The Hindu Business Line : At a loss on `office of profit'

Section 314 of the Companies Act, 1956 requires a special resolution of members if directors are sought to be appointed to any office of profit under the company.

The storm raised by the issue of MPs holding offices of profit under the Central or State government is likely to have an anticlimactic end what with both the sides agreeing to bury the hatchet and bringing in an omnibus Bill protecting as many conceivable offices of profit as possible from attack from the disgruntled elements. As of now, the government of the day notifies offices on piecemeal basis as and when they came under attack.

Curiously, the framers of the Constitution themselves supplied the escape route with Article 102, prohibiting dual office under the government — empowering the incumbent government to notify a specific office for rendering it immune from attack under Article 102. The government of the day seized this opportunity with alacrity way back in 1959 and brought into the statute the Parliament (Prevention of Disqualification) Act, 1959, the antidote, as it were, to the solemn prohibition contained in Article 102.

FOR A WHOLESOME REGIME

In the wake of the Jaya Bachchan and the subsequent Sonia Gandhi episodes, the political system, cutting across party lines, seems to have realised the dangers of this piecemeal approach. What the politicians perhaps have in mind is a more wholesome and permanent regime that would obviate the knee-jerk reaction from time to time. The omnibus Prevention of Disqualification Bill on the anvil will effectively render Article 102 a dead letter.

So what? After all, with a cap on ministership — 15 per cent of the legislative strength — wannabe ministers have to be accommodated some place where they can savour the loaves and fishes of office besides sating their peripatetic proclivities. What better place to accommodate them than at the helm of the innumerable governmental corporations and councils our landscape is dotted with.

There are a few who question the very wisdom of the prohibition on dual office given the fact that there is nothing to stop an industrialist or a tycoon from seeking membership of a legislature. In the US, for a member of the House of Representatives as well as the Senate, any office, governmental or private, is out of bounds. Be that as it may. Section 314 of the Companies Act, 1956 requires a special resolution of members if directors are sought to be appointed to any office of profit under the company. And also for the appointment of relatives and associates, if the monthly remuneration is more than Rs 10,000. If the monthly remuneration is in excess of Rs 50,000, then both Central Government approval and special resolutions are necessary.

SEEKING IMMUNITY

The political class, however, is in favour of consensus for once so that as many offices of profit as conceivable can be made immune from attack. Enough of individual resolutions seems to be the refrain of all the political parties. Even the seemingly solemn company law provision has been considerably diluted, thanks to the Delhi High Court verdict in R. K. Sangal vs Auto Lamps Ltd (1984 55 Comp Cas. 742).

In a technically correct judgment, which came as manna to the corporates, the court said that when the remuneration is not expressed per month, the appointment does not come under the purview of Section 314. Predictably, the corporate sector has lapped up this escape route with unconcealed glee so much so that in its aftermath, quarterly, six-monthly and annual remunerations have become de rigueur for appointments otherwise running the risk of falling foul of Section 314.

That the majesty of law has been a casualty is not bemoaned any more than the demise of the majesty of article 102 is mourned.

DEFINING THE OFFICE

If this parallel somehow reminds one of the politician-industrialist nexus, perish the thought. Rest assured, the similarity is only accidental. But both the political class and the captains of industry can afford to laugh up their sleeves at having rendered the respective law targeting them toothless.

There are issues of divergence as well. In the absence of any definition of the term `office of profit' in the Constitution and the 1959 Act, the Supreme Court had to come up with its own definition and one of the tests is the power to dispense patronage. The company law, however, trains its guns only on pecuniary benefits. The Department of Company Affairs has let the professionals off the hook unless they commit the indiscretion of taking retainer-ship. While this distinction appears to be specious, the Constitution does not let off the professional class. It is another matter that Parliament is all set to let off the entire tribe of politicians from the stifling restriction through the omnibus Bill.

(The author is a Delhi-based chartered accountant.)

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