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Section 190: Contract of employment with managing or whole-time directors

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Section 189 All 470 Sections of Companies Act Section 191
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 190

Section 190 ensures corporate governance transparency by requiring public companies to keep copies of service contracts or written memoranda of employment of Managing and Whole-time Directors open for inspection by members at the registered office without fee.

  • Mandatory Maintenance of Managerial Employment Charters: Every company (other than private companies) must keep at its registered office a full copy of the contract of service with each Managing Director (MD) or Whole-time Director (WTD), or a detailed written memorandum setting out all employment terms if the contract is oral.
  • Absolute Right of Shareholder Inspection: Copies and memoranda maintained under Section 190 must remain open for inspection by any member of the company without payment of any fee during regular business hours.
  • Exemption for Private Companies: By virtue of the Ministry of Corporate Affairs Notification dated June 5, 2015, private companies are wholly exempt from the provisions of Section 190, preserving contractual confidentiality in closely held enterprises.
  • Penal Sanctions for Denial: Refusal of inspection or default in maintaining the contract attracts a statutory penalty of twenty-five thousand rupees on the company and five thousand rupees on every defaulting officer for each refusal.
Key Landmark Precedents:
  • Shanti Prasad Jain v. Kalinga Tubes Ltd., AIR 1965 SC 1535: The Supreme Court emphasized that shareholder scrutiny of management's service contracts is integral to corporate democracy, preventing clandestine executive compensation arrangements unknown to the general body.
  • S.K. Gupta v. K.P. Jain, (1979) 3 SCC 54: Affirmed that executive directors are fiduciaries whose employment terms and remuneration structures must be transparently disclosed; unrecorded side-agreements regarding managerial perks are unenforceable against the company.
Courtroom Practice & Strategic Litigation Guidance:

When contesting executive compensation excess or wrongful termination of an MD/WTD in a public company, serve a formal requisition under Section 190 for inspection of the service agreement. If the company fails to produce the executed contract or written memorandum within business hours, move the NCLT for an immediate inspection order under Section 190(3) and lodge an RoC complaint.

Section 189 All 470 Sections of Companies Act Section 191