TMI Blog2022 (11) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors out of which not less than one half shall be independent Directors. On a conjoint reading of Section 160, Section 178 of the Companies Act, 2013 and Rule 13 of the Rules 2014, it is evident that a clear cut procedure is prescribed in so far as the notice of candidature is concerned. Whatever that be, the primary question to be considered is whether the rejection of nomination and election to the Director Board of the appellant company, a private banking company, has any public law element in order to consider the alleged violations exercising the powers conferred under Article 226 of the Constitution of India. The prayer sought for in petition for complaints filed before the RBI as well as SEBI against its nominee Directors, are not at all connected or related to the fundamental issue raised in the writ petition on account of the rejection of nomination. It is also stated that the matters with respect to Exts. P6 and P7 are not at all germane to decide the issue with regard to the rejection of the nomination of the petitioners. Even though learned Senior Counsel for the writ petitioners Sri. P. Chidambaram contended that from the website of the appellant Bank, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The captioned writ appeals are filed by respondent No. 2, M/s. Dhanalakshmi Bank Ltd., Thrissur challenging the common interim order passed by the learned Single Judge in W. P. (C) Nos. 19758 and 20425 of 2021 dated 09.03.2022, whereby the learned Single Judge held that the writ petitions are maintainable under Article 226 of the Constitution of India, in a challenge made by the appellant. Since the subject issue cropped up for consideration in both the appeals are typical, with the concurrence of all the parties, the appeals are heard together. The issue is whether the rejection of the nomination of the writ petitioners for the directorship of the appellant under Section 160 of the Companies Act, 2013 by the appellant bank, allegedly being a statutory violation, is a subject matter amenable for writ jurisdiction. 2. Brief facts are required to be discussed in order to consider the said issue; Petitioners 1 and 2 in W. P. (C) No. 19758 of 2021 leading to W. A. No. 425 of 2022 / respondents 1 and 2 herein are shareholders of the appellant - M/s. Dhanalakshmi Bank Ltd., however, the 3rd petitioner / the 3rd respondent herein, is not a shareholder. Petitioner in leading to writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board to reassess the performance of the petitioner Sri. P. K. Vijayakumar and recommend him for appointment as Director to be placed before the 94th AGM; and (v) to quash Ext. P3 letter dated 20.09.2021 rejecting the application of the petitioner by the Board of Directors submitted under Section 160 of the Companies Act, 2013. 5. Brief material facts which are relevant for disposal of the appeals discernible from the writ petitions are as follows:- 6. The contention advanced by the petitioners in W. P. (C) No.19758 of 2021 is that the appellant Dhanalakshmi Bank Ltd., its Board of Directors and the Nomination Remuneration Committee is bound to discharge their statutory responsibilities under Section 160 of the Companies Act, 2013, to inform the General Body Meeting of the Dhanalakshmi Bank with respect to the candidature of the 1st petitioner for the office of the Director as mandated under Section 160(2) of the Companies Act. It is also the contention of the said petitioners that under Section 160 of the Companies Act, a person eligible for appointment to the post of Director at the General Body of the company can place a notice in writing at the company's registered of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of persons for appointment based on the qualification, expertise, track record, integrity and other 'fit and proper' criteria. Petitioners have also produced Ext. P1(a) the 'fit and proper' criteria formulated by the RBI and the prescribed format of declaration. 11. Therefore, the contention advanced is that when the application was submitted by the 1st petitioner and others, nominating themselves to the post of Directors, the Bank had no other option than to place it before the General Body and to have not done so and rejecting the request of the 1st petitioner and others is a clear violation of the statutory prescriptions contained under Sections 160 and 178 of the Companies Act, 2013. 12. The petitioner in the other writ petition has also raised similar contentions; as we have pointed out above, the essential relief sought in the writ petition is in respect of the rejection of the nomination offered by the petitioner by the Director Board of the Bank. Petitioner therein has also contended that petitioner is the most suitable person and he was formerly the Director General of Income Tax (Rtd.), former Insurance Ombudsman, Independent External Monitor (IEM) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sides, observed that the question of maintainability can be heard as a preliminary issue and therefore remitted the matter for reconsideration of the question of maintainability of the writ petitions. 18. It was in the said backdrop, the learned Single Judge considered the issue and passed the impugned order holding that the writ petitions are maintainable, after taking into consideration the provisions of various statutes referred to above and the law laid down by the Hon'ble Apex Court in multiple judgments; the operative portion of the order read as follows:- 34. The discussions above lead to a situation where it must be found that there is a mandatory statutory duty to consider the application/proposal for appointment as directed in a general meeting. The power of the general body under Section 160 has not been delegated to the Board of Directors. Such a delegation would necessarily affect the very constitution of the Board, which ultimately is a representative body which must conduct the affairs of a banking company. A banking company, whether in the private sector or in the public sector, is handling public money, public finance and also has to necessarily comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udge has not appropriately taken into account the contentions advanced by the appellant Bank, the RBI and the SEBI. It is also submitted that the appellant is a private Bank and is not amenable to the writ jurisdiction conferred under Article 226 of the Constitution of India. It is further contended that the appellant is not a statutory body or an instrumentality or agency of the Government; that the appellant is not a company financed and / or owned by the Government; that the appellant is not being run on Government funding; that the shares of the appellant are held by private shareholders; and that the appellant does not discharge a public duty or a positive obligation of a public nature. 22. It is also contended that the learned Single Judge erred in interpreting Section 160 of the Companies Act, 2013 and further it is contended that the learned Single Judge failed to appreciate that no person has a right under Section 160 of the Companies Act, 2013 to have his candidature for Directorship place directly before the General Body Meeting in the case of a banking company. That apart it is contended that the learned Single Judge failed to consider and appreciate that Section 35A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was incorporated in the said writ petition with the intention of making an attempt to maintain the writ petition before the writ court. 26. On the other hand, learned counsel appearing for the writ petitioners have submitted that since reliefs are sought against the RBI, SEBI and ROC, Kochi, the writ petition is perfectly maintainable. It is also pointed out that since there is failure on the part of the Directors of the appellant banking company to adhere to the requirements of Section 160 of the Companies Act, 2013, being a mandatory statutory violation, it is well settled that a writ petition is maintainable under law. Other contentions are also raised with respect to the factual circumstances involved in the matter and argued that there is a real element of public duty involved in the matter since the appellant Bank is discharging public duty by accepting deposits from the public and granting loans to the public. That apart it is contended that the Board of Directors of the appellant has no power or authority to reject an application submitted under Section 160 of the Companies Act, 2013. It is also contended that under Section 152(2) of the Companies Act, 2013, every Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. 31. We have evaluated the rival submissions made across the Bar. 32. Before referring to the relevant provisions discussed above, at the outset, we place on record that the appeals are fought by the rival parties mainly relying upon the judgments of the Hon'ble Apex Court and the High courts respectively in LIC v. Escorts Ltd. [(1986) 1 SCC 264], Binny Ltd. v. V. Sadasivan [(2005) 6 SCC 657], Ramakrishna Mission v. Kago Kunya [(2019) 16 SCC 303], Federal Bank Ltd. v. Sagar Thomas [(2003) 10 SCC 733], Chanda Deepak Kochhar v. ICICI Bank Ltd. [2020 SCC Online Bom. 374], Sulochana Gupta v. RBG Enterprises Pvt. Ltd. [2020 SCC Onliine Ker. 4153], Praga Tools Corporation v. Shri C. A. Imanual [(1969) 1 SCC 585], Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. R. Rudani [(1989) 2 SCC 691], State of U. P. v. Johri Mal [(2004) 4 SCC 714], K. K. Saksena v. International Commission on Irrigation Drainage [(2015) 4 SCC 670], Rejendra Menon v. Cochin Stock Exchange Limited [1989 SCC Online Ker. 539 (Single Judge) and 1990 SCC Online Ker. (Division Bench)] and Sri. Ramdas Motor Transport Ltd. v. Tadhi Adhinarayana Reddy [(1997) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) in such manner as may be prescribed. 37. It is true, from the said provision, that definite parameters are prescribed concerning how an application for Directorship is to be submitted and considered. Section 178 of Act 2013 deals with the Nomination and Remuneration Committee and Stakeholders Relationship Committee. Sub-section (1) thereto specifies that the Board of Directors of every listed company and such other class shall constitute a Nomination and Remuneration Committee consisting three or more non-executive Directors out of which not less than one half shall be independent Directors. 38. It is important to note that sub-section (2) of Section 178 stipulates that the Nomination and Remuneration Committee shall identify persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every Director's performance. 39. It is equally important to bear in mind that as per sub-section (3) of Section 178, the Nomination and Remuneration Committee shall formulate the criteria for determining qualifications, po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attempt to see that the writ petition is made maintainable, we are inclined to discuss the contents of Exts. P6 and P7. 44. In Ext. P6 complaint made to the Deputy Governor, Regulation, RBI, Mumbai, Sri. P. K. Vijayakumar, the petitioner has stated that the RBI nominee Mr. G. Jagan Mohan, particularly targets him along with a couple of other Directors and even though he has addressed concern to the part time Chairman of the Bank, the Chairman has ignored the representation and therefore he is compelled to bring it to the notice of the Regulator. On going further through Ext. P6 said to be a whistle blower's complaint, it can be seen that allegations are made against the RBI nominee Sri. G. Jagan Mohan and Sri. D. K. Kashyap. It is true that various allegations are made against the said persons, however the said letter dated 23.06.2021 has nothing to do with the rejection of nomination by the Director Board of the appellant Bank. So also, in Ext. P7 complaint dated 16.09.2021 addressed to the Chairman, SEBI, Mumbai, allegations are made against the RBI nominees. 45. Therefore, it can be seen that the complaint of Sri. P. K.Vijayakumar filed before the RBI as well as the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office as such chairman, or whole-time director, as the case may be, under the provisions of this Act shall also cease to be a director of the banking company and shall also not be eligible to be appointed as a director of such banking company, whether by election or co-option or otherwise, for a period of four years from the date of his ceasing to be the chairman or whole-time director, as the case may be. (3) If, in respect of any banking company the requirements, as laid down in subsection (2), are not fulfilled at any time, the Board of directors of such banking company shall re-constitute such Board so as to ensure that the said requirements are fulfilled. (4) If, for the purpose of re-constituting the Board under sub-section (3), it is necessary to retire any director or directors, the Board may, by lots drawn in such manner as may be prescribed, decide which director or directors shall cease to hold office and such decision shall be binding on every director of the Board. (5) Where the Reserve Bank is of opinion that the composition of the Board of directors of a banking company is such that it does not fulfill the requirements of subsection (2), it may, afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting. 50. Therefore, in our considered opinion, the prayer sought for in W. P. (C) No. 20425 of 2021 leading to W. A. No. 432 of 2022, in regard to Exts. P6 and P7 complaints filed before the RBI as well as SEBI against its nominee Directors, are not at all connected or related to the fundamental issue raised in the writ petition on account of the rejection of nomination. We also wish to state that the matters with respect to Exts. P6 and P7 are not at all germane to decide the issue with regard to the rejection of the nomination of the petitioners. 51. This question was considered by the Hon'ble Apex Court in Begum Sabiha Sultan v. Nawab Mohd. Mansur Ali Khan and Others [(2007) 4 SCC 343] and held as follows:- 11. This position was reiterated by this Court in T. Arivandandam Vs. T.V. Satyapal Anr. [(1978) 1 S.C.R. 742] by stating that what was called for was a meaningful --- not formal --- reading of the plaint and any illusion created by clever drafting of the plaint should be buried then and there. In Official Trustee, West Bengal Ors. Vs. Sachindra Nath Chatterjee Anr. [(1969) 3 S.C.R. 92], this Court approving the statement of the law by Mukherjee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said understanding of the plaint by the trial judge and Division Bench, on a reading of the plaint as a whole. 52. So also, in ING Vysya Bank Ltd. v. Modern India Ltd. and Another [2008 SCC Online Bom. 103], it is held as follows:- 8. ...........The Court will decide the issue by looking at the kernel and disregarding the chaff. The existence of a jural relationship of licensor and licensee or, as the case may be, of landlord and tenant; the nature of the cause of action; the character of the reliefs sought and whether the claim of the Plaintiff arises from and out of the obligations of the parties as licensor and licensee or, landlord and tenant are important considerations. The garb or cloak which is wrapped around the pleadings by an astute draftsman must be kept aside to deduce the pith and substance of the pleadings. If the suit relates to the recovery of possession, it is a suit to which Section 41(1) applies notwithstanding the fact that some of the reliefs or a portion of the cause of action is structured around a claim for specific performance. The Court must ask itself : Does the theme and the foundation relate to the recovery of possession? And in answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a private Bank like the appellant, even assuming it as a public duty, has nothing to do with the election to the Director Board of the banking company, whose activity is confined to the realm and control of the shareholders of the appellant company. 58. The deliberation made above would make it clear that none of the provisions of the Banking Regulation Act and the SEBI Act are dealing with the election to the post of Directors of the appellant banking company. Even assuming that the procedures contained under Section 160 and Section 178 of the Companies Act are violated, it is a subject matter within the realm of a private dispute by and between the rival parties. 59. In that view of the matter we deem fit and proper to discuss the preposition of law laid down by the Hon'ble Apex Court in some of the abovementioned judgments. It is laid down by the Hon'ble Apex Court in most of the judgments above that a writ of mandamus or the remedy under Article 226 is pre-eminently a public law remedy and is not generally available as a remedy against private wrongs. 60. It is held in Binny Ltd. (supra) that a writ of mandamus under Article 226 is used for enforcement of vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis. A service voluntarily undertaken cannot be said to be a public duty. Besides ICRISAT has a role which extends beyond the territorial boundaries of India and its activities are designed to benefit people from all over the world. While the Indian public may be the beneficiary of the activities of the Institute, it certainly cannot be said that ICRISAT owes a duty to the Indian public to provide research and training facilities. 62. So also, it was held therein that, it is difficult to draw a line between public function and private functions when they are being discharged by purely personal authority and that a body is performing a public function when it seeks to achieve some collective benefit for the public or a section of the people and is accepted by the public for that section of the public as having authority to do so; and that bodies, therefore, exercise public functions when they intervene or participate in social or economic affairs in the public interest. It was also held therein that the duty cast on the public body may be either statutory or otherwise and the source of such power is immaterial but nevertheless there must be the public law element in such acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans, taking steps for recovery and so on, but the said function discharged by the appellant banking company has nothing to do with its private affair to elect the Board of Directors, if at all assuming that such transactions have any public element and public duty. 67. In that context, the Hon'ble Apex Court in Phoenix ARC Private Ltd. Vishwa Bharati Vidya Mandir and Others [(2022) 5 SCC 345], had to consider the performance of public functions by a private party vis-a-vis the necessity of, for invocation of writ jurisdiction and held as follows; 18. Even otherwise, it is required to be noted that a writ petition against the private financial institution ARC appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normally expected to be performed by the State authorities. During the course of a commercial transaction and under the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o change the management, by a resolution of the Company like any other shareholder. 69. Considering the issue, we are of the view that the appellant Bank is able to satisfy this Court that the rejection of the nomination for the post of Directorship has nothing to do with the public element or public duty of the appellant company or its Board of Directors or the Nomination and Remuneration Committee. Even though various other judgments are cited by the rival parties, we are of the view that the legal position with respect to the maintainability of a writ petition is so well settled with the preposition laid down by the Hon'ble Apex Court in its various judgments and as discussed above. 70. Succinctly put, we have no hesitation to say that interference is required to the interim order of the learned Single Judge in view of the fact that the issue raised in the writ petition has no public element involved, and the issue of rejection of nomination has nothing to do with the public duty and public function if any discharged by the Bank with respect to the other commercial and financial banking activities of the Bank concerning the public. It is only appropriate to state at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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