Ours is a small co-operative bank in Maharashtra. We have 13 elected directors and 2 co-opted expert directors u/s. 73AAA(2) of the MCS Act. We wish to remove expert directors since they are not sincere and create groupism in the bank and halt smooth functioning of the board. Kindly guide us about the procedure to remove them from the board.
I C Naik
Concept of “Expert Directors” is the invention of the Constitution of India vide the Constitution (97th Amendment ) Act 2011 (97CAA). Consequently the MCS Act 1960 empowers the management committees to co-opt maximum of two experts in addition to the strength of the management committee specified under bye-laws. In one of the post 97CAA judgments Hon. Supreme Court of India laid down a law which is effective inspite of no provision exists in any law for removal of Expert Directors.
The Apex Court was confronted with a short question namely
” 2. Whether in the absence of a specific provision on removal by no confidence in the Act, Rules or even Bye-laws of a Cooperative Society, the Chairperson/elected office bearer can be removed by a motion of no confidence, is the short but complex question.
The Apex Court answered this question in affirmative while laying down the law at Paragraph 53 of the judgment extracted below:
“53. The cooperative society registered under the Central or the State Act is bound to function as a democratic institution and conduct its affairs based on democratic principles. Democratic functioning on democratic principles is to be reflected in the respective Acts or Rules or Bye-laws both on the principle and procedure. If not, it is for the court to read the democratic principles into the Act or Rules or Bye-laws. If a procedure is prescribed in any Act or Rule or Bye-law regarding election of an office bearer by the Board, as defined under Article 243ZH(b) of the Constitution of India, and for removal thereof, by way of a motion of no confidence, the same procedure has to be followed. In case there is no express provision under the Act or Rules or Bye-laws for removal of an office bearer, such office bearer is liable to be removed in the event of loss of confidence by following the same procedure by which he was elected to office.”
Expert Director is co-opted by the management committee and as such he can as well be removed by it by a majority decision. He is not holding an elective post so No Confidence Motion is also not necessary.
This is of course my reading of the S C Order and applying it to the situation as there is no precedent of Judiciary saying so in so many words. Even if an Expert Director were to claim that he cannot be removed because there is no provision in bye-laws, his claim will fall flat because he has not been elected like other members of the Committee and that he is entitled to take recourse to bye-laws. He is not a party to the bye-laws which are contracts interse the members {Read Para 15 in the case of Zoroastrian Co-Operative Housing Society Limited Rd-Sc 253 (15 April 2005) [https://indiankanoon.org/doc/713373/