The Tribunal found that Form No. MR-1 is a statutory filing required under the Companies Act, 2013, upon the appointment of a director
The National Company Law Appellate Tribunal (NCLAT) has held that a dispute arising from an employment contract concerning the determination of emoluments and salaries to be paid to an employee of a company after his termination cannot be adjudicated by the National Company Law Tribunal (NCLT) or the NCLAT under the Insolvency and Bankruptcy Code, 2016 (Code).
The National Company Law Tribunal, New Delhi, Adjudicating Authority’s ruling dated January 29, 2020, in C.P. (IB) 1972 of 2019, was contested by Akhilesh Kulshrestha, the appellant under Section 61 of the Code. After the Section 9 application was admitted, the appeal was granted on August 25, 2022, and the case was remanded to the adjudicating authority for further orders.
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In order to challenge the order, M/s SAAB India Technologies Private Limited (Respondent) filed Civil Appeal No. 5923 of 2022 with the Supreme Court. The Supreme Court then remanded the case back to this Appellate Tribunal on August 14, 2024, to decide whether the Appellant was entitled to the same salary and benefits after resigning his position as Chief Financial Officer (CFO) in his capacity as a Director alone. The parties were instructed by the Supreme Court to re-argue the case with pertinent supporting documentation.
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According to the appellant, the Respondent failed to pay the salary and other dues of ₹30,01,999/-for the period of March 2, 2019 to May 20, 2019, during which he purports to have remained a Director even after his employment as CFO was terminated. It was further argued that records the Respondent provided to several statutory agencies showed that he was receiving compensation in both his roles as Chief Financial Officer and Whole-Time Director (WTD).
In contrast, the Respondent argued that the Appellant was only entitled to ₹9,50,000 per month as the Respondent’s CFO under the terms of the Employment Contract and that the Appellant was not entitled to any further compensation for the role of a Whole-time Director.
The Tribunal found that Form No. MR-1 is a statutory filing required under the Companies Act, 2013, upon the appointment of a director. The form does not indicate that the Appellant was receiving separate compensation for his role as ‘Whole-Time Director’.
The New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Mr. Arun Baroka (Technical Member) held that the designation of ‘Whole-Time Director’ was selected in Form No. MR-1 among other roles including CFO—solely because the form permits only one designation to be chosen. The stated annual salary of ₹86,49,600/- represents his total remuneration, not an additional payment for the directorship.
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It was viewed that as per article of association, the payment of remuneration to the Appellant as a Whole-time Director had to be approved by way of a resolution passed by the Board of Directors. However, no such resolution passed by the Board is placed on record, which can help the Appellants’ case.
It was evident that no document was placed on record demonstrating that the Board had approved payment of remuneration to the Appellant for his position as a Director. Appellant’s reliance on Article 49 of the AoA, is also misplaced as Article 49 does not provide for payment of remuneration to a Whole-time Director as a matter of course.
The Tribunal ruled that the Appellant was not entitled to any further remuneration because he did not perform any directing tasks throughout this time. Furthermore, the matter cannot be brought up under the Code because it is contractual in nature and stems from the employment contract.
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