As per the Companies Act, the remuneration limit to directors in loss-making companies with an effective capital of Rs 100-250 crore is Rs 1.2 crore. For the FY19, when it reported a net loss of Rs 90.73 crore, the Godrej group holding company paid Rs 6.11 crore to Dubash and Rs 4.24 crore to Nabar — or an extra Rs 4.9 crore and Rs 3.04 crore, respectively.
Companies can pay remuneration in excess of the limits mentioned in the Act if a special resolution is passed by the shareholders, said Amit Tandon, the founder and managing director of Institutional Investor Advisory Services India. “A few big companies have passed similar resolutions in the past as the Companies Act 2013 uses standalone profit/loss to calculate the remuneration,” he said.
Godrej Industries reported losses only two times in the past 12 years — in FY17, it had posted a loss of Rs 145 crore. Its loss in FY19 was mainly on the back of a Rs 243.8 crore provision made against impairment of its investment in Nature’s Basket.
The grocery and fresh food store chain, which was a wholly-owned subsidiary of Godrej Industries, was acquired by RP Sanjiv Goenka Group’s Spencers Retail for Rs 300 crore in an all-cash deal in May 2019. Godrej Industries, with primary interests in FMCG, was unable to commit the kind of investments and focus needed to scale up the modern retail chain it founded in 2008. Dubash, the executive director and chief brand officer at Godrej Industries, had steered Nature’s basket as its chairperson.
Godrej group chairman Adi Godrej said shareholders had granted approval for the remuneration packages. “Normally, these approvals come in from the board but since GIL does not record profit sometimes, we sough shareholder approval. We recorded an impairment of Rs 243 crore on the balance sheet for the year for Nature’s Basket which we sold to Spencers,” he said.
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