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TMI Blog1967 (10) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in Table A of the First Schedule to the Act of 1913 subject to certain regulations which were specified in the articles of association. Regulation No. 8 is important and it runs as follows : "8. The management of the company shall be entirely in the hands of its directors who may pay all such expenses of and preliminary and incidental to the promotion, formation, establishment and registration of the company as they think fit and shall discharge all their responsibilities and exercise all their powers and privileges through their representatives appointed amongst themselves or from outside upon such terms and conditions, subject to such powers and privileges and for such period as they may determine. The business of the concern shall be managed by the board of directors in majority". Three resolutions were passed by the company in respect of the remuneration or maintenance of its directors. The first of these was the resolution dated June 22, 1952, by which the directors took the decision that each director shall receive Rs. 250 a month plus 2i per cent, out of the net profits as his "remuneration" for managing the company and that, apart from this, the "maintenance c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, there was no restriction at all on the remuneration of the directors of a private company which was not a subsidiary of a public company because of the provision contained in sub-section (9) of section 309 of that Act. It has, therefore, been argued that the official liquidator erred in rejecting the claims of the appellants. As the Act of 1913 was in force when the company was registered and for quite some time thereafter, and the Act of 1956 came into force while the company was still in existence, I shall examine the merits of these appeals separately under each of those Acts. I shall first deal with the claims under the Act of 1913 for it was under that Act that the company was registered in 1952. As has been mentioned, the articles of association of the company provided that " subject as hereinafter provided, the regulations contained in Table 'A' of the First Schedule to the Indian Companies Act........shall apply to the company". The company, therefore, specifically adopted Table 'A' of the First Schedule to the Act of 1913 and incorporated, among others, regulation 8 in its articles which has been reproduced above. The other regulations in the articles of association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory restriction in the case of a private company cannot mean that its directors are, in all circumstances, entitled to remuneration merely because of the coming into force of the Act of 1956. It is necessary that there should be a provision in the articles of association of a company for payment of remuneration to its directors before a claim therefor can be entertained. So it has to be examined whether it can be said that there was any such provision in the articles of association of the company after the commencement of the Act of 1956. Mr. Bhansali has argued that, in the absence of any restriction in the Act of 1956, regulation 8 of the articles of association should be given full effect, without the requirement that the remuneration should be determined in a general meeting of the company. This argument cannot be accepted as correct because, as has been mentioned above, the company having been registered before he commencement of the Act of 1956, it was governed by regulation 71 of Table 'A' of the First Schedule to the Act of 1913 which, in its turn, brought into application the requirement of regulation 69 that the remuneration of the directors shall be determined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral powers of the board of directors and the remuneration payable to them, and do not place any restriction of the nature contemplated by regulations 69 and 71 of Table 'A' of the Act of 1913 in the case of private companies, it would be anomalous if those restrictions are allowed to continue after April 1, 1956, when the new Act came into force. It has been urged that any other interpretation would defeat the purpose of the new scheme brought in force by the Act of 1956 and that it would deny a benefit to an old company which is available to any new company registered after April 1, 1956. This argument also does not bear scrutiny. As I have pointed out, all that sub-section (9) of section 309 provides is that the restrictions imposed by the section regarding the remuneration of directors shall not apply to a private company unless it is a subsidiary of a public company. But that is far from saying that a "post-1956" private company cannot make a regulation in its articles of association, while providing for the remuneration of its directors, that such remuneration would be payable only after the approval of the general meeting of the company. In fact even the first proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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