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CS Professional · Compliance Management, Audit and Due Diligence · Non-Compliances, Penalties and Adjudications

Orion Ltd restated its financial statements because of non-compliance with a requirement under the Act. Its managing director received Rs 90 lakh remuneration (including stock options) for the restated period, whereas Rs 70 lakh would have been payable on the restated figures. He resigned last year. What is the correct position?

The company shall recover Rs 20 lakh. Section 199 covers past and present managing directors where restatement results from fraud or non-compliance, and only the excess over what restated figures would have supported is recoverable: Rs 90 lakh minus Rs 70 lakh.

  1. ANothing is recoverable as he is no longer in office
  2. BThe company shall recover Rs 20 lakh from him, as recovery extends to past or present managing directorsCorrect
  3. CThe company shall recover the entire Rs 90 lakh
  4. DRecovery applies only if fraud, not mere non-compliance, caused the restatement

Explanation

Section 199 requires recovery from any past or present managing director, whole-time director, manager or CEO of remuneration in excess of what would have been payable on restatement, where restatement is due to fraud or non-compliance. Excess is 90 minus 70 = Rs 20 lakh. Resignation does not help, and non-compliance suffices.

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