IN THE HIGH COURT AT CALCUTTA CONSTITUTIONAL WRIT JURISDICTION ORIGINAL SIDE BEFORE:

THE HON’BLE JUSTICE RAJA BASU CHOWDHURY WPO/198/2023 MUKUL SOMANY VERSUS UNION OF INDIA & ORS.

AND WPO/200/2023 MUKUL SOMANY VERSUS UNION OF INDIA & ORS.

AND WPO/201/2023 MUKUL SOMANY VERSUS UNION OF INDIA & ORS.

For the petitioner : Mr. J.P. Khaitan, Sr. Advocate Mr. Pratyush Jhunjhunwala, Advocate Mr. Mrigank Kejriwal, Advocate Ms. Rishi Raju, Advocate Ms. Sretapa Sinha, Advocate Ms. Sruti Datta, Advocate Mr. Akkal Dudhewala, Advocate For the respondents : Mr. Smarajit Roychowdhury, Advocate Mr. Amit Sharma, Advocate Heard on : 07.04.2025, 08.04.2025, 10.04.2025, 17.04.2025 & 21.04.2025 Judgment on : 21st April, 2025 RAJA BASU CHOWDHURY, J:

1. Challenging the orders passed under Section 264 of the Income Tax Act, 1961 (hereinafter referred to as ‘the said Act’) in respect of the assessment years 2016-2017, 2017-18 and 2018-19 all dated 29th March 2021, the instant writ petitions have been filed. To consider the scope of the challenge, it is necessary to note down the facts giving rise to the same

2. It is the petitioner’s case that while he was Vice-Chairman and Managing Director of Hindustan National Glass and Industries Limited (hereinafter referred to as the “said Company”) which is a public company and an existing company within the meaning of Companies Act, 2013 (hereinafter referred to as ‘the Companies Act’) by a special resolution of the members of the company passed on 30th March, 2015, the petitioner was reappointed as the Vice-Chairman and Managing Director of the said company for a period of three years w.e.f. 1st April, 2015 at a salary of Rs.16,67,500/- per month with an annual increment with the limit of 15% of the salary last drawn subject to the condition that such increase is in compliance with the provisions of Sections 196, 197, 203 read with Schedule V and other applicable provision of the Companies Act.

3. According to the petitioner, by reasons of absence/inadequacy of profits on 21st March, 2015, an application was made by the said company to the Central Government in terms of Sections 196 and 197 read with Schedule V of the Companies Act seeking approval for payment of the aforesaid higher remuneration to the petitioner. Initially, the Central Government vide its communication dated 30th May, 2016 informed that the total remuneration of the petitioner should be Rs.18,00,000/- per annum for a period of three years without any annual increment as the said company had not furnished no objection certificate in favour of the proposal from all its lenders to whom it had allegedly made default in payment of debt. To remove the above short coming the company subsequently obtained no objection certificate from the lead banker and had filed another application with the Central Government on 16th February, 2017 incorporating such no objection. Unfortunately, the Central Government required the petitioner to furnish ‘no objection certificate’ from HSBC Bank as well.

4. During the pendency of the aforesaid application before the Central Government, Section 197 of the Companies Act was amended by the provisions of the Companies (Amendment) Act, 2017 with effect from 12th September, 2017. In the light of the aforesaid amendment, the Central Government no longer had power to approve the payment of higher remuneration and accordingly, the application filed by the said company seeking approval which was pending before the Government abated.

5. The factum of abetment of the company’s application as aforesaid was communicated to the said company by the Government by a communication dated 9th October, 2019. Consequent thereupon, as required in terms of Section 197(17) upon the application of the company having abated, the company was required within one year from the commencement of such amended provision to obtain approval in accordance with the provisions of the said section. To more fully appreciate, the aforesaid provision of Section 197(17)