WP(C) 2258/2007 BEFORE THE HON’BLE MR. JUSTICE I.A. ANSARI Whether the Board of Directors of a Company, registered under the Companies Act, 1956, can delegate any of its powers to anyone and if so, whether the person to whom the power has been delegated can, in turn, sub-delegate the powers, so del egated to him, even if the Board of Directors had authorized their delegatee to sub-delegate the powers delegated to him. To put it a little differently, the mo ot question is: whether delegatee of the Board of Directors of a company can, in turn, sub-delegate any of his powers even if the Board of Directors authorize h im to do so? 2. The factual background of the case, which has raised the questions noted above, may, in brief, be set out as under :- (i) The petitioner herein is an employee of the Central Inland Water Transport Corporation Limited (hereinafter referred to as ’the Corporation’), a Govt. of India undertaking, which is registered as a Company under the Companie s Act, 1956. The petitioner has been working as an Inspector (Estate Security), which is in the grade of Supervisor under the River Services Division (RSD) of t he Corporation. 3. While the petitioner was serving in the grade of Supervisor at Guwahati , he was served with three memoranda of charges based on different articles of c harges, the memoranda having been issued on 19.09.2006, 08.12.2006 and 21.03.200 7. 4. The petitioner has put to challenge, in this writ petition, the order, d ated 28.08.2006, issued by the Respondent No.2 (i.e. the Chairman cum Managing D irector, CIWTC), appointing respondent No.6, namely, Sri J. Paul, Officer-in-Cha rge (RSD-Marine Operations), as the ad hoc Disciplinary Authority in respect of all employees of the River Services Division, for, it is on the strength of the order, dated 28.08.2006, aforementioned, that disciplinary proceeding against t he petitioner has been initiated by the memorandum, dated 08.12.2006, aforementi oned . The memorandum, dated 08.12.2006, issued by the respondent No.6, as the a d hoc disciplinary authority, initiating disciplinary proceeding on the charges levelled against the petitioner, and the letter, dated 03.04.2007, issued by the Corporation, asserting that the respondent No.6 is the competent authority to a ct as ad hoc disciplinary authority on the basis of his empowerment by the respo ndent No.2 to act as disciplinary authority in the proceedings drawn against the petitioner on his alleged misconduct, are also under challenge in the present w rit petition. 4. As per Annexure B to the Central Inland Water Transport Corporation Ltd. Conduct Rules & Service, Discipline & Appeal Rules, 1979, the Heads of the resp ective Divisions are the disciplinary authority in respect of the Supervisors an d subordinate staff under their respective Division. The Chairman-cum-Managing D irector (hereinafter referred to as ’the CMD’) is the appellate authority. In re spect of the petitioner, who is a Supervisor in the River Services Division, th e Head of the River Services Division is, in terms of the said Rules, the discip linary authority and the Chairman-cum-Managing Director is the appellate authori ty. 5. The respondent No.6, namely, Sri J. Paul, a retired acting Chief Manager (RSD- Marine Operation) of the CIWTC, was re-employed, on ad hoc basis, as Offi cer-in-Charge (RSD- Marine Operations) in the CIWTC, by order, dated 01.04.2006, passed, in this regard, by the CIWTC. At the time of appointment of respondent No.6, on contract basis, as indicated hereinbefore, one Sri Alok Kumar Choudhury was serving as General Manager (RSD), i.e., as the head of the River Services D ivision. The said Sri Alok Kumar Choudhury having taken voluntary retirement, th e post of General Manager (RSD) fell vacant. In view of the release of Sri Alok Kumar Choudhury, Sri J. Paul, (i.e., the respondent No.6) was nominated/appointe d, by an order, dated 02.05.2006, to look after the River Services Division on d ay-to-day basis and it was further declared that River Services Division will be under the overall control of the Chairman-cum-Managing Director as an additiona l charge. 5. On 02.05.2006 itself, Sri Alok Kumar Choudhury handed over the charge of his office of the head of the River Services Division to respondent No.6. There after, on 09.05.2006, respondent No.2, as the Chairman-cum-Managing Director, n ominated respondent No.6 (Sri J. Paul) to act as ad hoc disciplinary authority i n respect of all employees of the River Services Division. 6. The writ petitioner has put to challenge the authority of the respondent No.6 (Sri J. Paul) to act as the ad hoc disciplinary authority on, broadly spea king, two grounds, namely, (i) that the respondent No.6, being a contractual emp loyee of Corporation, does not stand on the footing of a regular employee and co uld not have, therefore, been nominated to function as ad hoc disciplinary autho rity and (ii) the respondent No.2, as the Chairman-cum-Managing Director, was no t competent to delegate to the respondent No.6 the power to act as the disciplin ary authority in the capacity of head of the River Services Division. 7. As, according to the writ petitioner, respondent No.6 does not have the authority in law to act as disciplinary authority, not only the appointment of respondent No.6 as ad hoc disciplinary authority by order, dated 09.05.2006, afo rementioned, but also issuance of the memoranda of charges, on 28.08.2006, by th e respondent No.6, against the writ petitioner, is without any authority of law. 8. The respondents have contended that in terms of Rule 11.1 of the Recruit ment and Promotion Rules of the Corporation, it is possible to employ, on contra ctual basis, a retired employee of the Corporation and, having been employed, on contractual basis, by order, dated 01.04.2006, aforementioned, respondent No.6 stands on the same footing as does other employee of Corporation within the mean ing of the expression ’employee’, which appears in Rule 2(ii) of the relevant Co nduct Rules and which governs all employees of the Corporation. 9. The respondents also contend that the Board of Directors of Corporation, in its 186th meeting, held on 30.03.98, had adopted a resolution appointing the CMD of the company as a Committee under Article 77 of Table A under Schedule 1 of the Companies Act, 1956, subject to the supervision and control of the Board of Directors making it clear that the CMD shall exercise all powers of administ ration, in relation to the employees of the Company including the power to suspe nd or take disciplinary proceedings against any such employee in terms of the ex isting Rules of the Corporation. By its said resolution, dated 30.03.98, the Boa rd of Directors further resolved empowering the CMD to, in turn, delegate all or any of his powers to any other officer of the company on such terms and conditi ons and for such period as the CMD may think fit including his power to take dis ciplinary action against the employees of the Corporation. 10. The respondents have further contended that the above decision of the Bo ard of Directors has been formalized by the amendment of the relevant Conduct Ru les on 05.12.2009, whereunder the Officer-in-charge (RSD) and Manager (Commercia l) is the disciplinary authority in respect of Junior Officers and employees, s uch as, Supervisors, the CMD being the appellate authority. 10. I have heard Mr. BC Das, learned Senior counsel, for the petitioner, and Mr. U. Bhuyan, learned counsel, appearing on behalf of the respondents. 11. The fact that the CMD has been delegated by the Board of Directors the p ower to take disciplinary action against all employees of the Corporation in ter ms of the Board of Director’s decision, in its 186th meeting, held on 30.03.98, has not been in dispute nor is the legality of the power, which the Board has de legated to the CMD is questioned in this writ petition. What is under challenge the delegation of power by the CMD to respondent No.6. 12. As the source of power of the CMD to sub-delegate his power to responden t No.6 enabling the latter to act as the ad hoc disciplinary authority is sought to be traced by the respondents to the resolution of the Board of Directors in its 186th meeting held on 30.03.98, the relevant portion of the resolution of th e Board of Directors is extracted below : The Board approved the Delegation of Powers to be exercised by the Chairman-cum -Managing Director of the Corporation and adopted the following resolution :- Resolved that the Chairman-cum-Managing Director of the Company be and is hereb y appointed as a Committee under the Provision of Article 77 of Table-A under Sc hedule-I of the Companies Act, 1956 which applies to the Company and subject to the Supervision and Control of the Board of Directors, the Chairman-cum-Managing Director shall exercise the powers which are delegated to him as follows : (a) to carry on day to day management and administration of the business and affairs of the Company ; (b) to enter into any agreement in connection with the loans obtained or to be obtained from Govt. of India from time to time and to sign the same; (c) to execute Indemnity Bonds, Counter Indemnity Bonds, Letter of Guarantee , Counter Guarantee on behalf of the Company; (d) to appear for and to represent the company in any Court in India and abr oad and also in any Tribunal and before all authorities and controllers or befor e all Judges and other officers of such Courts etc. and to sign and verify all p laints, written statements, petitions including those under Article 226 of the C onstitution of India, Tabular Statements, Applications, Claims, Declarations and other paper and also to deposit any money, documents and papers in any Court or Tribunal or other authorities and to take back the same and grant receipt; (e) to settle, compound or submit to arbitration or compromise any of such s uits or other proceedings on such terms as he may think fit in the interest of t he Company; (f) also for the purpose aforesaid to appoint and remove any solicitors, adv ocates and other lawyers and to sign all authority to lawyer; (g) to demand and receive any money security or money or any property whethe r movable or immovable belonging to the company and to grant receipts; (h) to sign all rent bills and give notices to quit and vacate; (i) to exercise all powers of administration in relation to the employees of the Company including power to suspend or take disciplinary proceedings against any such employees in terms of the existing Rules of the Corporation; and (j) to delegate to all or any of his powers as aforesaid to any other office r of the Company on such terms and conditions and for such period as the Chairma n-cum-Managing Director may think fit. 13. Appearing on behalf of the petitioner, Mr. B.C. Das, learned Senior Coun sel, has submitted that a Company, such as, Central Inland Water Transport Corpo ration, has to function, within the provisions of the Companies Act, 1956. Artic le 77 of Table-A under Schedule-I of the Companies Act, 1956, points out Mr. Da s, enables the Board of Directors to delegate any of its powers to a Committee c onsisting of one or more members and any Committee, which is so formed, shall, i n exercise of the powers so delegated, conform to any regulations that may be im posed on it by the Board. Article 77 does not, contends Mr. Das, empower the Boa rd to allow sub-delegation of its power by the Committee. 14. In effect, what Mr. Das contends is that a Board is competent to delegat e its powers to a Committee consisting of one or more member, but the Committee, so formed, cannot, in turn, be empowered by the Board to delegate its powers to any other person or authority. In the present case, though the Board has allowe d the CMD to sub-delegate the powers, which have been delegated to the CMD, the same is, according to Mr. Das, per se beyond the jurisdiction of the Board of Di rectors and, on the strength of such exercise of power, no lawful authority can be said to have been derived by the CMD, in the present case, to delegate his po wers to respondent No.6 and thereby enable the respondent No.6 to act as a disci plinary authority. In support of his submission that a delegatee, in the absence of any power expressed or implied, cannot sub-delegate its power, Mr. Das place s reliance on Sahni Silk Mills (P) Ltd. and another vs. Employees State Insuranc e Corporation, reported in (1994) 5 SCC 346. 15. Responding to the above submissions made on behalf of the petitioner, Mr . U. Bhuyan, learned counsel, submits that in the present case, in an administra tive set up, where numerous functions are required to be performed by the admini strators, it is not possible for one individual to exercise all the powers and i t may, therefore, become necessary, in a given case, not only to allow delegatio n of powers, but also sub-delegation of such powers. This aspect, according to M r. Bhuyan, is recognized by the Supreme Court in Sahni Silk Mills (P) Ltd. and another (supra) at para 5. 16. It is also submitted by Mr. Bhuyan that Article 77 of Table-A under Sche dule-I of the Companies Act, admittedly, empowers a Board of Director to delegat e any of its powers to a Committee consisting of one or more members as the Boar d may think fit. In exercise of its power, the Board, in the present case, has, points out Mr. Bhuyan, delegated its powers, in its 186th meeting, to the CMD. W hile so delegating its powers to the CMD in relation to the employees of the Cor poration including the power to suspend or take disciplinary actions against its employees, the Board has also empowered the CMD to delegate all or any of his s aid powers to any other officer of the Corporation and it is in exercise of this power of sub-delegation, which the Board has given to the CMD, that respondent No.6 has been appointed by the CMD as the disciplinary authority in respect of the employees working in the River Services Division of the Corporation. The act of the CMD is, therefore, according to Mr. Bhuyan, consistent with the action o f the Board inasmuch as it is the Board, which has empowered the CMD to sub-dele gate its power to any other officer of the company on such terms and conditions and for such period as the CMD may think fit. The exercise of the power by the C MD, in the present case, in appointing respondent No.6, as the disciplinary auth ority, cannot, therefore, according to Mr. Bhuyan, be faulted with. 17. The question, therefore, in the light of the rival submissions made befo re the Court, is, as already noted above, this: Whether the Board has the power to delegate any of its power to one or more persons and further empower such per son or persons to sub-delegate the power given to it/them in favour of any other employee of the Corporation? In order to receive a correct answer to this que stion, it is necessary to take note of the provisions contained in Article 77 of Table A under Schedule I to the Companies Act, 1956. Article 77 is, therefore, reproduced below: 77.(1)The Board may, subject to the provisions of the Act, delegate any of its powers to Committees consisting of such member or members of its body as it thi nks fit. (2) Any Committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on it by the Board. 18. From a bare reading of Article 77(1), it becomes clear that the Board h as ample power to delegate any of its powers to a Committee consisting of one or more members as the Board may think fit. There is nothing in Article 77 or unde r any other provisions of the Companies Act, 1956, empowering the Board to allo w sub-delegation of its power by the Committee to which the Board may have deleg ated its power. 19. Situated thus, it becomes clear that the provisions of the Companies Act , 1956, while permitting the Board to delegate any of its powers to a Committee, as indicated hereinbefore, does not empower the Board to allow sub-delegation o f its powers. Viewed in this light, it becomes clear that while the Board was co mpetent to delegate its power of administration in relation to their employees i n the Corporation including the power to suspend an employee or take disciplinar y action against him, the Board had no power to allow the CMD to delegate any of his powers to some other officer of the company. Consequently, the empowerment of the CMD by the Board allowing the former to delegate his powers to any other officer of the Corporation is per se against the provisions of the Companies Act , 1956, which the Corporation is bound to adhere to as any other company. Logic ally extended, it would mean that the CMD could not have delegated his power to take disciplinary action against the employees of the Company to respondent No.6 and respondent No.6 could not have, therefore, acted and cannot act as the disc iplinary authority, ad hoc or otherwise, in respect of the employees of the Rive r Services Division including a Supervisor, such as, the petitioner. 20. As regards the question as to whether sub-delegation of powers of the Bo ard to the CMD and by the CMD to the respondent No.6 is sustainable in law, it n eeds to be noted, as correctly pointed out by Mr. Bhuyan, learned counsel for th e respondents, that though the Courts have been insisting that the delegated pow er should be exercised by the authority upon whom it is conferred and by nobody else, yet the extension of the administrative function of an administrator has m ade the Courts consider liberally sub-delegation of power. What is, however, ext remely important to note, in this regard, is that the Supreme Court, while reco gnizing in Sahni Silk Mills (P) Ltd. and another(supra), the fact that the Court s have started acknowledging the public authorities’ liberty to employ agents to exercise its powers, has nevertheless observed : 5. The courts are normally rigorous in requiring the power to be exercised by the persons or the bodies authorized by the statutes. It is essential that th e delegated power should be exercised by the authority upon whom it is conferred and by no one else. At the same time, in the present administrative set up extr eme judicial aversion to delegation cannot be carried to an extreme. A public au thority is at liberty to employ agents to exercise its powers. That is why in ma ny statutes, delegation is authorized either expressly or impliedly. Due to the enormous rise in the nature of the activities to be handled by statutory authori ties, the maxim delegatus non potest delegare is not being applied specially whe n there is question of exercise of administrative discretionary power. 21. From the above observations, made in Sahni Silk Mills (P) Ltd. and anoth er(supra), it becomes clear that there was a time, when sub-delegation of power was considered wholly impermissible. However, gradually, due to change of time, the Courts have started recognizing legitimacy of sub-delegation of powers. What must, however, be borne in mind is that when delegation of power is allowed by a statute, the statute must, either expressly or by necessary implication, allow sub-delegation of the power or else, the delegatee cannot be sub-delegate. In o ther words, sub-delegation is not permissible in the absence of any express prov ision or necessary implication derived from the statute, which permits delegatio n of power. 22. In the case at hand, the Corporation, being registered under the Compani es Act, 1956, has to function within the framework of the Companies Act, 1956. I ndependent of, and contrary to, the provisions of the Companies Act, 1956, no co mpany, registered under the said Act, can act. Thus, if the Companies Act, 1956, does not allow sub-delegation of power by the Board, the fact that the Board, i n the present case, has allowed sub-delegation of power by the CMD to any other employee of the company will not clothe the CMD with the power to sub-delegate his powers to respondent No.6 or to any other person. When the Board itself is i ncompetent to allow sub-delegation of power, the CMD could not have appointed re spondent No.6 as the disciplinary authority, ad hoc or otherwise, on the strengt h of power, which the Board has given to the CMD in contravention of the provisi ons embodied in the Companies Act, 1956, as reflected by Article 77 aforemention ed. 23. Referring to the Circular, dated 23.11.95, issued by the General Manager (Finance), CIWTC Limited, which contains a copy of the Delegation of the Admini strative and Financial Power Rules, 1985, (in short, the Rules of 1985,) Mr. Bhu yan submits that Rule 6 of the Rules of 1985 empowers the CMD to re-delegate his power to any other officer of the company. For the purpose of better appreciati on of the above submission of Mr. Bhuyan, Rule 6 is reproduced below : 6. The powers delegated to the Chairman may be re-delegated by him to anoth er officer of the Company to such extent and on such terms and conditions and fo r such period as the Chairman-cum-Managing Director may think fit. 24. It needs to be noted that the Rules of 1985 are administrative rules. Th ese rules cannot override or prevail upon the provisions of the Companies Act, 1 956, and if any of the Administrative Rules run counter to the provisions of the Companies Act, 1956, such a rule cannot survive. 25. Bearing the above aspect of law in mind, when Rules of 1985 are re-visit ed, it clearly transpires that Rule 6 stands on no better footing than the res olution of the Board of Directors, as adopted in its 186th meeting, empowering t he CMD to delegate his powers given to him by the Board to any other employee of the company. Rule 6, therefore, stand, if I may reiterate, on no better footing than the resolution of the Board. When the resolution, adopted by the Board per mitting sub-delegation of power by the Board has already been held by this Cour t to be without jurisdiction, the fact that in administrative capacity, the Corp oration has framed Rule 6 will not clothe the CMD with the power to sub-delegate the powers, which have been delegated to him by the Board. Seen in this light, Rule 6 cannot save the impugned order, dated 28.08.2006, whereby respondent No.6 has been appointed as the ad hoc disciplinary authority by the respondent No.2. 26. That contrary to the statutory provisions, sub-delegation of power is im permissible is clearly discernible from the decision of the Supreme Court in Sah ni Silk Mills (P) Ltd. and another(supra), which Mr. Das has relied upon. The co ntroversy, in Sahni Silk Mills (P) Ltd. and another(supra), arose as regards the question as to whether sub-delegation of power by the Director General of the E mployees State Insurance Corporation (hereinafter referred to as the Corporation ) was proper. It is Section 94-A of the Employees State Insurance Act, 1948, whi ch empowers the Corporation to delegate its power to any officer or authorities subordinate to the Corporation. Section 94-A reads as under : 94-A. Delegation of powers.-The Corporation, and subject to