2.2  Query:     

Meaning of the term ‘officer’ for the purpose of Part I of

Schedule VI to the Companies Act, 1956.

1.  A public sector undertaking is a registered company under the Companies Act, 1956. Various provisions of the Companies Act are applicable to the company. One such provision is to disclose information regarding “Maximum amount due to officers at any time during the year” and “Amount due from officers” in the “Loans and Advances” in Schedule VI to the Companies Act, 1956, in the balance sheet.

2. The querist has stated that Section 2(30) of the Companies Act, 1956, states the definition of “Officer” as under:

“Officer” includes any director, managing agent, secretaries and treasurers, manager or secretary, or any person in accordance with whose directions or instructions the Board of Directors or any one or more of the directors is or are accustomed to act and also includes-

 

(a)   where the managing agent or the secretaries and treasurers is or are a firm, any partner in the firm;

 

(b)   where the managing agent or the secretaries and treasurers is or are a body corporate, any director or manager of the body corporate.”

It can thus be seen in the view of the querist that any person who is associated with the decision making is an “Officer” within the meaning of the Companies Act, 1956.

3. The querist has informed that the company has such an organisational set up which is headed by CMD, supported by whole time directors, Executive Directors and Chiefs. In most of the cases, Chiefs are reporting to the whole time Directors/Executive Directors who are in turn reporting to either CMD or whole time Directors. Since this is a public sector company, decisions are therefore finally taken by CMD and whole time Directors and in some cases by Executive Directors and Chiefs based on sub-delegation of powers by CMD to such persons.

 4. The querist has also stated that till last, they have been including CMD, whole time directors and Company Secretary as an “Officer” for the purpose of above disclosure.

5. The querist has also informed that the statutory auditors of the company are of a different view and are of the opinion that Executive Directors, Chiefs and Asstt. Company Secretary may also be included in the above list. However, the company is of the opinion that CMD, whole time Directors and Company Secretary only should be included in the above list since they are the final authorities who are taking decision on behalf of the Company.

6.  The querist has sought the opinion of the Expert Advisory Committee as to whether the list of officers can be enlarged by including those persons who are ultimate controlling heads of the departments and later on reporting to the CMD.

1. The Committee notes section 2(30) of the Companies Act, 1956, which, inter alia, states as follows:

“Officer includes any director, manager or secretary, or any person in accordance with whose directions or instructions the Board of Directors or any one or more of the directors is or are accustomed to act.”

2.  In view of the above, the Committee is of the opinion that who can be considered as an ‘officer’ of the company under section 2(30) of the Companies Act, 1956, is a question of fact, in each case, as to whether as per his directions or instructions and Board of Directors or any one or more of the directors is or are accustomed to act. Accordingly, no hard and fast rule can be laid down with regard to a particular category of officers such as ultimate controlling heads of the departments, since the status may differ from case to case. For instance, an executive director will be an ‘officer’ if he is on the Board.

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