Sections 378S and 378T explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 378S lists matters the Board of a Producer Company can decide only through resolutions passed at the annual general meeting of Members. Section 378T makes directors jointly and severally liable to make good a loss where they vote for, or approve, something done in contravention of the Act, any other law or the articles, and lets the company recover profits and losses from them.
Under section 378S, the Board acts only through resolutions passed at the annual general meeting on six matters, including budget and annual accounts, patronage bonus, bonus shares, limited return and loans to directors. Under section 378T, directors who vote for or approve anything done in contravention of the Act, other law or articles are jointly and severally liable to make good any loss or damage to the company. The company may also recover an amount equal to any profit a director made, or the loss or damage it suffered. This liability is in addition to other liabilities. The Bill 2026 does not amend these sections.
The two sections at a glance
| Section | Subject | Key point |
|---|---|---|
| 378S | Matters for the general meeting | Six matters the Board can exercise only through AGM resolutions |
| 378T | Liability of directors | Joint and several liability; recovery of profit or loss; liability is additional |
Section 378S: what the Members decide
Section 378S says the Board "shall exercise the following powers on behalf of that Company, and it shall do so only by means of resolutions passed at the annual general meeting of its Members":
| Clause | Matter |
|---|---|
| (a) | Approval of the budget and adoption of the annual accounts |
| (b) | Approval of patronage bonus |
| (c) | Issue of bonus shares |
| (d) | Declaration of limited return and decision on the distribution of patronage |
| (e) | Specifying the conditions and limits of loans the Board may give to any director |
| (f) | Approval of any transaction of the kind reserved in the articles for Members' approval |
The Board still prepares and proposes. Section 378R(2)(b) has the Board recommend patronage for approval at the general meeting, and section 378R(2)(g) has it place annual accounts before the AGM. See section 378R on the Board's powers and section 378E on patronage bonus and limited return.
Clause (f) and the articles. Because clause (f) depends on what the articles reserve, the articles are the place to add major transactions, such as large asset sales or borrowing beyond a limit. The articles must already address reserves, funds that may be raised, debt limits and loans to Members (section 378G(3)(j) and (k)); see sections 378F to 378I.
Section 378S and the Board. An approval by the Board alone is not enough on these six matters. A Board that declares a limited return or issues bonus shares without an AGM resolution acts outside section 378S. If you are unsure whether an earlier resolution met this test, our legal consultation service can review it.
Section 378T: liability of directors
| Sub-section | What it says |
|---|---|
| (1) | When directors vote for a resolution, or approve by any other means, anything done in contravention of the Act, any other law in force or the articles, they are jointly and severally liable to make good any loss or damage suffered by the Producer Company |
| (2) | Without prejudice to (1), the company has a right to recover from its director: (a) where he made a profit from the contravention, an amount equal to that profit; (b) where the company incurred a loss or damage from the contravention, an amount equal to that loss or damage |
| (3) | The liability is in addition to and not in derogation of any other liability under this Act or any other law |
Reading sub-section (1). The trigger is not only a formal vote. The words "by any other means" show that approval outside a formal vote can also count. The contravention can be of the Act, any other law or the articles. "Jointly and severally" means the company can claim the whole loss from any one of the directors who voted for or approved it, leaving them to sort out contribution among themselves.
Reading sub-section (2). Two separate recoveries exist: the director's own profit and the company's loss. The text lists them as "(a)" and "(b)" under a right to recover "an amount equal to" each; it does not say which is chosen where both arise, so take advice before framing a claim.
Who can be caught. The section speaks of "the directors" who voted for or approved. Sub-section (1) is worded around directors who vote for or approve the act, so recording dissent in the minutes is sensible.
A worked example
A Producer Company's articles say that any loan above a stated limit to a director needs Members' approval. The Board, without going to the AGM, lends a director an amount above the limit. Three directors vote for the loan; two dissent and ask that their dissent be recorded. The loan is a contravention of the articles and, on these facts, of the requirement in section 378S(e) that the Members specify the conditions and limits. If the company loses money on it, the three directors who voted for it are jointly and severally liable under section 378T(1). If the director who took the loan made a profit from it, the company can also recover an amount equal to that profit under sub-section (2)(a).
Proposed change
The Corporate Laws (Amendment) Bill, 2026 amends other provisions of Chapter XXIA (sections 378P, 378Q, 378Y, 378ZA, 378ZF, 378ZM and 378ZS), but our search found no clause amending section 378S or 378T. The Bill is pending and is not law.
Need help with director duties?
Directors of a Producer Company answer for decisions taken by vote or approval, and the general meeting controls several key matters. Our legal consultation team can review your articles, Board minutes and planned resolutions before you act.
Key takeaways
- Six matters must go through AGM resolutions, including accounts, patronage bonus, bonus shares, limited return and limits on loans to directors.
- Directors who vote for or approve a contravention are jointly and severally liable for the company's loss.
- The company may recover a director's profit or the loss suffered.
- The liability is in addition to other liabilities under the Act or any other law.
- Record dissent in the minutes.
Read next
- Section 378R: powers of the Board
- Sections 378U and 378V: committees and Board meetings
- Sections 378O to 378Q: directors of a Producer Company
- Annual compliance for a Producer Company
Disclaimer: Based on the Companies Act, 2013 as amended up to 1 April 2021 (official consolidated text), read with later developments noted in the article; proposals in the Corporate Laws (Amendment) Bill, 2026 are pending and not law as on 30 September 2026. Verify current notifications and rules before acting.