Consequence of termination or modification of certain agreements

(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,—

(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;

(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:

Proviso

Provided 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 office of a director or any other office 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:

Proviso

Provided 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 provision 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 office of a director or any other office 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 office.

(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 ) or sub-section (1A), and every other director of the company who is knowingly a party to such contravention, shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to five lakh rupees f ive lakh rupees, or with both.

Notes, amendments & references (4)

Refer Rule 83 National Company law Tribunal Rules 2016. To view the rule, Click Here

Inserted vide the Companies (Amendment) Act, 2019 dated 31.07.2019 w.e.f., 15.08.2019. To view the Amendment Act, Click Here . To view the commencement Notification, Click Here .

with imprisonment for a term which may extend to six months or Omitted vide Companies (Amendment) Act, 2020 dated 28.09.2020 with effect from 21.12.2020. To view the Act, Click Here . To view the commencement notification, Click Here .

Substituted vide Companies (Amendment) Act, 2020 dated 28.09.2020 with effect from 21.12.2020. To view the Act, Click Here . To view the commencement notification, Click Here .