Case No: Civil Petition for Leave to Appeal No. 605 of 1999
Judge: Mustafa Kamal ,
Court: Appellate Division ,,
Advocate: Mr. Rafique-ul-Huq,Dr. M. Zahir,,
Citation: 51 DLR (AD) (1999) 258
Case Year: 1999
Appellant: Phoenix Leasing Ltd.
Respondent: Bangladesh Bank
Subject: Company Matter,
Delivery Date: 1999-7-12
Mustafa Kamal CJ
Bimalendu Bikash Roy Choudhury J
AMM Rahman J
Mahmudul Amin Choudhury J
Phoenix Leasing Ltd and others
Bangladesh Bank and others
July 12, 1999.
The Financial Institution Act, 1993
i) Section 25(3) is not a provision which is concerned with the individual or representative character of a director. Petitioner Nos. 2 and 5 may be the nominee-directors of Appollo Steel Mills Ltd in the Board of Directors of the petitioner company. But they are also directors of the City Bank Limited and therefore their directorship is hit by the omnibus provision of section 25(3)………...(18)
ii) The petitioner company was formed knowingly and voluntarily under the restrictive provisions of the said Act. It cannot now complain that its freedom of association has been restricted by section 25(3)……..(20)
iii) Section 25(3) does not on terms make any distinction between directors who represent their own share- holding individually and nominee-directors who represent their companies’ share holdings. It applies to all, whether they are individuals or nominees of a bank, insurance or financial institutions………(22)
Dr. M. Zahir Senior Advocate, instructed by Sharifuddin Chaklader Advocate-on-Record —For the Petitioners.
Dr. Rafiqur Rahman, Senior Advocate, instructed by Serajur Rahman, Advocate-on-Record —For the Respondents.
Civil Petition for Leave to Appeal No. 605 of 1999.
(From the Judgment and order dated 11-5-1999 passed by the High Court Division in Writ Petition No. 4992 of 1997).
Mustafa Kamal CJ.
1. The writ-petitioners of Writ Petition No. 4992 of 1997 have preferred this petition for Leave to Appeal from the judgment and order dated 11-5-99 passed by a Division Bench of the High Court Division discharging the Rule Nisi with costs.
2. Petitioner No.1, Phoenix Leasing Limited, is a lease finance company registered under the Companies Act to act as a financial institution licensed by the Bangladesh Bank on 9-5-95 under section 4 (1) of the Arthik Protisthan Ain (Financial Institutions Act, 1993). Petitioner Nos. 2-6 are directors of the petitioner Company. After obtaining licence, the petitioner company by letter dated 19-7-95 sought the approval of Bangladesh Bank for inclusion of petitioner Nos. 3 and 4 as nominee -directors of Phoenix Insurance Company Limited and of petitioner Nos. 2 and 5 as nominee- directors of Appollo. Steel Mills Limited (Annexure Al). By letter dated 24-8-95 (Annexure-B) Bangladesh Bank wanted to know whether the representatives of Appollo Steel Mills Limited, i.e. petitioner Nos. 2 and 5 are the directors of any Bank or Insurance Company. By letter, dated 27-8-95 petitioners No.1 informed the Bangladesh Bank that petitioner Nos. 2 and 5 are directors of the City Bank Limited. By letter dated 6-9-95 (Annexure-C) Bangladesh Bank informed petitioner No.1 that the matter of approval is under consideration of the Bank. By letter dated 25-10-95, Bangladesh Bank wanted to know the full particulars of a11 the proposed nominee-directors. The matter rested there for the moment.
3. Section 25(3) of the Arthik Protisthan Ain, 1993 provides as follows:
২৫(৩) আপাততঃ বলবত অন্য কোন আইনে জাহা কিছুই থাকুক না কেন, অন্য কোন আর্থিক প্রতিষ্ঠান, ব্যাংক কোম্পানি বা বীমা কোম্পানির পরিচালক আছেন এমন কোন ব্যক্তি কোন আর্থিক প্রতিষ্ঠানের পরিচালক হইবার যোগ্য হইবেন না।
It is, however, provided in section 48 of the said Act as follows:
৪৮। কতিপয় ক্ষেত্রে অব্যাহতি প্রদানের ক্ষমতা। বাংলাদেশ ব্যাংক, সরকারের সহিত পরামর্শক্রমে, সরকারি গেজেটে প্রজ্ঞাপন দ্বারা ঘোষণা করিতে পারে যে, এই আইনের সকল বা কোন বিশেষ বিধান, কোন নির্দিষ্ট আর্থিক প্রতিষ্ঠান বা সকল আর্থিক প্রতিষ্ঠানের ক্ষেত্রে সাধারনভাবে বা প্রজ্ঞাপনে নির্ধারিত কোন মেয়াদকালে প্রযোজ্য হইবে না।
On 27-8-95, Bangladesh Bank by a Gazette notification provided as follows (Annexure-E): নং বিসিডি (নন-ব্যাংকিং) ১০৫১/প্রজ্ঞা/৩—আর্থিক প্রতিষ্ঠান আইন, ১৯৯৩ ইং (১৯৯৩ ইং সনের ২৭ নং আইন)- আর ২৫ (৩) ধারার বিধান অনুযায়ী অন্য কোন আর্থিক প্রতিষ্ঠান, ব্যাংক, বীমা কোম্পানির পরিচালক আসেন এমন কোন ব্যক্তি কোন আর্থিক প্রতিষ্ঠানের পরিচালক হইতে পারবেন না। এক্ষণে উক্ত আইনের ৪৮ ধারায় প্রদত্ত খমতাবলে বাংলাদেশ ব্যাংক কর্তৃক সরকারের সাথে পরামর্শক্রমে কেবল মাত্র সরকার কর্তৃক মনোনীত কোন পরিচালক অথবা কোন ব্যাংক, বীমা বা আর্থিক প্রতিষ্ঠানের প্রতিনিধিত্বকারি কোন পরিচালকের ক্ষেত্রে আইনের উপরুক্ত বিধান হইতে উক্ত আইনে সংজ্ঞায়িত আর্থিক প্রতিষ্ঠানসমূহকে অব্যাহতি প্রদান করা হইল।
4. By letter dated 13-3-96 (Annexure-F) Bangladesh Bank wrote to petitioner No.1 stating that Bangladesh Bank has no objection to the inclusion of Petitioners Nos. 2-5 as nominee-directors of their respective companies to the Board of Petitioner No.1.Then came a notification dated 14-12-96 (Annexure-G by Bangladesh Bank as follows : নং আঃ প্রঃ (নন-ব্যাংকিং) ১০৫১/প্রজ্ঞা/৩—আর্থিক প্রতিষ্ঠান আইন, ১৯৯৩ ইং (১৯৯৩ ইং এর ২৭ নং আইন)-এর ২৫ (৩) ধারার বিধান হইতে বাংলাদেশ ব্যাংক কর্তৃক সরকারের সহিত পরামর্শক্রমে কেবলমাত্র সরকার কর্তৃক মনোনীত কোন পরিচালক অথবা কোন ব্যাংক, বীমা বা আর্থিক প্রতিষ্ঠানের প্রতিনিধিত্বকারী কোন পরিচালকের ক্ষেত্রে আইনের উপরুক্ত বিধান হইতে উক্ত আইনে সংজ্ঞায়িত আর্থিক প্রতিষ্ঠানসমূহ অব্যাহতি প্রদানের যে আদেশ ১৪ই জৈষ্ঠ্য ১৪০২ বাং/২৮ শে মে ১৯৯৫ ইং তারিখে নং বিসিডি (নন-ব্যাংকিং) ১০৫১/প্রজ্ঞা/৩ নম্বর প্রজ্ঞাপন মারফত জারি করা হইয়াছিল, এক্ষণে উক্ত আইনের ৪৮ ধারার প্রদত্ত ক্ষমতাবলে বাংলাদেশ ব্যাংক সরকারের সহিত পরামর্শক্রমে ঐ আদেশ অবিলম্বে প্রত্যাহার করিল।
5. The said notification dated 14-12-96 was communicated to petitioner No.1 by Bangladesh Bank by a circular dated 1-2-97 (Annexure-H). By a notice, dated 4-2-97 petitioner No.1 was directed to intimate within 7 days as to whether there was any director of any Bank, Insurance or Financial institution in their Board of Directors in violation of section 25(3) of the said Act.
6. The writ petitioners filed the instant writ petition challenging the vires of section 25(3) of the said Act and the notification of withdrawal of the exemption of restriction imposed by section 25(3) of the said Act dated 14-12-96 (Annexure-G) under section 48 of the said Act and also the directive dated 26-4-97 (Annexure-L) issued by the Bangladesh Bank complaining violation of section 25(3) of the said Act by the petitioner-company.
7. In their affidavit-in-opposition respondent Nos. 1-3 stated that relaxation of section 25(3) was made by notification dated 27-8-95 (Annexure-E) but the relaxation having been found discriminatory was repealed restoring the restriction imposed by section 25(3) of the said Act. The impugned letter dated 26-4-97 was issued for, compliance with section 25 (3) of the said Act.
8. The High Court Division found that there was no violation of fundamental rights of the petitioners as urged by them.
9. Dr. M. Zahir, learned Counsel for the petitioners, submits first, that the Bangladesh Bank having allowed petitioner Nos. 2-5 expressly to be in the Board of Director of Petitioner No. 1 by letter dated 13-3-96 (Annexure-F), it cannot be unilateral action withdraw the exemption of section 25(3) and thereby unseat them as directors. The power of granting exemption does not carry with it the power of withdrawal.
10. Dr. Rafiqur Rahman, learned Counsel for respondent No. 1 entering Caveat, submits that before the Gazette notification dated 27-8-95 granting exemption under section 48 of the said Act, petitioner Nos. 2-5 were never given any permission by Bangladesh Bank to be included in the Board of Directors of the petitioner company. The writ petition itself reveals that the matter rested with the letter dated 25-10-95 (Annexure-D) written by Bangladesh Bank to the petitioner company asking for full particulars of petitioner Nos. 2-5. Hence, there cannot be any question of allowing petitioner Nos. 2-5 to be in the Board of Directors of the petitioner company before 27-8-95. On perusal of the writ petition, we find that the submissions of Dr. Rahman are correct.
11. An express permission was given by the letter of the Bangladesh Bank dated 13-3-96 (Annexure-F) but, Dr. Rahman submits, that letter was a surplusage because petitioner Nos. 2-5 already came under the umbrella of relaxation made by the Gazette notification dated 27-8-95 (Annexure-E). We also find substance in this submission of Dr. Rahman.
12. As to the question whether after making an exemption under section 48 of the said Act the Bangladesh Bank can withdraw it, Dr. Rafiqur Rahman submits that exemption is in the nature of an exception and the exemption-giving authority can always withdraw it. Although Dr. M Zahir is very emphatic in his submission that an exemption once given under section 48 creates a vested right and cannot be withdrawn later we agree with the submission of Dr Rafiqur Rahman that an exercise of discretion under section 48 is in the nature of an exercise of an enabling power which can be withdrawn also in the discretion of the authority. It creates no vested right. We, therefore, do not find any substance in the first contention of Dr M Zahir.
13. Dr. Zahir next submits that once an exemption is made under section 48 of the said Act the nominee-directors become eligible to act as directors of the petitioner company and section 25(3) does no longer apply to them. There being no change in the factual circumstances the same set of directors who were considered eligible for appointment as directors cannot be subsequently found ineligible to continue as directors.
14. It is not necessary for the exemption- giving authority to narrate or describe what are the changes in the factual circumstances necessitating the withdrawal of exemption. Once the power of relaxation is, there under section 48, it is innate in the said power to withdraw the same as and when the exemption making authority thinks fit to do so. Hence, we do not find that there is much validity in this submission either.
15. The third submission of Dr. Zahir is that the withdrawal of exemption by notification dated 14- 12-96 is prospective and not retrospective. It will not affect those who are already continuing as nominee-directors like petitioner Nos. 2-5. Those who are already in cannot be ousted.
16. This interpretation of the impugned notification dated 14-12-96 is not acceptable on the face of it. Section 25(3) of the said Act is a barring provision making certain persons ineligible for being appointed as directors of a financial institution Until there is an exercise of power of exemption under section 48, the bar remains as a permanent provision in the said Act. When an exemption is given the bar under section 25(3) is relaxed; but when the exemption is withdrawn the legal consequence is the revival of the permanent bar under section 25(3), which will affect the existing nominee-directors including petitioner Nos. 2-5. The question of prospectivity and retrospectively does not arise in these circumstances. It is a case of certain section of an Act remaining in abeyance as if in a state of hibernation because of an exemption granted and the revival of it as soon as the exemption is withdrawn.
17. Dr. Zahir submits next that petitioner Nos. 2 and 5 are nominees of Appollo Steel Mills Limited d not of any bank, insurance or financial institution. It was wholly illegal to unseat them because they did not sit in the Board of the petitioner company as a nominee-directors of any bank, insurance or financial institution.
18. Section 25(3) is not a provision which is concerned with the individual or representative character of a director. Petitioner Nos. 2 and 5 may be the nominee-directors of Appollo Steel Mills Ltd. in the Board of Directors of the petitioner company. But they are also directors of the City Bank Limited and therefore their directorship is hit by the omnibus provision of section 25(3).
19. Dr Zahir then submits that under Article 38 of the Constitution every citizen shall have the right to form an association or union, subject to any reasonable restrictions imposed by law in the interest of morality or public order. The petitioner company was formed by the citizens of this country in exercise of their fundamental right of freedom of association which includes the right to continue the association with its existing members. There is no nexus between the restriction imposed by section 25(3) and morality or public order. Therefore, section 25(3) is ultra virus Article 38 of the Constitution.
20. The fallacy of the submission is that the petitioner company was formed in 1995 under the said Act with all the restriction contained therein. It was also not formed with petitioner Nos. 2-5 as nominee-directors. The petitioner-company was still seeking the permission of Bangladesh Bank to include them in its Board of Directors. When the petitioner company was not formed at all with petitioner Nos. 2-5 as its directors, there is no question of acquiring any fundamental right to continue with petitioner Nos. 2-5 as its directors. Besides the petitioner-company was formed in 1995 after the Arthik Prothisthan Ain, 1993 was enacted on 30-9-93. It was already governed by the restrictions imposed by section 25(3) of the said Act. The petitioner company was formed knowingly and voluntarily under the restrictive provisions of the said Act. It cannot now complain that its freedom of association has been restricted by section 25(3).
21. Lastly, Dr. Zahir submits that section 25(3) of the said Act refers only to those individuals who are directors of a bank, insurance or financial institution in their individual capacity, and personally holding shares in the financial institution in question. It does not refer to directors who are nominee-directors of a corporate body. The nominee-directors do not represent themselves or their own personal shareholdings in the petitioner company. They represent their principal organisations and the share holdings of their principal companies. As such, he submits, section 25(3) ought to be interpreted to mean directors who are individuals and not nominee- directors.
22. The argument does not hold good. Section 25(3) does not on terms make any distinction between directors who represent their own share-holding individually and nominee-directors who represent their companies’ share holdings. It applies to all, whether they are individuals or nominees of a bank, insurance or financial institutions.
Thus all the submissions of Dr. Zahir fail and the petition is dismissed.