NATIONAL ENGINEERING INDUSTRIES LTD Vs. SECRETARY MINISTRY OF LAW JUSTICE AND COMPANY AFFAIRS NEW DELHI

JUDGEMENT

(1.) THE petitioners in this petition under Article 226 of the Constitution of India have challengned an order dated 28th April, 1980 passed by the Government of India under Section 310 of the Companies Act, 1955 thereinafter referred to as the act) and also the order as contained in the letter dated 24th December, 1981 passed by the said authorities. . The petitioners have also challenged the conditions imposed by the said impugned order dated 28th April, 1980 particularly the condition imposing a ceiling of Rs. 60,000/-per annum. The petitioners have also asked for a declaration that sections 310, 637a in. Section 637aa of the Act are ultra vires Articls 19 of the Constitution and also a declaration that section 310 of the said Act is ultra vires Article 14 of the Constitution so far as it purports to apply to remuneration within the limits prescribed in Section 339 (4) of the said Act.

(2.) THE petitioner no. 1 National Engineering Industries ltd. is an existing company within the meaning of the Act and carries on -business, inter alia at No. 9/1 R. N. Mukherjee Road, Calcutta hereinafter referred to as the Company ). This, company does not have a whole time Director or any Managing. Director. Petitioner No. 2 is one of the Directors" and shareholders of the petitioner No. 1. The Directors of the conpany were being paid remuneration by way of sitting fees vide Section 309 (2) of the Act. Consequent on the cessation of Managing Agencies the company decided to pay resmaneration of the company by way of commission at the rate of 1 % of the net profits of the company to all its Directors to be divided amongst than in equal proportion. Accordingly, by special resolution passed by the shareholders of the company at Extraordinary general Meeting held on 14th May,1970 the company resolved that subject to approrval of the Central Government, the Directors of the company be paid commission at the rate of 1% of the net profits of the company computed in the manner referred to in Section 198 (1) of the Act to be divided amongst them in equal proportion. The remuneration by vey of commission is proposed to such Directors who are Non-Executive Directors of the company.

(3.) THE company made an appalication to the Central government for approval under Section 309 (4) of the Act and such approval was granted by the Central Government by its letter dated 7th August, 1971 subject to a maximum of Rs. 60,000/- per annum to all the Directors of the company, It is, however, contended by the petitioner that the company in ignorance of its true legal rights that no approval of the Central Government would be necessary made the said application foe approval.