Supreme Court Upholds Disqualification Clause for Workman Directors in Banking Sector

The case of Federation of Bank of India Staff Unions & Anr. vs. Union of India & Anr. revolved around the nomination of workman directors in nationalized banks and the validity of Clause 3(2)(iii) of the Nationalized Banks (Management and Miscellaneous Provisions) Scheme, 1970. The Supreme Court upheld the clause, rejecting claims of discrimination and violation of Article 14 of the Constitution.

Background of the Case

The appellants, Federation of Bank of India Staff Unions, represented employees of the Bank of India. The dispute arose from the process of nominating a workman director to the Board of Directors. Under Section 9(3) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the Central Government has the power to frame schemes for managing nationalized banks. This section specifies that workmen and officers can be nominated as directors on the bank’s board.

The appellants submitted a panel of three names for the workman director position. However, the Central Government rejected all three candidates, stating that each had less than three years of service before retirement, rendering them ineligible under Clause 3(2)(iii) of the Scheme.

Arguments by the Petitioner (Federation of Bank of India Staff Unions)

• The disqualification provision under Clause 3(2)(iii) unfairly applied only to workmen but not to officer directors.
• This differentiation created an unreasonable classification, violating Article 14 of the Indian Constitution, which guarantees equality before the law.
• The government’s insistence on a fresh panel was unjustified since the employees had already been selected by the union.
• The government had arbitrarily imposed an additional qualification criterion that was not part of the original statutory provisions.

Arguments by the Respondent (Union of India)

• The government’s decision was based on a legally valid scheme framed under the Banking Companies Act, 1970.
• The disqualification criterion for workman directors was necessary to ensure stability and continuity in bank governance.
• Officers and workmen belong to different categories and cannot be treated the same for nomination purposes.
• The government had the discretion to reject candidates who did not meet the eligibility requirements.

Supreme Court’s Analysis and Key Findings

The Supreme Court examined the legal provisions and upheld the validity of Clause 3(2)(iii) of the Scheme. The Court made the following observations:

• “It would be clear from a perusal of clauses (e) and (f) of Section 9(3) of the Act that both the categories of employees are different – one is workman/employee category as defined under Section 9(3)(e) and the other is officer/employee category as defined under Section 9(3)(f) of the Act.”
• “It is for the legislature to decide as to what qualifications and disqualifications should be prescribed for various categories of employees for their nomination on the post of Director.”
• “There lies a distinction between the worker and the officer. The former is defined under Section 2(s) of the Industrial Disputes Act, 1947, whereas the latter is governed by separate service rules.”
• “Article 14 of the Constitution applies inter se two equals and not inter se unequals. The case at hand falls under the latter category, and, therefore, reliance placed on the principle enshrined under Article 14 of the Constitution by the appellants is wholly misplaced.”

Final Judgment

The Supreme Court dismissed the appeal, holding that:

• The three candidates proposed by the union had retired, making the challenge to their rejection irrelevant.
• There was no discrimination in prescribing different eligibility criteria for workmen and officer directors.
• The classification was rational and based on the inherent differences between workmen and officers.
• Clause 3(2)(iii) of the Scheme was legally valid and did not violate the Constitution.

Significance of the Judgment

The ruling reaffirmed that:

• The government has the authority to establish reasonable eligibility criteria for nominations to public sector banks.
• Different categories of employees can be subject to different qualification requirements without violating constitutional principles.
• Judicial review will not interfere with policy decisions unless they are arbitrary or unconstitutional.

Conclusion

The Supreme Court’s decision in Federation of Bank of India Staff Unions vs. Union of India upholds the regulatory framework governing nationalized banks. It reinforces the principle that workmen and officers can be treated differently in terms of eligibility criteria for director nominations, as long as such differentiation is based on a rational classification. The judgment clarifies that policies framed under the Banking Companies Act are subject to judicial scrutiny but will not be overturned unless they are unreasonable or violate fundamental rights.

Petitioner Name: Federation of Bank of India Staff Unions & Anr..
Respondent Name: Union of India & Anr..
Judgment By: Justice Abhay Manohar Sapre, Justice Indu Malhotra.
Place Of Incident: Goa.
Judgment Date: 01-03-2019.

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