Companies Act, 1956: Section 2(24) – Meaning of the term ‘manager’

Three conditions are to be satisfied before a person may become a manager under section 2(24) of the 1956 Act, viz., a) he must be an individual as opposed to a firm or a body corporate or an association, b) he must have the management of the whole or substantially the whole of the affairs of the company and c)he must be subject to the superintendence, control and direction of the Board of Directors.

The definition of the word “managers” given in s. 2(24) of the 1956 Act is very wide, and whatever be the nomenclature employed by the parties, if large powers of management of substantially the whole business of the company are vested in a person then that person becomes the managers. Ramchandiram Mirchandani v. The India United Mills Ltd.,  AIR 1962 Bom 92. In Basant Lal v. Emperor, 1917 Cr LJ 215, it was held that a person who is not in charge of the entire business of a company cannot be deemed to be the manager of the company. A person entrusted with the business of a branch is not a manager but merely an agent whose duties are confined within certain prescribed limits and he cannot have any control over the affairs of the company as a whole. In Abdul Rahman Khan v. Mufassal Bank Ltd., AIR 1926 All 497, it was held that where articles provide that a manager may be appointed and may be given the ordinary powers of a manager, it is reasonable to infer that a person allowed to act as managers was given such powers.

manager

For discussion on the meaning of “managers” and comparison with the definitions of “managing agent” and “managing director”, read out this entire article, which could provide a clear idea.

Only one Manager

 It may be noted that a company can have only one manager under the 1956 Act (the position is the same under the 2013 Act), though it may have more than one managing or whole time director. Unlike a managing director who is entrusted with only substantial powers of management, a manager under the Act has the management of the whole or substantially the whole of the affairs of the company. It therefore follows that only one incumbent can have management of the whole or substantially the whole of the affairs of the company; if there are more than one such person, neither can have the management of the whole or substantially the whole of the affairs of the company; If there are more than one such person, neither can have the management of the whole or substantially the whole of the affairs of the company.

President – when not Manager

However, where the President reports to the managing director and is not subject to the superintendence, control and direction of the Board of directors, in view of s. 2(24) of the 1956 Act (now s. 2(53) of the 2013 Act) which says that a manager in order to be a manager has to be subject to the superintendence, control and direction of the Board, there seems to be an escape route. However, a chief executive officer or President, reporting directly to the Board, and in charge of the whole or substantially the whole of the affairs of the company, may well be construed as the “managers”.

Body corporate cannot be Manager

Under s. 384 of the 1956 Act, a firm, a body corporate or an association cannot be appointed as the managers. In CIT (Kerala) Alagappa Textiles (Cochin) Ltd, (1979) 49 Com Cases 947:AIR 1980 SC 235, it was held that where substantially the whole of the business of a company has been made over to a financing company, the financing company could not be regarded as the manager since it did not function subject to the superintendence, control and direction of the Board of the financed company and therefore there was no violation of s. 384.

Note: Section 196 of the 2013 Act dealing with appointment of managing director, managers and whole time director does not specifically provide that nobody corporate or firm could be appointed as such. However, from the wording of s. 2(53) of the 2013 Act, it is apparent that only an individual could be appointed as managing director, managers whole time director.

Shop manager is not manager under the Act

In R. v. Boal. (1992) BCLC 872 (CA) the person prosecuted under the Fire Precautions Act, 1971 [English] was the assistant general managers of a book shop. His primary duty was to be the chief buyer and he had been given no managerial training and none in matters of health. safety or fire precautions. He was in charge of the shop while the general managers were away on holiday when an inspector found serious breaches of the fire certificate. He was charged on the basis that he was a manager. It was held that the intended scope of the Act was to fix with criminal liability only those who were in a position of real authority and who were responsible for putting proper procedures in place, namely the decision makers within the company who had both the power and responsibility to decide corporate policy and strategy, and since the person charged was only responsible for day to day running of the bookshop rather than enjoying any sort of governing role relating to the affairs of the company, the defense that he was not managers would have succeeded if raised at the trial. The conviction was accordingly quashed.

Factory manager is not manager under the Act-Department’s view

 Factory manager in charge of production not concerned with the buying of raw materials or the selling of finished products and not having control over the company’s finances, would not be manager” within the meaning of s. 2(24).

Site manager

The site manager of a company was held to be not a manager for the purposes of the Control of Pollution Act, 1974 (English). The Court said that a person would only be liable under the Act if it could be shown that he was a decision maker within the company having both the powers and responsibility to decide corporate strategy and policy. Woodhouse v. Walsall Metropolitan Borough Council, (1994) 1 BCLC 435 (QBD)

Manager and Managing Director distinguished

As regards the position of a manager who is also director and that of a managing director, though the officers are seemingly indistinguishable, there is a difference due to the mode of appointment of each. Whereas in the case of a manager who is also appointed director, if for any reason his office of director is vacated the office of manager held by him is not affected: in the case of a managing director, if he ceases to be director for any reason whatsoever, his office of ‘managing director’ also will cease along with it. The very definition of managing director which begins by saying that a ‘managing director is a director..’  shows that a person cannot be managing director without being director. But manager can continue to be manager whether or not he holds the office of director also.

Management of the whole or substantially the whole

The Supreme Court has laid down in CIT, Kerala v. Alagappa Textiles (Cochin) Ltd, (1979) 49 Com Cases 947 : AIR 1980 SC 235 that what matters is not that a person is described as a manager but whether he is exercising substantial powers of management. Thus it is not necessary that a manager should be in the employment of the company because an employee may not be a manager and a manager need not be an employee. Seth Multanimal &Sons Ltd. v. CIT (1952) 22 Com Cases 264, 268 (All). There is this common feature between a manager and a managing director that both enjoy substantial powers of management but the source from which this power arises is somewhat different. In the case of manager his power is natural and arises from the fact of his appointment but in the case of managing director it has to be specifically entrusted to him by the Board of directors or by the company. Thus, where the Board of directors told the managing director that he should confine himself to managing the affairs of a single subs managing director. The powers of management and, therefore, those of a manager or managing director, do not include the power to purchase the liability of a third person, and still less that of the company’s own managers or manager’s partner in a private transaction of own.

In CIT, Kerala v Alaguppa Teule Cochin) Lid. (supra) it was held that where substantially the whole of the business of a company had been made over to a financing company, such company could not be regarded as a manager since it did not function subject to the ‘superintendence, control and direction’ of the Board of the borrowing company. A person in charge of a branch of the business and not the entire business is not “managers”.

Representative Capacity of Manager, Managing Director

 When the interests of the managing director do not conflict with the interests of the company, the court may allow him to appear in a court and make representation on behalf of the company notwithstanding the fact that he does not hold a power of attorney as required by Order 3 of the Code of Civil Procedure.Puri Construction Pvt. Ltd versus N.L. Mehta. (1982) 2 Comp LJ 765 (Del). A manager or, managing director is vested with representative capacity and persons dealing with him in the ordinary course of business are entitled to assume that he has the necessary authority.

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