swapnil dabke (senior executive) (320 Points)
28 October 2012Many times I have come accross Nil Remuneration for a Whole Time Director. If we go through the INDIAN CONTRACT ACT , it says contract should be for valuable consideration. If we apply that section to the Remuneration of WTD, the appointment o0f WTD for NIL Remuneration is Void. Hence what is the validity of Nil Remuneration to the WTD ?
whole time directors of the company get sitting fees for attending the meetings of the company. they are appointed by the resolution passed in the meeting. it is as per the companies act 1956. why u relate them under indian contract act.?
if u still relate with contract act then they get there sitting fees for the meeting when they are held.
Thanks
P C Agrawal
(Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)
(8229 Points)
Replied 06 November 2012
Contract Act defines consideration as under:
"When at the desire of the promisor the Promisee or any other person has done or abstain from doing, or does or abstain from doing or promises to do or to abstain from doing, something, such act or abstinence or promise is called consideration."
Thus consideration need not be in cash only. It can be in the form of rights & responsibilities also. When WTD is appointed by the Board without remuneration, certain rights and responsibilities are involved which fulfils the requirement of Contract Act. Payment of sitting fee is immaterial.
Thanks
CAclubindia
