2011 (4) TMI 1502 - HC - Companies Law

Summary

Issues Involved:
1. Legality of disqualification of nominees for Workmen Director based on residual service before superannuation.
2. Interpretation of Clause 3(2)(iii)(b) of the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970/1980.
3. Alleged discrimination between categories of directors.
4. Delay and laches in filing the petition.

Detailed Analysis:

1. Legality of Disqualification Based on Residual Service:
The petitioners challenged the disqualification of their nominees for the position of Workmen Director on the grounds that they had less than three years of residual service before superannuation. The court examined Clause 3(2)(iii)(b) of the Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970/1980, which states that a workman shall be disqualified unless "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." The court upheld this clause, stating that it ensures continuity and prevents mid-term vacancies, which could disrupt the Board's functioning.

2. Interpretation of Clause 3(2)(iii)(b):
The petitioners argued that Clause 3(2)(iii)(b) should be construed as directory rather than mandatory. They contended that the bank had previously appointed directors with less than three years of service left. However, the court rejected this argument, emphasizing that the clause is mandatory. The court noted that the scheme is legislative in nature and the use of the word "shall" indicates an imperative provision. The court applied the principle of harmonious construction, stating that the clause does not conflict with Clause 9(2)(a) of the scheme, which specifies the term of office for directors.

3. Alleged Discrimination Between Categories of Directors:
The petitioners claimed that the clause discriminates against workmen directors compared to officer directors. The court dismissed this argument, noting that the nomination process for officer directors involves consultation with the Reserve Bank of India and follows a different procedure as outlined in Clause 3(3) and the Third Schedule of the scheme. The court found no merit in the plea of discrimination, stating that the two categories are not comparable and the provisions are not discriminatory.

4. Delay and Laches in Filing the Petition:
The respondents argued that the petition should be dismissed due to delay and laches, as it was filed more than one and a half years after the communication dated 10th October 2009. The court, however, did not base its decision solely on this ground but considered the substantive issues raised in the petition.

Conclusion:
The court dismissed the petition, upholding the disqualification clause as mandatory and not discriminatory. The court emphasized the importance of ensuring continuity in the Board of Directors and rejected the argument that the clause was directory. The court also found no merit in the claim of discrimination between workmen and officer directors. The petition was dismissed without any order as to costs.