SC| There cannot be a uniform qualification/disqualification for the Board of Directors under the Banking Companies Act

Supreme Court: The bench of Abhay Manohar Sapre and Indu Malhotra, JJ  has held that there cannot be a uniform qualification or/and disqualification for the Board of Directors under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

Background of the case:

The case at hand related to the nomination of a Director from the workman/employee category falling in clause (e) of Section 9(3) of the Act and as well as to his/her disqualification for being nominated as a Director in that category Section 9(3) of the Act provides for composition of Board of Directors and also provides as to who can be nominated as Directors in the Board of Directors. Clauses (a) to (i) of sub­section (3) of Section 9 of the Act sets out various categories from which   one Director from each of such categories is nominated in the Board of Directors. Clause(e) deals with a category of workman/employee Director whereas clause(f) deals with a category of officer/employee Director for their nomination in the Board of Directors.

On Distinction between Clauses (e) and (f) of Section 9(3) of the Act:

Both the categories of employees are different as per the perusal of the clauses (e) and (f) of Section 9(3) of the Act that:

  1. One is worker/employee category as defined under Section 9(3)(e) and the other is officer/employee category as defined under Section 9(3)(f) of the Act.
  2. It is for the legislature to decide as to what qualifications and disqualifications should be prescribed for various categories of the employees for their nomination on the post of Director.
  3. There lies a distinction between the worker and the officer. The former, i.e., worker is defined under Section 2(s) of the Industrial Disputes Act, 1947 and is governed by that Act whereas the latter, i.e., officer is not governed by the Industrial Disputes Act but is governed by separate service rules. Both these categories of employees, therefore, cannot be equated with each other and nor can be placed at par for providing equal qualification or/and disqualification for their nomination as a Director in the Board of Directors.
  4. Article 14 of the Constitution applies inter se two equals and not inter se unequals.
  5. The nominee worker/employee has only a right under the Act to be appointed as Director from the category of worker/employee in terms of Section 9 (3)(e) of the Act provided the concerned nominee whose name is recommended by the Union fulfils the qualifications laid down in Clause 3(2)(iii) of the Scheme but not beyond it.

On Uniform Qualification/Disqualification for Board of Directors under Section 9(3) clause (a) to (i):

The Board of Directors consists of persons coming from different fields. There cannot, therefore, be a uniform qualification or/and disqualification for such persons. Indeed, the qualifications and disqualifications are bound to vary from category to category and would depend on the post, experience and the stream from where a person is being nominated as a Director. Moreover, the qualification and disqualification has to be seen prior to his/her becoming a Director and not after his/her appointment as a Director.

[Federation of Bank of India Staff Unions v. Union of India, 2019 SCC OnLine SC 302, decided on 01.03.2019]

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