KERALA CERAMICS & CLAYS STAFF ASSOCIATION (CITU) v. STATE OF KERALA AND OTHERS

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN MONDAY, THE 19TH SEPTEMBER 2011 / 28TH BHADRA 1933 WP(C).No. 20749 of 2011(P) -------------------------- PETITIONER(S): --------------- 1. KERALA CERAMICS & CLAYS STAFF ASSOSCIATION (CITU), PAPPINISSERY, KANNUR-670561 REPRESENTED BY ITS PRESIDENT. 2. HINDUSTAN CHINA CLAY WORKS NATIONAL LABOUR UNION (INTUC), PAPPINISSERY, KANNUR-670561 REPRESENTED BY ITS PRESIDENT. 3. KERALA PUBLIC SECTOR AND AUTONOMOUS BODIES OFFICERS FEDERATION(SPATO), UNIT COMMITTEE, PAPPINISSERY, KANNUR, REPRESENTED BY ITS SECRETARY 4. HINDUSTAN CHINA CLAY WORKS LABOUR UNION (CITU), POUPPILI KAI, NEELESWARAM KANNUR-671314, REPRESENTED BY ITS SECRETARY 5. HINDUSTAN CHINA CLAY LABOUR UNION - (CITU), PAYANGADI, KANNUR-670561, REPRESENTED BY ITS SECRETARY BY ADV. SRI.P.RAMAKRISHNAN RESPONDENT(S): --------------- 1. STATE OF KERALA, REPRESENTED BY THE SECRETARY, INDUSTRIES(H) DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001. 2. THE KERALA CLAYS AND CERAMIC PRODUCTS LIMITED, CLAY HOUSE, PAPPINISSERY, KANNUR-670561, REPRESENTED BY ITS MANAGING DIRECTOR. 3. N. LAKSHMANAN NAMBIAR, PRABHATHAM, PALLIKKUNNU.P.O., KANNUR-670004. BY ADV. SRI.E.K.NANDAKUMAR FOR R2 AND R3 BY GOVT. PLEADER SRI.HANIL KUMAR THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 1/09/2011, THE COURT ON 19/09/2011 DELIVERED THE FOLLOWING: ## APPENDIX IN W.P.(C) NO.20749 OF 2011 EXT.P1 TRUE COY OF ARTICLES OF ASSOCIATION OF THE 2ND RESPONDENT. EXT.P2 TRUE COPY OF GOVERNMENT ORDER DATED 15.9.2011 EXT.P3 TRUE COPY OF GOVERNMENT ORDER DATED 27/8/2002 EXT.P4 TRUE COPY OF GOVERNMENT ORDER DATED 15/9/2004. EXT.P5 TRUE COY OF GOVERNMENT ORDER DATED 25.7.2005. EXT.P6 TRUE COPY OF GOVERNMENT ORDER DATED 1.3.2006. - EXT.P7 TRUE COPY OF JUDGMENT DATED 30.1.2009 OF THE FIRST CLASS JUDICIAL MAGISTRATE'S COURT, KANNUR IN STC NO.416/2006 - EXT.P8 TRUE COPY OF REPRESENTATION DATED 30.5.2011 SUBMITTED BY THE 1ST PETITIONER BEFORE THE 1ST RESPONDENT. - EXT.P9 TRUE COPY OF REPRESENTATION DATED 31.5.2011 SUBMITTED BY THE 3RD PETITIONER BEFORE THE FIRST RESPONDENT. - EXT.P10TRUE COPY OF REPRESENTATION DATED 31.5.2011 SUBMITTED BY THE 4TH PETITIONER BEFORE THE 1ST RESPONDENT. - EXT.P11TRUE COPY OF REPRESENTATION SUBMITTED BY THE PETITIONERS BEFORE THE 1ST RESPONDENT. - EXT.P12TRUE COPY OF GOVERNMENT ORDER DATED 22.7.2011 ISSUED BY THE FIRST RESPONDENT. EXT.P13 TRUE COPY OF GOVERNMENT ORDER DATED 27.7.2011 - EXT.P13(a) TRUE COPY OF A REPORT PUBLISHED IN MATHRUBHOOMI DAILY OF 27/7/2011. - EXT.P14 TRUE COPY OF TABULATION SHOWING THE YEAR WISE PERFORMANCE OF THE COMPANY FROM THE YEAR 2001-2002 TO 2010-2011 - EXT.P15 TRUE COPY OF THE COMPLAINT SUBMITTED BY THE AMIN AGAINST THE 3RD RESPONDENT. RESPONDENT'S EXHIBITS: - EXT.R3(a) TRUE COPY OF THE G.O.(Rt)919/2011/1D dated 27.7.2011 - EXT.R3(b) TRUE COPY OF JOINING REPORT DATED 27.7.2011 - EXT.R3(c) TRUE COPY OF LETTER DATED 26.7.2011 ISSUED BY THE SECRETARY OF THE SECOND PETITIONER UNION TO THE MD OF THE 2ND RESPONDENT. W.P.(C) No.20749 of 2011 : 2 : EXT.R3(d) TRUE COPY OF LETTER DATED 27.7.2011 ISSUED BY THE SECRETARY OF THE 2ND PETITIONER UNION TO THE MD OF THE 2ND RESPONDENT. EXT.R3(e) TRUE COPY OF THE BYE-LAWS OF HINDUSTAN CHINA CLAY WORKS NATIONAL LABOUR UNION (INTUC) EXT.R3(f) TRUE COPY OF THE LETTER DATED 28.7.2011 SENT BY THE SECRETARY OF THE HINDUSTAN CHINA CLAY WORKS NATIONAL LABOUR UNION (INTUC) TO THE 3RD RESPONDENT. EXT.R3(g) TRIE COPY OF THE BALANCE SHEET OF THE 2ND RESPONDENT COMPANY FOR THE YEARS 1997-98 TO 2006-07, AS EXTRACTED FROM THE ANNUAL REPORT 2006-07. EXT.R3(h) TRUE COPY OF THE POLICE COMPLAINT DATED 15.7.2005 FILED BY THE 3RD RESPONDENT. EXT.R3(i) TRUE COPY OF THE CRL.APPEAL NO.71/09 FILED BY THE 3RD RESPONDENT BEFORE THE HON'BLE DISTRICT AND SESSIONS COURT, THALASSERY DATED NIL. //TRUE COPY// P.A. TO JUDGE. ## **P.N.RAVINDRAN, J. ----------------------------------------W.P(C).No.20749 of 2011 ----------------------------------------Dated this the 19[th] day of September, 2011** ## **JUDGMENT** The petitioners are trade unions representing the managerial staff and workmen of the second respondent company. In this writ petition they challenge Ext.P12 Government order dated 22.7.2011 appointing the third respondent as the Managing Director of the second respondent company. The brief facts of the case are as follows. 2. The second respondent is a Government company as defined in section 2(18) of the Companies Act, 1956. As per the Articles of Association of the second respondent company the Governor shall have the power to appoint or nominate the Directors and the Managing Director of the company. As per the Articles of Association the term “Governor” means the Governor of Kerala and includes the Government of Kerala. As per Article 117, the Governor is empowered to appoint one of the Directors of the company to be the Managing Director. The third respondent, who was working as Works Manager in the Kerala State Wood ## **W.P(C).No.20749 of 2011** -:2:- Industries Limited, Nilambur, a Government of Kerala undertaking, was appointed as Director and Managing Director of the second respondent company as per Ext.P2 Government order dated 15.9.2001. The term for which the third respondent was appointed as Director and Managing Director of the second respondent company was fixed as three years by Ext.P3 Government order dated 27.7.2002. The term of appointment was extended for a further period of one year as per Ext.P4 Government order dated 15.9.2004 and by Ext.P5 Government order dated 25.7.2005, the term of appointment was extended till 30.4.2006, the date on which the third respondent attained the age of superannuation as the Works Manager of Kerala State Wood Industries Limited. Later, by Ext.P6 Government order dated 1.3.2006 the term of appointment of the third respondent as the Director and Managing Director of the second respondent company was extended for a period of one year from 1.5.2006 on re-employment basis. The said term came to an end on 30.4.2007. 3. While the third respondent was the Managing Director of the second respondent company, the Court of the Munsiff of ## **W.P(C).No.20749 of 2011** -:3:- Kannur ordered attachment of a motor car belonging to the company as per order passed on E.P.No.196 of 2005 in O.S.No.438 of 1997. On the allegation that the third respondent, along with three employees of the second respondent company wrongfully confined the Amin and the Process Server deputed by the civil court to attach the car belonging to the second respondent company, they were prosecuted for the offences punishable under sections 188, 353, 506(1), 342 read with section 34 IPC in STC No.416 of 2006 on the file of the Court of the Judicial Magistrate of First Class-II, Kannur. By Ext.P7 judgment delivered on 30.1.2009, the learned Magistrate found the third respondent, who was the first accused therein, guilty of the offence punishable under section 342 IPC and convicted him to undergo simple imprisonment for one month. The other accused were found not guilty and acquitted. The third respondent was also found not guilty and acquitted of the offences punishable under sections 188, 353 and 506(1) read with section 34 IPC. Aggrieved thereby, the third respondent has filed an appeal before the Court of Session, Kannur and the said appeal is pending. This writ petition is filed contending that under Article ## **W.P(C).No.20749 of 2011** -:4:- 117 of the Articles of Association of the second respondent company the Governor can appoint only a Director as the Managing Director of the company, the third respondent is not a Director and therefore Ext.P12 Government order appointing the third respondent as the Managing Director is illegal. It is also contended that the third respondent, who has been convicted by the criminal court for the offence punishable under section 342 IPC, cannot be appointed as Managing Director of a company in view of the stipulation contained in section 267(c) of the Companies Act, 1956. The petitioners contend that by Ext.P7 judgment, the third respondent was convicted for an offence involving moral turpitude and therefore he is disqualified to be appointed as the Managing Director of the second respondent company. 4. The third respondent has filed a counter affidavit dated 2[nd] August 2011. Relying on Ext.R3(a) Government order dated 27.7.2011 whereby the third respondent was nominated as the Director and Managing Director of the second respondent company it is contended that the challenge to the third respondent's appointment relying on Article 117 of the Articles of ## **W.P(C).No.20749 of 2011** -:5:- Association does not any longer survive. As regards Ext.P7 judgment whereby the third respondent was convicted, it is contended that the third respondent has filed Criminal Appeal No.71 of 2009 in the Court of Session, Thalassery and that in the said appeal the appellate court has suspended the execution of the sentence of imprisonment. As regards the contention that the conviction under section 342 IPC is for an offence involving moral turpitude, it is contended that as the judgment of conviction has not attained finality and as no moral turpitude is involved, the third respondent is no way ineligible or disqualified to be appointed as the Director and Managing Director of the second respondent company. 5. I heard Sri.P.Ramakrishnan, learned counsel appearing for the petitioners, Sri.Hanil Kumar, learned Government Pleader appearing for the first respondent and Sri.P.Gopinatha Menon, learned counsel appearing for respondents 2 and 3. I have also gone through the pleadings and the materials on record. Sri.P.Ramakrishnan, learned counsel for the petitioners submitted that in view of Ext.R3(a) order the petitioners confine the challenge to the third respondent's appointment as Managing ## **W.P(C).No.20749 of 2011** -:6:- Director of the second respondent company only on the ground that by virtue of the stipulation in section 267(c) of the Companies Act, 1956 the third respondent is disqualified and ineligible to be appointed as the Managing Director of the second respondent company. The learned counsel for the petitioner contended with reference to the findings and observations in paragraph 11 of Ext.P7 judgment that the conduct of the third respondent in wrongfully confining the Amin and the Process Server deputed by the civil court to attach the motor car belonging to the company discloses vileness or depravity and therefore, as the offence committed by the third respondent involves moral turpitude he is disqualified and ineligible to be appointed as the Managing Director of the second respondent company. Per contra, the learned counsel appearing for respondents 2 and 3 contended that there is nothing in Ext.P7 judgment which justifies the inference that the third respondent has been convicted of an offence involving moral turpitude and that even assuming that the occurrence as alleged took place, it cannot be said that the conviction is for an offence involving moral turpitude. 6. I have considered the rival submissions made at the Bar ## **W.P(C).No.20749 of 2011** -:7:- by the learned counsel on either side. The short question that arises for consideration in this writ petition is whether the conviction of the third respondent for the offence punishable under section 342 IPC can be said to be a conviction for an offence involving moral turpitude so as to attract section 267 of the Companies Act, 1956. Section 267 of the Companies Act reads as follows:- _**267. Certain persons not to be appointed managing directors** :- No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its managing or whole-time director who-_ - _(a) is an undischarged insolvent, or has at any time been adjudged as insolvent;_ - _(b) suspends, or has at any time suspended, payment to his creditors, or makes, or has at any time made, a composition with them; or_ - _(c) is, or has at any time been, convicted by a Court of an offence involving moral turpitude._ 7. Ext.P7, the judgment of conviction and sentence, has not attained finality. The operation of the judgment of conviction has not been stayed, but the execution of the sentence of imprisonment alone has been stayed by the appellate court. ## **W.P(C).No.20749 of 2011** -:8:- Therefore, as held by the Apex Court in _**Rama Narang v. Ramesh Narang**_ , (1995) 2 SCC 513, section 267 of the Companies Act would apply if the conviction is for an offence involving moral turpitude. The expression “moral turpitude” has not been defined anywhere. The expression “moral turpitude” was explained by a learned single Judge of the Allahabad High Court in _**Baleshwar Singh v. District Magistrate and Collector, Banaras**_ , AIR 1959 Allahabad 71 as follows:- _“(23) The expression 'moral turpitude' is not defined anywhere. But it means anything done contrary to justice, honesty, modesty or good morals. It implies depravity and wickedness of character or disposition of the person charged with the particular conduct. Every false statement made by a person may not be moral turpitude, but it would be so if it discloses vileness or depravity in the doing of any private and social duty which a person owes to his fellowmen or to the society in general. If therefore the individual charged with a certain conduct owes a duty, either to another individual or to the society in general, to act in a specific manner or not to so act and he still acts contrary to it and does so knowingly, his conduct must be held to be due to vileness and depravity. It will be contrary to accepted customary rule and duty between man and man.”_ ## **W.P(C).No.20749 of 2011** -:9:- The said observation was approved by the Apex Court in _**Allahabad Bank and another v. Deepak Kumar Bhola**_ , (1997) 4 SCC 1. In _**Pawan Kumar v. State of Haryana**_ , (1996) 4 SCC 17, the Apex Court held that the expression “moral turpitude” is an expression which is used in legal as also societal parlance to describe conduct which is inherently base, vile, depraved or having any connection showing depravity. From the judicial pronouncements referred to above it is evident that to constitute an offence involving moral turpitude the conduct of the offender should disclose vileness or depravity in the doing of any private and social duty which he owes to his fellowmen or to the society in general. 8. The question whether a person convicted of the offence punishable under section 341 IPC can be said to be convicted of an offence involving moral turpitude was considered by a learned single Judge of the Bombay High Court in _**Jaysing Rangarao Raut v. Maharashtra State Electricity Board and another**_ , (1980) 1 LLJ 117. The petitioner before the Bombay High Court was an employee of the Maharashtra State Electricity Board. He, along with other members of a trade union, went on strike and ## **W.P(C).No.20749 of 2011** -:10:- during the period of the strike prevented a jeep carrying Engineers of the Maharashtra State Electricity Board from proceeding to the water works at Budhgaon to carry out repairs. A criminal case was registered against the petitioner and 12 others for the offences punishable under sections 147,149, 341, 353 and 427 IPC. All the accused were convicted of the offence under sections 149 and 341 IPC and were sentenced to pay a fine of Rs.51/- each and in default to undergo simple imprisonment for two weeks. They were acquitted of the other charges. On appeal, the appellate court acquitted five persons and confirmed the conviction and sentence of the remaining eight persons including the petitioner. The accused filed a revision petition before the Bombay High Court. In the revision petition five more persons were acquitted, but the conviction of the petitioner and two others was confirmed. After the judgment of conviction and sentence became final, the Maharashtra State Electricity Board terminated the service of the petitioner before the Bombay High Court as per order dated 2.12.1968. He thereupon filed a complaint under section 33A of the Industrial Disputes Act, 1947 before the Industrial Tribunal challenging the order of termination on various **W.P(C).No.20749 of 2011** -:11:- grounds. The Maharashtra State Electricity Board took the stand that the order of termination was issued under Regulation 24 of the Maharashtra State Electricity Board Employees' Service Regulations and that the order of termination was not an order of dismissal under Regulation 88. Regulation 24 enabled the employer to terminate the service of an employee by issuing one month's notice in writing or with notice pay. Regulation 88 prescribed the procedure for dealing with acts of misconduct. Regulation 89 (c) stipulated that the procedure prescribed under Regulation 88 need not be followed and all or any of its provisions may be waived when the punishment such as dismissal or removal is ordered on account of conviction of the employee in a criminal court for an offence involving moral turpitude. The Industrial Tribunal upheld the termination applying Regulation 89(c). Interfering with the order of the Industrial Tribunal, the learned single Judge of the Bombay High Court held that in order that an offence may be considered as involving moral turpitude it is necessary that there should be on the part of the person convicted, a transgression of the moral code coupled with baseness or depravity of character. The learned Judge, applying ## **W.P(C).No.20749 of 2011** -:12:- the test laid down by the Allahabad High Court in _**Mangali v. Chakki Lal,**_ AIR 1963 All. 527, held that the action of the petitioner before the Bombay High Court does not shock the moral conscience of the society in general, that the motive which led to the action was not a base one and that the petitioner cannot be said to be a person of depraved character or a person who was to be looked down upon by the society in general. 9. In the instant case, the judgment of conviction and sentence has not attained finality. The third respondent was found guilty and convicted of the offence punishable under section 342 IPC for wrongfully confining the Amin and the Process Server in his chambers at a point of time when he was the Managing Director of the second respondent company on an earlier occasion. P.W.1, the Amin deputed by the civil court to attach the motor car, had deposed that the third respondent herein, the first accused in the case, went out of his chambers and locked the room from outside while he and P.W.2 the Process Server and P.W.3 the lawyer appearing for the decree holder were in the room, thereafter opened the room and asked them to get out of **W.P(C).No.20749 of 2011** -:13:- the room. P.W.1 has further deposed that when they came out of the room the accused, four in number, stood around the car and prevented them from taking away the car. From the evidence on record it is evident that the confinement, if at all there was such confinement, was only for a short period. The question whether on the evidence a finding of guilt was rightly entered is a matter for the appellate court to decide. However, from the findings and observations in Ext.P7 judgment, it cannot be said that the action of the third respondent would shock the moral conscience of the society in general or that the motive which led to the commission of the alleged offence of wrongful confinement was a base one. It cannot also be said from the materials on record that the third respondent is to be viewed as a person with a depraved character or one who has to be looked down upon by the society in general. From the conduct of the third respondent, which is reflected in Ext.P7 judgment, it cannot be said that it was inherently base or vile or that there was a transgression of the moral code on his part coupled with baseness or depravity of character. I am therefore, of the opinion that the conviction of the third respondent of the offence punishable under section 342 IPC ## **W.P(C).No.20749 of 2011** -:14:- cannot be said to be conviction of an offence involving moral turpitude. 10. Section 274(1)(d) of the Companies Act stipulates that a person shall not be capable of being appointed as Director of a company, if he has been convicted by a court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence. While under section 267 of the Companies Act, which deals with the appointment of Managing Director, it is enough if the person sought to be appointed as the Managing Director has been convicted by a court of an offence involving moral turpitude, in the case of a Director apart from conviction of an offence involving moral turpitude the person convicted should have been sentenced to undergo imprisonment for a term of not less than six months. Section 283(1)(e) of the Companies Act stipulates that the office of a Director shall become vacant if he is convicted by a court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months. Here also, the disqualification will be attracted and the office of Director will **W.P(C).No.20749 of 2011** -:15:- become vacant only if he is convicted and sentenced to undergo imprisonment for not less than six months. Sub-section (2) of section 283 of the Companies Act stipulates that notwithstanding anything in clauses (d), (e) and (j) of sub-section (1), the disqualification referred to in those clauses shall not take effect for thirty days from the date of the adjudication, sentence or order and where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence or order until the expiry of seven days from the date on which such appeal or petition is disposed of. In the instant case, the third respondent was convicted and sentenced to undergo imprisonment for only one month. Therefore, sections 274(1)(d) and 283(1)(e) can have no application. It cannot therefore, be said that the third respondent is disqualified from being appointed as a Director of the second respondent company. As noticed by the Apex Court in _**Rama Narang v. Ramesh Narang**_ (supra) the Companies Act has drawn a distinction between a Director and Managing Director and in the case of a Director, who is generally not in charge of the day-to-day management of the company affairs, the law is not as ## **W.P(C).No.20749 of 2011** **==> picture [28 x 10] intentionally omitted <==** strict as in the case of the Managing Director who runs the affairs of the company and remains in overall charge of the business carried on by the company. The appointment of the third respondent as a Director of the second respondent company cannot therefore, be assailed on the ground that he has been convicted to undergo imprisonment for a period of one month, even assuming for the sake of arguments that the conviction was of an offence involving moral turpitude. I accordingly hold that there is no merit in the writ petition. The writ petition fails and it is dismissed. The parties shall bear their respective costs. **P.N.RAVINDRAN, Judge.** **ahg.** **P.N.RAVINDRAN, J. --------------------------W.P(C).No.20749 of 2011 ----------------------------** ## **JUDGMENT** **19[th] September, 2011**