Umesh Kumar Sinha v. State Of Bihar — 1994 DIGILAW 1 (PAT)

Judgment B. P. Singh, J. 1. The petitioner, who claims to have been duly appointed as the Managing Director of the Bihar State Pharmaceutical and chemical Development Corporation, (hereinafter referred to as the respondent corporation) has assailed annexures 13 and 14 to the writ petition. Annexure 13 is a memo whereby the services of Ram Prakash mahto, IAS, respondent No. S have been placed at the disposal of the department of Industries for his appointment and posting as the Managing director of the respondent corporation. Annexure 14 is the notification whereby, under Articles 92 (a) and 129 of the Articles of Association of tbe respondent Corporation, the petitioner has been removed from the post of managing Director of the Corporation and has been posted as officer on Special Duty in the head quarters of the Department of Industries. By the same notification respondent No.5 an I. A. S. Officer has been appointed and posted as the Managing Directer of the respondent Corporation till further orders. The petitioner contends that he being an employee of the respondent Corporation cannot be transferred outside the Corporation to any post under the Government of Bihar without his consent. He, therefore submits that the first part of the notification transferring him as officer on Special Duty in the Department of Industries is illegal. He also contends that since there is only one post of Managing Director, in the respondent Corporation, and he has been duly appointed to the said post, respondent No 5 cannot be appointed as Managing Director of the respondent Corporation ignoring the right of the petitioner to hold that post. In view of the counter affidavit filed on behalf of the State of Bihar, challenge to the first part of the notification annexure 14 need not be considered because in the counter affidavit it has been clearly stated that the order transferring the petitioner as the Officer on Special Duty in the Department of Industries is being recalled. Consequently the petitioner continues as a managing Director of the respondent Corporation. The counter affidavit however makes it clear that respondent No.5 shall also function as the Managing Director of the respondent Corporation. The petitioner challenges this arrangement of having two Managing directors in the respondent Corporation on the ground that the same is not permissible in law. Consequently the petitioner continues as a managing Director of the respondent Corporation. The counter affidavit however makes it clear that respondent No.5 shall also function as the Managing Director of the respondent Corporation. The petitioner challenges this arrangement of having two Managing directors in the respondent Corporation on the ground that the same is not permissible in law. His case is that there being only one sanctioned post of managing Director, two Managing Directors cannot be appointed against a single post. The petitioner has also impugned annexures 13 and 14 on the ground that the same have been issued with mala fide motive, solely calculated to defeat the right of the petitioner, who has displeaded the chairman of the Corporation, and the powers that be in the State of Bihar. 2. The background of the case reveals that this is not the first writ petition filed by the petitioner, and that for quite some time the petitioner has been in and out of Court In fact he relies upon some of the findings recorded by this Court in an earlier proceeding to support his stand in the instant writ petition. It is, therefore, necessary to notice the background in which the present dispute arises. 3. The petitioner, a qualified Chemical Engineer, applied in response to an advertisement issued by the Bureau of Public Enterprises, Government of Bihar, for appointment to the post of Managing Director of the respondent corparation. An interview was conducted by the Bureau of Public enterprises and thereafter the petitioner was selected for appointment as managing Director of the respondent Corporation This was communicated to him by the Special Secretary, in the Department of Industries, government of Bihar by letter dated 8th September 1984 (Annexure 2 ). The letter discloses that in accordance with Articles 92 and 129 of the article of Association of the respondent Corporation, by order of the governor the petitioner was appointed as the Managing Director of the respondent Corporation on the terms and conditions mentioned in the said communication which were to the effect tha,t the petitioner was appointed in the pay scale of Rs.3000-Rs 3,500, with a starting salary of rs 3300/- and was appointed on probation for a period of two years. After expiry of the period of two years, if his services were found to be satisfactory he was to be confirmed on the post of Managing Director of the respondent Corporation. The petitioner thereafter joined as the managing Director of the Corporation and completed his period of probation on 11.10.1986. By resolution dated 11th March, 1987, the Board of directors of the respondent corporation resolved to permanently absorb the petitioner on the post of Managing Director of the respondent Corporation. No formal order confirming the petitioner as such has been brought to notice and perhaps, such an order was never issued. 4. According to the petitioner he was sent on deputation to serve as expert/consultant in the Pariyojna Sangathan for a period of one year. After completing his tenure in the aforesaid Sangathan, he wanted to join the respondent Corporation on 12 10 1983 as its Managing Director. The petitioner found that there was some reluctance on the part of the State government in allowing him to join the post of Managing Director in the respondent Corporation, which compelled him to file a writ petition before this Court being CWJC No 8755 of 1988 The writ petition was admitted for hearing on 25.1.1989 and by an interim order the petitioners joining letter dated 12.10.1988 as Managing Director, was deemed to have been accepted. Thereafter by order dated 1.121989 the State Government purported to terminate the services of the petitioner as the Managing Director of the respondent Corporation in view of the provisions of Articles 92 and 129 of the Articles of Association of the respondent Corporation, which provided for the appointment of a Managing Director for a period not exceeding five years at a time. Since the petitioner had completed a term of five years as managing Director of the Corporation, by the aforesaid order (annexure 7)his term was not renewed and his services were sought to be the Governor of Bihar. The petitioner impugned the order annexure 7 dated 1st December 1989 by amending his writ petition being CWJC No 8755 of 1988 which was pending before this Court: He challenged the validity of the order annexure 7, which was annexure 19 to the writ petition CWJC No.8755 of 1988. The court however refused to grant stay of the operation of the aforesaid order. The court however refused to grant stay of the operation of the aforesaid order. A learned single Judge of this Court heard and disposed of the aforesaid writ petition He allowed the writ petition and quashed the aforesaid order dated 1st of December, 1989 whereby the Government purported to terminate the services of the petitioner by not renewing his appointment for any further period after the expiry of five years as provided under Article 129 of the Articles of Association of the respondent Corporation. I shall consider later the findings recorded by the learned Judge in the aforesaid writ petition, because considerable reliance has been placed upon the judgement in support of the contention that the appointment of the petitioner was not made under Article 129 of the Articles of Association and that his appointment was made by the Governor through the Council of Ministers in exercise of authority vested in him under Article 124 (a) (ii) of the articles of Association. It was not disputed before us that the judgment in the aforesaid writ petition has attained finality as no appeal was preferred against the said judgment. In obedience to the order of this Court, the Government issued a notification on the 10th July 1992 (annexure 9) reinstating the petitioner on the post of Managing Director in exercise of power under Articles 92 and 129 of the Articles of Association of the Corporation. The petitioner has taken objection to the references to Articles 92 and 129 of the Articles of Association in the said notification, since according to him, this Court bad decided that his previous appointment had not been under Articles 92 and 129 of the Articles of Association. 5. The petitioner took over charge as Managing Director on 14.7 1992. By notification annexure 10 dated 27th Nove.1992 by order of the Governor the services of Shri B K Verma, I. A. S. , were placed at the disposal of the department of Industries for appointment as the Managing Director of the respondent Corporation. The petitioner was aggrieved by the aforesaid notification inasmuch as it was an attempt to appoint another Managing director in the respondent Corporation, against the single post which was held by the petitioner. He, therefore, filed a writ petition before this Court being CWJC no 12301 of 1992 By order dated 4.12.1992 an order was passed directing the respondents to maintain status quo. He, therefore, filed a writ petition before this Court being CWJC no 12301 of 1992 By order dated 4.12.1992 an order was passed directing the respondents to maintain status quo. By a subsequent order dated 15 12.1992 the writ petition was admitted for hearing and the order of status quo was maintained. However it appears from another order passed on 14.1.1993 that the writ petition was dismissed as having become infructuous on the statement made by the counsel for the State as well as by the corporation that the impugned order had been withdrawn so that the petitioner had not subsisting grievance. This Court, however, gave liberty to the petitioner to move this Court in future if cause of action arose. The grievance of the petitioner is that the respondent did not permit this Court to decide the question as to whether a second Managing Director could be appointed in the Corporation. It was with this intention that the order placing the services of an I. A. S- Officer at a disposal of the department of Industries for his appointment as Managing director of the respondent Corporation was withdrawn, making the writ petition infructuous. 6. After the disposal of the writ petition on the ground that the same had become infructuous, annexure-13 was issued on the 24th March, 1993 placing the services of respondent No.5, an I. A. S. Officer, at the disposal of the department of Industries for his appointment as Managing Director of the respondent Corporation. This was followed by annexure 14, a notification whereby the petitioner was sought to be transferred as Officer on special duty in the head quarters of the department of Industries and respondent no.5 was appointed as the Managing Director of the respondent corporation. As noticed earlier the notification in so far as it related to the appointment of the petitioner as Officer on Special Duty in the Government of Bihar was recalled, and therefore the only question which falls for consideration is as to whether the respondent No.5 could be appointed as Managing director of the respondent Corporation in addition to the petitioner who was regularly appointed as the Managing Director of the respondent corporation. 7. 7. In a very cryptic counter affidavit filed on behalf of the State and affirmed by its Additional Industrial Development Commissioner, apart from stating the fact that the Government had decided to recall the order as contained in annexure 14 to the extent it recall the order as contained in annexure 14 to the extent it related to the transfer of the petitioner as officer on Special Duty in the head quarters of the Department of Industries, it is stated that since there are serious allegations against the petitioner, and since the matter was being inquired into, the Government took a decision to initiate a proceeding against the petitioner. It was also decided to appoint one more Managing Director in the meantime as Managing Director no 2. 8. The instant writ petition was admitted for hearing on the 7th July 1993 but the interim order passed earlier was modified and the State was given liberty to appoint respondent No.5 or any other person as Managing director No 2 in the Corporation. The petitioner filed an application for modification of the aforesaid order of this Court granting liberty to the state to appoint any person as the second Managing Director in the corporation. Reliance was placed on a Sec.197 (A) of the Companies Act which, according to the petitioner prohibited the appointment of more than one Managing Director in a Company. By order dated 22.7.1993, the petitioner for modification of the order was left to be considered at the time of hearing of the writ petition. Aggrieved by that order the petitioner preferred a Special Leave Petition before the Supreme Court of India impugning the interim order of this Court granting liberty to the State Government to appoint a second Managing director in the Corporation, as also against its subsequent order refusing to modify its earlier order. The matter was disposed of by the Supreme Court at the admission stage itself. By an earlier order dated 39 1993 the Supreme Court granted stay of the operation of the order of (his Court dated 7 7 1993 whereby the state Government was granted liberty to appoint respondent No 5 or any other person as Managing Director No.2 in the Corporation. By an earlier order dated 39 1993 the Supreme Court granted stay of the operation of the order of (his Court dated 7 7 1993 whereby the state Government was granted liberty to appoint respondent No 5 or any other person as Managing Director No.2 in the Corporation. By order dated 142 94 their Lordships of the Hon ble Supreme Court disposed of the special Leave Petition filed by the petitioner and directed expeditious disposal of the writ application by the High Court, and maintenance of the status quo till the writ application was disposed of by this Court. The writ petition was taken up for hearing with the consent of the parties with utmost expedition but for reasons recorded in our order dated 20.5.94 we could not deliver judgment earlier, even though the hearing concluded on the 8th of april 1994. 9. Mr Giri counsel for the petitioner has urged before us the following submissions. He submitted that the order annexure 13 and the notification annexure 14 (subsequently modified) whereby a second Managing director has been appointed in the respondent Corporation has to be viewed in the background of the facts of the case, and must be held to have been issued mala fide both in law and fact. The modification to annexure 14 was a colourable exercise of power to defeat the interim order of this court. Secondly he submitted that there was no provisions in the Companies act which authorised the appointment of two Managing Directors at a time. In fact Sec.197-A of the Companies Act prohibited the appointment of two Managing Directors in a Company. Thirdly, the petitioner cannot be transferred outside the Corporation without his consent, since he is an employee of the Corporation and not of the Government of Bihar. Fourthly, the decision rendered by this Court earlier in CWJC No 8755 of 1988 attained finality and was binding on the partitions. The same issues cannot be raised in the instant writ petition as they are barred by the principles of res judicata. Fourthly, the decision rendered by this Court earlier in CWJC No 8755 of 1988 attained finality and was binding on the partitions. The same issues cannot be raised in the instant writ petition as they are barred by the principles of res judicata. In this connection he further submitted that even the finding of the learned single Judge in the earlier writ petition to the effect that the petitioner was not appointed under Article 129 of the Articles of Association but was appointed under Article 124 (a) (ii) of the Articles by the Governor, was binding upon this Court, and a different view cannot be taken in the instant writ application. Even if the judgment rendered in the earlier writ petition is found to be erroneous, the effect of the judgment or could not be taken. . . . . . . (sic) was reviewed or set aside in appeal. Fifthly, it was submitted that the appointment of respondent No.5 as Managing Director was in any event illegal as it was done in violation of Article 16 of the constitution of India. Lastly, it was submitted that respondent No.5 was not appointed in terms of Article 129 of the Articled of association and his appointment was bad for this reason as well. 10. The learned Advocate-General appearing on behalf of the State submitted that the instant writ petition was not maintainable because the governor had appointed the petitioner as Managing Director in exercise of authority conferred upon him under Article 129 of the Articles of Association. He acted not as bead of the State but under the Articles of association which was conferred upon him the power to appoint directors. The petitioner could not challenge the said order by filing a writ petition before this Court He further submitted that there was nothing in the companies Act which prohibited the appointment of more than one managing Director. On the other hand Articles of Association of the Company in terms provided that more than one Director could be appointed as Managing director. There was, therefore, no illegality in the appointment of a second managing Director. He further submitted that the allegations of mala fide were vague. and general in nature. The necessary parties were not before this Court, and in their absence no finding of mala fide could be recorded against them. There was, therefore, no illegality in the appointment of a second managing Director. He further submitted that the allegations of mala fide were vague. and general in nature. The necessary parties were not before this Court, and in their absence no finding of mala fide could be recorded against them. In any event he submitted that appointment of a second Managing Director was in accordance with law and no question of mala fide arose for consideration of this Court 11. Mr. Shyama Prasad Mukherji, Sr. Advocate appearing on behalf of the respondent No 5 submitted that the writ petition filed by the petitioner was not maintainable because the Governor had acted within the frame work of the Companies Act and had exercised powers conferred upon him, by the Articles of Association Since the orders impugned only brought out a change in the management of the Company, the petitioner had no right to maintain a writ petition since the action was not in the public law field- He also submitted that the finding recorded in the earlier writ petition that the petitioner was appointed as Managing Director not under article 129 of the Articles of Association but under Articles 124 (a) (ii) was an erroneous finding. He submitted that no question of res judicata arose, and it was open to this Court to hold that the petitioner was appointed only for a period of five years and in the absence of renewal of the term he ceased to hold office after the expiry of the first term The provisions of the Companies Act particularly Sec.317 and the Articles of Association of the Corporation as they stood on the date of appointment of the petitioner, provided that a managing Director could be appointed only for a term of five years at a time. Even though by a subsequent notification issued in the year 1983 under Sec.620 of the Companies Act, the provisions of Sec.317 were made inapplicable to Government Companies, the same did not benefit the petitioner because he was appointed before the notification was issued under section 620 of the Companies Act. In any event, since there was no change in the Articles of Association, even if there was no statutory prohibition, the prohibition imposed by the articles of Association as regards the term of the appointee, applied with full force. In any event, since there was no change in the Articles of Association, even if there was no statutory prohibition, the prohibition imposed by the articles of Association as regards the term of the appointee, applied with full force. Counsel for respondent No.5 contended that on general principle as well, there can be no objection to the appointment of more than one managing Director On the plea of mala fide he submitted that the plea was not properly raised in the writ petition and in the absence of necessary particulars and parties, this Court should not examine the plea of mala fide. Mr. Abhay Singh, Sr. Advocate appearing on behalf of the respondent corporation supported the case of the private respondent and further submitted, relying upon authorities that the appointment of a second managing Director in exercise of authority conferred by the Articles of association, was an exercise of power not in the Public law field but in private law field, inasmuch as it did not deal with any essential Governmental function, but only had the effect of restructuring the management of a Company. Mr. Rajeshwar Singh who also claims to represent the respondent Corporation, submitted that the Board of Directors of the respondent Corporation was bound by the Memorandum and articles of Association If the Articles permitted the appointment of two or more Managing Directors, no fault could be found with annexure 14. 12. I shall consider the plea of mala fide later, but I shall first consider the submission urged on behalf of the petitioner that as a matter of law two Managing Director cannot be appointed in one company. Counsel for the petitioner has relied upon Sections 197-A 317 and 620 of the Companies act in support of his submission that the Companies Act does not permit the appointment of more than one Managing Director in a company. On the other hand the respondents have relied upon the same provisions read with Article 129 of the Articles of Association of the Corporation and submitted that there is nothing in law prohibiting the appointment of more than one Managing Director in a company. For the sake of convenience the provision of Sections 197-A, 317 and 620 of the Companies Act as also Article 129 of the Articles of Association are reproduced below :- Article 129. For the sake of convenience the provision of Sections 197-A, 317 and 620 of the Companies Act as also Article 129 of the Articles of Association are reproduced below :- Article 129. "the Company by the ordinary resolution or the Directors may subject to the provisions of Sections 268 and 269 of the Act, and subject to any directions that may be given by the governor from time to time, appoint one or more of the directors to be the Managing Director or Managing Directors or other whole-time Directors of the Company for a term not exceeding five years at a time and may from time to time subject to the provisions of any contract between him or them and the company remove or dismiss him or them from office and appoint another or others in his or their place or places. " Sec.197a. "company not to appoint or employ certain different categories of managerial personnel at the same time. "notwithstanding anything contained in this Act or any other law or any agreement or instrument, no company shall, after the commencement of the Companies (Amendment) Act, 1980 appoint or employee at the same time, or after the expiry of six months from sucn commencement, continue the appoint ment or employment at the same time, of more than one of the following categories of managerial personnel, namely : (a) Managing Director. (b) [* * *] (c) [* * *] (d) Manager. Sec.317 Managing Director not to be appointed for more than five years at a time.1. "no company shall, after the commencement of this Act, appoint or employ any individual as its Managing Director for a term exceeding five years at a time.2. Any individual holding at the commencement of this Act the office of Managing Director in a company shall unless his term expires earlier, be deemed to have vacated his office immediately on the expiry of five yeare from the commencement of this Act.3. Any individual holding at the commencement of this Act the office of Managing Director in a company shall unless his term expires earlier, be deemed to have vacated his office immediately on the expiry of five yeare from the commencement of this Act.3. Nothing contained in sub-section (1) shall be deemed to prohibit the re-appointment, re-employment or the extension of the term of office, of any person by further periods not exceeding five years on each occassiont provided that any such re-appointment, re-employment or extension shall not be sanctioned earlier than two years from the date on which it is to come into force.4 This section shall not apply to a private company unless it Is a subsidiary of public company. Sec.620 Power to modify Act in relation to Government companies.1. The Centra] Government may, by notification in the official Gazette, direct-that any of the provisions of the act (other than sections 618, 619 and 619-A specified in the notification :- (a) shall not apply to any Government company; or (b) shall apply to any Government company, only with such exceptions modifications and adaptations, as may be specified in the notification.2. A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft before each House of parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both house agree in dise approving the issue of the notification or both Housagree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified from as jnay be agreed upon by both the house" Sec.197-A of the Companies Act was amended by Act 17 of 1969 and categories B and C were declared with effect from 3rd April 1970 which provided for the categories "managing agent and Secretaries" and "treasurers". Counsel for the petitioner submitted that Sec.197-A applies to Government companies a? well, and though a notification has been issued under Sec.620 of the Companies Act by the Government making section 317 inapplicable to Government Companies as such notification has been issued which has the effect of making 197-A in applicable to Government companies. Counsel for the petitioner submitted that Sec.197-A applies to Government companies a? well, and though a notification has been issued under Sec.620 of the Companies Act by the Government making section 317 inapplicable to Government Companies as such notification has been issued which has the effect of making 197-A in applicable to Government companies. At this stage I may only notice that the respondents have brought on record a notification issued by the Central Government in exercise of power under Sec.620 of the Companies Act dated 16th July 1985 being notification no. GSR 577 (E) directing that the sections of the Companies act mentioned in the notification including Sec.317 (but not including section 197-A) shall not apply to a Government Company in which the entire paid-up share capital is held by any State Government. 13. I shall proceed on the basis that the provision of Sec.197-A of the Companies Act applies to a Government Company like the respondent Corporation. Counsel for the petitioner contends that in terms of section 197-A two managing directors cannot be appointed in a company at time. In my view the submission must be rejected as it ignores the crucial words of the section. The learned Advocate-General rightly pointed out that the section only provides that no company shall after the commencement of the Companies (Amendment) Act, 1960, appoint or employ at the same time, or after the expiry of six months from such commencement shall continue, the appointment or employment at the same time "of more than one of the following categories of managerial personnel" (emphasis supplied ). Initially there were four categories of managerial personnel specified in the section namely ; (a) Managing director (b) Managing agent and secretaries (c) treasurers and (d) manager. Two categories, namely "managing agent and secretaries" and "treasurers" have since been deleted by Act 17 of 1969, consequent upon the abolition of the managing agent system. The section prohibits the employment of more than one category of managerial personnel specified under that section. It does not prohibit the appointment of more than one person in the same category there is nothing in the section which prohibits the appointment of more than one managing director in a Company but it prohibits a company from appointing managing agent and secretaries or treasurers or manager, if it has appointed a managing director. It does not prohibit the appointment of more than one person in the same category there is nothing in the section which prohibits the appointment of more than one managing director in a Company but it prohibits a company from appointing managing agent and secretaries or treasurers or manager, if it has appointed a managing director. The restriction is on the employment of more than one category of managerial personnel, and not of the number of personnel employed of any one category. The submission, therefore, urged on behalf of the petitioner must be rejected and it must be held that Sec.197-A does not bar the appointment of more than one managing director. The learned Advocate-General referred to other provisions of the companies Act, such as, Sections 269.275 and 388 and submitted that there is nothing in those provisions which prohibits the appointment of more than one managing director in a Company. Counsel for the petitioner also did not point out any other provision in the Companies Act prohibiting the appointment of more than managing director 14. In the light of the provisions of the Companies Act, one may consider the provision of Article 129 of the Articles of Association. Article 129 clearly provides that the Company may from time to time appoint one or more of the directors to be the managing director or iranaging directors for a term not exceeding five years at a time. There is, therefore, express provision in the Articles of Association for appointment of more than one managing director. In the absence of anything to the contrary in the companies Act, the Articles of Associatiom must prevail if they are consistent with the provisions of the Companies Act. I have therefore no hesitation in coming to the conclusion that more than one director of a a Company may be appointed as Managing Director or Managing Directors of the Company. 15. Counsel for the parties addressed arguments at the Bar on the basis of the statutory provisions as contained in the Companies Act and the provisions of the Articles of Association of the respondent Corporation however, in my visw, the matter should also be considered from another angle, namely whether there can be any objection in principle to the appointment of more than one Managing Director as the Managing Director as the managing Director/directors of a Company. In my view, there can be no objection in principle to the appoi ntment of more than one managing director in a company. It is not practicable for the Board of Directors to transact all work in meetings of the Board of Directors, having regard to the large number of matters which may require their attention day to day. It is, therefore, practicable to appoint one or more of the Directors as Managing Director or Managing Directors of the company and to entrust them with such powers as the Board may consider appropriate. Whether one or more than one Managing Director should be appointed, is a matter which must be considered in each case having regard to the nature of work and its volume. The Managing Directors derive their authority from the Board of directors and in exercise of functions delegated to them they are under the supervisory control of the Board of Directors in most matters. The Board has the power from time to time to revoke, or alter or vary all or any of such powers. In the absence of any statutory prohibition, there appears to be no reason in principle why the Board may not appoint more than one managing Director. Renowned authors on the subject are unanimous in their view that more than one Director may be appointed Managing director/managing Directors of a company. In Palmers Company Law. Volume-I, 23rd Edition at page 828, paragraph 62-07. It has been stated thus :- "in large companies the day to day management and decisions are normally left to one or more managing directors. A Managing director as such has no specific powers or duties recognised by the law : what powers and duties he is to have must be derived from the company itself It is common to find provisions in the articles authorising the appointment by the Directors of one or more of their body as Managing Directors (see Articles 107-109), and in such cases the Articles must be looked at to see the terms upon which such appointments may be made by the Directors ; subject thereto the actual agreement made between the company and the Managing Directors has to be considered. " In Core-Browne on Companies, 43rd Edition paragraph 26-8. " In Core-Browne on Companies, 43rd Edition paragraph 26-8. The law has been stated in the following words ;- "the general rule is that the Directors cannot appoint one of themselves to an office of profit or delegate power to a Managing Director unless expressly empowered by the Articles or by a resolution of the company. It is, therefore, usual to insert in the Articles power for the Directors to appoint one or more of their body to be managing director or directors, and to pay him or them special remuneration, delegating to him or them such powers as are necessary. " Similar is the atatement of the law in Penningtons Company Law, 3rd Edition, page 125 In Halsburys Laws of England.4th Edition, Volume vii, page 289, paragraphs 501 and 502 the law with regard to delegation of powers by the Board and the appointment of Managing Directors has been discussed It is observed that without express authority to do so the directors cannot delegate their duties or powers. Articles of Association, however, generally confer authority on the directors to delegate their powers to committees or local hoards or Managing Directors. 16. The law as stated by the important authors on the subject leaves no room for doubt that it is open to the Board of Directors, if authorised by the Articles of Association to do so, to nominate one or more of the directors to be the Managing Director or Managing Directors of the company. In fact in England, Article 107 Schedule I, Table A, Part I of the companies Act, 1948, provides that the Directors may from time to time appoint one or more of their body to the office of managing Director for such period and on such terms as they think fit, and, subject to the terms of any agreement entered into in any particular case, may revoke such appointment. Article 129 of the Articles of Association of the respondent corporation incorporates a similar provision. 17. Mr. Mukerji learned counsel appearing for the respondent No.5 took the extreme position that the petitioner had no right to maintain the instant writ petition because he ceased to hold office on the expiry of the term of five years from the date of appointment. He submitted thai the judgment earlier rendered in CWJC No.8755 of 1988 was perincuriam and in any event erroneous. He submitted thai the judgment earlier rendered in CWJC No.8755 of 1988 was perincuriam and in any event erroneous. The judgment has no binding effect so far this court is concerned It should, therefore, be held that the petitioner ceased to hold office of Managing Director when he completed bis terms of five years from the date of his appointment. The question whether a second managing director could be appointed is therefore academic as the petitioner had no subsisting right to hold the office of managing director. Mr. Giri on the other hand took the extreme stand that not only the judgment rendered in the earlier writ petition was binding upon the parties as it had attained finality and operated as res judicata in the instant proceeding, the proposition of law laid down by the single Judge in the earlier judgement in support of his decision was also binding upon this Court, so that this Court is precluded from taking a view even on a question of law different from the view which found acceptance by the learned single Judge. He submitted that the question whether the petitioner was appointed for a term of five years only, was conclusively decided in the earlier writ petition and the contention of the petitioner that be was appointed to hold office till he superannuated from service, or was removed in accordance with law, which found favour with the learned single Judge, cannot be registered in this proceeding. He however further submitted that the finding of the learned single Judge that the petitioner was not appointed as Managing director under Article 129 of the Articles of Association, but was appointed by the Governor in exercise of authority vested in him under article 124 (a) (ii) of the Article was also binding upon this Court. Consequently the provision in Article 129 of the Articles of Association for appointment of one or more directors as managing directors of the Company did not affect the case of the petitioner since he was not appointed under that Article In order to appreciate the rival submissions urged at the Bar it is necessary to notice the provisions of the Companies Act and Articles of association of the Company. Sec.317 which has been reproduced earlier in this judgment provides that no Company after the commencement of the Act shall appoint or employ any individual as its managing director for a term exceeding five years at a time. Consistent with Sec.317 of the Companies Act article 129 of the Articles of Association of the respondent Corporation provides for the appointment of one or more of the directors to be the managing director or managing directors of the company for a term not exceeding five years at a time. The petitioner was appointed as the managing director of the company on 8th Sept.1984 as would be evident from annexure 2 Though the letter of appointment provides for a period of probation of two years, and confirmation thereafter, it does not prescribe the tenure of appointment. On a plain reading of annexure 2 it would appear that the petitioner was appointed as managing director to hold office for an unspecified period. Assuming it to be so, it cannot be contended that the letter of appointment override the provisions of Sec.317 of the Companies Act. The letter of appointment must be read in the light of the statutory provisions, and so read, it must be held that the petitioner could not hold office after the expiry of the statutory period of five years prescribed by section 317 of the Companies Act, unless his term was renewed as provided in that section Counsel for the respondent No.5 substituted that by issuance of a notification in exercise of powers vested in it by Sec.620 of the Act the Central Government directed that Sec.317 of the Act shall not apply to a Government Company. The notification was issued on 16th of July 1985, i. e. after the issuance of the letter of appointment of the petitioner. The notification has perspective operation and therefore it did not extend the term of the petitioner. In any event, even if the prohibition contained in Sec.317 was removed in view of the notification issued under Sec.620 of the companies Act, as similar prohibition contained in Article 129 of the Articles of association continued to operate. The notification has perspective operation and therefore it did not extend the term of the petitioner. In any event, even if the prohibition contained in Sec.317 was removed in view of the notification issued under Sec.620 of the companies Act, as similar prohibition contained in Article 129 of the Articles of association continued to operate. Since Article 129 of the Articles of association was not amended or modified, the appointment having been made under the Articles of Association, the term of office of the petitioner could not be more than five years even in the absence of any period specified in the letter of appointment. It must, therefore, be held that the appointment was made only for a term of five years. The submission is attractive and also plausible, but I am afraid the issue is barred by the general principles of res judicata. In CWJC No.8755 of 1988 the validity of the order dated 1st December, 1989 was directly in issue. By that letter the petitioner was informed that on the expiry of five years from 8.9.1984 (from the date of appointment) the petitioners services would stand terminated under Article 92 read with Article 129 of the Articles of Association of the Corporation. A learned single Judge of this Court allowed the writ application and quashed the letter dated 1st December, 1989 which was annexure 19 in that writ application and has been annexed as annexure 7 in the instant writ application. No appeal was preferred against the judgment of the learned single Judge end consequently the judgement attained finality. Such being the position, the issue is barred by the general principles of res judicata and it is therefore, not permissible for this Court now to hold that the appointment of the petitioner came to an end on the expiry of the term of five years. Learned counsel for the petitioner is right in placing reliance upon the judgment of the Supreme Court reported in AIR 1961 SC 1457 and air 1960 SC 1186 and in contending that for the application of the general principles of res judicata, it is not necessary to go into the question as to whether the previous decision was right or wrong. The binding character of judgment pronounced by courts of competent jurisdiction is itself an essential part of the rule of law, and the rule of law obviously is the basis of the administration of justice. Doctrine of estoppel by judgment does not rest on any superior authority of the Court rendering the judgment, and a judgment of one court is a bar to an action between the same parties for the same cause in the same court or in another court, whether the latter has concurrent or other jurisdiction. The rule is subject to the limitation that the judgment In the former application must have been rendered by a court or tribunal of competent jurisdiction. It is not urged by any of the parties before us that the Court rendering judgment in the earlier application lacked jurisdiction. It is also not disputed that the question which primarily fell for consideration in the earlier writ petition was whether the term of appointment of the petitioner came to an end on the expiry of five years from the date of appointment. Such being the factual position. I mast conclude that it is not open to this Court now to hold that the term of office of the petitioner came to an end on the expiry of the five years from the date of his appointment. It is immaterial whether the earlier judgment was right or wrong, because the general principles of res judicata prevent this court from Investigating the matter any further. The earlier judgment having attained finality, even if it be found to be erroneous, it binds the parties and prevents any further investigation on that issue between the same parties in any subsequent action. 18. It is however a different question as to whether the reasons recorded by the learned judge in support of his decision in the earlier writ petition are also binding upon us by application of the principles of res judicata. In my view, the principles of res judicata are quite different and distinct from the principle of stare decisis or the law relating to the binding nature of precedents. In my view, the principles of res judicata are quite different and distinct from the principle of stare decisis or the law relating to the binding nature of precedents. While the former precludes a court from investigating the same question over again between the same parties when a judgement has earlier been rendered by a court of competent jurisdiction and has attained finality, the latter deals with the binding effect of principles of law laid down in an earlier decision of the Court. It is well settled that the principles of law laid down by a court has binding effect and another co-ordinate Bench of the same court cannot refuse to follow the same. It is equally well settled that a division Bench of the same court is not bond by the declaration of law by a single judge of the court, and for good reasons it may overrule the decision. If the Bench hearing the matter has authority to overrule the judge or bench which decided the earlier matter, it can do so without violating the principles relating to binding precedents after recording its reasons. A larger Bench of the Court can overrule the law laid down by smaller Beach of the same court. Similarly a court of superior jurisdiction is not bound by the law laid down by a court of inferior jurisdiction. In such consideration, the correctness or incorrectness of the earlier decision is directly in issue, as is not the case in cases where the general principles of res judicata apply. In the instant case the earlier judgment was rendered by a learned single Judge of this Court. This Bench, which is a Division Bench is not bound by the law as disclosed by the learned single Judge if it finds good reasons to take a contrary view. The decision must be distinguished from the reasons for the decision. While the former is relevant in considering the application of the general principles of resjudicata, the latter is not. The decision in the case binds the parties after the judgment attains finality. The reasons for the decision aie not binding by application of principles of res judtcaia. The decision must be distinguished from the reasons for the decision. While the former is relevant in considering the application of the general principles of resjudicata, the latter is not. The decision in the case binds the parties after the judgment attains finality. The reasons for the decision aie not binding by application of principles of res judtcaia. A larger Bench of the Court may hold for reasons to be recorded that the earlier declaration of law was erroneous, and even though the decision in the case cannot be altered, it is not bound to apply in all cases, or even in a subsequent action between the same parties on any other issue, the principles of law earlier declared by a smaller Bench, if the same is found to be unacceptable by a larger bench. 19. Coming to the facts of the instant case, the learned Judge while deciding CWJC No.8755 of 1988 held as follows :- Article 129 provides that the company by ordinary resolution or the. directors may subject to the provisions of Sections 268 and 269 of the Act, and subiect to any directions that may be given by the Governor from time to time appoint one or more of the Directors to be the managing director or managing directors of the company for a term not exceeding five years at a time Article 131 provides that the remuneration of the managing director has to be fixed by the company in general meeting, subject to the approval of the central Government. I have no hesitation in holding that a managing director of the respondent corporation could be appointed only under Article 129 of the Articles which is a special provision providing for the appointment of managing director. The special provision must override the general provision It is not accurate to state that Article 124 vests in the Governor the power to make appointments to all posts those maximum salary exceeds rs.2,000/-. All that it provides is that the Board shall before creating a post or makine an appointment to a post carrying a maximum salary exceeding Rs.2,000/- obtain the decision of the Governor for the creation of such post or appaintment thereto. The power to make the appointment vests in the board of Directors but the power mint be exercised only after the matter has been reserved for the decision of the Governor. The power to make the appointment vests in the board of Directors but the power mint be exercised only after the matter has been reserved for the decision of the Governor. In the case of appointment of a Managing Director as well, the appointment must be made by the company by ordinary resolution or by the Board of Directors, subject to the provisions of Sections 268 and 269 of the Companies Act, and subject to any directions that may be given by the Governor in this regard from time to time. The power to appoint a managing director vests in the general body of shareholders of a company or its Board of Directors. The Governor may from time to time give directions in the matter, but the appointment must be made by the company by ordinary resolution or by the Board of Directors, who are the only competent appointing authorities and not the Governor. Unfortunately the Government has not taken care to follow the provisions of the Companies Act and the Articles of Association meticulously. If the submission of the petitioner, that he was appointed a managing director of the company by the Governor acting through the Council of Ministers is accepted, it must be held logically that the appointment itself use illegal, because there is no provision either in the Companies Act or in the Articles of Association which vests in the Governor the power to appoint a Managing director of a Government Company. Since none of the parties contended before us that the initial appointment of the petitioner was itself illegal, it is not necessary for me to say anything more on this point. I must, however, hold that the petitioner was appointed as a Managing director under Article 129 of the Articles of Association and not under article 124 of the Articles, though he should have been appointed for a tenure of five years at a time in accordance with the Articles of Association in view of the earlier judgement of this Court that question cannot be reagitated and it must be held that he was appointed for an unspecified period, meaning thereby that he shall hold the office of managing Director till such time as he superannuates from service in accordance with law or his services are dispensed with or terminated in accordance with law. 20 Perhaps the notice of the learned judge was not pointedly drawn to the provision of Articles 317 of the Companies Act, be use that action clearly provides that a managing director may be appointed for a term not exceeding five years at a time At the time when the petitioner was a appointed, Sec.317 was applicable to the Government companies as well. Though in the subsequent year the Central Government declared that section 317 shall not apply to Government companies, there being no corresponding change in the Articles of Association, the plea that the tenure of the petitioner came to an end on the expiry of five years was certainly plausible, and a possible reasonable view of the matter. 21. I shall now consider the plea of mala fide urged on behalf of the petitioner. It is well settled that the plea of mala fide must be expressly pleaded and strictly proved. The burden of establishing mala fide is very heavy on the person who alleges it. The allegation of mala fides are often more easily made than proved, and the very seriousness of such allegations demands proof of a high order of credibility. Counsel for the petitioner contended that the background of the case gives indication as to the manner in which the powers that be in the Government of Bihar tried to dispense with the services of the petiioner. An attempt was thereafter made to appoint another managing director to that the importance of the petitioner was reduced. Faced with an adverse interim order, the respondent withdrew the earlier notification appointing another managing director. Thereafter the impugned annexures were issued appointing respondent no 5 as the managing director of the company. The respondent 1 to 4 in the instant writ application are the State of Bihar and its authorities. Respondent No 5 is the person who has been appointed as the managing director, while respondent No.6 is the Bihar State Pharmaceutical and chemical Development Corporation Ltd. through its secretary. It will thus be seen that apart from respondents are State and its authorised and the respondent corporation. In paragraph 16 of the writ petition it is stated that the State Government continued its mala fide act in clear defiance of the interim order passed by this Hon ble Court on 25.1.1989 by posting the petitioner as managing director North Bihar Industrial Area Development Authority, Muzaffarpur. In paragraph 16 of the writ petition it is stated that the State Government continued its mala fide act in clear defiance of the interim order passed by this Hon ble Court on 25.1.1989 by posting the petitioner as managing director North Bihar Industrial Area Development Authority, Muzaffarpur. However, that order was withdrawn. Similar allegations of harassment etc. are made in some of the other paragraphs of the writ petition The specific allegations, if any. are made in paragraphs 23 and 24 of the writ petition which reads as follows :- "that it is essential to point out here that the vested interests, who had created bias against the petitioner earlier in the Government and because of that the petitioner had been harassed since long, continued its activities and some how trying to see the petitioner off from the post of Managing Director specially with pivotal role being done by the present Chairman of the Corporation, prof. Ravindra Charan Yadav, MLA. The petitioner being the managing Director of the Corporation has taken many decision in the interest of the Corporation which has not been liked by chairman because of bis political background. The petitioner had to check misuse of fund on the Chairman which has been about Rs 1,00 lakh per month before the joining of the petitioner as Managing director. The petitioner has been able to cut down the monthly expenditure on the Chairman to the permissble limit and the Chairman with the help of his political friends, has created a situation in which the petitioner may be eased out of the post of Managing Director. And in that design, to ease out the petitioner, a proposal had been introduced and carried through by which one Shri v. K. Verma was posted as Managing Director of the respondent corporation. That it is submitted that the posting of Shri V. K. Verma on the post of the Managing Director in the petitioners institution was result of the action of the Chairman of the respondent corporation and because of his political manoeuvring by which he has put on alarm all the political forces against the petitioner. " 22. From these paragraphs of the writ petition extracted above, it would appear that the petitioner has made certain allegations against the chairman and his political friends. " 22. From these paragraphs of the writ petition extracted above, it would appear that the petitioner has made certain allegations against the chairman and his political friends. Surprisingly the aforesaid Chairman and his political friends have not been made parties in the instant writ application, in their absence it would have been impermissible to investigate the allegations. The petitioner has referred to events which according to him have caused him much harassment. In my view the pleadings are not sufficient to justify an investigation into the plea of mala fide. The allegations are vague and general in nature and the persons conccined are not parties in the instant proceeding. I, therefore, find no substance in the plea of mala fide urged on behalf of the petitioner Assuming that some of the decisions taken by the respondents earlier were erroneous, it does not necessarily follow that they were taken out of malice. An action may be erroneous or even illegal, but not necessarily mala fide. In the absence of clear pleadings and the facts which constitute mala fide, this court will not be justified in investigating such a plea. The plea of mala fide being devoid of particulars, they being vague and general in nature, and the persons against wnom the allegations have been made not being parties in this proceeding, the plea of mala fide in fact must be rejected outright 23. The plea of malice in law, in the facts and circumstances of the instant case, is equally untenable. Malice in law is another fact of the concept, of perversity. It implies that the action complained of is such that no rational person in the given facts and circumstances, could possibly, have taken that action.1 he petitioner contends that there was first an effort to get rid of the petitioner by purporting to terminate the services of the petitioner on the ground that he was appointed only for a period of five years. When that attempt failed, the respondents attempted to transfer the petitioner outside the corporation, but promptly recalled the order when challenged The device of appointment of a second managing director must be viewed in this background, and must be held to be vitiated on account of malice in law. 24. I have earlier considered the question as to whether the petitioner was appointed for a tenure of five years only or for an unspecified period. 24. I have earlier considered the question as to whether the petitioner was appointed for a tenure of five years only or for an unspecified period. I cannot say that the plea of the respondents that the petitioner could have been validly appointed only for a term of five years at a time, was perverse. The plea was plausible and supported by the provision in the Articles of association, even though the same was ejected by this Court. At best the action may be characterised as erroneous in law, and not as one vitiated by malice in law. So tar as the appointment of a second managing director is concerned, the position in law is well settled that the Board of Directors if authorised by the Articles, may appoint one or more of their body to the office of managing director. The appointment of another managing director does not in any manner adversely attect the rights and privileges of the petitioner who continues to enjoy the benefits to which he is entitled. The petitioner cannot claim in law mat the board must delegate all powers to him, because the power of delegation is to be exercised by the Board in its discretion The Board may also revoke, alter or vary any such powers delegated to a Managing Director. If therefore, the Board appoints another managing director, and delegates some of the powers to him, the action cannot be said to be vitiated by malice in law. 25. It is not necessary for me to consider the plea of the petitioner that he cannot be transferred to any post outside the corporation without his consent Counsel for the State clearly stated that part of the notification, annexure 14, has been recalled and there is no question of the petitioner being asked to serve in any capacity outside the corporation against his wishes. 26. Lastly, it was faintly submitted that respondent No.5 was not appointed in accordance with law. Before his appointment, no advertisement was issued nor was he subjected to any process of selection. The appointment was therefore, invalid Reliance was placed upon a decision of the Supreme Court reported in AIR 1984 SC 363 The plea is unsustainable. The respondent No.5 is a member of the Indian Administrative service and he has been deputed to work as Managing Director of the respondent corporation of the Government of Bihar. The appointment was therefore, invalid Reliance was placed upon a decision of the Supreme Court reported in AIR 1984 SC 363 The plea is unsustainable. The respondent No.5 is a member of the Indian Administrative service and he has been deputed to work as Managing Director of the respondent corporation of the Government of Bihar. In such appointments by deputation, unless there is anything to the contrary in the relevant rules, by laws, or the Articles of Association of a Company it is not necessary to advertise the post before appointment a member of the I A. S. on deputation as its managing director. Counsel for the petitioner has not drawn my attention to any rule or bye-law which prescribed that the post of managing director must be advertised before it is filled up by the Board of Directors. The decision reported in AIR 1984 SC 363 is clearly distinguishable inasmuch as bye-law 2 of the relevant bye-laws in that case provided that before appointment of the director, the vacancy in the post should be suitably publicised. The Conrt held that an appointment made in clear breach of the said bye-law was illegal It was obligatory on the part of the institute to follow the bye laws when they had been framed for the conduct of its affairs to avoid arbitrariness. In the instant case no such rules or bye law has been brought to my notice. Moreover respondent No.5 is a member of the indian Administrative Service and was appointed as managing director on deputation and not on permanent basis. This was done under the directions of the Governor of Bihar and was therefore in accordance with Article 129 of the Articles of Association. I find no illegality in the appointment of respondent No. S as the managing director of the respondent corporation, 27. As noticed earlier, the respondents vehemently contended before me that this Court should throw out this writ petition at the threshold on the ground that it was not maintainable. Annexures 13 and 14 did not operate in the public law field and only dealt with reorganising the management of the Government Corporation The appointment of a second managing director did not in any manner adversely affect the petitioner in asmuch as his rights and privileges were not diminished. Annexures 13 and 14 did not operate in the public law field and only dealt with reorganising the management of the Government Corporation The appointment of a second managing director did not in any manner adversely affect the petitioner in asmuch as his rights and privileges were not diminished. Even though respondent company is a Government company and is therefore "state" within the meaning of Articles 12 of the Constitution of India, the action taken by the impugned annexures did not operate in the public law field and, therefore, a writ petition was not maintainable. Several authenties were cited before me by counsel for the respondents I however consider it not necessary to examine this question in this case. May be, in an appropriate case this question may have to be decided. There are special reasons why I do not wish to consider this question in this proceeding. Firstly, several writ petitions were filed by the petitioner earlier and were entertained by this Court. In the instant writ petition as well the petitioner moved the Supreme Court and the Hon ble supreme Court observed that the controversy must be resolved at any early date in the larger interest of the corporation. I, therefore, considered it necessary to pronounce a decision on merit, rather than to reject the writ petition on the ground of maintainability. In any event, since I have come to conclusion that annexures 13 and 14 do not deserve to be quashed, it is unnecessary for me to go into the vexed question as to whether the action complained of in the instant case operated in the public law field or the private law field. With a view to avoid any further controversy I consider it desirable that the matter be decided on merit, disregarding the technical objection. 28. In the result, I hold that there is nothing in the Companies Act which prohibits the appointment of a second Managing Director in a government company. The Articles of Association of the respondent Corporation which is a Government Company, in terms provides that one or more directors may be appointed as managing director or managing directors of the Corporation. Such being the legal position, there is no merit in the contention that more than one managing director cannot be appointed in the respondent corporation. The Articles of Association of the respondent Corporation which is a Government Company, in terms provides that one or more directors may be appointed as managing director or managing directors of the Corporation. Such being the legal position, there is no merit in the contention that more than one managing director cannot be appointed in the respondent corporation. I further held the petitioner has been appointed as Managing Director of the company under Article 129 of the Articles of association however, in view of the judgment of this Court in an earlier writ petition which has attained finality, by application of the general principles of res judicata, the respondents cannot be permitted to urge that the term of the petitioner as managing director came to an end on the expiry of the term ot five years for which he should be deemed to have been appointed under Article 129 of the Articles of Association read with Sec.317 of the companies Act, which was applicable to Government Companies when the appointment was made The action of the respondent is not vitiated by mala fides The respondent No.5 had been duly and validly appointed as managing Director of the respondent corporation. 29. In view of the above conclusions, this writ application fails and is dismissed, but without any order as to costs. Appeal Dismissed.