REPCO bank’s amended bylaws not in tune with law: Madras HC

CHENNAI: The Madras High Court had allowed a contempt petition filed against REPCO bank for not constituting the board of directors in consonance with the Multi-State Cooperative Societies (MSCS) Act, 2002 despite the High Court wanting it to be done in line with Section 48 of the MSCS Act.

“The REPCO society’s amended bylaw provides for nominating more than 1/3rd of its total members. This is in violation of the second proviso of Section 48 of the MSCS Act, which restricts the total number of nominated persons shall not exceed more than 1/3rd of the total number of members of the board. These amended bylaws were made in such a way defeating the spirit of the constitution, ” Justice G Jayachandran held on allowing the sub-application filed by P Thanapal.

The judge made this observation after finding a prima facie case as the bank submitted that it would constitute 10 board members, including four nominated members.

Of the 10 board members, 6 members will be elected by the general body from the delegates among the members' representatives, the bank submitted.

“Three members are to be nominated by the State and Central governments. A Managing Director (MD) will be appointed by the board, who will be an ex-officio member of the board of directors. Apart, the board is also vested with the discretion to co-opt two directors, who are field experts, ” the bank informed the court.

On recording the submissions, the judge held that there the nominated members cannot be more than one-third of the total members of the board.

Justice Jayachandran also noted that the MD/ex-officio member of the board cannot claim an exception under Section 41 (3) proviso (1) in respect of the restrictions on total members of the board or under Section 48 (1) proviso (1), the restriction on nominated members (1/3rd of the total members).

"Therefore, the MD of the REPCO society, who is vested with voting rights cannot get umbrage under the proviso to Section 41 (3) of the Act, ” the judge held, adding that the central registrar of cooperative societies who has the powers to monitor the amendment process and the society had intentionally breached the court order which directed them to follow the mandate of the constitution and law to amend their bylaws. The judge issued notice to the respondents and adjourned the matter on June 17.

When the petitioner filed a contempt application against the bank in 2021 for not filling the board of directors positions as per the court’s direction, the REPCO bank informed that it would complete the process within six to eight months. Therefore, the judge closed the contempt petition on June 29, 2021. However, the petitioner filed another sub-application seeking a direction to initiate action against the REPCO for suppressing several facts saying that it has amended the bylaws as per the MSCS Act and got a favourable order.