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2017 DIGILAW 699 (MP)

PRAFUL CHANDRA NAIK v. STATE OF MADHYA PRADESH

2017-05-23

S.A.DHARMADHIKARI, SHELL NAGU

body2017
ORDER : SHELL NAGU, J. 1. All the aforesaid writ appeals including W.A. No. 108/2017, involving similar questions of facts and law have been heard analogously and are being decided by the present common order. For the purpose of adjudication facts are taken from W.A. No. 108/2017. 2. The present intra court writ appeal filed under section 2(1) of the Madhya Pradesh uchcha Nyalaya (Khand Nayaya Peeth Ko Appeal) Adhiniyam 2005 assails the final order dated 2.2.2017 passed in WP. No. 5031/2014. The petition in question assailed the notice issued by respondent No. 3 subsidiary company (Employer) superannuating the petitioner/appellant at the age of 58 instead of 60 years despite the said company having resolved in it's Board meeting to enhance the age of superannuation from 58 to 60 years for employees other than belonging to Class IV employee and 62 years for employees belonging to Class IV category. The writ court found the claim of the appellant to be untenable on the anvil of Clause 18 of the Articles of Association of the respondent No. 3 company the employer which is reproduced below:- Restriction On Powers Of The Board Of Directors 18. Subject to the provision of the Act, the Chairman of the Board of Directors shall reserve for the approval of The Mptrifac any proposal or decision of the Board of Directors in respect of any of the following matter namely- (a) Any Capital investment decision/programme of Rs. Five crore or more which are not otherwise sanctioned by the State Government/Central Government. (b) Creation of and appointment to all posts carrying basic pay beyond Rs. 2500/- per month. (c) Rules of the Company governing the general conditions of the services of the employees drawing basic pay exceeding Rs. 1500/- per month. (d) Sale, lease or otherwise dispose off the whole or substantially the whole of the undertaking of the Company. (e) Formation of subsidiary company/companies. (f) Winding up of the company. (g) Any other matter which is in the opinion of the chairman be of such importance as to be reserved for the approval of the Mptrifac. No action shall be taken by the company in respect of any proposal or decision of the Board of Director reserved for the approval of Mptrifac as aforesaid until his approval to the same has been obtained. (emphasis supplied) 3. No action shall be taken by the company in respect of any proposal or decision of the Board of Director reserved for the approval of Mptrifac as aforesaid until his approval to the same has been obtained. (emphasis supplied) 3. The writ court has held that though the respondent No. 3 company/employer had resolved in it's meeting to enhance the age of superannuation from 58 to 60 years/60 to 62 years but in view of the provisions of Article 18 (supra) since no approval of the holding company MP TRIFAC could be obtained of the said resolution, the said resolution does not confer any justiciable cause to the petitioner/appellant to seek superannuation at the said proposed enhanced age. 4. Learned counsel for the appellant has raised various contentions which do not appear to have been raised before the writ court. However since the new contentions relate to the relm of law this court deems it appropriate to consider the same and therefore delineates the said submissions in the following manner; 1. The restriction imposed on the powers of the Board of Directors of the respondent No. 3 subsidiary company (employer) is made subject to the provisions of the Companies Act which recognizes even a subsidiary company to be independent enough to take and implement decisions at it's own level without any extraneous reservations. In support provisions of section 179 and Section 2(87) of Companies Act are relied upon. 2. On the anvil of Section 2(87) and Section 179 it is submitted by the learned counsel for the appellant that no further restrictions can be imposed by the Articles of Association or any other provision of the Companies Act or even by the holding Company. 3. It was thus incorrect on the part of the writ court to have treated the resolution of the Board of Directors of the respondent No. 3 company for enhancing the age of superannuation to be a mere proposal; 4. Once the respondent No. 3 subsidiary company (Employer) resolved in it's Board meeting enhancing the age of superannuation and authorizes it's Managing Director to undertake further action, then the further action that was contemplated was grant of benefit under the said resolution and not to send the proposal for approval to the holding company i.e. Trifac. 5. Once the respondent No. 3 subsidiary company (Employer) resolved in it's Board meeting enhancing the age of superannuation and authorizes it's Managing Director to undertake further action, then the further action that was contemplated was grant of benefit under the said resolution and not to send the proposal for approval to the holding company i.e. Trifac. 5. Learned counsel for the petitioner relied upon decision in the case of State Of U.P. v. Dayanand Chakrawarty & Ors. reported in AIR 2013 SC 3066 (paras 20, 27 and 28) and Osmania University v. V. S. Muthurangam And Ors. reported in AIR 1997 SC 2758 (paras 7 and 8). 6. Per contra, learned counsel for respondents No. 2 and 3 subsidiary company (employer) supporting the impugned order has relied upon the proviso to Clause 18 and first proviso to section 179 of Companies Act, 2013 and sought dismissal of this WA. 7. Before referring to the findings recorded by the writ court it would be apt to mention here that the parties informed that an application for amendment was moved before writ court in WP. No. 8161/2016 after the passing of the basic order. 8. It is submitted that the non-consideration of the said application led to prejudice to appellant. Findings: 9. The submissions of the learned counsel for the appellant by referring to the provisions of Companies Act 2013 need not detain this Court at all as the same deserves to be rejected at the very outset; the reason being that powers vested in the Board of Directors under section 179 of the Companies Act are circumscribed inter alia by the provisions of Articles of Association of the company which is evident from a bare perusal of the first proviso to Section 179. Section 179(1) along with it's first proviso is reproduced below for convenience and ready reference:- 179. Powers of Board.- (1) The Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorized to exercise and do: Provided that in exercising such power or doing such act or thing, the Board shall be subject to the provisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting: (emphasis supplied) 9.1. The plain reading of section 179 of Companies Act elicits that the Board of Directors of a Company are authorized to do all acts and things which company is authorized to do under the Act. 9.2. However the exercise of power under section 179 is circumscribed by it's proviso by making the power of companies under section 179 to be subject to the other provisions of the Act or to the Memorandum of Association or to the Articles of Association of the Company. Thus any power exercised by the Company cannot be de-horse or in contravention of the contents of the Articles of Association. In the present case the provision to clause 18 of the Articles of Association of the Respondent No. 3 Company restricts the exercise of powers on aspects contained in Clause 18. Thus the reliance made to Section 179 is of no avail to the appellant. 9.3. The proviso to Clause 18 (supra) of the Articles of Association of the respondent No. 3 employer company prohibits the respondent No. 3 from exercising powers on any of the subjects enumerated in Clause (a) to (g) of Clause 18 until the holding company MP Trifac accords approval. 9.4. In the instant case the power for enhancement of age of superannuation is contained in Clause 18 (c) of Articles of Association of respondent No. 3 Company which relates to general conditions of service of the employees. Thus the resolution of respondent No. 3 Company for enhancement of age of superannuation passed while exercising the power under Clause 18 (c) of Articles of Association was subject to it's proviso prohibiting execution of such resolution until approval is accorded by the holding company TRIFAC. This course of action is not only in line with Clause 18 of the Articles of Association but also the first proviso to Section 179 of the Companies Act. 9.5. However the contention of the learned counsel for the appellant that a subsidiary company is an independent legal entity capable of taking it's own decisions without any restrictions on it's powers by referring to Section 2 (87) and Section 179 of Companies Act is of no avail as the said provisions essentially define a subsidiary company and the extent and limitations of power of Board of Directors, which in fact do not assist the appellants as explained above. 9.6. 9.6. Further submission of the learned counsel for the appellant that the writ court has misunderstood the resolution to be a proposal deserves to be rejected at the very outset. In para 8 (eight) of the impugned judgment the writ court has used the expression "proposing to enhance the age" merely to explain the character of the resolution in question. The resolution was undoubtedly a decision taken by the Board of Directors but in view of the proviso to Clause 18 of the Articles of Association as reproduced supra the same remained a mere proposal in nature which could have matured into a decision worthy of implementation as and when holding company approved the same. In the instant case the holding company has not approved the said decision, and therefore the writ court rightly termed it as a 'proposal'. 9.7. Coming to the aspect of amendment which is said to be material in nature it is seen from the amendment application I.A. No. 1816/2017 in W.P. 8161/2016 that it was not substantial but merely formal in nature which sought to make the MP TRIFAC as a party in view of the said company having come into effect as the holding company of the Audyogik Kendra Vikas Nigam (AKVN) situated at Bhopal, Indore, Jabalpur, Riwa and Gwalior. Thus the amendment was not essential in nature and therefore cannot cause any dent in the findings recorded by the writ court. 10. the decision of the Apex Court in the case of Usmania University (supra) is of no avail to the appellant/petitioner as the Apex Court in the said case was dealing with the claim of parity of enhancement of age of superannuation put up by non-teaching staff of Usmania University with that of teaching staff of the same University, on the anvil of Section 38 of the Usmania University Act 1959 which provided that the conditions of service relating to such salaried officers of the University shall as far as possible be uniform except in respect of salaries payable to them. The fact situation before the Apex Court was distinct and thus the ratio laid down is inapplicable to the present case. The fact situation before the Apex Court was distinct and thus the ratio laid down is inapplicable to the present case. The other case of Dyanand (Supra) of the Apex Court relied upon by the petitioner deals with the fact situation where UP Jal Nigam made two separate class of employees prescribing different ages of superannuation i.e. 58 years and 62 years. Thus this case is factually distinct and as such the ratio laid down therein is in applicable, to the fact situation prevailing herein. 11. Consequently the writ court has rightly dismissed the petition by holding that in the light of the proviso to Article 18 of the Articles of Association the resolution passed by the subsidiary company (employer) enhancing the age of superannuation can be given effect to only when the holding company MPSIDC/MP TRIFAC grants approval to the said resolution and since no approval was accorded the said resolution of respondent No. 3 Company is a mere proposal which cannot be implemented in law. 12. Consequently no fault can be found with the order of the writ court which is accordingly upheld. 13. Consequently all the writ appeal deserve to be and are therefore rejected. 14. The appellants in each WA are saddled with litigation cost of Rs. 2000/- to be paid to subsidiary company and the holding company in equal proportion paid by appellant (s) in each WA within 90 days from today with compliance report filed in Registry of this Court in that regard. 15. A copy of this order shall be kept in the record of WA.109/2017, WA.110/2017, WA.111/2017, WA.112/2017, WA. 117/2017, WA. 199/2017.