TaxTMI 
TaxTMI 
TaxTMI 
2022 (11) TMI 168
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.... the writ petitioners for the directorship of the appellant under Section 160 of the Companies Act, 2013 by the appellant bank, allegedly being a statutory violation, is a subject matter amenable for writ jurisdiction. 2. Brief facts are required to be discussed in order to consider the said issue; Petitioners 1 and 2 in W. P. (C) No. 19758 of 2021 leading to W. A. No. 425 of 2022 / respondents 1 and 2 herein are shareholders of the appellant - M/s. Dhanalakshmi Bank Ltd., however, the 3rd petitioner / the 3rd respondent herein, is not a shareholder. Petitioner in leading to writ appeal No. 432 of 2022 / the 1st respondent herein, is a shareholder of the appellant Bank and formerly a Director. 3. Reliefs sought for by the petitioners in W. P. (C) No. 19758 of 2021 are that (i) issue a writ of mandamus commanding Dhanalakshmi Bank Ltd; Board of Directors of Dhanalakshmi Bank Ltd., represented by its Managing Director; and the Nomination and Remuneration Committee of Dhanalakshmi Bank Ltd., to place the candidature of the petitioners before the General Body of M/s. Dhanalakshmi Bank Ltd. scheduled to be held on 29.09.2021 for consideration as Directors, in accordance with Section....
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....ration Committee is bound to discharge their statutory responsibilities under Section 160 of the Companies Act, 2013, to inform the General Body Meeting of the Dhanalakshmi Bank with respect to the candidature of the 1st petitioner for the office of the Director as mandated under Section 160(2) of the Companies Act. It is also the contention of the said petitioners that under Section 160 of the Companies Act, a person eligible for appointment to the post of Director at the General Body of the company can place a notice in writing at the company's registered office, not less than 14 days before the General Body meeting signifying his candidature as a Director. 7. It is also the case of the petitioners that the 1st petitioner has given a notice in writing and deposited Rs. 1,00,000/- and therefore the appellant company registered under the Companies Act has a statutory duty to inform the members of the General Body of the candidature of such person. According to the petitioners, apart from the 1st petitioner, 3 others had placed their candidature i.e. (i) Sri. B. Ravindran Pillai; (ii) Sri. P. K. Vijayakumar (petitioner in the connected writ petition), who was the Director ....
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....ns contained under Sections 160 and 178 of the Companies Act, 2013. 12. The petitioner in the other writ petition has also raised similar contentions; as we have pointed out above, the essential relief sought in the writ petition is in respect of the rejection of the nomination offered by the petitioner by the Director Board of the Bank. Petitioner therein has also contended that petitioner is the most suitable person and he was formerly the Director General of Income Tax (Rtd.), former Insurance Ombudsman, Independent External Monitor (IEM) for Visakhapatnam Steel Plant Ltd. and FACT Ltd. Udyogamandal, Kochi. 13. True, petitioner therein Sri. P. K. Vijayakumar has also contended that the RBI and the SEBI have failed to take prompt steps against the appellant Bank as well as its Director Board for not adhering to the Corporate Governance Standards and ignoring the scheme for selection of fit and proper candidates under the 2004 notification, and the SEBI (LODR) Regulations, 2015. 14. The basic pleading raised in the said writ petition is that the petitioner is aggrieved for not including his name for reappointment even though he was declared fit and proper on 24.05.2021. It is a....
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....datory statutory duty to consider the application/proposal for appointment as directed in a general meeting. The power of the general body under Section 160 has not been delegated to the Board of Directors. Such a delegation would necessarily affect the very constitution of the Board, which ultimately is a representative body which must conduct the affairs of a banking company. A banking company, whether in the private sector or in the public sector, is handling public money, public finance and also has to necessarily comply with several statutory requirements including conducting business in accordance with certain national policies. It cannot hence be said that there is no public law element at all in the functioning of a Bank. There can be cases where individual actions relating to contract with a depositor or a customer who has taken a loan may arise which necessarily is in the field of a private contract. We are not concerned here with a singular business transaction, but with the very functioning of the company and its conduct of the business through a properly constituted Board of Directors. Actions in this regard cannot be termed to be purely in the private field. It is the....
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....n of a public nature. 22. It is also contended that the learned Single Judge erred in interpreting Section 160 of the Companies Act, 2013 and further it is contended that the learned Single Judge failed to appreciate that no person has a right under Section 160 of the Companies Act, 2013 to have his candidature for Directorship place directly before the General Body Meeting in the case of a banking company. That apart it is contended that the learned Single Judge failed to consider and appreciate that Section 35A of the Banking Regulation Act provides RBI the power to issue directions inter alia to secure the proper management of banking companies, which directions the banking companies are bound to comply with. 23. It is also contended that the learned Single Judge failed to consider and appreciate that in terms of the RBI circular read with 'Dr. Ganguly Group Report' in case of banking companies; (i) there is a requirement for the Directors to have requisite professional qualifications, special experience, specified technical skills etc.; (ii) there is a requirement for the Directors to have high integrity and an impeccable track record; (iii) accordingly Banks ....
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....nces involved in the matter and argued that there is a real element of public duty involved in the matter since the appellant Bank is discharging public duty by accepting deposits from the public and granting loans to the public. That apart it is contended that the Board of Directors of the appellant has no power or authority to reject an application submitted under Section 160 of the Companies Act, 2013. It is also contended that under Section 152(2) of the Companies Act, 2013, every Director shall be appointed by the company in the general meeting and therefore there is a clear statutory requirement for the Directors to place the applications of the petitioners before the General Body of the appellant Bank. 27. It is also pointed out that in order to maintain a writ petition the appellant Bank need not be a Public Sector Bank; and further that the appellant Bank is regulated by RBI, SEBI and ROC, who are all having statutory powers and duties and therefore, the appellant Bank is amenable to writ jurisdiction. It is also contended that in view of the clear violations of the provisions of law and failure on the part of the appellant Bank to adhere to the statutory requirements del....
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....ual [(1969) 1 SCC 585], Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. R. Rudani [(1989) 2 SCC 691], State of U. P. v. Johri Mal [(2004) 4 SCC 714], K. K. Saksena v. International Commission on Irrigation & Drainage [(2015) 4 SCC 670], Rejendra Menon v. Cochin Stock Exchange Limited [1989 SCC Online Ker. 539 (Single Judge) and 1990 SCC Online Ker. (Division Bench)] and Sri. Ramdas Motor Transport Ltd. v. Tadhi Adhinarayana Reddy [(1997) 5 SCC 446]. 33. So also, learned Senior Counsel for the writ petitioners have relied upon the judgment of a Full bench of this Court in John Kuriakose v. State of Kerala [(2015) 1 KLT 720 (FB)], a Division Bench judgment of this Court in the President, Peechi Service Cooperative Bank and Another v. Tessy Varghese and Others [(2015) 4 KLT 919], the judgment in Y. Sleebachan v. State of Kerala and Others (judgment rendered by us) Manu/KE/2283/2020. 34. To put it differently, the learned Senior Counsel on either side have submitted that the judgments referred to above are rendered by the Hon'ble Apex Court as well as the High Courts in their favour. In order to understand the contentions appropriately, we ....
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....rsons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every Director's performance. 39. It is equally important to bear in mind that as per sub-section (3) of Section 178, the Nomination and Remuneration Committee shall formulate the criteria for determining qualifications, positive attributes, and independence of a Director and recommend to the Board a policy, relating to the remuneration for the Directors, key managerial personnel and other employees. Other prescriptions are also contained under the said provision. 40. The Companies (Appointment and Qualification of Directors) Rules, 2014, is a Rule constituted also taking into consideration Section 160 of the Companies Act, 2013. Rule 13 of the said Rules dealing with notice of candidature of a person for Directorship specifies that the company shall, at least 7 days before the general meeting, inform its members of the candidature of a person for the office of a Director or the intention of a member to propose such person as a candidate for that office, (i) b....
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....ious allegations are made against the said persons, however the said letter dated 23.06.2021 has nothing to do with the rejection of nomination by the Director Board of the appellant Bank. So also, in Ext. P7 complaint dated 16.09.2021 addressed to the Chairman, SEBI, Mumbai, allegations are made against the RBI nominees. 45. Therefore, it can be seen that the complaint of Sri. P. K.Vijayakumar filed before the RBI as well as the SEBI have no manner of connection, or somewhat totally detached from the paramount and essential relief sought for in the writ petitions, that is to say, the rejection of nomination as per Ext. P3 communication dated 20.09.2021. 46. Now, in the above background, we propose to consider whether the RBI and the SEBI have any manner of control in so far as the nomination to the post of Directorship of the appellant Bank is concerned. Section 10A(2) of the Banking Regulation Act, 1949, reads as follows:- "10A. Board of directors to include persons with professional or other experience.- (2) Not less than fifty-one per cent of the total number of members of the Board of directors of a banking company shall consist of persons, who-- (a) shall have special....
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....wn in such manner as may be prescribed, decide which director or directors shall cease to hold office and such decision shall be binding on every director of the Board. (5) Where the Reserve Bank is of opinion that the composition of the Board of directors of a banking company is such that it does not fulfill the requirements of subsection (2), it may, after giving to such banking company a reasonable opportunity of being heard, by an order in writing, direct the banking company to so re-constitute its Board of directors as to ensure that the said requirements are fulfilled and, if within two months from the date of receipt of that order, the banking company does not comply with the directions made by the Reserve Bank, that Bank may, after determining, by lots drawn in such manner as may be prescribed, the person who ought to be removed from the membership of the Board of directors, remove such person from the office of the director of banking company and with a view to complying with the provision of sub-section (2) appoint a suitable person as member of the Board of directors in the place of the person so removed whereupon the person so appointed shall be deemed to have been du....
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....stating that what was called for was a meaningful --- not formal --- reading of the plaint and any illusion created by clever drafting of the plaint should be buried then and there. In Official Trustee, West Bengal & Ors. Vs. Sachindra Nath Chatterjee & Anr. [(1969) 3 S.C.R. 92], this Court approving the statement of the law by Mukherjee Acting Chief Justice in Hirday Nath Roy Vs. Ramchandra Barna Sarma, [I.L.R. 48 Calcutta 138 F.B.] held: "Before a court can be held to have jurisdiction to decide a particular matter it must not only have jurisdiction to try the suit brought but must also have the authority to pass the orders sought for. It is not sufficient that it has some jurisdiction in relation to the subject- matter of the suit. Its jurisdiction must include the power to hear and decide the questions at issue, the authority to hear and decide the particular controversy that has arisen between the parties." 12. Reading the plaint as a whole in this case, there cannot be much doubt that the suit is essentially in relation to the relief of partition and declaration in respect of the properties situate in Village Pataudi, Gurgaon, outside the jurisdiction of court at Delhi. I....
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....the recovery of possession, it is a suit to which Section 41(1) applies notwithstanding the fact that some of the reliefs or a portion of the cause of action is structured around a claim for specific performance. The Court must ask itself : Does the theme and the foundation relate to the recovery of possession? And in answering that question, the pleadings must be considered as a whole without severing its constituents or reading parts in isolation." 53. We have also gone through the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Retirements) Regulations, 2015 issued by the Securities and Exchange Board of India wherein also we find that the provisions are dealing with principles governing disclosures and obligations; right of shareholders; equitable treatment; role of stakeholders in corporate governance; disclosure and transparency; responsibilities of the Board of Directors; and other responsibilities. 54. The said regulations also deal with the parameters to be followed by the Board of Directors conducting the business of the company. However, none of the provisions therein also is dealing with the nomination to Directorship. But ....
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....most of the judgments above that a writ of mandamus or the remedy under Article 226 is pre-eminently a public law remedy and is not generally available as a remedy against private wrongs. 60. It is held in Binny Ltd. (supra) that a writ of mandamus under Article 226 is used for enforcement of various rights of the public or to compel public / statutory authorities to discharge their duties and act within their bounds. It was also held therein that the scope of mandamus is limited to enforcement of public duty and the scope is determined by the nature of the duty to be enforced, rather than the identity of the authority against whom it is sought. It was further held therein that if the private body is discharging a public function and the denial of any right is in connection with the public duty imposed on such body, the public law remedy can be enforced. 61. So also, in Ramakrishna Mission (supra), the Hon'ble Apex Court had occasion to consider the issue after conducting a threadbare survey of all the earlier judgments, and held that even if the body discharges a public function in a wider sense, there is no public law element involved in the enforcement of the private contr....
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....ervene or participate in social or economic affairs in the public interest. It was also held therein that the duty cast on the public body may be either statutory or otherwise and the source of such power is immaterial but nevertheless there must be the public law element in such action; and there cannot be any general definition of public authority or public function and the facts of each case decide the point. 63. In Federal Bank Ltd. (supra) also, the Hon'ble Apex Court has held that a writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State Government; (ii) an authority; (iii) a statutory body; (iv) an instrumentality or agency of a State; (v) a company which is financed and owned by the State; (vi) a private body run substantially on state funding; (vii) a private body discharging public duty ought positive obligation of public nature; and (viii) a person or a body under liability to discharge any function under any statute to compel it to perform such a statutory function. 64. In our view, the judgments cited above are all rendered sequentially upholding the principles of law laid down by the Hon'ble A....
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....over the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable. Therefore, decisions of this Court in the cases of Praga Tools Corporation [(1969) 1 SCC 585 and Ramesh Ahluwalia [(2012) 12 SCC 331] relied upon by the learned counsel appearing on behalf of the borrowers are not of any assistance to the borrowers." 68. In Life Insurance Corporation of India v. Escorts Ltd. And Others [(1986) 1 SCC 264], the Hon'ble Apex Court held as follows:- "102. For example, if the ac....