Officer in Default in Companies Act 2013

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Officer in Default

The expression ‘officer in default’ has been defined in Sec.5  of the Companies Act, 1956. The following officers of the Company have been considered as ‘officers in default.’

(a)   the managing director or managing directors;

(b)   the whole-time director or whole-time directors;

(c)   the manager;

(d)   the secretary;

(e)   any person in accordance with whose directions or instructions the Board of directors of the Company is accustomed to act;

(f)    any person charged by the Board with the responsibility of complying with that provision:

Provided that the persons so charged has given his consent in this behalf to the Board.

(g)   where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors:

In this connection Circular No.6/94 F.No.3/41/93-CL-V dated 24^th June, 1994 which interprets the provision of Sec.5  of the Companies Act 1956 is reproduced hereunder.

The circular has been issued by the DCA based on the decision of the Rajasthan High Court in Ravindra Narayan V. ROC, Jaipur

“The issue relating to correct interpretation of ‘officer who is in default’, as per provision of section 5 of the Companies Act, 1956, has been considered by the Department in the light of the above said judgment of the Hon’ble Rajasthan High Court. The Department is of the view that this judgment has correctly interpreted the provisions of section 5 as amended in 1988. It may, therefore, please be ensured that where the penal provisions provide for punishment of ‘officers in default’, prosecution be filed against the managing director(s), whole-time director(s) and Manager, apart from the Secretary, if any, and the company and only in those cases where there is no such managerial personnel (i.e. managing director / whole-time director / Manager), prosecution be filed against all ordinary directors, apart from the Secretary, if any, and the
company.

It is clear from the aforegoing that liability comes on the ordinary Directors only in case of a ‘Board-managed’ company i.e. a company which does not have any Managing Director. As Rocket has a Managing Director, non-wholetime Directors have not to be treated as ‘officers in default in any case.

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