Companies Act, 1990
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Civil remedies for breach of section 31 . |
38.—(1) Where a company enters into a transaction or arrangement in contravention of section 31 the transaction or arrangement shall be voidable at the instance of the company unless— | |
(a) restitution of any money or any other asset which is the subject matter of the arrangement or transaction is no longer possible, or the company has been indemnified in pursuance of subsection (2) (b) for the loss or damage suffered by it; or | ||
(b) any rights acquired bona fide for value and without actual notice of the contravention by any person other than the person for whom the transaction or arrangement was made would be affected by its avoidance. | ||
(2) Without prejudice to any liability imposed otherwise than by this subsection but subject to subsection (3), where an arrangement or transaction is made by a company for a director of the company or its holding company or person connected with such a director in contravention of section 31 , that director and the person so connected and any other director of the company who authorised the transaction or arrangement shall (whether or not it has been avoided in pursuance of subsection (1)) be liable— | ||
(a) to account to the company for any gain which he has made directly or indirectly by the arrangement or transaction; and | ||
(b) (jointly and severally with any other person liable under this subsection) to indemnify the company for any loss or damage resulting from the arrangement or transaction. | ||
(3) Where an arrangement or transaction is entered into by a company and a person connected with a director of the company or its holding company in contravention of section 31 that director shall not be liable under subsection (2) if he shows that he took all reasonable steps to secure the company's compliance with that section and, in any case, a person so connected and any such other director as is mentioned in the said subsection (2) shall not be so liable if he shows that, at the time the arrangement or transaction was entered into, he did not know the relevant circumstances constituting the contravention. |