AI Drafter 
TaxTMI 
TaxTMI 
2011 (4) TMI 1502
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..... He is an employee of the second Respondent Bank. The first Respondent is the Union of India, sued through the Department of Finance which is the controlling and governing authority for the Nationalised Banks. Respondent No. 2 is a Nationalised Bank, in which, the member of the Petitioners are employed. 4. It is the case of the Petitioners that the Bank is managed by a Board of Directors. The Board of Directors is to be constituted under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (hereinafter, referred to as the "Act"). Further, this provision empowers the Central Government to make a scheme for carrying out the provisions of the Act. The scheme, inter alia, provides for constitution of the Board of Directors and all such matters in connection therewith or incidental thereto as the Central Government may consider it necessary or expedient. Section 9(3) of the Act states that every Board of Directors, constituted under any scheme made under Sub-Section 9(1) shall include one Director from among, such of the employees of the corresponding new bank, who are workmen under Section 2(s) of the Industrial Disputes Act, 1947 and such a Direc....
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....the age of superannuation. Such being the case, the Central Government conveyed its inability to nominate any of them as the Director on the Board of Directors of the second Respondent Bank and the Petitioners were requested to forward a fresh panel. 9. The Petitioners submitted a representation dated 21st October, 2009 to the Additional Secretary to reconsider the decision. However, the second Respondent Bank requested the Petitioners to submit a fresh panel by a letter dated 18th January, 2010. The Petitioners forwarded a representation to the Finance Minister of India, but the Bank once again requested them to submit a fresh panel. Correspondence continued and ultimately, the Petitioners being dissatisfied with the letter dated 10th October, 2009 (Annexure "C") and the further communications of the Bank and finding that there is no response to their representation, filed this writ petition under Article 226 of the Constitution of India seeking to quash and set aside the same. 10. Mr. Kantak, learned Counsel appearing on behalf of the Petitioners submits that the first Respondent could not have treated the three employees whose names were forwarded for being appointed as a ....
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....does not have three years of service left before retirement. This discrimination between Directors on the Board of Directors should be avoided and that is how the clause providing for disqualification should be construed and particularly not creating any impediment in appointing any Workman as a Director of the second Respondent Bank, irrespective of his age and tenure of service. How many years of service of such employees is left, is not a relevant consideration at all. The composition of the Board should be broad-based and representative in character. Once such is the intent of the statute, then, this Court should not accept the stand of the Respondents, but proceed to allow the petition and quash the impugned communication. 12. In support of his submissions, Shri Kantak has relied upon the decisions of the Hon'ble Supreme Court reported in the case of National and Grindlays Bank Ltd., v. Municipal Corporation for Greater Bombay, reported in: AIR 1969 SC 1048; in the case of All India Bank Officers' Confederation etc., v. Union of India and Ors. reported in: AIR 1989 SC 2045; and in the case of Sultana Begum v. Prem Chand Jain, reported in: (1997) 1 SCC 373. 13. In....
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....t the clause is not binding on the parties. It is submitted that the scheme has been formulated by the Government in consultation with the Reserve Bank of India. In terms of Clause 3(2)(iii), a workman of a nationalised Bank shall be disqualified for being nominated as a director unless he is and has been serving for a continuous period of not less than five years in the nationalised Bank and he is of such age that there is no likelihood of his attaining the age of superannuation during his term of office as a director. It is submitted that the comparison made is also not well founded. There cannot be any discrimination, much less hostile discrimination, as contented. In these circumstances, the scheme cannot be faulted and the instances cited do not support the case of the Petitioners at all. If there is no discrimination, then, the petition should be dismissed. 16. With the assistance of the learned Counsel appearing for the parties, we have perused the petition and the annexures thereto and even the affidavits filed on record. We have also perused the statutory provisions and the scheme, so also the decisions brought to our notice. 17. For properly appreciating the rival c....
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....fer of the whole or any part of the undertaking of any other banking institution to a corresponding new bank; [(ca) the manner in which the excess number of directors shall retire under second proviso to Clause (i) of Sub-section (3);] (d) such incidental, consequential and supplemental matters as may be necessary to carry out the provisions of this Act. 4[(3) Every Board of Directors of a corresponding new bank, constituted under any scheme made under Sub-section (1), shall include- (a) 5[not more than four whole-time directors] to be appointed by the Central Government after consultation with the Reserve Bank; (b) one director who is an official of the Central Government to be nominated by the Central Government: Provided that no such director shall be a director of any other corresponding new bank. Explanation.-For the purposes of this clause, the expression "corresponding new bank" shall include a corresponding new bank within the meaning of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980); [(c) one director, possessing necessary expertise and experience in matters relating to ....
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....ominated under Clause (h)or to be elected under Clause (i) of Sub-section (3) shall- (A) have special knowledge or practical experience in respect of one or more of the following matters, namely: (i) agricultural and rural economy, (ii) banking, (iii) cooperation, (iv) economics, (v) finance, (vi) law, (vii) small-scale industry, (viii) any other matter the special knowledge of, and practical experience in, which would, in the opinion of the Reserve Bank, be useful to the corresponding new bank; (B) represent the interests of depositors; or (C) represent the interests of farmers, workers and artisans. [(3-AA) Without prejudice to the provisions of Sub-section (3-A) and notwithstanding anything to the contrary contained in this Act or in any other law for the time being in force, no person shall be eligible to be elected as director under Clause (i) of Sub-section (3) unless he is a person having fit and proper status based upon track record, integrity and such other criteria as the Reserve Bank may notify from time to time in this regard.] [(3-AB) The Reserve Bank ma....
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....constitution of the banking institution or the corresponding new bank, as the case may be. [Explanation I].-In this section, 'banking institution' means a banking company and includes the State Bank of India or a subsidiary bank.] [Explanation II.-For the purposes of this section, the expression "corresponding new bank" shall include a corresponding new bank within the meaning of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980).] [(6)] Every scheme made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session for a total period of thirty days [which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid], both Houses agree in making any modification in the scheme or both Houses agree that the scheme should not be made, the scheme shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without pr....
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....s what is observed by the Hon'ble Supreme Court in paras 6, 7 and 8 of the report: 6. The object of Section 9 of the Act, insofar as it is material, is to empower the Central Government to make a scheme for the Constitution of the Board of Directors so as to include representatives of the employees and other specified categories. "Employees" include workmen and non-workmen. The categories specified, apart from the employees, are depositors, farmers, workers and artisans. The representatives of these classes of people are to be either elected or nominated in the manner specified by the Scheme. The legislature has left it to the Central Government to make a scheme providing for appointment to the Board from amongst the specified categories either by election or by nomination. 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 refle....
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....ay choose election or nomination as the appropriate mode of appointment in respect of various categories. But we do not agree with him when he submits that the Central Government has discretion to avoid election even where election is appropriate and feasible in respect of a particular category of persons. The very object of leaving the choice to the Central Government as to the mode, which is election or nomination, is to enable it to reasonably exercise its discretion in such a way as to give the best form of representation to every category of persons mentioned in the Act. It may be possible to appoint a representative of the depositors by election instead of nomination. It would be perfectly within the discretion of the Central Government to choose that 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 identificat....
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....ive Union, within a date to be specified by the Central Government, which date shall not be more than six weeks from the date of communication made by the Central Government, requiring the representative Union to furnish the panel of names; Provided that where the Central Government is of the opinion that owing to the delay which is likely to occur in the verification and certification of any Union or Federation as a representative Union, it is necessary in the interests of the nationalised bank so as to do, it may nominate any employees of the nationalised bank, who is a workman, to be a director of that Bank. (ii)(a) where there is no representative Union to represent the workmen of a nationalised bank, or (b) where such representative Union, being in existence, omits or fails to furnish any panel of names within the specified date, or (c) where all the persons specified in the panel furnished by the representative Union are disqualified, whether under item (iii) of this sub-clause or under Clause 10, the Central Government may, at its discretion appoint such workmen of the nationalised bank, as it may think fit, to be a director of such bank. ....
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....superannuation during his term of office as a director. It is this stipulation which is challenged as being in conflict with Clause 9 of the scheme. 23. Clause 9 of the Scheme reads as under: [9. Term of office of other directors; (1) a director other than a director referred to in Clause (a) and Clause (i) of Sub-section (3) of Section 9 of the Act shall hold office during the pleasure of the Central Government. (2) Subject to the provisions of Sub-clause (1), (a) a director referred to in Clause (e) and Clause (f) of Sub-section (3) of Section 9 of the Act shall hold office for such term not exceeding three years as the Central Government may specify at the time of his nomination and thereafter until his successor has been nominated and shall be eligible for re-nomination. (b) a director referred to in Clause (g) and Clause (h) of Sub-section (3) of Section 9 of the Act shall hold office for such term not exceeding three years as the Central Government may specify at the time of his nomination and shall be eligible for renomination. Provided that no such director shall hold office continuously for a period exceeding six yea....
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....ess he is of such an age that there is likelihood of his attaining the age of superannuation in any way curtails or reduces the term of office. The "term of office" is a period for which a person is nominated or appointed as a director. However, Clause 3(iii) creates a disqualification for being nominated as a Director. That is a disqualification at the threshold. Therefore, we do not see how such a provision is conflicting with, leave alone collides with Clause 9(2)(a). In fact, on a proper reading of the clauses, it will be clear that they can exist with each other without any conflict or collision. 25. In the case of K. Prabhakaran v. P. Jayarajan, reported in AIR 2005 SC 688, at page 706 (para 59), the Supreme Court holds that the disqualification provision must have a substantial and reasonable nexus with the object sought to be achieved and the provision should be interpreted with the flavour of reality bearing in mind the object for enactment. A plain and ordinary dictionary meaning of the term "disqualification" is "make or pronounce ineligible or unsuitable". It is not the contention of the learned Counsel Mr. Kantak that Clause 10 of the scheme which provides for disqu....
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....26. We have applied the principle of harmonious construction and applying that very principle, we are of the opinion that if all clauses in the scheme are read together and as a whole, there is no substance in the contention of Mr. Kantak that the provision of disqualification is not in tune with the legislative mandate. The interpretation placed by the Central Government is fully in accordance with the object of having a truly representative Board of Directors. That such a person should be representing the workmen employee category who will be able to continue for a period of three years at least, cannot be said to be a stipulation defeating the right given by Section 9(3)(e) of the Act. Ultimately, it is not the right of the employees to have their Nominee or representative as a Director, but it is a power given to the Central Government to nominate several persons, including employees of Nationalised Banks on the Board of Directors of the Nationalised Banks, with a view to give representation to all those who are working in and for the Bank. In such circumstances, we find much substance in the contention of Mr. Amonkar that the scheme can be interpreted harmoniously and no claus....
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....workman for filling up the post of Workman Employee Director. If he is not in a position to continue for a period of three years as provided in Clause 9(2) of the scheme, then, the purpose of nominating him is not achieved at all. A person must get adequate time to acquaint himself with the working of the Board. It is expected that he truly represents the section to whom he belongs. If he is to retire or superannuate shortly, he may not be interested in participating in the affairs of the Bank, when such participation is the least that is expected of him. An inactive and disinterested Workman-Director who merely fills a vacancy can hardly serve anybody's interest, leave alone that of the Bank. If the nomination is to be effective and complete, a person, who is available for initial term of three years atleast, should be nominated or else it will make mockery of the law providing nomination. We are of the view that not just the Central Government, equally the Union, is performing a public function, and it cannot nominate any person who does not possess the qualification provided by the Scheme. It is not left to their freewill to opt and pick and choose any employee to be their r....
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....tor, is singled out. However, that has absolutely no substance, because in the case of such Directors, the scheme provides that he shall be nominated by the Central Government in consultation with the Reserve Bank of India after procedure for verification of membership of officers' associations by whatever name called operating in the nationalised banks and for obtaining a panel of names for appointment of non-workmen employee director on the Boards of nationalised banks as mentioned in the Third Schedule has been followed (see Clause 3(3)). If this provision is perused carefully, it is clear that the right given to the representative Union under Clause 3(2)(i) is not given to the officers who have to be nominated as Directors on the Board. The Central Government undertakes the exercise in terms of the Third Schedule to the Scheme. Clause 3(3) and the Third Schedule have to be read together to understand the manner in which the Officer Employee is appointed as a Director on the Board. So understood, there appears to be no difficulty in rejecting the argument of discrimination, as these two are not comparable categories at all. Therefore, there is no merit in the plea of discrim....