Companies Act Section 378ZT

Companies Act, Section 378ZT: Power of the Central Government to Modify Provisions of the Companies Act in Their Application to Producer Companies

Section 378ZT of the Companies Act, 2013, grants specific powers to the Central Government to modify, adapt, or exempt certain provisions of the Companies Act from being applicable to Producer Companies. This provision ensures that the unique nature and operational needs of Producer Companies formed primarily by farmers, artisans, or producers of primary goods can be addressed appropriately within the broader framework of company law, while allowing for necessary regulatory flexibility.

1. Authority of the Central Government to Modify Applicability of the Act

Sub-section (1) of Section 378ZT empowers the Central Government, through a notification, to make decisions regarding the applicability of provisions of the Companies Act to Producer Companies. However, this authority is limited to provisions outside of Chapter XXIA, which exclusively deals with Producer Companies.

In particular, the Central Government may issue a notification stating that:

(a) Certain provisions of the Companies Act, 2013 (other than those contained in Chapter XXIA), shall not apply to:

All Producer Companies, or any class or category of Producer Companies, depending on the circumstances and policy considerations.
(b) Certain provisions of the Companies Act, 2013 (again, excluding Chapter XXIA), shall apply to:

All Producer Companies, or a specific class or category of such companies, with such modifications, exceptions, or adaptations as may be detailed in the notification.
This mechanism allows for a more tailored application of corporate law provisions to Producer Companies, recognizing that these entities operate differently from conventional for-profit companies.

2. Parliamentary Oversight of Government Notifications

To ensure that the power exercised by the Central Government is subject to parliamentary scrutiny and democratic oversight, sub-section (2) of Section 378ZT provides a detailed process for review by the Parliament of India.

Before any notification under sub-section (1) is formally issued, the following steps must be followed:

A draft of the proposed notification must be laid before both Houses of Parliament the Lok Sabha and the Rajya Sabha.
This draft must be presented while Parliament is in session, and must remain under consideration for a total period of thirty (30) days.
The thirty-day review period may fall within a single session of Parliament, or be spread over two or more successive sessions.
During this review period, Parliament has the power to intervene in either of the following ways:

If both Houses of Parliament agree to disapprove the issuance of the notification, then the notification shall not be issued at all.
If both Houses agree to modify the contents of the draft notification, then the notification shall be issued only in the modified form as approved by both Houses.
The notification, therefore, becomes valid and enforceable only if Parliament does not object or modifies it in accordance with its legislative powers.