Section 318
COMPENSATION
FOR LOSS OF OFFICE TO DIRECTORS
[1990] 68 COMP.
CAS. 264 (KAR.)
v.
Vignan Industries Ltd.
M.P.
CHANDRAKANTARAJ URS J.
SEPTEMBER 8, 1989
R. Narayan
and Bindukumar for the Petitioner.
S.G.
Sundaraswamy for the Respondent.
The
petitioner, admittedly, is an ex-employee of the respondent-company. Many of
the facts are not in dispute and they are as under; he was employed as a
full-time technical director on a specified salary and allowances and other
perquisites that went with it. In accordance with the requirements of the
Companies Act and the Rules made thereunder, his appointment was approved by
the Company Law Board. After the first period of appointment expired, it was
further extended on October 30, 1973, for a further period of five years. That
was also approved by the Company Law Board. However, he tendered his
resignation, allegedly, at the request of the Government of Karnataka. His
resignation came to be accepted by the respondent-company. Thereafter, he
claimed that a sum of Rs. 4,02,828.90 was due on account of premature
termination of his employment and the company not having paid the said amount
despite repeated demands and a registered notice, he presented this petition
under section 433 (e) and (?) of the Companies Act for an order winding up the
company as it is unable to pay its debts.
That his
appointment was in accordance with the order of appointment and the agreement
which he was required to execute in that behalf is also not disputed. The
agreement itself is not produced by the petitioner. However, he has filed an
application to summon that agreement from the respondent-company. I do not
think that this court should embark on an investigation of the terms of the
agreement until the petitioner establishes that he has the locus standi to
present a petition in this court under section 433 of the Companies Act.
Section 439
of the Companies Act provides for the persons who are competent to present a
petition for winding up of a company registered under the Companies Act. The
petitioner at best may come under the category of creditors specified in
section 439 of the Act. Even according to the document produced by him, clause 9
of the approval granted by the Central Government, imposed as a condition,
provides for compensation being paid for premature termination before the
expiration of the tenure fixed in the agreement of appointment as fixed by the
company in general meeting for loss of office. Such determination is not even
pleaded in the petition nor prima facie proof of that has been presented to the
court.
On the other
hand, it is admitted that no such determination has been made by the company at
its general meeting. If that is not done, this court cannot investigate the
claims for compensation for loss of office on account of his resignation
whatever the provocation or reason may be, then grant him compensation,
thereafter treat him as a creditor and then wind up the company for non-payment
thereof. They are duties entrusted to
the civil court which must look into such claims for damages for loss of
office. Till he obtains a decree from the civil court, he cannot be treated as
creditor.
Learned
counsel for the petitioner, however, argued that, under section 318 of the
Companies Act, he is entitled to compensation. I do not think that that
provision was intended as a provision conferring jurisdiction on the company
court to determine the quantum of compensation. The language is clear and that
section is no more than a declaratory provision authorising the company to
compensate loss of office to the categories of employees mentioned therein and
no more. It does not confer jurisdiction on this court to determine the quantum
which the company is required to pay as compensation. Therefore, the argument
of learned counsel is rejected.
However, it
is submitted by learned counsel for the respondent that whatever was admitted
to be due to the petitioner as arrears of salary has been paid after the
presentation of this petition in this court and that is not disputed by counsel
for the petitioner.
In that view
of the matter, this company petition is not maintainable and for that reason,
it is dismissed.
The application
filed to summon documents, etc., does not survive for consideration.
Order
accordingly.