Restructuring of Salary Without Formal Board Resolution or Express Contractual Promise Does Not Constitute Legally Enforceable Deferred Salary.

The Appellant, Sunil Vadehra, joined the Respondent company in 1995 and was later inducted into the Board of Directors.

Due to a financial crisis in FY 2002-03, the company implemented a graded reduction in salaries (15% to 30%) for employees earning above ₹12,000/month.

The Appellant’s salary was reduced from ₹1,42,333 to ₹84,000 between April 2002 and March 2003.

The Appellant alleged this was a "deferment" to be repaid later, along with a one-month bonus compensation.

He resigned on 19.11.2003 and later filed a suit for recovery of ₹8,89,381.

The Trial Court dismissed the suit, finding no contractual proof of deferment.

1. Whether the salary reduction during FY 2002-2003 constituted a "deferment" creating a legally enforceable debt or a permanent "restructuring" necessitated by financial constraints?

2. Whether the Appellant established a contractual right to a one-month salary as bonus compensation?

3. Whether the absence of an Annual General Meeting (AGM) resolution rendered the reduction of the Director's remuneration invalid?

The Court applied Section 96 and Order XLI of the Code of Civil Procedure, 1908, governing appeals from original decrees.

The dispute centered on the law of contracts regarding the "burden of proof" (Onus Probandi), where the plaintiff must establish the existence of a binding contractual obligation.

The Court referenced the precedent in M/s Aithent Technologies Pvt. Ltd. v. Archana Verma (RFA 608/2014), which held that salary restructuring during the same period in the same company did not constitute a "deferment" without documented proof.

The Court also distinguished the principle in Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan [(2005) 1 SCC 212] regarding Board Resolutions, noting it was inapplicable to the facts of the present case.

The Court observed that while the Appellant claimed the salary reduction was a deferment, he was a key member of the management team that formulated and implemented the arrangement during an "Open-House Meeting".

The Court noted a critical lack of formal documentation, such as Board Resolutions or written agreements, to prove that the company intended to repay the reduced amounts.

Significant weight was given to the separation document dated 11.11.2003 (Ex. DW-1/P3), signed by the Appellant upon resignation, which detailed final financial terms but remained silent on any "deferred salary" or "bonus".

The CEO's letter dated 05.04.2004 (Ex. PW-1/3) was held insufficient as it neither quantified the dues nor specifically acknowledged the salary reduction as a debt.

Consequently, the Court found the Appellant’s conduct inconsistent with his claims, as he did not protest the settlement at the time of resignation.

The Court affirmed that the reduction was a "restructuring" and not a "deferment".

The absence of an AGM resolution was deemed irrelevant as the suit was for recovery of debt, not for the invalidation of the salary reduction.

The High Court dismissed the appeal and upheld the Trial Court’s Judgment and Decree dated 18.04.2024.