The Calcutta High Court has affirmed that a Managing Director is entitled to full payment of all outstanding dues - salary, perquisites, leave encashment, and gratuity - when these are duly acknowledged by board resolutions and remain unpaid despite contractual and fiduciary obligations. The judgment underscores the enforceability of corporate commitments even when the employee has voluntarily deferred compensation for the company’s benefit.
Background & Facts
The Dispute
The Plaintiff, Debajan Datta, was appointed as Managing Director of the Defendant company, Webcon Consulting (India) Limited, a public limited company, pursuant to a letter of appointment dated 13.07.2011. The Plaintiff undertook to revitalize the company’s financial health, which subsequently improved under his leadership. To alleviate working capital constraints, the Plaintiff voluntarily abstained from drawing a portion of his salary and perquisites. The Defendant company formally acknowledged this gesture through multiple Board Resolutions, expressing gratitude and recording the non-withdrawal of dues.
Key Facts
- The Plaintiff was appointed Managing Director on 13.07.2011
- The Plaintiff voluntarily deferred salary and perquisites to support company liquidity
- The Defendant passed multiple Board Resolutions between 2011 and 2016 acknowledging the Plaintiff’s forbearance and recording the accrual of unpaid dues
- The Plaintiff’s salary was enhanced by Board Resolution during his tenure
- The Plaintiff superannuated on 31.07.2016
- As of superannuation, the following amounts remained outstanding:
- Outstanding Salary: Rs. 9,00,000
- Outstanding Perquisites: Rs. 20,00,000
- Leave Encashment: Rs. 4,50,004
- Gratuity: Rs. 2,79,806
- Interest @ 18% p.a. from 31.07.2016: Rs. 64,63,039
- Total claimed: Rs. 1,00,92,835
- The Plaintiff also alleged that certain employees of the Defendant tampered with and uploaded false minutes of a Board meeting dated 22.09.2014 on the Ministry of Corporate Affairs portal on 21.11.2014
- The Plaintiff filed the suit on 28.06.2022 seeking recovery of the above amounts, damages of Rs. 20,00,000, and other reliefs
Procedural History
- 13.07.2011: Appointment as Managing Director
- 2011 - 2016: Multiple Board Resolutions passed acknowledging non-withdrawal of salary and perquisites
- 31.07.2016: Superannuation of the Plaintiff
- 21.11.2014: False minutes uploaded to MCA portal
- 28.06.2022: Suit filed in Calcutta High Court (CS/255/2022)
- Service of summons: Completed on the Defendant
- No written statement filed: Defendant remained absent
- 10.03.2026: Hearing concluded
- 19.03.2026: Judgment delivered
Relief Sought
The Plaintiff sought:
- Recovery of Rs. 1,00,92,835 as unpaid salary, perquisites, leave encashment, gratuity, and interest
- Damages of Rs. 20,00,000 for defamation and corporate misconduct
- Interest on the principal amount
- Costs of litigation
The Parties' Positions
The Plaintiff relied on documentary evidence including:
- Appointment letter (Ext. A)
- Board Resolutions (Ext. B to Ext. Q)
- Internal communications and financial records
- Oral testimony establishing the voluntary deferral and subsequent non-payment
The Defendant did not file a written statement, appear in court, or contest the claim. The suit became undefended.
The Legal Issue
The central question was whether a Managing Director is legally entitled to recover unpaid salary, perquisites, leave encashment, and gratuity when these amounts have been formally acknowledged by board resolutions and remain outstanding after superannuation, and whether damages for alleged falsification of corporate records can be awarded in a civil suit for recovery of dues.
Arguments Presented
For the Petitioner
The Plaintiff’s counsel argued that:
- The Board Resolutions constituted binding corporate acknowledgments of liability
- The voluntary deferral of salary did not constitute waiver or condonation of the debt
- The Plaintiff’s contributions significantly improved the company’s financial position, making the non-payment inequitable
- The documentary evidence (Ext. A to Ext. Q) was unchallenged and sufficient to establish the claim
- The claim for damages was ancillary to the primary claim and arose from the Defendant’s fraudulent conduct
For the Respondent
The Defendant did not file any written statement or appear in court. No counter-arguments were presented.
The Court's Analysis
The Court examined the documentary evidence, including the Board Resolutions, which explicitly recorded the Plaintiff’s forbearance and the accrual of unpaid dues. The Court held that such resolutions, passed under the authority of the company’s Articles of Association and the Companies Act, 2013, constitute binding acknowledgments of liability.
"The Board Resolutions are not mere expressions of gratitude; they are formal corporate records acknowledging the existence of a debt and the continued accrual of unpaid remuneration."
The Court noted that the Plaintiff’s voluntary abstention from drawing salary was a gesture of goodwill, not a relinquishment of right. The law does not permit a company to benefit from such forbearance and then deny the obligation once the employee leaves.
The Court further held that the claim for damages of Rs. 20,00,000 was not substantiated by evidence of direct loss or reputational harm attributable to the falsified minutes. While the act of tampering with corporate records is serious, the Plaintiff failed to demonstrate quantifiable damages flowing from it in the context of a civil suit for recovery of dues.
The Court emphasized that in an undefended suit, the burden on the Plaintiff is to establish a prima facie case through credible evidence, which was fully discharged.
The Verdict
The Plaintiff succeeded in part. The Court allowed the suit for recovery of Rs. 1,00,92,835 with interest at 12% per annum from the date of institution of the suit (28.06.2022) until realization. The Defendant was directed to pay the decretal amount within three months from the date of drawing up the decree. In case of default, the Defendant shall pay an additional 3% penal interest on the principal and capitalized interest from the expiry of the three-month period. The claim for damages of Rs. 20,00,000 was dismissed.
What This Means For Similar Cases
Corporate Acknowledgments Are Legally Binding
- Board Resolutions recording unpaid dues to directors or key employees constitute enforceable contractual obligations
- Voluntary deferral of compensation does not extinguish the right to claim it later
- Practitioners must treat such resolutions as primary evidence in recovery suits
Damages Require Direct Causation
- Alleged corporate misconduct, such as falsification of minutes, cannot be grounds for damages in a civil recovery suit unless directly linked to quantifiable loss
- Separate criminal or regulatory complaints may be more appropriate for such allegations
- Civil suits for recovery must focus on clear, documented financial obligations
Undefended Suits Demand Rigorous Evidence
- Even in the absence of a defense, courts require clear, credible, and corroborated documentary proof
- Oral testimony must be supported by contemporaneous records
- Practitioners should ensure all relevant Board Resolutions, appointment letters, and financial records are properly marked and authenticated
