Zilla Singh and another Vs. Chandgi and others

Citation - AIR 1991 SC 263

Honourable Judges -M.M. PUNCHHI AND S.C. AGRAWAL

Issue -Civil P.C. (5 of 1908), O.22, R.4

Date of Judgement -Oct 30 1990

Case Number : Civil Appeal No. 336 of 1976

Judgement:

JUDGMENT: - This appeal is directed against the Judgment and order of the Punjab and Haryana High Court dated March 20, 1974 regular second appeal No. 1432 of 1968 preferred by the appellant herein before the High Court was dismissed as having abated.
2. The facts are straight and simple. Rikhi and Nanu were two brothers, Nanu had a son by the name of Nagar and Rikhi had three sons - Matu, Chandan and Pahlada. Zilla Singh the appellant herein is the son of Chandan. On the death of Nagar his agricultural estate was mutated in the revenue papers in the name of his widow Sarupi. She also succeeded to his house. Zilla Singh appellant claiming himself to be an adopted son of Nagar filed a suit for possession in the Court of Sub-Judge, Ist Class, Panipat alleging (1) that Nagar left no widow at all much less by the name of Sarupi and (2) of being the adopted son was Nagar was entitled to succeed to the estate. The trial Court partially decreed the suit holding that Sarupi was the widow of Nagar and Zilla Singh appellant his adopted son, directing delivery of half share of the property to Zilla Singh appellant. On Sarupi's appeal, the Additional District Judge, Karnal dismissed the suit taking the view that Nagar had not validly adopted Zilla Singh in accordance with the provisions of the Hindu adoptions and Maintenance Act, 1976 as the adoptee being 16/ 17 years of age on the date of adoption, and no custom or usage had been established as required by law permitting adoption of a person above 15 years of age. The adoption was thus held invalid and even otherwise not been proved. On this basis the judgment and decree of the trial Court was upset.
3. When Zilla Singh appellant was in second appeal before the High Court the contesting respondent Sarupi died. Her estate was mutated in favor of the Manbhari the sister of Nagar. The appellant appealed against the sanction of mutation before the Collector concerned but unsuccessfully. Fully cognizant that Manbhari had appeared on the scene to claim the estate of Sarupi the appellant chose to sleep over the matter and did not have the estate of Sarupi represented by making a suitable application under tile provisions of Order XXII of C.P.C. within time. On the contrary an application was moved by the children of Manbhari, who by then had also died, to be substituted in place of Sarupi deceased so as to contend that the appeal had abated. It is that stage that the appellant moved two applications (1) for stating that he need not have made application under the provisions of Order XXII of C.P.C. as he himself as heir of Sarupi was on record and secondly to challenge the action of the applicants in becoming parties on the basis of relationship of the applicants with Manbhari the alleged sister of Nagar. The High Court when seizen of the matter required the trial Court to report as to whether Manbhari was the sister of the Nagar and the applicant's children of Manbhari. The trial Court on examining evidence and consideration reported that the relationship was established and Manbhari was the sister of Nagar. On that basis the appeal was dismissed as abated and the view of the High Court is now under challenge.
4. We have heard Mr. S. K, Gambhir learned counsel of the appellant. As long as the finding of the Lower Appellate Court stands the appellant was not the adopted son of Nagar and Sarupi was the widow of Nagar. Besides the finding reported to the High Court was that on the death of Sarupi Manbhari succeeded to the estate and on the later's death her children. In the situation we fail to appreciate the claim of the appellant that he could continue the appeal on the sole assertion that he was the adopted son of Nagar being fully aware that the children of Manbhari had appeared in the scene and had successfully claimed the estate before the Revenue Authorities. There is no cause pleaded why the application for bringing on record the legal representatives of Sarupi were belatedly made or cause to have the abatement set aside. In the circumstances it appears to us that the view of the High Court is unexceptionable. The appeal fails and accordingly it is dismissed, but in the circumstances we leave the parties to bear their own costs.
Held:
Appeal dismissed.
The High Court and the charge and the proceedings in question were thereupon quashed by the High Court in July/ August, 196.7. There were three more cases tried by the special Judge, Ferozpur and acquitted.
83. The appellant filed a document in this Court claiming the monetary claim on the basis that his termination was wrongful. According to the appellant, he was entitled to recover Rs. 4,83,061.90 paise. However, according to the statement filed by Shri Nayar, learned Counsel for the respondents in this case, the appellant was entitled to withdraw from the District Board Rs. 2,46,464.46 paise, in case he would have been in service before his date of superannuation, i.e., 30th September, 1984. There is no evidence from either side as to whether the appellant had worked somewhere else though the appellant did not work with the respondent because of his suspension. The appellant had, however, stated that he did not so work. In that view of the matter, if the contentions of the appellant are accepted that the clause under which the terms of employment of the appellant was agreed and under which the termination was effected without any inquiry and further in view of the fact that the learned trial Judge before whom the appellant had filed the suit first and decreed the suit declaring the appellant to be entitled to be in service, the appellant, in our opinion, should rightly be granted a monetary claim for Rs. 4,83,061.90 paise and further interest at 6% from 30th September, 1984. This would be in consonance with justice and equity in the facts and the circumstances of this case. This order, however, will have to be passed if we accept the contention on behalf of the appellant herein on the construction of the clause.
84. In the matter of M/s. Indian Airlines, which is the subject-matter of the Application for Intervention No. 1 of 1990 in Civil Appeal No. 2846 of 1986, Mr. Lalit Bhasin, on behalf of the interveners contended that there has been distinction between the discharge simpliciter and dismissal from service by way of punishment. According to Mr. Bhasin the effect of the judgments of this Court in the Central Inland Water's case (AIR 1986 SC 1571) and West Bengal's case (AIR 1985 SC 722) was to take away the right of the employer to terminate the services of an employee by way of discharge simpliciter. According to Mr. Bhasin, this Court had recognized the existence of the inherent right of an employer to terminate the services of an employee in terms of the contract of employment and also under the various labor enactments'.
85. Attention of this Court was invited to the provisions of the Industrial Employment (Standing Orders) Act, 1946, which applies to all industrial establishments whether in the public or private sector. Under and as a part of the said Act, model standing orders are set out and Standing Order No. 13 provides for simple termination of employment by giving one month's notice etc. Similarly, there are provisions under various Shops and Establishments Acts of different Estates providing for termination of employment of permanent employee after giving one month's notice or pay in lieu of notice. Attention of this Court was invited to S. 30 of Delhi Shops and Establishments Act.
86. The Industrial Disputes Act itself makes distinction between discharge and dismissal and attention of this Court was invited to S. 2(oo) of the Industrial Disputes Act, which defines 'retrenchment'. This section expressly excludes termination of services as a result of non-renewal of contract of employment. Section 2(s) of the Industrial Disputes Act defines 'workman' to include any person who has been dismissed, discharged or retrenched. Section 2A distinguishes discharge, dismissal and retrenchment.
87. It is pertinent to point out that the Original Regulation 13 of Indian Airlines Employees Service Regulations was set out as under:
"13. The services of an employee are terminable at 30 days on either side or basic pay in lieu:
Provided, however, the Corporation will be at liberty to refuse to accept the termination of his service by an employee where such termination is sought in order to avoid disciplinary action contemplated or taken by the Management."
88. After the decisions of this Court in Central Inland Water's case (AIR 1986 SC 1571), Indian Airlines initiated steps to amend its Regulation 13 to bring it in line with Article 311(2) of the Constitution as directed by this Court in the Hindustan Steels Ltd.'s case (AIR 1985 SC 251). It appears that the Board of Directors of Indian Airlines has accordingly approved of the amendments to Regulation 13 and the amended Regulation reads as under:
"(a) The services of an employee may be terminated without assigning any reasons to him/her and without any prior notice but only on the following grounds not amounting to misconduct under the Standing Orders, namely: -
(i) If he/ she is, in the opinion of the Corporation (the Board of Directors of Indian Airlines) incompetent and unsuitable for continued employment with the Corporation and such incompetence and unsuitability is such as to make his/her continuance in employment detrimental to the interest of the Corporation;
OR
if his/her continuance in employment constitutes, in the opinion of the Corporation (the Board of Directors of Indian Airlines), a grave security risk making his/her continuance in service detrimental to the interests of the Corporation;
OR
if in the opinion of the Corporation (the Board of Directors of Indian Airlines) there is such a justifiable lack of confidence which, having regard to the nature of duties performed, would make it necessary in the interest of the Corporation, to immediately terminate his/her services.
(b) The employee can seek termination of his/ her employment by giving 30 days' notice or basic pay in lieu:
Provided however the Corporation will be at liberty to refuse to accept the termination of his/ her service by an employee where such termination is sought in order to avoid disciplinary action contemplated or taken by the Management."
89. According to Mr. Bhasin, in the Amended Regulation 13, Indian Airlines had taken care to set out the circumstances in which the services of an employee can be terminated by way of discharge and without holding inquiry. Mr. Bhasin urged that these are eventualities, which do not constitute misconduct, and yet retention of an employee in the service by the management for any one of the grounds mentioned in the aforesaid Regulation might be considered as detrimental for the management or against public interest. Mr. Bhasin submitted that the power has been vested with the Board of Directors and not with any individual. According to, Mr. Bhasin, plain reading of Regulation 13, as amended, would clearly establish that the vice, if any, or arbitrariness is completely removed and sufficient guidelines are made available to the highest functionary, namely, the Board of Directors to exercise the restricted and limited power now available to the employer under these Regulations.
90. Similar submissions have been made on behalf of Air India, who are interveners. Submissions made herein before were alternative submissions. The original Regulation 48 of Air India Employees Service Regulations was as follows:
"Termination:
The services of an employee may be terminated without assigning any reason, as under:
(a) of a permanent employee by giving him 30 days' notice in writing or pay in lieu of notice;
(b) of any employee on probation by giving him 7 days' notice in writing or pay in lieu of notice;
(c) of a temporary employee by giving him 24 hours' notice in writing or pay in lieu of notice.
Explanation: For the purposes of the regulation, the word "pay" shall include all emolument, which would be admissible if he were on privilege leave."
91. After the decisions of this Court declaring the aforesaid Regulation as void in Civil Appeal No. 19 of 1982 in the case of Manohar P. Kharkar & Anr. v. Raghu Raj & Anr, Air India amended the aforesaid Regulation, which now reads as under:
"(a) The services of a permanent employee may be terminated without assigning any reasons to him/her and without any prior notice but only on the following grounds not amounting to misconduct under Service Regulation 42, namely:
(i) if he/ she is, in the opinion of the Corporation (the Board of Directors of Air India) incompetent and unsuitable for continued employment with the Corporation and such incompetence and unsuitability is such as to make his/her continuance in employment detrimental to the interests of the Corporation;
OR
If his/ her continuance in employment constitutes, in the opinion of the Corporation (the Board of Directors of Air India), a grave security risk making his/ her continuance in service detrimental to the interests of the Corporation;
OR
If, in the opinion of the Corporation (the Board of Directors of Air India), there is such a justifiable lack of confidence which, having regard to the nature of duties performed, would make it necessary, in the interest of the Corporation, to immediately terminate his/ her services.
(b) The services of an employee on probation may be terminated without assigning any reason to him/her but on giving 30 days' notice in writing or pay in lieu thereof
(c) The services of a temporary employee' may be terminated without assigning any reason to him/her but on giving 15 days' notice in writing or pay in lieu thereof.
Explanation: For the purpose of this Regulation the word "pay" shall include all emoluments which would be admissible if he were on privilege leave."
92. The question regarding justification of the action taken by the management was touched by this Court, but since the action was based on the old Regulation 48, it had to be quashed. It was submitted on behalf of the Air India that care had been taken to suit the circumstances in which the services of an employee could be terminated by way of discharge simpliciter and without holding inquiry. These are eventualities, which do not constitute misconduct, and yet retention of an employee in the service of the management for any one of the grounds mentioned in the said Regulation might be considered as detrimental for the management or against public interest. It was submitted that the said Regulation 48 has to be read with Regulation 44(A), which reads as under:
"44(A) (i) Notwithstanding anything contained in these Regulations and if, in the opinion of the Corporation (the Board of Directors of Air India), it is not possible or practicable to hold an inquiry under the relevant provisions of these Regulations, the Corporation may, if satisfied that the employee has been guilty of any misconduct, any one of the punishment mentioned in Regulation 43 on the employee concerned.
Provided that before exercising his extra ordinary power, the Board shall give 30 days' prior notice to the employee concerned of the act of misconduct that the reasons why it is not possible or practicable to hold an inquiry into such misconduct, and the punishment proposed by the Board and the employee shall he entitled to make a full written representation to the Board in response to such notice.
(ii) No action shall be taken under the Regulation until the Board has taken into consideration the representation made by the concerned employee under the proviso to Section (i) within the notice period."
93. The original Regulation 44 was also modified. According to the interveners, the cumulative reading of Regulation 48, as amended, and Regulation 44, as amended, would clearly establish that the vice, if any, of arbitrariness is completely removed and sufficient guidelines are made available to the Board of Directors to exercise the restricted and limited power now available to the employer under these Regulations.
94. In C.M.P. No. 30309 of 1988, on behalf of the New India Assurance Co., the intervention application was filed. It was stated that in the Courts below the Writ Petition No. 835 of 1975 was filed by the employee challenging his termination and the appeal filed thereon were decided on grounds available to the petitioner at that time. A special leave petition was filed by the employee concerned, which has now become C.A. No. 655 of 1984. After the judgment in the Central Inland Water's case (AIR 1986 SC 1571), an additional ground is now being taken to contend that a contract entered into way back in the sixties when the employee concerned was an employee of the Orissa Co-operative Insurance Society Ltd., Cuttack could not be enforced now and the same ought to be declared void in view of the Central Inland Water's case.
95. The intervention was allowed on 24th January 1990 and Smt. Shyamla Pappu, Senior Advocate submitted written submissions. It was submitted that adjudication on the merits and the consideration of the facts and circumstances of the case might be left to the Bench hearing the matter after the decision of the question of law referred to the Constitution Bench.
96. In this connection, it may, however be noted that the General Insurance was nationalized under the provisions of the General Insurance Provisions (Nationalization) Act, 1972 and the said Act came into force on 20th September, 1972, prior to this, General Insurance (Emergency Provisions) Act, 1971 was passed under the provisions of which Act all undertakings of all Insurers vested in the Central Government with effect from 13th May, 1971. This was pending nationalization, which took place in 1972 as aforesaid.
97. Section 7(1) of the said Act, which provided for the takeover of former employees, reads as under:
"Every whole-time officer or other employee of an existing Insurer other than an Indian Insurance Company, who was employed by that insurer, wholly or mainly with his general insurance business immediately before the appointed day, shall, on the appointed day, become an officer or other employee, as the case may be, of the Insurance Company, in which the Undertaking to which the service of the officer or other employee relates has vested and shall hold his office or service on the same terms and conditions and with the same rights to pension, gratuity and other matters as would have been admissible to him if there had been no such vesting and shall continue to do so until his employment in the Indian Insurance Company in which the undertaking or part has vested, is terminated or until his remuneration, terms and conditions are duly altered by that Indian Insurance Company."
98. The original terms and conditions had not been altered and the employees like the appellant in C. A. No. 855 / 84 continued to be governed by the original terms and conditions of the contract at the time of termination. The original terms and conditions of employment, therefore, continued in force. The contract of service was entered into when the appellant joined the Orissa Co-operative Insurance Society Ltd. way back in 1961 and at the time of take-over by the Central Government was the Divisional Manager of the said society. After the take over by the Central Government of general insurance in 1972, a great deal of reorganization had to be effected in order to tone up the system of general insurance which had become unwieldy due to the mushroom growth of societies with no control whatsoever when insurance was in private hands.
99. It was submitted by Smt. Shyamla Pappu that there are many such cases where action was taken soon after nationalization of general insurance in 1972. If such orders were set aside today, Smt. Shyamla Pappu posed the question, what would be the result? Would the order set aside, at this stage give the employee a right to be reinstated? If the answer to the above is in the affirmative, would it be conducive to efficiency in the conduct of a public utility such as general insurance, Smt. Pappu raised the question. Would it not hamper the Company's business considering that the reduction/reorganization of staff was essential for the effective functioning of the public service? Smt. Pappu asked the question would the public service not be saddled with unnecessary and/ or incompetent staff, thus, burdening the public utility/ service with unmanageable costs and staff that is ineffective? It was urged that the New India Assurance Company had a clause, in the contract at the relevant time, which was as follows:
"in the event of the society not having any further need of any employee's services, whether permanent or temporary, which shall be decided by the Board, the Principal Officer shall give 30 days' notice in writing for termination of his services or in lieu thereof pay such employee a sum equivalent to one month pay including allowance up to the period of notice."
100. The above clause covered cases of retrenchment, abolition of posts and other situations, which had been adjudicated upon by this Court. If, however, the Central Inland Water's case (1986 (3) SCC 156: AIR 1986 SC 157 1) is applied, Smt. Shyamla Pappu submitted, then the management of the intervenor Company will be powerless even in a case of abolition of posts or retrenchment or any other allied situation. It is seen that the power to terminate an employee is coexistent with the power to appoint. Smt. Shyamla Pappu relied on the General Clauses Act and submitted that the Central Inland Water's case was erroneous in so far as it made a complete negation of this power. Then, it was submitted by her that in case of an employer who had made all the necessary investigation and the employee concerned has been fully heard before the order of termination and if the decision of Central Inland Water's case was applied, then even such a case would be a case of illegal termination considering that there would be no power to terminate. It was submitted that the Central Inland Water's case had to be read down because paras 77, 92 and 93 (Paras 78, 93 and 94 of AIR) of the report take in even private employment. The sweep of the judgment cannot hold good and had to be curtailed.
101. According to Smt. Pappu, what then was the position of termination effected when the law was different? It cannot be said that they are entitled to relief now. It should be clarified that the judgment of this Court would apply prospectively, it was submitted. Past cases might be treated as concluded in view of the law prevailing at that time and also in view of the contentions urged by the parties in the Courts below at various stages. In the event, this Court comes to the conclusion that even old cases would be covered by the judgment now rendered, the orders already passed may be upheld and a post-decisional hearing might be directed so that the management concerned has the opportunity of showing that there existed good reasons for termination though the same were not communicated to the employee concerned because the law then existing did not require such a communication. In the interest of justice, we should allow such a course.
102. In the light of the provisions and in the facts and the circumstances of the case, it is, therefore, necessary to consider the validity of the power of termination of employment by the employers or authorities of the employees without holding any inquiry in the circumstances noted in the several civil appeals and applications herein.
103. In these civil appeals, the question of actual user of power is not the main issue, but the validity of clauses or regulations containing the aforesaid power. The instances of actual user of power, however, are not wholly irrelevant on the question of the validity or extent of the power because these explain the extent and content of power and/ or occasion for such user. Firstly, we have to, in view of the facts and the circumstances of the Civil Appeal No. 2876 of 1986, consider the amplitude of the power under clause (b) of Regulation 9 of the Regulations concerned. We have noted the contents of that Regulation. We have also noted the amplitude of the expression of that power as was canvassed before the High Court in the matter under appeal and as noticed by the decision of this Court in Delhi Transport Undertaking v. Balbir Saran Goel's case (AIR 1971 SC 836). A survey of the several authorities of law and the development of law from time to time would lead one to the conclusion that the philosophy of the Indian Constitution, as it has evolved, from precedent to precedent, has broadened the horizons of the right of the employees and they have been assured security of tenures and ensured protection against arbitrariness and discrimination in discharge or termination of his employment. This is the basic, concept of the evolution from the different angles of law of master and servant or in the evolution of employer. and employee relationship. It is true that the law has traveled in different channels, Government servants or servants or employees having status have to be differentiated from those whose relationships are guided by contractual obligations.
104. But it has to be borne in mind that we are concerned in these matters with the employees either of semi-Government or statutory corporations or public undertakings who enjoy the rights, privileges, limitations and inhibitions of institutions who come within the ambit of Article 12 of the Constitution. It is in the background of these parameters that we must consider the question essentially and basically posed in these matters. The basic and the fundamental question to be judged is, in what manner and to what extent, the employees of these bodies or corporations or institutions could be affected in their security of tenure by the employers consistent with the rights evolved over the years and rights emanating from the philosophy of the Constitution as at present understood and accepted.
105. We have noted the exhaustive and the learned analysis of the background of the diverse facts projected in the several cases and appeals before us.
106. Efficiency of the administration of these undertakings is very vital and relevant consideration. Production must continue, services must be maintained and run. Efficacy of the services can be manned only by the disciplined employees or workers. Discipline, decency and order will have to be maintained. Employees should have sense of participation and involvement and necessarily sense of security in semi-permanent or quasi permanent or permanent employment. There must be scope for encouragement for good work. In what manner and in what measure, this should be planned and ensured within the framework of the Constitution and, power mingled with obligations, and duties enjoined with rights, are matters of constitutional adjustment at any particular evolved stage of the philosophy of our Constitution.
107. We have noted several decisions, numerous as these are, and the diverse facts, as we have found. We have noted that in some cases arbitrary action or whimsical action or discriminatory action can flow or follow by the preponderance of these powers. The fact that the power so entrusted with a high-ranking authority or body is not always a safe or sound insurance against misuse. At least, it does not always ensure against erosion of credibility in the exercise of the power in particular contingency. Yet, discipline has to be maintained efficiency of the institution has to be ensured. It has to be recognized that quick actions are very often necessary in running of an institution or public service or public utility and public concern. It is not always possible to have inquiry because disclosure is difficult; evidence is hesitant and difficult, often impossible. In these circumstances, what should be the approach to the location of power and what should be the content and extent of power, possession and exercise of which is essential for efficient running of the industries or services? It has to be a matter both of balancing and adjustment on which one can wager the salvation of rights and liberties of the employees concerned and the future of the industries or the services involved.
108. Bearing in mind the aforesaid principles and objects, it appears to us that the power to terminate the employment of permanent employee must be there. Efficiency and expediency and the necessity of running an industry or service make it imperative to have these powers. Power must, therefore, (be) with authorities to take decision quickly, objectively and independently. Power must be assumed with certain conditions of duty. The preamble, the policy, purpose of the enacting provision delimit the occasions or the contingencies for the need for the exercise of the power and these should limit the occasions of exercise of such powers. The manner in which such exercise of power should be made should ensure fairness, avoid arbitrariness and mala fide and create credibility in the decisions arrived at or by exercise of the power. All these are essential to ensure that power is fairly exercised and there is fair play in action. Reasons, good and sound, must control the exercise of power.
109. We have noted the rival submissions. Learned Attorney General of India and the learned Solicitor General and others appearing for those who sought for sustaining the power by the employers or the authorities contend that for efficiency of the industry, for the attainment of the very purpose for which aforesaid Regulations concerned or of similar institutions are created, there should be power to terminate the employment of undesirable, inefficient, corrupt, indolent, disobedient employees in those cases where holding of inquiry or prolonging these employees for that purpose would be detrimental, difficult and frustrating. It is in this context that we should examine the power under the aforesaid Regulation 9(b). The power must be there, the power must be utilized by person or authority, high ranking enough or senior enough who can be trusted or who can be presumed to be able to act fairly, objectively and independently. The occasion for the exercise of the power must be delimited with precision, clarity or objectivity. And those occasions must be correlated to the purpose for which the powers are sought to be exercised. In concrete terms, for the running of tile industry or the service, efficiently, quickly and in a better manner or to avoid deadlocks or inefficiency or friction, the vesting of the power in circumstances must be such that will evoke credibility and confidence. Reasons must be there, reasons must be perceptible, reasons must be relevant and the reasons must be of authority independently, fairly and objectively arrived at.
110. Notice of hearing may or may not. be given, opportunity in the form of an inquiry may or may not be given, yet arbitrariness and discrimination and acting whimsically must be avoided. These powers must, therefore, be so read that the powers can be exercised on reasons, reasons should be recorded, reasons need not always be communicated, must be by authorities who are competent and are expected to act fairly, objectively and independently. The occasion for the use of power must be clearly circumscribed in the above limits. These must also circumscribe that the need for exercise of those powers without holding a detailed or prolonged inquiry is there.
111. As we have noted, a good deal of controversy was that these inhibitions or limitations or conditions are not there in the amplitude or the extent of the power enumerated or stated in Regulations 9(b) of the aforesaid Regulations concerned or of similar provisions that we have examined in these cases.
112. We have noted the argument, learned and interesting, on the question of judicial law making imputing to the legislatures what these have not articulated. Should the Courts say or can say what the legislatures have not said? We have noted the controversy of how should legislation of limited legislatures, Parliaments or rule making bodies, who are not expected or enjoined to make rules or laws contrary to or in derogation or the constitutional prohibitions and inhibitions be read. We have been tempted to read down in the path of judicial law making on the plea that legislature could not have intended to give powers to the authorities or employers which would be violative of fundamental rights of the persons involved in the exercise of those powers and, therefore, should be attributed those powers on conditions which will only make these legal or valid. Our law making bodies are not laws unto themselves and cannot create or make all laws. They can only confer powers or make laws for the conferment of powers on authorities, which are legal and valid. Such powers conferred must conform to the constitutional inhibitions. The question, therefore, is - is it possible or desirable to read down the power conferred under Regulation 9(b) or similar regulations permitting employer or the authority to terminate the employment of the employees by giving reasonable notice or pay in lieu of notice without holding inquiry with the conditions indicated or mentioned herein before? Will it or will it not amounts to making laws or stating which the legislature or the law making body has not stated?
113. We have been reminded that Judges should not make laws. But the question is -can the Judges articulate what is inarticulate and what can be reasonably and plainly found to be inherent on the presumption that a legislature or a law making body with the limited authority would act only within limitations so as to make the legislation or law valid and the legislature must be presumed to act with certain amount of knowledge and fairness protecting the rights of people concerned and aiming at fairness in action?
114. We have noted the rival contentions. We have noted the submission that Mr. Garg, Mr. Ramamurthi and others invited us not to read down and against legislating positively with conditions. But the question is are those conditions which we are invited to attribute to the legislature or the law making bodies contrary to or against her manifest intention of the legislature?
115. Legislation, both statutory and constitutional, is enacted; it is true, from experience of evils. But its general language should not, therefore, necessarily be confined to the form that that evil had taken. Time works changes, brings into existence new conditions and purposes and new awareness of limitations. Therefore, a principle to be valid must be capable of wider application than the mischief, which gave it, birth. This is particularly true of the constitutional constructions. Constitutions are not ephemeral enactments designed to meet passing occasions. These are, to use the words of Chief Justice Marshall, "designed to approach immortality as nearly as human institutions can approach it in the application of a constitutional limitation or inhibition, our interpretation cannot be only of 'what has been' but of 'what may be'. See the observations of this Court in Sunil Batra v. Delhi Administration (AIR 1978 SC 1675). Where, therefore, in the interpretation of the provisions of an Act, two constructions are possible, one, which leads towards constitutionality of the legislation, would be preferred to that which have the effect of destroying it. If we do not read the conferment of the power in the manner we have envisaged before, the power is liable to be struck down as bad. This, we say in spite of the argument by many including learned Solicitor General of India and Smt. Shyamla Pappu that in contractual obligations while institutions or organizations or authorities, who come within the ambit of Art. 12 of the Constitution are free to contract on the basis of 'hire and fire' and the theory of the concept of unequal bargain and the power conferred subject to constitutional limitations could not be applicable. We are not impressed and not agreeable to accept that proposition at this stage of the evolution of the constitutional philosophy of master and servant framework or if you would like to call it employer or employee relationship. Therefore, these conferment of the powers on the employer must be judged on the constitutional peg and so judged without the limitations indicated aforesaid, the power is liable to be considered as arbitrary and struck down.
116. Whenever a statute comes up for consideration, it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language, and for that matter any language in use today, is not an instrument of mathematical precision. It has been said that our literature would have been much the poorer if it were. Leaving, however, the question of richness or poverty of our literature apart, we must proceed on the assumption that human mind cannot foresee everything. It has, therefore, been said that when a question arises whether the power has been properly conferred and even if so, the extent of it, Lord Denning has opined that a Judge in such a situation cannot simply fold his hand and blame the draftsmen and look for new enactment. Lord Denning invites us to set to work on the construction task of finding the intention of the Parliament or the law making body and we must, however, do this not only from the language of the statute, because, as we have seen, language is an imperfect medium and very often thoughts are perpetually in search of 'broken language'. But the judge must also do it from a consideration of the social conditions which give rise to it, and of the mischief which it was intended to remedy and also in the light of the constitutional inhibitions and then supplant the written words and add to it and give force and life to the intention and purpose of the legislature or the law making authority. A Judge must not alter the material of which a law or an instrument is woven, but he can and should iron out the creases and if one may venture to say, make articulate the inarticulate premise but make articulate only which follow from necessary compulsions of the situations and the constitutional position. See in this connection the observations of Lord Denning in "The Discipline of Law" at p. 12.
117. It is true that judicial jealousy of legislature in law making has long been outdrawn, but the strict construction remains still an established rule. It is generally accepted principle that Judges in interpreting statutes should give effect to the legislators' intent. By doing so, the Courts do recognize their subordinate position and their obligation to help the legislature to achieve its purpose. But in that effort, creativity is essential. There have been differences of opinion on the practices that the Courts may employ in attempting to discover the legislative intent. In the beginning, conventional practice was only to look to the words of the statutes. Now the entire spectrum has to be examined. It has been said that Judges are not unfettered glossators.
118. It is true that there is no actual expression used enabling the legislation or the statute in question indicating the limitations or conditions as aforesaid. But it must proceed on the premise that the law making authority intended to make a valid law to confer power validly or which will be valid. The freedom, therefore, to search the spirit of the enactment or what is intended to obtain or to find the intention of the Parliament gives the Court the power to supplant and supplement the expressions used to say what was left unsaid. This is a power, which are an important branch of judicial power, the concession of which if taken to the extreme is dangerous, but denial of that power would be ruinous and this is not contrary to the expressed intention of the legislature or the implied purpose of the legislation. It was not as Shri Ramamurthi tried to argue that legislature wanted to give an uncontrolled and absolute power to discharge employees on the part of the employers without any inquiry in all circumstances. That cannot be and that was not intended to be as can be implied from all the circumstances.
119. In the aforesaid view of the matter, I would sustain the constitutionality of this conferment of power by reading that the power must be exercised on reasons relevant for the efficient running of the services or performing of the job by the societies or the bodies. It should be done objectively, the reasons should be recorded, it should record this and the basis that it is not feasible or possible reasonably to hold any inquiry without disclosing the evidence, which in the circumstances of the case would be hampering the running of the institution. The reasons should be recorded, it need not be communicated and only for the purpose of the running of the institution, there should be factors which hamper the running of the institution without the termination of the employment of the employee concerned at that particular time either because he is a surplus, inefficient, disobedient and dangerous.
120. Construction or interpretation of legislative or rule provisions proceeds on the assumption that Courts must seek to discover and translate the intention of the legislature or the rule-making body. This is one of the legal fictions upon the hypothesis of which the framework of adjudication of the intention of a piece of legislation or rule proceeds. But these are fictional myths to a large extent, as experience should tell us. In most of the cases legislature, that is to say, vast majority of the people who are supposed to represent the views and opinions of the people, do not have any intention, even if they have, they cannot and do not articulate those intentions. On most of these issues there is no comprehension or understanding. Reality would reveal that it is only those who are able to exert their view points, in a common parliamentary jargon, the power lobby, gets what it wants, and the machinery is of a bureaucratic set up who draft the legislation or rule or law. So, therefore, what is passed on very often as the will of the people in a particular enactment is the handy work of a bureaucratic machine produced at the behest of a power lobby controlling the corridors of power in a particular situation. This takes the mythical shape of the intention of the people in the form of legislation. Again, very often, the bureaucratic machine is not able to correctly and properly transmute what was intended to be conveyed. In such a situation, is it or is it not better, one would ponder to ask, whether the Courts should attribute to the law making body the knowledge of the values and limitations of the Constitution, and knowledge of the evils that should be remedied at a particular time and in a situation that should be met by a particular piece of legislation, and the Court with the experience and knowledge of law, with the assistance of lawyers trained in this behalf, should endeavor to find out what will be the correct and appropriate solution, and construe the rule of the legislation within the ambit of constitutional limitations and upon reasonable judgment of what should have been expressed. In reality, that happens in most of the cases. Can it be condemned as judicial usurpation of law making functions of the legislature thereby depriving the people of their right to express their will? This is a practical dilemma, which Judges must always, in cases of interpretation and construction, face and a question, which they must answer.
121. I have noted the guidelines for the exercise of the power, preamble, relevant sections from which the reasons should be inferred and recorded, although they need not be communicated. These should be recorded in order to ensure effective judicial review in a given case. Termination simpliciter under Regulation 9(b) or similar powers can be exercised only in circumstances other than those in Regulation 9(a). The exercise of such powers can only be for purposes germane and relevant to the statute. There are several illustrations of that, namely, the employee is incompetent or unsuitable so as to make his continuance in the employment detrimental to the interest of the institution, where the continuance of the employee is a grave security risk making his continuance detrimental to the interest of the Corporation and where because of the conduct of the employee, there is lack of confidence in the employee which makes it necessary in the interest of the Corporation to immediately terminate the service of the employee. These, however, are illustrative and not exhaustive. Therefore, each case of the conferment of the power involved should be decided on the aforesaid basis.
122. I am conscious that clear intention as indicated in legislation cannot be permitted to be defeated by means of construction. It has been said that if the legislature has manifested a clear intention to exercise an unlimited power, it is impermissible to read down the amplitude of that power so as to make it limited. I do not agree. Our legislatures are limited by the constitutional inhibitions and it is time, in my opinion, that we should read their Acts and enactment's with the attribute that they know their limits and could not have intended to violate the Constitution. It is true that where there are clear, unambiguous and positive terms in legislation, the Court should be loath to read down. It should proceed with a straightforward method of striking down such legislations. But where the statute is silent or not expressive or inarticulate, the court must read down in the silence of the statute and in the inarticulation of its provisions, the constitutional inhibitions and transmute the major inarticulate premise into a reality and read down the statute accordingly. It is true perhaps, as has been said, that in the history of constitutional law, statutes are seldom read down to mean what they say and intend. It is begging the question. If the statutes are seldom read down to mean what they say and intend. It is begging the question. If the statute does not specifically say, in such circumstances. as to how do we find the intention to transgress the constitutional limitations. At least, the relevant provisions of the relevant statutes and the rules, mentioned herein before, are, in my opinion, on these points, not expressive enough to betray an intention (to) transgress constitutional limitations. 1 am afraid that reference to Elliott Ashton Welsh, 11 v. United States (1970) 398 US 333; 26 Law Ed. 2d 308 is inept in the background of the principles we are confronted with. The plain thrust of legislative enactment has to be found out in the inarticulate expressions and in the silence of the legislation. In doing so, to say what the legislature did not specifically say, is not distortion to avert any constitutional collision. In the language of the relevant provisions with which we are confronted, I do not find that intention of the legislature (was) to flout the constitutional limitations.
123. I am also unable to accept the contention of Mr. Garg as well as Mr. Ramamurthi that it is clear as a result of the constitutional position of the security of tenure of the employees as well as the expressed language of the provisions of several enactment that there is no valid power of the termination of employment of the permanent employees without holding an inquiry or giving an opportunity to the employees to rebut the charges on the grounds of termination in all circumstances. It was contended, as I have noted, by Shri R. K. Garg that no principle of interpretation permitted reading down a provision so as to make it into a different provision altogether different from what was intended by the legislature or its delegate. Reference was made to the decision of this Court in R.M.D.C.'s cases (AIR 1957 SC 628). I am unable to accept this contention. It is not that the reading down is used for a purpose, which is just the opposite, which the legislature had intended. Legislature had not intended arbitrary or uncontrolled or whimsical power. Indeed it considered. This is not the proper way to read that power in the said Regulation 9(b). Para 522 of the Shastri Award, read properly, must be circumscribed with the conditions indicated above as a necessary corollary or consequence of that power. It is also not reading to the legislature conditions, which were not there in the second proviso to Art. 311(2) of the Constitution. In view of the ratio of the five Judges Bench decision of this Court in Tulsiram's case (AIR 1985 SC 1416), which had examined all the relevant decisions, I am unable to accept the submission of Shri R. K. Garg and Mr. Ramamurthi. Absolute powers, it is true, cannot be regulated without essential legislative policy, but here properly read, absolute power was not there. Power that was only constitutionally valid, that power can be presumed to have been given and if that presumption is made, conditions indicated above inevitably attach.
124. We are not concerned with the concept of industrial democracy sought to be propounded by Mr. Garg in this case. The validity and the propriety of having industrial democracy are not in issue. What is in issue is demonstrable fair play and justice, as sought for by Mr. Garg, in the exercise of the power, which must be conceded as an essential attribute for proper functioning of the institution.
125. It is true that no drafts as such have been submitted by the learned Attorney General or by the learned Solicitor General nor by any counsel appearing for the management. But these conditions, which we have noted, are necessary corollary flowing from the conferment of the power of termination in a constitutional manner for the smooth, proper, and efficient running of the industry.
126. In the aforesaid view of the matter, I am unable to accept the submissions of Mr. Garg and Mr. Ramamurthi. The power must be there, the power must be read down in the manner and to the extent indicated above, in my opinion, of terminating the services of permanent employees without holding any inquiry in the stated contingencies and this would be by either virtue of the silence of the provision indicating the contingencies of termination or by virtue of constitutional inhibitions. That reading would not violate the theory that Judges should not make laws.
127. In the aforesaid view of the matter, I direct that whenever question of exercise of the power of termination of permanent employees by reasonable notice without holding any inquiry arises, the extent of the power should be read in the manner indicated above and we reiterate that such powers can be exercised for the purposes of the Act which will be determinable by the preamble and by relevant enacting provisions and the contingencies for the exercise of the power must be specified and powers should be exercised by authority competent and independent enough and should be articulated by reasons stated even if not communicated. These are the limitations inherent and latent in the framework of our Constitution and the power with these limitations is valid.
128. Having regard to the aforesaid view, I will have to dispose of the appeals in terms of the aforesaid principles.
129. Next the question arises what would be the position of the rights and liabilities determined as anterior to or before our reading these powers to be conditioned as aforesaid. Having regard to the finality of the position of law and having regard to the theory that parties have adjusted their rights on the understanding of the law as it was, in our opinion, justice of the situation would be met if we declare and hold that pending litigation should be examined in the light of the aforesaid principles and dispose of in the aforesaid light, namely, where issues of damages or consequences of termination by virtue of exercise of the power are still pending adjudication in any forum and have not been finally adjudicated, these should be re-examined by the appropriate authorities before whom these issues are pending in the light of these principles, that is to say, the exercise of the power should be judged on these- conditions and in the light of those conditions. If in the light of these conditions, the exercise of the power is valid, the termination should be held to be valid, if on the other hand, there was exercise without compliance with these conditions, the termination would be invalid and consequences in law of damages or reinstatement or others will follow, but previous termination where the list is no longer pending before any authority will not be reopened. To that extent, I will declare this to be the law prospectively.
130. I had, after circulating the draft judgment herein, the advantage of the views of my learned brothers. They do not agree with me. With respect, I am definitely of the opinion that time has come for the judicial interpretation to play far more active, creative and purposeful role in deciding what is according to law. Law as evolved in India today, in my opinion, makes the limitations on user of power quite clear and distinct, in this branch. These are constitutional limitations. Therefore, every provision in any legislation by limited legislatures, in my opinion, should be Judged bearing in mind that the legislature and the law-making authorities were aware and are bound by these constitutional limitations. These inhibitions must be read into these provisions so that law becomes effective, purposeful and legal. In that view of the matter, I am of the opinion that we should approach the question of constitutional limitations or inhibitions in our interpretation in deciding in each individual case by not 'what has been' but 'what may be'. This is the role and purpose of constitutional interpretation by the apex Court of the country. I know that this view of mine is not shared in this decision by my learned brothers. I respect their views, but I would like to hope that one day or the other this Court would be mature enough to fulfill what is purposeful and I believe to be the true role and purpose of the Court in interpretation in the light of constitutional inhibitions. Having had the advantage of the views of my learned brothers, I regret, with respect, I cannot join them in their views. I am the loser for the same, but I will fondly hope only for the time being.
131. I believe that we must do away with 'the childish fiction' that law is not made by the judiciary. Austin in his Jurisprudence at page65, 4th Edn. has described the Blackstone's principle of finding the law as 'the childish fiction'. Chief Justice K. Subba Rao in L. C. Golak Nath v. State of Punjab (1967) 2 SCR 762 at p. 811 at p. 1667) has referred to these observations. This Court under Art. 141 of the Constitution are enjoined to declare law. The expression 'declared' is wider than the words 'found or made'. To declare is to announce opinion. Indeed, the latter involves the process, while the former express result. Interpretation, ascertainment and evolution are parts of the process, while that interpreted, ascertained or evolved is declared as law. The law declared by this Court is the law of the land. To deny this power to this Court on the basis of some outmoded theory that the Court only finds law but does not make it, is to make ineffective the powerful instrument of justice placed in the hands of the highest judiciary of this country. See the observations of Chief Justice K. Subba Rao in L. C. Golak Nath v. State of Punjab (supra at pp. 813/14) (of 1967 (2) SCR 762): (at pp. 1668-69 of AIR 1967 SC 1643). I would, therefore, plead for a more active and creative role for the Courts in declaring what the law is.
132. In the aforesaid light, in Civil Appeal No. 2876 of 1986, having regard to the facts and the circumstances and the attitude taken by the Delhi Transport Corporation, I do not interfere with the order for the High Court. The appeal shall. therefore, fail.
133. Having regard to the facts and the circumstances and the observations above, Civil Appeal No. 655 of 1984 (M. L. Kamra v. Chairman-cum-Managing Director, New India Assurance Co.) will be placed before a division bench of this Court to be disposed of in accordance with law and in the light of the observations made herein.
134. For the reasons that I have indicated above, in Civil Appeal No. 1115 of 1975 [Satnam Singh v. Zilla Parishad Ferozpur and another], with the facts herein where apparently no reasons were recorded, the appeal of Satnam Singh succeeds and in the interest of justice, the monetary relief should be given to the appellant which is quantified at Rs. 4,83,061.90 paise (Rupees four lakhs eighty three thousand and sixty one and ninety paise). 1 has indicated before the basis on which this quantification has been made.
135. For the same reasons, Civil Appeal No. 4073 (NL) of 1985 [Mahesh Kumar Giroti v. The Regional Manager, Region 11, Regional Officer, State Bank of India, Bareilly and others], Civil Appeal No. 331 of 1987 [The Delhi Transport Corporation and another v. Shri Hans Raj], Civil Appeal No. 328 of 1987 [The Delhi Transport Corporation and another v. Shri Rohtash Singh], Special Leave Petition NO. 7612 of 1987 [Delhi Transport Corporation v. Shri Mohinder Singh and another] and Civil Appeal No. 350 of 1987 The Delhi Transport Corporation and another v. Shri Prem Singh should be placed before the division Bench of this Court to be disposed of in accordance with the observations made herein and in accordance with law. The appeals I would dispose of accordingly.
136. Interventions of the parties are allowed and the C. M. Ps. is disposed of in the aforesaid terms.
RAY. J. (Majority view): - 137. I have had the privilege of deciphering the judgment rendered by the learned Chief Justice. As the question involved in these groups of appeals for decision is very important, it is deemed necessary to express my views on this important matter.
138. The pivotal question which arises for consideration is whether Regulation 9(b) of the Regulations framed under S. 53 of the Delhi Road Transport Act, 1950 which provides for termination of services of permanent employees on giving simply one month's notice or pay in lieu thereof without recording any reason therefor in the order of termination is arbitrary, illegal, discriminatory and violative of Audi Alteram Partem Rule and so constitutionally invalid and void. It is also necessary to consider in this respect whether the said Rule 9(b) can be interpreted and read down in such a manner to hold that it was not discriminatory nor arbitrary nor does it confer unbridled and uncanalised power on the transport authority to terminate, however, the services of any employee including permanent employee without any reason whatsoever by the Delhi State Transport Authority. It is also necessary to consider whether such a power can be exercised without conforming to the fundamental right embodied in the Art. 14 as interpreted by this Court in E. P. Royappa's case that arbitrariness is the antithesis of equality enshrined in the Art. 14 of the Constitution. In other words, whether such a regulation has to comply with the observance of fundamental rights guaranteed by Part III of the Constitution and whether such a power is to be exercised in furtherance of and in consonance with the Directive Principles embodied in Arts. 38 and 39 of the constitution.
139. It is convenient to set out the relevant provisions of Regulation 9(b) framed by the Delhi Road Transport Authority under the 1950 Act.
9(b): - Termination of services
(b) Whether the termination is made due to reduction of establishment or in circumstances other than those mentioned in (a) above one month's notice or pay in lieu thereof will be given to all categories of employees.
140. On a plain reading of this Regulation it is apparent that the authority has been conferred the power to terminate the services of any employee whether permanent or temporary by giving one month's notice or pay in lieu thereof without recording any reason whatsoever in the purported order of termination of services. Thus a regular, temporary or permanent employee of the State Transport Authority can be dismissed or removed from service at the whims and caprices of the concerned authority without any reason whatsoever and undoubtedly this evidences that such unbridled, indiscriminate and uncanalised power to terminate the services even of a permanent employee without assigning any reason and without giving any opportunity of hearing as fair play and justice demands a reasonable procedure is per se, arbitrary and discriminatory. It has been contended by the Attorney General, appearing on behalf of the State that such a power is not uncanalised or unbridled and arbitrary inasmuch as firstly such power has been conferred on the responsible authority namely D.T.C. for public purposes and secondly, the Regulation 9(b) is to be read down so as to make it constitutionally valid. It will be seen that there is guidance for exercise of. this power in the regulation itself. It has also been submitted in this connection by the learned Attorney General that a provision of the Constitution has to be presumed to be valid unless it is proved by the other side challenging the constitutional validity of such a provision that the same is arbitrary and so void. Several authorities have been cited at the Bar on this point.
141. It is profitable to refer to the earlier pronouncements of this Court on this crucial question. Rules 148(3) and 149(3) in contravention of the provision of Art. 14 of the Constitution were challenged before this Court in the case Moti Ram Deka v. General Manager, N.E.F. Railway Maligaon Pandu (1964) 5 SCR 683 Rule 148(3) of the Railways Establishment Code is set out here under:
148(3) "Other (non-pensionable) railway servants: -
The service of other (non-pensionable) railway servants shall be liable to termination on notice on either side for the periods shown below. Such notice is not however required in cases of dismissal or removal as a disciplinary measure after compliance with the provisions of Cl. 2 of Art. 311 of the Constitution, retirement on attaining the age of superannuation and termination of service due to mental or physical incapacity."
142. In this case the service of Moti Ram Deka, a peon employed by the Railway and Sudhir Kumar Das a confirmed clerk, whose services have been terminated under R. 148(3) of the said Rules challenged the termination of their services before the Assam High Court which rejected the same and ultimately it came up to this Court on Special Leave.
It was held by the Majority that Rules 148(3) and 149(3) are invalid inasmuch as they are inconsistent with the provisions of Article 311(2). As they purport to removal from service of permanent servants without compliance with the procedure prescribed by Art. 311(2). It was also held that the R. 148(3) contravenes Art. 14 as it does not give any guidance for exercise of the discretion by the authority concerned and hence it is invalid.
143. It is necessary to refer in this connection to the pronouncement of this Court in the case of Parshotam Lal Dhingra v. Union of India, 1958 SCR 828 where it has been held that protection of Art. 311 are available only where dismissal, removal or reduction in rank is sought to be inflicted by way of punishment and not otherwise. Thus even the probationer or temporary employee if removed from service or dismissed from service. as a penal measure having civil consequences has to conform to the procedure prescribed by Art. 311(2) of the constitution. Even a probationer who has no right to the post cannot be removed from service as a penal measure without complying with art. 311(2) of the Constitution.
144. In the case of Shyam Lal v. State of Uttar Pradesh, (1955) 1 SCR 26), it was held by this court that a compulsory retirement from service under the Civil Services (Classification, Control and -Appeal) Rules does not amount to dismissal or removal within the meaning of Art. 311 of the Constitution and therefore does not fall within the provision of the said Act.
145. In the case of Ram Krishna Dalmia v. Justice S.R. Tendolkar, 1959 SCR 279 the constitutionality of the Commission of Inquiry Act, 1952 was challenged. It was held that the Act was valid and intra vires and that the notification was also valid excepting the words "as and by way of securing redress or punishment" in Cl.10 thereof which went beyond the Act.
146. It has been further held that it is now, well settled that while Art. 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation Thus, to pass the test of permissible classification two conditions must be fulfilled, namely, that (i) That the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together from others left out of the group and, (ii) that that differential must have a rational relation to the object sought to be achieved by the statute in question.
147. It has also been held that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds.
148. This Court observed in Jyoti Pershad v. Administrator for the Union Territory of Delhi, (1962) 2 SCR 125 while holding that S. 19 of the Slum Areas (Improvement and Clearance) Act, 1956, was not obnoxious to the equal protection of laws guaranteed by art. 15 of the Constitution, there was enough guidance to the. competent authority in the use of his discretion under S. 19(1) of the Act. The restrictions imposed by S. 19 of the Act could not be said to be unreasonable.
149. It has been further observed that (1) If the statute itself or the rule made under it applies unequally to persons or things similarly situated, it would be an instance of a direct violation of the Constitutional Guarantee and the provision of the statute or the rule in question would have to be struck down.
(2) The enactment or the rule might not in terms enact a discriminatory rule of law but might enable an unequal or discriminatory treatment to be accorded to persons or things similarly situated. This would happen when the legislature vests a discretion in an authority, be it the Government or an administrative official acting either as an executive officer or even in a quasi-judicial capacity by a legislation which does not lay down any policy or disclose any tangible or intelligible purpose, thus clothing the authority with unguided and arbitrary powers enabling it to discriminate.
150. In State of Orissa v. Dr. (Miss). Bihapani Dei, (1967) 2 S-CR 625: (AIR 1967 SCR 1269) the respondent joined service of the State Government in 1938. In the service record certain date of birth was recorded. In 1961 Government held inquiry as to date of birth and she was asked to show cause why a certain date of birth should not be taken as a date of birth. The inquiry report was not disclosed to her and she was not given any opportunity to meet the evidence. The Government refixed her date of birth and ordered that she will be compulsorily retired. It was held that such an inquiry and decision was contrary to the basic concept of justice and cannot have any value. It is true that the order is administrative in character, but even an administrative order which involves civil consequences as already stated, must be made consistently with the rules of natural justice after informing the first respondent of the case of the State, the evidence, in support thereof and after giving an opportunity to the first respondent of being heard and meeting or explaining the evidence. No such steps were admittedly taken; the High Court was, in our judgment, right in setting aside the order of the State.
151. In A.K. Kraipak v. Union of India, (1 969) 2 SCC 262 it has been held at page 268-269 Paragraph 13 (at p. 154, para 13 of AIR): -
"The dividing line between an administrative power and a quasi-judicial power is quite thin and is being gradually obliterated. for determining whether a power is an administrative power or a quasi-judicial power one has to look to the nature of the power conferred, the person or persons on whom it is conferred, the framework of the law conferring that power, the consequences ensuing from the exercise of that power and the manner in which that power is expected to be exercised. Under our Constitution the rule of law pervades over the entire field of administration. Every organ of the State under our Constitution is regulated and controlled by the rule of law. In a welfare State like ours it is inevitable that the jurisdiction of the administrative bodies is increasing at a rapid rate. The concept of rule of law would lose its vitality if the instrumentalities of the State were not charged with the duty of discharging their functions in a fair and just manner. The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously. The procedures which are considered inherent in the exercise of a judicial power are merely those which facilitate if not ensure a just and fair decision What was considered as an administrative power some years back is now being considered as a quasi-judicial power."
152. In the case of Union of India v. J. N. Sinha, (1 97 1) 1 SCR 791 Col. J. N. Sinha was compulsorily retired by an order of the President of India dated 13-8-69 under S. 56(j)) of the Fundamental Rules from Government service without assigning any reason in the order. The High Court on a writ petition against the impugned order held that there was violation of principles of natural justice.
On an appeal on Special Leave this Court held (para 7 of AIR): -
"Rules of natural justice are not embodied rules nor can they be elevated to the position of fundamental rights. As observed by this Court in Kraipak v. Union of India (AIR 1970 SC 150) "the aim of rules of natural justice is to secure justice to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. If a statutory provision can be read consistently with the principles of natural justice, the courts should do so because it must be presumed that the legislature and the statutory authorities intend to act in accordance with the principles of natural justice. But on the other hand a statutory provision either specifically or by necessary implication excludes the application of any or all the principles of natural justice then the court cannot ignore the mandate of the legislature or the statutory authority and read into the concerned provision the principles of natural justice. Whether the exercise of a power conferred should be made in accordance with any of the principles of natural justice or not depends upon the express words of the provision conferring the power, the nature of the power conferred, the purpose for which it is conferred and the effect of the exercise of that power."
153. It was held that fundamental R. 56(j) does not in term require that any opportunity should be given to the concerned servant to show cause against the compulsory retirement. The order of the President is; therefore, not bad as the authority bonafide forms that opinion.
154. In the case of Air India Corporation v V. A. Rebello, AIR 1972 SC 1343: (1972 Lab IC 668), the service of the respondent was terminated under Regulation 48 of the Air India Employees' Service Regulations. The said Regulation 48 reads as under: -
CHAPTER VIII - Cessation of Service
X X X X X X X X X X
48. Termination: The service of an employee may be terminated without assigning any reason, as under:
(a) of a permanent employee by giving him. 30 days' notice in writing or pay in lieu of notice;
(b) of an employee on probation by giving him 7 days' notice in writing or pay in lieu of notice;
(c) of a temporary employee by giving him 24 hours' notice in writing or pay in lieu of notice.
155. In this case the complainant, V. A. Rebello was dismissed from service under Regulation 48 by paying salary of 30 days in lieu of notice. The order does not suggest any misconduct on behalf of the complainant and it is not possible to hold that the order was passed on any misconduct. This has been challenged by the complainant by filing a complaint before the National Industrial Tribunal. Under S. 33-A of the Industrial Disputes Act, 1947 the order was challenged as amounting to dismissal from service. The Tribunal held in its award that the discharge of the respondent is not a discharge simpliciter but in. breach of S. 33-A of Industrial Disputes Act and as such directed the complaint to be considered on the merits. On appeal by Special Leave this Court while considering the purpose and scope of Std Sections 33(1) and 33(2) of the Industrial Disputes Act, held following its decision in The Workmen of Sudder Office Cinnamara v. The Management, (1 971) 2 Lab LJ 620: (1972 Lab IC 1262 at pp. 1267-68) as follows:-
"That if the termination of service is a colourable exercise of the power vested in the management or as a result of victimisation or unfair labour practice, the Industrial Tribunal would have jurisdiction to intervene and set aside such a termination. In order to find out whether the order or termination is one of termination simpliciter under the provisions of contract or of standing orders, the Tribunal has ample jurisdiction to go into all the circumstances which led to the termination simpliciter. The form of the order of termination, is not conclusive of the true nature of the order, for it is possible that the form may be merely a camouflage for an order of dismissal for misconduct. It is, therefore, open to the Tribunal to go behind the form of the order and look at the substance. If the Tribunal comes to the conclusion that though in form the order amounts to termination simpliciter but in reality cloaks a dismissal for misconduct, it will be open to it to set aside the orders as a colourable exercise of power by the management."
156. The same principles have also been reiterated in the later decision of this Court in Tata Oil Mills Co. Ltd. v. Workmen, (1964) 2 SCR 125 It has been observed in this case:
"That the position of the industrial workman is different from that of a Government servant because an industrial employer cannot "hire and fire" his workmen on the basis of an unfettered right under the contract of employment, that right now being subject to industrial adjudication; and there is also on the other hand no provision of the Constitution like Arts. 310 and 311 requiring consideration in the case of industrial workmen."
It has been further observed:-
"That Regulation 48 which has been set out earlier as it's plain language shows does not earlier as its plain language shows does not lay down or contemplate any defined essential prerequisite for invoking its operation. Action under this Regulation can be validly taken by the employer at his sweet will without assigning, any reason. He is not bound to disclose why he does not want to continue in service the employee concerned. It may be conceded that an employer must always have some reason for termination the services of his employee. Such reasons apart from misconduct may, inter alia, by want of full satisfaction with his overall suitability in the fact that the employer is not fully satisfied with the overall result of the performance of his duties by his employee does not necessarily imply misconduct on his part."
157. In the case of Maneka Gandhi v. Union of India, (1978) 2 SCR 621 The petitioner was issued a passport on June 1, 1976 under the Passport Act, 1967. On the 4th of July, 1977, the petitioner received a letter dated 2nd July, 1977, from the Regional Passport Officer, Delhi, intimating to her that it was decided by the Government of India to impound her passport under S. 10(3)(c) of the Act "in public interest." The petitioner was required to surrender her passport within 7 days from the receipt of that letter. The petitioner immediately addressed a letter to the Regional Passport Officer requesting him to furnish a copy of the statement of reasons for making the order as provided in S. 10(5), a reply was sent by the Government of India, Ministry of External Affairs on 6th July, 1977 stating inter alia that the Government decided "in the interest of the general public" not to furnish her copy of the statement of reasons for the making of the order. The petitioner challenges the action of the Government in impounding her passport by a writ petition. Sub-section(1) of S. 10 empowers the Passport Authority to vary or cancel the endorsement on a passport or travel document or to vary or cancel it on the conditions subject to which a passport or travel document has been issued having regard to, inter alia the provisions of S. 6(1) or any notification under S. 19. Sub-section (2) confers powers on the Passport Authority to vary or cancel the conditions of the passport or travel document on the application of the holder of the passport or travel document and with the previous approval of the Central Government, Sub-sec. (3) provides that the Passport Authority may impound or cause to be, impounded or revoke a passport or travel document on the grounds set out in cl. (a) to (b). The order impounding the passport in the present case was made by the Central Government under cl. (c) which reads as follows:-
"(c) If the passport authority deems it necessary so to do in the interest of the sovereignty and integrity of India the security of India, friendly relations of India with the foreign, country, or in the interests of the general public."
158. It was held that the right to travel and go outside the country is included in the right to Personal Liberty.
159. In order to apply the test contained in Arts. 14 and 19 of the Constitution we have to consider the objects for which the exercise of inherent rights recognised by Art. 21 of the Constitution are restricted as well as the procedure by which these restrictions are sought to be imposed, both substantive and procedural laws and actions taken under them will have to pass the test imposed by Arts. 14 and 19, whenever facts justifying the invocation of either of these Articles may be disclosed. Violation for both Arts.21 and 19(1)(g) may be put forward making it necessary for the authorities concerned to justify the restriction imposed by showing satisfaction of tests of validity contemplated by each of these two Articles.
160. The tests of reason and justice cannot be abstract. They cannot be divorced from the needs of the nation. The tests have to be pragmatic otherwise they would cease to be reasonable. The discretion left to the authority to impound a passport in public interest cannot invalidate the law itself
161. The orders under S. 10(3) must be based upon some material even if the material concerns in some cases of reasonable suspicion arising from certain credible assertions made by reliable individual. In an emergent situation, the impounding of a passport may become necessary without even giving an opportunity to be heard against such a step which could be reversed after an opportunity is given to the holder of the passport to show why the step was unnecessary.
162. It is well-settled that even if there is no specific provision in a statute or rules made thereunder the showing cause against action proposed to be taken against an individual, which affects the right of that individual the duty to give reasonable opportunity to be heard will be implied from the nature of the function to be performed by the authority which has the power to take punitive or damaging action.
163. An order impounding a passport must be made quasi-judicially. This was not done in the present case. It cannot be said that a good enough reason has been shown to exist for impounding the passport of the petitioner. The petitioner had no opportunity of showing that the ground for impounding it given in this Court either does not exist or has no bearing on public interest or that the public interest can be better served in some other manner. The order should be quashed and the respondent should be directed to give an opportunity to the petitioner to show cause against any proposed action on such grounds as may be available.
164. Even executive authorities when taking administrative action which involves any deprivation of or restriction on inherent fundamental rights of citizens must take care to see that justice is not only done but manifestly appears to be done. They have a duty to proceed in a way which is free from even the appearance of arbitrariness, unreasonableness or unfairness. They have to act in a manner which is patently impartial and meets the requirements of natural justice.
165. It is also pertinent to refer in this connection the pronouncement of this Court in the case of E. P. Royappa v. State of Tamil Nadu, (1974) 2 SCR 348
"Equality and arbitrariness are sworn enemies, one belongs to the rule of law in a public while the other to the whim and caprice of an absolute monarck. Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. the principle of reasonableness which legally as well as philosophically, is an essential element of equality or non-arbitrariness parvades Article 14 like a brooding omni presence and the procedure contemplated by Art. 21 must answer the test of reasonableness in order to be in conformity with Art. 14, it must be right and just and fair and not arbitrary, fanciful or oppressive."
166. In the case of Municipal Corporation of Greater Bombay v. Malvenkar, (1978) 3 SCR 1000 the services of respondent No. 2, a permanent clerk in the Bombay Electric Supply and Transport Undertaking, which is run by the appellant were terminated from the close of work on January 23, 1968 as her record of service was unsatisfactory. The order of termination stated that the respondent No. 2 should be paid one month's wages in lieu of notice and would also be eligible for all the benefits as might be admissible under the Standing Orders and Service Regulations of the Undertaking. The respondent No. 2 made an application before the Labour Court under S. 42(4) of the Bombay Industrial Relations Act contending that the order terminating her services was invalid as it was not passed by the competent authority as envisaged by the Standing Order and that the so called Executive Assistant to the General Manager had no authority to terminate her services because no validly sanctioned post of that designation existed of 20th or 23rd January, 1968. It was also contended that the aforesaid order besides being mala fide, was violative of the principles of natural justice in as much as the same was passed without holding any enquiry. The Labour Court dismissed the application. The respondent's appeal before the President of the Industrial Court - was however allowed. The Industrial Court held that the impugned orders bore only the initials of the General Manager and therefore it was passed by an authority which was lacking in authority, the wording "unsatisfactory service record" cast a stigma and was patently punitive attracting the non-observance of Standing Order No. 26 which did not create an absolute right in the management to terminate the services of an employee for misconduct without holding an enquiry or giving her a fair opportunity of being heard. A Writ application filed by the appellant was dismissed holding inter alia that the fact that Standing Order 26 required reasons to be mentioned in the order terminating the services of an employee did not mean that an order of dismissal on the ground of misconduct could be converted into an order of discharge simpliciter by mentioning therein the nature of misconduct.
167. While allowing the appeal on Special Leave it was held by this Court that under Standing Order 26 powers have been given to the Management in a particular case and: this, question has to be determined having regard to the substance of the matter and not its form. One is the power of holding disciplinary enquiry under clause (2) of Standing Order 21 read with standing Order 23 and the other is the power to terminate the service of an employee by one calendar month's written notice or pay in lieu thereof under Standing Order 26. The question is as to which power has been exercised by the Management in a particular case and this question has to be determined having regard to the substance of the matter and not its form. There are two distinct and independent powers and as far as possible, neither should be construed so as to emasculate the other or to render it ineffective. One is the power to punish an employee for misconduct while the other is the power to terminate simpliciter the service of an employee without any other adverse consequences. Proviso (i) to clause (1) of Standing Order 26 requires that the reason for termination of the employment should be given in writing to the employee when exercising the power of termination of services of the employee under Standing 0. 26. The Management is required to articulate the reason which operated in its mind for terminating the services of the employee. But merely because the reason must obviously not be arbitrary, capricious or irrelevant, it would not necessarily in every case make the order of termination punitive in character so as to require compliance with the requirements of clause (2) of Standing 0, 21 read with Standing Order 23. It, as further held that the service of the respondent was not satisfactory was undoubtedly based on past incidents set out in the record but for each of these incidents punishment in one form or another had already been meted out to her and it was not by way, of punishment for any of these incidents, but because as gathered from these incidents, her record of service was unsatisfactory that her service was terminated by the management under Standing Order 26. The appellant produced satisfactory evidence to show that the impugned order terminating the service of the respondent was justified and hence the impugned order must be sustained despite its having been passed without complying with the requirements of clause (2) of Standing, Order 21 read with Standing Order 23. This decision has been made in the special facts and circumstances in that particular case.
168. In the case of Manohar P. Kharkhar v. Raghuraj, (1981) 2 Lab LJ 459: (1983 Lab IC 350) (Bom), the petitioners challenged the order of termination of services dated 29-4-1981, under Regulation 4,8 of Air India Employees' Service Regulations. The petitioner No. 1 was the. Director of Engineering and the Head of the Engineering Department while the petitioner No.2 was Deputy Director of Engineering (Maintenance) and the Head of the Maintenance Division of the Air India Corporation. The Chairman and Managing Director of the said Corporation lost confidence in their ability and suitability to hold such important posts of Head of Departments which were reasonable for maintenance of the Air Crafts, safety of the Air Crafts and safety of the passengers carried therein and the order of termination were based on the note of The Chairman dated 29-4-1981. Loss of confidence was the result of the negligence and failure to discharge their duty culminating in the admitted sabotage in the case of Makalu, an air craft for the flight of VVIP. On this occasion the petitioners services were terminated on April 29, 1951 by the Chairman who recorded in its record the round of loss of confidence. This order was challenged as arbitrary and capricious and Regulation 48 was violative of Art. 14 of the Constitution as it contained no guidelines for choosing between employees and employees, occasion to occasion for the contemplated action.
169. In negativing the contentions, it was held after exhaustively analysing the note dated 29-4-1981, that sheer unsuitability and unfitness to hold office is not a misconduct in its generic sense or in its artificial meaning under Regulation 42. Regulations 42 to 44 have no application. Confidence in the petitioners' suitability was lost due to such overall inefficiency of the departments under the petitioners. Conclusions could not be different even if it assumed that the note contemplated finding of the petitioners guilty of gross inefficiency and negligence. Inefficiency by itself did not amount to misconduct in its generic sense.
170. It was further held that the petitioners have no right to the post and do not possess any security of tenure. It was also held that if the Corporation choose to act under Regulation 48 and the action is not mala fide, arbitrary or capracious the question of its having acted in colourable exercise of its power could not arise. It was further held that the power conferred under Regulation 48 to terminate the services of permanent employees on 30 days notice without assigning any reason is not violative of Art. 14 of the Constitution. Accordingly the writ petition was dismissed and the rule was discharged. This decision however has not duly considered the ratio of the decision made by this Court in L. Michael v. Johnson Pumps India Ltd., (1975) 3 SCR 489 and also in the case of Air India Corporation v. V. A. Rebello (AIR 1972 SC 1343) , as well as the ratio of the decision in the case of Sukhdev Singh v. Bhagat ram Sardar sing Raghuvanshi, (1975) 1 SCC 421: (AIR 197, SC 1331).
171. In the case of S.S. Muley v. J.R.D. Tata, (1979) 2 Serv LR 438: (1980 Lab IC 11), constitutionality came up for consideration and this Court held the said Regulation 48 to be discriminatory and void as it gives unrestricted and unguided power on the Authority concerned to terminate the services of a permanent employee by issuing a notice or pay in lieu, thereof without giving any opportunity of hearing to the employee concerned and thereby violating the principles of natural justice and also Art. 14 of the Constitution.
172. In West Bengal State Electricity Board v. Desh Bandhu Ghosh, (1985) 3 Scc 116 the first respondent, a permanent employee of the West Bengal State Electricity Board, filed the writ petition out of which the appeal arises in the Calcutta High Court to quash an order dated March 22, 1984 of the Secretary, West Bengal State Electricity Board terminating his services as Deputy Secretary with immediate effect on payment of three months' salary in lieu of three months' notice. The order was made under Regulation 34 of the Boards Regulations which enables the Board to terminate the services of any permanent employee "by serving three months' notice or on payment of salary for the corresponding period in lieu thereof." The Regulation 34 reads as follows: -
34.In case of a permanent employee, his services may be terminated by serving three months' notice or on payment of salary for the corresponding period in lieu thereof."
173. This order of termination was challenged on the ground that Regulation 34 was arbitrary in nature and it was patently discriminatory. The High Court struck down the first paragraph of Regulation 34 and quashed the order of termination of service of the first respondent.
174. In the case of Workmen of Hindustan Steel Ltd. v. Hindustan Steel Ltd., (1985) 2 SCR 428 Standing Order 32 which provided for conferment of power in the General Manager to terminate the services of an employee if satisfied for reasons recorded in writing that it was inexpedient or against the order of security to employ the workman, the workman could be removed or dismissed from service without following the procedure laid down in Standing Order 31.
"32. Special Procedure in certain cases.
Where a workman has been convicted for a criminal offence in a Court of law or where the General Manager is satisfied, for reasons to be recorded in writing, that it is inexpedient or against the interests of security to continue to employ the workman, the workman may be removed or dismissed from service without following the procedure laid down in Standing Order 31.
175. The appellant, an Assistant in the 1st Respondent undertaking was removed from service on the ground that it was 'no longer expedient, to employ him. The management dispensed with the departmental enquiry, after looking into the secret report of one of their officers that the appellant had misbehaved with the wife of an employee and that a complaint in respect thereof had been lodged with the Police. The Tribunal held that as the employer dispensed with the disciplinary enquiry in exercise of the power conferred by Standing Order 32, it could not be said that the dismissal from service was not justified and the respondent was quite competent to dismiss him from service without holding any enquiry.
176. It was held that the reasons for dispensing with the enquiry do not spell out what was the nature of the misconduct alleged to have been committed by the appellant and what prompted the General Manager to dispense with the enquiry.
177. As there was no justification for dispensing with the enquiry imposition of penalty of dismissal without the disciplinary enquiry as contemplated by Standing O.31 is illegal and invalid.
178. It was further held that:---"A Standing Order which confers such arbitrary uncanalised and drastic power to dismiss an employee by merely stating that it is inexpedient or against the interest of the security to continue to employ the workman is violative of the basic requirement of natural justice inasmuch as that the General Manager can impose penalty of such a drastic nature as to affect the livelihood and put a stigma on the character of the workman without recording reasons why disciplinary inquiry is dispensed with and what was the misconduct alleged against the employees. It is time for such a public sector undertaking as Hindustan Steel Ltd. to recast S.O. 32 and to bring it in tune with the philosophy of the Constitution failing which it being other authority and therefore a State under Art. 12 in an appropriate proceeding, the vires of S.O. 32 Will have to be examined. It is not necessary to do so in the present case because even on the terms of S.O. 32, the order made by the General Manager is unsustainable."
179. In the case of Tata Oil Mills Co. Ltd. v. Workmen (AIR 1966 SC 1672) the service of Mr. Banerjee, an employee of the appellant, was terminated on the ground that the appellant had lost confidence in him and in lieu of notice he was paid one month's salary. The union to which Mr. Banerjee belonged took up his cause and on the failure of the parties to reach a settlement the matter was referred to the Industrial Tribunal by the Government. It was contended before the Tribunal by the appellant that the order of termination of services of Mr. Banerjee was an order of discharge which it was competent to make, under R. 40(1) of the Service Rules, whereas the respondent contended that the termination was not a discharge simpliciter but was in substance dismissal and that the Tribunal was entitled to consider the property of the appellant's action.
180. The Tribunal held that it had jurisdiction to look into the reasons behind the discharge of an employee. On the examination of the evidence the Tribunal found that no mala fides on the part of the employer had been proved and that the termination of service did not amount to victimisation or unfair labour practice. Even so it held that the discharge was not justified and directed the reinstatement of Mr. Banerjee.
181. This Court held that in the matter of an order of discharge of an employee the form of the order is not decisive. An Industrial Tribunal has jurisdiction to examine the substance of the matter and decide whether the termination is, in fact, discharge simpliciter or it amounts to dismissal which has put on the cloak of discharge simpliciter. The test always has to be whether the act of the employer is bonafide or whether it is a mala fide and colourable exercise of the powers conferred by the terms of contract or by the standing orders.
182. In O.P. Bhandari v. Indian Tourism Development Corporation Ltd., (1986) 4 SCC 337 (.AIR 1987 SC 111). The question of constitutionality of Rule 31(v) of the Indian Tourist Development Corporation Rules came up for consideration before this Court in this case. Rule 31 is quoted below:-
31. Termination of services - The services of an employee may be terminated by giving such notice or notice pay as may be prescribed in the contract of service in the following manner:
(v) of an employee who has completed his probationary period and who has been confirmed or deemed to be confirmed by giving him 90 days' notice or pay in lieu thereof.
It has been observed by this Court -
"This rule cannot co-exist with Articles 14 and 16(1) of the Constitution of India. The said rule must therefore die, so that the fundamental rights guaranteed by the aforesaid constitutional provisions remain alive. For otherwise, the guarantee enshrined in Articles 14 and 16 of the Constitution can be set at naught simply by framing a rule authorizing termination of an employee by merely giving a notice. In order to uphold the validity of the rule in question it will have to be held that the tenure of service of a citizen who takes up employment with the State will depend on the pleasure or whim of the competent authority unguided by any principle or policy. And that the services of an employee can be terminated though there is no rational ground for doing so, even arbitrarily or capriciously. To uphold this right is to accord a "magna carta" to the authorities invested with these powers to practise uncontrolled discrimination at their pleasure and caprice on considerations at their pleasure and caprice on considerations not necessarily based on the welfare of the organisation but possibly based on personal likes and dislikes, personal preferences and prejudices. An employee may be retained solely on the ground that he is a sycophancy and indulges in flattery, whereas the services of one who is meritorious (but who is wanting in the art of sycophancy and temperamentally incapable of indulging in flattery) may be terminated. The power may be exercised even on the unarticulated ground that the former belongs to the same religious faith or is the disciple of the same religious teacher or holds opinions congenial to him. The power may be exercised depending on whether or not the concerned employee belongs to the same region, or to the same caste as that of the authority exercising the power, of course without saying so. Such power may be exercised even in order to make way for another employee who is favourite of the concerned authority. Provincialism, casteism, nepotism, religious fanaticism, and several other obnoxious factors may in that case freely operate in the mind of the competent authority on deciding whom to retain and whom to get rid of. And these dangers are not imaginary ones. They are very much real in organisations where there is a confluence of employees streaming in from different States. Such a rule is capable of robbing an employee of his dignity, and making him a supine person whose destiny is at the mercy of the concerned authority (whom he must humour) not withstanding the constitutional guarantee enshrined in Articles 14 and 16 of the Constitution of India. To hold otherwise is to hold that the fundamental right embedded in Arties 14 and 16(1) is a mere paper tiger and that is so ethereal that it can be nullified or eschewed by a simple device of framing a rule which authorizes termination of the service of an employee by merely giving a notice of termination. Under the circumstances the rule in question must be held to be unconstitutional and void."
This decision followed the observations of this Court in Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguly (AIR 1986 SC 1571) and West Bengal State Electricity Board v. Desh Bandhu Ghosh (AIR 1985 SC 722) .
183. In central Inland Water Transport Corporation Limited v. Brojo Nath Ganguly, (1986) 3 SCC 156 the appellant Corporations is a Government Company incorporated under the Companies Act. The Majority shares of the Corporation are held by the Union of India and the remaining shares are held by the State of West Bengal and Assam. Article 47 provided for appointment and reappointment of the auditors of the Corporation to be made by the Central Government on the advice of the Comptroller and Auditor-General of India and the nature of control to be exercised by the Comptroller and Auditor-General in the matter of audit and accounts. Article 51-A entitled the President to call for returns, accounts etc. of the Corporation. The respondents in the two appeals were in the service of the said company. Their appointment letters were in a stereotype form under which the Corporation could without any previous notice terminate their services. A Scheme of Arrangement was entered into between the Corporation and that company for dissolution of the latter and takeover of its business and liabilities by the former. The Scheme inter alia stipulated that the Corporation shall take as many of the existing staff or labour as possible and that those who could not be taken over shall be paid by the concerned company all moneys due to them under the law and all legitimate and legal compensations payable to them either under Industrial Disputes Act or otherwise legally admissible and that such moneys shall be provided by the Government of India to the transferor Company who would pay these dues. The two respondents were in the service of the said company and their services were taken over by the Corporation after the Scheme of Arrangement was sanctioned by the High Court. The respondent Ganguly was appointed as the Deputy Chief Accounts Officer and was later promoted as Manager (Finance), the respondent Sengupta was appointed as Chief Engineer (River Services) and was later promoted as General Manager (River Services).
184. Rule 9(i) of the Corporation's Service, Discipline and Appeal Rules of 1979 provided that the services of a permanent employee could be terminated on three months' notice on either side or on payment of three months' pay plus DA to the employee or on deduction of a like amount from his salary as the case may be in lieu of the notice. A notice under Rule 9(i) was served on him terminating his services with immediate effect by paying three months pay. Both Ganguly and Sengupta filed writ petition before High Court and a Division Bench of that Court, allowed the same.
185. The Corporation filed appeals before Supreme Court. The impugned questions for determination were (i) whether the appellant-Corporation was an instrumentality of the State so as to be covered by Articles 12 and 36 of the Constitution and (ii) whether an unconscionable term in a contract of employment entered into with the Corporation was void under Section 23 of the Contract Act and violative of Article 14 and as such whether Rule 9(i) which formed a part of the contract of employment between the Corporation and its employees to whom the said Rules applied, was void? This Court held that it being a Government Company within the meaning of Article 12 of the Constitution has to comply with the rights embodied in Part III of the Constitution and the Directive Principles and in Part IV of the Constitution. It was further held that by extending the executive power of the union and each of the States to the carrying on any trade or business, Article 298 does not convert either the Union of India or any of the States which collectively form the Union into a merchant buying and selling goods or carrying on either trading or business activity, for the executive power of the Union and the States, whether in the field of trade or business or in any other field, is always subject to constitutional limitations and particularly the provisions relating to Fundamental Rights in Part III and is exercisable in accordance with and for the furtherance of the Directive Principles of State Policy.
186. Rule 9(i) can aptly be called the 'Henry VIII Clause'. It confers an absolute, arbitrary and unguided power upon the Corporation. It does not even state who on behalf of the Corporation is to exercise that power. While the Rules provide for four different modes in which the services of a permanent employee can be terminated earlier than his attaining the age of superannuation, namely, Rules 9(i), 9(ii), 36(iv)(b) read with Rules 38 and 37, Rule 9(i) is the only rule which does not state in what circumstances the power conferred by the rule is to be exercised. Thus even where the Corporation could proceed under Rule 36 and dismiss an employee on the ground of misconduct after holding a regular disciplinary inquiry, it is free to resort instead to Rule 9(i) in order to avoid the hassle of an inquiry. No opportunity of a hearing is at all to be afforded to the permanent employee whose service is being terminated in the exercise of this power. It thus violates audi alteram partem rule of natural justice also which is implicit an Article 14. It is not covered by any of the situations which would justify the total exclusion of the audi alteram partem rule. The view that the Board of Directors would not exercise this power arbitrarily or capriciously as it consists of responsible and highly placed persons ignores the fact that however highly placed a person may be he must necessarily possess human frailties and "power tends to corrupt, and absolute power corrupts absolutely."
187. Rule 9(i) is also discriminatory for it enables the Corporation to discriminate between employee and employee. It can pick up one employee and apply to him Rule 9(i). It can pick up another employee and apply to him Rule 9(ii). It can pick up yet another employee and apply to him Rule 36(iv)(b).read with Rule 38 and to yet another employee it can apply Rule 37. All this the Corporation can do when the same circumstances exist as would justify the Corporation in holding under Rule 38 a regular disciplinary inquiry into the alleged misconduct of the employee.
188. This Court in Delhi Transport Undertaking v. Balbir Saran Goel, (1970) 3 SCR 757 considered the question whether the services of a permanent employee under Delhi Transport Undertaking could be terminated under Regulation 9(b) of the Regulation without complying with the procedure prescribed by Regulation 15 and (ii) whether although the order was made in perfectly harmless and innocuous terms purporting to be within Regulation 9(b) it was a mere camouflage for inflicting punishment for breach of Standing Order 17, as the respondent approached the High Court without exhausting the Departmental remedies and held that the order was not proved to be made mala fide on the part of the authority terminating the service nor the question of malafide was gone into. by the Courts below.
189. Regulation 9(b) empowered the authorities to terminate the service after giving one month's notice or pay in lieu thereof. The order was held to have been made unequivocally in terms of the Regulation 9(b) as the employee was a cantankerous person and it was not desirable to retain him in service. The order was upheld. The question whether Regulation 9(b) was illegal and void as it conferred arbitrary and uncanalised power to terminate the service of a permanent employee without recording any reason and without giving any opportunity of hearing before passing the purported order as required under Article 14 of the Constitution was neither raised nor considered in this case.
190. In L.Michael v. Johnson Pumps India Ltd., (AIR 1975 SC 661) the services of the appellant, an employee of the respondent, were terminated by the latter giving him one month's notice as per the standing orders without assigning any reasons for the termination. An industrial dispute was referred to the Labour Court. The management alleged that the employee misused his position by passing on important and secret information about affairs of the company to certain outsiders, that even after he was transferred to another section he made attempts to elicit information from the section with a view to pass it on to outsiders, and that therefore, the management lost confidence in the employee and terminated his services by a bonafide order. The Labour Court confirmed the order.
191. On appeal this Court set aside the order holding that the Labour Court has misled itself on the law. This Court directed reinstatement of the employee with all back wages.
192. The manner of dressing up an order does not matter. The Court will lift the veil to view the reality or substance of the order.
193. The Tribunal has the power and indeed the duty to X-ray the order and discover its true nature, if the object and effect, if the attendant circumstances and the ulterior purpose be to dismiss the employee because he is an evil to be eliminated. But if the management, to cover up the inability to establish by an inquiry, illegitimately out ingeniously passes an innocent looking order of termination simpliciter, such action is bad and is liable to be set aside. Loss of confidence is no new armour for the management; otherwise security of tenure, ensured by the new industrial jurisprudence and authenticated by a catena of cases of this Court can be subverted by this neo formula Loss of confidence in the law will be the consequence of the Loss of Confidence doctrine.
194. An employer who believes and suspects that his employee, particularly one holding a position of confidence, has betrayed that confidence, can, if the conditions and terms of employment permit terminate his employment and discharge him without any stigma attaching to the discharge. But such belief or suspicion of the employer should not be a mere whim or fancy. It should be bona fide and reasonable. It must rest on some tangible basis and the power has to be exercised by the employer objectively, in good faith, which means honestly and with due care and prudence. If the exercise of such power is challenged on the ground of being colourable or malafide or an act of victimisation or unfair labour practice, the employer must disclose to the Court the grounds of his impugned action so that the same may be tested judicially.
195. This Court in the case of Workmen of Hindustan Steel Ltd. v. Hindustan Steel Ltd. (AIR 1985 SC 251) while considering the constitutionality of Standing Order 32 of the Hindusthan Steel Ltd. which conferred power on the General Manager to remove or dismiss a Workman without following the procedure for holding a disciplinary enquiry laid down in Standing Order 31 observed that:-
"It is time for such a public sector undertaking as Hindusthan Steel Ltd. to recast S.O. 32 and to bring it in tune with the philosophy of the Constitution failing which it being other authority and therefore a State under Article 12 in an appropriate proceeding, the views of S.O. 32 will have to be examined."
196. It is convenient to refer in this context relevant passage in paragraph 4 in Chitty on Contracts, 25th Edition, Volume 1
"These ideas have to a large extent lost their appeal today. 'Freedom of contract', it has been said, 'is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large.' Freedom of contract is of little value when one party has no alternative between accepting a set of terms proposed by the other or doing without the goods or services offered. Many contracts entered into by public utility undertakings and others take the form of a set of terms fixed in advance by one party and not open to discussion by the other. These are called 'contracts d'adhesion' by French lawyers. Traders frequently contract, not on individually negotiated terms, but on those contained in a standard form of contract settled by a trade association. And the terms of an employee's contract of employment may be determined by agreement between his trade union and his employer, or by a statutory. scheme of employment. Such transactions are nevertheless contracts notwithstanding that freedom of contract is to a great extent lacking."
197. This Court has observed in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (AIR 1986 SC 1571) as under (at Pp. 1610-11 of AIR):-
" Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the Courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them."
198. The Court has, therefore, the jurisdiction and power to strike or set aside the unfavourable terms in a contract of employment which purports to give effect to unconscionable bargain violating Art. 14 of the Constitution.
199. Thus on a conspectus of the catena of cases decided by this Court the only conclusion follows is that Regulation 9(b) which confers powers on the authority to terminate the services of a permanent and confirmed employee by issuing a notice terminating the services or by making payment in lieu of notice without assigning any reasons in the order and without giving any opportunity of hearing to the employee before passing the impugned order is wholly arbitrary, uncanalised and unrestricted violating principles of natural justice as well as Art. 14 of the Constitution. It has also been held consistently by this Court that the Government carries on various trades and business activity through the instrumentality of the State such as Government Company or Public Corporations. Such Government Company or Public Corporation being State instrumentalities are State within the meaning of Art. 12 of the Constitution and as such they are subject to the observance of fundamental rights embodied in Part III as well as to conform to the directive principles in Part IV of the Constitution. In other words the Service Regulations or Rules framed by them are to be tested by the touchstone of Art. 14 of Constitution. Furthermore, the procedure prescribed by their Rules or Regulations must be reasonable, fair and just and not arbitrary, fanciful and unjust. Regulation 9(b),. therefore, confers unbridled, uncanalised and arbitrary power on the authority to terminate the services of a permanent employee without recording any reasons and without conforming to the principles of natural justice. There is no guideline in the Regulations or in the Act, as to when or in which cases and circumstances this power of termination by giving notice or pay in lieu of notice can be exercised. It is now well settled that the 'audi alteram partem' rule which in essence, enforces the equality clause in Article 14 of the Constitution is applicable not only to quasi judicial orders but to administrative orders affecting prejudicially the party in question unless the application of the rule has been expressly excluded by the Act or Regulation or Rule, which is not the case here. Rules of natural justice do not supplant but supplement the Rules and Regulations. Moreover, the Rule of Law which permeates our Constitution demands that it has to be observed both substantially and procedurely. Considering from all aspects Regulation 9(b) is illegal and void as it is arbitrary, discriminatory and without any guidelines for exercise of the power. Rule of law posits that the power to be exercised in a manner which is just, fair and reasonable and not in an unreasonable, capricious or arbitrary manner leaving room for discrimination. Regulation 9(b) does not expressly exclude the application of the 'audi alteram partem' rule and as such the order of termination of service of a permanent employee cannot be passed by simply issuing a month's notice under Regulation 9(b) or pay in lieu thereof without recording any reason in the order and without giving any hearing to the employee to controvert the allegation on the basis of which the purported order is made.
200. It will be profitable to refer in this connection the observations of this Court in the case of Union of India v. Tulsiram Patel, 1985 Supp (2) SCR 131 where the constitutionality of provisions of Art. 311 particularly the 2nd proviso to clause (2) of the said Article came up for consideration. This Court referred to the findings in Roshan Lal Tandon v. Union of India, (1968) 1 SCR 185 wherein it was held that though the origin of a Government service is contractual yet when once appointed to his post or office, the Government servant acquires a status and his rights and obligations are no longer determined by the consent of both the parties, but by statute or statutory rules which may be framed and altered unilaterally by the Government. In other words, the legal position of a Government servant is more one of status than of contract. The hall-mark of status is the attachment to a legal relationship of rights and duties imposed by the public law and not by mere agreement of the parties. It has been observed that Art. 14 does not govern or control Art. 311. The Constitution must be read as a whole. Art. 311(2) embodies the principles of natural justice including audi alteram partem rule. Once the application of clause (2) is expressly excluded by the Constitution itself, there can be no question of making applicable what has been so excluded by seeking recourse to Article 14 of the Constitution.
201. In the case of Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi (AIR 1975 SC 1331, Para 93) , Mathew, J. pointed out that:-
"The governing power wherever located must be subject to the fundamental constitutional limitations."
202. This has been referred to and relied upon in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (AIR 1986 SC 1571) and a similar Rule 9(i) was termed as "Henry VIII clause" as it confers arbitrary and absolute power upon the Corporation to terminate the service of a permanent employee by simply issuing a notice or pay in lieu thereof without recording any reason in the order and without giving any opportunity of hearing to the employee. Thus, the Rule 9(i) of the Services Discipline and Appeal Rules, 1979 was held void under Section 23 of the Indian Contract Act, 1872,