TMI Blog1992 (9) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... tition are as follows : ( a )On March 29, 1990, the Government of Goa issued a notification, inter alia , accepting the resignation dated February 12,1990, tendered by one Ramesh Chowgule as the director of the Economic Development corporation of Goa, Daman and Diu Limited (hereinafter referred to for the sake of brevity as "the Corporation"). By the said notification dated March 29, 1990, the petitioner came to be nominated as a director of the said Corporation in the place of Shri Chowgule and also as chairperson of the said corporation with immediate effect. At this stage, it may be noted that at the relevant time the petitioner was a Member of the Legislative Assembly (Velim). ( b )In the board meeting held on March 30, 1990 of the corporation a resolution came to be passed by which the corporation approved the above nomination made by the Government in favour of the petitioner. At the said board meeting, the petitioner was also appointed the chairperson on the board of the said corporation and a resolution to that effect was passed unanimously by the corporation. The said Resolution No. 1795 reads as follows : "Resolved that the appointment of Kum. Farrel Furtado, MLA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions mentioned in the show-cause notice. In answer to the irregularity mentioned in item No. 1 of the show-cause notice, the petitioner stated that she had received honorarium regularly from the corporation amounting to Rs. 44,200. According to the petitioner, the charge was totally misconceived and untenable as she has received honorarium and not salary from the corporation and, therefore, there was no contravention of article 68B of the articles of association of the corporation. It is also pertinent to note that the petitioner in her reply to the said show-cause notice has referred to honorarium as compensatory allowance and the receipt of the amount of Rs. 44,200 has not been denied by the petitioner. She has further stated that she was appointed as chairperson for a period of five years from March 29, 1990, and that as chairperson she was deeply involved in revitalising various activities of the corporation and it was in this circumstance that the corporation decided to compensate her suitably in the form of monthly honorarium in the sum of Rs. 2,900. As regards item No. 2 of the show-cause notice, the petitioner admitted that for her tours outside Goa, she claimed travelling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( g )It is against the said order of the removal dated January 30, 1992, as also the notification filling in the vacancy caused by the removal of the petitioner also dated January 30, 1992, that the petitioner being aggrieved has filed this petition under article 226 of the Constitution. ( h )Briefly, it may be mentioned that it is the case of the petitioner in the writ petition that the order of removal of the petitioner, which is the subject-matter of challenge in this petition, has been passed by the Government arbitrarily. It is the case of the petitioner that the said decision of the Government to remove the petitioner as the director and chairperson of the corporation was politically motivated. In that connection, the petitioner has referred to certain news report in Sunaparant dated November 20, 1991 (that is prior to the issuance of the above show-cause notice). The petitioner has relied upon the contents of the said report to indicate that the decision to remove the petitioner as director and chairperson was taken much prior to the issuance of the said show-cause notice. It was further submitted that a bare reading of the said report indicated that the decision to remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued with a mala fide intent and in the circumstances it was liable to be set aside. Learned counsel appearing on behalf of the petitioner broadly submitted a two-fold contention : Contention ( a ): It was submitted that the petitioner was appointed as a director and consequentially chairperson on March 29, 1990, pursuant to the notification issued by the Government. The contention proceeds on the basis that the power to appoint the petitioner was duly exercised by the Administrator under article 68 of the articles of association of the corporation. However, there was no power vested in the Government to remove the petitioner as a director and as chairperson of the corporation. According to the petitioner, the said power vested in the board of directors of the company and the Government had no authority to remove the petitioner by the impugned order as a director and consequentially as chairperson. In this connection, it was also submitted that the removal of a director is contemplated under section 284 of the Companies Act and had the procedure under section 284 of the said Act been followed, the petitioner could not have been removed for the alleged acts of irregularities f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration. It defines the word "Administrator" to mean the Administrator of Goa, Daman and Diu. Article 2 states that respondent No. 2 corporation shall be a public limited company. Article 5 lays down that the authorised share capital of the company shall be rupees thirty crores divided into thirty lakhs equity shares of Rs. 100 each. Article 7 lays down that subject to the provisions of the Companies Act and the articles and subject to the directions of the Administrator, the shares shall be under the control of the board of directors. Article 45 deals with the right of the Administrator to appoint any person as his representative. It lays down that the Administrator, so long as he is a shareholder of the company may, from time to time, appoint one or more persons (who need not be a member of the company) to represent him at the meetings of the company. Article 67 finds place under Chapter XI which deals with the board of directors of the company. It lays down that the number of directors shall not be less than three and not more than 12. The said directors shall not be required to hold qualification shares. Article 68(1) lays down that one-third of the directors shall be appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above facts indicate that the Government was pleased to nominate the petitioner as the director of the corporation in the place of Shri Chowgule when the vacancy occurred. She was also appointed as the chairperson on and from March 29, 1990. Her appointment was in pursuance of article 68(4) read with article 79 of the above articles of association. This is indicated by the above notification dated March 29, 1990, read with the addendum dated November 29, 1990. Article 68(1) deals with appointment of non-rotational directors by the Government. The said directors are nominees of the Government. At this stage, it may be relevant to note that a non-rotational director is a category which is distinct from a rotational director under the Companies Act. This position has been spelt out clearly by certain departmental clarifications issued under section 268 of the Companies Act. The said clarifications have been reproduced at pages 1260 and 1261 of the Guide to the Companies Act by A.Ramaiya Twelfth edition 1992. The said clarifications indicate that a non-rotational director cannot be nominated by the equity shareholders on the board of a company. Such a right is vested only in the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to revoke the said nomination/appointment as a matter of right which flowed from articles 68(1) and 68(4) with regard to non-rotational directors appointed by the Administrator. Section 284 of the Companies Act deals with removal of directors by the company. It requires a company to pass an ordinary resolution to remove a director (not being a director appointed by the Central Government under section 408 of the Companies Act). Section 274 deals with disqualification of directors whereas section 284 of the Companies Act deals with removal of directors. In the present case, neither the show-cause notice nor the order of removal indicates any exercise of power under section 284 of the Companies Act. The reason is obvious. The company has not removed its director but the Government or the Administrator has revoked the nomination, and as a consequence, the appointment which was earlier made under article 68(1) read with article 68(4) of the said articles of association stood terminated. A clear dichotomy is prevalent in the present case. The Government's right to revoke the appointment under article 68(1) is not the same thing as removal of a director by the company under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of tenure of the chairperson. He further submitted that the totality of facts mentioned above clearly indicate that the impugned action of removal flows from the power of appointment given to the Administrator under article 68(1) and not from any statutory provision. Accordingly, it was submitted that the entire action is under the articles of association and it is a matter of contract and it is not a matter of statutory provision. In the circumstances, it was submitted that a writ petition under article 226 of the Constitution was not maintainable. In this connection, the learned Advocate-General relied upon certain judgments, both of the Bombay High Court as also of the apex court, to indicate that the articles of association and the rights which flow therefrom are not matters which confer any status in law in favour of the petitioner and the appointment of the petitioner was purely contractual. In this connection, he relied upon the judgment of the Bombay High Court in the case of Major General Shanta Shamsher Jung Bahadur Rana v. Kamani Bros. Pvt. Ltd, [1959] 29 Comp Cas 501 (Bom.) ; AIR 1959 Bom. 201. In that case, a suit was filed by the plaintiff, a joint managing di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the petitioner., however, cited the judgment of the Supreme Court in Kumari Shrilehha Vidyarthi v. State of U.P., AIR 1991 SC 537. The said case dealt with appointment of a district Government counsel by the State Government. The question arose as to whether removal en bloc of all district Government counsel by the State Government was ultra vires article 14. The Supreme Court found that the presence of public element was attached to the office of the district Government counsel and, in the circumstances, it attracted article 14 of the Constitution. In that connection, it was observed that the requirements of article 14 and contractual obligations are not alien concepts but both the concepts can co-exist. The Constitution does not permit unfairness in any actions of the State in any sphere of activity (including in matters of contract). There is no dispute regarding the ratio of the said decision. In the present case, there is no presence of public element attached to the office of non-rotational director. Secondly, as mentioned hereinafter, we have come to the conclusion that reasons have been given in the show-cause notice which warranted the Government to revoke the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph is the relevant ratio of the judgment on the question of the maintainability of the writ petition. In the present case, the State has ventured into the corporate world by purchasing the shares of the corporation and the right which it has exercised regarding the appointment and the removal of the petitioner as a director is the right available to the Government as a shareholder qua non-rotational directors. In the circumstances, we fail to appreciate how a writ petition under article 226 of the Constitution could be entertained in the present case. Contention ( b ) ... As regards this contention of the petitioner, there is no merit in the case of the petitioner that the Government has acted arbitrarily and with a mala fide intent. The show-cause notice to the petitioner clearly indicates that the Government as a shareholder came across certain alleged irregularities. By reply to the said show-cause notice, the said irregularities came to be denied. It is true that the impugned order of removal refers to misuse of power by the petitioner and also to gross irregularities. However, reading the impugned order of removal as a whole, it appears that the matter was considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order cannot constitute punishment as contended by learned counsel for the petitioner. It may also be noted that the petitioner had no vested right to continue as chairperson for five years. On the other hand, under article 68(1) and article 68(4) of the articles of association, the Government had absolute discretion in the matter of appointment and removal of nominees who represent the Government on the board of directors of the company as non-rotational directors. As the Government has exercised the said discretion based on adequate material, there is no reason to interfere with the exercise of the said discretion under article 226 of the Constitution. In the present case, the Government has exercised the discretion properly in terminating the contract before its due date of expiry. It does not constitute a ground of removal as alleged by the petitioner. There was no vested right in the chairperson to continue for the entire period of the contract and in the case of premature termination it is a well-settled principle of law that the right of the petitioner in such an eventuality was only to claim compensation for the unexpired period. In the circumstances, both in law ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
