Full Judgment Text
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PETITIONER:
M.L.KAMRA
Vs.
RESPONDENT:
CHAIRMAN-CUM-MANAGING DIRECTOR.NEW INDIA ASSURANCE CO. LTD.
DATE OF JUDGMENT17/01/1992
BENCH:
RAMASWAMY, K.
BENCH:
RAMASWAMY, K.
AHMADI, A.M. (J)
CITATION:
1992 AIR 1072 1992 SCR (1) 220
1992 SCC (2) 36 JT 1992 (1) 188
1992 SCALE (1)40
ACT:
Orissa Insurance Co-operative Society Limited Service
Rules.
Rule 5-Whether arbitrary, unreasonable and void-
declared to be recast.
Statutory Interpretation.
Presumption in favour of constitutionality of
legislation-Interpretation favouring constitutionality to be
accepted.
HEADNOTE:
While the appellant was working as Divisional Manager
at Delhi, the general insurance business was nationalised
and its management was taken over by the Central Government
under General Insurance (Emergency Provisions) Ordinance,
1971 which was replaced by Act 57 of 1972 and vested in the
Custodian of the New India Assurance Co. Ltd. the management
of Orissa Insurance Co-operative Society Ltd.
By operation of Section 7 of the Act the services of
the appellant and others stood transferred and vested with
the custodian.
The appellant was kept under suspension from August
9,1973 pending investigation into charges of embezzlement.
Explanation was called for on October 16,1973 and the
appellant submitted his reply on December 7, 1974, While
dropping the proceeding, the appellant was served with a
termination order dated april 17, 1975 issued by the
respondent.
The appellant challenged the aforesaid termination
order in a writ petition in Delhi High Court which was
dismissed by a Single Judge on November 11,1983 and this
judgment was confirmed by the division Bench in a Letter
Patent Appeal.
In the appeal to this Court it was contended on behalf
of the
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appellant placing reliance on the majority view in D.T.C v.
D.T.C Mazdoor Congress & Ors. judgment Today 1990(3) SC 725
that Rule 5 of the Orissa Insurance Co-operative Ltd.
services Rules is ultra vires of Article 14 of the
Constitution. On behalf of the respondent it was contended
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that unlike Rule 9 involved in D.T.C’s case, Rule 5 in the
instant case provided guidelines, and that the Board of
Directors had to take a decision, whether the need to
continue the employee’s service subsists which would be
based on relevant material and thus there would be objective
consideration before taking a decision, not only regarding
the need to continue the post but also the services of the
Officer or the employee, and if so construed the rule is not
ultra vires of article 14.
Allowing the appeal, this Court,
HELD: Rule 5 of the Orissa Insurance Co-operative
Society Ltd. is capable of the interpretation that the Board
of management may form an objective opinion, on the basis
of material, that the post which the officer or the employee
is occupying is no longer in need and that the post would be
abolished. This would be a policy decision depending on the
exigencies. Once the Board reaches such a decision to abolish
the post, in consequence the service of the officer/employee
occupying the post could be terminated. Viewed in that light
the said rule does not become arbitrary, unreasonable or
void offending Article 14 and therefore the rule is valid.
[225G-226 B]
There is a presumption in favour of constitutionality of
a legislation or statutory rule unless ex facie it violates
the fundamental rights guaranteed under Part III of the
constitution. If the provisions of a law or the rule is
construed in such a way as would make it consistent with the
Constitution and another interpretation would render the
provision or the rule unconstitutional, the Court would lean
in favour of the former construction. [225 E]
It is clear in the instant case, that the Board of
Management did not abolish the post but put an end to the
service of the appellant, obviously due to loss of
confidence as his honesty and integrity became suspicious
and his continuance in service was felt inexpedient and not
in the interest of the business of the respondents. But rule
8 was available for taking action for misconduct but was not
availed. Therefore, the order terminating the services of
the appellant is illegal. [226 C]
222
Normally the appellant is entitled to reinstatement but
the ends of justice would be met by directing the
respondents to pay him Rs. 1,00,000 as compensation, instead
of reinstatement and further continuance in service. The
compensation awarded would be staggered between the year
1973 till date for the purpose of income tax and given the
appropriate relief. [226D-E]
March of service jurisprudence necessitates that the
respondent recast Rule 5 in tune with the Constitution and
the law. [226-E]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No.655 of
1986.
From the Judgment and Order dated 23.4.1984 of the
Delhi High Court in Letters Patent Appeal No.25 of 1984.
M.K.Ramamurthy, Ms S. Pappuh, B.P.Singh, Rishi Kesh,
Raj Birbal, Sanjeev Sabharwal, B.R.Sabharwal and M.M.
Kashyap for the appearing parties.
S.S.Harlakha appeared in person.
S.S.Onkarmal appeared in person for the Intervener.
The Judgment of the Court was Delivered by
K. Ramaswamy, J. In this appeal by special leave, by
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way of additional grounds with leave, the appellant impugnes
Rule 5 of the Orissa Insurance Co-operative Society Ltd.
Service Rules (for short "the Rules") as unconstitutional
and void offending Article 14 of the Constitution of India.
The material facts relevant to the point are that while the
appellant was working as Divisional Manager at Delhi, the
general insurance business was nationalised and its
management was taken over by the Central Government under
General Insurance (Emergency Provisions) Ordinance, 1971
replaced by Act 57 of 1972 (for short "the Act") and vested
in the custodian of the New India Assurance Co. Ltd., the
management of Orissa Insurance Co-operative Society Ltd. By
operation of s.7 of the Act, the services of the appellant
and others stood transferred and vested with the custodian.
Under the Act, the Board of Directors was empowered to
terminate the service of the officer/employee of the
insurer. The appellant was kept under suspension from August
9,1973 pending investigation into the embezzlement,
Explanation was called for on October 16, 1973. in response
thereto the appellant submitted his reply on december 7,
1974. While dropping the
223
proceeding, the appellant was served with termination order
dated April 17,1975 issued by the respondent. The appellant
challenged it in a writ petition in Delhi High Court which
was dismissed by a learned Single Judge on November 11, 1983
and was confirmed by the Division Bench in Letter Patent
Appeal No.351/1984 dated April 23, 1984.
Section 7 of the Act provides that every whole time
officer or other employee of an existing insurer employed in
connection with his General Insurance business, immediately
before the appointed day, shall become an officer/employee
of the Indian Insurance Co. in which the undertaking of the
insurer to which the service of the officer relates has
vested and would hold his office 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 unless
and until his appointment is terminated. Section 16(1) in
Chapter V provides that if the Central Govt. is of the
opinion that for the more efficient carrying on of General
Insurance business, it is necessary to do so, it may by
notification, frame one or more schemes providing for all or
any of the following matter; (e) the rationalisation or
revision of pay-scales and other terms and conditions of
service of officers and other employees wherever necessary.
Pursuant thereto, the central Govt. framed the New India
Assurance Co. Ltd Merger Scheme, 1973 with effect from
December 31, 1973. Thereunder by Rule 3, the undertaking was
transferred to the respondent; under Rule 5 the existing
whole time officer etc. became the officer of the transferee
company (New Indian Assurance Co. Ltd) and could hold his
office on the same terms and conditions as would have been
admissible to him if there had been no such transfer, as
referred to in paragraph 3. He shall continue to remain an
officer unless and until his employment, in the transferee
company is terminated or the terms and conditions are duly
altered by any other scheme framed under the Act. By
notification dated April 29, 1976 the Central Govt. also
framed the scheme called the General Insurance
(Rationalisation of pay-scales and other Conditions of
Service of Development Step) Scheme, 1976 which came into
force on May 1, 1976, the details of which are not material
for the reason that service of the appellant was terminated
, in terms of the existing rule 5 of the Rules. Suffice to
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state that pursuant to the nationalisation under the Act and
Scheme, the appellant became the officer of the respondent.
Rule 5 read thus:
Termination of Service:
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"An employee whether permanent or
temporary shall not leave or discontinue his
service in the Society without first giving 30 days
notice in writing of his intention to do so, to the
Principal Officer, Failure to do so will entail
forfeiture of the pay of the month. In the event of
the Society not having any further need of any
employee’s service 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 service or in lieu thereof pay
such employee a sum equivalent to his one month pay
including allowance upto the termination of the
period of notice by way of compensation provided
that nothing in these rules shall affect the rights
of the society to dismiss an employee under Rule 8
for misconduct etc. without any notice or salary in
lieu of notice, in the manner prescribed in these
rules.
An employee shall ordinarily retire from
the Society’s services on completion of his 55th
year unless the Board reserves to continue him in
office of such period as may be determined from
time to time."
It is thus manifest that an employee, whether permanent
or temporary, has an option to leave or discontinue by
giving 30 days’ notice in writing of his intention to do so.
His failure thereof shall entail forfeiture of the pay of
the month. The employee ordinarily would be superannuated on
completion of his 55th year unless the Board continues him
for an extended period as may be determined from time to
time. Equally in the event of the Society not having any
further need of the employee’s service, whether permanent or
temporary, which should be decided by the Board, the
Principal Officer shall give 30 days’ notice in writing for
termination of his service or in lieu thereof, pay one
month’s salary including allowances upto the period of
termination. The respondent also has the right to dismiss an
employee, under Rule 8, for misconduct in the manner
prescribed in the Rules. Admittedly, though action was
initiated against the appellant for the charges of
embezzlement etc. which are misconduct, the charges were
dropped. Taking aid of Rule 5 and without conducting an
enquiry or giving an opportunity, the appellant’s service
was terminated by tendering one month’s salary in lieu of
notice and also a direction to pay all the allowances upto
that date including the period of his suspension. It is not
necessary to go into the grounds taken in the High Court
assailing the invalidity of the termination order as they
are not pressed before us. Sri Ramamurthy, the learned
Senior counsel for the appellant placing reliance on the
ratio of the majority view in D.T.C. v. D.T.C Mazdoor
Congress & Ors.,
225
Judgment today (1990) 3 SC 725 contended that Rule 5 is
ultra vires of Article 14 of the Constitution. Smt. Shyamala
Pappu, the learned Senior counsel for the respondent
contended that unlike Rule 9 in D.T.C’s case Rule 5 provides
guidelines. The Board of Directors have to take a decision,
whether the need to continue the employee’s service subsists
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which would be based on the relevant material. Thereby,
there would be objective consideration before taking a
decision, not only regarding the need to continue the post
but also the services of the officer or the employee. Though
the rule does not provide for prior notice, post-decisional
opportunity would be read into the rule. If so read, the
rule is not ultra vires Article 14. In our view the ratio in
D.T.C.’s case has no application. Rule 9 of the rules of
Delhi Transport Corporation Service Regulation gives naked
power to terminate the services of a permanent employee by
giving one month’s notice or pay in lieu thereof. It was not
the contention therein, that the rule was capable of two
constructions. It is settled law that there is a presumption
of constitutionality of the rule. The court ought not to
interpret the statutory provisions, unless compelled by
their language, in such a manner as would involve its
unconstitutionality, Since the legislature of the rule
making authority is presumed to enact a law which does not
contravene or violate the constitutional provisions.
Therefore, there is a presumption in favour of
constitutionality of a legislation or statutory rule unless
ex facie it violates the fundamental rights guaranteed under
Part III of the constitution. If the provisions of law or
the rule is construed in such a way as would make it
consistent with the constitution and another interpretation
would render the provision or the rule unconstitutional, the
court would lean in favour of the former construction. In
view of this settled legal position, the question emerges
whether the language in Rule 5 would be capable to be
construed consistent with the fundamental rights in Part
III. As stated earlier, the phrase "in the event of the
Society not having any further need of any employee’s
service whether permanent or temporary which shall be
decided by the Board" is susceptible of two interpretations.
The one interpretation put up by Sri Ramamurty is that the
Board may unilaterally and arbitrarily decide that there is
no need for the services of a particular employee, in given
facts and circumstances, though the post which the employee
is occupying may continue and would be put to an end by
giving one month’s notice or pay in lieu thereof. In that
event the rule per se is arbitrary offending Article 14. The
other view capable to be construed from the language
employed would be that the Board of Management may form an
objective opinion, on the basis of the material, that the
post which the officer or the employee is occupying no
longer is in need. Thereby, the post would be abolished.
This would be a policy decision depending on the exigencies.
In consequences the service of the employee also would
become
226
redundant or surplus. In that event his service would no
longer be needed. The officer or employee may be permanent
or temporary but the absence of the need for the continuance
of the post would necessitate to terminate the service of an
employee or officer. It must not be a pretext or a rouse to
get rid of the service of an inconvenient officer or of an
employee. If that be so. it would become colourable exercise
of power and would be liable to be quashed as offending
Article 14. Once the Board reaches a decision to abolish the
post, in consequence the service of the officer/ employee
occupying couched in Rule 5 also is capable of that
interpretation. In that light we are of the opinion that
Rule 5 does not become arbitrary. unreasonable or void
offending Article 14. Accordingly, we hold that the rule is
valid.
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But from the facts, it is clear that the Board of
Management did not abolish the post but put an end to the
service of the appellant. Obviously due to loss of
confidence as his honesty and integrity became suspicious
and his continuance in service was felt inexpedient and not
in the interest of the business of the respondents. But Rule
8 was available for taking action for misconduct but was not
availed. Therefore, the impugned order terminating the
services of the appellant is illegal. What would be the
consequence? Normally the appellant is entitled to
reinstatement but in our view the ends of justice would be
met by directing the respondent to pay him Rs. 1,00,000 as
compensation, instead of reinstatement and further
continuance in service. The compensation awarded would be
staggered between the year 1973 till date for the purpose of
income tax and given the appropriate relief. In this view it
is not necessary to deal with other contentions or decisions
cited across the bar. Before parting with the case it is
necessary to mention that march of service jurisprudence
necessitates the respondent to recast the rules in tune with
the constitution and the law. The appeal is allowed but
without cost. The intervention application filed by Sri S.S.
Onkarmal Harlalka is dismissed.
S.B. Appeal allowed.
227