2019 (3) TMI 403 - SC - Indian Laws

Legality of Clause 3(2)(iii) of The Nationalized Banks (Management and Miscellaneous provisions) Scheme, 1970 - whether Clause 3(2)(iii) of the Scheme is legal or ultra vires the Constitution? - disqualification for being nominated as a Director - the submission is that the disqualification provided in Clause 3(2)(iii)(b) of the Scheme for the worker/employee category is only confined to their category. No such similar disqualification is made applicable to the officer/employee category - Held that - It would be clear from a perusal of clauses (e) and (f) of Section 9(3) of the Act that both the categories of employees are different one is worker/employee category as defined under Section 9(3)(e) and the other is officer/employee category as defined under Section 9(3)(f) of the Act. Second, it is for the legislature to decide as to what qualifications and disqualifications should be prescribed for various categories of the employees for their nomination on the post of Director. Third, there lies a distinction between the worker and the officer. The former, i.e., worker is defined under Section 2(s) of the Industrial Disputes Act, 1947 and is governed by that Act whereas the latter, i.e., officer is not governed by the Industrial Disputes Act but is governed by separate service rules. Both these categories of employees, therefore, cannot be equated with each other and nor can be placed at par for providing equal qualification or/and disqualification for their nomination as a Director in the Board of Directors. Fourth, Article 14 of the Constitution applies inter se two equals and not inter se unequals. Fifth, the nominee worker/employee has only a right under the Act to be appointed as Director from the category of worker/employee in terms of Section 9 (3)(e) of the Act provided the concerned nominee whose name is recommended by the Union fulfills the qualifications laid down in Clause 3(2)(iii) of the Scheme but not beyond it. Appellants then submitted that once the employee is nominated to the Board of Directors may be from different categories specified under Section 9, then no distinction should be made between them while prescribing the qualification and disqualification - This submission has also no merit. A mere reading of Section 9(3) clause (a) to (i) would go to show that the Board of Directors consists of persons coming from different fields. There cannot, therefore, be a uniform qualification or/and disqualification for such persons. Indeed, the qualifications and disqualifications are bound to vary from category to category and would depend on the post, experience and the stream from where a person is being nominated as a Director. Moreover, the qualification and disqualification has to be seen prior to his/her becoming a Director and not after his/her appointment as a Director. There is no good ground to interfere with the reasoning and the conclusion arrived at by the High Court, which rightly dismissed the appellants writ petition, and upheld Clause 3(2)(iii) of the Scheme as being legal - appeal dismissed.

Summary

Issues:
1. Challenge to the communication dated 10.10.2009 and enforcement of the letter dated 08.06.2009
2. Legality of Clause 3(2)(iii) of the Scheme, 1970

Analysis:
1. The appeal challenged the communication dated 10.10.2009 and sought enforcement of the letter dated 08.06.2009, which recommended three workers/employees for nomination as Director. However, the workers had retired, rendering the relief infructuous as new Directors were already nominated. Thus, this issue was no longer relevant for consideration.

2. The main issue for consideration was the legality of Clause 3(2)(iii) of the Scheme, 1970. The appellants argued that the clause created discrimination between worker/employee and officer/employee categories without a reasonable basis, violating Article 14 of the Constitution. However, the Court found no merit in this argument.

3. The Court analyzed Section 9(3)(e) and (f) of the Act along with Clauses 3(2)(i), (ii), and (iii) of the Scheme. It highlighted the distinction between worker/employee and officer/employee categories, emphasizing that different qualifications and disqualifications were justified based on the nature of their roles and governing laws.

4. The appellants contended that once nominated, Directors from different categories should not face distinctions in qualifications and disqualifications. However, the Court reasoned that diverse backgrounds of Directors necessitated varying criteria, which should be assessed before appointment, not after.

5. Ultimately, the Court upheld the legality of Clause 3(2)(iii) of the Scheme, dismissing the appeal for lack of merit. It affirmed the High Court's decision, emphasizing the need for specific qualifications and disqualifications tailored to different categories of Directors based on their roles and responsibilities.