this behalf;
(f) interest on debentures issued by the company;
(g) interest on mortgages executed by the company and on loans andadvances secured by a charge on its fixed or floating assets;
(h) interest on unsecured loans and advances;
(i) expenses on repairs, whether to immovable or to movable property, provided the repairs are not of a capital nature;
1[(j) outgoings inclusive of contributions made under clause (e) of sub-section (1) of section 293 ;]
(k) depreciation to the extent specified in section 350;
2[(l) the excess of expenditure over income, which had arisen in computing the net profits in accordance with this section in any year which begins at or after the commencement of this Act, in so far as such excess has not been deducted in any subsequent year preceding the year in respect of which the net profits have to be ascertained;]
(m) any compensation or damages to be paid in virtue of any legal liability, including a liability arising from a breach of contract;
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1. Subs. by Act 65 of 1960, S. 127, for cl. (j).
2. Subs. by s. 127, ibid., for cl. (l).
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(n) any sum paid by way of insurance against the risk of meeting any liability such as is referred to in clause (m);
1[(o) debts considered bad and written off or adjusted during the year of account.]
(5) In making the computation aforesaid, the following sums shall not be deducted –
(a) the remuneration payable to the managing agent;
(b) income-tax and super-tax payable by the company under the Indian Income-tax Act, 1922, (11 of 1922) or any other tax on the income of the company not falling under clauses (d) and (e)of sub-section (4)
(c) any compensation, damages or payments made voluntarily, that is to say, otherwise than in virtue of a liability such as is referred to in clause (m) of sub-section (4) ;
1[(d) loss of a capital nature including loss on sale of the undertaking or any of the undertakings of the company or of any part thereof not including any excess referred to in the proviso to section 350 of the written-down value of any asset which is sold, discarded, demolished or destroyed over its sale proceeds or its scrap value.]
Ascertainment of depreciation
2[350. Ascertainment of depreciation.
The amount of depreciation to be deducted in pursuance of clause (k) of sub-section (4) of section 349 shall be the amount calculated with reference to the written-down value of the assets as shown by the books of the company at the end of the financial year expiring at the commencement of this Act or immediately thereafter and at the end of each subsequent financial year, 3[at the rate specified in Schedule XIV]:
Provided that if any asset is sold, discarded, demolished or destroyed for any reason before depreciation of such asset has been provided for in full, the excess, if any, of the written-down value of such asset over its sale proceeds or, as the case may be, its scrap value, shall be written off in the financial year in which the asset is sold, discarded, demolished or destroyed.]
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1. Ins. by Act 65 of 1960, s. 127.
2. Subs. by s. 128, for s. 350.
3. Subs. by Act 31 of 1988, s.50 (w.e.f.15.6.1988)
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351. Special provision where there is a profit sharing arrangement between two or more companies.
Where there is an arrangement between two or more companies to share their profits, and not less than two of those companies have the same managing agent, any profits paid in pursuance of the arrangement by any of the companies having that managing agent to any other or others of them shall –
(a) be excluded from the net profits of the company making such payment; and
(b) be included in the net profits of the company receiving such payment, or where more than one company receives such payment, be included in the net profits of each of the receiving companies, to the extent of the payment received by it.
352. Payment of additional remuneration.
Additional remuneration in excess of the limits specified in sections 198 and 348 may bepaid to the managing agent if and only if, such remuneration is sanctioned by a special resolution of the company and is approved by the Central Government as being in the public interest.
353. Time of payment of remuneration.
The remuneration payable to the managing agent for any financial year or part thereof shall not be paid to him, until the accounts of the company for such financial year have been audited and laid before the company in general meeting:
Provided that the minimum remuneration, if any, payable in pursuance of section 198 may be paid to the managing agent in such suitable instalments as may be specified either in the articles of the company or in a resolution passed by the company at an annual general meeting or in the managing agency agreement executed by the company.
354. Managing agent not entitled to office allowance but entitled to be reimbursed in respect of expenses.
The managing agent shall not be paid any office allowance, but he may be reimbursed in respect of any expenses incurred by him on behalf of the company and sanctioned by the Board or by the company in general meeting; and nothing contained in sections 348 to 353 shall be deemed to prohibit his being so reimbursed.
355. Saving.
Sections 348 to 354 shall not apply to a private company unless it is a subsidiary of a public company.
356. Appointment of managing agent or associate as selling agent of goods produced by the company.
(1) No managing agent and no associate of a managing agent, shall receive any commission or other remuneration from the company, in respect of sales of goods produced by the managed company, if the sales are made from the premises at which they are produced or from the head office of the managing agent or from any place in India.
(2) For sales of any goods produced by the company which are effected from any place outside India not being a place specified in sub-section (1), the managing agent, or an associate of the managing agent, may be appointed as a selling agent subject to the following conditions, namely –
(a) that the managing agent or associate maintains an office at such place for his own business, that is to say, for a business not connected with that of the company 1[or any other company managed by the managing agent];
(b) that the remuneration payable in respect of the work done as selling agent by the managing agent or associate is in accordance with the terms of a special resolutionpassed by the company in that behalf ; and
(c) that no other sums are payable by the company to managing agent or associate whether by way of expenses or otherwise.
(3) Any appointment made in pursuance of sub-section (2) shall not be made for a term exceeding five years but may be renewed from time to time for a term not exceeding five years on each occasion:
Provided that such renewal shall not be effected earlier than one year from the date on which it is to come into force.
(4) The special resolution referred to in clause (b) of sub-section (2) shall set out the material terms subject to which the appointment of selling agent is made,
(5) Every appointment made under sub-section (2) and all particulars relating thereto shall be entered in a register maintained by the company for the purpose.
357. Application of section 356 to case where business of company consists of the supply or rendering of any services.
Where and in so far as the business of a company consists in the supply or rendering of any services, the provisions of section 356 shall apply in respect of any such business procured for the company by its managing agent or any associate of its managing agent from any place outside India, in like manner as those provisions apply in respect of sales of any goods produced by a company which are effected from that place.
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1. Ins. by Act 65 of 1960, s. 129.
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358. Appointment of managing agent or associate as buying agent for company.
(1) No managing agent, and no associate of a managing agent, shall receive any payment whatever, from the company except expenses, if any, sanctioned under section 354 in respect of purchases of goods made on its behalf either in India, or in cases to which sub-section (2) does not apply, outside India.
(2) Where purchases of goods are made on behalf of a company by its managingagent or any associate of its managing agent, at any place outside India, then, if the managing agent or associate maintains an office at such place not only for such purchase but also for his own business, that is to say, for a business not connected with that of the company 1[or any other company managed by the managing agent], he may receive, at the option of the company, either –
(a) such part of the expenses of such office as may reasonably be attributed to the purchases made on behalf of the company as aforesaid; or
(b) remuneration, by way of commission or otherwise, in respect of the work done by the managing agent or associate in making such purchases.
(3) In cases to which clause (a) of sub-section (2) applies, the maximum amountwhich may be paid to the managing agent shall be specified in a special resolution passed by the company; and in cases to which clause (b) of that sub-section applies, the remuneration payable to the managing agent or associate shall be in accordance with the terms of a special resolution, passed by the company in that behalf.
(4) The special resolution referred to in sub-section (3) shall set out in sufficient detail nature of the office maintained by the managing agent or associate outside India, the purposes for which it is maintained, the scale of its operations, the expenses incurred in maintaining the office, and the proportion of those expenses which may be reasonably attributed to the work done on behalf of the company.
(5) The special resolution shall not remain in force for a term exceeding three years but may be renewed from time to time for a term not exceeding three years on each occasion:
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1. Ins. by Act 65 of 1960, s. 130.
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Provided that no renewal shall take place earlier than one year from the date on which it is to come into force.
(6) Every resolution passed in pursuance of this section shall be entered in a register maintained by the company for the purpose.
359. Commission, etc. of managing agent as buying or selling agent of other concerns.
(1 A company in general meeting may, by resolution, authorise its managing agent or any associate of its managing agent to retain any commission or other remuneration earned or to be earned by such agent or associate as the 1* * * agent, secretary or selling or buying agent of any firm, body corporate or other concern in respect of any goods, power, freight, repairs or other services, for the sale, purchase, supply or rendering of which a contract has been, or is to be, entered into by such firm, body or concern with the company, provided the prices or amounts charged to or received by the company are at rates which are not less favourable to the company than the market rates or which are otherwise reasonable.
(2) Every contract so entered into and all particulars relating thereto shall be entered in a separate register maintained by the company for the purpose.
360. Contracts between managing agent or associate and company for the sale or purchase of goods or the supply of services, etc.
2[(1) A contract between a company and its managing agent or an associate of the managing agent –
(a) for the sale, purchase or supply of any property, movable or immovable, or for the supply or rendering of any service other than that of managing agent, or
(b) for the underwriting of any shares or debentures, to be issued or sold by the company; shall not be valid against the company –
(i) unless the contract has been approved by the company by aspecial resolution passed by it, and
(ii) where the contract is for the supply or rendering of any service other than that of managing agent, unless further the contract has been approved by the Central Government. either before the date of the contract or at any time within three months next after that date.]
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1. The words “managing agent, secretaries and treasurers, manager” omitted by Act 65 of 1960, s. 131.
2. Subs. by s. 132, ibid., for sub-section (1).
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(2) The special resolution aforesaid shall –
(a) set out the material terms of the contract proposed to be entered into 1[or entered into]; and
(b) provide specifically that for any property supplied or sold, or any services supplied or rendered, by the company, the managing agent or associate shall make payment to the company within one month from the date of the supply or sale of the 2[property], or the supply or rendering of the service, as the case may be.
(3) Every such contract and all particulars relating thereto shall be entered in a separate register maintained by the company for the purpose.
3[(4) Nothing in clause (a) of sub-section (1) shall affect any contract or contracts for the sale, purchase or supply of any property or the supply or rendering of any services, in which either the company or the managing agent or associate, as the case may be, regularly trades or does business, provided that the value of such property or the cost of such services does not exceed five thousand rupees in the aggregate in any year comprised in the period of thecontract or contracts.]
361. Existing contracts relating to matters dealt with in sections 365 to 360 to terminate on 1st March, 1958.
All contracts in force at the commencement of this Act, to which a company or the managing agent or an associate of the managing agent of a company is a party, shall in so far as the contracts relate to any of the matters referred to in sections 356 to 360, be deemed toterminate on the first day of March, 1958, unless they terminate on an earlier date.
Registers to be open to inspection
362. Registers to be open to inspection.
The registers referred to in sections 356 to 360 shall be open to inspection, and extracts may be taken there from and copies thereof may be required, by any member of the company, in the same manner, to the same extent and on payment of the same fees as in the case of the register of members of the company.
363. Remuneration received in contravention of foregoing sections to be held in trust for company.
4 [(1)] Where the managing agent of a company, or an associate of the managing agent, receives any sum from the company, whether directly or indirectly, by way of remuneration, rebate, commission, expenses or otherwise –
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1. Ins. by Act 65 of 1960, S. 132.
2. Subs. by s. 132, ibid., for “goods”.
3. Subs. by s. 132, ibid., for sub-section (4).
4. S. 363 renumbered as sub-section (1) of that section by s. 133, ibid.
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(a) in the case of a public company or a private company which is a subsidiary of a public company, in contravention of sections 348 to 354 and sections 356 to 36; or
(b) in the case of a private company which is not a subsidiary of a public company, in contravention of sections 356 to 36; the managing agent or associate 1[shall refund such sum to the company and until such sum is so refunded, hold it in trust for the company].
2[(2) The company shall not waive the recovery of any sum refundable to it under sub-section (1) unless permitted by the Central Government.]
Assignment of, or charge on, remuneration
364. Company not to be bound by assignment of, or charge on, managing agent’s remuneration.
Any assignment of, or charge on, his remuneration, or any part thereof, effected by a managing agent shall be void as against the company.
This section shall not affect the rights inter se of the managing agent and any person other than the company.
Compensation for termination of office
365. Prohibition of payment of compensation for loss of office in certain cases.
A company shall not pay or be liable to pay to its managing agent any compensation for the loss of his office in the following cases –
(a) where the managing agent resigns his office in view of the re-construction of the company or of its amalgamation with any other body corporate or bodies corporate and isappointed as the managing agent, secretaries and treasurers, manager or other officer of the reconstructed company or of the body corporate resulting from the amalgamation;
(b) where the managing agent resigns his office, otherwise than on the reconstruction of the company or its amalgamation as aforesaid;
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1. Subs. by Act 65 of 1960, s. 133, for certain words.
2. Ins. by s. 133, ibid.
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(c) where the managing agent vacates his office in pursuance of section 324, 1[324A,] 330 or 332;
(d) where the managing agent is deemed to have vacated his office in pursuance of clause (a), (b), (c) or (d) of section 334 or of section 336;
(e) where the managing agent is deemed to have vacated his office in pursuance of clause (e) of section 334, provided the winding up of the company was due to the negligence or default of the managing agent;
(f) where the managing agent is deemed to have been suspended, or is suspended, from his office in pursuance of section 335 or sub-section (2) of section 340;
(g) where the managing agent is removed from office by a resolution in pursuance of section 337 or 338; and
(h) where the managing agent has instigated, or has taken part in bringing about, the termination of his office.
Limit of compensation for loss of office
366. Limit of compensation for loss of office.
The compensation which may be paid by a company to its managing agent for loss of office shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term, or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which his office ceased or was terminated, or where he held the office for a lesser period than three years, during such period:
Provided that in the event of the winding up of the company commencing, whether before, or at any time within twelve months after, the date of the cessation or termination of the office of managing agent, no compensation shall be payable to him if the assets of the company on the winding up, after deduction of the expenses thereof, are not sufficient to repay the share capital (including the premiums, if any,) contributed by the members of the company.
Other rights and liabilities, not affected on terminations of office
367. Managing agent’s rights and liabilities after termination of office.
Where the office of a managing agent ceases or is terminated –
(a) the managing agent and the company shall be entitled to enforce any claim or demand which each may have against the other, in respect of anything done or omitted to be done by either of them before the cessation or termination of the managing agency; and
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1. Ins. by Act 17 of 1969, s. 5.
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(b) the rights and liabilities, in relation to the company, of the managing agent in any other capacity, shall not be affected.
Restrictions on powers
368. Managing agent to be subject to control of Board and to restrictions in Schedule VII.
The managing agent of a company, whether appointed before or after the commencement of this Act, shall exercise his powers subject to the superintendence, control and direction of its Board of directors and subject also to the provisions of the memorandum and articles of the company and to the restrictions contained in Schedule VII.
369. Loans to managing agent.
(1) No public company, and no private company which is a subsidiary of a public company, 1[shall directly or indirectly make] any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by –
(a) its managing agent or any associate of its managing agent; or
(b) any body corporate in respect of which the Central Government, by order, declares that it is satisfied that the Board of directors, managing director, managing agent, secretaries and treasurers or manager thereof is accustomed to act in accordance with the directions or instructions of the managing agent or associate of the managing agent, notwithstanding that the body corporate may not itself be an associate of the managing agent.
2[(2) Nothing contained in sub-section (1) or section 295 shall apply to –
(a) any credit given by the company to its managing agent for the purpose of facilitating the company’s business and held by such agent in his own name in one or morecurrent accounts, subject to limits previously approved by the directors of company and on noaccount exceeding twenty thousand rupees in the aggregate; or
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1. Subs. by Act 65 of 1960, s. 134, for ” shall make”.
2. Subs. by s. 134, ibid., for sub-section (2).
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(b) any loan made by a holding company to its subsidiary.
Explanation.-Credit referred to in clause (a) of sub-section (2) is confined to any cash advance given by way of a permanent advance or imprest for facilitating the carrying on of the company’s business, transactions on such advance or imprest account being settled as far as possible on a monthly basis.]
Loans, etc., to companies under the same management
370. Loans, etc., to companies under the same management.
(1) No company (hereinafter in this section referred to as “the lendingcompany”) shall –
(a) make any loan to, or
(b) give any guarantee, or provide any security, in connection with a loan made by any other person to, or to any other person by any body corporate 1* * *, unless the making of such loan, the giving of such guarantee or the provision of such security has been previously authorised by a special resolution of the lending company.
2[Provided that no special resolution shall be necessary in the case of loans made to other bodies corporate not under the same management as the lending company where the aggregate of such loans does not exceed 3[such percentage of the aggregate of thesubscribed capital of the lending company and its free reserves as may be prescribed:]
Provided further that the aggregate of the loans made to all bodies corporate shall not exceed without the prior approval of the Central Government –
(a) 3[such percentage of the aggregate of the subscribed capital of the lending company and its free reserves as may be prescribed] where all such other bodies corporate are not under the same management as the lending company;
(b) 3[such percentage of the aggregate of the subscribed capital of the lending company and its free reserves as may be prescribed] where all such other bodies corporate are under the same management as the lending company.
Explanation 4[1].-If a special resolution has been passed by the lending company authorising the making of loans up to the limit of 3[the percentage of the aggregate specified in clause (a) or, as the case may be, the percentage of the aggregatespecified in clause (b) of the second proviso]
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1. The words ” which is under the same management as the lending company” omitted by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967).
2. Added by s. 46, ibid. (w.e.f. 1-4-1967).
3. Subs. by Act 31 of 1988, s.51 (w.e.f. 17.4.1989).
4. Renumbered as Explanation 1 by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967)
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then, no further special resolution or resolutions shall be deemedto be necessary for the making of any loan or loans within such limit.]
1[Explanation 2.-If a special resolution has been passed bythe lending company authorising the Board of Directors to give any guarantee or provide any security up to a limit specified in the resolution, then, no further special resolution or resolutionsshall be deemed to be necessary for giving any guarantee or providing any security within such limit.]
2[(1A) Where the lending company –
(a) makes any loan to, or
(b) gives any guarantee, or provides any security, in connection with a loan made by any other person to, or to any other person by, a firm in which a partner is a body corporate under the same management as the lending company –
(i) the loan shall be deemed to have been made to, or
(ii) the guarantee or the security shall be deemed to have been given or provided in connection with the loan made by such other person to, or to such otherperson by, a body corporate under the same management.]
3[(1B)] 4[For the purposes of sub-sections (1) and (1A)] two bodies corporate shall be deemed to be under the same management –
(i) if the managing agent, secretaries and treasurers, managing director or manager of the one body, or where such managing agent or secretaries and treasurers are a firm, any partner in the firm, or where such managing agent or secretaries and treasurers are a private company, any director of such company, is –
(a) the managing agent, secretaries and treasurers, managing director or manager of the other body; or
(b) a partner in the firm acting as managing agent or secretaries and treasurers of the other body; or
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1. Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967).
2. Ins. by Act 65 of 1960, S. 135.
3. Explanation numbered and lettered as sub-section (1B) by s. 135, ibid.
4. Subs. by s. 135, ibid., for ” For the purposes of this sub-section “.
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(c) a director of the private company acting as managing agent or secretaries and treasurers of the other body; or
(ii) if a majority of the directors of the one body constitute, or at any time within the six months immediately preceding constituted, a majority of the directors of the other body ; 1[or]
1[(iii) if not less than one-third of the total voting power with respect to any matter relating to each of the two bodies corporate is exercised or controlled by the same individual or body corporate; or
(iv) if the holding company of the one body corporate is under the same management as the other body corporate within the meaning of clause (i), clause (ii) or clause (iii), or
(v) if one or more directors of the one body corporate while holding, whether by themselves or together with their relatives, the majority of shares in that body corporate also hold, whether by themselves or together with their relatives, the majority of shares in the other body corporate.]
1[(1C) Every lending company shall keep a register showing –
(a) the names of all bodies corporate under the same management as the lending company and the name of every firm in which a partner is a body corporateunder the same management as the lending company, and made guarantee given or security provided by the lending company 2[in relation to any such body corporate] under this section –
(i) the name of the body corporate to which the loan has beenmade whether such loan has been made before or after that body corporate came under the same management as the lending company,
(ii) the amount of the loan,
(iii) the date on which the loan has been made,
(iv) the date on which the guarantee has been given or security has been provided in connection with a loan made by any other person to, or to any other person by, any body corporate or firm referred to in sub-section (1) or (1A) together with the name of the person, body corporate or firm.
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1. Ins. by Act 65 of 1960, s. 135.
2. Ins. by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967).
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(1D) Particulars of 1[every loan, guarantee or security referred to in sub-section (1C)] shall be entered in the register aforesaid within three days of the making of such loan, or the giving of such guarantee or the provision of such security or in the case of any loan made, guarantee given or security provided before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) within three months from such commencement or such further time not exceeding six months as the company may by special resolution allow.
(1E) If default is made in complying with the provisions of sub-section (1C) or (1D), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees and also with a further fine which may extend to fifty rupeesfor every day after the first during which the default continues.
(1F) The register aforesaid shall be kept at the registered office of the lending company and –
(a) shall be open to inspection at such office, and
(b) extracts may be taken there from or copies thereof may be required, by any member of the company to the same extent and in the same manner and on the payment of the same fees as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly.]
2[(2) Nothing contained in the foregoing provisions of this section shall apply to –
(a) any loan made –
(i) by a holding company to its subsidiary, or
(ii) by the managing agent or secretaries and treasurers to any company under his or their management, or
3[(iii) by a banking company, or an insurance company, in the ordinary course of its business ; 4[or]
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1. Subs. by Act 31 of 1965, s. 46, for ” every such loan, guarantee or security (w.e.f. 1-4-1967).
2. Subs. by Act 65 of 1960, S. 135, for sub-section (2).
3. Subs. by Act 31 of 1965, S. 46, for sub-clause (iii) (w.e.f. 1-4-1967).
4. Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967).
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(iv) by a private company, unless it is a subsidiary of a public company; 1[or]
(v) by a company established with the object of financing industrial enterprises;]
(b) any guarantee given or any security provided –
(i) by a holding company in respect of any loan made to its subsidiary; or
(ii) by the managing agent or secretaries and treasurers in respect of any loan made to any company under his or their management; or
2[(iii) by a banking company, or an insurance company, in the ordinary course of its business; or
(iv) by a private company, unless it is a subsidiary of a public company; or
(v) by a company established with the object of financing industrial enterprises.]
(3) Nothing in this section shall apply to a book debt unless the transaction the nature of a loan or an advance.
(4) For the purposes of this section, any person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act shall be deemed to be a director of the company.]
3[(5) Where before the commencement of the Companies (Amendment) Act, 1965, any loan, guarantee or security has been made, given or provided by a company which could nothave been made, given or provided under this section as amended by that Act, and such loan, guarantee or security is outstanding at such commencement, the company shall, within six months from such commencement enforce the repayment of the loan made or, as the case may be, revoke the guarantee given or the security provided, notwithstanding any agreement to the contrary:
Provided that the aforesaid period of six months may be extended by the Central Government on an application made to it in that behalf by the company.]
4[Explanation.–For the purposes of this section, “loan” includes any deposit of money made by one company with another company, not being a banking company.]
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1. Ins. by Act 34 of 1966, s. 3 (w.e.f. 1-4-1967).
2. Subs. by s. 3, ibid., for sub-clause (iii) (w.e.f. 1-4-1967).
3. Ins. by Act 31 of 1965, s. 46 (w.e.f. 1-4-1967).
4. Added by Act 31 of 1988, s. 51 (w.e.f. 17-4-1989)
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Provisions as to certain loans which could not have been made if sections 369 and 370 were in force.
370A. Provisions as to certain loans which could not have been made if sections 369 and 370 were in force.
Where any loan made, guarantee given or security provided by a company and outstanding at the commencement of the Companies (Amendment) Act, 1960 (65 of 1960.) would not have been made, given or provided if section 369 or section 370 had’ been in force at the time when such loan was made, guarantee given or security provided, the company shall, within six months from the commencement of that Act, enforce the repayment of the loan made or, as the case may be, revoke the guarantee given or the security provided, notwithstanding any agreement to the contrary:
Provided that the period of six months within which the company is required by this section to enforce the repayment of the loan or to revoke the guarantee or security, may be extended –
(a) in the case of a loan guarantee or security under section 369, by the Central Government on an application made to it by the company for that purpose;
(b) in the case of a loan, guarantee or security under section 370, by a special resolution of the company.]
Penalty for contravention of section 369, 370 or 370A.
371. Penalty for contravention of section 369, 370 or 370A.
(1) Every person who is a party to any contravention of 2[section 369 or section 370 [excluding sub-section (1C) or (1D)], or section 370A] including in particular any person to whom the loan is made, or in whose interest the guarantee is given or the security is provided, shall be punishable with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months:
Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been repaid in part, the maximum punishment which may be imposedunder this sub-section by way of imprisonment shall be proportionately reduced.
(2) All persons who are knowingly parties to any such contravention shall be liable, jointly and severally, to the lending company for the repayment of the loan, or for making good the sum which the lending company may have been called upon to pay in virtue of the guarantee given or the security provided by such company.
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1. Ins. by Act 65 of 1960, s. 136.
2. Subs. by s. 137, ibid., for “section 369 or 370
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372. Purchase by company of shares, etc., of other companies.
(1) A company, whether by itself or together with its subsidiaries (hereafter in this section and section 373 referred as the investing company), shall not be entitled to acquire, by way of subscription, purchase or otherwise (whether by itself, or by any individual or association of individuals in trust for it or for its benefit or on its account) the shares of any other body corporate except to the extent, and except in accordance with the restrictions and conditions, specified in this section.]
1[ The Board of directors of the investing company shall be entitled to invest in any shares of any other body corporate up to such percentage of the subscribed equityshare capital, or the aggregate of the paid-up equity and preference share capital, of such other body corporate, whichever is less, as may be prescribed:]
Provided that the aggregate of the investments so made by the Board in all other bodies corporate shall not exceed 1[such percentage of the aggregate of the subscribedcapital and free reserves of the investing company, as may be prescribed:]
Provided further that the aggregate of the investments made in all other bodiescorporate in the same group shall not exceed 1[such percentage of the aggregate of thesubscribed capital and free reserves of the investing company as may be prescribed.]
(3) In computing at any time the percentages specified in sub-section (2) and the provisos thereto, the aggregate of the investments made by the investing company in otherbody or bodies corporate [whether before or after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960),] up to that time shall be taken into account.
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1. Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989)
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(4) The investing company shall not make any investment in the shares of any other body corporate in excess of the percentages specified in sub-section (2) and the provisos thereto, unless the investment is sanctioned by a resolution of the investing company in general meeting and 1[unless previously approved] by the Central Government:
Provided that the investing company may at any time invest up to any amount in shares offered to it under clause (a) of sub-section (1) of section 81 (hereafter in this section referred to as rights shares) irrespective of the aforesaid percentages:
Provided further that when at any time the investing company intends to make any investments in shares other than rights shares, then, in computing at that time any of the aforesaid percentages, all existing investments, if any, made in rights shares up to that time shall be included in the aggregate of the investments of the company.
(5) No investment shall be made by the Board of directors of an investing company in pursuance of sub-section (2), unless it is sanctioned by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting, except those not entitled to vote thereon, and unless further notice of the resolution to be moved at the meeting has been given to every director in the manner specified in section 286.
(6) Every investing company shall keep a register of all investments made by it in shares of any other body or bodies corporate (whether in the same group or not and whether in the case of a body corporate in the same group, such investments were made before or after that body came within the same group as the investing company), showing in respect of each investment the following particulars –
(a) the name of the body corporate in which the investment has been made;
(b) the date on which the investment has been made;
(c) where the body corporate is in the same group as the investing company, the date on which the body corporate came in the same group;
(d) the names of all bodies corporate in the same group as the investing company.
(7) Particulars of every investment to which sub-section (6) applies shall be entered in the register aforesaid within seven days of the making thereof or in the case of investments made before the commencement of the Companies (Amendment) Act, 1960, (65 of 1960.) within six months from such. commencement, or such further time as the CentralGovernment may grant on an application by the company in that behalf.
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1. Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989)
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(8) If default is made in complying with the provisions of sub-section (6) or (7), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees and also with a further fine which may extend to fifty rupees for every day after the first during which the default
(9) The register aforesaid shall be kept at the registered office of the investing company and –
(a) shall be open to inspection at such office, and
(b) extracts may be taken there from and copies thereof may be required, by any member of the investing company to the same extent, in the same manner, and on the payment of the same fees as in the case of the register of members of the investing company; and the provisions of section 163 shall apply accordingly.
(10) Every investing company shall annex in each balance-sheet prepared by it after the commencement of the Companies (Amendment) Act, 1960, (65 of 1960), a statement showing the bodies corporate (indicating separately the bodies corporate in the same group) in the shares of which investments have been made by it (including all investments, whether existing or not, made subsequent to the date as at which the previous balance-sheet was made out) and the nature and extent of the investments so made in each body corporate:
Provided that in the case of a company whose principal business is the acquisition of shares, stock, debentures or other securities (hereafter in this section referred to as an investment company), it shall be sufficient if the statement shows only the investments existing on the date as at which the balance-sheet to which the statement is annexed has been made out.
(11) For the purposes of this section, a body corporate shall be deemed to be in the same group as the investing company –
(a) if the body corporate is the managing agent of the investing company; or
(b) if the body corporate and the investing company should, in virtue of sub-section (1B) of section 370, be deemed to be under the same management.
(12) References in the foregoing provisions of this section to shares shall in the case of investments made by the investing company in other bodies corporate in the same group, be deemed to include references to debentures also.
(13) The provisions of this section except the first proviso to subsection (2) 1[and sub-section (5)] shall also apply to an investment company.
(14) This section shall not apply –
(a) to any banking or insurance company
(b) to a private company, unless it is a subsidiary of a public company;
(c) to any company established with the object of financing, whether by way of making loans or advances to, or subscribing to the capital of, private industrial enterprises in India, in any case where the Central Government has made or agreed to make to the company a special advance for the purpose or has guaranteed or agreed to guarantee the payment of moneys borrowed by the company from any institution outside India;
2[(d) to investments by a holding company in its subsidiary other than a subsidiary within the meaning of clause (a) of sub-section (1) of section 4;
(e) to investments by a managing agent or secretaries and treasurers in a company managed by him or them.]
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Investments made before commencement of Act.
373. Investments made before commencement of Act.
Where any investments have been made by a company 3[in any other body corporate in the same group] at any time after the first day of April, 1952, which, if section 372 had been then in force, could not have been made except on the authority of a resolution passed by the investing company and the approval of the Central Government, the authority of the company by means of a resolution and the approval of the Central Government shall be obtained to such investments, within six months from the commencement of this Act ; and if such authority and approval are notso obtained, the Board of directors of the company shall dispose of the investments, in so far as they may be in excess of the limits specified in sub-section (2) of section 372 and 4[the secondproviso to that sub-section], within two years from the commencement of this Act.
Penalty for contravention of section 372 or 373
374. Penalty for contravention of section 372 or 373.
If default is made in complying with the provisions of 5[section 372 [excluding sub-sections (6) and (7)] or section 373), every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees.
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1. Ins. by Act 31 of 1965, s. 47 (w.e.f. 15-10-1965).
2. Subs. by Act 31 of 1988, s.52 (w.e.f. 17.4.1989).
3. Ins. by Act 65 of 1960, s. 139.
4. Subs. by s. 139, ibid., for “the proviso to that sub-section.
5. Subs. by s. 140, ibid., for ” section 372 or 373.”
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375. (1) Managing agent not engage in business competing with business of managed company. A managing agent shall not engage on his own account in any business which is of the same nature as, and directly competes with, the business carried on by a company ofwhich he is the managing agent or by a subsidiary of such company, unless such company by special resolution permits him to do so.
(2) For the purposes of sub-section (1), a managing agent shall be deemed to be engaged in business on his own account, if such business is carried on by –
(a) a firm in which he is a partner; or
(b) a private company at any general meeting of which not less than twenty per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of the body corporate;
(c) a body corporate (not being a private company) at any general meeting of which not less than seventy per cent of the total voting power may be exercised or controlled byany of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of such body corporate.
(3) If a managing agent engages in any business in contravention of this section, he shall be deemed to have received all profits and benefits accruing to him from such business, in trust for the company under his management or the subsidiary of such company, as the case may be; and where such profits and benefits are deemed to have been so received by the managing agent in trust for two or more such companies or subsidiaries, such profits and benefits shall be held by the managing agent in trust for each of them in such proportions as may be agreed upon between them or, failing such agreement, as may be decided by the Court.
376. Condition prohibiting reconstruction or amalgamation of company except on continuance of managing agent, etc., to be void.
Where any provision in the memorandum or articles of a company, or in any resolution passed in general meeting by, or by Board of directors of, the company, or in an agreementbetween the company and its managing agent or any other person, whether made before or after the commencement of this Act, prohibits the reconstruction of the company or its amalgamation with any other body corporate or bodies corporate, either absolutely or except onthe condition that the managing director, managing agent, secretaries and treasurers, or manager of the company is appointed or reappointed as secretaries and treasurers, managing director,managing agent, or manager of the reconstructed company or of the body resulting from amalgamation, as the case may be, shall become void with effect from the commencement of this Act, or be void, as the case may be.
Restrictions on right of managing agent to appoint directors
377. Restrictions on right of managing agent to appoint directors.
(1) The managing agent of a company may, if so authorised by its articles, appoint not more than two directors where the total number of the directors exceeds five, and one director where the total number does not exceed five.
1[(1A) Nothing contained in sub-section (1), or In any other provision of this Act, or in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting, or by its Board of directors shall be deemed to authorise the managing agent to appoint the chairman of the Board of directors.]
(2) The managing agent may, at any time, remove any director so appointed, and appoint another director in his place or in the place of a director so appointed who resigns or otherwise vacates his office.
(3) Any provision contained in the articles of, or in any agreement with, the company, authorising the managing agent to appoint more than the number of directors authorised undersub-section (1), which is in force immediately before the commencement of this Act, shall in regard to the excess, be void, with effect from the expiry of one month from such commencement.
(4) Where at the commencement of this Act, the number of directors appointed by the managing agent exceeds the number authorised under sub-section (1), the managing agent shall determine which of them shall continue to hold office, and intimate the choice made by himto the company before the expiry of one month from such commencement; and only the director or directors so chosen shall continue to hold office as directors after such expiry.
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1. Ins. by Act 65 of 1960, s. 141.
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(5) If no choice is made by the managing agent as aforesaid, all the directors appointed by him shall, with effect from the expiry of one month from the commencement of this Act, be deemed to have vacated their offices.
1[(6) Where from any cause the total number of directors is so reduced as not to exceed five, but the number of directors appointed by the managing agent exceeds, after suchreduction, the number authorised under sub-section (1), the managing agent shall determine which of them shall continue to hold office and intimate the choice made by him to the company before the expiry of one month from the happening of the cause and only the director so chosen shall continue to hold office as director with effect from such expiry:
Provided that if no choice is made by the managing agent as aforesaid, all the directors appointed by him shall with effect from such expiry, be deemed to have vacated their offices.]

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