1986 (7) TMI 329 - HC - Companies Law

Court Quashes Order on Professional Qualifications, Declares Qualification, Directs Government to Convey Opinion

Stup Consultants Ltd. Versus Union of India

The court quashed the order related to the non-expression of opinion on Shri C.R. Alimchandani's professional qualifications. It declared him qualified as ... remuneration of directors Issues Involved:1. Professional status of Shri C.R. Alimchandani.2. Remuneration under Section 309 of the Companies Act, 1956.3. Central Government's obligation to express an opinion on professional qualifications.4. Distinction between professional services and managing director duties.5. Compliance with Section 269 of the Companies Act.Detailed Analysis:1. Professional Status of Shri C.R. Alimchandani:The petitioner company sought the Central Government's opinion on the professional status of Shri C.R. Alimchandani, appointed as senior chief consultant. The petition highlighted his qualifications, including a civil engineering degree from Poona University, advanced studies in France, and recognition as an expert in pre-stressed concrete technology. The respondents did not contest these qualifications, implicitly acknowledging his professional status.2. Remuneration under Section 309 of the Companies Act, 1956:Section 309 controls the remuneration of directors, including managing and whole-time directors. The proviso to Section 309(1) allows remuneration for professional services if the Central Government opines that the director possesses the requisite qualifications. The petitioner company invoked this provision, seeking an opinion from the Central Government, which was not provided in the impugned letter dated January 14, 1983. The court noted that the Central Government's failure to express an opinion was unjustified, given the undisputed qualifications of Shri Alimchandani.3. Central Government's Obligation to Express an Opinion on Professional Qualifications:The court emphasized that upon invoking Section 309(1), it is incumbent upon the Central Government to express an opinion on the professional qualifications of a director. The Central Government's refusal to do so, instead requiring compliance with other provisions of company law, was deemed inappropriate. The court directed the Central Government to convey its opinion on Shri Alimchandani's qualifications within two months.4. Distinction Between Professional Services and Managing Director Duties:The petitioner company passed two resolutions: one appointing Shri Alimchandani as senior chief consultant and another reappointing him as managing director without additional remuneration. The court clarified that Section 309 does not prohibit directors from rendering professional services. The remuneration for such services, if deemed professional by the Central Government, does not require prior approval. The court rejected the argument that Shri Alimchandani's monthly salary as a consultant implied whole-time employment, noting no prohibition against professionals being employees.5. Compliance with Section 269 of the Companies Act:While the petition also touched upon the approval required under Section 269 for the reappointment of a managing director, the court confined its decision to the expression of opinion on professional qualifications. The respondents were allowed to proceed according to the law regarding the reappointment of Shri Alimchandani as managing director.Conclusion:The writ petition succeeded, and the court quashed the order dated January 14, 1983, insofar as it related to the non-expression of opinion on Shri Alimchandani's professional qualifications. It declared that Shri Alimchandani possesses the requisite qualifications for practicing as a civil engineer and directed the Central Government to convey this opinion to the petitioner company within two months. The court's decision did not affect the Central Government's approval process for the reappointment of Shri Alimchandani as managing director.