Section 243: Consequence of termination or modification of certain agreements
This section outlines the consequences of terminating or modifying certain agreements, including restrictions on appointments and penalties for non-compliance.
Penalty
(2) Any person who knowingly acts as a managing director or other director or manager of a company in contravention of clause (b) of sub-section (1) 4[or sub-section (1A)], and every other director of the company who is knowingly a party to such contravention, shall be punishable 5*** with fine which may extend to 6[five lakh rupees].
The section, clause by clause
What the section says
In plain terms
(1)Where an order made under section 242 terminates, sets aside or modifies an agreement such as is referred to in sub-section (2) of that section,—
If the Tribunal terminates, sets aside or modifies a certain agreement, the company will not be liable for any claims for damages or compensation, and a managing director or other director or manager whose agreement is terminated or set aside cannot be appointed or act as such for 5 years without the Tribunal's leave.
(1)(a)such order shall not give rise to any claims whatever against the company by any person for damages or for compensation for loss of office or in any other respect either in pursuance of the agreement or otherwise;
(1)(b)no managing director or other director or manager whose agreement is so terminated or set aside shall, for a period of five years from the date of the order terminating or setting aside the agreement, without the leave of the Tribunal, be appointed, or act, as the managing director or other director or manager of the company:
provisoProvided that the Tribunal shall not grant leave under this clause unless notice of the intention to apply for leave has been served on the Central Government and that Government has been given a reasonable opportunity of being heard in the matter.
(1A)The person who is not a fit and proper person pursuant to sub-section (4A) of section 242 shall not hold the officer of a director or any other officer connected with the conduct and management of the affairs of any other officer connected with the conduct and management of the affairs of any company for a period of five years from the date of the said decision:
provisoProvided that the Central Government may, with the leave of the Tribunal, permit such person to hold any such office before the expiry of the said period of five years.
(1B)Notwithstanding anything contained in any other provisions of this Act, or any other law for the time being in force, or any contract, memorandum or articles, on the removal of a person from the officer of a director or any other officer connected with the conduct and management of the affairs of the company, that person shall not be entitled to, or be paid, any compensation for the loss or termination of officer.]
On removal from office, a person is not entitled to any compensation for loss or termination of office, regardless of any other provisions or contracts.
(2)Any person who knowingly acts as a managing director or other director or manager of a company in contravention of clause (b) of sub-section (1) 4[or sub-section (1A)], and every other director of the company who is knowingly a party to such contravention, shall be punishable 5*** with fine which may extend to 6[five lakh rupees].
A person who acts as a managing director or other director or manager in contravention of the rules, and any other director who is knowingly a party to such contravention, is punishable with a fine of up to five lakh rupees.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. The words “with imprisonment for a term which may extend to six months or” omitted by Act 29 of 2020, s. 43 (w.e.f. 21-12-2020).
- 2. Subs. by s. 43, ibid., for “one lakh rupees, or with both” (w.e.f. 21-12-2020).
- 3. Ins. by Act 22 of 2019, s. 35 (w.e.f. 15-8-2019).
- 4. Ins. by Act 22 of 2019, s. 35 (w.e.f. 15-8-2019).
- 5. The words “with imprisonment for a term which may extend to six months or” omitted by Act 29 of 2020, s. 44 (w.e.f. 21-12-2020).
- 6. Subs. by s. 44, ibid., for “five lakh rupees, or with both” (w.e.f. 21-12-2020).
This section refers to
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.