TaxTMI 
TaxTMI 
2015 (12) TMI 992
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....ing the earlier rejection dated 5th August, 2014 of the said application and which writ petition, finding that the order dated 5th August, 2014 had been passed without hearing the petitioners, was allowed vide order dated 12th March, 2015 with a direction to the respondent to decide the application afresh after taking into account submissions made by the petitioners and giving them an opportunity to present their case in a personal hearing. 3. Accordingly, the impugned order is a detailed one, giving reasons therein. 4. In the circumstance, though the petition has come up before this Court for the first time today but it has been enquired from the counsel for the respondent appearing on advance notice as to what purpose issuing formal notice of the petition and calling for a counter affidavit would serve in as much as the stand of the respondent is clear from the impugned order itself. 5. The counsel for the respondent has fairly agreed that the respondent has nothing further to show besides what is stated in the impugned order. 6. The senior counsel for the petitioners and the counsel for the respondent have thus been finally heard on the petition. 7. It is not in d....
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....city, the approval for the period from 1st October, 2013 to 31st March, 2014 has been denied; The contention of the petitioners that the three other companies in which the petitioner no.2 is a Director belong to the same group as the petitioner no.1 Company and that one of such company is now defunct, did not find favour. 10. The 2011 Rules, referred to in the impugned order, in Rule 5 thereof, in this regard provide as under:- "5. Procedure for Examination of Application: The application under Rule 3 shall be examined with respect to the following, in addition to all other requirements under the Companies Act, 1956:- (a) In the case of individual appointee, an undertaking from him that he/she will be in the exclusive employment of the company and will not hold a place of profit in any other company. (b) The monetary value of all allowances and perquisites and of total remuneration package (monthly/annually proposed to be paid to the appointee and details of the services that will be rendered by him to the company. (c) Details of shareholding pattern particularly the shareholding of the directors along with his/her/their relatives, the public ....
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.... viii. Whether appointee is working as a director in any other company. If so, details thereof. If not, a certificate to that effect from a Chartered Accountant/Company Secretary in whole time practice." and which were furnished by the petitioners and with respect whereto nothing has been observed in the impugned order. Presumably the respondent was fully satisfied on all the aforesaid aspects. 12. It is the contention of the senior counsel for the petitioners that the only requirement of Rule 5(a) of the 2011 Rules is that the appointee has to be in the exclusive employment of the Company and is not to hold a place of profit in any other company. 13. It is further contended that the expression "place of profit" has been defined in Section 314(3) of the Companies Act, 1956 as under:- "(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- (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, commissi....
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.... the petition. 17. However the latter contention is not found to have any merit since the challenge in the earlier writ petition was also to a similar order and which was set aside on the ground of having been passed without complying with the principles of natural justice. 18. As far as the reference to Section 10 of the 1956 Act is concerned, the same prescribes the High Court having jurisdiction under that Act i.e. under the Companies Act i.e. for availing the remedies provided thereunder. Admittedly, against the impugned order there is no remedy under the 1956 Act and the petitioner has approached this Court in exercise of jurisdiction under Article 226 of the Constitution of India and on the parameters whereof this Court would certainly have the territorial jurisdiction to entertain the petition. 19. I am unable to find any merit in the reasoning given in the impugned order for denial of permission from 1st October, 2013 to 31st March, 2014. Even otherwise, the respondent, on its own cannot adopt or start following a „principle‟, without any basis therefor and particularly when the decision of the application of the instant nature is to be governed by the ....
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....ector in three other companies and is thus not in the exclusive appointment of the petitioner no.1 Company. 23. Rule 5(a) undoubtedly uses the expression "exclusive employment of the company" but further proceeds to state that the appointee "will not hold a place of profit in any other company". 24. The question which arises is whether on account of the petitioner no.2 being a Director in other companies can be said to be not in the exclusive employment of the petitioner no.1 Company or holding a place of profit in the other companies. 25. The word „employee‟ or „employment‟ is not found defined, neither in the 1956 Act nor in the 2013 Act. While the former defines Director as including any person occupying the position of Director by whatever name called, the latter defines Director as meaning a Director appointed to the Board of a Company. Else, the word „employee‟ and „employment‟ have definite connotation. Black‟s Law Dictionary 8th Edition (i) defines „employee‟ as a person who works in the service of another person under an express or implied contract of hire under which the employer has the right to c....
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.... a place of profit in the company. 31. The consistent view of the Courts in Canara Workshops Ltd. Vs. Union of India (1966) 36 Comp. Cas 553 (Kar), Firestone Tyre and Rubber Co. Vs. Synthetics and Chemicals Ltd. (1971) 41 Comp. Cases 377 (Bom), A.R. Sudarsanam Vs. Madras Purasawalkam Hindu Janopakara Saswatha Nidhi Ltd. MANU/TN/0002/1982 and Ram Pershad Vs. CIT, Delhi (1972) 2 SCC 696 is that remuneration payable as a Director of a company is not office of profit. Justice D.P. Madon speaking for the Bombay High Court in the Firestone Tyre and Rubber Co. supra held that the object underlying Section 314 is to prevent a Director or his relative from holding any office or place of profit carrying a total monthly remuneration beyond the prescribed limits under the company and thereby put in his pocket directly or indirectly additional profit over and above the remuneration to which he is entitled as such Director, without obtaining the requisite permission. Similarly in fact the Madras High Court in the A.R. Sudarsanam supra clearly held that a Director cannot be said to hold any office or place of profit if he should receive the remuneration to which he is entitled as such Director....