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TMI Blog1993 (8) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... considerable employment within the country. The Apparel Export Promotion Council (hereinafter referred to as the "council") was also to undertake various activities to develop export markets and provide service to the garment export industry and it seems the garment export industry contributes about 15 per cent. of the total foreign exchange earning of the country being the single largest foreign exchange earner. The main objects of the council are as follows : "(1)To promote, advance, increase, develop, export of all types of readymade garments, excluding woollen knitwear and garments of leather, jute and hemp. (2)To undertake all export promotion measures, particularly, to undertake market research, quota distribution and allocation, to find out the tariff and other restrictive practices of importing countries, to find out the product range and export prices of garments of other countries, to develop new designs and patterns of garments, to undertake marketing in individual foreign markets, to send trade delegations and missions to foreign countries as well as to survey export potential of readymade garments from the country. (3)To appoint representatives, agents or corresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for its code activities from the Central Government though certain amounts were sanctioned for certain coded activities to the council by the committee of the Ministry of Commerce. It seems for the last 15 years the Apparel Export Promotion Council has been carrying on the function of distribution of export entitlement along with other functions, and it also seems that with a view to facilitate the functions the executive committee of the council passed a resolution dated July 17, 1991, wherein the council requested the Central Government to depute a senior Government officer as Director-General who would have such powers as decided by the executive committee from time to time. It seems that the Central Government has been deputing various officers as Directors-General who have been functioning as such. Article 91 empowers the executive committee to make bye-laws in respect of secretary, officers and other employees of the council in order to regulate the conditions of service, their appointment/dismissal, and in exercise of the power conferred by the said article the executive committee has made certain rules and bye-laws including Service Rules, 1983, Rules of Discipline, 1983, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive committee and that the transfer of employees and staff of the council or taking disciplinary action against employees are matters of internal management of the Apparel Export Promotion Council and cannot be termed as functions of the council involving national/public interest. It is also alleged in the affidavit that the directions, which are impugned, issued by the Central Government are illegal and invalid as they are made without jurisdiction. It is also alleged in the affidavit that under section 291 of the Companies Act, the board of directors are entitled to exercise all powers and to do all acts which the company is authorised to do, that the articles of association provide that the affairs of the council are to be managed by the executive committee, which is a body comprising elected members and nominees of the Central Government, that the executive committee is in fact constituted as the board of directors of the company, that the ultimate responsibility for the acts of the council also vests with the executive committee, that article 100 of the Apparel Export Promotion Council provides that no change, alteration or modification shall be made to the articles without t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressure or threats, and it was necessary to divest the executive committee of its powers to control the staff, the principles of natural justice required that the Government should at least have afforded reasonable opportunity to the executive committee to put forth its own point of view and that the impugned directions violate article 14 of the Constitution and as such they are invalid. It is also stated that article 101 in no manner confers powers on the Government to pass orders at its whim and that there should have been some material on record for the Government to conclude that the members of the Apparel Export Promotion Council are subjected by certain officers of the council to undue pressure and threats and/or inducements. It is also alleged in the affidavit that there are 27 elected members, that they are well placed exporters, that they have spent their life and have gained knowledge from the export activities and that by the impugned directions not only the power of transfer of the staff and dealing with other matters of the staff have been snatched but other powers like sanctioning of tours, etc., had also been taken away from the executive committee. It is also stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rference by the Government in the autonomous functions of the company is completely contrary to the Import Policy 1992-97, that the impugned directions have been issued with an oblique purpose and mala fide intentions, that the said directions have been issued in order to protect the interest of Mr. A.K. Singh, that the petitioner has made several representations to the respondent in the months of July, August, September, 1991, and in the month of November, 1992, and also in the month of February, 1993. It is further stated in the affidavit that there were changes in the Ministry of Textiles, that the petitioner has given a representation to the Minister in the month of February, 1993, and as such there is some delay in approaching this court, challenging the directions issued in the year 1991. A counter-affidavit has been filed by the respondent stating that the writ petition is not maintainable. It is also claimed in the counter-affidavit that under article 42( a ), the executive committee shall have not more than 20 members including the chairman and vice-chairman but excluding the Government nominees, that they shall be elected by the council or nominated by the chairman un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as authorised the Textile Commissioner to exercise day-to-day supervision over the matters relating to allocation of export entitlements under the Export Entitlement Distribution Policy, that export of garments and knitwear to developed countries is an extremely profitable trading activity fetching substantial profits to exporters of such items, and that since most of the garment and knitwear items having a good demand in the six major markets referred to above, are subject to quantitative limits, quotas are a primary requirement for exporting such garments and knitwear from India. It is also claimed in the counter-affidavit that exporters have a big stake in quotas and administration of quota policy becomes a very important and sensitive assignment. It is also claimed in the counter-affidavit that as part of the duties and responsibilities in administering the quota policy of Government, the officers of the council carry out certain main functions, that the said functions call for scrutiny of basic documents, supervision over cases put up by subordinate staff and a measure of application of mind and exercise of judgment, that in view of the functions carried out by the, officers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector (Per) at Delhi, that, however, the Director-General ordered the said A. K. Singh to stay on in Delhi and that it also ordered the said Pradhan to go to Bombay failing which he would be liable to suspension. It is further claimed in the counter-affidavit that both the said Singh and Pradhan, who were faced with the alternative of either obeying the orders of the chairman or the orders of the Director-General chose to obey the orders of the latter since they felt that the Director-General was the competent authority in the matter. As such, the Director-General highlighted the persistent efforts by the executive committee members, especially the chairman to change the composition of the committee and the need to provide adequate safeguards to officers of the council who deal with quota matters. It is also claimed in the counter-affidavit that the Director-General recommended to the Government to take action under article 101 of the articles of association of the council, that in invoking article 101 and issuing directions under it, the Government was solely dictated by public interest, that under the bilateral agreements between the Government of India and Governments of impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounter-affidavit that the Government's direction is essentially a reiteration of what is already contained in the service rules 1983 and that this direction was issued to give a sense of security and independence to the officers of the Apparel Export Promotion Council dealing with the highly sensitive quota administration work. It is further claimed in the counter-affidavit that the writ petition is totally misconceived. In the reply affidavit filed by the petitioner it is stated that article 100 of the articles of association relates to section 31 of the Companies Act. It is also stated that article 42A clearly states that for the purpose of managing the affairs of the council there shall be an executive committee and that it is very clear that the management of the affairs is vested only with the executive committee which shall have 30 members including the chairman but excluding the Government nominees. It is also stated in the counter-affidavit that it is surprising as to how an averment can be made that four Government nominees can have control over the whole executive committee of 34 members. The allegation that there is suppression of material facts is denied in the reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company bound by the articles of association and that what the Government cannot do directly it cannot do indirectly also by taking shelter under article 101 in the name of public interest which is against the provisions of the Companies Act. It is also stated in the reply affidavit that certain averments are made in the counter-affidavit to mislead this court and that not even a single instance had been referred to by the respondent as to how some members of the executive committee or the chairman have done anything against such objectives. It is also stated in the reply affidavit that the staff committee had been formulated in such a way by the impugned order to bypass and override the executive committee which is supreme under the articles of association. It is also stated in the reply affidavit that the respondent has got no legal authority to interfere with the day-to-day functions of the chairman or in the decisions taken by the executive committee. It is also stated in the reply affidavit that the Apparel Export Promotion Council is an autonomous body incorporated under section 25 of the Companies Act and that the directions issued by the respondent interfere with the func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding the service matters of officers/ officials of the council only. It is also claimed in the counter-affidavit that the constitution of staff committee is neither unduly influenced nor subjugated by exporters, but it is a prerequisite for the impartial implementation of the quota policy by the council which is essentially a function delegated by the Government to Apparel Export Promotion Council. Mr. Habibullah Basha, learned senior counsel for the petitioner, contends that the impugned directions have been issued under article 101 of the articles of association and that it is illegal. Learned senior counsel refers me to article 1( e ) where "the committee" is defined and article 1( f ) where "general meeting"' is defined and also articles 57, 58, 88 and 89 and contends that a conjoint reading of these articles will show that the executive council is the authority to manage the affairs of the Apparel Export Promotion Council. Learned senior counsel also refers to sections 25, 31, 33, 189 and 291 of the Companies Act. Learned senior counsel also refers to the service rules of the council and contends that the executive committee made rules 14 and 23 therein. Learned senior cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting" as follows : "General meeting" means a meeting of the members." Article 6 speaks of membership subscription and it runs thus : "... ( a )Members shall pay an admission fee of Rs. 1,000 and shall further pay minimum annual subscription of Rs. 1,000 or such amount as may be prescribed by the executive committee from time to time within the above said limit ... ( b )Government nominees shall not be required to pay any admission fee or annual subscription ..." Article 7 speaks of "authorised representative" and it runs thus ; "All members shall be entitled to appoint a representative with power to remove any representative so appointed and on a vacancy being caused for any reason whether by resignation, death or removal, or otherwise, to appoint another person as his representative. ( a )A representative of the member for the time being shall be entitled to attend the meeting of the council, form quorum and exercise right of vote and shall exercise all powers, as if, he were himself individually a member. A member shall be entitled to withdraw and/or rescind appointment of such representative and for this purpose the member shall give a notice in writing to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been valid, if the articles had not been made, provided that, the committee, shall not, except with the consent of the council in general meeting : ( a )sell, lease or otherwise, dispose of the whole or substantially the whole of the undertaking of the council or where the council owns more than one undertaking of the whole or substantially the whole of any such undertaking ; ( b )invest, otherwise than, in trust securities or scheduled banks the amount of compensation received by the council in respect of the compulsory acquisition of any such undertaking as is referred to in clause ( a ) or of any premises or properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time . . ." Article 58 speaks of the "functions of the committee" as follows : "( a )to administer the general affairs of the council. ( b )to determine what work shall be undertaken and to arrange for the conduct of such work. ( c )to receive and deal with reports and recommendations of sub committees. ( d )to arrange for the publication of reports and other documents issued by the council. ( e )to collabor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany licensed under section 25 of the Companies Act, 1956. The grant of licence under this provision provides for conferment of a special privilege on any association which is proposed to be formed as a limited company under the Companies Act, for serving public interest, without a profit motive. A reading of the provisions of the articles of association and the provisions of the Companies Act clearly shows that the impugned directions have been issued by the Government, the respondent herein, without jurisdiction. I am not able to agree with the arguments of Mr. V. T. Gopalan, learned Senior Central Government Standing Counsel, that the impugned directions can be issued in pursuance of article 101 of the articles of association. Under article 101( i ), the Central Government shall have the powers to give directions to the council as to the exercise and performance of its functions in matters involving national public interest. There cannot be any doubt that the Central Government has got power to give directions in matters involving national public interest, for the performance of the functions of the council. I am of the view that by no stretch of imagination, can any directions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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