202. Compensation for loss of office of managing or whole-time director or manager
(1) A company may make payment to a managing or whole-time director or manager,
but not to any other director, by way of compensation for loss of office, or as consideration
for retirement from office or in connection with such loss or retirement.
(2) No payment shall be made under sub-section (1) in the following cases, namely:—
(a) where the director resigns from his office as a result of the reconstruction of
the company, or of its amalgamation with any other body corporate or bodies corporate,
and is appointed as the managing or whole-time director, manager or other officer of
the reconstructed company or of the body corporate resulting from the amalgamation;
(b) where the director resigns from his office otherwise than on the reconstruction
of the company or its amalgamation as aforesaid;
(c) where the office of the director is vacated under sub-section (1) of section 167;
(d) where the company is being wound up, whether by an order of the Tribunal
or voluntarily, provided the winding up was due to the negligence or default of the
director;
(e) where the director has been guilty of fraud or breach of trust in relation to, or
of gross negligence in or gross mismanagement of, the conduct of the affairs of the
company or any subsidiary company or holding company thereof; and
(f) where the director has instigated, or has taken part directly or indirectly in
bringing about, the termination of his office.
(3) Any payment made to a managing or whole-time director or manager in pursuance
of sub-section (1) shall not exceed the remuneration which he would have earned if he had
been in office for the remainder of his term or for three years, whichever is shorter, calculated
on the basis of the average remuneration actually earned by him during a period of three
years immediately preceding the date on which he ceased to hold office, or where he held the
office for a lesser period than three years, during such period:
Provided that no such payment shall be made to the director in the event of the
commencement of the winding up of the company, whether before or at any time within
twelve months after, the date on which he ceased to hold office, if the assets of the company
on the winding up, after deducting the expenses thereof, are not sufficient to repay to the
shareholders the share capital, including the premiums, if any, contributed by them.
(4) Nothing in this section shall be deemed to prohibit the payment to a managing or
whole-time director, or manager, of any remuneration for services rendered by him to the
company in any other capacity.