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CMA Final · Corporate and Economic Laws · Prevention of Oppression and Mismanagement

Meera Pharma Ltd's managing director Mr Rao held office for 5 years and ceased to hold office with 4 years of his term remaining. His average actual remuneration over the last three years was Rs 30 lakh a year. Assuming no prohibition applies, what is the maximum compensation for loss of office under the Act?

The maximum is Rs 90 lakh. Section 202(3) limits compensation to the remuneration for the remaining term or three years, whichever is shorter, using the average of the last three years. Three years is shorter than four, so 3 x Rs 30 lakh gives Rs 90 lakh.

  1. ARs 90 lakhCorrect
  2. BRs 120 lakh
  3. CRs 30 lakh
  4. DRs 150 lakh

Explanation

Under section 202(3), the payment cannot exceed remuneration for the remainder of the term or three years, whichever is shorter, based on the three-year average. Remainder is 4 years and the other limit is 3 years, so 3 years applies: 3 x Rs 30 lakh = Rs 90 lakh. Rs 120 lakh wrongly uses the full remaining term.

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