Managerial remuneration - Payment of - Supreme Court decision - Companies Law - CIRCULAR NO. 8

CIRCULAR NO. 8 [F. NO. 1/4/92-CL-V], DATED 19-8-1994, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS/MINISTRY OF LAW, JUSTICE COMPANY AFFAIRS, GOVERNMENT OF INDIA subject:- Managerial remuneration - Payment of - Supreme Court decision in Union of India v. Mahindra Mahindra Ltd. - [Civil Appeal No. 2272 of 1980] I am directed to enclose herewith a copy of Press Note issued by the Central Government on 19-8-1994. The contents of the Press Note [No. 6/94, dated 19-8-1994 [See Annex] are self explanatory. ANNEX PRESS NOTE 6/94 [NO.1/4/92-CL.V], DATED 19-8-1994, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS, GOVERNMENT OF INDIA As per the administrative guidelines issued in 1969, a maximum salary of Rs. 7,500 per month was admissible to managerial personnel. Revised guidelines were issued in 1978 in terms of which the maximum permissible salary was reduced from Rs. 7,500 per month to Rs. 5,000 per month. The administrative guidelines issued in 1978 were challenged by M/s. Cibatul Limited and M/s. Mahindra Mahindra Limited in Gujarat and Delhi High Courts, respectively. 2. These High Courts struck down the 1978 guidelines, holding that the Central Government was not empowered under the Act to regulate remuneration of managerial personnel. On an appeal filed by the Central Government, the Supreme Court of India stayed operation of High Courts' order subject to the condition that the Central Government would approve remuneration of managerial personnel only in such companies which gave express consent to be governed by the provisions of the impugned guidelines. Thereafter, applications submitted by companies were decided by the Central Government after obtaining from them written consent. Where applicant companies did not give such written consent, their applications were kept in abeyance pending decision of the Supreme Court on the appeal filed by the Central Government against the orders of Gujarat and Delhi High Courts. About a thousand cases were kept pending. 3. In the context of the sea-change in the wake of liberalised policies of the Central Government, the Central Government and M/s. Mahindra Mahindra Ltd. approached the Supreme Court for a consent order for disposal of the pending appeal. The Supreme Court of India have since passed an order in terms of which appointment of managerial personnel made in terms of resolution of shareholders passed in general meeting of M/s. Mahindra Mahindra Limited and all other companies in similar position, i.e., those which did not accept approval of managerial remuneration by the Central Government in accordance with 1978 guidelines is deemed to have been approved in all cases in which the quantum of remuneration paid or payable does not exceed limits specified in 1969 guidelines, i.e., salary of Rs. 7,500 per month and other perquisite and benefits specified in the guidelines. Also, in terms of the said orders of the Supreme Court, any payments made and received and any payments to be made and received pursuant to the specific provisions made in the companies' accounts would not be treated as being in excess of permissible managerial remuneration provided the payments so made or received or to be made and received were covered by 1969 guidelines. In cases where undertakings have been given to Courts to refund amounts in excess of those permissible under 1978 guidelines, persons having given such undertakings will be discharged from the same in view of the orders passed by the Supreme Court subject to the quantum of remuneration not exceeding 1969 guidelines. 4. In view of the aforesaid orders of the Supreme Court of India, about a thousand applications lying undisposed with the Central Government for want of express consent of applicant companies are deemed to have been disposed of subject to the condition that the remuneration paid or payable was covered under 1969 guidelines. However, it has been clarified by the Supreme Court that the orders shall not apply to such companies and their managerial personnel as had consented to be governed by 1978 administrative guidelines of the Central Government.