IN WPO 1137 OF 2023 - CAL HC - Provisions of Memorandum of Association indicate that Board of Governors were not the be-all and end- all of the Indian Institute of Social Welfare and Business Management and could not be rendered so by effecting an amendment at the own sweet will of the governors: Calcutta High Court while setting aside decision to dissolve Board of Trustees
Justice Sabyasachi Bhattacharyya [22-06-2023]

Read more: Shri Dipendra Kumar Sanyal v. The Director And Member Secretary Board Of Governors

Simran Singh

New Delhi, June 28, 2023:  The Calcutta High Court has set aside the decision taken in a meeting of the Board of Governors (BOG) of the Indian Institute of Social Welfare and Business Management whereby the President had opined that the Board of Trustees (BOT) would be dissolved and the BOG would continue. The said proposal was accepted by the BOG and confirmed subsequently in a meeting dated 10-12-2018.

The Single Judge Bench of Justice Sabyasachi Bhattacharyya stated that in the scheme of things and in order to maintain proper checks and balances, the existence of the BOT was undoubtedly an essential feature of the Institute and its Memorandum of Association (Memorandum).

The Bench was of the view that a comprehensive perusal of the provisions of the Memorandum, clearly indicated that the BOG, although having primacy in certain aspects, “was not the be-all and end- all of the Institute and could not be rendered so by effecting an amendment at the own sweet will of the governors.”

The Bench stated that the BOG could not arrogate to itself the entire trove of powers in respect of the Institute, in the teeth of Clauses 38, 39, 42 and 44, which were cardinal features of the Memorandum of Associations of the Institute. The said provisions could very well be termed as the ‘basic structure’ of the Memorandum of Association and contained the implicit balancing factors contemplated in the functioning of the Institute, of which the memorandum could not be denuded. Such an amendment, if permitted, would demolish the very concept of functioning of the Institute and its autonomy, all the more so since several members of the BOG were functionaries of the State, who were ex-officio members of the BOG. Hence it was stated that the defence of delay taken by the respondents could not be paid heed to.

In the matter at hand, the petitioner argued that the said resolution was patently contradictory to the Memorandum of Association of the Institute and, if accepted, would render the functioning of the Institute lop-sided by concentrating the entire power in the BOG, which was never the intention of the founders.

The Bench stated that upon perusal of the relevant clauses of the Memorandum of Association of the Institute, it undoubtedly indicated that the BOT had an essential role to play within the scheme, such as:

1. Clause 37 pertained to execution of documents and provided that all documents and instruments on behalf of the BOT were to be executed by such trustee or trustees, as the Board may from time to time determine, which documents would be valid and binding.
2. Clause 38 stipulated that the trustees would spend money or transfer or deal with the properties vested in them and execute documents as the BOG may determine from time to time. The concurrence of the trustees, as per the said Clause, would be necessary for sale, transfer, conveyance, mortgage, charge, encumbrance, alienation and lease of the properties of the Institute.
3. Clause 39 provided that the trustees would invest the funds of the Institute and realise all income, rents, issues and profits of the properties of the Institute out of which they would pay all outgoings in respect of such properties and hold the balance for the objects and purposes of the Institute.
4. Clause 44 stipulated that the trustees would appoint one of their Members as Treasurer.
5. Clause 42 provided that all properties of the Institute, movable and immovable, would be vested in the BOT.
6. Clause 46 empowered the BOT to finally prepare the budget along with their views to be placed before the AGM of the Members of the Institute.
7. Clause 50 stipulated that in case a budget was rejected, the BOG would be competent, in spite of such rejection, to spend out the money or funds of the Institute, such sums were stipulated to be those required for the administration and management of the Institute and for the due discharge of the functions including payment of all outgoings, salary to the staff and engagements and commitments already made or accepted.
8. Clause 57 of the Memorandum provided that the Rules and Regulations of the Institute may be altered, amended and added to by a vote of 2/3rd of the Members of the BOG present and voting at the meeting of the BOG after notice of the proposed amendment, alteration or addition had been given in writing to all members not less than one month before the meeting which were binding on all existing members.
9. The agenda for AGM of the Institute had been stipulated in Clause 47 of the Memorandum, which included various facets of the activities of the Institute including a budget as finally prepared by the BOG, statement showing annual receipts and disbursement and a report showing various activities of the Institute including activities which the BOG desired to take in the future.
10. As per Clause 49, at any meeting, 3/4th of the members of the Institute present and voting may make additions and alterations to the Budget or reject the same. Otherwise the budget, as placed before the meeting, shall be deemed to have been approved by the members.

Hence, the Bench stated that the argument of respondent 1 that the amendments or alterations to the Memorandum or Rules and Regulations of the Institute had to be mandatorily placed before the AGM did not find place in the provisions of the Memorandum itself.  Rather, stated that Clause 57 indicated that two-thirds of the members of the BOG could, by voting at their own meeting after notice of the proposed amendment of not less than one month, may have such amendment or alteration effected which would then be binding on all existing members.

The Bench thus stated that the argument made by respondent 1 that the petition was premature could not be accepted. “In fact, the impugned decision of the BOG, having been confirmed and ratified by the majority subsequently, now operates as a time-bomb, which may explode at any point of time at the sweet will of the BOG. There is no safety net between the impugned decision and its implementation within the contemplation of the Memorandum itself. As per the statutory requirement, the resolution merely has to be intimated to the appropriate authority for the purpose of giving the same the sanctity of law. However, there is nothing to prevent the said decision to be implemented even now, as there is no specific time-bar for the same. Thus, the apprehension of the petitioner is quite valid to the extent that the impugned decision, if permitted to remain, may be implemented at any point of time.”

Even without going into the merits of the allegation that the challenge could not be taken out before the removal of respondent 2 from his office as the Minister of Higher Education, Government of West Bengal, the Court stated that the cause of action on the basis of apprehension of the petitioner was still alive and was a continuing cause of action, since the impugned decision could be implemented by the BOG at any point of time at its option.

While navigating through the issue of locus standi of the petitioner, the Court stated that he was  a part of the meeting confirming the impugned decision and was the sole objector to the impugned amendment. “The very fact of the petitioner being recognised as a part of the said meeting indicates that he had the locus standi to be a part of the meeting, prima facie as a member of the BOT. If the respondents were to challenge his membership of the BOT, it was for the respondents to plead and prove the same in accordance with law, which, having not been done, it does not lie in the mouth of the respondents to deny the locus standi of the petitioner, even as an integral part of the functioning of the Institute, to prefer a challenge to the paradigm alteration of the Memorandum of Association of the Institute.”