1991 (8) TMI 281 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the writ petition.
2. Representation of employees on the board of directors.
3. Powers of the Reserve Bank of India under sections 10A and 35A of the Banking Regulation Act, 1949.
4. Compliance with Article 43A of the Constitution of India.

Detailed Analysis:

1. Maintainability of the Writ Petition:
The petitioner sought a writ of mandamus directing the Reserve Bank of India (RBI) to take action under section 35A of the Banking Regulation Act, 1949, to fill up vacancies on the board of directors. The respondents argued that the writ petition was not maintainable as the first respondent was a company incorporated under the Companies Act and not amenable to writ jurisdiction. The court held that the petition was maintainable because the relief sought was against a statutory authority (RBI) to exercise its statutory powers under section 35A of the Act. Therefore, the contention that the writ petition was not maintainable was not sustainable in law.

2. Representation of Employees on the Board of Directors:
The petitioner argued that employee representation on the board was based on the theory of employees' participation in management, supported by Article 43A of the Constitution of India. However, the court noted that while Article 43A provides for workers' participation in management, it requires legislative action to be enforceable. The court observed that no such legislative steps had been taken for the bank in question, which was governed by the Companies Act. The court also noted that the Central Government had framed a scheme under section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, for nationalized banks, but this did not apply to scheduled banks like the first respondent. Consequently, the court held that in the absence of statutory provisions, the first respondent could not be compelled to appoint employees to the board.

3. Powers of the Reserve Bank of India Under Sections 10A and 35A of the Banking Regulation Act, 1949:
The court examined the powers conferred on the RBI under sections 10A and 35A of the Banking Regulation Act. Section 10A specifies the qualifications and composition of the board of directors, while section 35A allows the RBI to issue directions to banking companies in certain circumstances. The court held that the RBI could only exercise these powers when specific conditions were met, such as ensuring the board's composition fulfilled the requirements of section 10A(2). The RBI could not issue directions to fill board vacancies unless the situation warranted such action under section 35A. The court found no such conditions existed in this case, and therefore, the RBI could not be compelled to issue the directions sought by the petitioner.

4. Compliance with Article 43A of the Constitution of India:
The petitioner contended that the decision not to fill the vacancies was contrary to Article 43A of the Constitution, which promotes workers' participation in management. The court acknowledged the article but noted that it was a Directive Principle of State Policy, not enforceable by law unless supported by specific legislation. The court reiterated that no such legislative provision existed for the first respondent-bank. Consequently, the court held that the petitioner's argument based on Article 43A could not be enforced in the absence of statutory backing.

Conclusion:
The court concluded that the writ petition lacked merit and dismissed it. The court emphasized that the RBI's powers under sections 10A and 35A of the Banking Regulation Act were limited and could not be invoked to compel the first respondent to fill board vacancies in the absence of specific statutory provisions. The court also underscored that while Article 43A of the Constitution promotes workers' participation in management, it requires legislative action to be enforceable, which was not present in this case.