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Gauhati High Court · body

2010 DIGILAW 715 (GAU)

Md. Shamim Ahmed v. Union of India

2010-09-14

I.A.ANSARI

body2010
JUDGMENT I.A. Ansari, J. 1. Whether the Board of Directors of a company, registered under the Companies Act, 1956, can delegate any of its powers to anyone and if so, whether the person to whom the power has been delegated can, in turn, sub-delegate the powers, so delegated to him, even if the Board of Directors had authorized their delegatee to sub-delegate the powers delegated to him. To put it a little differently, the moot question is: whether delegatee of the Board of directors of a company can, in turn, sub-delegate any of his powers even if the Board of directors authorize him to do so? 2. The factual background of the case, which has raised the questions noted above, may, in brief, be set out as under: (i) The Petitioner herein is an employee of the Central inland Water Transport Corporation Limited ('the Corporation'), a Government of India undertaking, which is registered as a Company under the Companies Act, 1956. The Petitioner has been working as an Inspector (Estate Security), which is in the grade of Supervisor under the River Services Division (RSD) of the Corporation. 3. While the Petitioner was serving in the grade of Supervisor at Guwahati, he was served with three memoranda of charges based on different articles of charges, the memoranda having been issued on 19.9.2006, 8.12.2006 and 21.3.2007. 4. The Petitioner has put to challenge, in this writ petition, the order, dated 28.8.2006, issued by the Respondent No. 2 (i.e. the Chairman-cum-Managing Director, CIWTC), appointing Respondent No. 6, namely, Sri J. Paul, Officer-in-Charge (RSD-Marine Operations), as the ad hoc Disciplinary Authority in respect of all employees of the River Services Division, for, it is on the strength of the order, dated 28.8.2006, aforementioned, that disciplinary proceeding against the Petitioner has been initiated by the memorandum, dated 8.12.2006, aforementioned. The memorandum, dated 8.12.2006, issued by the Respondent No. 6, as the ad hoc disciplinary authority, initiating disciplinary proceeding on the charges levelled against the Petitioner, and the letter, dated 3.4.2007, issued by the Corporation, asserting that the Respondent No. 6 is the competent authority to act as ad hoc disciplinary authority on the basis of his empowerment by the Respondent No. 2 to act as disciplinary authority in the proceedings drawn against the Petitioner on his alleged misconduct, are also under challenge in the present writ petition. 5. 5. As per Annexure B to the Central Inland Water Transport Corporation Ltd. Conduct Rules and Service, Discipline and Appeal Rules, 1979, the Heads of the respective Divisions are the disciplinary authority in respect of the Supervisors and subordinate staff under their respective Division. The Chairman-cum-Managing Director ('the CMD') is the appellate authority. In respect of the Petitioner, who is a Supervisor in the River Services Division, the Head of the River Services Division is, in terms of the said Rules, the disciplinary authority and the CMD is the appellate authority. 6. The Respondent No. 6, namely, Sri J, Paul, a retired acting Chief Manager (RSD-Marine Operation) of the CIWTC, was re-employed, on ad hoc basis, as Officer-in-Charge (RSD- Marine Operations) in the CIWTC, by order, dated 1.4.2006, passed, in this regard, by the CIWTC. At the time of appointment of Respondent No. 6, on contract basis, as indicated hereinbefore, one Sri Alok Kumar Choudhury was serving as General Manager (RSD), i.e., as the head of the River Services Division. The said Sri Alok Kumar Choudhury having taken voluntary retirement, the post of General Manager (RSD) fell vacant. In view of the release of Sri Alok Kumar Choudhury, Sri J. Paul, (i.e., the Respondent No. 6) was nominated/appointed, by an order, dated 2.5.2006, to look after the River Services Division on day-to-day basis and it was further declared that River Services Division will be under the overall control of the Chairman-cum-Managing Director as an additional charge. 7. On 2.5.2006 itself, Sri Alok Kumar Choudhury handed over the charge of his office of the head of the River Services Division to Respondent No. 6. Thereafter, on 9.5.2006, Respondent No. 2, as the CMD, nominated Respondent No. 6 (Sri J. Paul) to act as ad hoc disciplinary authority in respect of ail employees of the River Services Division. 8. On 2.5.2006 itself, Sri Alok Kumar Choudhury handed over the charge of his office of the head of the River Services Division to Respondent No. 6. Thereafter, on 9.5.2006, Respondent No. 2, as the CMD, nominated Respondent No. 6 (Sri J. Paul) to act as ad hoc disciplinary authority in respect of ail employees of the River Services Division. 8. The writ Petitioner has put to challenge the authority of the Respondent No. 6 (Sri J. Paul) to act as the ad hoc disciplinary authority on, broadly speaking, two grounds, namely, (i) that the Respondent No. 6, being a contractual employee of Corporation, does not stand on the footing of a regular employee and could not have, therefore, been nominated to function as ad hoc disciplinary authority and (ii) the Respondent No. 2, as the CMD, was not competent to delegate to the Respondent No. 6 the power to act as the disciplinary authority in the capacity of head of the River Services Division. 9. As, according to the writ Petitioner, Respondent No. 6 does not have the authority in law to act as disciplinary authority, not only the appointment of Respondent No. 6 as ad hoc disciplinary authority by order, dated 9.5.2006, aforementioned, but also issuance of the memoranda of charges, on 28.8.2006, by the Respondent No. 6, against the writ Petitioner, is without any authority of law. 10. The Respondents have contended that in terms of Rule 11.1 of the Recruitment and Promotion Rules of the Corporation, it is possible to employ, on contractual basis, a retired employee of the Corporation and, having been employed, on contractual basis, by order, dated 1.4.2006, aforementioned, Respondent No. 6 stands on the same footing as does other employee of Corporation within the meaning of the expression 'employee', which appears in Rule 2(ii) of the relevant Conduct Rules and which governs all employees of the Corporation. 11. 11. The Respondents also contend that the Board of directors of Corporation, in its 186th meeting, held on 30.3.1998, had adopted a resolution appointing the CMD of the company as a Committee under Article 77 of Table-A under Schedule-I of the Companies Act, 1956, subject to the supervision and control of the Board of directors making it clear that the CMD shall exercise all powers of administration, in relation to the employees of the company including the power to suspend or take disciplinary proceedings against any such employee in terms of the existing Rules of the Corporation. By its said resolution, dated 30.3.1998, the Board of directors further resolved empowering the CMD to, in turn, delegate all or any of his powers to any other officer of the company on such terms and conditions and for such period as the CMD may think fit including his power to take disciplinary action against the employees of the Corporation. 12. The Respondents have further contended that the above decision of the Board of directors has been formalized by the amendment of the relevant Conduct Rules on 5.12.2009, whereunder the Officer-in-charge (RSD) and Manager (Commercial) is the disciplinary authority in respect of Junior Officers and employees, such as, Supervisors, the CMD being the appellate authority. 13. I have heard Mr. B.C. Das, learned senior counsel, for the Petitioner, and Mr. U. Bhuyan, learned Counsel, appearing on behalf of the Respondents. 14. The fact that the CMD has been delegated by the Board of directors the power to take disciplinary action against all employees of the Corporation in terms of the Board of director's decision, in its 186th meeting, held on 30.3.1998, has not been in dispute nor is the legality of the power, which the Board has delegated to the CMD is questioned in this writ petition. What is under challenge the delegation of power by the CMD to Respondent No. 6. 15. What is under challenge the delegation of power by the CMD to Respondent No. 6. 15. As the source of power of the CMD to sub-delegate his power to Respondent No. 6 enabling the latter to act as the ad hoc disciplinary authority is sought to be traced by the Respondents to the resolution of the Board of directors in its 186th meeting held on 30.3.1998, the relevant portion of the resolution of the Board of directors is extracted below: The Board approved the Delegation of Powers to be exercised by the CMD of the Corporation and adopted the following resolution: Resolved that the CMD of the Company be and is hereby appointed as a Committee under the Provision of Article 77of Table-A under Schedule-I of the Companies Act, 1956 which applies to the company and subject to the Supervision and Control of the Board of directors, the CMD shall exercise the powers which are delegated to him as follows: (a) to carry on day-to-day management and administration of the business and affairs of the Company; (b) to enter into any agreement in connection with the loans obtained or to be obtained from Government of India from time to time and to sign the same; (c) to execute Indemnity Bonds, Counter Indemnity Bonds, Letter of Guarantee, Counter Guarantee on behalf of the Company; (d) to appear for and to represent the company in any Court in India and abroad and also in any Tribunal and before all authorities and controllers or before all Judges and other officers of such Courts, etc., and to sign and verify all plaints, written statements, petitions including those under Article 226 of the Constitution of India, Tabular Statements, Applications, Claims, Declarations and other paper and also to deposit any money, documents and papers in any Court or Tribunal or other authorities and to take back the same and grant receipt; (e) to settle, compound or submit to arbitration or compromise any of such suits or other proceedings on such terms as he may think fit in the interest of the company; (f) also for the purpose aforesaid to appoint and remove any solicitors, advocates and other lawyers, and to sign all authority to lawyer; (g) to demand and receive any money security or money or any property whether movable or immovable belonging to the company and to grant receipts; (h) to sign all rent bills and give notices to quit and vacate; (i) to exercise all powers of administration in relation to the employees of the company including power to suspend or take disciplinary proceedings against any such employees in terms of the existing Rules of the Corporation; and (j) to delegate to all or any of his powers as aforesaid to any other officer of the company on such terms and conditions and for such period as the CMD may think fit. 16. Appearing on behalf of the Petitioner, Mr. B.C. Das, learned senior counsel, has submitted that a company, such as, Central Inland Water Transport Corporation, has to function, within the provisions of the Companies Act, 1956. Article 77 of Table-A under Schedule-I of the Companies Act, 1956, points out Mr. Das, enables the Board of directors to delegate any of its powers to a Committee consisting of one or more members and any Committee, which is so formed, shall, in exercise of the powers so delegated, conform to any regulations that may be imposed on it by the Board. Article 77 does not, contends Mr. Das, empower the Board to allow sub-delegation of its power by the Committee. 17. In effect, what Mr. Das contends is that a Board is competent to delegate its powers to a Committee consisting of one or more member, but the Committee, so formed, cannot, in turn, be empowered by the Board to delegate its powers to any other person or authority. In the present case, though the Board has allowed the CMD to sub-delegate the powers, which have been delegated to the CMD, the same is, according to Mr. Das, per se beyond the jurisdiction of the Board of Directors and, on the strength of such exercise of power, no lawful authority can be said to have been derived by the CMD, in the present case, to delegate his powers to Respondent No. 6 and thereby enable the Respondent No. 6 to act as a disciplinary authority. In support of his submission that a delegatee, in the absence of any power expressed or implied, cannot sub-delegate its power, Mr. Das places reliance on Sahni Silk Mills (P.) Ltd. and Anr. Employees State Insurance Corporation, (1994) 5 SCC 346 . 18. Responding to the above submissions made on behalf of the Petitioner, Mr. U. Bhuyan, learned Counsel, submits that in the present case, in an administrative set up, where numerous functions are required to be performed by the administrators, it is not possible for one individual to exercise all the powers and it may, therefore, become necessary, in a given case, not only to allow delegation of powers, but also sub-delegation of such powers. This aspect, according to Mr. Bhuyan, is recognized by the Supreme Court in Sahni Silk Mills (P.) Ltd. and Anr. (supra) at para 5. 19. It is also submitted by Mr. This aspect, according to Mr. Bhuyan, is recognized by the Supreme Court in Sahni Silk Mills (P.) Ltd. and Anr. (supra) at para 5. 19. It is also submitted by Mr. Bhuyan that Article 77 of Table-A under Schedule-I of the Companies Act, admittedly, empowers a Board of director to delegate any of its powers to a Committee consisting of one or more members as the Board may think fit. In exercise of its power, the Board, in the present case, has, points out Mr. Bhuyan, delegated its powers, in its 186th meeting, to the CMD. While so delegating its powers to the CMD in relation to the employees of the Corporation including the power to suspend or take disciplinary actions against its employees, the Board has also empowered the CMD to delegate all or any of his said powers to any other officer of the Corporation and it is in exercise of this power of sub-delegation, which the Board has given to the CMD, that Respondent No. 6 has been appointed by the CMD as the disciplinary authority in respect of the employees working in the River Services Division of the Corporation. The act of the CMD is, therefore, according to Mr. Bhuyan, consistent with the action of the Board inasmuch as it is the Board, which has empowered the CMD to sub-delegate its power to any other officer of the company on such terms and conditions and for such period as the CMD may think fit. The exercise of the power by the CMD, in the present case, in appointing Respondent No. 6, as the disciplinary authority, cannot, therefore, according to Mr. Bhuyan, be faulted with. 20. The question, therefore, in the light of the rival submissions made before the court, is, as already noted above, this: Whether the Board has the power to delegate any of its power to one or more persons and further empower such person or persons to sub-delegate the power given to it/them in favour of any other employee of the Corporation? In order to receive a correct answer to this question, it is necessary to take note of the provisions contained in Article 77 of Table-A under Schedule-I to the Companies Act, 1956. Article 77 is, therefore, reproduced below: 77. In order to receive a correct answer to this question, it is necessary to take note of the provisions contained in Article 77 of Table-A under Schedule-I to the Companies Act, 1956. Article 77 is, therefore, reproduced below: 77. (i) The Board may, subject to the provisions of the Act, delegate any of its powers to Committees consisting of such member or members of its body as it thinks fit. (2) Any Committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on it by the Board. 21. From a bare reading of Article 77(1), it becomes clear that the Board has ample power to delegate any of its powers to a Committee consisting of one or more members as the Board may think fit. There is nothing In Article 77 or under any other provisions of the Companies Act, 1956, empowering the Board to allow sub-delegation of its power by the Committee to which the Board may have delegated its power. 22. Situated, thus, it becomes clear that the provisions of the Companies Act, 1956, while permitting the Board to delegate any of its powers to a Committee, as indicated hereinbefore, does not empower the Board to allow sub-delegation of its powers. Viewed in this light, it becomes clear that while the Board was competent to delegate its power of administration in relation to their employees in the Corporation including the power to suspend an employee or take disciplinary action against him, the Board had no power to allow the CMD to delegate any of his powers to some other officer of the company. Consequently, the empowerment of the CMD by the Board allowing the former to delegate his powers to any other officer of the Corporation is per se against the provisions of the Companies Act, 1956, which the Corporation is bound to adhere to as any other company. Logically extended, it would mean that the CMD could not have delegated his power to take disciplinary action against the employees of the Company to Respondent No. 6 and Respondent No. 6 could not have, therefore, acted and cannot act as the disciplinary authority, ad hoc or otherwise, in respect of the employees of the River Services Division including a Supervisor, such as, the Petitioner. 23. 23. As regards the question as to whether sub-delegation of powers of the Board to the CMD and by the CMD to the Respondent No. 6 is sustainable in law, it needs to be noted, as correctly pointed out by Mr. Bhuyan, learned Counsel for the Respondents, that though the courts have been insisting that the delegated power should be exercised by the authority upon whom it is conferred and by nobody else, yet the extension of the administrative function of an administrator has made the courts consider liberally sub-delegation of power. What is, however, extremely important to note, in this regard, is that the Supreme Court, while recognizing, in Sahni Silk Mills (P.) Ltd. and Anr. (supra), the fact that the courts have started acknowledging the public authorities' liberty to employ agents to exercise its powers, has nevertheless observed: 5. The courts are normally rigorous in requiring the power to be exercised by the persons or the bodies authorized by the statutes. It is essential that the delegated power should be exercised by the authority upon whom it is conferred and by no one else. At the same time, in the present administrative set up extreme judicial aversion to delegation cannot be carried to an extreme. A public authority is at liberty to employ agents to exercise its powers. That is why in many statutes, delegation is authorized either expressly or impliedly. Due to the enormous rise in the nature of the activities to be handled by statutory authorities, the maxim delegatus non-protest delegate is not being applied specially when there is question of exercise of administrative discretionary power. 24. From the above observations, made in Sahni Silk Mills (P.) Ltd. and Anr. (supra), it becomes clear that there was a time, when sub-delegation of power was considered wholly impermissible. However, gradually, due to change of time, the courts have started recognizing legitimacy of sub-delegation of powers. What must, however, be borne in mind is that when delegation of power is allowed by a statute, the statute must, either expressly or by necessary implication, allow sub-delegation of the power or else, the delegatee cannot be sub-delegate. In other words, sub-delegation 'is not permissible in the absence of any express provision or necessary implication derived from the statute, which permits delegation of power. 25. In other words, sub-delegation 'is not permissible in the absence of any express provision or necessary implication derived from the statute, which permits delegation of power. 25. In the case at hand, the Corporation, being registered under the Companies Act, 1956, has to function within the framework of the Companies Act, 1956. Independent of, and contrary to, the provisions of the Companies Act, 1956, no company, registered under the said Act, can act. Thus, if the Companies Act, 1956, does not allow sub-delegation of power by the Board, the fact that the Board, in the present case, has allowed sub-delegation of power by the CMD to any other employee of the company will not clothe the CMD with the power to sub-delegate his powers to Respondent No. 6 or to any other person. When the Board itself is incompetent to allow sub-delegation of power, the CMD could not have appointed Respondent No. 6 as the disciplinary authority, ad hoc or otherwise, on the strength of power, which the Board has given to the CMD in contravention of the provisions embodied in the Companies Act, 1956, as reflected by Article 77aforementioned. 26. Referring to the Circular, dated 23.11.95, issued by the General Manager (Finance), CIWTC Limited, which contains a copy of the Delegation of the Administrative and Financial Power Rules, 1985, ('the Rules of 1985') Mr. Bhuyan submits that Rule 6 of the Rules of 1985 empowers the CMD to re-delegate his power to any other officer of the company. For the purpose of better appreciation of the above submission of Mr. Bhuyan, Rule 6 is reproduced below: 6. The powers delegated to the chairman may be re-delegated by him to another officer of the company to such extent and on such terms and conditions and for such period as the CMD may think fit. 27. It needs to be noted that the Rules of 1985 are administrative rules. These rules cannot override or prevail upon the provisions of the Companies Act, 1956, and if any of the Administrative Rules run counter to the provisions of the Companies Act, 1956, such a rule cannot survive. 28. 27. It needs to be noted that the Rules of 1985 are administrative rules. These rules cannot override or prevail upon the provisions of the Companies Act, 1956, and if any of the Administrative Rules run counter to the provisions of the Companies Act, 1956, such a rule cannot survive. 28. Bearing the above aspect of law in mind, when Rules of 1985 are re-visited, it clearly transpires that Rule 6 stands on no better footing than the resolution of the Board of Directors, as adopted in its 186th meeting, empowering the CMD to delegate his powers given to him by the Board to any other employee of the company. Rule 6, therefore, stand, if I may reiterate, on no better footing than the resolution of the Board. When the resolution, adopted by the Board permitting sub-delegation of power by the Board has already been held by this Court to be without jurisdiction, the fact that in administrative capacity, the Corporation has framed Rule 6 will not clothe the CMD with the power to sub-delegate the powers, which have been delegated to him by the Board. Seen in this light, Rule 6 cannot save the impugned order, dated 28.8.2006, whereby Respondent No. 6 has been appointed as the ad hoc disciplinary authority by the Respondent No. 2. 29. That contrary to the statutory provisions, sub-delegation of power is impermissible is clearly discernible from the decision of the Supreme Court in Sahni Silk Mills (P.) Ltd. and Anr. (supra), which Mr. Das has relied upon. The controversy, in Sahni Silk Mills (P.) Ltd. and Anr. (supra), arose as regards the question as to whether sub-delegation of power by the Director General of the Employees State Insurance Corporation ('the Corporation') was proper, it is Section 94A of the Employees State Insurance Act, 1948, which empowers the Corporation to delegate its power to any officer or authorities subordinate to the Corporation. Section 94A reads as under: 94A. Delegation of powers. - The Corporation, and subject to any regulations made by the Corporation in this behalf, the Standing Committee may direct that all or any of the powers and functions which may be exercised or performed by the Corporation or the Standing Committee, as the case may be specified, be also exercisable by any other officer or authority subordinate to the Corporation. 30. 30. The resolution of the Corporation, which was relied upon as the authority for sub-delegation in Sahni Silk Mills (P.) Ltd. and Anr. (supra), read as under: Resolved that for purposes of levy of damages under Section 85B(1) of the Employees' State Insurance Act, 1948, as amended up-to-date, the Director General or any other officer authorized by him may levy and recover damages from the employers not exceeding the rates as per Table annexed. 31. Recognizing the fact that Section 94A provides that the Corporation may direct that all or any of the powers and functions which may be exercised or performed by the Corporation may, subject to such conditions, if any, as may be specified, be also exercisable by any officer or authority subordinate to the Corporation, the Corporation could not have delegated its power to be exercised by any other officer authorized by the Director General, it was contended, in Sahni Silk Mills (P.) Ltd. and Anr. (supra), that in the process, there has been a sub-delegation, because the Director General, on the authority given to him by the Corporation by its resolution, as is the case at hand, cannot authorize any other person to exercise that power, particularly, when no such other officer either has been named or has been described by the designation in the resolution of the Corporation. In this fact situation, the Supreme Court, at para 10, in Sahni Silk Mills (P.) Ltd. and Anr. (supra), observed as under: 10. So far as the present Section 94A is concerned, it says that the Corporation subject to any regulation made by the Corporation in that behalf, may direct that particular or any of the powers and functions which may be exercised or performed by the Corporation, may, in relation to such matters and subject to such conditions, if any, as may be specified "be also exercisable by any officer or authority subordinate to the Corporation". Section 94A does not specifically provide that any officer or authority subordinate to the Corporation to whom the power has been delegated by the Corporation, may in his turn authorize any other officer to exercise or perform that power or function. Section 94A does not specifically provide that any officer or authority subordinate to the Corporation to whom the power has been delegated by the Corporation, may in his turn authorize any other officer to exercise or perform that power or function. But by the resolution dated 28.2.1976 the Corporation has not only delegated its power Under Section 85B(1) of the Act to the Director General', but has also empowered the Director General to authorize any other officer to exercise the said power. Unless it is held that Section 94A of the Act, enables the Corporation to delegate any of its powers and functions to any officer or authority subordinate to the Corporation, and he in his turn can sub-delegate the exercise of the said power to any other officer, the last part of the resolution dated 28.2.1976 cannot be held to be within the framework of Section 94A, According to us, Parliament while introducing Section 94A in the Act, only conceived direct delegation by the Corporation to different officers or authorities, subordinate to the Corporation, and there is no scope for such delegate to sub-delegate that power, by authorizing any other officer to exercise or perform the power so delegated. 32. From the decision in Sahni Silk Mills (P.) Ltd. and Anr. (supra), it becomes clear that when a statute allows delegation of power by a Corporation or a body to any officer or authority of the Corporation, the Corporation or the body, in turn, cannot allow sub-delegation of power unless such a power is, expressly or impliedly, conferred by the statute. 33. In the case at hand, there is no provision under the Companies Act, 1956, or under any other statute empowering the Board of directors of a company to allow sub-delegation of power by its delegatee. In such circumstances, the resolution, adopted by the Board, in the present case, in its 186th meeting, empowering the CMD to delegate his powers, as a disciplinary authority, is bad in law. The empowerment of the CMD by the Board ought to be, thus, treated as non est in law. 34. As a corollary, the CMD does not have, and he did not have, the power or authority to delegate his power of taking disciplinary action, against the employees of the company, in favour of the Respondent No. 6. The empowerment of the CMD by the Board ought to be, thus, treated as non est in law. 34. As a corollary, the CMD does not have, and he did not have, the power or authority to delegate his power of taking disciplinary action, against the employees of the company, in favour of the Respondent No. 6. Nomination/appointment of the Respondent No. 6, therefore, as the ad hoc disciplinary authority, for the Supervisors and other employees working under the River Services Division, in the Corporation is wholly without jurisdiction and cannot be allowed to stand good on record. 35. In the result, and for the reasons discussed above, this writ petition succeeds. The impugned order, dated 28.8.2006 empowering the Respondent No. 6 to act as ad hoc disciplinary authority is hereby set aside and quashed. In consequence thereof, memorandum, dated 8.12.2006, issued by the Respondent No. 6 shall also stand set aside and quashed. The Respondents will, however, remain at liberty to take appropriate disciplinary action, if so warranted, against the present Petitioner, in accordance with law. 36. No order as to costs.