The Managing Director of the company

MIs. Excellent Industries Ltd. is a Multi-product Company with a paid up capital of Rs. 4 crores. A contract for the purchase of Textile Machineries and balancing Equipments valued at Rs. One crore was placed before the Board for approval. The Managing Director of the company is interested in this contract because his son-in-law in a partner of the firm selling the machineries and the equipment to the company. Explain briefly the procedure to be followed by the company to enter into the said
contract. Since the Managing Director of Mis. Excellent Industries Ltd. is interested in the contract for the purpose of textile machineries etc., the same should be approved by the Board of Directors at its meeting. It cannot be approved through resolution passed by circulation [Section 297). The company should also obtain the approval of Central Government since its paid up capital is more that Rs. 1 crore. For this purpose the following steps are to be taken:
(i) Hold a Board meeting and place the terms of the contract for consideration.
The Managing Director should disclose nature of his interest as required
under Section 299.
(ii) The Managing Director should neither take part in the discussion nor vote in respect of the said contract. His presence will also be not counted for the purpose of quorum (Section 300 and 303 of the Companies Act).
(iii) The consent of the Board must be accorded by way of a resolution passed at
the meeting of the_Board.
(iv) The particulars of the contract must be entered in the register maintained
under Section 301 which should be made available for inspection.
(v) An application to the Central Government should be made in Form 24A by enclosing (a) certified copy of the Board resolution approving the contract; (b) certified copy of the agreement containing the particulars of the contract; and (c) Bank Draft/Challan evidencing the payment of prescribed fee.
Mr. V, a chartered accountant, is a Director in PQR Limited. The Company
proposes to appoint/engage the firm V & Co. in which Mr. V is a partner in one or more of the following capacities:
j Consultants on regular retainer basis.
(H)Authorized representatives to appear before tribunals.
Discuss whether the provisions of Section 314 of the Companies Act are attracted
in the above situations.
Apparently the prohibition under sub-sections (1) and (lB) of Section 314 of the Companies Act, 1956 is not applicable to remuneration/compensation given to directors or their associates for the services of a professional nature rendered by them to the company in their professional capacity such as advocate, chartered accountant, solicitor, etc. However, prohibition will apply to them if they bind themselves on
regular retainership basis. Thereore, (i). a kctoI Q1aere c.:ountas appoient
by the company on a regulab1tE-J!lersp £!sas advlse!:t.c2ulta!lt, .mter.nal aud;tor,
etc., shall be hit by the restrictive provisions q,f sub-sectiop.s (l) aDd (lB) of Sc.Hon 3l4.
(ii) Based on the above analogy as contained above, the bare engagement of a Charactered Accountant in a particular case and the payment to him of his professional fees in that case would not attract the provisions of sub-sections (1) and (1 B) of Section 314 of the Companies Act. Engaging a person in his professional capacity for performing a particular function, say, for attending to a particular case or for undertaking a particular assignment of consultancy, or rendering advice on a specific matter, would not by itself constitute appointment to an office or place of profit in or under the company. ,But, if the terms of engagement of attend to a’Irtlie tax casesor act as adviser in all connected matters, whethr gQ.erally
or in ap—articular city or town, then even thoug,