R GAC ELECTRODES LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) A short point in company law arises for consideration in this case. The point is, for payment of remuneration to a director of a company for services of a professional nature rendered by him and for excluding it from his managerial remuneration as a director, is it a certificate of the Central Government under S.309(1) proviso (b) of the Companies Act, 1956 (for short the Act) that is to be obtained or is it the previous approval of the Central Government, under S.310 of the Act that is to be applied for and got.

(2.) The 1st petitioner is a Public Limited Company with its registered office at Golf Links Road, Kowdiar, Trivandrum and the 2nd petitioner is a director and shareholder of the 1st petitioner. The 2nd petitioner who is a solicitor and advocate practising at Bombay was appointed as a director of the 1st petitioner in 1974. The 2nd petitioner began to render professional services to the 1st petitioner from September, 1976 onwards. The 1st petitioner, through its advocates, by Ext. P1.c application requested the 2nd respondent, Secretary, Company Law Board, for a certificate that the 2nd petitioner possesses the requisite qualifications for the practice of the profession as a solicitor. The 3rd respondent Undersecretary by Ext. P1.b letter dated 10-5-1977 informed the 1st petitioner that an application under Form 26 of the Companies (Central Government's) General Rules and Forms, 1956 should be submitted as S.310 of the Companies Act, 1956 was attracted. The 1st petitioner's advocates by Ext. P1. a letter dated 18-5-1977 pointed out to the 3rd respondent that the application was under S.309(1) of the Act for the grant of a certificate and for exclusion of the remuneration paid to the 2nd petitioner for services rendered by him as a solicitor. The 3rd respondent, however, by Ext. P1 letter dated 30-9-1977 insisted that a Form 26 application should be made to the Central Government. By way of abundant caution, and without prejudice to its contentions, the 1st petitioner filed the application as insisted in Ext. P1 letter. As insisted by the 3rd respondent, the 1st petitioner got a resolution passed by the shareholders sanctioning the said payment and forwarded the same to the 3rd respondent. Later, the 1st petitioner reconsidered the matter and by Ext. 2(a) letter dated 15-3-1979 withdrew its application submitted under S.310 of the Act and contended that by the payments in question, no question of any increase in the remuneration of the director within the meaning of S.310 of the Act arises. On 31-5-1979 Ext. P2 reminder was also sent to the 3rd respondent.

(3.) The 2nd petitioner is a director of two other Companies and he has been rendering legal services to those Companies from 1968 onwards. Exts. P3 and P4 are certificates issued by the Central Government under S.309(1) of the Act, to the said Companies.