a) where the WTD/MD is completes his tenure of 5 years and is paid gratuity for the period. He is reappointed for another 5 years, but resigns before completion of tenure of another 5 years after reappoinemnt. In such case he will loose gratuity for his second term.

b) where the WTD/MD is appointed only for 3 years due to inadequate profit or loss and then reappointed for another term of 3 years: In this case he will not get any gratuity even though he might have completed 6 years of service.

This is with limited understanding on the matter.

Section 309 of the Companies Act, 1956 provides that a Director who is neither in the whole-time employment of the Company nor a managing director may be paid remuneration by way of commission, if the Company by special resolution, authorizes such payment.

Section 309 of the Companies Act, 1956 requires approval of members of the Company by passing a Special Resolution in General Meeting for payment of remuneration by way of commission to Non-Executive Directors of the Company

In addition to the Commission on the net profits each Non-Executive Director of the Company may be  entitled to a fee of Rs. ……. per attended meeting of the Board and Audit Committee.

https://www.vakilno1.com/bareacts/companiesact/SCHEDULE%20659%20-%20674/sSCXIII%20-%20671.htm

¹[SCHEDULE XIII
Conditions to be fulfilled for the appointment of a managing or whole-time director or a manager without the approval of the Central Government
(See sections 198, 269, 310 and 311)

PART II
Remuneration
Section I.- Remuneration payable by companies having profits

Subject to the provisions of section 198 and section 309, a company having profits in a financial year may pay any remuneration, by way of salary, dearness allowance, perquisites, commission and other allowances, which shall not exceed five per cent of its net profits for one such managerial person, and if there is more than one such managerial person, ten per cent for all of them together.

Section II.- Remuneration payable by companies having no profits or inadequate profits

¹[1. Notwithstanding anything contained in this part, where in any financial year during the currency of tenure of the managerial person a company has no profits or its profits are inadequate, it may pay remuneration to a managerial person by way of salary, dearness allowance, perquisites and any other allowances, not exceeding ceiling limit of Rs.24,00,000 per annum or Rs.2,00,000 per month calculated on the following scale: -

1. Substituted by Notification No. GSR 215(E) dated 2nd. March, 2000.

2. A managerial person shall also be eligible to the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in paragraph 1 of this section:

(a) contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income-tax Act, 1961,

(b) gratuity payable at a rate not exceeding half a month's salary for each completed year of service, and

(c) encashment of leave at the end of the tenure.

PART-III
Provisions applicable to Parts I and II of this Schedule

1. The appointment and remuneration referred to in Parts I and II of this Schedule shall be subject to approval by a resolution of the shareholders in general meeting.

2. The auditor or the secretary of the company or where the company has not appointed a secretary, a secretary in whole-time practice shall certify that the requirements of this Schedule have been complied with and such certificate shall be incorporated in the return filed with the Registrar under sub-section (2) of section 269.]

A very informative article is posted at LCI link:

https://www.lawyersclubindia.com/articles/print_this_page.asp?article_id=2821

Remuneration to Directors

B. REMUNERATION TO NON-EXECUTIVE

DIRECTORS

Limits

If the company has Managing Director or whole time director

or a manager: - 1% of net profits

If the company has no Managing Director or whole time

director or a manager: - 3% of net profits

Mode of Payment

Section 309(4) authorizes payment of remuneration to non –

executive directors in two ways : -

(i) by way of monthly, quarterly or annual payment with

the approval of the Central Government; or

(ii) by way of commission if the Company by way of Special

Resolution authorizes such payment.

Approvals Required

1. In order to pay remuneration by way of commission, a

Special Resolution in the General Meeting is required to be

passed.

2. In order to pay such remuneration by way of a monthly,

quarterly or annual payment the Company is required to obtain

the approval of Central Government.

3. In order to pay the remuneration in excess of 1% or 3% (as

mentioned above) to its directors a separate approval of the

Central Government is required for paying such higher

remuneration.

4. Such higher remuneration is authorized by the Company in

its General Meeting.

Sitting Fee

A director may receive remuneration by way of a sitting fee

for each meeting of the Board, or a committee thereof, attended

by him. By virtue of sub-section (2) of Section198. Sitting

fee paid to directors shall not be reckoned for the purpose of

calculating Directors Remuneration.

The whole Time Director may be eligible for Gratuity and NON-EXECUTIVE

DIRECTO on commission, fee may not be. Gratuity before completion of five years is prerogative of employer. This employee was in permanent service before being made the Director. You may try and cajole him to accept the amount awarded by company.

Kindly obtain the opinion from a lawyer expert in such matters.