Judgment 1. THE petitioners in this petition under Article 226 of the Constitution of India have challengned an order dated 28th April, 1980 passed by the Government of India under Section 310 of the Companies Act, 1955 thereinafter referred to as the act) and also the order as contained in the letter dated 24th December, 1981 passed by the said authorities he petitioners have also challenged the conditions imposed by the said impugned order dated 28th April, 1980 particularly the condition imposing a ceiling of Rs. 60,000/-per annum. The petitioners have also asked for a declaration that sections 310, 637a in. Section 637aa of the Act are ultra vires Articles 19 of the Constitution and also a declaration that section 310 of the said Act is ultra vires Article 14 of the Constitution so far as it purports to apply to remuneration within the limits prescribed in Section 339 (4) of the said Act. 2. THE petitioner no. 1 National Engineering Industries ltd. is an existing company within the meaning of the Act and carries on -business, inter alia at No. 9/1 R. N. Mukherjee Road, Calcutta hereinafter referred to as the Company. This, company does not have a whole time Director or any Managing. Director. Petitioner No. 2 is one of the Directors" and shareholders of the petitioner No. 1. The Directors of the company were being paid remuneration by way of sitting fees vide Section 309 (2) of the Act. Consequent on the cessation of Managing Agencies the company decided to pay resmaneration of the company by way of commission at the rate of 1 % of the net profits of the company to all its Directors to be divided amongst than in equal proportion. Accordingly, by special resolution passed by the shareholders of the company at Extraordinary general Meeting held on 14th May,1970 the company resolved that subject to approval of the Central Government, the Directors of the company be paid commission at the rate of 1% of the net profits of the company computed in the manner referred to in Section 198 (1) of the Act to be divided amongst them in equal proportion. The remuneration by very of commission is proposed to such Directors who are Non-Executive Directors of the company. The remuneration by very of commission is proposed to such Directors who are Non-Executive Directors of the company. The company made an application to the Central government for approval under Section 309 (4) of the Act and such approval was granted by the Central Government by its letter dated 7th August, 1971 subject to a maximum of Rs. 60,000/- per annum to all the Directors of the company, It is, however, contended by the petitioner that the company in ignorance of its true legal rights that no approval of the Central Government would be necessary made the said application foe approval. 3. BY another Special Resolution dated 13th January, 1975 the shareholders of the company again authorised payment of the remuneration to the said non-Executive Directors at the same rate of 1 % for a period of further 5 years and although, according to the company, no approval was- necessary, the company in ignorance of its legal rights made an application to the Central Government. The Central Government gave such approval by a letter dated 26th May, 1975 o'n the same conditions i. e., subject to a ceiling of Rs. 60,000/- payable to all Directors. 4. BY another Special Resolution dated 27th September, 1979 the shareholders of the company again authorised the company to pay remuneration to its non-Executive Directors at the same rate of 1% of the met profits to be divided equally amongst them and the company again applied for approval to the Central Government. By letter dated 28th April, 1980 the Central Government granted its. approval to the payment of the said remuneration against subject to the said maximum of Rs 60,000/- per annum. 5. IT is alleged by the petitioners that they have now come to learn for the first time about the true and correct construction of the relevant provisions of the Act, namely Section 309 and Section 310 of the Act. It has also been contended on behalf of the company that in any event the imposition of ceiling of Rs. 60,000/- was arbitrary, vitiated by non-application of mind, ultravitas and bad. 6. THE question as involved in the writ application is that whether any such approval of the Central Government for which the company applied for previously is at all necessary under Section 309 and also Section 310 of, the Company. 60,000/- was arbitrary, vitiated by non-application of mind, ultravitas and bad. 6. THE question as involved in the writ application is that whether any such approval of the Central Government for which the company applied for previously is at all necessary under Section 309 and also Section 310 of, the Company. The answer to this question would depend in the construction of Section 309 and Section 310 of the Act. It is now contended by the petitioners that the provision of Section 310 of the Act has no application to the instant case and the approval was sought for in the past, under a mistaken belief that such approval was required to be obtained from the Central Government. 7. THE learned Counsel for the petitioners submits that when there is a payment of remunerataion by way of commission within the limits prescribed under Section 309 (4) of the Act, it is not necessary to have approval of the Central Government. It has been submitted by the learned Couasel appearing for the petitioner that Section 309 permits payment of remuneration without tie approval of the Central Government, such approval is not necessary by virtue of the provision of Section 310 of the Act. The learned Counsel submits that section 309 itself has made a distinction of "payment of remuneration with and without approval and such distinction would become meaningless and superfluous if Section 310 is sought to be applicable no approval is called for under Section 309 of the Act. It is submitted by the learned Counsel for the petitioner that section 309 is a special provision whereas section 310 of the Act is a general provision. In such a case, according to the Learned Counsel for the petitioner, it is well settled that a special provision will prevail upon the general one and as such Section 310 of the Act would have no application in cases were the remuneration can be paid without approval under Section 309 of the-Act. 8. IT is contended by the Learned Counsel for the petitioner if the two sections are harmoniously construed, it will be clear that Section 310 of the Act has no application if the remuneration is payable within the limits specified in Section 309. 8. IT is contended by the Learned Counsel for the petitioner if the two sections are harmoniously construed, it will be clear that Section 310 of the Act has no application if the remuneration is payable within the limits specified in Section 309. It is also argued by the Learned Counsel for the petitioner that in any case, where the percentage of remuneration, viz., 1% in the instant case remains constant and is not altered then Section 310 of the Act does not and cannot have any application. The Learned Counsel for the petitioners submits that although Section 310 of the Act mentions increase in the amount, in cases, where remuneration is being provided on the basis of percentage the "amount" must refer to the percentage since the provision of such remuneration on the basis of quantum would be impossible to anticipate in advance. The learned Counsel submits that Section 310 of the Act will have no application if the percentage of remuneration remains the same. According a the learned counsel, Section 310 of the Act contemplates provision of remuneration in advance for a period of 5 years and it cannot be anticipated In advance from year to year as to whether there will be any increase or decrease in the quantum of the profits. The learned Counsel also contends that even if it is assumed that section 310 of the Act is applicable to the instant case, if the remuneration is proposed to be paid within the stipulated limits of section 309 then no approval would be necessary if percentage of remuneration proposed to be paid remains the same and is not proposed to be altered. The learned counsel by way of example submits that where the rate of sitting fees remains the same, there cannot be an increase in amount within the meaning of Section 310 even when the number of sitting per year increases. 9. THE learned Counsel for the petitioner has also contended that Section 309 provides for different classes of remuneration, by way of sitting fees, by way of commission etc., the learned Counsel for the petitioner argues that Section 310 only comes into operation if remuneration within a particular class is increased and not otherwise. 9. THE learned Counsel for the petitioner has also contended that Section 309 provides for different classes of remuneration, by way of sitting fees, by way of commission etc., the learned Counsel for the petitioner argues that Section 310 only comes into operation if remuneration within a particular class is increased and not otherwise. According to him, payment of sitting fees is in one category whereas the payment of commission is in another category and there is no doubt that Section 303 clearly and specifically permits payment of remuneration by way of commission for non Executive Directors without any approval of the Central Government if Such remuneration is within the stipulated limits, even whether such Directors are being paid over and above sitting fees or not. 10. THE learned Counsel for the petitioner has argued in the alternative that even if an approval under Section 310 is called for in case of payment of remuneration by way of commission in addition to payment of sitting fees, in the present case the approval was granted for the first time in 1970 and for any subsequent proposal to pay remuneration if there was no increase then the question of approval could not arise. Regarding the question as to the condition imposing a ceiling of Rs. 60,000/-, as stated above, it has been submitted on behalf of the petitioner that such imposition is arbitrary, ultra vires and without jurisdiction. . 11. IT has been contended by the learned Counsel for the petitioner that Section 637a provides that where the approval of the Central Government or the Company law Board is required or authorised by any provision of the Act, the Central Government may grant such approval subject to such condition, limitation Or restriction as it may think fit. . 11. IT has been contended by the learned Counsel for the petitioner that Section 637a provides that where the approval of the Central Government or the Company law Board is required or authorised by any provision of the Act, the Central Government may grant such approval subject to such condition, limitation Or restriction as it may think fit. The learned Counsel also submits that Section 637aa of the Act provides, inter alia, that notwithstanding anything contained in Section 309 or Section 637a of the Act, the Central Government while according its approval to any appointment or to any remuneration may fix the remuneration within the limits specified in the Act or such percentage of profits as it may think fit, but while doing so, it shall have regard, inter alia, to (i) the financial position of the company, (ii) the remuneration or commission drawn by the individual concerned in any other capacity, (iii) the remuneration or commission drawn by him from any other Company, (iv)professional qualification and experience of the individual concerned, (v) public policy relating to the remuneration of disparties in income. 12. IT is submitted by the learned counsel for the petitioner that before imposing terms, the central Government must have regard to the financial position of the company concerned as also the position of the individual. As in the instant case, a blanket condition of Rs. 60,000/- has been imposed for 1970, 1975 and 1980 which cannot be sustained since it has been done without considering the relevant facts and materials as contemplated by Section 637aa of the Act. It has also been contended by the learned Counsel that Section 309 of the Act contemplates that remuneration by way of commission should relate to the profits of the company and a condition totally unrelated to and having no nexus to the profits, as in the instant case, according to the learned Counsel, is clearly ultra vires and bad. The learned Counsel for the petitioner has submitted that the condition sought to be imposed by the Central Government is clearly contrary to the provisions of Section 637aa and such condition has been imposed on a pure non-application of mind to the facts involved. 13. The learned Counsel for the petitioner has submitted that the condition sought to be imposed by the Central Government is clearly contrary to the provisions of Section 637aa and such condition has been imposed on a pure non-application of mind to the facts involved. 13. THE contention of the learned counsel for the respondent is that in the facts of the case, approval of the Central Government is necessary under Section 310 of the Act and as such, the company had all along applied for such approval and the Central Government granted such approval upon terms. 14. THE learned Counsel for the respondent has submitted that it would appear from the several applications of the company seeking an increase of the remuneration from the existing remuneration paid by way of sitting fees to the proposed remuneration to be paid by way of commission. Therefore, there is an increase from the existing remuneration paid by way of sitting fees when the remuneration is sought to be made by way of commission at tae rate of 1% of the net profits of the company. It is submitted by the learned Counsel for the respondent that if there is any "increase in the amount" as contemplated by Section 310 of the Act an approval would be necessary. It has been fairly conceded by the learned Counsel for the respondent that if there is a proposal to increase renumeration by way of commission within the limits prescribed by Section 309 of the Act then Section 310 of the Act would not be applicable and no approval would also be necessary under Section 310 of the Act. It is submitted by the learned Counsel that in the present case, it is not in doubt that there is a proposal to increase the remuneration to be paid by way of commission from the existing remuneration paid by way of sitting fees and in such case, Section 310 of the Act clearly comes into operation and the approval under this section would be necessary. The learned Counsel for the respondent submits that considering the instant case there is no dispute that sitting fees payable to the Directors is the remuneration within the meaning of Section 309/2) of the Companies act, 1956, there is no dispute that the commission payable to the Directors is the remuneration within the meaning of Section 309 4) of the Act; there is no dispute that since 1970 the Company has been applying to the Central Government for approval to pay commission to the Directors under Section 309 and 310 of the Act and once there is an increase whether directly or indirectly in the quantum or amount of remuneration, the provisions of Section 310 of the Act would be attracted and the approval of the Central Government would be required before giving effect to the same proposal for payment of remuneration by way of commission. 15. IT has also been submitted by the learned Counsel for the respondent that once such sanction or approval is required under the provision of Section 310 of the Act, then provision of Section. 637a and S37aa of the Act would come into play and the Central Government is empropered to put such restriction including a ceiling in the amount of remuneration as the Central Government thinks fit and proper in the facts and circumstances of the case. 16. THE Learned Counsel has also submitted that in the facts of the present case, the Central Government did ask for particulars before according approval. It has been contended by the learned Counsel that by letter dated 18th February, 1980 the Central Government called, for information from the company on two points, namely (i) specific duties performed by the Directors of the company and the time devoted by them to the affairs of the company and (ii) remuneration drawn by the Directors of the company from other sources. The company by its letter dated 11th April, 1980 purported to furnish some particulars. The Central Government vide its letter dated 28th April 1930 accorded approval subject to a maximum of Rs. 60,000/- per annum to be divided amongst the Directors in equal proportion for a period of 5 years with effect from April, 1980. The company by its letter dated 11th April, 1980 purported to furnish some particulars. The Central Government vide its letter dated 28th April 1930 accorded approval subject to a maximum of Rs. 60,000/- per annum to be divided amongst the Directors in equal proportion for a period of 5 years with effect from April, 1980. The learned Counsels submits that again by letter dated 26th February 1981 the Central Government required the company to furnish details of the specific responsibility entrusted to each of the Directors to justify the increase in the quantum of remuneration by way of commission. The company by its reply dated 13th April, 1981 did not give specific particulars required by the central Government, therefore, according to the learned counsel for the respondent, it is not correct to say that the Central Government did not enquire into the relevant affairs of the company nor did not have any regard to the requisite conditions contained in Section 637aa of the Act. 17. FINALLY it is the submission of the learned Counsel for the respondent that on the construction of the said two relevant provisions of the act and from the conduct of the party, there could be a definite conclusion that in the present case the approval of the Central Government would be necessary and the conditions as imposed by the Central Government is fully justified in the facts and circumstances of the case. It is the submission of the learned Counsel that this application has no merits and should be dismissed. 18. THE question which arises in this proceeding is as to whether in the facts of this case, any approval of the Central government is necessary under Section 310 of the Companies Act, 1356. This, however, relates to the construction of Section 309 and Section 310 of the Companies Act. Section 309 (2) of the Act permits companies to pay Directors' remuneration by way of a fee for each meeting of the Board. Such fee may be upto a maximum limit of Rs. 250/- and no approval of the central Government is necessary by reason of the proviso to Section 310 of the Act. 19. Section 309 (2) of the Act permits companies to pay Directors' remuneration by way of a fee for each meeting of the Board. Such fee may be upto a maximum limit of Rs. 250/- and no approval of the central Government is necessary by reason of the proviso to Section 310 of the Act. 19. SECTION 309 (3) of the act permits companies to pay remuneration to Directors in their whole-time employment, whether managing Director or otherwise, either by way of a monthly payment or at a specified percentage of the net profits or a combination of both, provided that such remuneration should not exceed 5% of the net profits for one Director and 10% of the net profits for Directors taking together in the event of there being more than one, except with the approval of the Central Government. 20. SECTION 309 (4) of the act permits companies to pay remuneration to non-executive Directors either by. way of monthly, quarterly or annual payment with the approval of the Central Government or by way of commission, if so authorised by a Special resolution of the Company, provided such remuneration should not exceed 1% of the net profits of the company, if the company has a tetnaging or a whole time Director or a manager and 3% of the net profits in any other case. In the casa of remuneration payable to whole time Directors also the company in general meeting may make payments exceeding the limit stipulated with the approval of the Central Government. Section 309 (7) of the act provides that a Special Resolution contemplated in the case of payment of remuneration to non-executive Directors should not remain in force for more, than five years hut may be renewed from time to time. 21. SECTION 310 of the Act, inter alia, provides that in the case of a public company (as the petitioner company is) any provision relating to the remuneration of any Director including a Managing or whole-time Director or any amendment thereof, which purports to increase or has the effect of increasing whether directly or indirectly, the amount thereof, shall not hays any effect unless approved by the Central Government. 22. IN the instant case the directors of the company were being paid by way of sitting fees as permitted by Section 309 (2) of the Act. 22. IN the instant case the directors of the company were being paid by way of sitting fees as permitted by Section 309 (2) of the Act. Partner remuneration by way of commission at 1 % of the net profits of the company was proposed to be paid to the directors over and above the sitting fee. Since about 1970, the company sought permission of the Central Government in form No. 26 under Section 310 of the Act, as would appear from annexure to the petition, pages 23 to 47 Such permission was granted subject to the condition that maximum amount of Rs. 60,000/- may be paid to all the Directors. 23. THE petitioner now contends that the provisions; of section 310 of the Act have no application, to the instant case and approval was sought for in the past under a mistake a belief that such approval was necessary. 24. THE applications in' Form No. 26 in annexures to the petition, pages 23 to 47, referred to above, State that the Directors were being paid remuneration by way of sitting fees which has been described as existing remuneration, and there was a proposal to pay further remuneration in the nature of commission at the rate of 1% of the net profits of the company by way of increment. The petitioner also gave reasons for the proposed increase in remuneration It will appear from the said applications in Form No. 26, pursuant to Sections 310, 311 and 338, that the remuneration proposed is sitting fee of Rs. 200/-for each meeting plus commission @ 1 % of the net profits of the company proposed to be paid to the Directors. It would, therefore, appear that the existing remuneration consisted of sitting fees and an increase was proposed in the Act. Section 310 of the Act, as stated above, provides, inter alia, that any provision relating to the remuneration of any Director including a managing or whole-time Director which purports to increase or has the effect of increasing the amount thereof shall not have any effect unless approved by the Central Government. It is, however, true that payment of commission by way of remuneration within the limits prescribed under Section 309 (4) of toe act would not require any approval. It is, however, true that payment of commission by way of remuneration within the limits prescribed under Section 309 (4) of toe act would not require any approval. But in the instant case, an increase in the remuneration is proposed by deciding to pay a further remuneration by way of, commission in addition to the existing remuneration, that is, the sitting fee of Rs. 200/-for each board meeting. Here, the remuneration by way of commission within the limits as prescribed by Section 309 (4) of the Act cannot be taken as a solitary Item. This remuneration by way of commission under Section 309 (4) as proposed is in addition to the sitting fee under Section 309 (2) of the Act. As I read Section 309 and section 310 of the Act, it seems to me that this additional remuneration by way of commission, although within the permissible limits, over and above or in addition to sitting fee is a provision relating to the remuneration of any ' Director which purports to increase or has the effect of increasing, directly or indirectly, the amount thereof within the meaning of Section 310 of the Act. 25. IF, however, there is a proposal for payment of remuneration to the Directors for the first time by way of commission at the prescribed percentage as under Section 309 (4), it may have been contended that no approval of the, central Government is necessary. I am not, however, concerned with such a situation in the present application. 26. IN the instant case it is not in dispute that sitting fees payable to the Directors is remuneration within the meaning of Section 309 (2) of the Act, and the commission payable to the Director is remuneration within the meaning of Section 303 (4) of the Act. It is also not in dispute that the said remuneration by way of commission is proposed to be paid in addition to the existing remuneration of sitting fees. Therefore, it seems to me that payment of this further remuneration is an increase, directly or indirectly, in the quantum or amount within the meaning of Section 310 of the Act. I am, therefore, of the opinion that, in the facts of the case, approval of Central Government is necessary under Section 310 of the Act. Therefore, it seems to me that payment of this further remuneration is an increase, directly or indirectly, in the quantum or amount within the meaning of Section 310 of the Act. I am, therefore, of the opinion that, in the facts of the case, approval of Central Government is necessary under Section 310 of the Act. It has been contended on behalf of the petitioners that where the remuneration is provided on the basis of percentage, the "amount" in Section 310 of the Act must refer to the percentage, and if percentage remains static there is no increase in the amount of remuneration within the meaning of Section 310 of the Act. I need not consider this contention in this proceeding. As stated above, I have held that in the, present case that the payment of further remuneration by way of commission over and above the existing remuneration by way of fees amounts to an increase or has the effect of increasing, directly or indirectly the amount of remuneration within the meaning of Section. 310 of the Act. 27. THE petitioner has also challenged the validity of the condition Imposed by the Central Government to the extent of Rs. 60,000/- while according sanction to the increase in remuneration proposed by the petitioner company. If sanction is granted, then under the provisions of Section 637 and section 6 37aa of the Act, the Central Government is empowered to put such restrictions including fixing of the maximum amount of remuneration to be paid to the Directors. 28. IT has been contended on behalf of the petitioner that imposition of a ceiling, as has been done in the present case, on the basis of any guidelines has been held to be bad by Gujarat High court in Citabul Ltd. and Ors. v. Union of India, (1980) 50 company Cases 437 and Delhi High Court in Mahindra and Mahindra Ltd. and Ors. v. Union of India (1983)51 Company cases 337. The petitioner has contended that imposition of condition has also been struck down by Bombay High Court in Ruby Mills Ltd, vs. Union of India (1935 57 company Gases 193. In this case the condition was to the effect that if any payments were to be made to Director for rendering legal services, prior approval of the Central Government would have to be obtained. In this case the condition was to the effect that if any payments were to be made to Director for rendering legal services, prior approval of the Central Government would have to be obtained. It may be noted that professional fees are not remuneration under Section 309 (1) of the Act. The Delhi High Court declared section 637a of the Act to be ultra vires the Constitution in 41 Company Cases 643. In view of this judgment, the Companies Act was amended by introducing therein Sec. 637aa of the Act in 1972. The Supreme Court, however, reversed the said" judgment of Delhi High Court on appeal holding, inter alia, that Sec. 637a is intra vires the constitution and in fixing a limit the Central Government acted within its powers. See 47 Company Cases, 173. The Gujarat High Court in 50 Company Cases 437 did not decide the constitutional validity of Sec. 637a and Sec. 63taa of the Act but struck down the guidelines dated 11th November, 1969 as being ultra vires. The Delhi High Court in 53 Company Cases 337 did not decide the question of vires of Sec. 637aa but struck down the guidelines dated 9th November 1978. 29. IT appears that in the present case while granting sanction the Central Government did not disturb the rate but fixed the upper limit of the quantum or amount of remuneration, I think the Central government is wall within its power under Sec. 637a or Sec. 637aa of the Act to fix such upper limit in the" facts of the case. 30. IN the result, this writ application fails and is dismissed. The Rule is discharged. In the facts of the case, there will be no order as to costs. Interim order, if any, is vacated. There will be a stay of operation of this judgment and order till 29/10/1990. All parties to act on a signed copy of the minutes of the operative part of this judgment on the usual undertaking. Writ petition rejected.