2004 (10) TMI 352 - HC - Companies Law

Summary

Issues:
Power of State Government in nominating Directors in the Board of Multi-State Co-operative Societies under section 48 of the Multi-State Co-operative Societies Act, 2002 vs. power of nomination by the Central and State Governments as per the bye-laws.

Analysis:
The judgment delves into the conflict between the power of the State Government to nominate Directors in a Multi-State Co-operative Society under the 2002 Act and the bye-laws framed under the 1984 Act. The bye-laws of the society allow for the nomination of Directors by the State Governments of Kerala and Karnataka, as well as other entities, in a specific manner. The provisions of the 1984 Act and its rules restrict the number of government nominees to three or one-third of the total members of the board. However, the 2002 Act introduces a new framework for nomination of Directors based on the share capital held by the Central or State Governments, with a provision that the number of nominated persons should not exceed one-third of the total board members.

The judgment emphasizes the importance of consistency between the Act and the bye-laws, highlighting that the bye-laws should not be inconsistent with the statute. Under the 2002 Act, the State Government is entitled to nominate at least one Director if its share capital is less than twenty-six percent of the total issued equity share capital. In this case, the bye-laws allow for the nomination of two Directors by the Kerala Government, which is not deemed inconsistent with the Act. The judgment upholds the protection of bye-law provisions under section 126 of the 2002 Act, emphasizing that the bye-laws enable the State to nominate two Directors, which is not in conflict with the Act.

Furthermore, the judgment clarifies that the power of nomination under the 2002 Act is not in addition to the power granted by the bye-laws unless explicitly stated in the statute. While the Act allows for the nomination of one Director by the State Government, the bye-laws permit two nominations, and in this case, two Directors were already nominated. The judgment rejects the argument that the State Government can nominate an additional Director beyond the provisions of the bye-laws based solely on the Act's requirement of one government nominee.

In conclusion, the judgment dismisses the Writ Appeal, affirming the decision that the State Government's power to nominate Directors in the Multi-State Co-operative Society is limited by the provisions of the bye-laws and the 2002 Act, and that the nomination of an additional Director by the State Government was not justified under the prevailing legal framework.