ALL INDIA BANK OFFICERS' CONFEDERATION AND ORS. versus UNION OF INDIA & ORS.

Citation: [1989] 3 S.C.R. 850 · Decided: 14-08-1989 · Supreme Court of India · Bench: M.M. DUTT · Disposal: Case Allowed
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

A 
ALL INDIA BANK OFFICERS' CONFEDERATION 
~ 
AND ORS. 
v. 
UNION OF INDIA & ORS. 
AUGUST 14, 1989 
B 
~ 
[MURARI MOHON DUTT AND T. KOCHU THOMMEN, JJ.] 
Banking Companies (Acquisition and Transfer of undertakings) 
Act, 1970: Section 9-0bject of. 
Nationalised Banks (Management and Miscellaneous Provisions) 
-~ 
c Scheme, 1980: Clause ]-Nationalised Banks-Board of Directors-
J 
Appointment of Directors-Discretion of Central Government-How 
to be exercised-Appointment of non-workmen Directors-Practice of 
appointing persons from out of panel submitted by respective Associa-
tions representing non-workmen employees-Circular discontinuing the 
D practice-Validity of 
Words and phrases: 'Employees'-Whether includes workmen 
and non-workmen. 
~-
The Central Govt. in exercise of its power under Section 9 of the 
E Banking Companies (Acquisition and Transfer of Undertakings) Act, 
1970 enacted the Nationalised Banks (Management and Miscellaneous 
Provisions) Scheme, 1980. Clause 3(h) of the said scheme deals with the 
. 
appointment of workmen Directors and it provides that the Central 
Govt. shall constitute the Board of a Nationalised Bank consisting of 
one Director from among the employees of the nationalised hank, who 
F are workmen, to be appointed from out of a panel of 3 such employees 
. ...., 
furnished to it by the Representative Union. Clause 3(c) of the Scheme 
deals with appointment of non-workmen Directors and it provides that 
the Central Government shall constitute the Board of a nationalised 
bank consisting of one director, from among the employees of the 
nationalised bank, who are not workmen, to be appointed after consul-
G talion with the Reserve Bank. The cconsistent practice of the Central 
Govt. was to appoint a non-workman Director from out of a penal of 3 
names furnished to it by the majority association of non-workmen 
.. 
employees. By a circnlar dated 23.8.82, it was clarified that as far as 
appointment of non-workmen Director is concerned, there is no justifi-
cation for restricting the choice to the office bearers of the Association. 
H 
This was to enable the Central Govt. to appoint any officer of proven 
850 
J. 
BANK OFFICER CONFEDERATION v. U.0.1. 
- 851 
ability and character to the Board of Directors of a nationalised Bank 
irrespective of his affiliation with any association. 
The petitioners in these petitions to this Court, challenged this 
circular as contrary to the mandate of the Act and the Scheme, and also 
contended that clause 3 of the Scheme was ultra vires Section 9 of the 
Act. 
Allowing the petitions, 
HELD: I. The Circular is ultra vires the Act and the Scheme and 
~ it is, therefore, null and void and of no effect. [86IC] 
j 
\ 
) 
2. The object of the Banking Companies (Acquisition and Trans-
fer of undertakings) Act, 1970 is to render the largest good to the 
largest nnmber of people. The object of Section 9 of the Act is to 
empower the Central Govt. to make a Scheme for the constitution of the 
Board of Directors so as to include representatives of the employees i.e. 
workmen and non-workmen and other specified categories viz. deposi-
tors, farmers, workers and artisans. The representatives of these classes 
of people are to be either elected or nominated in the mannner specified 
by the Scheme. The legislature has left it to the Central Government to 
make a scheme providing for appointment to the Board from amongst 
the specified categories either by election or by nomination. The discre-
tion as to the mode of appointment is left to the Central Government, 
but it is not an unrestrained or unrestricted discretion, but a discretion 
which must be reasonably exercised so as to give effect to the true intent 
of the legislature i.e. to give the Board a truly representative character 
so as to reflect the genuine interests of the various persons manning or 
dealing with the bank as an industry and a commercial enterprise. 
What is postulated is such election or nomination as would lend to the 
Board of Directors its truly representative character in consonance and 
harmony with the extremely delicate, vital and significant role of the 
banking industry in the context of the national policy and objectives and 
economic development. The mode of election or nomination must, 
therefore, be such as would be ideally suitable and appropriate to the 
banking industry. Neither the election nor the nomination should be 
conducted in a manner unmindful of the distinctiveness
Excerpt shown. Read the full judgment & AI analysis in Lexace.