Section 406 of the Companies Act, 2013
Section 406 of the Companies Act, 2013
Title: Power to Modify Act in its Application to Nidhis
Key Provisions:
Power of Central Government:
The Central Government may, by notification, direct that any of the provisions of the Companies Act, 2013:
Shall not apply, or
Shall apply with such exceptions, modifications, and adaptations
as may be specified, to any Nidhi or a mutual benefit society.
Consultation with RBI:
Such notification can be issued only in consultation with the Reserve Bank of India (RBI).
Laying before Parliament:
Every notification issued under this section must be laid before both Houses of Parliament.
Explanation:
A Nidhi is a type of Non-Banking Financial Company (NBFC) recognized under Indian law, primarily created to borrow and lend money among its members.
Section 406 gives the Central Government flexibility to make special rules for Nidhis due to their unique structure and purpose.
Related Rule:
Nidhi Rules, 2014 were issued under this section, defining what constitutes a Nidhi company and prescribing compliance requirements.
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