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Friday, May 13, 2016

whether the respondent No.1 is fit and proper for election as a Director of the appellant-bank. This is for the reason that in the impugned order dated 24th May, 2013 before the High Court, the said committee took into account only the fact that the respondent No.1 was over age and the fact that he had already been Director in the appellant-bank for more than two terms. We, therefore, remit the matter to the nomination committee to decide this case after a consideration of all the criteria laid down in the RBI Circular dated 1st November, 2007 and the Guidelines dated 10th December, 2007 issued by the Ministry of Finance, Government of India. Needless to add, all these criteria will be taken into account without giving any one or more criteria undue weightage, the idea being tha ultimately the nomination committee has to decide, in accordance with Section 9 (3AA) of the Act, whether the respondent No.1 is a fit and proper person to be elected as a Director of the appellant-bank. = We, therefore, set aside the order of the learned Single Judge and Division Bench of the High Court of Calcutta and remit the matter to the committee as aforesaid. The committee will decide in accordance with what is stated in our judgment within a period of four weeks from receiving our order.

                                                              NON-REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                        CIVIL APPEAL NO.4820 OF 2016
                  (Arising out of SLP (C) No.14209 of 2014)


      UCO BANK                                          APPELLANT


                                VERSUS

      SAUMYENDRA ROY CHOUDHURY & ORS.             RESPONDENTS


                            J U D G M E N T

      R.F.NARIMAN,J.


      1.    Leave granted.

2.    The matter arises out of a decision by the  nomination  committee  set
up under an RBI Circular dated 24th May, 2013,  in  which  it  has  decided,
having regard to the fact that the respondent no.1 before us is  over  aged,
i.e. above 65 years, and the fact that he has already served  for  a  period
of two terms as Director of the Appellant  Bank  is  disqualified  therefore
from standing for any further election as Director of the said Bank.
      3.    The said decision was challenged before the High Court in  Civil
Suit No. 212 of 2013.  By an interim order dated 29th  November,  2013,  the
learned trial Judge allowed  the  interim  prayer  of  the  respondent  no.1
before us, namely, Prayer (e), by which an interim mandatory injunction  was
ordered to deem the said Director as having been elected  as  a  shareholder
director  notwithstanding the impugned order dated  24th  May,  2013.   This
was for the reason that prima facie the learned Single Judge held  that  the
Government of India  Guidelines  dated  10th  December,  2007,  which  alone
contained the twin disqualifications of being above age as  well  as  having
stood for election as a Director twice, could not apply to persons  who  are
elected Directors as opposed to non-official Directors,  who  are  only  the
Directors nominated under a Statutory  Scheme  under  Section  9(3)  of  the
Banking Companies (Acquisition and Transfer of Undertaking) Act,  1970.   It
was further held that the RBI Guidelines dated 1st  November,  2007,  issued
pursuant to the Statutory Power contained in Section 9  (3AA)  of  the  said
Act, alone governed the facts of these cases, and that no other criteria  de
hors the criteria in these guidelines could possibly be taken into account.

      4.    The appeal from the aforesaid judgment met with the  same  fate,
as the Division Bench, by the impugned Judgment and Order  dated  15th  May,
2014, reiterated the findings of the learned Single Judge  and  granted  the
same relief based on the  same  view  taken  of  the  respective  guidelines
issued by the Government of India and by the Reserve Bank of India.

      5.    Considering that the Suit is yet to be decided, and that we  are
only confronted with an interim order passed by the High Court,  we  do  not
propose to go into the merits of the contentions raised by  learned  counsel
on either side.  Suffice it to say that, prima  facie,  the  RBI  Guidelines
dated 1st November, 2007 framed under Section 9 (3AA) of the said Act  would
apply to the facts of the case.  What is important under the Section  itself
is to determine the fit and proper status of  a  person  who  wishes  to  be
elected  as  a  Director  in  the  appellant-Bank  based  on  track  record,
integrity and such other criteria as the RBI notifies from time to  time  in
this regard.  The RBI, in  the  Guidelines  dated  1st  November,  2007  has
expressly stated that in  determining  the  fit  and  proper  status  of  an
existing  elected  Director/proposed  candidate,  the  nomination  committee
should determine his educational qualification, his experience and field  of
expertise, track record and integrity. What is important  to  note  is  that
the aforesaid list, as stated by the said Guidelines,  is only  illustrative
and not exhaustive.  Further,  what  is  important  is  that  the  committee
should see whether non adherence to any  of  the  aforesaid  criteria  would
hamper  the  existence  of  the  elected  Director/proposed  candidate  from
discharging his duties as Director on the Board of the bank.
6.    We have been shown a letter dated 3rd September, 2013, written by  the
Under Secretary, Ministry of Finance, Department of Financial  Services,  to
the appellant-bank.  This letter is set out by us hereinbelow:
“     As you are aware, the  election  of  shareholder  director  in  Public
Sector Banks  is  administered  by  RBI  guidelines  no.  DBOD  No.  BC  NO.
471/29.39.001/2007-08  dated  01.11.2007  as  per   which   the   Nomination
Committee of the Bank's Board is to undertake a process of due diligence  to
determine the `fit and  proper'  status  of  persons  to  be  elected  under
Section 9(3)(i) of the Banking Companies  Act,  1970/80.   These  guidelines
are broad, illustrative and largely indicative.
2.    Therefore, I am directed to state that in order  to  ensure  that  the
candidates  elected  as  shareholder  director  discharge  their  duties  as
director on the Board with greatest transparency and in public interest,  it
is  desirable  that  Government  guidelines   dated   01.06.2011   regarding
appointment of part-time non-official director also be kept  in  mind  while
carrying out determination of `fit and proper'  status  of  the  candidates.
You are requested to advice the board of your bank accordingly.
3.    This issues with approval of S(FS).”


7.    We are prima facie of the view that this letter applies to cases  like
the present.  This being the case, we are of the view that the present  case
should be remanded to the nomination committee so that the  committee  takes
a fresh decision as to whether the respondent No.1 is  fit  and  proper  for
election as a Director of the appellant-bank.  This is for the  reason  that
in the impugned order dated 24th May, 2013 before the High Court,  the  said
committee took into account only the fact that the respondent No.1 was  over
age and the fact that he had already been  Director  in  the  appellant-bank
for more than two terms.  We, therefore, remit the matter to the  nomination
committee to decide this case after a  consideration  of  all  the  criteria
laid down in the RBI Circular dated 1st November, 2007  and  the  Guidelines
dated 10th December, 2007 issued by the Ministry of Finance,  Government  of
India.  Needless to add, all these  criteria  will  be  taken  into  account
without giving any one or more criteria  undue  weightage,  the  idea  being
that ultimately the nomination committee has to decide, in  accordance  with
Section 9 (3AA) of the Act, whether the respondent No.1 is a fit and  proper
person to be elected as a Director of the appellant-bank.
      8.    We, therefore, set aside the order of the learned  Single  Judge
and Division Bench of the High Court of Calcutta and  remit  the  matter  to
the committee as aforesaid.  The committee will decide  in  accordance  with
what is stated in our judgment within a period of four weeks from  receiving
our order.  We request a Single Judge of the High Court  to  take  up  Civil
Suit No. 212/2013 for hearing within a period of  eight  weeks  from  today.
We expect that the learned Single Judge will decide the  said  suit  finally
within six months from today.
10.   With the above observations, the aforesaid civil  appeal  is  disposed
of.

                                         .....................J.
                                         [KURIAN JOSEPH]



                                         ....................J.
                                         [ROHINTON FALI NARIMAN

      NEW DELHI;
      MAY 05, 2016

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