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TMI Blog1976 (12) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed by the Board to the managing director of any company is Rs. 1,20,000. - 1840-1842 OF 1971 - - - Dated:- 17-12-1976 - H.R. KHANNA, A.C. GUPTA AND JASWANT SINGH, JJ. Mrs. Shyamla Pappu, R.N. Sachthey and Girish Chandra for the Appellant . H.K. Puri for the Respondent . JUDGMENT Khanna, J. This judgment would dispose of Civil Appeals Nos. 1840, 1841 and 1842 of 1971 which have been filed on certificate by the Company Law Board against the common judgment of the Delhi High Court in three writ petitions by the respondent-company and its two managing directors to challenge the order dated September 27, 1967. The respondent-company. Upper Doab Sugar Mills Ltd., is a public limited company governed by the provisions of the Companies Act, 1956 (hereinafter referred to as "the Act"). The company has its registered office at Shamli, District Muzaffarnagar (Uttar Pradesh). Its main business is manufacture of sugar from sugar-cane. It also manufactures spirits, industrial alcohols and rum from molasses. From 1951 onwards the respondent-company was managed by a firm of managing agents. Two of the partners of that firm were Shri Rajinder Lal and Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the aforesaid ceiling be raised. The Board rejected that representation. Three writ petitions were thereafter filed in January, 1969, by the company and Shri Rajinder Lal and Shri Narinder Lal for restraining the appellant-Board from giving effect to the condition set out above that the total remuneration of each managing director should not exceed Rs. 1,20,000 per annum. Prayer was made that the appellant-Board be directed to accord approval for payment to the managing directors the remuneration as passed in the resolution of the board of directors along with the necessary perquisites. The petition was resisted by the appellant-Board and the affidavit of the Secretary of the Board was filed in opposition. At the hearing in the High Court the following two questions were agitated on behalf of the respondent-company and its managing directors: "(1)Whether the administrative ceiling imposed by the Board on September 28, 1967, on the remuneration payable to the managing directors by the company is ultra vires or illegal ? (2)Whether the refusal by the Board to enhance the remuneration of the managing directors above the ceiling of Rs. 50,000 for the loss year was bad because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this section shall affect the operation of sections 352 to 354 and 356 to 360. (2) The percentage aforesaid shall be exclusive of any fees payable to directors under sub-section (2) of section 309. (3) Within the limits of the maximum remuneration specified in sub section (1) a company may pay a monthly remuneration to its managing or whole-time director in accordance with the provisions of section 309 or to its manager in accordance with the provisions of section 387 ". Section 269 reads as under : "269. Appointment or reappointmenl of managing or whole-time director to require Government approval in certain cases. (1) In the case of a public company or a private company which is a subsidiary of a public company, whether such public company or private company is an existing company or not, the appointment of a person for the first time as a managing or whole-time director shall not have any effect unless approved by the Central Government: Provided that in the case of a public company, or a private company which is a subsidiary of a public company, incorporated after the commencement of the Companies (Amendment) Act, 1960, the appointment of a person as a managing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and partly by the other : Provided that except with the approval of the Central Government such remuneration shall not exceed five per cent, of the net profits for one such director, and if there is more than one such director, ten per cent, for all of them together ". Sub-section (1) of section 637A reads as under : "637A. Power of Central Government to accord approval, etc., subject to conditions and to prescribe fees on applications. (1) Where the Central Government is required or authorised by any provision of this Act, ( a )to accord approval, sanction, consent, confirmation or recognition to or in relation to, any matter; ( b )to give any direction in relation to any matter ; or ( c )to grant any exemption in relation to any matter ; then, in the absence of anything to the contrary contained in such or any other provision of this Act, the Central Government may accord, give or grant such approval, sanction, consent, confirmation, recognition, direction or exemption subject to such conditions, limitations or restrictions as it may think fit to impose and may, in the case of contravention of any such condition, limitation or restriction, rescind or withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid remuneration either by way of monthly payment or at a specified percentage of the net profit of the company or partly by one way or partly by the other. According to the proviso to that sub-section, except with the approval of the Central Government, such remuneration of the whole-time director or managing director shall not exceed 5 per cent, of the net profits for one such director and if there is more than one such director 10 per cent, for all of them together. Perusal of section 309 shows that it. does not deal with the appointment of managing directors. It only pertains to the remuneration of managing or whole-time directors who have already been appointed. The effect of the proviso to sub-section (3) of section 309 is that if the tenure of a managing director who has already been appointed continues after the coming into force of the Act, the remuneration to be paid to such a managing director shall not after the coming into force of the Act exceed 5 per cent, of the net profits for one such director, and if there be more than one such director, 10 per cent, for all of them together. The present, however, is not a case of managing directors having been appointed ear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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