Examine with reference to the provisions of the Companies Act, 2013, the validity of the proposal regarding remuneration and sitting fee to directors.

6 Commission at the rate of 6% of the net profits to its Managing Director, Mr. Srivastav: Part (i) of the Second Proviso to Section 197 (1) of the Companies Act, 2013, provides that except with the approval of the company in general meeting by a special resolution, the remuneration payable to any one managing director or whole time director or manager shall not exceed 5% of the net profits of the company and if there is more than one such director then remuneration shall not exceed 10% of the net profits to all such directors and manager taken together. In the present case, since the REL is being managed by a Managing Director, the commission at the rate of 6% of the net profit to Mr. Srivastav, the Managing Director is not allowed and hence approval of company in general meeting is required by way of a special resolution. Additional remuneration in capacity of professional services: The company also proposes to pay suitable additional remuneration to Mr. Charan, a Director, for professional services to be rendered by him as industrial engineer, whenever such services are utilized by the company: (1) According to section 197 (4) , the remuneration payable to the directors of a company, including any managing or whole-time director or manager, shall be determined, in accordance with and subject to the provisions of this section, either (i) by the articles of the company, or (ii) by a resolution or, (iii) if the articles so require, by a special resolution, passed by the company in general meeting, and (2) the remuneration payable to a director determined aforesaid shall be inclusive of the remuneration payable to him for the services rendered by him in any other capacity. (3) Any remuneration for services rendered by any such director in other capacity shall not be so included if— (i) the services rendered are of a professional nature; and (ii) in the opinion of the Nomination and Remuneration Committee, if the company is covered under sub-section (1) of section 178, or the Board of Directors in other cases, the director possesses the requisite qualification for the practice of the profession. Hence, in the present case, the additional remuneration payable to Mr. Charan, a Director, for professional services rendered by him as industrial engineer will not be included in the maximum managerial remuneration. Accordingly, such additional remuneration shall be allowed but an opinion of Nomination and Remuneration Committee needs to be obtained. Sitting Fee: Section 197 (5) of the Companies Act, 2013 provides that a director may receive remuneration by way of fee for attending the Board/Committee meetings or for any other purpose as may be decided by the Board provided that the amount of such fees shall not exceed the prescribed amount. As per Rule 4 of the Companies (Appointment and Remuneration of Managerial personnel) Rules, 2014 the amount of sitting fees payable for attending meetings of the Board or Committees thereof may be decided by the Board but such sitting fees shall not exceed 1 lakh rupee per meeting. Further, the sitting fee payable to an independent director shall not be less than that payable to other directors. From the above, it is clear that sitting fees can be increased from 50,000 rupees to 75,000 rupees per meeting by passing a resolution in the Board Meeting and altering the Articles of Association by passing a Special Resolution. When sitting fees stands increased for other directors, it shall automatically be increased in case of independent directors because the latter cannot be paid less than that payable to former.