Advise the chairman of your company

Advise the chairman of your company on the following
The managing director of the company has requested for an advance of Rs. 2
lakhs to meet the medical expenses to be incurred abroad for his dependent father.
According to Schedule XIII of the Companies Act, 1956 perquisites payable to the managing director include medical expenses incurred for the managing director and his family. As per explanation ‘family’ includes dependent parents of the managing director.
Schedule XIII as amended by GSR No. 48E dated 1-2-1994 and according to the revised schedule a company having profits in a financial year may pay remuneration by way of salary, dearness allowance, perquisites, commission and other allowances not exceeding five per cent of its net profit for one such managerial person, and if there are more than one such managerial persons, ten per cent for all of them together. Thus, the request of the managing director for an advance of Rs. 2lakhs to meet the medical expenses can be entertained if it is in line with these limits.
In case the. company is not having any profits or the profits are inadequate Schedule XIII lays down the maximum remuneration payable to the managerial personnel inclusive of all allowances. If the remuneration to be paid to the managing director inclusive of the medical advance desired is in excess of the limit of Schedule XIIl, approval of the Central Government will be required.
. Shri Prakash Chand was appointed as the Managing Director of Mis Sun Fabrics Ltd. , for a period of 5 years with effect from 1.4.1996 on a remuneration of Rs. 50,000 per month with other perquisites which are in excess of the limits laid down in Schedule XIII to the Companies Act. The Central Govemment has received a complaint in this regard, as the company has not sought the approval of the Central Government for the said appointment. Examine the powers of the Central Government in such a situation. Also examine the validity of the acts of Shri Prakash Chand as Managing
Director Sub-section
(7) of Section 269 provides that where the Central Government SI/O mota or on any information received by it is, prima facie, of the opinion that any appointment has been made without the approval of the Central Government in contravention of the requirements of Schedule XIII, it shall be competent for the Central Government to refer the matter to the Company Law Board for decision.
Sub-section (8) requires that, on receipt of the aforesaid reference, the Company Law Board shall issue a notice to the company, the managing director and other officers at fault, to show cause as to why such appointment should not be terminated and penalties provided under sub-section (1) be not imposed.