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HIGH COURT OF PATNA
B.P. Singh and A.N. Trivedi, JJ.
Umesh Kumar Sinha - Petitioner
Versus
The State of Bihar & ors. – Respondents
Civil Writ Jurisdiction Case No. 3056 of 1993
Decided On : 2.6.1994
COMPANIES ACT - Appointment of Managing Director - Whether more than one Managing Director can be appointed in a Company - Whether the appointment of a second Managing Director in exercise of authority conferred by the Articles of Association, was an exercise of power not in the public law field but in private law field - Whether the plea of malafide urged on behalf of the petitioner is sustainable.
Fact of the Case:
The petitioner, who claims to have been duly appointed as the Managing Director of the Bihar State Pharmaceutical and Chemical Development Corporation, (hereinafter referred to as the respondent Corporation) has assailed annexures 13 and 14 in the writ petition. Annexure 13 is a memo whereby the services of Ram Prakash Mahto, I.A.S., respondent no. 5 have been placed at the disposal of the Department of Industries for his appointment and posting as the Managing Director of the Respondent Corporation. Annexure 14 is the notification whereby, under Articles 92 (a) and 129 of the Articles of Association of the respondent Corporation, the petitioner has been removed from the post of Managing Director of the Corporation and has been posted as Officer on Special Duty in the head quarters of the Department of Industries. By the same notification respondent no. 5 an I.A.S. Officer has been appointed and posted as the Managing Director of the respondent Corporation till further orders.
Finding of the Court:
The Court held that there is nothing in the Companies Act which prohibits the appointment of a second Managing Director in a Government company. The Articles of Association of the respondent Corporation, which is a Government Company, in terms provides that one or more directors may be appointed as Managing Director or Managing Directors of the Corporation. Such being the legal position, there is no merit in the contention that more than one Managing Director cannot be appointed in the respondent Corporation. The Court further held that the petitioner has been appointed as Managing Director of the company under Article 129 of the Articles of Association. However, in view of the judgement of this Court in an earlier writ petition which has attained finality, by application of the general principles of res judicata, the respondents cannot be permitted to urge that the term of the petitioner as Managing Director came to an end on the expiry of the term of five years for which he should be deemed to have been appointed under Article 129 of the Articles of Association read with section 317 of the Companies Act, which was applicable to Government companies when the appointment was made. The action of the respondents is not vitiated by malafides. The respondent no. 5 had been duly and validly appointed as Managing Director of the respondent Corporation.
Issues: 1. Whether more than one Managing Director can be appointed in a Company? 2. Whether the appointment of a second Managing Director in exercise of authority conferred by the Articles of Association, was an exercise of power not in the public law field but in private law field? 3. Whether the plea of malafide urged on behalf of the petitioner is sustainable?
Ratio Decidendi: 1. The Court held that there is nothing in the Companies Act which prohibits the appointment of a second Managing Director in a Government company. The Articles of Association of the respondent Corporation, which is a Government Company, in terms provides that one or more directors may be appointed as Managing Director or Managing Directors of the Corporation. Such being the legal position, there is no merit in the contention that more than one Managing Director cannot be appointed in the respondent Corporation. 2. The Court held that the appointment of a second Managing Director in exercise of authority conferred by the Articles of Association, was an exercise of power not in the public law field but in private law field, in as much as it did not deal with any essential Governmental function, but only had the effect of restructuring the management of a Company. 3. The Court held that the plea of malafide urged on behalf of the petitioner is not sustainable.
Final Decision: The writ application fails and is dismissed, but without any order as to costs.
B.P Singh, J.
The petitioner, who claims to have been duly appointed as the Managing Director of the Bihar State Pharmaceutical and Chemical Development Corporation, (hereinafter referred to as the respondent Corporation) has assailed annexures 13 and 14 in the writ petition. Annexure 13 is a memo whereby the services of Ram Prakash Mahto, I.A.S., respondent no. 5 have been placed at the disposal of the Department of Industries for his appointment and posting as the Managing Director of the Respondent Corporation. Annexure 14 is the notification whereby, under Articles 92 (a) and 129 of the Articles of Association of the respondent Corporation, the petitioner has been removed from the post of Managing Director of the Corporation and has been posted as Officer on Special Duty in the head quarters of the Department of Industries. By the same notification respondent no. 5 an I.A.S. Officer has been appointed and posted as the Managing Director of the respondent Corporation till further orders. The petitioner contends that he being an employee of the respondent Corporation cannot be transferred outside the Corporation to any post under the Government of Bihar without his consent. He, therefore, submits that the first part of the notification transferring him as Officer on Special Duty in the Department of Industries is illegal. He also contends that since there is only one post of Managing Director, in the respondent Corporation, and he has been duly appointed to the said post, respondent no. 5 cannot be appointed as Managing Director of the respondent Corporation ignoring the right of the petitioner to hold that post. In view of the counter affidavit filed on behalf of the State of Bihar, challenge to the first part of the notification annexure 14 need not be considered because in the counter affidavit it has been clearly stated that the order transferring the petitioner as the Officer on Special Duty in the Department of Industries is being recalled. Consequently the petitioner continues as a Managing Director of the respondent Corporation. The counter affidavit however makes it clear that respondent no. 5 shall also function as the Managing Director of the respondent Corporation. The petitioner challenges this arrangement of having two Managing Directors in the respondent Corporation on the ground that the same is not permissible in law His case is that there being only one sanctioned post of Managing Director, two Managing Directors cannot be appointed against a single post. The petitioner has also impugned annexures 13 and 14 on the ground that the same have been issued with malafide motive, solely calculated to defeat the right of the petitioner, who has displeased the Chairman of the Corporation and the powers that be in the State of Bihar.
2. The background of the case reveals that this is not the first writ petition filed by the petitioner, and that for quite some time the petitioner has been in and out of Court. In fact he relies upon some of the findings recorded by this Court in an earlier proceeding to support of his stand in the instant writ petition. It is therefore, necessary to notice the background in which the present dispute arises.
3. The petitioner, a qualified Chemical Engineer, applied in response to an advertisement issued by the Bureau of Public Enterprises, Government of Bihar, for appointment to the post of Managing Director of the respondent Corporation. An interview was conducted by the Bureau of Public Enterprises and thereafter the petitioner was selected for appointment as Managing Director of the respondent Corporation. This was communicated to him by the Special Secretary, in the Department of Industries, Government of Bihar by letter dated 8th Sept. 1984 (Annexure 2). The letter discloses that in accordance with Articles 92 and 129 of the Articles of Association of the respondent Corporation, by order of the Governor the petitioner was appointed as the Managing Director of the respondent Co
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