Karnataka High Court tells government to appoint only qualified persons to the state-owned company

The Karnataka High Court has said that the government must appoint only qualified, with domain knowledge and professional excellence to the post of Chairman of a government company or public sector undertaking. A division bench comprising Justices DK Singh and Venkatesh Naik T said this while dismissing the petition filed by former chairman of the Mysore Sugar Factory Limited (MySugar), a State Government Company located in Mandya.

“The decision to appoint a politician would always result in compounding the miseries of the Government Company/Public Sector Undertaking, its workmen and would result in detriment to the public interest. The decision of the Government to appoint the petitioner who had no professional qualifications and domain knowledge as the Chairman of once one of the biggest sugar factories in Asia for political reasons was a bad decision which has resulted in whopping further losses to an extent of Rs 127 crores during his tenure,” the bench said while dismissing the petition filed by Nagarajappa B, a resident of Mandya.

The petitioner, a postgraduate in Agricultural Sciences and an agriculturist, was appointed as the Chairman of MySugar on October 1, 2008 with the status of the Minister of State. In 2012, M Srinivas, an MLA, filed a complaint before the then Chief Minister alleging serious irregularities, misconduct and misfeasance against Nagarajappa.

In May 2014, the state government entrusted the matter to the Upalokayukta under section 7(2-A) of the Karnataka Lokayukta Act. Prior to this, on December 26, 2012, the state government cancelled the order appointing Nagarajappa as the Chairman of MySugar. In 2020, the Upalokayukta filed the report with a finding that MySugar Company had incurred huge losses during the tenure of the petitioner as the Chairman.

Challenging this report, the petitioner claimed that he was not a government servant and that he was removed from the post. It was further submitted that the Chairman is one of the members of the Board of Directors and the decisions were taken by the Board and not by the petitioner alone. On the other hand, the government argued that the Upalokayukta report is only a recommendation to initiate appropriate proceedings for recovery of the losses to the tune of Rs 127 crores during the tenure of the petitioner.

The court noted that of the 12 allegations, Upalokayukta had found five allegations established prima facie, while others not proved. The bench further said that though after his removal from service the petitioner would not be a public servant, he would be a public servant for the misconduct committed by him during his tenure.

“We are of the view that the Government was well within the power to refer the conduct(s)/action(s) taken by the petitioner as the Chairman of MySugar Company to the Lokayukta and the reference was not bad in law. Further, the detailed report has been submitted by the Upalokayukta after examining each and every allegation, response and evidence, and therefore, we do not find that there is any error committed by the Upalokayukta in the report. The recommendations for taking appropriate action for recovery of the losses caused for the decisions taken by the petitioner as Chairman of MySugar Company is left to the Government, and the Government should act upon the recommendations,” the bench said.