TaxTMI 
TaxTMI 
TaxTMI 
1989 (8) TMI 364
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....he Government of India, Ministry of Finance, Department of Economic Affairs, (Banking Division), New Delhi. They contend that the circular is contrary to the mandate of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (Act No. 5 of 1970) (hereinafter referred to as the 'Act') and the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1980 (hereinafter referred to as the 'Scheme'). They further contend that Clause 3 of the Scheme in terms of which the circular is purported to have been issued is ultra vires Section 9 of the Act unless the said clause is so read as to be in harmony with the section, and when so read the said clause does not justify or support the impugned circular. The petitioners, therefore, seek a writ of mandamus to direct the Central Government to appoint a nominee of the majority association of each of the nationalised banks as a member of its Board of Directors. The circular in question reads : As you are aware, in terms of Sub-clause (c) of Clause 3 of Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970/1980, one Director from among the employees of the nationalised banks who ....
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....rined in Article 19(1)(c) and Article 43A of the Constitution of India. 4. The Additional Solicitor General, representing the Central Government, and Mr. Harish N. Salve, counsel for the Reserve Bank of India, contend that the Act postulates both election and nomination of members of the Board of Directors and the choice between the two modes of appointment is left to the Central Government. The election or nomination has to be conducted in a manner as specified in the Scheme. The Scheme in effect postulates all appointments to be by nomination. In the case of workmen-employees, the Director is appointed by the Central Government from amongst the names of three employees furnished by the representative Union. Such appointment, though made out of, and restricted to, the panel furnished by the Union, is in effect a nomination of the one preferred by the Central Government. In the case of non-workmen-employees, the choice is not restricted to any panel and the only condition postulated is consultation with the Reserve Bank of India. Unionisation, though desirable among workmen, is not a matter to be encouraged in the case of other employees for selection to the Board of Directors, fo....
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....tion. The discretion as to the mode of appointment is, of course, left to the Central Government, but it is not an unrestrained or unrestricted discretion, but a discretion which must be reasonably exercised so as to give effect to the true intent of the legislature as to the composition of the Board of Directors. The object of the legislature is to give the Board a truly representative character so as to reflect the genuine interests of the various persons manning or dealing with the bank as an industry and a commercial enterprise. 7. The object of the Act is to nationalise the banks in order to, as stated in the preamble to the Act, "control the heights of the economy and to meet progressively, and serve better, the needs of development of the economy in conformity with the national policy and objectives". The very purpose of that legislative exercise is to render the largest good to the largest number of people of this "sovereign, socialist, secular, democratic republic".1 It is with this object in view that the Act has envisaged a truly representative Board of Directors chosen by election where election is feasible or by nomination where that mode is more a....
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....t mode. On the other hand, the depositors being not an organised body of persons, although easily identifiable, selection of their representative by nomination may be easier, more feasible and perhaps more appropriate for the purpose of appointment to the Board. Farmers, workers other than employees, and artisans mentioned under Sub-section (3)(b) of Section 9 are best represented by nomination, they being difficult of identification and their connection with the bank being more remote than in the case of employees or even depositors. For these classes of people, the discretion is entirely that of the Central Government to choose the mode of representation. In the case of employees, on the other hand, election is indeed the most logical, the most appropriate, the most democratic and certainly the most advantageous form of representation. They are well-identified, well-organised, well-motivated and interested associates and participants in the banking industry. They are as much a part of the bank as the management is. There can be no legitimate management culture foreign to their vital interests. There can be no valid management policy contrary to their genuine needs. The Act does n....
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....the case of workmen-employees mentioned under Sub-clause (b) of Clause 3. The field of choice was thus understood by the Government to be limited to the panel of names furnished by the representative Union of workmen or Association of non-workmen as the case may be. But, as stated earlier, Sub-clause (c) of Clause 3 is vaguely drafted and when read without regard to the legislative intent, as disclosed by the Act, is capable of a contrary interpretation, as is now sought to be put upon it by the Central Government, and that interpretation is, in our view, wrong, and, in any case, out of harmony with the principle enshrined in Articles 19(1)(c) and 43A of the Constitution. 11. The Additional Solicitor General poses the question whether the Scheme would not be even more defective if Sub-clause (c) were to receive the same construction as Sub-clause (b) so as to restrict the choice of appointment to the three persons specified on the panel furnished by the representative Association. The Act, he says, speaks of election or nomination, and if election were to be construed to be the appropriate mode of choosing the representatives of the employees, appointment by nomination of one pers....