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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 ..... irm of managing agents. Two of the partners of that firm were Shri Rajinder Lal and Shri Narinder Lal. The managing agency agreement of that firm was to expire on January 14, 1967. On October 4, 1966, the board of directors of the company resolved not to continue the managing agency of the said firm and decided to appoint two managing directors to conduct and manage the affairs of the company. Accordingly, on October 8, 1966, in exercise of the powers under article 117 of the articles of association of the company the board of directors resolved to appoint Shri Rajinder Lal and Shri Narinder Lal as the two managing directors of the company. The salary of each of the managing directors was fixed at Rs. 5,000 per month. In addition to that, each managing director was to get commission at the rate of 3½ per cent, of the net profits of the company during a financial year computed in the manner laid down in section 309(5) of the Act. Besides that, other service benefits such as gratuity, provident fund, free medical treatment, transportation and free furnished residential accommodation were to be provided to such of the managing directors. The resolution of the board of directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managing directors above the ceiling of Rs. 50,000 for the loss year was bad because the company was not granted adequate hearing and because the order of refusal did not state the reasons there for ? " The High Court answered the second question against the respondent-company. This question also no longer survives in these appeals. On the first question, the High Court after referring to the various provisions held that the action of the Board in reducing the remuneration of the managing directors was arbitrary and void. In this Connection, the High Court observed-See [1971] 41 Comp. Cas. 643, 651 (Delhi): "But any condition regarding remuneration which is contrary to the provisions of sections 198 and 309 would not be regarded as germane to section 269 inasmuch as the legislature has exhaustively dealt with remuneration in sections 198 and 309 with the effect that section 269 does not include in its scope any element regarding the fixation of remuneration". Referring to the general administrative policy of the Government of fixing ceiling on managerial remuneration, the High Court observed that any such policy which resulted in placing a ceiling below the legislative ceilings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment) Act, 1960, the appointment of a person as a managing or whole-time director for the first time after such incorporation may be made without the approval of the Central Government but such appointment shall cease to have effect after the expiry of three months from the date of such incorporation unless the appointment has been approved by that Government. (2) Where a public company or a private company which is a subsidiary of a public company, is an existing company, the reappointment of a person as a managing or whole-time director for the first time after the commencement of the Companies (Amendment) Act, 1960, shall not have any effect unless approved by the Central Government" Sub-sections (1), (2) and (3) of section 309 read as under: "309. Remuneration of directors.-(1) The remuneration payable to the directors of a company, including any managing or whole-time director, shall be determined, in accordance with and subject to the provisions of section 198 and this section, either by the articles of the company, or by a resolution or, if the articles so required, by a special resolution, passed by the company in general meeting and the remuneration payable to any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescind or withdraw such approval, sanction, consent, confirmation, recognition, direction or exemption". After hearing learned counsel for the parties and giving the matter our earnest consideration, we are of the opinion that the view taken by the High Court in quashing the condition imposed by the appellant-Board about the fixation of the remuneration of the managing directors cannot be sustained. The High Court in arriving at its conclusion took the view that section 198 and the proviso to sub-section (3) of section 309 specifically dealt with the question which arose for determination. In view of those provisions, the High Court inferred that sections 269 and 637A upon which reliance had been placed by the appellant-Board could not be of much avail to the appellant. Mr. Puri on behalf of the respondents has adopted the same reasoning in this court and has contended that section 198 and the proviso to sub-section (3) of section 309, being special provisions relating to the remuneration of managing directors, they would exclude, so far as that question is concerned, general provisions like those contained in sections 269 and 637A. The above reasoning, we find, is vitiated by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appointed earlier and continuing to act as such after the coming into force of the Act. Shri Rajinder Lal and Shri Narinder Lal have been appointed managing directors of the company for the first time after the coming into force of the Act. Their appointment as managing directors had to be approved in terms of section 269 of the Act. The company consequently applied to the Central Government for approving their appointment. The appellant-Board, to whom the powers of the Central Government have been delegated for this purpose, while granting approval to the appointment of the aforesaid two persons as managing directors, inserted the condition that the total remuneration of each managing director by way of commission and salary shall not exceed rupees one lakh twenty thousand per annum. The above remuneration is in addition to the benefit of certain perquisites which would be available to the managing directors. The Board, in our opinion, acted well within its power in imposing this condition. Section 637A of the Act makes it clear, inter alia, that where the Central Government is required or authorised by any provision of the Act to accord approval in relation to any matter, then, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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