Madras High Court
S. Srinivasan, Chairman And Chief ... vs All India Bharat Overseas Bank ... on 10 February, 2000
Equivalent citations: 2000(2)CTC41
ORDER Judgement Pronounced by A.S. Venkatachala Moorthy, J.
1. The above three writ appeals can be disposed of by a common judgment inasmuch as these writ appeals have been filed against the same order of a learned single Judge in Writ Petition No.1407 of 1998, dated 19-11-1999.
2. For the purpose of discussion, we intend to refer to the cause title as given in the first case i.e. Writ Appeal No.2371 of 1999.
3. Respondents 1 to 3 filed Writ Petition, viz., W.P. No.1407 of 1998 against respondents 4 and 5 (respondents 1 and 2 in the writ petition) and the appellant (the third respondent in writ petition), questioning the order, dated 27-2-1998, of the Executive Director of the Reserve Bank of India granted approval by virtue of powers conferred under Section 35(B)(i)(h) of the Banking Regulation Act, 1949 (hereinafter referred as the B.R. Act) to the fifth respondent herein viz., Bharat Overseas Bank Limited (hereinafter referred to as the fifth respondent bank) to appoint the appellant as the Chairman for a period of two years from 1.3.1998.
4. Even before ranting of such approval respondents 1 to 3 filed the said Writ Petition No.1407 of 1998, which came up before this Court for admission on 4-2-1998 with a prayer to issue a writ of mandamus, directing the fourth respondent herein viz., the Reserve Bank of India not to consider the appointment of the appellant herein for the post of Chairman and Executive Officer in the fifth resident bank. The said Writ Petition was admitted, but however, no interim order was granted. Subsequent thereto, the appellant was reappointed as the Chairman and the Managing Director of the fifth respondent bank. Necessarily, this made respondents 1 to 3 to come forward with a miscellaneous petition, seeking necessary amendment to the prayer. Writ Miscellaneous Petition No. 1573 of 1998 was filed seeking amendment in the prayer and it was also ordered and the amended prayer is to the following effect:
" ..to issue a declaration, declaring that the re-appointment of the appellant herein as the Chairman and Executive Officer in the fifth respondent bank by its order, dated 27-2-1998 in Reference No. DBOD/No.08: 35: 001/98 as illegal and contrary to Section 35B of the Banking Regulation Act, 1949 (hereinafter referred to as the 'Act')..."
It may also be mentioned here that originally the writ petition was filed by the first respondent and thereafter, respondents 2 and 3 were impleaded as petitioners 2 and 3 in the writ petition by virtue of the order made by this Court in Writ Miscellaneous Petition Nos.17777 and 17778 of 1998.
5. The learned single Judge in the final order in the said Writ Petition No. 1407 of 1998 held that the re-appointment of the appellant as the Chairman and Executive Officer in the second respondent Bank, as approved by the first respondent Reserve Bank of India in the order, dated 27-2-1999 cannot be said to be in accordance with Section 35B of the Act and in the interest of the general public and set aside the said order, granting approval and allowed the said writ petition. Against the said order, the appellant herein who was the third respondent in the writ petition filed a Writ Appeal and that is writ appeal No.2371 of 1999.
6. Writ Appeal No.2414 of 1997 has been filed by the second respondent in the writ petition against the same order of the learned single Judge. The first respondent in the writ petition viz., the Reserve Bank of India also filed an independent appeal against the said order and that is before us as Writ Appeal No.2525 of 1999.
7. The averments made in the affidavit filed by respondents 1 to 3 in support of the writ petition can be stated as under:
" The first respondent union is the only recognised union in the fifth respondent bank. There are 750 employees working in the bank, who are all the members of the union. It was formed in the year 1975. According to the first respondent, the Chairman and Chief Executive Officer in the fifth respondent bank is appointed normally for a period of three years. However, the appellant was appointed as the Chairman and Chief Executive Officer of the fifth respondent bank for a period of five years viz., between 1-12-1992 and 30.11.1997. The Board of Directors of the fifth respondent bank reviewed the performance of the bank for the period between 1.12.1992 and 30.11.1997 and decided not to extend the services of the third respondent and decided to take required steps to employ an agency to receive the applications from the prospective candidates and to screen the same and submit a short listed candidates to the Board of Directors. Accordingly, applications were invited from the eligible candidates, stipulating the age limit as 45-50 years, but, however, subsequently, it was decided to relax the age limit by extending it as 55 instead of 50. Advertisement in that regard was made on 26.8.1997, inviting applications within a period of ten days therefrom. It is the further case of the first respondent that applications were received by the Board and the Board in its meeting held on 17.9.1997 decided to short list the same to nine. It is the specific case of respondents 1 to 3 that the Board Meeting held on 17.9.1997 was headed by the appellant herein. The appellant's name was not included in the list, as he never applied for the post and he was also not qualified for the post was as per the revised advertisement. According to these respondents, a co-ordinator for the appointment, Mr. G. Lakshmi Narayanan on 29.9.1997 communicated to all the Board of Directors that apart from the nine short listed candidates, the appellant's name should also be included for the interview. A Board Meeting was convened on 30.9.1997 and notices were also sent by fax to all the Board of Directors. In fact even prior to this i.e. on 27.9.1997 the appellant herein sent an application to the Chairman and Directors of the share holding banks and the fifth respondent bank requesting them to consider his application for the post of Chairman and Chief Executive Officer. The further grievance of the respondents is that the appellant openly canvassed support from them, who constituted an interview panel.
8. It is further stated in the affidavit that even though the appellant did not apply to the post in pursuance of the advertisement, he in the last minute somehow managed on the eve of the interview to include his name by back door through a resolution of the Board of Directors of the fifth respondent bank. Ultimately, the Board of Directors recommended four names for the appointment of the next Chairman to the fifth respondent bank in the order of merit and the name of the appellant was ranked last. It is further alleged that since the appellant was not qualified to the post of Chairman and Chief Executive Officer, as per the advertisement, dated 26.7.1997. The appointment of the appellant to the post would therefore be contrary to Section 35B of the B.R. Act. A representation was sent on 3.10.1997 by the second respondent herein to the Reserve Bank of India viz., the fourth respondent herein, requesting them not to consider the candidature of the appellant. Thereafter, the first respondent also sent a letter, dated 3.10.1997 impressing upon the Reserve Bank of India the reasons as to why it should not consider the name of the appellant for the post of Chairman and Chief Executive Officer in the fifth respondent bank. According to respondents 1 to 3, the appellant's track record during the relevant period viz., between 1992 and 1997 was poor and apart from that he is also not qualified for the post, as per the advertisement and that being so, he should not be appointed to the said post. Apart from this, there is also an allegation to the effect after the appellant joined the fifth respondent bank on 1.12.1992, right from the date of joining the fifth respondent had been taking a very negative attitude towards the employees by victimising them for their legitimate trade union activities, instead of negotiating with the workmen and arriving at an amicable solution. He even went to the extent of performing Homams and Yagnas within the bank's premises from out of the funds of the bank better industrial relations, thus wasting public money. There is also a probe on charges of bribery by the Director of Vigilance and Anti Corruption on the directions from Madras High Court given in Writ Petition No. 12206 of 1997. It is further contended that the appellant is involved in financial irregularities and malpractices and that using his discretionary powers he sanctioned loans to various parties on the basis of invalid documents and title deeds.
9. The further plea of the respondents is that the All India Bharat Overseas Bank Employees as an union is interested in the welfare of the fifth respondent bank and interested in protecting the interests of the employees and that if the appellant's candidature is approved by the Reserve Bank of India, it will be not only contrary to the public interest, but it is also clearly in violation of Section 35B of the B.R.Act.
10. The fourth respondent, Reserve Bank of India resisted the said contentions, inter alia contending that the writ petition is not maintainable as respondents 1 to 3 have not shown any breach of any fundamental or legal right so as to invoke the writ jurisdiction of this Court. That apart according to the fourth respondent, respondents 1 to 3 are not the aggrieved persons and they have no locus standi to file the writ petition. The counter-affidavit filed points out the powers of the Reserve Bank under the Reserve Bank of India Act, 1934. It is further stated therein that in order to supervise and regulate the banking sector, it has been vested with certain powers under the Banking Regulation Act to approve the appointment or reappointment of the Chairman and of the Managing Director of a banking company in the interests of the banking company and in the overall interests of the depositors. According to the Reserve Bank of India, Banking companies are special companies and they form a class by themselves and apart from the public interest, the interests of the depositors will have to be safeguarded. The Reserve Bank of India has also ample powers not only to watch the day to day working of the banking institutions, but also to gather information regarding the working of the banking institutions by inspection or otherwise. A reference is also made in the counter-affidavit to the various Sections in the Banking Regulation Act, 1949. It is pointed out that according to Section 35B of the Act no appointment or re-appointment or termination of appointment of a Chairman, a managing or whole time Director, Manager or Chief Executive Officer by whatever name called, shall have effect unless such appointment reappointment or termination of appointment is made with the previous approval of Reserve Bank of India which is within the discretion of the Reserve Bank of India and no writ lies, against the use of such discretionary power by the Reserve Bank of India and that the post of Chairman is extremely important and sensitive one. The Reserve Bank of India being the supervisor and regulator of the banking company in India is allowed to take its own decision. According to the fourth respondent, a writ will not lie under the aforesaid circumstances, especially when it involves investigation into the questions of fact. The counter affidavit then refers to the resolution passed by the board of the banking company viz., the fifth respondent herein in the form of a letter, dated 13th October, 1997 requesting that one of the suitable candidates may be considered for the appointment as the Chief Executive Officer. The Reserve Bank of India felt that the preparation of panel suffered from certain infirmities and hence it should not consider the same, and sent back the same to the Board of Directors of the fifth respondent to rectify the defect and resubmit a panel of names for fresh consideration. The Board of Directors of the fifth respondent bank resubmitted to the fourth respondent after rectifying the defects. The Reserve Bank of India by letter, dated 27.2.1998 duly signed by the executive Director granted approval for the appointment of the appellant. It is further claimed by the Reserve Bank of India that the approval for the appointment of the third respondent was given after due application of mind and also after taking into consideration the recommendations of the Board of Directors. According to the Reserve Bank of India, inasmuch as the impugned order does not suffer from any infirmity or irregularity nor there is any violation of any provisions of the Act, the writ petition has to be dismissed.
11. The Secretary of the fifth respondent bank also filed a detailed counter affidavit opposing the writ petition filed by petitioners 1 to 3. Briefly it is contended therein that on 19.7.1997, the bank held a meeting in which it was resolved to call for applications by advertisement from eligible candidates for the post of Chairman and Chief Executive Officer indicating the age limit as 45 years to 50 years and that the candidates should have a minimum of five years experience at the top management level. As the advertisement did not evoke the desired response, on 20.8.1997, the Board of Directors of the fifth respondent bank decided to readvertise inviting applications from the prospective candidates by relaxing the age limit from 45-50 years to 45-55 years. On 17.9.1997 the Board of Directors out of the 58 applications received prepared a list, short listing 1 to 9 candidates, after screening some of the candidates and the Board also decided to call the candidates for interview on 1.10.1997. It is further stated in the counter affidavit that in the Board meeting held on 17.9.1997, it was mooted that having regard to the phenomenal growth achieved by the bank in the last five years under the chairmanship of the appellant as to why his candidature should not be considered for inclusion of his name in the panel, particularly when there was no age qualification for the appointment to the post of Chairman and when there was also a provision for reappointment of the person who has held the post of Chairman. On 27.9.1997, the appellant submitted his application for appointment to the post of Chairman. As the Board of Directors had already finalised the list of candidates to be called for interview in the meeting held on 17.9.1997, on 29.9.1997 a circular resolution was passed to include the application of the appellant and the appellant was interviewed on 1.10.1997 by the selection committee, after informing the candidates, who were already short listed. The interview committee prepared a list containing 9 candidates for selection for the post of the Chairman and the name of the third respondent was shown as item No.4. The Board meeting held on 4.10.1997 it was resolved to submit the first four names recommended by the interview committee to the fourth respondent viz.. Reserve Bank of India for its approval for appointment as the Chairman. The fifth respondent bank sought necessary orders on 13.10.1997, but however, the same was rejected by the Reserve Bank of India viz., the fourth respondent herein pointing out that the selection process was not proper and therefore, it was not in a position to consider the panel. Subsequently, the fifth respondent held a board meeting on 27.11.1997, setting right the irregularities pointed out by the Reserve Bank of India and resubmitted the same panel. As the tenure of the third respondent was to expire in the meanwhile, the fourth respondent Reserve Bank of India suggested to the fifth respondent bank to seek permission for the extension of the tenure of the appellant for a period of three more months. Accordingly, an application was also sent. According to the fifth respondent, it had followed the rules and regulations in preparing the panel and forwarding it to the fourth respondent Reserve Bank of India and as such the writ petition is devoid, of any merit.
12. It is further contended that the deponent of the affidavit by name Jayakaran Daniel filed in support of the writ petition had no knowledge or authority to file the writ petition and that the fourth respondent Reserve Bank of India had been impleaded as one of the parties in the writ petition for the purpose of maintaining the writ petition and hence the action of the fifth respondent, which is a private company is not maintainable in law. An objection is also raised that the respondent union has no locus standi to challenge the action of the fifth respondent bank in including the name of the appellant in the panel of names submitted to the Reserve Bank of India for the appointment to the post of Chairman. According to the fifth respondent bank none of the grounds urged by the respondent union is true and sustainable in law. In fact there is no statutory age qualification nor the memorandum of Articles of Association specify any such age qualification for appointment of Chairman. All that Section 35B of the Act requires is that the bank shall not make appointment of Chairman without the prior approval of the first respondent Reserve Bank of India. On the question of various allegations made against the appellant, it is contended that it is not for the respondent union to urge those allegations as a ground to challenge the inclusion of the name of the appellant in the panel and the fourth respondent as the monitoring authority under the Act can always go into the allegations and if those allegations are found to be true, the first respondent will take appropriate action. It is further explained in the counter affidavit that the writ petition has been filed with a personal grouse against the appellant and not to vindicate any public interest or the interest of the bank. A mention is also made that during the pendency of the appointment of the appellant as Chairman between 1992 and 1997, the bank has made phenomenal progress and has also laid down a solid financial foundation in enjoying a reputation of a very high order. In all other respects, the counter affidavit virtually adopts the stand taken by the fourth respondent Reserve Bank of India.
13. It has to be pointed out here that the appellant did not choose to file any counter affidavit in the writ petition.
14. Learned single Judge considered the matter in detail and came to the following conclusions:
(a). The writ petition is maintainable
(b). Respondents 1 to 3 in these Appeals are aggrieved persons and that they have locus standi to file the writ petition;
(c). The fifth respondent bank has power to relax the condition imposed with reference to a candidate or candidates;
(d). Respondents 4 and 5 herein have given a go by to all the norms and procedures with reference to the selection of candidates for the said post in question and appoint the appellant who is not even eligible to be considered for such a post.
(e). Even the norms prescribed for the purpose of selection of candidates for the said post had not been taken into consideration by the selection committee. and
(f). The reappointment of the appellant as the Chairman and Chief Executive Officer of the fifth respondent Bank as approved by the Reserve Bank of India i.e. the fourth respondent by the impugned order, dated 27.2.1999 cannot be said to be in accordance with Section 35B of the Act or in the interest of the public.
15. The argument put forth by the respective learned senior counsel appearing for the appellants in all the three appeals can be briefly summed up as under:
(a) Respondents 1 to 3 are not the aggrieved persons and the writ petition was filed by them to ventilate their personal grievance and not with any public Interest, as alleged by them;
(b) If at all any one wants to question the correctness or otherwise of the appointment of the appellant, it can be done only by a rival claimant and no third party can file a writ petition and more so respondents 1 to 3;
(c) There has been no violation, of any statutory provisions either by the fourth respondent or by the fifth respondent in reappointing the appellant as the Chairman and Chief Executive Officer of the fifth respondent bank.
(d) No mala fides of any kind whatsoever have been attributed against the fourth or the fifth respondent.
(e) Applications were called for from the eligible candidates with the age limit around 45-55 years and as the appellant had not even completed 57 years as on the relevant date, it cannot be said that he was over aged.
(f) Even otherwise the Board of Directors have got power to grant relaxation of any condition stipulated in the advertisement prescribing the qualifi-cations. It could be exercised by the Board in certain situations in the interest of the bank.
(g) When the panel of names seeking approval of the Reserve Bank of India was forwarded, the same was sent back by the Reserve Bank of India to rectify the defects/mistakes. The fifth respondent bank passed necessary resolution and that the same panel was resubmitted and the Reserve Bank of India finding that everything was in order granted approval for the appointment of the appellant.
(h) The Reserve Bank of India being the bankers bank and which has been vested with very wide powers to control and monitor all the other banks can very well examine the matter and grant approval for the appointment of the appellant as the Chairman and Chief Executive-Officer of the fifth respondent bank, and
(i) The fourth respondent Reserve Bank of India has given valid reasons and in fact no mala fides have been attributed against it by respondents 1 to 3 and that being so, this Court considering the fact that the decision for granting approval having been taken by an expert body may not take up the exercise of considering the merits and demerits of the candidates and arrive at a conclusion as to who is the best candidate. The decision by the Reserve Bank of India is in the nature of a policy decision and this Court may not endevaour to find out the correctness of the same.
15A. Learned senior counsel appearing for respondents 1 to 3 in their turn made the following submissions:
(a) Respondents 1 to 3 are the aggrieved persons, as registered unions and certainly they have every interest in the efficient functioning of the fifth respondent bank. The first respondent union has 750 employees at the relevant point of time working in the fifth respondent bank. It is not as if there are mere strangers or wayfarers or officious intervener without any interest or concern. They have special interest in the subject matter and their concern is deeper as that of a busy body. That apart, there is certainly public interest in the efficient functioning of the fifth respondent bank.
(b) When an appointment is made for a sensitive and a very responsible post like the one which is the subject matter of this writ appeal and even though the fifth respondent bank is not a nationalised bank, since it is being controlled by the Reserve Bank of India, it can by virtue of the powers conferred under the various Acts, monitor even the day to day functioning of the said banks.
(c) In those circumstances, when selection and appointment are made it should be in conformity with the relevant provisions of the Act as well as the standard and acceptable norms. As and when there is any violation -of those provisions of the Act as well as failure to adopt the procedures or satisfy the standard and acceptable norms, this Court can interfere with the same and set right the matter. In other words, if judicial review is held to be not permissible, it will result in grave miscarriage of justice affecting the public interest at large and the nation as a whole.
15.B Whether respondents 1 to 3 have any locus standi to file the writ petition?
16. Respondent bank claims to be a leading Indian private sector bank and has a strategic network of branches in India and in Thailand. The bank is owned by a consortium of seven banks, out of which one bank is a nationalised bank which holds 30 per cent of the shares. It is further claimed that the fifth respondent has a total business of Rs.1,000 crores and has a sound financial base and has healthy capital adequacy ratio. Respondents 1 to 3 herein are. the unions. The first respondent is the All India Bharat Overseas Bank Employees Union with a membership of 750. The second respondent is the All India Bank Officers Confederation, while the third respondent is the National Bank Confederation Bank Employees.
17. Some rulings of the Apex Court will be useful for this Court to arrive at a finding:
(a) In F.C.K.U. (Regd) Sindri v. Union of India, 1981 (1) LLJ 193 a question arose as to whether the workers of a Government company can challenge the sale of redundant plants and equipments belonging to the factory on the ground that such sale is illegal and unconstitutional and that it violates their rights under Articles 14, 16 and 19 of the Constitution of India. In that case, the Apex Court observed thus:
"If a citizen is no more than a wayfarer or officious intervener without any interest or concern beyond what belongs to any one of the 660 million people of this country, the door of the Court will not be ajar for him. But if he belongs to an organization which has special interest in the subject matter, if he has some concern deeper than that of a busy body, he cannot be told off at the gates, although whether the issue raised by him is justiciable may still remain to be considered. I, therefore, take the view that the present petition would clearly have been permissible under Article 226"
(b) The next ruling that can be usefully referred to is reported in National Textile Workers' Union v. P.R.Ramakrishnan, . In that case the question arose as to whether the workers union must be heard in the winding up petition before the winding up Court. The Apex Court considered that matter and certain observations made therein are relevant for this case and the same are extracted hereunder:
"Today special scientists and thinkers regard a company as a living, vital and dynamic, social organism with firm and deep-rooted affiliations with the rest of the community in which it functions. It would be wrong to look upon it as something belonging to the shareholders. It is true that the shareholders bring capital, but capital is not enough. It is only one of the factors which contributes to the production of national wealth. There is another equality, if not more, important factor of production and that is labour. Then there are financial institutions and depositors, who provide the additional finance required for production and lastly, there are the consumers and the rest of the members of the community who are vitally interested in the product manufactured in the concern. Then, how it can be said that capital, which is only one of the factors of production, should be regarded as owner having an exclusive dominion over the concern, as if the concern belongs to it? A company, according to the new socio-economic thinking, is a social institutions having duties and responsibilities towards the community in which it functions."
xxxxxxx "That is why we find that in recent times, there is considerable thinking on the subject of social responsibilities of corporate management and it is now acknowledged even in highly developed countries like the United States and England that maximisation of social welfare should be the legitimate goal of a company and shareholders should be regarded not as proprietors of the company, but merely as suppliers of capital entitled to no more than reasonable return and the company should be responsible not only to shareholders but also to workers, consumers, and the other members of the community and should be guided by considerations of national economy and progress. This new concept of a company was felicitously expressed by Desai, J, sitting as a Judge of the Gujarat High Court in Panchmahals Steel Limited v. Universal Steel Traders, 1976 (46) Com. Case 796 (Guj) in the following words:
" Time-honoured approach that the Company law must safeguard the interest of investors and shareholders of the company would be too rigid a framework in which it can now operate. New problems call for a fresh approach. And in ascertaining and devising this fresh approach, the objective for which the company is formed may provide a guideline for the directions to be taken. As Prof. De Wool of Belgium puts it, the company has a three-fold reality-economic, human and public-each with its own internal logic. The reality of the company is much broader than that of an association of capital; it is a human working community that performs a collective action for the common good. In recent years, a debate is going on in the world at large on the functions and foundations of corporate enterprise. The 'preservationists' and the 'reformers' are vigorously propounding their view on the possible reform of company, the modern trend emphasising the public interest in corporate enterprise."
The learned Judge elaborated this 'modern trend' by quoting from Professor Gower's book on the Principles of Modern Company Laws One Section of the community whose interests as such are not afforded any protection, either under this head or by virtue of the provisions for investor of creditor protection, are the workers and employees of the taken over company. This is a particularly unfortunate facet of the principle that the interest of the company means only the interest of the members and not of those whose livelihood is in practice much more closely involved.
We are concerned in these appeals only with the relationship of the workers vis-a-vis the company. It is clear from what we have stated about that it is not only the shareholders, who have supplied capital who are interested in the enterprise which is being run by a company but the workers, whose supply labour are also equally, if not more, interested because what is produced by the enterprise is the result of labour as well as capital."
(c) In the decision reported in Workmen of Meenakshi Mills v. Meenakshi Mills. Ltd.. 1992 (I) LLN 1055, the Apex Court considered the question of retrenchment and also the validity of Chapter 5B of the Industrial Disputes Act, 1947. In the course of discussions in paragraph 48 of the said Judgment, the Apex Court ruled thus:
"The expression "interest of workers" in our opinion, covers the interests of all the workers employed in the establishment, including not only the workers who are proposed to be retrenched but also the workers who are to be retained. It would be in the interests of the workers as a whole that the industrial establishment in which they are employed continues to run in good Health because sickness leading to closure of the establishment would result in unemployment for all of them", (Italics supplied).
(d) In Dr. Mrs. Meera Massey and others v. Dr. S.R. Mehrotra and others, 1998 (3) Supreme 50 while dealing with the petition filed challenging the appointment of lecturers in the University by a Professor in the same University, the Apex Court considered the locus standi of that person and in the course of discussions, pointed out that an applicant may ordinarily fall in any of three categories, (i) person aggrieved (ii) stranger, (iii) busybody or meddlesom interloper. Persons in the last category are easily distinguishable from those coming under the first two categories and such persons interfere in things which do not concern them. The Apex Court further observed they masquerade as crusaders for justice and that they pretend to act in the name of pro bono publico, though they have no interest of the public or even of their own to protect and in such cases, the High Court should do well to reject the applications of such busybodies at the threshold. It has been further pointed out that the Court must ensure that the course of justice is not obstructed or polluted by unscrupulous litigants by invoking the extraordinary jurisdiction of the Court for personal matters. So far as that case is concerned, the Apex Court fuled that the feelings of the professors were bona fide and they did not institute the proceedings for any political reasons or for publicity. On the aspect of maintaining Public Interest Litigation, the Court pointed out that any member of the public having sufficient interest can maintain an action for judicial redress for public injury arising from breach of public duty or from violation of some provision of the Constitution or the law and seek enforcement of such public duty and observance of such constitutional or legal provisions.
(e) In Janata Dal v. H.S. Chowdhary, , while dealing with the scope of public interest litigation and on the aspect of the locus standi, the Supreme Court observed thus:
"While this Court has laid down a chain of notable decisions with all emphasis at their command about the importance and significance of this newly developed doctrine of PIL it has also hastened to sound a red alert and a note of severe warning that Courts should not allow its process to be abused by a mere busybody or a meddlesome interloper or wayfarer or officious intervener without any interest or concern except for personal gain or private profit or other oblique consideration.."
18. From the above rulings, the following would emerge:
(1) If a citizen has no interest in the matter the Court will close the doors and prevent his entry, but however, if he belongs to an institution which has special interest in the subject matter and if he has some concern deeper than that of a busy body, then he will be listened by the Court; and (2) It would be in the interest of the workers as a whole that the industrial establishment in which they are employed continues to run in good health because sickness leading to closure of the establishment would result in unemployment for all of them.
19. So far as the present case is concerned, as already stated there are about 750 employees/members in the first respondent union. True in the affidavit the respondents 1 to 3 have alleged that the appellant had taken a very negative attitude towards the employees by victimising them for their legitimate trade union activities. But, at the same time, it has to be noted that apart from that, in paragraph 15 of the affidavit filed in support of the writ petition certain serious complaints have been made against the appellant alleging financial irregularities and mal practices and which has resulted in considerable loss to the fifth respondent bank. Surprisingly, no counter affidavit was filed in the writ petition by the appellant herein.
20-A. Only now before this Court, a counter affidavit is sought to be filed. Let us straight away deal with it. We are not accepting the same for the following reasons:
(i) The reasons given for not filing any counter in the writ petition, which was pending before this Court for nearly one and half years are mentioned in the affidavit as:
"Though I was made as the third respondent in the writ petition, as the order impugned in the writ petition has to be sustained by the Reserve Bank of India and the fifth respondent, I was advised that it was not necessary for me to file a counter-affidavit and as such I did not file a counter affidavit in the writ petition. I understand that the first respondent is repeatedly harping on the allegations made in paragraphs 13, 14 and 15 of the affidavit filed in support of the writ petition No.1407 of 1998. I have now filed the appeal in my personal capacity."
Regarding the first reasoning it has to be noted that the counter affidavits in the writ petition were filed by the fourth and fifth respondents even before July, 1999. The appellant should have atleast, after examining them, taken steps to file the counter affidavit. Regarding the second one, we do not expect the appellant to put forth such a funny explanation.
(ii) Even though the appeal was filed in November, 1999, only for the first time, before this Court that too after the appellant in W.A.No.2525 of 1999 argued the case, the counter was presented in Court.
(iii) The Apex Court in Indian Petrochemicals Corporation and another v. Shramik Sena and others, 1999 (2) L.R.I. 469 ruled that such an affidavit could be filed and taken on record only with the express permission of the court to file the affidavit. In this case, the appellant has not sought any leave by filing any application. Hence, we are not inclined to accept the affidavit and take it on record.
20-B. In paragraph 27 of the counter-affidavit filed in the writ petition by the fifth respondent bank what is stated is that the Reserve Bank of India is the sole authority to monitor the functioning of the fifth respondent bank and nothing more. In respect of all these allegations, the Reserve Bank of India has not come forward with any comments. In this situation, this Court has to proceed on the basis that this is a matter which requires serious consideration and certainly respondents 1 to 3 have deeper concern than an ordinary man in the Street. As observed by the Supreme Court the workers would like to see that the company in which they are employed should run in good health because serious sickness may cause hardship to them and even retrenchment in extreme cases. If the bank is healthy then the employees/staff stand to gain in several ways. But, if it is otherwise, their interests will suffer in many ways. That apart as already noted 30 per cent of the shares of the fifth respondent bank are held by one of the nationalised banks. For all the above reasons this Court is of the view that respondents 1 to 3 have locus standi to file the writ petition seeking redressal of their grievance.
21. Learned senior counsel appearing for the Reserve Bank of India would submit that if at all any one who can question the appointment of the appellant as the Chairman of the Bank in question, it can only be by a rival claimant or by a person who claims that due to some reasons attributable to the bank he could not apply. In this regard, learned senior counsel refers to the rulings of the Apex Court in R.K.Jain v. Union of India, , wherein in paragraph 74 it reads thus:
In service jurisprudence it is settled law that it is for the aggrieved person i.e. non appointee to assail the legality of the offending action. Third party has no locus standi to canvass the legality or correctness of the action. Only public law declaration would be made at the behest of the petitioner, a public spirited person."
It has to be remembered that this is not in pure and simple a service matter.
22. The abovesaid ruling will not apply to the facts of this case. In that case the Court was dealing with the submissions regarding the comparative merits of two persons viz., Sri Harish Chander and Mr. Kalyanasundaram and it came to the conclusion that the petitioner therein cannot challenge the appointment in the writ petition on the ground that he is not aggrieved by the appointment of Sri Harish Chander. Only in that context the Apex Court held that the appointment can be challenged on the basis of the merits only by a person who is aggrieved by the appointment. In fact, the Apex Court in the said decision also held that judicial review is concerned with whether the incumbant possessed of the qualification for appointment and the manner in which UK appellant came to be made or the procedure adopted whether fair, just and reasonable.
23-A. Coming to the present case, the grievance of respondents 1 to 3 is that the appellant is not eligible to be considered for the appointment for various reasons, but unfortunately, he was appointed as the Chairman. Respondents 1 to 3 have not come forward with a case that some x or y is more qualified and that person alone should be appointed. Here, the Court is not requested to compare the merits or demerits of the various candidates. That apart it cannot be said that respondents 1 to 3 are strangers or third parties who have nothing to do with the subject matter of appointment of a Chairman for the fifth respondent bank. In this view of the matter, this Court comes to the conclusion that the said ruling relied upon by learned senior counsel appearing for the fourth respondent would not apply to the facts of this case.
23-B. Whether the Board of Directors of the fifth respondent bank including the appellant in the panel sent to the Reserve Bank of India for being considered for the appointment as the Chairman of the bank is proper and correct and in confirmity With the standard and norms, which are not improper or irrational or unjust?
24. The first aspect to be considered is what are the qualifications specified as per the advertisement, which a candidate should possess to be considered for the post in question viz., the Chairman and Chief Executive Officer. In the advertisement inviting applications two requirements are mentioned: (a) age should be around 45-55 years; (b) at least five years experience (in the Indian Banking industry) at the top level of which two years should have been at the level of a General Manager.
25. It may be straight away pointed out that the respondents 1 to 3 have not pleaded in the affidavit in the writ petition that the appellant on the relevant date did not possess the second qualification viz., required 'experience'. From the particulars mentioned in the bio data furnished by the appellant which are not disputed, it can be well said that he had the necessary qualification. The appellant worked as Chief Executive and Executive Director in International Finance Ltd., IBU, Hong Kong during 1984-1988 and then as Director (Finance) in Simon Carves India Ltd., Calcutta during 1989-1992 and he was on deputation from Indian Bank at that time. As per Section 10B of the Act, a Chairman is required to have special knowledge and practical experience of the working of the banking company or a financial institution. That apart, admittedly, the appellant joined the fifth respondent as Chairman from 1992 onwards. So at the relevant point of time, he had much more experience at the top level in the banking industry than five years.
26. The other requirement is that the applicants should be around 45-55 years. Admittedly, at the relevant time that was in September, 1997 the appellant had completed 57 years. The question is as to what exactly is the prescribed age limit It is seen from the records that on the previous occasions, when applications were called for, the age was specified as less than 55 years i.e. those who have not completed 55 years. The words employed in the advertisement in our opinion would only convey that the persons who are between 45-55 could apply for the post. This is because the lower age limit and the upper age limit are prescribed. That being so, there is no question of further extending the period by reading the word 'around' independently and separately with the figures 45 and 55.
27. That apart even assuming that the word 'around' should be read independently with 45 and 55, then, it can only refer to persons who have completed 55 years and a few months and in any case not exceeding 12 months, as otherwise he/she would cross 55 years and he/she would complete 56 years. Similarly, the lower limit can be some months less than 45 years and not in any case cover a person who has not completed 44 years.
28. In this context, we also refer to the meaning of the word 'around':
Oxford Dictionary gives the meaning of the word 'around' as 'approximately at'; 'at a time near to' The word 'approximately' is explained as 'fairly correct; or 'accurate'; near to the accurate; Law Laxicon by Ramanatha Iyer 1997 Edition gives the meaning of the term 'approximate' as 'very near'; closely resembling or fairly correct';
Websters III New Edition New International Dictionary explains the term 'around' as 'in close to all sides so as to surround'; 'somewhere close by';
The New Oxford Encyclopedic Dictionary gives the meaning of the word 'around' as 'on either side round;
'approximately';
For the word 'approximately' the meanings given therein are 'very near'; and 'fairly correct'.
29. For all the reasons given above, we are of the view that from a reading of the advertisement it is clear that the advertisement was published by the company through the agency, calling for the applications from the eligible candidates, who have completed 45 years, but not completed 55 years. Even if the interpretation of the appellant is accepted the upper age limit can only be 55 years and a few months and not 56 years. Admittedly the appellant was aged about 57 years at the relevant time. Hence, as per the requirements in the notifications calling for applications the appellant was not qualified to apply for the post and more so to be considered.
30. The next aspect to be considered is whether the application submitted by the appellant belatedly could be accepted and considered by the fifth respondent. In the meeting of the Board of Directors a decision was taken to engage a human resource consultant who will call for applications from the prospective candidates or in other words in the said board meeting, the board decided to invite applications from the eligible candidates, ' who would be able to achieve the targeted growth of the bank' It is not as if the Board also decided to entertain applications from the persons, who are working in the fifth respondent bank, directly to the bank. Hence, all the candidates including the appellant have to apply and should have applied only in response to the advertisement and that too only to the agency viz.,, Price Waterhouse, Human Resources Consulting Groups.
31. The last date as per the said advertisement was ten days from 26.8.1997. Admittedly, the appellant did not apply within the period stipulated. So not only the appellant did not satisfy the age qualification, but also he did not apply to the post in time to the Consulting Agency mentioned above. But only at a later stage that was on 27.9.1997, after the preparation of the shortlisted candidates, the appellant submitted his application. Even though the company has got the power to relax the age condition, in the absence of the application in time and in the absence of any clause in the advertisement to the effect that in deserving cases the company will relax the age limit, the fifth respondent company by accepting the application of the appellant cannot be said to have acted in confirmity with the standard and norms which are net arbitrary and irrational. It has also to be pointed out that it is not the case of the bank that after receiving the application, the Board of Directors considered the application for the purpose of relaxing the age qualification.
32. It may be pointed out at this juncture that originally by advertisement, dated 12.8.1997 in the press media, the fifth respondent called for applications from the persons who are aged about 45-50 years. Later by a subsequent advertisement in the press on 26.8.1997, the fifth respondent called for applications from candidates, who possess the requisite qualification with the age limit of 45-55 years. The fifth respondent should have in all fairness and in confirmity with the acceptable standard and norms issued another advertisement, making it known about the relaxation in deserving cases and further calling for applications giving reasonable time. This is because after seeing the advertisement, the candidates otherwise eligible but crossed the age limit of 56 years might have applied for the post. It has to be remembered that the bank was in search of a best candidate, who would be able' to achieve the targeted growth of the bank.' The company erred in accepting and considering the application of the appellant in a manner unknown to law and acceptable standards/norms and contrary to 'the advertisements .
33-A In this context let us refer to some decisions of the Apex Court.
In the decision reported in State of Rajasthan v. Hitendra Kumar Bhatt, 1997 (7) Supreme 128, the Apex Court observed thus:
"Looking to the clear terms of the advertisement which we have referred to above, the respondent was not eligible for consideration. It is submitted by the respondent before us that since he has been continued and has now been confirmed we should not disturb his appointment. He has requested that his case should be considered sympathetically. The fact, however, remains that the appellants have taken the correct stand right from the beginning. The respondent's application was not considered and he was not called for an interview. It was on account of interim orders which were obtained by the respondent that he was given appointment and continued. He was aware that his appointment was subject to the outcome of his petition. One cannot, therefore, take too sympathetic a view of the situation in which the respondent finds himself. A cut off date by which all the requirements relating to qualifications have to be met, cannot be ignored in an individual case.
There may be other person who would have applied had they known that the date of acquiring qualifications was flexible. They may not have applied because they did not possess the requisite qualification on the prescribed date. Relaxing the prescribed requirements in the case of one individual may, therefore, cause injustice to others." (Italics supplied).
34. In service law the material date for determining the eligibility is the last date fixed for receiving the applications- Harpal Kaur Chahal v. Director Punjab Instructions, 1995 Supp (4) S.C.C.706);
In the case in Smt. Bekha Chaturvedi v. University of Rajasthan, 1993 (1) LLN 617, the Apex Court ruled that the required qualification of the candidates should be examined only with reference to the last date for submitting applications and not the date of selection;
In the rulings in District Collector & Chairman, Vizianagaram S.W.R.S. Society v. M.Tripura Sundari Devi, 1993 SCC 520, the Apex Court had an occasion to consider the appointment of an unqualified person of a post of a Teacher in the following terms:
"It must further be realised by all concerned that when an advertisement mentions a particular qualification and an appointment is made in disregard of the same, it is not a matter only between the appointing authority and the appointee concerned. The aggrieved are all those who had similar or even better qualifications than the appointee or appointees but who had not applied for the post because they did not possess the qualifications mentioned in the advertisement. It amounts to a fraud on public to appoint persons with Inferior qualifications in such circumstances unless it is clearly stated that the qualifications are relaxdable. No Court should be a party to the perpetuation of the fraudulent practice. We are afraid that the Tribunal lost sight of this fact.." (Italics supplied.)
35. In this context it may also to be pointed out that Section 46A of the Act is to effect that every Chairman who is appointed on a whole-time basis, managing director, director, auditor-shall be deemed to be a public servant for the purpose of Chapter IX of the Indian Penal Code.
"21. Public Servant"
Twelfth-Every person-
"(a) in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government;
(b) in the service or pay of a local authority, a corporation established by or under a Central, Provincial or State Act or a Government company as defined in Section 617 of the Companies Act, 1956."...
As such, it cannot be said that this is not a public office and that the conditions/norms need not be strictly followed.
36. Hence we hold that the fifth respondent bank even after knowing the previous performance of the appellant passed a resolution on 19.7.1997 deciding to go in for public advertisement to call applications from the prospective candidates to achieve the targeted growth of the bank, committed a grave error in accepting the belated application of the appellant, who was not qualified as he was on that date crossed the upper age limit prescribed in the advertisement. By so doing, it has violated the rule of law and the established standards/norms which are not irrational or arbitrary.
37. The next aspect that has to be considered is as to whether the appellant by his conduct " has disentitled himself for being considered to be appointed as the Chairman and Chief Executive Officer of the 5th respondent Bank. On 14.5.1997 the 4th respondent sent a communication to the Board of Directors, Bharat Overseas Bank, Madras. In the said communication the 4th respondent invited the attention of the Board to the Central Office circular dated 7.6.83 in terms of which applications seeking approval for appointment/reappointment of Chairman and Chief Executive Officer should be submitted to the concerned regional office in the prescribed form with all particulars atleast four months before the expiry of the term Of the office of the present incumbent. Herein in this case as per the said circular the Board of Directors should have forwarded the name for approval to the Reserve Bank of India before 31.7.1997. Curiously, even after receiving the said communication nothing was done immediately. The Board for the first time considered the matter on 19.7.97 i.e. nearly after two and a half months. This Court put a pointed question to the learned Counsel appearing for the appellant as well as the 5th respondent as to why there was so much delay, for which there was no answer. According to the resolution passed on 19.7.1999 in the said meeting, the appellant was not present while discussing the agenda relating to the appointment of Chairman and Chief Executive Officer for the Bank. The relevant portion of the resolution reads as under:
"The item was taken up for discussion on 19.7.1997. Shri S.Srinivasan being interested was not present while discussing the agenda item and G. Lakshminarayanan chaired the meeting."
The correctness of this part of resolution is not disputed by the appellant. This Court put a pointed question to the learned Counsel- appearing for the appellant as to in what way the appellant was interested on that date. The learned Counsel replied by saying that since the Board was considering about the new incumbent for the post which the appellant was holding on that day, he thought it fit not to take part in the meeting while considering the said subject. Straightaway, we may say that we are not able to accept this explanation. As a devoted officer of the Bank, holding a very important post he should have remained while the discussion was going on to give his valuable suggestions in choosing a new incumbent.
38. Again, the resolution is silent as to what the Board decided with regard to the prescription of age limit while calling for the applications. The resolution is only to the effect that Sri. Lakshminarayanan the Director of the Bank was authorised to take all necessary steps as may be required for appointment of human resources consultant and fix their fees and also for screening the applications for the post of Chairman by the consultant and to submit the shortlisted candidates to the Board for the purpose of interview. Even though this resolution was passed on 17.7.97 the advertisement was issued calling for applications in the newspaper namely Economic Times only on 12.8.1997. According to the 5th respondent Bank as they did not get sufficient number of applications, second advertisement came to be issued prescribing the age limit as 45-55 years and that advertisement was published in the newspaper Economic Times dated 26.8.97. Thereafter on 17.9.1997, the Board again met to consider the appointment of Chairman and Chief Executive Officer for the Bank. The resolution with regard to the same, passed on that day has been made available before this Court. According to the resolution, while the Board took up the short listing of candidates to be called for interview, though the appellant was present, did not participate in the discussion. Here again we do not understand as to why he did not participate in the discussion. Thereafter on 27.9.1997 the appellant sent his applications along with bio-data to the Board of Directors of the Bank requesting it to consider him for reappointment for Chairman and Chief Executive Officer. Two days thereafter i.e. on 29.9.97 the 5th respondent Bank sent a communication to all the Directors, proposing the Board meeting on 30.9.97. Again on the same day another communication was sent to all the Directors forwarding the circular resolution. This communication was signed by none else than by the Private Secretary to Chairman, the appellant herein. It is stated therein that the Private Secretary is forwarding the circular resolution after consulting the Chairman namely the appellant who was on that relevant date in Mumbai. It appears, four directors gave their consent while one opposed it. Two directors did not indicate either one way or other. After passing the resolution by circular, the interview committee was requested to interview the appellant and the said committee approved after interviewing the shortlisted candidates seven in number also interviewed the appellant herein and that was on 1.10.97. The interview committee prepared a list on merits and the appellant was ranked as No.4. Ofcourse, thereafter on 4.10.97 the Board met again and ratified the resolution passed earlier in the circular. The board decided to send a panel containing the first four names.
39. The appellant having applied to the Board of Directors for being considered for appointment as Chairman and Chief Executive Officer of the 5th respondent Bank should not have in all fairness issued instructions to his Private Secretary as to how his application to be dealt with. Even though a reference is made in paragraph 6 of the counter affidavit filed by the 5th respondent in the writ petition, nothing is stated therein as to at whose instance or direction the said resolution was forwarded by the private secretary of the Chairman namely the appellant herein. It is not known as to why the company secretary who has filed the counter affidavit for the 5th respondent bank in the writ petition was not allowed to deal with the matter. It. may be pointed out in paragraph 6 a vague statement is made to the effect after the Board meeting held on 17.9.1997, it was mooted that having regard to the phenominal growth of the Bank for the past five years under the Chairman ship of the appellant why that should not be considered for inclusion in the Bank. It is not known as to when and who mooted this idea. Again it is not as if this phenominal growth noted came to the knowledge only on 17.9.1997. The Board was very much aware even on 19.7.1999 when it decided to go in for public advertisement and the same specially mentioned that the bank is in search of a proper person who can achieve the targeted growth. Whatever it is, this Court is of the considered opinion that the appellant by being cause for sending the circular resolution for approval touching his own application for reappointment has disentitled himself by such conduct to be considered for the said post.
40. From the facts narrated above, a question arises in our mind as to whether that even on 19.7.1997, the appellant had in mind to apply for reappointment and that was why he absented himself and did not take part in the discussions in the Board meetings held on 19.7.1997 and on 17.9.1997? We are not accepting the explanation of the appellant as to why he did not participate in the discussions of the board on those days. Is it by adopting this back-door method the appellant has succeeded not only in gaining entry to appear directly before the Interview Committee but also prevented others similarly placed from competing with him and his application being considered in the regular meeting to avoid open discussion apprehending possible opposition?
We do not propose to consider this any further, as there is no such pleading and the appellant had no opportunity to answer the same.
41-A The next point that has to be considered is as to what are the powers of the Reserve Bank of India and what is the role to be played by it?
Whether the Reserve Bank of India has acted in accordance with Section 35B of the B.R. Act and in the public interest?
42. Let us refer to the relevant provisions in the B.R. Act.
Section 10B(4) lays down the qualifications and disqualifications of Chairman. It refers thus:
(4) Every chairman who is appointed on a whole-time basis and every managing director of a banking company appointed under sub-section (1A) shall be person who has special knowledge and practical experience of
(a) the working of a banking company, or of the State Bank of India or any subsidiary bank of a financial institution, or
(b) finance'? economic or business administration;
Provided that a person shall be disqualified for being a (chairman who is appointed on a whole time basis or a managing director), if he-
(a) is a director of any company other than a company referred to in the proviso to sub-section (2), or
(b) is a partner of any firm which carries on any trade, business or industry, or
(c) has substantial interest in any other company or firm, or
(d) is a director, manager, managing agent, partner or proprietor of any trading, commercial or industrial concern, or
(e) is engaged in any other business of Vocation.
Section 10-BB confers power of Reserve Bank of India to appoint a person originally under sub-section (4) of Section 10B to the Chairman of the Board of Directors on whole-time basis whenever there is a vacancy.
Section 35 deals with the power of the Reserve Bank to give directions in the public interest, or in the interest of banking policy or to prevent the affairs of any banking company being conducted in a manner detrimental to the interest of the depositors or in a manner prejudicial to the interests of the banking company or to secure the proper management of any banking company generally.
Section 35-B deals with the provisions relating to appointments of managing directors etc. to be subject to previous approval of the Reserve Bank. Section 35B reads thus, Section 35-B(B):- no appointment or re-appointment or termination of appointment of a chairman, a managing or whole-time director, manager or chief executive officer by whatever name called, shall have effect unless such appointment, reappointment or termination of appointment is made with the previous approval of the Reserve Bank.' Part II A of the said Banking Regulations Act deals with control over the management. According to Section 36AA whether the Reserve Bank is satisfied that in the public interest or in preventing the affairs of a banking company being conducted in a manner detrimental to the interests of the depositors or for securing the proper management or any banking company it is necessary to do so, the Reserve Bank may remove from office any Chairman, Director, Chief Executive Officer or other Officer.
Section 36-AB gives powers to the Reserve Bank to appoint additional directors.
43. Let us also refer to the few rulings of the Apex of Court touching on the powers and duties of the Reserve Bank of India:
In the decision in Vellukurrel v. Reserve Bank of India, , while considering the validity of the Banking Companies Act (1949), Sections 38(1) and (b) (iii), the Supreme Court in paragraphs 18 and 22 respectively observed thus:
"But the most important function of the Reserve Bank is to regulate the banking system generally. The Reserve Bank has been described as a bankers' bank. Under the Reserve Bank of India Act, the scheduled banks maintain certain balances and the Reserve Bank can lend assistance to those banks "as a lender of the last resort". The Reserve Bank has also been given certain advisory and regulatory functions. By its position as a Central Bank, it acts as an agency for collecting financial information and statistics. It advises Government and other banks on financial and banking matters., and for this purpose it keeps itself informed of the activities and monetary position of scheduled and other banks, and inspects the books and accounts of scheduled banks and advises Government after inspection whether a particular bank should be included in the second schedule or not. Every scheduled bank is required to send to the Reserve Bank and to the Central Government a weekly return of its position in a form, which is prescribed. Sometimes, however, the Reserve Bank allows a particular bank to send its returns once a month instead of every week. From these returns, the Reserve Bank prepares and publishes consolidated statements showing the monetary position in the country. The inclusion of a bank in the second schedule is the function of the Reserve Bank and under Sections 42(6) (a) (iii) and (b) (ii), it satisfies itself, inter alia, that the affairs of the particular bank are not being conducted in a manner detrimental to the interests of its depositors. The Reserve Bank has further the power to prohibit any scheduled bank from receiving after a week, any fresh deposits."
In para 22, the Apex Court ruled thus:
"We have seen that the Reserve Bank was already functioning as a Central Bank with a certain measure of control over the other banks, scheduled or unscheduled. This control was tightened in the Banking Companies Act by making provisions which were intended to protect the interests of the depositors. Differences noticeable between the Banking Companies Act, on the one hand and the Companies Act, on the other, which have been characterised as discriminatory, or thus explainable on the basis of the object to be achieved."
In para 28, the Apex Court ruled thus:
"The Reserve Bank, apart from its being a reasonable body is answerable to the Central Government, and the public opinion is certainty strong and vocal enough for it to heed. (Italics supplied.) The next ruling that can be usefully referred to is the one reported in Peerless General F. & I Co., Ltd., v. Reserve Bank of India, . The relevant paragraphs are 31 and 53 which respectively read thus:
"Before examining the scope and effect of the impugned paragraphs 6 and 12 of the directions of 1987, it is also important to note that Reserve Bank of India which is bankers ' bank is a creature of Statute. It has large contingent of expert advice relating to matters, affecting the economy of the entire country and nobody can doubt the bona fides of the Reserve Bank in issuing the impugned directions of 1987. The Reserve Bank plays an important role in the economy and financial affairs of India and one of its important functions is to regulate the banking system in the country. While examining the power conferred by Section 58A of the Companies Act, 1956 on the Central Government to prescribe the limits upto which, the manner in which and the conditions subject to which deposits may be invited or accepted body non banking companies, this Court in Delhi Cloth and General Mills v. Union of India, observed as under:
"Mischief was known and the regulatory measure was introduced to remedy the mischief. The conditions which can be prescribed to effectuate this purpose must a fortiori, to be valid, fairly and reasonably, relate to checkmate the abuse of juggling with the depositors/investors hard earned money by the Corporate sector and to confer upon them a measure of protection viz., availability of liquid assets to meet the obligation of repayment of deposit which is implicit in acceptance of deposit. Can it be said that the conditions prescribed by the deposit Rules are so irrelevant are have no reasonable nexus to the objects sought to be achieved as to be arbitrary? The answer is emphatically in the negative. Even at the cost of repetition, it can be stated with confidence that the rules which prescribed conditions subject to which deposits can be invited and accepted do operate to extend a measure of protection against the notorious abuses of economic power by the corporate sector, to the detriment of depositors /investors a segment of the society which can be appropriately described as weaker in relation to the mighty corporation. One need not go so far with Ralph Nadar in 'Amercia Incorporated' to establish that political institutions may fail to arrest and control this ever-widening power of corporations. And can one wish away the degree of sickness in private sector companies? to the extent companies develop sickness, in direct proportion the controllers of such companies become healthy. In a Welfare State it is the constitutional obligation of the State to protect socially and economically weaker segments of the society against the exploitation by corporations. We, therefore, see no merit in the submission that the condition prescribed bear no relevance to the object or the purpose for which the power was conferred under Section 58A on the Central Government."
"This Court in Joseph Kuruvilla Vellukunnel V Reserve Bank of India, , held that the RBI is a banker's bank and lender of the last resort." Its objective is to ensure monetary stability in India and to operate and regulate the credit system of the country. It has, therefore, to perform a delicate balance between the need to preserve and maintain the credit structure of the country by strengthening the rule as well as apparent credit worthiness of the banks operating in the country and the interest of the depositors. In underdeveloped country like ours, where majority population are illiterate and poor and are not conversant with banking operations and in underdeveloped money and capital market with mixed economy, the Constitution charges the State to prevent exploitation and so the RBI would play both promotional and regulatory roles. Thus the R.B.I, occupies place of "pre- eminence" to ensure monetary discipline and to regulate the economy or the credit system of the country as an expert body. It also advices the Government in public finance and monetary regulations. The banks or non-banking institutions shall have to regulate their operations in accordance with, not only as per the provisions of the Act but also the rules and directions or instructions issued by the RBI in exercise of the power thereunder. Chapter 3B expressly deals with regulations of deposit and finance received by R.N.B.Cs. The directions, therefore, are statutory regulation".
44. In the counter affidavit filed by the fourth respondent. Reserve Bank of India, we find the following averments:
"I state that the Reserve Bank of India is the Central Bank of the country constituted in terms of the Reserve Bank of India Act, 1934. In order to supervise and regulate the banking sector, it has been vested with various powers of superintendence and control over banking companies in terms of the B.R. Act. The Reserve Bank of India is vested with certain powers under the B.R. Act to approve the appointment or reappointment of the Chairman and of the Managing Director of a banking company in the interest of the banking company and in the overall interests of the depositors.
Then the counter affidavit proceeds to refer to the rulings of the Kerala High Court in Ephrem Ambokken Poyya Via Chalakudy v. Assistant Chief Officer, Reserve Bank of India, Trivandrum, O.P.No.112 of 1962, dated 20th December, 1963 and has extracted the following passage:
"Banking companies are special companies and they form a class by themselves. Apart from the public interest, the interest of the depositors will have to be safeguarded. Provision similar to those contained in the Companies Act which have been adverted to, have, therefore, been incorporated in the Banking Companies Act as well. Instead of the Central Government being the approving authority, the Reserve Bank is constituted the controlling body. This Reserve Bank is an expert body and is in control of the banking business in the country and it is only appropriate that such an expert body should be entrusted with the control of the banking institutions. The Reserve Bank has also been conferred vast powers and have been enabled not only to watch the day to day working of the banking institutions, but to gather information regarding the working of the banking institutions by inspection or otherwise. It is this body, the Reserve Bank, that has been given the power to approve the appointment or reappointment of a Managing Director."
In paragraph 7 of the counter affidavit, it is stated as follows:
"I state that the post of Chairman is extremely important and sensitive post and therefore, it is necessary that the Reserve Bank of India being the supervisor and regulator of the banking company in India is allowed to take its own decision."
45. This Court directed the Reserve Bank of India to produce the entire file relating to the re-appointment of the appellant in the year 1998 and accordingly, the same has been produced before this Court.
46. Coming to the facts of this case, the Board of Directors of Bharat Overseas Bank passed a resolution accepting the recommendations of the Interview Committee and forwarded it to the Reserve Bank of India a panel consisting of first four names as appearing in the list submitted by the Interview Committee. By a communication, dated 21.11.1997, the Reserve Bank of India wrote to the Board of Directors of the fifth respondent bank that the process of preparation of panel suffers from certain infirmities. It further pointed out that the procedure followed by the bank for the preparation is defective, inasmuch as the board's resolution passed in its meeting dated 19th July, 1997 did not specify the eligibility criteria, particularly the age for selection of panel of suitable candidates. Pointed attention was drawn in the said communication to the effect that the advertisement given in the Economic Times dated 12th August 1997 specify the age limit, between 45-50 years was subsequently modified in another advertisement dated 26.8.1997 and the resolution passed by the Board in this regard has not been submitted to the Reserve Bank of India alongwith the panel of papers. The Reserve Bank of India returned the panel stating that it is not in a position to consider the panel, as there was procedural infirmity and advising the bank to follow the proper procedure, cure the defect and submit the panel of names to the Reserve Bank of India for consideration. Thereafter, the fifth respondent bank sent a communication, dated 27.11.1997 enclosing the copy of the Board's resolution dated 21.11.1997, which according to the Board ratified all the actions taken in this regard. The Reserve Bank of India by a communication, dated 27.2.1998, exercising its powers under Section 35B of the B.R. Act conveyed its approval for the reappointment of the appellant. The question that arises for consideration is as to whether the action of the Reserve Bank of India in granting approval in its communication, dated 27.2.1998 is in accordance with the provisions of Section 35B of B.R. Act.
47. At the outset, it may be clearly mentioned that this Court is not examining whether any policy decision (economical or financial) taken by the Reserve Bank of India is correct or not. Similarly, this Court is not taking up the exercise of comparing the merits and demerits of the four candidates, whose names find a place in the panel that was forwarded by the Board of Directors to the Reserve Bank of India.
48. From the file produced by the Reserve Bank of India, we find the copies of the following documents were before it:
1. Resolution passed by the bank on 19.7.1997;
2. The two advertisements made in the "Economic Times", calling for applications from the prospective candidates;
3. The resolution passed by the bank on 17.9.1997;
4. The application of the appellant to the board seeking reappointment;
5. The letter, dated 29.9.1997 written by the Private Secretary to the Chairman forwarding the Circular resolution to all the members of the Board; and
6. Copy of the resolution passed by the bank on 4.10.1997, accepting the recommendations of the interview committee.
49. When the bank decided to advertise and call for applications it was very much aware of the performance of the appellant. But, however, the fifth respondent thought it should invite applications from the public and the advertisement specifically says that the person who will be ultimately selected to the post of Chairman and Chief Executive Officer will be responsible for developing strategies, conceptualising and aimed at achieving the targeted growth of the bank. This should obviously mean that that bank was anxious to select a best available candidate in the country. If the Board of Directors thought that they are satisfied with the appellant's candidature, then they would have straight away considered the reappointment of the appellant. There is no doubt that the Board of Directors were fully aware of the performance of the appellant in the last five years. When that being the factual position and rightly when the bank while extending the upper age limit of the candidates to 55 years issued a second advertisement, calling for the applications, it should have issued another advertisement making it known that the upper age limit is relaxable in appropriate cases and calling for applications. This aspect of the matter the Reserve Bank of India ought to have noticed. The Reserve Bank of India ought not to have proceeded on the basis that the procedure adopted by the bank in this case in sending a penal of names is a curable defect. Instead it should have directed the fifth respondent bank to go in for fresh advertisement, calling for applications from the prospective candidates, indicating that the upper age limit is relaxable in deserving cases. When the Reserve Bank of India has got wide powers, and when it claims that it has got the power to monitor the day to day administration of the banks, the Reserve Bank of India-cannot escape from its duty, contending that all it has to verify is whether a candidate is qualified and not disqualified as per the provisions of Section 10B of the B.R. Act. The failure on the part of the Reserve Bank of India has resulted in it not acting in accordance with Section 35B of the B.R. Act. When the Reserve Bank of India is vested with powers as we have noted already, such powers are always coupled with corresponding duties, i.e. the duty here being the Reserve Bank of India should have advised the fifth respondent to go in for a fresh advertisement as mentioned earlier.
50. Now, we are inclined to refer to the file produced by the Reserve Bank of India before this Court. We find in page 122 of the said file that an office note has been prepared and at page 134 we also find a note which reads thus:
" Before taking a decision on the appointment of the next CEO one may take the following action:
1. ..............
2. Take a L.D. opinion whether the inclusion of Sri Srinivasan's name in the panel is in order.
3. ................
At the bottom of the note an initial has been put with date as 14.11.1997. After leaving some space on the right hand side, we find the word 'ED'"
But, however, we do not find from the files anything to show that a legal opinion was in fact sought for pursuant to this noting.
51. It appears that after getting the so-called defects rectified and after receiving the resolution of the meeting held on 27.11.1997, the fourth respondent Reserve Bank of India requested the Legal Department to examine whether the infirmities earlier observed could be treated as rectified. But however, the papers were returned by the Law Department. It further appears that the Legal Advisor has discussed the entire matter with the top management. The relevant portion of the file at page 235 reads "We had marked the connected papers to the Legal Department with a request to examine whether the infirmities earlier observed could be treated as rectified."
"The papers have since been returned by the Legal Department, it appears that the Legal Advisor has discussed the matter with the top management." (Italics supplied)
52. From the files, we also find that on 26.2.1998, a proposal was put up to the effect that the tenure of the appellant can be extended for a period of two years from March, 1998 on the existing terms and conditions. The concluding paragraph of the said proposal reads thus:
"If the above proposal is approved, a separate order will be passed and kept on record. This procedure has been suggested by the Legal Department (with whom also the whole matter was discussed) in the special context of the pending case before the Chennai High Court."
52-A. From the file produced before us, we only come to the conclusion that no opinion in writing was obtained from the Legal Department at any stage till the impugned order came to be passed and what appears from the file is that there was only an oral consultation by the Banking Operations and Development Department of the Reserve Bank of India, the fourth respondent herein with the R.B.I's Legal Department.
When the Department of Banking Operations and Development of the Reserve Bank of India was considering the grant of approval for appointment to a post of Chairman of a nationalised bank, which admittedly is an important and sensitive one and when the Reserve Bank of India had some legal doubt, and in the light of various facts set out as above, can it be heard to sav that it consulted the Law Department orally? and Whether such oral consultation is sufficient and whether it can be said to be in conformity with the acceptable standards and norms?
The answer is "No"
53. The other aspect which we would like to point out from the file is that the Reserve Bank of India department of banking operations and development, Madras sent a communication, dated 27.10.1997 and it starts at page 31 in the file. At page 35 of the said file i.e. Annexure I sent alongwith the communication, under the heading "General" it is stated several complaints have been received or being received against Sri Srinivasan, containing allegations regarding his style of functioning, financial irregularities, etc... We find one sentence which reads thus:
"We understand that the legal Department of Supervision had investigated some of the complaints". (Italics supplied).
Annexure II is the report by the Department of Supervision. At page 39 under the heading complaints the following is stated "On investigation, however, conclusive evidence to substantiate these complaints has been lacking" (Italics supplied.) We would like to point out that even if there is some doubt against a person he should be avoided.
54. We are not for a moment holding or coming to the conclusion that the appellant is guilty of certain irregularities in approving the credit proposals. But we would like to point out two aspects of the matter.
1. All complaints were not investigated against the appellant
2. There was some evidence against the appellant with reference to those complaints but not sufficient enough to come to a definite conclusion.
But, the impugned order at para 4 reads, "Investigation by the bank did not reveal any involvement of Sri Srinivasan in those complaints"
55. At one stage i.e. on 7.2.1998, the Department of Banking Operations and Development of the Reserve Bank of India came to the conclusion that the appellant can be reappointed under the provisions of Section 10BB of the B.R. Act. The said office note begins at page 223 and ends at page 240 with the initial of the Executive Director of the Reserve Bank of India. At page 239, we also find the following:
"9.5. It is pertinent to observe that the unions/federations have been harping on the infirmities and irregularities in the preparation of the panel by the bank. Had the panel had been prepared following the normal procedures as expected of by the Board of Directors, the ground for such complaints could have been obviated to a certain extent.
9.6. In view of the above, we do not propose to approve any one of the names proposed by the bank".
In these circumstances, the fourth respondent. Reserve Bank of India should not have granted approval for the appointment of the appellant.
56. Apart from that we also to point out that the Reserve Bank of India sent a communication, dated 14th May, 1997, calling upon the Board of Directors to send a panel by 31.7.1997. But, even the first meeting of the Board of Directors in this regard was held on held 19.7.1997. The appellant being the Chairman of the Board of Directors was not diligent enough to take immediate action and to send the panel within the prescribed time viz., 31st July, 1997. He may not be solely responsible but being a person in the realm of affairs, he is mainly answerable. An officer holding a highly responsible and sensitive post like the appellant, is expected to be diligent.
57. We also refer to the ruling of the Supreme Court in Union Bank of India v. Vishwa Mohan, , the Supreme Court observed thus:
"It needs to be emphasised that in the banking business absolute devotion, diligence integrity and honesty needs to be preserved by every bank employees and in particular the bank officer. If this is not observed the confidence of the public depositors would be impaired" (Italics supplied.)
58. It is claimed in para 7 of the counter affidavit "Hence I state that the approval or otherwise of any name prescribed by the Board of the banking company is a matter within the discretion of the Reserve Bank of India and no writ lies against the use of such discriminatory power by the Reserve Bank of India"
59. From the above discussion can it be said that the fourth respondent Reserve Bank of India has satisfied the standards/norms/requirements expected of an Officer, who is exercising discretion conferred by the statute?
Our answer is in the negative.
60. In this regard we refer to the decision in U.P.State Road Transport Corpn v. Mohd. Ismail, , the Apex Court ruled thus:
"The discretion allowed by the statute to the holder of an office, as Lord Halsbury observed in Sharp v. Wakefield, 1891 AC 173 at p. 179, is intended to be exercised "according to the rules of reason and justice, not according to private opinion; according to law and not humour. It is to be, no arbitrary, Vague and fanciful, but legal and regular. And it must be exercised within the limits to which an honest man competent to the discharge of his office ought to confine himself." Every discretion conferred by statute on a holder of public office must be exercised in furtherance of accomplishment of purpose of the power. The purpose of discretionary decision making under Regn." 17 (3) was intended to rehabilitate the disabled drivers to the extent possible and within the above said constraints. The Corporation, therefore, cannot act mechanically. The discretion should not be exercised according to whim, caprice or ritual. The discretion should be exercised reasonably and rationally. It should be exercised faithfully and impartially. There should be proper value Judgment with fairness and equity." (Italics supplied)
61. For all the foregoing reasons, we are entirely in agreement with the findings of the learned single Judge that the reappointment of the appellant as Chairman and Chief Executive Officer, the fourth and fifth respondents have given a go-bye to all the norms and procedures and with respect to the selection of candidates or the said post and on the appointment of a person, who is to even eligible to be considered for such post and that he impugned order cannot be said to be in accordance with action 35B of the B.R. Act and in the interest of the public.
62. The next aspect that is to be considered is whether the Executive Director of the second respondent has power or authority to pass the impugned order in question. The learned single Judge in his order, after referring to the various provisions of the Act has pointed out that no regulation was produced before the Court to establish that the Executive Director of the second respondent has got the power to pass the impugned order, when the Governor and in his absence the Deputy Governor are having the power under the said provision to pass such orders.
63. Learned Senior Counsel Mr.Habibullah Basha appearing on behalf of the Reserve Bank of India producing the regulations before us submitted that in fact the Executive Director has the authority and jurisdiction to pass the impugned order has not been questioned in the said writ petition. Learned Senior Counsel would submit that no such plea has been raised in the affidavit filed in support of the writ petition and further even during the course of arguments no such arguments were advanced before the learned Single Judge. It is also stated by learned Senior Counsel that the learned Single Judge in fact did not call upon the Reserve Bank of India to place before the Court the copy of the regulation, if any. Inasmuch as such an issue was not raised at any stage before the learned Single Judge, we do not consider it necessary to go into it and give a finding on that. Our such inclination is also because that
(a) we are setting aside the impugned order for other reasons; and
(b) because of which the life of the impugned order has come to an end;
64. Since we have taken such a view, it is just and proper that this Court vacates the finding of the learned Single Judge that the approval of the appointment of the appellant to the said post of Chairman and Chief Executive Officer of the fifth respondent bank granted by the Executive Director of the Reserve Bank of India is without power or jurisdiction. Accordingly we do so. We deem it only proper that such an issue can be considered as and when it is raised and all the parties are given complete opportunity to put forth their respective cases.
65. Learned Senior Counsel appearing for the fifth respondent in Writ Appeal No.2414 of 1999 submitted that in the event of this Court dismissing the Writ Appeal this Court may consider the question of granting permission to the appellant in Writ Appeal No.2371 of 1999 to continue as Chairman of the fifth respondent bank for the rest of the period i.e. upto 29th February, 2000. We are unable to accept the said request.
66. We have already considered the various aspects of the matter in detail and arrived at a different conclusions as stated supra. Hence, we do not find any reason either in law or in equity to accede to such a request.
67. We direct the concerned authority viz., fourth or 5th respondent herein to take immediate steps to relieve the appellant in Writ Appeal No.2371 of 1999 from the post of Chairman and Chief Executive Officer of the Bharath Overseas Bank. We do hope that the authority concerned will act swiftly and alternative arrangements will be made by them in accordance with law.
68. When the matter came up before this Court for hearing on 27.1.2000 Mr.Habibullah Basha, learned Senior Counsel appearing for the Reserve Bank brought to the notice of this Court that even though a new Chairman and Executive Officer for the Bharath Overseas Bank has to assume charge by 1st March, 2000, and according to the Circular issued by should be forwarded four months before the date of retirement of the present incumbent, so far the Reserve Bank of India has not received any communication in this regard from the fifth respondent bank. This Court put a query to the learned Senior Counsel appearing for the fifth respondent bank on this aspect. On instructions learned Senior Counsel submitted that the panel was not sent because of the pendency of all the above writ appeals. We are totally unable to accept or appreciate such an explanation. Pendency of these writ appeals has nothing to do with the sending of a panel for the appointment of a Chairman for the period commencing from 1st March, 2000. Even if the bank had any such a doubt, it should have taken steps to get the doubt clarified by taking out proper application before this Court.
69. On 31.1.2000, teamed Senior Counsel appearing for the fifth respondent submitted that emergent steps are being taken and that the panel will be sent by the fifth respondent bank without any further delay. We have already pointed out what the Apex Court has to say with regard to the functioning of the Officers of any bank in the decision Union Bank of India v. Vishwa Mohan, .
70. In this view of the matter, we dismiss writ appeals No. 2371 and 2414 of 1999. Writ appeal No.2525 of 1999 is allowed only to the extent indicated in the paragraph No.64 and in all other respect. Writ Appeal No.2525 of 1999 also shall stand dismissed. But however, there will be no order as to costs. Consequently the connected miscellaneous petitions also shall stand dismissed 70-A. Counsel on record for the fourth and fifth respondents shall communicate the operative portion of this common Judgment immediately to the fourth and fifth respondents, so as to enable them to take suitable follow up action immediately.