All
India Bank Officers' Confederation & Ors Vs. Union of India & Ors [1989] INSC 242 (14 August 1989)
Thommen,
T.K. (J) Thommen, T.K. (J) Dutt, M.M. (J)
CITATION:
1989 AIR 2045 1989 SCR (3) 850 1989 SCC (4) 90 JT 1989 (3) 389 1989 SCALE
(2)320
ACT:
Banking
Companies (Acquisition and Transfer of undertakings) Act, 1970: Section
9--Object of.
Nationalised
Banks (Management and Miscellaneous Provisions) Scheme, 1980: Clause 3--Nationalised
Banks--Board of Directors-Appointment of Directors--Discretion of 'Central
Government--How to be exercised--Appointment of non-workmen Directors--Practice
of appointing persons from out of panel submitted by respective Associations
representing non-workmen employees--Circular discontinuing the
practice---Validity of.
Words
and phrases: 'Employees'--Whether includes workmen and non-workmen.
HEAD NOTE:
The
Central Govt. in exercise of its power under Section 9 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 enacted the Nationalised
Banks (Management and Miscellaneous Provisions) Scheme, 1980.
Clause
3(b) of the said scheme deals with the appointment of workmen Directors and it
provides that the Central Govt. shall constitute the Board of a Nationalised
Bank consisting of one Director from among the employees of the nationalised
bank, who are workmen, to be appointed from out of a panel of 3 such employees
furnished to it by the Representative Union. Clause 3(c) of the Scheme deals
with appointment of non-workmen Directors and it provides that the Central
Government shall constitute the Board of a nationalised bank consisting of one
director, from among the employees of the nationalised bank, who are not
workmen, to be appointed after consultation with the Reserve Bank. The
consistent practice of the Central Govt. was to appoint a non-workman Director
from out of a penal of 3 names furnished to it by the majority association of
non-workmen employees. By a circular dated 23.8.82, it was clarified that as
far as appointment of non-workmen Director is concerned, there is no
justification for restricting the choice to the office bearers of the
Association. This was to enable the Central Govt. to appoint any officer of proven
851 ability and character to the Board of Directors of a nationalised Bank irrespective
of his affiliation with any association.
The
petitioners in these petitions to this Court, challenged this circular as
contrary to the mandate of the Act and the Scheme, and also contended that
clause 3 of the Scheme was ultra vires Section 9 of the Act.
Allowing
the petitions,
HELD:
1. The Circular is ultra vires the Act and the Scheme and it is, therefore,
null and void and of no effect.
[861C]
2. The
object of the Banking Companies (Acquisition and Transfer of Undertakings) Act,
1970 is to render the largest good to the largest number of people. The object
of Section 9 of the Act is to empower the Central Govt. to make a Scheme for
the constitution of the Board of Directors so as to include representatives of
the employees i.e. workmen and non-workmen and other specified categories viz.
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 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 i.e. 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. What is postulated is such election or nomination as
would lend to the Board of Directors its truly representative character in
consonance and harmony with the extremely delicate, vital and significant role
of the banking industry in the context of the national policy and objectives
and economic development. The mode of election or nomination must, therefore,
be such as would be ideally suitable and appropriate to the banking industry.
Neither the election nor the nomination should be conducted in a manner
unmindful of the distinctiveness of the banking industry. The Central Govt.
must in this regard act in consultation with the Reserve Bank of India which has the necessary expertise
and intimate knowledge in the field of banking, finance and other connected
matters. [856F-H; 857A-B, C-G] 852
2.1
But the Central Government has no discretion to avoid election even where
election is appropriate and feasible in respect of a particular category of
persons. For the appointment of representatives of depositors, farmers, workers
other than employees and Artisans, the discretion is entirely that of the
Central Govt. to choose the mode of representation. On the other hand, in the
case of employees, 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 such 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 not contemplate a management
unmindful of the true and legitimate interests of the employees. In a nationalised
bank, everyone is as much an employee as he is an employer.
There
is no antithesis between the management and the employees. The distinction that
traditionally existed prior to nationalisation is no longer applicable. The
true management culture is indeed the culture that represents the various
interests of all persons specified under Section 9 as well as the larger and
wider interests of national economy as postulated in the preamble to the Act.
[858B-G]
3. The
Central Govt. understood sub-clause (c) of Clause 3 regarding non-workmen
employees to warrant the same type of representation as in the case of
workmen-employees mentioned under subclause (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
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 viz.
there
is no justification for restricting the choice of non-workmen Directors to the
office bearers of the Association. That interpretation is wrong and, in any
case, out of harmony with the principle enshrined in Articles 19(1)(c) and
43(A) of the Constitution. [860B-D]
4. It
is open to the Central Government to amend the Scheme to improve on the
machinery for the conduct of an appropriate election, it is incumbent upon it,
until any such amendment is made, to work the present Scheme in such a way as
to give the maximum scope for the concerned employees to exercise their choice
in the selection of their representatives. [860H; 861A] 853
ORIGINAL
JURISDICTION: Transfer Case (Civil) No.219 of 1988.
WITH C.M.P.
No. 8572 of 1989.
(Under
Article 139(A)(1) of the Constitution).
AND
TRANSFER PETITION NOS. 376-40 of 1985.
Rajinder
Sachar and R. Vasudevan for the Petitioners in Transfer Case No. 219/88 and
C.M.P. No. 8572 of 1989.' M.K. Ramamurthy, D.S. Chauhan, Pinaki Misra, M.A. Krishnamoorthy,
H.S. Parihar, R.P. Kapoor, O.C. Mathur, Ms. Madhu Khatri, Ms. Bina Gupta, D.N. Misra
and Harish N. Salve for the Respondents in Transfer Case No. 2 19/88 and C.M.P.
8572 of 1989.
G. Ramaswamy,
Additional Solicitor General, Anil Dev Singh (NP), R.P. Srivastava, Ms. A. Subhashini
and C.V.S. Rao for the Petitioners in Transfer Petition No. 376-40 1 of 1985.
S.R. Seita
and P.K. Manohar for the Respondent in Transfer Petition Nos. 386 and 376 of
1985.
The
Judgment of the Court was delivered by THOMMEN, J. The first petitioner is a
registered Central Trade Union claiming to represent about 85 per cent of the
officers working in the various nationalised banks. Petitioners 2 to 4 are
principal office bearers of the first petitioner and are officers of different nationalised
banks.
They
are aggrieved by Circular dated 23.8.1982 (Annexure-A) issued by the Joint
Secretary to the 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,
854 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 are not workmen, is to be appointed by
the Central Government in consultation with the Reserve Bank of India on the
Board of each of the Nationalised Banks. Unlike in the case of workman, the
Scheme does not lay down any procedure for selection of the non-workman
Director. The intention clearly was that in the case of Officer-Director,
Government should have ample scope and freedom in selecting any officer of the
Bank to be the nonworkman Director. However, hitherto panel of names sent by
the banks for selection of the non-workman Director has been confined to
office-bearers of the Association of Officers.
Government
has recently reviewed this matter in the light of the relevant provisions of
the Scheme and come to a conclusion that there is no justification for
restricting the choice to the office-bearers of the Associations." The
object of the circular is to clarify that the Central Government no longer
regards itself bound by its earlier practice of appointing a person from out of
the panel of three names submitted by the respective Association representing
the majority of the non-workmen employees of each nationalised bank. The circular
makes it clear that the Government wishes to appoint any officer of proven
ability and character to the Board of Directors of a nationalised bank
irrespective of his affiliation with any Association.
The
petitioners contend that the circular is undemocratic and contrary to the
letter and spirit of the Act and the Scheme insofar as it cuts at the root of
the representative form of selection for appointment to the Board of Directors
as contemplated by the statute.
The
stand of the Central Government and other respondents, as stated in their
counter-affidavits, appears to be that the object of the circular is to neutralise
and discourage trade unionism amongst the officers and to keep the directorship
above union affiliation, and thus 855 encourage the growth of a
"management culture". Mr. Rajinder Sachar, supported by Mr. Ramamurthi,
contends that there is no justification whatsoever to issue any such circular
for the very object of the Act is to encourage democratic selection of the
Directors who will truly represent the interests of the various categories of
persons mentioned in the Act.
To
discourage trade unionism is contrary to the very spirit of the statute and
repugnant to constitutional principles enshrined in Article 19(1)(c) and
Article 43A of the Constitution of India.
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, for the Directors must represent the
interest of the bank as a whole and not of any special class of persons. The
Additional Solicitor General also submits that appointment by election is not
the only mode of representative appointment, but nomination is perfectly valid
and more effective from the point of view of the true institutional interest,
particularly with reference to management efficiency.
In the
light of these rival contentions, we shall examine the relevant provisions of
the Act and the Scheme.
Section
9 of the Act provides:
"9.
Power of Central Government to make scheme-(1) The Central Government may,
after consultation with the Reserve Bank, make a scheme for carrying out the
provisions of this Act.
856
(2) In particular,and without prejudice to the generality of the foregoing
power, the said scheme may provide for all or any of the following matters,
namely:
(a) ..............................
(b)
the constitution of the Board of Directors, by whatever name called, of the
corresponding new bank and all such matters in connection therewith or
incidental thereto as the Central Government may consider to be necessary or
expedient;
(c)
...............................
(d) such
incidental, consequential and supplemental matters as may be necessary to carry
out the provisions of this Act.
(3)
Every Board of Directors of a corresponding new bank, constituted under any scheme
made under subsection (1), shall include (a) representative of the employees,
and of depositors, of such bank, and (b) such other persons as may represent
the interests of each of the following categories, namely, farmers, workers and
artisans, to be elected or nominated in such manner as may be specified in the
scheme." 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 857 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.
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".
(See the preamble to the Constitution enshrining the national policy and
objectives.) 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 appropriate. But the legislature has
left it to the Central Government to specify by a scheme the manner in which
the election or nomination is to be conducted, bearing in mind the true
character and objective of the banking industry and its distinguishing features
as a highly sensitive commercial enterprise. Neither the election nor the
nomination should be conducted in a manner unmindful of the distinctiveness of
the banking industry. What is postulated is such election or nomination as
would lend to the Board of Directors its truly representative character in
consonance and harmony with the extremely delicate, vital and significant role
of the banking industry in the context of the national policy and objectives
and economic development. The mode of election or nomination must, therefore,
be such as would be ideally suitable and appropriate to the banking industry
and the choice of the mode is generally a matter for decision by the Central
Government. The Central Government must in this regard act in consultation with
the Reserve Bank of India, for it is the latter that has the
necessary expertise and intimate knowledge in the field of banking, finance and
other connected matters. The Act, therefore, requires the Central Government to
make the Scheme in consultation with the Reserve Bank of India. Any amendment or variation of the
Scheme also requires consultation with the Reserve Bank of India. [See Section 9(4)].
The
Additional Solicitor General is right when he submits that it 858 is generally
within the discretion of the Central Government to choose the special mode of
appointment. The Government may 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 a 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 subsection 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 not contemplate
a management unmindful of the true and legitimate interest of the employees. In
a nationalised bank, everyone is as much an employee as he is an employer.
There is no antithesis between the management and the employees. The
distinction that traditionally existed prior to nationalisation is no longer
applicable. The true management culture is indeed the culture that represents
the various interests of all persons specified under Section 9 as well as the
larger and wider interests of national economy as postulated in the preamble to
the Act.
We
will now examine the Scheme. Clause 3 of Chapter II of the Scheme provides:
859
"3. Constitution of the Board.--As soon as may be after the commencement
of this Scheme, the Central Government shall, by notification in the official
Gazette, constitute the Board of a nationalised bank, consisting of ( a )
..............................................
(b)(i)
one Director, from among the employees of the nationalised bank, who are
workmen, to be appointed by the Central Government from out of a panel of three
such employees furnished to it by the representative Union, within a date to be
specified by the Central Government;
..................................................
.....
( i i
) ...................................................
.
...................................................
.....
...................................................
.....
( i i i
) ................................................
(c) one
Director, from among the employees of the nationalised bank, who are not
workmen, to be appointed by the Central Government after consultation with the
Reserve Bank;
( d )
.................................................
( e )
.................................................
( f )
.................................................
( g )
.................................................
( h )
..................................................
The
scheme-making authority appears to us to have exercised the legislative power
delegated to it in making the Scheme in consonance with the Act, although in a
certain respect concerning the non-workmen-employees the intention of the
delegate of the legislature could have been articulated a little more
explicitly. We say so in 560 the light of the contemporaneous construction
placed on the statute by the delegate, namely, the Central Government, as
evinced by its own practice prior to the circular dated 23.8.1982. Until the
date of the circular, the consistent practice of the Central Government was to
appoint a non workmen Director from out of a panel of three names furnished to
it by the majority association of non-workmen employees. The Central Government
understood the Act and the Scheme to warrant such mode of appointment in the
case of all employees. In other words, the Central Government understood
sub-clause (c) of Clause 3 regarding non-workmen employees to warrant the same
type of representation as in 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, subclause (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 43(A) of the Constitution The Additional Solicitor General poses
the question whether the Scheme would not be even more defective if subclause
(c) were to receive the same construction as subclause (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
person out of the panel furnished by the representative Union of workmen or
Association of non-workmen, as the case may be, would not be a perfect
representation in keeping with the principle of election. That may or may not
be so, and there is always room for improvements; but the petitioners have no
complaint on that score. If the Central Government were to provide for election
in the manner chosen by it so as to appoint the true representatives of the
concerned employees, Mr. Sachat submits, the petitioners would have no
complaint, provided the provisions laid down in that behalf are valid and
reasonable.
While,
in our view, it is open to the Central Government to amend the Scheme to
improve on the machinery for the conduct of an appropriate election, it is
incumbent upon it, until any such amend561 ment is made, to work the present
Scheme in such a way as to give the maximum scope for the concerned employees
to exercise their choice in the selection of their representatives.
That
means, it would be perfectly in order for the Central Government to continue
the: practice followed by it prior to the circular in question or to hold
election of the representatives of the concerned employees, and, if necessary,
to amend the Scheme suitably for that purpose.
In the
circumstances, we declare that the circular dated 23.8.1982 (Annexure A) is
ultra vires the Act and the Scheme and it is, therefore, null and void and of
no effect. The Transfer Case is accordingly disposed of. Civil Miscellaneous
Petition No. 8572 of 1988 and Transfer Petitions Nos. 376-401 of 1985 are
allowed. Parties shall bear their respective costs.
T.N.A.
Petitions allowed.
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