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Section 407 – The Companies Act,1956

The Companies Act, 1956

407. Consequences of termination or modification of certain agreements.

(1) Where an order 1[***] made under section 397 or 398 terminates, sets aside, or modifies an agreement such as is referred to in clause (d) or (c) of section 402,

(a)the order shall not give rise to any claims whatever against the company by any person for damages or for compensation for loss of office or in any other respect either in pursuance of the agreement or otherwise;

(b)no managing or other director 2[***] or manager whose agreement is so terminated or set aside 3[***] shall, for a period of five years from the date of 4[the order terminating or setting aside the agreement] without the leave of the 5[Tribunal] be appointed, or act, as the managing or other director 2[***] or manager of the company.

(2) (a) Any person who knowingly acts as a managing or other director 2[***] or manager of a company in contravention of clause (b) of sub-section (1);


(c) every other director or every director, as the case may be, of the company, who is knowingly a party to such contravention,

shall be punishable with imprisonment for a term which may extent to one year, or with fine which may extend to 7[fifty thousand rupees] or with both.

(3) 8[No leave shall be granted] under clause (b) of sub-section (1) unless notice of the intention to apply for leave has been served on the Central Government and that Government has been given an opportunity of being heard in the matter.


1. The words “of a Court” omitted by Act 31 of 1988, sec. 67 (w.e.f. 31-5-1991).

2. The words “, managing agent, secretaries and treasurers,” omitted by Act 53 of 2000, sec. 182 (w.e.f. 13-12-2000).

3. The words “managing agent or secretaries and treasurers” omitted by Act 53 of 2000, sec. 182 (w.e.f. 13-12-2000).

4. Subs. by Act 65 of 1960, sec. 154 for “the order terminating the agreement” (w.e.f. 28-12-1960).

5. Subs. by Act 11 of 2003, sec. 44, for “Company Law Board”. Earlier the words “Company Law Board” were substituted by Act 31 of 1988, sec. 67, for the word “Court” (w.e.f. 31-5-1991).

6. Clause (b) omitted by Act 53 of 2000, sec. 182 (w.e.f. 13-12-2000).

7. Subs. by Act 53 of 2000, sec. 182, for “five hundred rupees” (w.e.f. 13-12-2000).

8. Subs. by Act 31 of 1988, sec. 67, for “No Court shall grant leave” (w.e.f. 31-5-1991).

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The Companies Act, 1956

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