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Environmental, Social and Governance (ESG) - Principles and Practice · Empowerment of the Company Secretary Profession

Secretary of Producer Company under Section 378X

Updated 11 October 2026 · Fact-checked

Section 378X requires a Producer Company with average annual turnover above ₹5 crore (or a prescribed amount) in each of three consecutive financial years to have a whole-time secretary. Only an ICSI member can be appointed. Default attracts a penalty of ₹100 a day, capped at ₹1 lakh, with a defence.

Understand Secretary of Producer Company under Section 378X

A Producer Company is a body corporate formed by farmers and other primary producers. It is governed by Chapter XXIA of the Companies Act, 2013. It works on mutual assistance principles, such as one member one vote and a limited return on share capital.

Most producer companies start small. So the law does not force every one of them to hire a secretary. Section 378X applies only when the company reaches a size threshold. The threshold is average annual turnover exceeding five crore rupees, or such other amount as may be prescribed, in each of three consecutive financial years.

Once the test is met, the company must have a whole-time secretary. The word whole-time matters. A part-time or outside professional engaged for a few hours does not satisfy the section. The person must also be a member of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980. No other individual can be appointed.

The section also has a penalty. If the company defaults, the company and every officer in default are liable to a penalty of ₹100 for every day the default continues, subject to a maximum of ₹1 lakh. For this chapter, officer includes a director, the Chief Executive, the Secretary, and anyone on whose directions the business is carried on (Section 378A(g)).

There is a relief. No penalty is imposed if the person shows that all reasonable efforts to comply were taken, or that the company's financial position made it beyond its capacity to engage a whole-time secretary. The section was inserted by Act 29 of 2020 with effect from 11 February 2021.

Key rules to remember

Trigger for appointment
Average annual turnover > ₹5 crore (or prescribed amount) in each of 3 consecutive financial years ⇒ whole-time secretary required
Section 378X(1). The test is per year for three years in a row, not one combined figure.
Qualification
Whole-time secretary must be a member of ICSI (Company Secretaries Act, 1980)
Section 378X(2). No individual without ICSI membership can be appointed.
Penalty
₹100 per day of default, maximum ₹1,00,000
Section 378X(3). Applies to the company and every officer in default.
Defence
No penalty if all reasonable efforts were taken, or the company's finances made engaging a whole-time secretary beyond its capacity
Proviso to Section 378X(3). The burden is on the person to show it.
Officer (Producer Company chapter)
Officer includes director, Chief Executive, Secretary, and any person on whose directions the business is carried on
Section 378A(g). Decides who can be held in default.

How to solve Secretary of Producer Company under Section 378X questions

Use this order for any case question on Section 378X. It follows the provision, facts, conclusion pattern.

  1. 1Confirm the entity is a Producer Company registered under the Act or the Companies Act, 1956 (Section 378A(l)).
  2. 2Check the turnover test. List turnover for each of the three consecutive financial years. Compute the average annual turnover and compare with ₹5 crore or the prescribed amount.
  3. 3Decide whether a whole-time secretary is required. State Section 378X(1) in one line.
  4. 4Test the person proposed. Check whether the individual is a member of ICSI. If not, the appointment is not allowed.
  5. 5If there is a default, apply Section 378X(3). Work out days of default times ₹100 and apply the ₹1 lakh cap.
  6. 6Check the proviso. Look for facts showing reasonable efforts or lack of financial capacity.
  7. 7Identify who is liable: the company and every officer in default, using Section 378A(g).
  8. 8Write a clear conclusion and a practical compliance advice, such as appoint an ICSI member and record it by a board resolution.

Quickest way: Four-check shortcut

When to use it: Use it for short-note or small fact-based questions when time is tight.

  1. Size: turnover above ₹5 crore in each of 3 consecutive years?
  2. Person: whole-time and an ICSI member?
  3. Default: ₹100 a day, maximum ₹1 lakh, on company and officers in default.
  4. Escape: reasonable efforts or financial incapacity shown? Then no penalty.

Common mistakes in Secretary of Producer Company under Section 378X

  • Saying every Producer Company must have a secretary.

    Students remember the rule for listed or large companies and apply it everywhere.

    Fix: Always state the turnover condition first: above ₹5 crore or prescribed amount in each of three consecutive years.

  • Using one year's turnover or a three-year total.

    The phrase average annual turnover in each of three consecutive financial years is read loosely.

    Fix: Check each of the three years separately against the threshold. Say so in your answer.

  • Allowing a part-time or non-ICSI professional.

    Students confuse this with general secretarial support or compliance outsourcing.

    Fix: Write that the secretary must be whole-time and an ICSI member.

  • Stating the penalty as ₹100 flat or ₹1 lakh flat.

    The per-day rate and the cap are mixed up.

    Fix: Write ₹100 for every day of default, subject to a maximum of ₹1 lakh. Compute and apply the cap.

  • Ignoring the proviso.

    Students stop at the penalty and forget the defence.

    Fix: Scan the facts for efforts to hire or weak finances, and mention that no penalty is then imposed.

  • Holding only the company liable.

    Officer liability is overlooked.

    Fix: Say the company and every officer in default are liable, and cite the definition of officer in Section 378A(g).

Worked examples

Example 1

Kisan Agro Producer Company Limited had turnover of ₹6 crore, ₹5.5 crore and ₹5.2 crore in three consecutive financial years. It has no secretary. Advise the board.

Show the solution
  1. The company is a Producer Company, so Section 378X can apply.
  2. Check each year: ₹6 crore, ₹5.5 crore and ₹5.2 crore all exceed ₹5 crore.
  3. The turnover condition is met in each of three consecutive years, so a whole-time secretary is required under Section 378X(1).
  4. The person appointed must be an ICSI member under Section 378X(2).
  5. Failure to appoint exposes the company and officers in default to a penalty under Section 378X(3).

Answer: Yes. The company must appoint a whole-time secretary who is an ICSI member. Delay risks a penalty of ₹100 a day, up to ₹1 lakh, on the company and officers in default.

Example 2

Mahila Dairy Producer Company met the turnover test but did not appoint a whole-time secretary for 1,500 days. Compute the maximum penalty and state whether a defence exists.

Show the solution
  1. Daily penalty is ₹100 under Section 378X(3).
  2. Days of default: 1,500. Uncapped amount = 1,500 × ₹100 = ₹1,50,000.
  3. The maximum is ₹1,00,000, so the cap applies.
  4. Penalty is therefore ₹1,00,000 on the company and on each officer in default, subject to the cap.
  5. The proviso gives a defence: no penalty if all reasonable efforts to comply were taken, or its finances made engaging a whole-time secretary beyond its capacity. The person must show this.

Answer: The penalty is capped at ₹1,00,000. It can be avoided only if reasonable efforts or financial incapacity are shown under the proviso.

Exam tips

  • Quote the three elements in order: turnover test, whole-time, ICSI membership. Examiners look for all three.
  • In case questions, tabulate the three years' turnover and test each year against ₹5 crore before concluding.
  • Always compute the penalty and apply the ₹1 lakh cap, then mention the proviso.
  • Link Section 378X with the definition of officer in Section 378A(g) when asked who is liable.
  • Close with a practical point: board resolution to appoint an ICSI member and file the required returns.

Practice questions from Empowerment of the Company Secretary Profession

Secretary of Producer Company under Section 378X in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Secretary of Producer Company under Section 378X: frequently asked questions

Is a company secretary mandatory for a producer company?

Not always. It is mandatory only when the Producer Company's average annual turnover exceeds ₹5 crore, or such other amount as may be prescribed, in each of three consecutive financial years. Then it must have a whole-time secretary.

Who can be appointed as secretary of a producer company?

Only an individual who is a member of the Institute of Company Secretaries of India can be appointed as whole-time secretary. Section 378X(2) allows no other qualification.

What is the penalty under Section 378X?

The company and every officer in default are liable to a penalty of ₹100 for every day the default continues. The total is capped at ₹1 lakh.

Can the penalty be avoided?

Yes. No penalty is imposed if it is shown that all reasonable efforts to comply were taken, or that the company's financial position made it beyond its capacity to engage a whole-time secretary.