UCO Bank Vs. Saumyendra Roy Choudhury & Ors, 5th May 2016, Supreme Court of India – Read Judgement

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(Arising out of SLP (C) No.14209 of 2014)


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.

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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



MAY 05, 2016

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Read Also: Case Brief – UCO Bank Vs. Saumyendra Roy Choudhury & Ors