As per Section 149 (6) of Companies Act 2013, A person cannot be appointed as an Independent Director in the company, if such person has or had pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year, as such relationship will affect the independence of the director.
As per the plain reading of the above mentioned Section, remuneration to be paid to such Independent Director can constitute a pecuniary relationship.
But MCA in its General Circular No. 14/2014 dated 09.06.2014, has clarified that the payment of remuneration to the Independent Directors, if it is as per Section 197 i.e. Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits, then such a transaction does not constitutes pecuniary relationship with the company.
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