Central Government its resolution

In Fenner (India) vs. Additional Registrar, the Madras High Court has adopted the
view that provisions of the section relating to approval are declaratory only and do not cast any obligation on the company to communicate to the Central Government its resolution for increasing the directors’ remuneration.
On the same analogy, the Registrar cannot proceed with the prosecution in the
matter referred to in the question.
In terms of the provisions of Section 309 (4) of the Act, remuneration to directors whoare not in whole-time employmL<>f the coanycan1)epala up to one perent of net profits, if the company has a managing director or a whole-time director or a manager and up to three per cent of the net profits of the company in any other case. The remunerations to part-time directors in excess of the aforesaid percentages can be paid with the approval of the shareholders in general meeting and with the approval
of the Central Governm
The directors of a company had more than 75% shares in the company. The company was carrying on business of constru’ction of projects. Directors acquired certain contracts in their own name in breach of trust and made profits for themselves. In the annual general meeting, they passed a resolution that the company had no interest in the contract. The minority shareholders filed a case against directors asking
them to account for the profits. Discuss. On the basis of the facts given, it may be stated that the directors seem to have committed a breach of trust by diverting business opportunities of the company to themsel’(es. Here the resolution passed at the annual general meeting will have no effect. :tl.li$ is an exception to the rule in Foss vs. Harbottle (1843) in which it was decided that no minority of shareholders can take it upon themselves to remedy an. alleged wrong done by the Company if th wrongful act is something wNch the majority can approve
e contention of the minority shareholders, referred to in the question, is in order. It may be mentioned here that in Cook vs. Deeks (1916) the directors of a Railway Construction Company obtained contracts in their names to construct a railway. It was held in that case that the benefit of the alleged contract belonged in equity to the Company and the directors could not use their voting power to benefit themselves. Accordingly, the directors will have to account to the Company for the profits made in respect of the contracts diverted.. Z was appointed as director of the company in an annual general meeting. He took over the office and carried on his functions as director. Subsequently, it was found that there were some irregularities in voting and hence the appointment was declared invalid. Would the acts done by Z. while in office as director, be binding upon
the company?
According-to Section 290, the acts done by a director shall bE: valid notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect of disqualification in his appointment. The Section will protect the bona fide acts and not where they are done with notice that they were done wrongfully or illegally. Hence, the acts done by Z as a director, before the irregularity was found, are in order and interests of company as well as outsiders dealing with the
company would be protected. But the acts done after the discovery of invalidity would
not be protected.