Section 378X Companies Act 2013 - Secretary of Producer Company
Section 378X of the Companies Act, 2013 forms part of Chapter XXIA dealing with Producer Companies. It requires certain Producer Companies to appoint a whole-time secretary, specifies the professional qualification for that office and provides a monetary penalty for non-compliance.
What Section 378X provides
Section 378X(1): Every Producer Company having an average annual turnover exceeding five crore rupees or such other amount as may be prescribed in each of three consecutive financial years shall have a whole-time secretary.
Section 378X(2): No individual shall be appointed as whole-time secretary unless he possesses membership of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980).
Section 378X(3): If a Producer Company fails to comply with sub-section (1), the company and every officer of the company who is in default are liable to a penalty of Rs. 100 for every day during which the default continues, subject to a maximum of Rs. 1 lakh.
The proviso protects a person from penalty where it is shown that all reasonable efforts to comply with sub-section (1) were taken, or that the financial position of the company was such that engaging a whole-time secretary was beyond its capacity.
Meaning and practical effect of Section 378X
Producer Company
A Producer Company is a company incorporated under the Producer Company provisions contained in Chapter XXIA of the Companies Act, 2013. The chapter contains special rules governing its objects, membership, management, general meetings, share capital, accounts and other matters.
Whole-time secretary
For the purpose of Section 378X, the statutory office must be held by an individual who is a member of the Institute of Company Secretaries of India. The provision therefore links the mandatory appointment directly to the professional qualification stated in sub-section (2).
Turnover test
The appointment obligation applies where the Producer Company has average annual turnover exceeding Rs. 5 crore, or another amount if prescribed, in each of three consecutive financial years. A Producer Company should therefore review the statutory threshold and its financial figures when determining whether the requirement applies.
Penalty for continuing default
The default attracts a daily penalty of Rs. 100, subject to the statutory maximum of Rs. 1 lakh, for the Producer Company and every officer who is in default. The proviso to sub-section (3) is relevant when reasonable compliance efforts were made or the company's financial position made the engagement of a whole-time secretary beyond its capacity.
Legislative background
Section 378X was inserted into the Companies Act, 2013 by section 52 of the Companies (Amendment) Act, 2020 and came into force on 11 February 2021. It forms part of the statutory framework for Producer Companies in Chapter XXIA.
Related Producer Company provisions
Section 378X should be read with the surrounding management provisions, including Section 378V on meetings of the Board and quorum, Section 378W on the Chief Executive and his functions, Section 378Y on quorum and Section 378Z on voting rights.
Official legal resources
For the current statutory text and regulatory material, refer to the official India Code and the Ministry of Corporate Affairs. The official consolidated Companies Act should be checked for amendments, notifications and rules applicable on the relevant date.
Note: This page is a general legal reference. For a compliance decision in a particular case, the current Act, applicable rules, notifications and facts of the Producer Company should be examined.