Section 378Q Companies Act 2013 - Vacation of Office by Directors

Section 378Q of the Companies Act, 2013 forms part of the statutory framework governing the management of Producer Companies. It specifies circumstances in which the office of a director of a Producer Company becomes vacant.

Current statutory position: Section 378Q was inserted into the Companies Act, 2013 by section 52 of the Companies (Amendment) Act, 2020 and came into force on 11 February 2021. The provision applies specifically to Producer Companies and, as far as may be, to a director of a Producer Institution that is a member of a Producer Company.

Meaning and scope of Section 378Q

The expression "vacation of office" means that a director ceases to hold the office of director when a statutory ground specified in Section 378Q is attracted. The provision deals with grounds connected with the director personally as well as specified defaults of the Producer Company in which the person is a director.

Section 378Q - Statutory provision

378Q. Vacation of office by directors.

(1) The office of the director of a Producer Company shall become vacant if,--

(a) he is convicted by a court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months;

(b) the Producer Company, in which he is a director, has made a default in repayment of any advances or loans taken from any company or institution or any other person and such default continues for ninety days;

(c) he has made a default in repayment of any advances or loans taken from the Producer Company in which he is a director;

(d) the Producer Company, in which he is a director--

(i) has not filed the annual accounts and annual return for any continuous three financial years; or

(ii) has failed to repay its deposit or withheld price or patronage bonus or interest thereon on due date, or pay dividend and such failure continues for one year or more;

(e) default is made in holding election for the office of director, in the Producer Company in which he is a director, in accordance with the provisions of this Act and articles;

(f) the annual general meeting or extraordinary general meeting of the Producer Company, in which he is a director, is not called in accordance with the provisions of this Act except due to natural calamity or such other reason.

(2) The provisions of sub-section (1) shall, as far as may be, apply to the director of a Producer Institution which is a member of a Producer Company.

When does a director's office become vacant?

Conviction involving moral turpitude: the director is convicted and sentenced to imprisonment for at least six months.
Producer Company loan default: the Producer Company defaults in repayment of advances or loans and the default continues for ninety days.
Director's own repayment default: the director defaults in repayment of an advance or loan taken from the Producer Company.
Continuous filing default: the Producer Company does not file annual accounts and annual return for three continuous financial years.
Specified payment default: failure concerning deposit, withheld price, patronage bonus, related interest or dividend continues for one year or more.
Election default: an election for the office of director is not held in accordance with the Act and the articles.
Meeting default: the required annual general meeting or extraordinary general meeting is not called, subject to the statutory exception for natural calamity or other such reason.

Application to a Producer Institution

Under sub-section (2), the grounds in sub-section (1) apply, as far as may be, to the director of a Producer Institution that is a member of a Producer Company. This extends the vacation-of-office framework beyond an individual director directly serving on the Producer Company in the circumstances contemplated by the provision.

Related provisions

Section 378Q should be read in the context of Part III of Chapter XXIA of the Companies Act, 2013. The immediately related provisions include Section 378O on number of directors, Section 378P on appointment of directors, Section 378R on powers and functions of the Board and Section 378T on liability of directors.

Official legal resources

For the authoritative and updated statutory text, readers should verify the provision through the India Code portal and the Ministry of Corporate Affairs. These official resources should be checked for subsequent amendments, notifications and commencement information.

Note: This page is intended as a general legal reference. Statutory provisions should be read with applicable amendments, rules, notifications and judicial decisions relevant to the facts of a particular matter.