Karnataka HC declines to indulge into the alleged mismanagement in FKCCI; says that the Federation is not an “instrumentality of the State” under Art. 12

Karnataka High Court

   

Karnataka High Court: While deciding the instant writ petition wherein an elected member of Federation of Karnataka Chambers of Commerce and Industry (FKCCI) came before the Court grieving against the alleged mismanagement of and undemocratic practices perpetrated in the FKCCI, the Bench of Krishna S. Dixit, J., declined to indulge in the matter and made certain observations regarding FKCCI and it being an “instrumentality of the State” under Art. 12 of the Constitution. Some of the important observations are as follows-

FKCCI being “instrumentality of the State” under Art. 12

  • While making observations upon this aspect, the Court noted indisputable facts that FKCCI is a very old institution having been incorporated as a company on 03-12-1938 and its Memorandum of Association enumerates its objectives, primary of which is to promote and protect inter alia trade, commerce, service and manufacture. There are 3,000 ‘direct members' and about 2,50,000 ‘indirect members' drawn from all sectors of trade, commerce & industry, spread all over Karnataka State. It is a member of national bodies like FICCI, ASSOCHAM & OVERSEAS Enterprises.

  • However, the Court observed that merely because the avowed objects of a private body linguistically partake the nature of certain functions which ordinarily governmental bodies do, it does not thereby become a limb or agency of the State. “The indicia to become one are different and apparently lacking in the formation and functioning of FKCCI. The Court also noted the submission of the petitioner's counsel who conceded that none of the High Courts in the country have yet held that Federations such as the counterparts of FKCCI fit into the expression ‘other authorities' employed in Art. 12.

  • The Court observed that if a body of individuals were to be treated as an instrumentality of State, then that would strain the writ jurisprudence, which has been developed, precedent by precedent, over the decades. The Court pointed out that an association of persons incorporated (or not), may undertake activities very much in public interest; however, it does not become a ‘State Agency' for the purpose of Part III of the Constitution.

Contractual Nature of Membership qua the Company

The Court noted that The FKCCI falls under Section 8 of the 2013 Companies Act which corresponds to Section 25 of the erstwhile Companies Act, 1956. The relation between a company of this kind and its members is essentially contractual in nature; since MOA/AOA have a binding effect on the company and its members therefore, the grievance of the petitioner if any cannot have redressal at the hands of constitutional Courts.

Desirability of Having Past Presidents in the Managerial Bodies

Noting one of the petitioner's grievances against the past Presidents being the ex-officio members of the Managing Committee, as provided under Art.11.1 (iii) of AOA, the Court observed that the provision intends to draw wisdom of the experienced and to employ it for the corporate objectives. The Court pointed out that such ideas are enacted even in the campus laws such as university legislations which provide for the appointment of ‘Old Guards' as professors emeritus and their inclusion in the Senate/Syndicate.

After all, ‘grey hair has to be respected' as of necessity, if not because of virtue”.

The Court did note that that there is some sense in the submission made on behalf of the petitioner that the inclusion of too many Past Presidents may jeopardize the flow of fresh blood into the Management Committee; however, it is for the wisdom of managerial section of the FKCCI to take a call on this.

Sub-Committee Recommendations and their Justiciability and Appointment of Observers from outside the Membership

  • The Court noted that whether a report/recommendation submitted by an expert committee should be made use of or not, is left to the discretion of the Managing Committee. It was further noted that that once the recommendation of the Bye-law Committee is tabled, deliberated & accepted, that would not proprio vigor bring about change in the structure of management of the FKCCI.

  • The Court noted that the petitioner had other channels to resolve his grievance, like the statutory channel under the Companies Act, 2013 and judicial channel in the form of NCLT. The petitioner could not have hastened to complain to the Writ Court, bypassing all these avenues.

  • Vis-a-vis grievance of petitioner against the appointment of Observers, the Court noted that past Presidents are being appointed as ‘Observers' as provided under the Byelaws of FKCCI since decades. The contention of the petitioner that these Observers should be drawn from outside so that there will be no scope for their lobbying for any particular section, cannot be agreed to. Merely because the persons appointed as Observers too have a voting right and they may vote as well, is too feeble a ground for faltering their appointments.

  • The Court stated that who should be members and who should not be, are all matters of private policy as incorporated in the MOA/AOA/Byelaws and the decision making in matters like these, are left to the Managing Committee of FKCCI.

With the afore-stated observations, the Court dismissed the instant petition.

[B. L. Shankarappa v. Federation of Karnataka Chambers of Commerce and Industry (FKCCI), 2022 SCC OnLine Kar 1585, decided on 30-09-2022]


Advocates who appeared in this case :

K.N. Phanindra, Senior Counsel a/w Kiran B S, Advocate, for the petitioners;

K.G. Raghavan, Senior Counsel a/w G. Komala, Advocate, for R1.


*Sucheta Sarkar, Editorial Assistant has prepared this brief.

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