2007 (5) TMI 676 - SC - Companies Law

Summary

Issues Involved:
1. Authority and jurisdiction of CMD to pass the dismissal order.
2. Validity and enforcement of the amended CDA Rules.
3. Right of appeal and potential prejudice to the respondent.

Summary:

1. Authority and Jurisdiction of CMD to Pass the Dismissal Order:
The High Court set aside the dismissal order passed by the CMD on 21.1.1997 and the Appellate Authority's order dated 27.9.1997, holding that the CMD did not have the authority to dismiss the respondent as per the unamended CDA Rules, which designated the Board as the Disciplinary Authority. The Supreme Court, however, found that the Board's resolution dated 18.3.1998 ratified the CMD's dismissal order, validating it retrospectively. The Court cited Maharashtra State Mining Corporation v. Sunil, emphasizing that an invalid act can be ratified by the competent authority, making it valid from the date of the original act.

2. Validity and Enforcement of the Amended CDA Rules:
The High Court held that the amendment to the CDA Rules did not come into effect because the date of enforcement was not stated in the amendment itself but in a subsequent circular. The Supreme Court disagreed, noting that the Board's resolution on 18.3.1998 clarified that the amendments were effective from 8.1.1996, the date when the majority of Directors approved the circular resolution. The Court concluded that Rule 41 of the CDA Rules, which requires the effective date to be stated in the amendment, was fully complied with.

3. Right of Appeal and Potential Prejudice to the Respondent:
The respondent argued that his right to appeal was compromised because the CMD, who issued the dismissal order, was also the designated Appellate Authority under the amended CDA Rules. The Supreme Court found no merit in this argument, noting that the respondent did file an appeal before the Board of Directors, which independently considered and dismissed the appeal. The Court referenced Balbir Chand v. Food Corporation of India Ltd., stating that a higher authority acting as the primary disciplinary authority does not inherently cause prejudice if an independent appellate review is available.

Conclusion:
The Supreme Court set aside the High Court's decision, restoring the dismissal order dated 21.1.1997 and the Appellate Authority's order dated 27.9.1997, subject to the final decision of the writ petition. The case was remanded to the High Court to consider other contentions raised by the respondent. The respondent was not entitled to subsistence allowance from the date of the Supreme Court's decision until the final disposition of the writ petition. The appeal was allowed, with parties bearing their respective costs.