The Company Law Board

The Company Law Board shall if, after giving a reasonable opportunity to the company, the managing director and other officers at fault comes to the conclusion that the appointment has been made in contravention of the requirements of Schedule XIII, make an order declaring that a contravention of the requirements of Schedule XIII has taken place [Section 269(9)].
On making of an order by the Company Law Board under sub-section (9):
(a) the company shall be liable to a fine which may extend to Rs. 50,000;
(b) every officer of the company who is in default shall be liable to a fine of
Rs. 1,00,000; and
(c) the appointment of the managing director shall be deemed to have come to an end and the person so appointed shall, in addition to being liable to pay a fine of Rs. 1,00,000, refund to the company the entire amount of salaries, commissions and perquisites received or enjoyed by him between the date of
his appointment and the passing of such order Contravention of the aforesaid provisions of sub-section (10) make the managing director and every other officer in default liable to imprisonment up to 3 years and a continuing fine @ Rs. 500 for every day of default.
Validity of the acts. However, sub-section (12) provides that all acts done by a managing director whose appointment has been found to be in contravention of Schedule XIII shall (if acts so done are valid otherwise) be valid notwithstanding the aforesaid order made by the Company Law Board.
Mis International Carrier Ltd. purchased a flat in Mumbai to give residential accommodation to Shri Ravi Mehta, the Managing Director. At the time of purchase of flat, the Managing Director was given an option to buy the flat during the course of his employment. The Managing Director exercised his option and paid the company half of the purchase price and requested for time to pay the balance amount in three equal
half-yearly instalments at 10% interest per annum. Examine whether the arrangement’The facts of the problem are based on the case of Dr. Fredie Ardeshir Mehta vs. Union of India (1991) 70 Compo Cas. 210 (Born.). In this case the Bombay High Court held that when a company gives official accommodation in the matter of payment of debt to one of its directors, it is not, and does not amount to, a ioan and company cannot be prosecuted for contravention of provisions of Section 295. The Court held that Section 295(1) prohibits a company from, directly or indirectly,