ArbritrationRulings

New Delhi HC: Electing President of any Corporate is statutory right not fundamental or common right, directs to maintain status quo of Petitioner position till the conclusion of arbitral proceeding

Shri Mukund L. Abhyankar vs. Chief Executive Officer, National Federation Of Urban Co-Op. Bank And Credit Societies Ltd. And Ors

Shri Mukund L. Abhyankar (‘Petitioner’), Director of the Cosmos Co-operative Bank Ltd. and President of the National Federation of Urban Co-operative Bank and Credit Societies Ltd. (‘NFSL’) filed petition u/ 9 of the Arbitration and Conciliation Act, 1996 in order to restrain no confidence motion for the removal of the petitioner from the post of President of NFSL which was passed by Chief Executive Officer, National Federation Of Urban Co-Op. Bank And Credit Societies Ltd. And Ors. (‘Respondent’).

On 147th meeting of the Board of Directors of NFSL Petitioner was removed from the post of President by a no confidence motion thereafter the subject matter of disputes between the parties were referred to the sole arbitrator, appointed by the Central Registrar of Co-operative Societies. The Sole arbitrator had accepted the Petitioner application however Respondent issued an email with a notice along with an agenda note of the 151st board meeting and mentioned that the agenda of the meeting was to pass the no confidence motion against the petitioner as the President of NFSL. In reply to that Petitioner sent a legal notice which stated that there was no provision for removal of the President of NFSL prior to completion of his tenure.

Hence the question before New Delhi HC was whether the Board of Directors of NFSL had the power to remove the petitioner as the President of NFSL prior to completion of his tenure and same was the principal dispute before the arbitral tribunal. HC further observed that there was no statutory provision either in the Byelaws of NFSL (‘the Byelaws’) or in the MSCS Act which provided for removal of the President. Hence, the Petitioner claimed that in absence of any statutory provision or express provision in the Byelaws of NFSL, the President of the Society (NFSL) could not be removed. This was disputed by the respondents, who apparently had the support of the majority of the Board of Directors. Respondent claimed that since the petitioner was elected by the Board of Directors, the said Board had the power to remove the President. According to the Respondents, NFSL is a democratic institution and the power to remove an office bearer was implicit with the electoral body that had the power to appoint the President.

HC referred to Mohan Lal Tripathi v. District Magistrate, Rai Bareilly and Ors. {(1992) 4 SCC 80}   and Jyoti Basu and Ors. v. Debi Ghosal and Ors.: (1982) 1 SCC 691 and held that fundamental principle that has emerged is that election to a post is a matter of Statute and Byelaws and in absence of any statutory provision, rule or byelaw, there would be no inherent power to remove an elected person prior to him/her completing the tenure by passing a no confidence motion. Common law principles are not applicable in election law and unless there is a specific provision for recall of a person elected to a office, his tenure cannot be truncated. There is little scope for applying equitable principles or notions.

Further, HC relied on Gujarat High Court in Nandlal Bavanjibhai Posiya  and Ors. v. Director of Agriculture Marketing and Rural Finance Gandhinagar and Anr.: AIR 2002 Guj. 348 ,the decision of the Division Bench in Motibhai R. Chaudhary v. Registrar of Co-operative Societies (under Gujarat Cooperative Societies Act, 1961): 2005 (1) GLH 270 and decision of a Single Judge of the Narmadaben Parmar v. Taluka Development Officer, Kheralu. {1998 (1) GLR 225} wherein it was held  even in absence of any provision in the statute, a no confidence motion could be brought against elected office bearers and held that Part IX B of the Constitution of India, which was introduced by the Constitution (Ninety-seventh Amendment) Act, 2011 had emphasize that the democratic functioning of cooperative societies had been accorded a constitutional status.

HC relied on Bhanumati and Ors. v. State of Uttar Pradesh: (2010) 12 SCC 1; and Usha Bharti v. State of Uttar Pradesh and Ors.: (2014) 7 SCC 663 wherein it was held that that once the cooperative society had been conferred a constitutional status under the Ninety Seventh Constitutional Amendment, it was necessary for the legislative bodies to ensure that the statutes were amended in conformity with the constitutional mandate. The court eloquently emphasized that “where the Constitution has conceived a particular structure of certain institutions, the legislative bodies are bound to mould the statutes accordingly. Despite the constitutional mandate, if the legislative body concerned does not carry out the required structural changes in the statutes, then, it is the duty of the court to provide the statute with the meaning as per the Constitution”. Hence, based on the SC ruling, HC accepted that an office bearer of a cooperative societies could be removed even in absence of a statute was the enactment of the Ninety Seventh Constitutional Amendment.

HC referred to Jyoti Basu and Ors. v. Debi Ghosal and Ors.: (1982) 1 SCC 691 wherein SC held that “a right to elect is neither a fundamental right nor a common right but is a pure and simple a statutory right – by holding that the issue involved in the case in hand was “not what the statute does say but what a statute must say”.

Accordingly, HC allowed Petitioner’s petition and directed that the status quo as to the position of the petitioner as on the date of filing, would be maintained till the conclusion of the arbitral proceeding

 

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