https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=770311 https://www.taxtmi.com/caselaws?id=770311 Entitlement to the emoluments and perks in capacity as a Director of the Respondent - relinquishment of the position of CFO - Contractual nature of dispute - Appellant contends that the documents of the Respondent, which were filed by the Respondent before various statutory authorities indicate that the Appellant was receiving the salary in dual capacity as the Whole-Time Director and Chief Financial Officer - HELD THAT:- The Appellant was appointed as Chief Financial Officer (CFO) w.e.f. 01.05.2014 by an employment contract dated 10.03.2014. Later on the Appellant was appointed as the Whole Time Director (WTD) of the Respondent by way of Board Resolution dated 28.09.2015 along with the Annual General Meeting (AGM) dated 29.09.2015. It is to be noted that the Appellant was appointed as WTD because he was working as the CFO. The employment of the Appellant was terminated as per Clause 8.1 of the employment contract between the two parties. All the dues, which included three months' notice or salary in lieu of the notice were paid to the Appellant. Once he ceases to be CFO, it is inconceivable that he could have continued as a WTD. It is worth noticing that the Appellant was not appointed as a WTD and there is no material to show any separate remuneration was payable to the Appellant for the position as a WTD. Further, from the materials on records, it is noted that there are no documents which suggest that the Appellant was being paid in the exclusive capacity as a WTD - It is inclined to agree with the contention of the Respondent for the reasons that he was appointed as a CFO and designated as WTD for being along with CFO and we cannot rely on the declarations on MR-1 for payment of salary exclusively as a WTD. Furthermore, Article 48 of Articles of Association of the Company provides that if Appellant had to be paid as a WTD, it had to be approved by a resolution passed by the Board of Directors and there was no such resolution passed by the board. There is nothing on record to demonstrate that the board had approved payment of remuneration to the Appellant for his position as a director - it is required to agree with the contention of the Respondent that since Article 48 provides that the remuneration to a Director has to be approved by the board and no such board resolution was passed, the Respondent is not liable to pay any amount to the Appellant. The Respondent was not a WTD exclusively but was CFO-cum-WTD. There was no obligation on the Respondent to pay the same emoluments to him, which were admissible to him in his capacity as CFO. The Appellant has not been able to provide any additional documents for us to determine as to whether after relinquishment of the position of CFO, the Appellant was entitled to the same emoluments and perks in his capacity as a Director of the Company - Also there are no documents on record, which substantiate the claim of the Appellant that he was liable to be paid the same emoluments as a CFO for the short period, till his appointment as a WTD was formally revoked as per the Act. There is a pre-existing dispute between the parties and this could not have been resolved by the NCLT under the Code. The law is very clear that as per Section 9(5)(ii)(d) of the Code, on an existence of pre-existing dispute, the Application is not maintainable. Conclusion - The Appellant was initially appointed as a CFO. Later on, being a CFO he was designated as WTD. On his termination, all terminal benefits were paid to him. The required formalities to remove him as a Director of the Company needed some approvals of the board as well as AGM which took time. During this interim period from 01.03.2019 till 20.05.2019, he was not working as CFO and therefore Appellants' claim that he was working as a WTD is not based any material on record. Therefore, his claim for same emoluments and perks in his capacity as a Director of the Company is devoid of any basis. The claim of the Respondent that he is liable to be paid as a Director of the Company, cannot be accepted. The present dispute arises out of the employment contract and is contractual in nature and cannot be raised under the Code. Accordingly, the Appeal is dismissed. Case-Laws IBC Wed, 07 May 2025 00:00:00 +0530