Madras High Court
Apparel Export Promotion Council vs Union Of India on 12 August, 1993
Equivalent citations: AIR 1994 MADRAS 57, (1997) 5 COMLJ 477 (1997) 90 COMCAS 309, (1997) 90 COMCAS 309
JUDGMENT Bakthavatsalam, J.
1. The short point that arises for consideration in this writ petition is whether the respondent has got jurisdiction to issue directions like the directions impugned herein dated July 12, 1991, to the petitioner council under article 101(1) of the articles of association of the Apparel Export Promotion Council.
2. The Apparel Export Promotion Council was incorporated under the Companies Act with a limited liability on February 22, 1978, and the company is licensed under section 25 of the Companies Act. It was incorporated as a non-profit organisation mainly with the object of promoting export of garments manufactured in India to various countries with a view to earn valuable foreign exchange and to provide 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 ready-made 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 ready-made garments from the country.
(3) To appoint representatives, agents or correspondents in foreign markets for the purpose of continuously and regularly reporting the market prices, market preferences and latest fashions and designs prevalent in the foreign countries.
(4) To conduct propaganda and publicity regularly and continuously so as to bring to the notice of the importers and the public in foreign countries the advantages of trade and commerce with India and to create a liking for the various types of garments markets for the purpose of continuously and regularly reporting to manufacturers, traders and exporters of garments.
(5) To assist members, especially, in the small scale sector by giving assistance in the matter of understanding and implementation of the drawback rules and procedures, import licence facilities provided and how to apply for the facilities.
(6) To establish design centres, to evolve improved design and patterns and garments suitable for export, to improve the qualities and standards of the fabrics and garments by importing technical know-how, to encourage export production of quality garments and to undertake necessary research in fashions, designs and techniques and to encourage manufacture of garments for exports.
(7) To undertake training of workers and technical personnel, to improve the skill of workers engaged in garment manufacturing in India and to assist in the technological base of the garment industry.
(8) To obtain from members of the council and to prepare for the council as a whole, action plans for promotion of exports, development of export markets, generation of production for exports, setting of export targets generally and in relation to specific countries and commodities on an annual basis and for such medium and longer terms as may be considered desirable and to ensure/undertake execution of such plans . . ."
3. The articles of association of the company contemplate an elected body of members called the executive committee and they also provide that the composition of the executive committee would include four nominees of the Central Government. Article 58 of the articles of association (hereinafter referred to as "the articles" in short) enumerates the functions to be performed by the executive committee and clause (g) of the said articles provides for the control of the staff of the council, and articles 100 and 101 were added for receiving the market development assistance grant 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 13 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, and Recruitment Rules, 1982, and Travelling Allowance Rules, 1984. It is alleged in the affidavit that on April 8, 1991, the executive committee decided that Mr. A.K. Singh, Director, Personnel, should be posted to Bombay against a vacant post, that the Director-General of the council, without any authority, it is alleged that on July 14, 1991, posted one Mr. Pradhan as additional director at Bombay and that such an action is not only illegal but also without jurisdiction. It is also alleged in the affidavit that the executive committee is like a board of directors and it is the prerogative of the board of directors to administer the affairs of the council. In paragraph 14 of the affidavit it is alleged that one Mr. A.K. Singh has acted in violation of the orders and lawful directions. It is also stated that instead of appreciating the discussion, at this stage the Government of India has come out with the impugned order in exercise of powers vested under article 101(1) of the articles, divesting the executive committee of its powers to deal with the staff or rather is divesting it even to take any steps or decision to transfer staff and officers, sanction tours, initiating and discharge of disciplinary matters and order of suspension of any of the officials. It is also alleged in the affidavit that the impugned directions were purportedly given in public interest because allegedly certain instances had come to the notice of the Government where the chairman and executive committee had taken decisions relating to transfer of individual officers and disciplinary matters. The petitioner also alleges in the affidavit that the respondent can exercise powers under article 101(1) of the articles only in respect of exercise and performance of functions of Apparel Export Promotion Council involving national/public interest, that the Central Government is not empowered to give directions to the council in respect of functions and/or matters of internal management of the council, that the main function of the Apparel Export Promotion Council being to promote exports, the Central Government has the power to issue directions garnish to the exercise and performance of such functions, that the respondent cannot while purportedly acting under article 101(1) take away the powers of the Apparel Export Promotion Council to manage its own day-to-day affairs through its executive 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 the previous approval of the Central Government, that it does not give the power to the Central Government, the respondent herein, to suo motu change or alter the articles of the council, that the impugned directions are tantamount to altering the articles of association itself and as such the directions are ultra vires the powers conferred by the articles of association.
4. It is alleged in the affidavit that as per the impugned directions, the Government of India has been vested with certain powers exclusively which cannot be exercised by the executive committee, that it is tantamount to virtually taking over a part of the management from the lawfully elected body without invoking the due procedure of law, that if the respondent is of the opinion that the affairs of the company are being carried out prejudically to the interests of the public order of the company, it has its recourse in law under the Companies Act and that, however, it cannot take over the management of the executive committee while exercising the power under article 101(1) of the articles. It is further alleged in the affidavit that in the guise of protecting the employees associated with the administration of export quotas, the respondent has stripped the executive committee of all its powers to manage and control the staff and officers of the Apparel Export Promotion Council and that it is imperative that the body which has the responsibility of managing the organisation should have the power to control various officers and employees comprising the organisation in order to function in an effective manner. The affidavit also refers to chapter 13 of the Import and Export Policy 1992-97 which deals with the Export Promotion Council, that para 140 of the said policy provides that the Export Promotion Council would be autonomous, that it would regulate its own affairs, and that para 150 of the policy had also been referred to. It is alleged in the affidavit that the Government may in terms of the policy either withdraw or curtail the support granted to an Export Promotion Council or even withdraw the functions assigned to it, that it cannot regulate the day-to-day affairs of the Export Promotion Council. It is also alleged in the affidavit that if the Central Government genuinely felt that it was subjecting the officers and staff associated with the management of export entitlements to undue 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 stated that the petitioner company is a company registered under section 25 of the Companies Act and that it is governed by the memorandum and articles of association of the company. Article 57 gives power to the executive committee to frame rules and regulations with respect to matters relating to the staff of the company and to administer the general affairs of the company, that it is vested with the power of day-to-day administration including appointment of the staff of the council and disciplinary action. It is also stated in the affidavit that section 31 of the Companies Act provides for alteration of any article by a special resolution, that any alteration of an article can be done only under this provision and that by the impugned directions, the Government has taken away the powers set out in articles 57, 58 and 91 of the articles of association of the company. It is further alleged in the affidavit that the Government, by the impugned directions has, in effect amended the articles which it has no right to do and that it is totally without jurisdiction and contrary to the provisions of the Companies Act. It is also alleged in the affidavit that it has no right to interfere in the transfer of the staff and officers at all levels and that it will amount to taking away the powers conferred under the articles of association which can only be done by the company itself and not by the Government under the guise of article 101 of the articles of association, that the Government has sought to exercise powers which it does not possess and that giving of directions does not amount to amending the articles of association changing the rules and arbitrary and capricious exercise of power and that on this ground also the impugned order is liable to be set aside. It is further stated in the affidavit that the Government has not even understood the basic scheme of the council, that it has tried to place the staff on a higher pedestal than the executive committee of the company, that the members of the committee are in the nature of directors of the company in that the power vested in them cannot be taken away in the manner in which it is sought to be done. It is also stated in the affidavit that on mere conjectures and surmises the respondent thought fit to issue directions, which are impugned herein, in violation of the principles of natural justice. It is also stated in the affidavit that the interference 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 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.
5. 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 under article 45, that in view of that it will be clear that the control by the Government is in-built and inherent in the Apparel Export Promotion Council. It is also claimed in the counter-affidavit that since Apparel Export Promotion Council is in the control of the Government it cannot challenge an order, like the directions impugned herein, in a petition under article 226 of the Constitution of India. It is also contended in the counter-affidavit that the Apparel Export Promotion Council Employees Union, for an identical relief, filed a writ petition before the High Court, Delhi, that it has not been brought into the affidavit filed in support of this writ petition and as such it is a material suppression of fact. It is also claimed in the counter-affidavit that the petitioner council was incorporated on February 22, 1978, under section 25 of the Companies Act and the memorandum of association of the council states the objects of the council, that the council has been sponsored by the Government of India, and that from 1979, the council was entrusted with the responsibility of administration of the export entitlement distribution policy (quota policy) of the Government with respect to readymade garments and knitwear. It is also claimed in the counter-affidavit that international trade in textiles and clothing has been governed since 1974, by multifibre arrangement which is an international treaty, that the multifibre arrangement (in short referred to as "MFA") lays down the rules and guidelines on the basis of which bilateral agreements have to be negotiated by the trading partners who are signatories to the MFA, that India is a signatory to multifibre agreement and its exports of readymade garments and knitwear to the USA, EEC, Canada, Austria, Norway and Finland which account for about 70 per cent, of the total value of India's garment exports under the agreements entered into with the countries under the MFA and that under the said bilateral agreements, annual quantitative limits are laid down for exports of certain garments and knitwear and certain textile products to the importing countries concerned. It is also stated in the counter-affidavit that the important task of administering the policy of Government has been entrusted to the petitioner council since 1979, that this task is essentially regulatory and licensing in nature, that the Government has 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 of the council, the said officers face the occupational hazard of being subject to pressure and influence from some exporters seeking to gain undue and unfair advantages from the officers of the Apparel Export Promotion Council, that this hazard is not a perceived one, that it had been borne out in many instances in the work of the officers of the council. It is also claimed in the counter-affidavit that the strength of executive committee members in the council is thirty exporters and four Government nominees, and that the hazard suffered by the officers was reported to Government in the early years of the setting up of the council with some interferences which run as follows :
"(a) close links of certain officers and staff with certain exporters (usually executive committee members).
(b) Promotions too quick and in disregard of efficiency in certain cases.
(c) Defective Recruitment Rules which prohibit fresh outside recruitment at all levels of staff and assistant directors except at the lowest point . . ."
6. It is further claimed in the counter affidavit that when the said aspect was formally raised for the first time as early as in the year 1982, the then Textile Commissioner suggested constitution of a staff committee comprising three Government nominees and three members of the trade to safeguard the employees of the Apparel Export Promotion Council engaged in quota administration work against possible interference and extraneous influence. It is further claimed in the counter-affidavit that a staff committee was constituted in the year 1982 and an IAS officer was posted to the council as its Director-General from the year 1983 onwards, that despite the said arrangement, executive committee members have been, during the past ten years, trying to take up the issues on writing of annual confidential reports, transfer of senior officers, deputation of officers abroad, etc. It is further claimed in the counter-affidavit that in the month of June, 1991, when one Arvind Pradhan, Additional Director, on his return from Brussels was posted to Bombay as Additional Director (FP) by the Director-General in consultation with the Textile Commissioner who is the chairman of the staff committee, the chairman, Apparel Export Promotion Council cancelled the said order and posted one A.K. Singh, Director (Per), from Delhi to Bombay and Arvind Pradhan as Additional Director (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 importing countries it is the sovereign obligation of the Government of India to administer the agreements in accordance with their provisions and as such the Government delegated this function to the Apparel Export Promotion Council in the year 1979 in good faith. It is further claimed in the counter affidavit that the Government is anxious that the administration of the quota policy which operationalises its bilateral agreements with major importing countries is carried out with the requisite degree of efficiency, impartiality and objectivity and that the Government is anxious to create a work culture in the council conducive to efficient, honest and impartial functioning of officers in the council without let or hindrance or fear or favour from any quarter and that if article 101 were not to be used, the only alternative before the Government was to withdraw the quota administration from the council itself. It is also claimed in the counter-affidavit that the Government is well within its rights to issue directions under article 101 and that the Central Government has the powers and competence to issue directions. It is further claimed in the counter-affidavit that the directions issued in this case do not lead to a departure from the articles of association and the essential objectives of the directions are set out in the counter-affidavit which are as follows :
"(a) Objective and impartial administration of the quota policy of the Government.
(b) Insulate the officers and staff handling quota work from pressures or threat or inducements from exporters whose personal business interests are involved in the quota work.
(c) Avoidance of any scope of interference into the day to day working of the officers and staff of the council from extraneous sources.
(d) To provide safeguards to officers and staff council dealing with quota work to carry out their duties and responsibilities without fear or favour . . ."
7. It is further claimed in the counter-affidavit that the impugned order has not created any new authority and that it has also not vested any new powers in an existing authority. It is also claimed in the counter-affidavit that the Apparel Export Promotion Council is an organisation sponsored by the Ministry of Textiles and the articles of association themselves provide for overriding powers as described in article 100. It is also claimed in the counter-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.
8. 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 affidavit. It is admittedly stated in the reply affidavit that the petitioner did not choose to file any affidavit and that the petitioner cannot be identified with a union consisting of subordinate employees which will be an embarrassment both to the executive committee of the Apparel Export Promotion Council and the Government. It is also stated in the reply affidavit that the writ petition filed in the Delhi High Court is pending at the admission stage and that there is nothing wrong in filing a separate petition Before this court. It is also stated in the reply affidavit that for more than 13 years till the impugned direction was issued, the Apparel Export Promotion Council was exercising its powers and managing both the staff and other responsibilities or policies of Government and that there had been never any hitch or complaint from anywhere. The allegation that there was any interference by the chairman or executive committee members is denied in the reply affidavit. It is also stated in the reply affidavit that not even a single instance has been quoted or produced or stated in the counter-affidavit. It is also stated in the reply affidavit that the letter dated February 10, 1988, has been brought in for the first time only when the counter has been filed on April 27, 1993. It is also stated in the reply affidavit that the allegations made in the letter dated February 10, 1988, have not been put forth even in the impugned direction. Though the reply affidavit deals with the admission of A.K. Singh, I do not think it necessary for the purpose of this writ petition, to go into that question exhaustively at this stage. It is also stated in the reply affidavit that there were always unanimous decisions and that there was never a dissenting note on any decisions of the staff committee, that the views of the trade and the Government nominees were both taken into consideration for arriving at a decision that a mere look at the memorandum and articles of association which were registered under section 25 of the Companies Act will clearly indicate that out of eight subscribers seven are businessmen, that one of them is the Commissioner-cum-Secretary to Government, Irrigation and Power Department, Bhubaneshwar, and that none of the subscribers was from the Government of India. It is also stated in the reply affidavit that Apparel Export Promotion Council is 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 functions of the chairman and the executive committee without any authority of law. It is also stated in the reply affidavit that the directions are arbitrary in nature and that when the directions issued are arbitrary it offends article 14 of the Constitution of India. It is also stated in the reply affidavit that the petitioner's right to have its own company administer it under the articles of association of the company and the freedom of the individual members have been gravely affected by the impugned directions. It is also stated in the reply affidavit that the Director-General himself is appointed by the executive committee and that a person employed cannot be heard to say that he is above the executive committee, which appointed him.
9. An additional counter-affidavit is filed claiming that just because certain directions may be issued by the respondent-Central Government under the articles of association, it cannot be said that the autonomy of the petitioner has been eroded. It is also claimed in the counter-affidavit that para 150 of the Export-Import Policy provides, inter alia, that one of the factors that the Government would take into consideration is the effective discharge of functions assigned to the council, and that because of this policy the Government found it necessary to regulate the staff matters. It is also claimed in the counter-affidavit that the impugned directions were meant to enable the council to effectively discharge the functions of quota distribution assigned to it consistent with national/public interest and that section 31 of the Companies Act does not apply to the facts of this case. It is also claimed in the counter-affidavit that article 101 has an overriding effect on other articles and a harmonious construction is required wherever the other articles have to be conformed to subject to any directive issued under article 101. It is further claimed in the counter-affidavit that the filing of the writ petition in the Delhi High Court brings out the nexus between the Apparel Export Promotion Council employees union and some members of the executive committee. It is further claimed in the counter-affidavit that through the impugned directions the Government has not taken over any authority or functions of the executive committee of the council and that the directions are limited to giving certain instructions to the council regarding 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.
10. 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 counsel also contends that as per the articles and rules of the executive committee, the executive committee alone has the power to deal with matters relating to staff. Learned senior counsel further contended that the impugned order is an order passed without jurisdiction and that it is a colourable exercise of power under the guise of directions. It is further contended that under article 101, amendment cannot be done to the service rules and that the articles of association are being tampered with by this way of directions. It is further contended that by the impugned order, the Government wants to nullify the committee and the selected representatives are being sidelined.
11. Mr. V.T. Gopalan, learned Central Government Standing Counsel, appearing for the Central Government, contends that the main function of the Apparel Export Promotion Council is the matter of distribution of quotas and that the Government has exercised only its function by the impugned directions. It is also contended by learned senior Central Government Standing Counsel and refers to articles 6, 7 and 42(a) (sic). It is also contended by learned senior Central Government Standing Counsel that without efficient and honest staff no distribution of quota system can be effectively implemented that by an effective controlling of the distribution of quota system the control of staff is done by way of issuing the directions, which are impugned herein. Learned senior Central Government Standing Counsel also contends that the control of staff has to be treated in view of voluminous records against the chairman and members and that service committee is the new composition in view of the directions issued under article 101 of the articles of association.
12. I have considered the arguments of Mr. Habibullah Basha, learned senior counsel, appearing for the petitioner and of Mr. V.T. Gopalan, learned Senior Central Government Standing Counsel, appearing for the respondent.
13. The Apparel Export Promotion Council is a company licensed under section 25 of the Companies Act, 1956. The main objects of the Apparel Export Promotion Council have been extracted above. Article 1(e) of the articles of association speaks of the "the committee" as follows :
"'The committee' means the executive committee of the council for the time being constituted under these articles."
14. Article 1(f) defines "general meeting" as follows :
"General meeting" means a meeting of the members."
15. 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..."
16. 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 secretary of the council conveying such intention. The appointment so made shall stand cancelled immediately on receipt of such notice in writing by the secretary of the council.
(b) The committee shall be entitled to frame rules and regulations and/or bye-laws for appointment of authorised representatives . . ."
17. Article 42 speaks of "executive committee" and for the purpose of this case, it is enough to deal with article 42(a) and it runs follows :
"For the purpose of managing the affairs of the council, there shall be an executive committee. The number of members of the executive committee shall not be more than 30 (including, the chairman and the vice-chairman, but excluding the Government nominees) elected by the council or nominated by the chairman, as herein provided, in article 45. There will be four Government nominees on the executive committee . . ."
18. Article 45 states that the executive committee shall consist of the following :
"Nine members from the Western Region, that is, from Maharashtra, Gujarat, Madhya Pradesh, Kutch, Saurashtra and Goa.
Nine members from the Northern Region, that is, from Delhi, Rajasthan, Haryana, Punjab, Uttar Pradesh, Himachal Pradesh and Jammu and Kashmir, six members from the Southern Region, that is, from Tamil Nadu, Karnataka, Kerala and Andhra Pradesh. Three members from the Eastern Region, that is, from West Bengal, Andaman and Nicobar Islands, Arunachal Pradesh, Assam, Bihar, Manipur, Meghalaya, Mizoram, Nagaland, Orissa and Tripura, four Government nominees.
Three nominees of the chairman as provided in article 60."
19. Functions and powers of the executive committee are stated in article 57 as follows :
"The committee may exercise all such powers of the council, including powers to frame, modify, and/or rescind, bye-laws, rules and regulation and do all such acts and things as are not contrary to the Act or any other law or by the memorandum or by the articles of association of the council required to be exercised by the council in general meeting, subject nevertheless to these articles, to the provisions of the Act or any other Act and to such regulations being not inconsistent with the aforesaid articles or provisions as may be prescribed by the council in general meeting, but no requisition made by the council in general meeting shall invalidate any prior act of the committee which would have 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 . . ."
20. 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 collaborate with kindred activities of other Export Promotion Councils in India, foreign countries and with international organisations working in the field.
(f) to control the finances of the council.
(g) to control the staff of the council.
(h) to make, alter, and repeal, from time to time, all such bye-laws as may be deemed necessary or expedient for the proper conduct and management of the council.
(i) to provide a seal of the council and also provide for its safe custody.
(j) to do all such other lawful acts as would be conducive to the interests of the council . . ."
21. Under article 88, there shall be a secretary and such other officers to the council as may be determined, from time to time by the committee. Under article 89, all officers and employees of the council shall be appointed by the committee. Under article 91, the executive committee may, in respect of the secretary, and other officers and employees of the council make bye-laws to regulate;
(a) the conditions of service,
(b) the appointment, promotion and dismissal,
(c) the grant of pay, leave allowance, pensions, gratuities and compensatory allowance,
(d) grant of advance of loans,
(e) the establishment and maintenance of provident fund.
22. Under article 99, the committee shall be the sole authority for the interpretation of articles and under article 100, no change, alteration or modification shall be made in any of the articles without the previous approval of the Central Government. Under article 101, the Central Government shall have certain powers. In so far as this case is concerned sub-clause (i) of article 101 is sufficient to decide the issue and it runs as follows :
"to give directions to the council as to the exercise and performance of its functions in matters involving national public interest and to ensure that the council gives effect to such directions . . ."
23. Service rules defining the terms and conditions of service of the staff of the Apparel Export Promotion Council are made and they are called as "Service Rules of Apparel Export Promotion Council, 1988". Rules of discipline are stated under rule 25 as follows :
"Employees of the council shall be governed by the rules of discipline as approved by the committee with regard to disciplinary proceedings, punishments, etc. . ."
24. As has been stated earlier, Apparel Export Promotion Council is a company 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 be given by the Central Government with regard to the control of the staff of the Apparel Export Promotion Council. If such a direction is given, in my view, it will contravene the articles of association and also it will take away the powers of the executive committee. If the Government wants to insert certain articles it has to take action under the provisions of the Companies Act for amending the articles of association. A careful reading of article 101, in my view, cannot empower the Government to take over the control of the staff, as rightly contended by Mr. Habibullah Basha, learned senior counsel, for the petitioner council. No doubt, the council is the creation of the Government. But in so far as it is an autonomous body, the Government cannot tinker with the power of the executive committee of the council by way of issuing directions, under article 101 of the articles of association. Simply because a change/alteration or a modification in the articles of association has to be made with the approval of the Government, it does not mean that the Government itself will create a situation where articles of the articles of association get altered. I do not think that any authority is needed for the proposition that if the power is exercised without jurisdiction it is arbitrary. Once it is held that the action of the respondent Government is arbitrary, it is settled law that any arbitrary action infringes article 14 of the Constitution. In my view, there cannot be any better example than this where the respondent wants to take over the staff control which is entirely under the control of the executive committee under the articles of association. In so far as Apparel Export Promotion Council is a company licensed under section 25 of the Companies Act, if the articles of association are read together with the provisions of the Companies Act, 1956, I do not think that the directions issued in this case can be upheld. Accordingly, the impugned directions are liable to be set aside.
25. Since I am deciding the issue on the question of "jurisdiction" under the articles of association read with Companies Act, I am not entering into the merits of the case wherein both parties allege factually in their affidavit as to what is the background for the issuance of directions, which are impugned herein.
26. In the result, the impugned order of the respondent is set aside and the writ petition shall stand allowed. However, there will be no order as to costs.