Can a Managing Director Work Full-Time Elsewhere? Seeking Legal Insights on Concurrent Employment

My company is faced with a peculiar issue. One of the senior management professionals who was appointed last year has decided to resign from the company to pursue his personal venture. However, his line of business is similar to that of my company. What is more shocking is that this senior person has concealed the fact that he is still a Managing Director in the company where he has shown himself to be a senior management employee. As per the ROC website, he is still the MD of the company, but to us and his LinkedIn profile, it shows that he is no longer associated with the given company. Our appointment letter clearly states that there can be no concurrent employment. This person, by being an MD in a company while being employed with my company, has flouted the clause of his appointment letter.

Seeking Advice on Concurrent Employment and Legal Implications

I would also like to know from my esteemed colleagues, as per the Companies Act 2013, can the MD of a company, while still being an MD of that company, be a full-time salaried employee of another company which has no association whatsoever with the company in which he is an MD? Also, does this constitute forgery and cheating?

A detailed inquiry will bring out facts. Breach of trust, fudging, or hiding of factual information is evident from what you mention in the post. Take out all documents concerning his employment held with you - application, confidentiality disclosures, etc. Then download information from the ROC website, and you will get a full idea of his actions. After that, you can decide on the action to be taken after hearing and recording what the employee has to say in his support.

The facts have been established. We have the details from the ROC site.

I just wanted to know if a person is an MD in an existing company, can he/she be an employee in another company. Please shed some light on this matter.

Dual employment is not in order. He cannot function as MD in one company and be an employee of a competing company.

Dear Nath Rao Ji, there is a further complication in this problem. The legal in charge of my company has stated that since the employee is the MD in another company and hid these facts during the course of his employment or before seeking employment, his employment is null and void as per the terms of his appointment letter. Our appointment letter states that one cannot have concurrent employment.

Now the legal in charge is asking us in HR to terminate him and recover the salary paid to him during this duration as his contract of employment is null and void. I have told the legal person that this would be incorrect as we have paid him for the tasks done. If not, can we claim damages from such an employee for not disclosing that he was already an MD of a company?

The employee in question has refused outright and has threatened to sue the company for this, where he will drag the HR function primarily. We in HR are quite perplexed as to what is the right course of action to be followed.

Regards, Anuradha

You need to take up the matter legally by suing the former MD for breach of contract. There will be negative publicity about the whole thing. But if the facts are true regarding double employment, then your company has a good case against the employee.