Question

Section 16 of the SARFAESI Act deals with compensation to directors upon takeover of management. What does Section 16(1) provide?

Q: Answer-Section 16 of the SARFAESI Act deals with compensation to directors upon takeover of management. Wha...

Section 161 provides a categorical bar Notwithstanding anything to the contrary contained in any contract or in any other law for the time being in force, no managing director or any other director or a manager or any person in charge of management of the business of the borrower shall be entitled to any compensation for the loss of office or for the premature termination under this Act of any contract of management entered into by him with the borrower. This prevents displaced management from seeking compensation as a bargaining chip or from using contractual entitlements to delay enforcement. Section 162 preserves the right of such persons to recover from the business moneys otherwise due to them e.g., salary accrued other than compensation.

A Directors are entitled to compensation equivalent to one year's salary upon removal

B Directors are entitled to pro-rata compensation for unexpired term

C Only managing directors are entitled to compensation for loss of office

D No managing director, director, manager or person in charge of management shall be entitled to any compensation for loss of office or premature termination of any contract of management under this Act

E Compensation must be determined by the DRT upon application by the displaced director

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