Section 314 - Director, etc., not to hold office or place of profit. - Companies Act, 1956

Director, etc., not to hold office or place of profit. 314. [1] [(1) Except with the [2] [consent] of the company accorded by a special resolution, ___ (a) no director of a company shall hold any office or place of profit, and (b) [3] [no partner or relative of such director, no firm in which such director, or a relative of such director, is a partner, no private company of which such director is a director or member, and no director or manager of such a private company, shall hold any office or place of profit carrying a total monthly remuneration of [4] [such sum as may be prescribed], except that of managing director or manager,] banker or trustee for the holders of debentures of the company, (i) under the company; or (ii) under any subsidiary of the company, unless the remuneration received from such subsidiary in respect of such office or place of profit is paid over to the company or its holding company: [5] [Provided that it shall be sufficient if the special resolution according the consent of the company is passed at the general meeting of the company held for the first time after the holding of such office or place of profit: Provided further that where a relative of a director or a firm in which such relative is a partner, is appointed to an office or place of profit under the company or a subsidiary thereof without the knowledge of the director, the consent of the company may be obtained either in the general meeting aforesaid or within three months from the date of the appointment, whichever is later.] Explanation . For the purpose of this sub-section, a special resolution according consent shall be necessary for every appointment in the first instance to an office or place of profit and to every subsequent appointment to such office or place of profit 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. (1A) Nothing in sub-section (1) shall 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 becomes a director of the company.] [6] [(1B) Notwithstanding anything contained in sub-section (1), (a) no partner or relative of a director or manager, (b) no firm in which such director or manager, or relative of either, is a partner, (c) no private company of which such a director or manager, or relative of either, is a director or member, shall hold any office or place of profit in the company which carries a total monthly remuneration of not less than [7] [such sum as may be prescribe], except with the prior consent of the company by a special resolution and the approval of the Central Government: [8] [* * *] [9] [(2) [10] [(a)] If any office or place of profit is held in contravention of the provisions of sub-section (1), the director, partner, relative, firm, private company [11] [* * *], or the manager concerned, shall be deemed to have vacated his or its office as such on and from the date next following the date of the general meeting of the company referred to in the first proviso or, as the case may be, the date of the expiry of the period of three months referred to in the second proviso to that sub-section, and shall also be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place of profit.] [12] [(b) The company shall not waive the recovery of any sum refundable to it under clause (a) unless permitted to do so by the Central Government.] [13] [(2A) 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 shall, before or at the time of such appointment, declare in writing whether he or it is or is not connected with a director of the company in any of the ways referred to in sub-section (1).] [14] [(2B) If, after the commencement of the Companies (Amendment) Act, 1974 (41 of 1974) any office or place of profit is held, without the prior consent of the company by a special resolution and the approval of the Central Government, the partner, relative, firm or private company appointed to such office or place of profit shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him on and from the date on which the office was so held by him. (2C) If any office or place of profit is held in contravention of the provisions of the proviso to sub-section (1B), the director, partner, relative, firm, private company or manager concerned shall be deemed to have vacated his or its office as such on and from the expiry of six months from the commencement of the Companies (Amendment) Act, 1974 (41 of 1974) or the date next following the date of the general meeting of the company referred to in the said proviso, whichever is earlier, and shall be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite or advantage enjoyed by him or it for the period immediately preceding the date aforesaid in respect of such office or place of profit. (2D) The Company shall not waive the recovery of any sum refundable to it under sub-section (2B) [15] [* * *] unless permitted to do so by the Central Government.] (3) Any office or place [16] [* * *] shall be deemed to be an office or place of profit under the company [17] [within the meaning of this section], (a) in case the office or place is held by a director, if the director holding it [18] [obtains from the company anything] by way of remuneration over and above the remuneration to which he is entitled as such director, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise; (b) in case the office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the indivi dual, firm, private company or body corporate holding it [19] [obtains from the company anything] by way of remuneration whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise. [20] [(4) Nothing in this section shall apply to a person, who being the holder of any office of profit in the company, is appointed by the Central Government, under section 408, as a director of the company.] ------------------------------------- Notes:- [1] Substituted by the Companies (Amendment) Act, 1960, Act 65 of 1960, section 116, for sub-section (1). [2] Substituted by section 44, by the Companies (Amendment) Act, 1965, Act 31 of 1965, for "previous consent", w.e.f. 15-10-1965. [3] Substituted by the Companies (Amendment) Act, 1974, Act 41 of 1974, section 29, w.e.f. 1-2-1975. [ no partner or relative of such a director, no firm in which such a director or relative is a partner, no private company of which such a director is a director or member, and no director, managing agent, secretaries, and treasures, or manager of such a private company shall hold any office or place of profit carrying a total monthly remuneration of five hundred rupees or more, except that of managing director, managing agent, secretaries and treasures, manager, legal or technical adviser, ]. [4] Substituted by Companies (Amendment) Act, 1988, section 48, w.e.f. 15-6-1988, for the words "five hundred rupees or more". [5] Substituted by the Companies (Amendment) Act, 1965, Act 31 of 1965, section 44, for the proviso, w.e.f. 15-10-1965. Earlier it was inserted by the Companies (Amendment) Act, 1960, Act, 65 of 1960. [6] Inserted by the Companies (Amendment) Act, 1974, Act 41 of 1974, section 29, w.e.f. 1-2-1975. [7] Substituted by the Companies (Amendment) Act, 1988, section 48, w.e.f. 15-6-1988 for the words "three thousand rupees". [ 3. Approval of the Central Government in case of Appointment of Relatives, etc. of Directors. __ No appointment for an office or place of profit in a company shall take effect unless approved by the Central Government on an application, in respect of ___ (a) Partner or relative of a Director or Manager; or (b) Firm in which such Director or Manager, or relative of either is a partner; or (c) Private company of which such Director of Manager or relative of either is a Director or Member which carries a monthly remuneration exceeding Rs. 50,000 p.m. ]. [8] Omitted by the Companies (Amendment) Act, 1988, section 48, w.e.f. 15-6-1988. The proviso read as follows: "Provided that in a case where no office of profit could have been held in the company by a person if this section had been in force at the time when the appointment or re-appointment to such office of profit was made, the company shall, within a period of six months from the commencement of the Companies (Amendment) Act, 1974, (41 of 1974) obtain the approval of the company in general meeting and of the Central Government for the holding, by such person, of the office of profit." [9] Substituted by the Companies (Amendment) Act, 1965, Act 31 of 1965, section 44, for sub-section (2), w.e.f. 15-10-1965. [10] Sub-section (2) relettered as clause (a) of that sub-section by the Companies (Amendment) Act, 1974, Act 41 of 1974, section 29, w.e.f. 1-2-1975. [11] Omitted by the Companies (Amendment) Act, 2000, w.e.f. 13-12-2000. as provisions relating to managing agents, secretaries and treasures had become redundant after abolition of system by Act 17 of 1969. [12] Inserted by the Companies (Amendment) Act, 1974, Act 41 of 1974, section 29, w.e.f. 1-2-1975. [13] Inserted by the Companies (Amendment) Act, 1960, Act 65 of 1960, section 116. [14] Inserted by the Companies (Amendment) Act, 1974, Act 41 of 1974, section 29, w.e.f. 1-2-1975. [15] The words and brackets "or (2C), as the case may be" omitted by the Companies (Amendment) Act, 1988, section 48, w.e.f. 15-6-1988. [16] The words in a company" omitted by the Companies (Amendment) Act, 1960, Act 65 of 1960, section 116. [17] Substituted by the Companies (Amendment) Act, 1974, Act 41 of 1974, section 29, for "within the meaning of sub-section (1)", w.e.f. 1-2-1975. [18] Substituted by the Companies (Amendment) Act, 1960, Act 65 of 1960, section 116, for "obtains anything". [19] Substituted by the Companies (Amendment) Act, 1960, Act 65 of 1960, section 116, for "obtains anything". [20] Inserted by the Companies (Amendment) Act, 1974, Act 41 of 1974, section 29, w.e.f. 1-2-1975.