if a person who is a Director of the Company and also Relative of Managing Director,appointed as Consultant U/S 314 with a remmuneration of Rs 3,00,000/- is it require to take approval of the central Govt ?
If no Please let me know any decided case / any department Clarification
Hi,
Yes, it is require, a person who is director any taking any amount in addition to his director remuneration will come under the perview of section 314.
In your case your director will covered under section 314(1B) and will take CG approval in addition to pasing of special resolution.
appointment of X will require compliance of section 314(1) only and not 314(1B), even though he is relative of another Director also. We must refer to the definition of Office or Place profit as explained in section 314(3) to clarify the issue. This states that:
314(3) any office or place shall be deemed to be an office or place of profit under the company
Within the meaning of this section (section 314).
(a) in case the office or place is held by a director, if the director holding it obtains from the company anything by way of remuneration over and above the remuneration to which he is entitled as such director, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise;
(b) in case the office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it obtains from the company anything by way of remuneration whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise.
The above bold words clarify intention of statute. Words of the section 314(1) and 314(1B) are clear that compliance of these provisions is necessary when any person categorized in that sections holds office or place of profit and not otherwise.
In our case, X who is a Director holds office of Profit. He is a relative of another Director also. Definition of office or place of profit made it clear that when it is held by a Director, what is meant by office or place of profit. In other cases the office or place of profit must be held by any individual other than Director. Hence, for applicability of provision of section 314(1B) and 314(1)(b), the office or place of profit must be held by any person other than Director.
It is important to note that definition of office or place of profit as explained in section 314(3) clarifies intention of the legislature to regulate separately a office held a Director though he may be a relative of another Director and by any person other than Director.
Therefore, in my view the Company must comply with provisions of section 314(1) and not section 314(1B).
Hence No Requriement of C.G Approvaval
Sir Please let me know will it be held valid
I agree, but in your case, remuneration is more than Rs. 10,000.
If remuneration increase is Rs. 10,0000 or more, then you will becovered under 314(1B) of the Companies Act, 1956.
Dear sir ,
the remmunaration limit is Prescribed only for the appointmet of relatives of Director U/S 314(1)(b)
Since we are appointing the Director U/S 314(1)(a)
i think when the director appointed U/S 314(1)(a) we can pay any amount of remmuneration without the approval of the C.G
please make it correct if i am wrong
CAclubindia
