Anand Moudgil vs STATE of HP and others

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High Court of H.P.
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
CWP No. 13984 of 2025
Reserved on 23.02.2026
Date of decision: 11.03.2026
_____________________________________________________________________________
Anand Moudgil
...Petitioner.
Versus
State of H.P. through Chief Secretary and others
…Respondents.
_____________________________________________________________________________

Coram
Hon’ble Mr. Justice Vivek Singh Thakur, Judge.
Hon’ble Mr. Justice Ranjan Sharma, Judge.

1
Whether approved for reporting? Yes.
_____________________________________________________________________________
For the Petitioner. Petitioner in person (through video
conferencing)
For the Respondents: Mr. Anup Rattan, Advocate General with Mr.
Raj Negi, Deputy Advocate General.
__________________________________________________________
Vivek Singh Thakur, Judge
Petitioner has preferred present petition, invoking Article 226
of Constitution of India for issuance of writ of Quo Warranto , Certiorari ,
Mandamus and/or passing any other writ, order or direction for declaring
that appointment of respondent No. 2, Principal Secretary/Additional
1
Whether the reporters of the local papers may be allowed to see the judgment?
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Chief Secretary (Transport) to the Government of Himachal Pradesh, as
Chairman, State Transport Authority, Himachal Pradesh, (STA-HP) and
appointment of respondent No. 3, Director, Transport, Himachal Pradesh,
as Chairman of all Regional Transport Authorities in Himachal Pradesh
(RTAs-H.P.), vide Notification dated 29.05.2023 (Annexure P-2), are void
ab initio , illegal and in direct contravention of Section 68(2), read with
third proviso of Motor Vehicles Act, 1988 (M.V. Act), as well as in the light
of Principle settled by the Apex Court in Mor Modern Transport
Company vs. State of Haryana, 2002 INSC 291, reported in (2002) 6
SCC 511 , on the ground that both, i.e., Principal Secretary/Additional
Chief Secretary (Transport), Himachal Pradesh and Director, Transport,
Himachal Pradesh, are having financial interest in Himachal Roadways
Transport Corporation, an undertaking of Government of Himachal
Pradesh, as both of them are also members of Board of Directors of the
said undertaking, as ex officio Director of the said Corporation,
established under provisions of Road Transport Corporation Act, 1950
(RTC Act), and thus, suffering from disqualification provided under
Section 68(2) of M.V. Act, 1988 and, therefore, are usurpers of the post,
despite the fact that any person, who has financial interest, whether as
proprietor, employee or otherwise, in any Transport undertaking, is
disqualified from appointed or continued to be as a member of STA or
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RTAs; and for quashing and setting aside Notification dated 29.05.2023
(Annexure P-2); to issue appropriate direction for reconstituting STA-HP
and RTAs-HP, strictly in conformity with Section 68(2) of M.V. Act by
appointing fit and disinterested persons as Chairman(s) in place of
Principal Secretary/Additional Chief Secretary (Transport) to the
Government of Himachal Pradesh (respondent No. 2) and Director,
Transport, Himachal Pradesh (respondent No. 3); and to award costs of
these proceedings.
2. Respondent No. 1 is State of Himachal Pradesh, sued
through Chief Secretary to the Government of Himachal Pradesh,
whereas respondent No. 2 is Additional Chief Secretary (Transport) to the
Government of Himachal Pradesh and respondent No. 3 is Director,
Transport, Himachal Pradesh.
3. As per the averments made in the petition, it has been
instituted in personal capacity and not as a Public Interest Litigation,
seeking issuance of writ of Quo Warranto against respondents No. 2 and
3, with submission that Locus-Standi arises to the petitioner from his
intention to undertake stage carriage operations in Himachal Pradesh, by
filing appropriate applications, which were decided by the STA and
concerned RTAs, by exercising the power under various provisions of
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Motor Vehicles Act, but the said STA and RTAs, were headed by a
Chairman, who was disqualified to be Chairman or member of STA/RTAs.
4. Referring to provisions of Sections 67 and 68 of M.V. Act, it
has been contended by the petitioner that it is duty of the respondent-
State to evolve a mechanism by constituting STA and RTAs, with
members having no financial interest in any of the transport undertaking
for promoting effective competition among the transport service providers.
However, by appointing such officers as a Chairman/member of STA and
RTAs, who have direct financial interest in the State Transport
undertaking, i.e., HRTC being Directors of the said Corporation, as ex
officio members of Board of Directors of the Said Corporation, the State
has committed an illegality, resulting into holding the post of Chairman
STA and Chairman RTAs by these persons/officers, who are disqualified
to be appointed as such under Section 68 of MV Act. To substantiate the
plea, reliance has been placed by the petitioner upon the judgment of the
Apex Court in Mor Modern Transport Co. vs. State of Haryana,
reported in (2002) 6 SCC 511 .
5. According to petitioner, for appointment of persons, having
financial interest in the transport undertaking, which is a competitor of
Private Transporter, including the petitioner, who intends to have stage
carriage permit in Himachal Pradesh, the omission and commission of the
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respondent-State has prejudisiouly infringed fundamental rights of the
petitioner, provided under Articles 14, 19(1)(e), 19(1)(g) and 21 as well as
Constitutional right under Articles 300-A and 301 of the Constitution.
6. In order to substantiate biasness and discriminatory conduct
of the STA and RTAs, petitioner has referred certain terms granted to
HRTC depots, table showing the default by the HRTC in making payment
of SRT with arrears of Rs. 2,70,34,65,506/-, as on 14.06.2024 and
arrears of SRT dues about (5,01,67,27,563/-), as on 31.10.2024, with
submissions that despite being in arrears in crores, no action has been
taken by the STA and RTAs for cancellation of permits under Section 86
of the MV Act, against the HRTC, because Chairmen of STA and
Chairman of RTAs are also members, as Directors, in Board of Directors
of HRTC.
7. Constitution of Board of Directors of HRTC has been placed
on record as Annexure P-3, wherein Principal Secretary (Transport) to the
Government of Himachal Pradesh and Director Transport, Himachal
Pradesh are members, as Directors therein. This fact has not been
disputed.
8. For substantiating the right to file petition to issue writ of Quo
Warranto , for removal of respondents No. 2 and 3 from the posts of
Chairman in STA and RTAs, reliance has been placed upon judgment
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passed by the Apex Court in University of Mysore and Another vs.
C.D. Govinda Rao and another, reported in (1963) 4 SCR, page 575 ,
wherein it has been observed as under:-
“The judgment of the High Court does not indicate that the attention of
the High Court was drawn to the technical nature of the writ of quo
warranto which was claimed by the respondent in the present
proceedings, and the conditions which had to be satisfied before a writ
could issue in such proceedings.
As Halsbury has observed*
"An information in the nature of a quo warranto took the place of the
obsolete writ of quo warranto which lay against a person who claimed
or usurped an office, 'franchise, or liberty, to, inquire by what authority
he supported his claim, in order that the right to the office or franchise
might be determined:"
Broadly stated, the quo warranto proceeding affords a judicial remedy
by which any person, who holds an inde- pendent substantive public
office or franchise or liberty, is called upon to show by what right he
holds the said office, franchise or liberty, so that his title to it may be duly
determined, and in case the finding is that the holder of the office has no
title, he would be ousted from that office by judicial order. In other
words, the procedure of quo warranto gives the judiciary a weapon to
control the Executive from making appointments to public office against
law and to protect a citizen from being deprived of public office to which
he has a right. These proceedings also tend to protect the public from
usurpers of public office, who might be allowed to continue either with
the connivance of the Executive or by reason of its apathy. It will, thus,
be seen that before a person can effectively claim a writ of quo
warranto, he has to satisfy the Court that the office in question is a
public office and is held by a usurper without legal authority, and that
inevitably would lead to the enquiry as to whether the appointment of
the alleged usurper has been made in accordance with law or not.”
9. Relevant paras of judgment in Mor Modern Cooperative
Transport Society Ltd. vs. Financial Commissioner & Secretary to
Govt. of Haryana and another, reported in (2002) 6 Supreme Court
Cases 269, referred by the petitioner, are as under:-
“13. It was argued before us by the respondents that Haryana
Roadways is neither a company nor a statutory corporation. It is run as a
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departmental entity and is a wing of the department of transport. It was
faintly urged that since Haryana Roadways is neither a company nor a
statutory corporation, as is the case in other States, it cannot be
considered to be an undertaking within the meaning of that term in sub-
section (2) of  Section 68 . It being a departmental entity, it was not an
undertaking. The submission is devoid of force and must be rejected.
Sub-section (2) of  Section 68  mandates that no person who has any
financial interest, whether as proprietor, employee or otherwise in any
transport undertaking shall be appointed or continue to be a member of
a Regional Transport Authority. The person concerned may be a
proprietor, or an employee, or he may otherwise have financial interest in
the transport undertaking. Clearly a proprietory concern also comes
within the ambit of sub-section (2) of  Section 68 . It is, therefore, futile to
contend that Haryana Roadways being a departmental agency is not an
undertaking for the purpose of sub-section (2) of  Section 68 . The
question as to whether it is an undertaking at all has to be answered
having regard to the language of sub-section (2) of  Section 68  and the
legislative intent. In Webster's Third New International Dictionary
"undertaking" has been assigned the meaning:
"The act of one who undertakes or engages in a project or
business; the business of an undertaker: a business, work, or
project which one engages in or attempts".
In Words and Phrases legally defined, Third Edition "Undertaking has
been defined thus:
'Undertaking' includes any trade, business or profession and, in
relation to a public or local authority, includes any of the powers or
duties of that authority, and, in relation to any other body of persons,
whether corporate or unincorporated, includes any of the activities
of that body".
Even applying the dictionary meaning of the word "undertaking", an
entity such as the Haryana Roadways, which is engaged in the business
of providing transport service to the people must be held be an
"undertaking". The use of the words "any undertaking" also makes it
abundantly clear that the undertaking may be either a private
undertaking or a Government or public sector undertaking including a
statutory corporation. We have, therefore, no hesitation in holding that a
State undertaking such as Haryana Roadways is within the
contemplation of sub-section (2) of  Section 68  of the Act.
14. The next question which falls for consideration is what is the
nature of the "financial interest" contemplated by the said sub-section.
The expression financial interest is capable of a narrower as well as a
wider meaning. In the narrower sense it implies direct personal benefit of
an economic nature. In the wider sense it may include any interest direct
or indirect which a person has in relation to the finances of the
undertaking. Such an interest may be the interest of an official who
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manages the finances of the undertaking or on whom rests the burden of
financial accountability. It is trite to say that the intention of the
Legislature must be found by reading the statutes as a whole. The Court
must ascertain the intention of the Legislature by directing its attention
not merely to the Clauses to be construed but to the entire statute; it
must compare the Clause with the other parts of the law, and the setting
in which the Clause to be interpreted occurs. The rule is of general
application as even plainest terms may be controlled by the context.
Expression used in a statute should ordinarily be understood in a sense
in which they best harmonize with the object of the statute, and which
effectuate the object of the Legislature. Therefore, when two
interpretations are feasible the Court will prefer that which advances the
remedy and suppress the mischief as the Legislature envisioned.
Keeping these principles in mind we shall now consider what meaning
has to be given to the expression "financial interest" in sub-section (2)
of  Section 68  of the Act.
15. Looking to the scheme of the Act it cannot be disputed that the
Regional Transport Authorities exercise powers and perform functions
which are conferred upon them by or under  Chapter V of the Act . The
power includes the power to grant stage carriage permits, attach
conditions thereto, to determine the duration of permits and their
renewal, to transfer permits, the cancellation and suspension of permits,
grant of temporary permits etc. Having regard to the fact that the State
undertaking competes with private operators in the business of providing
transport service, the Legislature advisedly has barred the appointment
of any person as a member of the Regional Transport Authority who has
any financial interest, whether as proprietor, employee or otherwise in
any transport undertaking, which must necessarily include a Government
undertaking. This is considered necessary with a view to ensure the
impartial functioning of the Regional Transport Authority which is
envisaged by the Act.
16. Counsel for the appellant drew support from the observations
made by this Court in  Krishna Bus Service Pvt. Ltd. Vs. State of Haryana
and Ors.  (1985) 3 SCC 711 where the appointment of the General
Manager of Haryana Roadways to exercise powers of Deputy
Superintendent of Police under the Punjab Motor Vehicles Rules was
challenged on the ground that it was violative of the fundamental rights
of the private motor vehicles operators guaranteed by  Articles 19(1)(g)  of
the Constitution. Upholding the challenge the Court observed :- (SCC p.
716, para 10)
"The General Manager of Haryana Roadways who is a rival in
business to the private operators of motor vehicles in the State
and is intimately connected with the running of motor vehicles
cannot be expected to discharge his duties in a fair and
reasonable manner. An unobstructed operation of the motor
vehicles by private owners operating along the same route or
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routes would naturally affect the earnings of the Haryana
Roadways. There is, therefore, every likelihood of his being
overzealous in discharging his duties of stopping a vehicle and in
searching, seizing and detaining motor vehicles belonging to
others and at the same time excessively lenient in the case of
vehicles belonging to his own department. If in discharging his
duties in the case of vehicles belonging to others he fails to give
due regard to the interests of the owners thereof he would be
violating their fundamental right to carry on business in a
reasonable way. If he is too lenient in inspecting the vehicles
belonging to his own department, the interests of the traveling
public at large would be in peril. In both the cases there is a
conflict between his duty on the one hand and his interest on the
other. Moreover administration must be rooted in confidence and
that confidence is destroyed when people begin to think that the
officer concerned is biased".
17. Counsel also relied on the observations made by this Court
in  Ishwar Singh Bagga & Ors. Vs. State of Rajasthan  (1987) 1 SCC 101.
That was a case where employees of the State Road Transport
Corporation were empowered to exercise powers that can be exercised
under Section 129-A by police officers who were empowered in that
behalf. Their appointment was challenged as being in violation of  Article
19(1)(g).  The challenge was upheld. Though, the question involved  in
that case  was whether an employee of the State Road Transport
Corporation was included in the expression 'other person' in  Section
129-A  of the Act, some observations made in the judgment are apposite.
It was observed : (SCC p. 111, para 7)
"It is thus clear that the Corporation is one of the many operators
of the motor vehicles in the State though the fleet of the motor
vehicles owned by it and the magnitude of the operations carried
on by it may be very large. The police officers who are
empowered to exercise certain powers under the Act should
exercise those powers in respect of motor vehicles owned by the
private operators and also in respect of the motor vehicles
owned by the Corporation. Negligence on the part of the
Transport Authorities, the Motor Vehicles Department and the
police officers in exercising their powers of supervision,
inspection and control in respect of the motor vehicles of the
Corporation leads to grave public suffering and sometimes to
disasters. They should not take it for granted that the motor
vehicles of the Corporation do not need to be checked or
inspected only because it is established by the State
Government. Omission on their part in discharging these duties
amounts to dereliction of public duty".
18. Relying on these observations, though made in a different
context, it was submitted that the Legislature had in mind the
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constitution of an impartial Regional Transport Authority having regard
to the powers and functions conferred on it and with this objective in
mind, an express provision was made debarring from membership of
the Regional Transport Authority such persons who had any financial
interest in any transport undertaking.
19. Having regard to the language of  Section 68  we are of the
considered view that the fact that the Transport Commissioner has no
personal financial interest in the State undertaking, is of no
consequence.  Section 68(2)  in express terms refers to a person having
"any financial interest" as proprietor, employee or otherwise in any
transport undertaking. The words employed are of the widest amplitude
and expressly include an "employee" of an undertaking. If a very narrow
meaning is given to the expression "any financial interest" as contended
by the respondents, the word "employee" will be rendered redundant,
because in all cases it may be argued that an employee has no
personal financial interest in the undertaking and his interest, whatever
it may be, financial or otherwise, is his official interest and duty to
protect the interest of his employer, including his financial interest. The
wide sweep of the language employed in  Section 68(2)  particularly the
use of the word "any" before "financial interest" leads us to hold that the
financial interest of the person concerned need not be direct personal
financial interest, but includes the financial interest which he may have
even as an employee of the undertaking.
20. The third proviso of sub-section (2) of  Section 68  affirms this
conclusion. The express language of the said proviso clearly debars "an
official connected directly with the management or operation of a
transport undertaking" from being appointed as a member, or continuing
as a member, of the Regional Transport Authority. Therefore,  Section
68(2)  read with third proviso makes it explicit that an official of the State
Transport Undertaking who is directly connected with the management
or operation of the transport undertaking is debarred from being
appointed a member of Regional Transport Authority. So far as the
Transport Commissioner is concerned he is undoubtedly such an
official, and moreover in the discharge of his official duties he shoulders
financial responsibility and is accountable to the State Government in
that regard. The conclusion is, therefore, irresistible that he is a person
who has financial interest in the transport undertaking within the
meaning of that expression in  Section 68(2)  of the Act. The same can
be said of the Traffic Manager who functions under the General
Manager of the Haryana Roadways.
21. The appellants had originally challenged the Notification dated
March 27, 1998, whereunder the Transport Commissioner was
appointed as Chairman of the Regional Transport Authorities. However,
during the pendency of the writ petition, since that Notification was
superseded by another Notification dated 31.12.1998 appointing the
Secretary, Regional Transport Authority of the concerned region as
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Chairman of the Regional Transport Authority, and the Traffic Manager
concerned of the office of the General Manager, Haryana Roadways
concerned located at District Headquarters as member, the appellant
amended the writ petitions and challenged the later Notification. During
the pendency of this appeal the position as it existed when the writ
petition was filed, has been restored so far as the appointment of
Chairman of the Regional Transport Authority is concerned, in as much
as the Transport Commissioner has again been appointed as Chairman
of the Regional Transport Authority by the Notification dated February
20, 2001. Since we have found that the Transport Commissioner is an
official of the Haryana Roadways and has a financial interest in that
undertaking within the meaning of that expression in Section 68(2) of
the Act, the Notification in so far it relates to the appointment of
Transport Commissioner as Chairman, Regional Transport Authority
must be quashed. We may however record that counsel for the
appellant did not challenge before us the appointment of the District
Transport Officer to act as Member Secretary of the Regional Transport
Authority.
10. No independent reply has been filed on behalf of respondent
No. 1-State, however, a joint reply has been filed on behalf of all the
respondents through respondent No. 2, Additional Chief Secretary
(Transport) to the Government of Himachal Pradesh.
11. It has been contended on behalf of respondents that there is
no infringement of fundamental and statutory right of the petitioner and
replying respondents are statutorily entrusted duty under MV Act, 1988
and H.P. Motor Vehicles Rules, 1999, to ensure effective regulation of
transport services, the proper consideration of permit applications and
maintenance of transparency, fairness, and public interest in all transport
related matters and, therefore, petition is not maintainable.
12. After a quote of Section 68(2) of M.V. Act, 1988, it has been
stated that the Notification dated 29.05.2023, has been issued in strict
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compliance with statutory provisions of Section 68(2) of MV Act, by
lawfully exercising the power vested in the State of Himachal Pradesh
under the said provision, as statutory framework separates prescribed
qualification for Chairman, including judicial, appellate or adjudicatory
experience from the disqualification on account of financial interest in any
transport undertaking, thereby ensuring administrative objectivity,
efficiency and protection against conflicts of interests and, therefore,
allegation of the petitioner regarding self appointment and any misuse of
official position by respondent No. 2 as Chairman STA and respondent
No. 3 as Chairman RTAs, is without merit and legally untenable, because
the respondents No. 2 and 3 being Senior IAS Officers, by virtue of their
services, have discharged numerous quasi judicial functions under Land
Revenue Act, Excise Act, Labour Laws and Motor Vehicles Act and are
also having experience of discharging regulatory, policy and quasi judicial
functions. It has been further contended that Section 68(2) of MV Act is
confined to situations, where person has a financial interest, whether as a
proprietor, employee or otherwise in a transport undertaking and this
safeguard is intended to prevent conflicts of interest and to maintain
impartiality in decision making, whereas eligibility of Chairman, on the
other hand, has been defined separately in the same provision, requiring
judicial, appellate or adjudicatory experience, and, according to
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respondents, therefore, the Statute draws a clear distinction between
qualification requirement for Chairman and disqualification clause relating
to financial interest, and the law clearly separates the rules for
qualifications for the Chairman from those applicable to other members,
and therefore, no disqualification applies in instant case to the Chairman
under Section 68(2) of the M.V. Act and, therefore, respondents No. 2
and 3 completely satisfies the statutory requirement for eligibility, and
thus, appointments of Chairman(s) of STA and RTAs are legal and in
accordance to the provisions of Section 68(2) of MV Act.
13. To repell the contention and prayer in the writ petition,
respondents have also taken plea that petitioner has a long record of
filing repetitive litigations since the year 2013, as he has preferred
multiple writ petitions against the STA and RTA, assailing the orders with
respect to stage carriage permits, review petitions, execution petitions
and contempt petitions repeatedly, even in decided matters and a long list
of more than dozen cases, has been narrated in the reply of the
respondents, with submissions that despite repeated adjudications, the
petitioner continues to re-agitate the same or similar issues, only to
harass the Government officers and obstruct lawful discharge of quasi
judicial functions by State Transport Authority and Regional Transport
Authorities, which amounts to abuse of process of law by the petitioner,
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who is a habitual and vexatious litigant and, therefore, it has been
contended that petitioner is causing harassment to the public servants
and obstruction of lawful discharge of quasi judicial function and thus, the
petition is liable to be dismissed on this count only.
14. It has been submitted on behalf of respondents that
respondents No. 2 and 3 are Directors in Board of Directors of HRTC, but
their simultaneous roles in STA and RTAs, as well as in Board of
Directors of HRTC, are ex-officio attached to their statutory positions
governed by law and, therefore, there is no infringement of statutory or
constitutional right of the petitioner.
15. It has been further contended on behalf of respondents that
term ‘financial interest’ in Section 68(2) of MV Act, referred to pecuniary
or proprietary interest, is directly connected to management or operation
of transport undertaking, whereas, neither respondent No. 2, nor
respondent No. 3, holds any direct or personal financial interest in HRTC
beyond their official capacity and their appointments have been made in
due course of executive power and are in accordance with the procedure
prescribed under the Act and relevant State Government Notifications.
Further, that competence of the State Government to appoint Chairman
of STA and RTAs, is statutory and exercise of such power with due
competence can be subjected to judicial review, only if it is established
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that appointments were made in bad faith, malafide or in clear violation of
statutory provisions and petitioner has failed to demonstrate any direct or
personal financial interest of respondents No. 2 and 3, as defined under
Section 68(2) of MV Act.
16. It has been further submitted that Legislature, under Section
67 of MV Act, 1988, has conferred authority upon State Government to
control/regulate road transport and this power is neither absolute, nor un-
regulated, but exercise of this power must confirm strictly to the limits and
objectives laid down by the Act itself and constitution of STA and RTAs, is
specifically for the purpose of effectuating the intent and framework
provided under the Act, particularly to ensure coordinated and controlled
growth of Road Transport in a manner that serves public interest, ensures
safety and promote efficiency, and the appointment of respondents No. 2
and 3 is within the power entrusted to the State, which is not beyond the
powers, either expressly or impliedly, and the constitution of STA and
RTAs is strictly in consonance with provisions of MV Act and applicable
rules framed thereunder and, thus, their appointments are valid and are
backed by lawful authority and there is no illegality or impropriety in
issuance of Notification dated 29.05.2023. Therefore, it has been
contended that the appointment of respondents No. 2 and 3 was not a
personal decision of respondents No. 2 and 3, but was a decision as per
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established norms and statutory framework. Further, that for holding the
office of Director of Board of Director in HRTC, and State Transport
undertaking, does not ipso fact o render their appointments as Chairman
STA as well as in RTAs, illegal, arbitrary or void ab initio , because
statutory scheme does not prohibit such appointments, where these are
made in official capacity and in accordance with law.
17. According to respondents, respondents No. 2 and 3 hold ex
officio position, as Directors of Board of Directors in HRTC, a State
Transport undertaking, and, therefore, it does not, in any manner, attracts
the statutory disqualification under Section 68(2) of MV Act, read with
third proviso thereof. It has been submitted that these provisions aim to
prevent conflicts of interest, where a person is directly engaged in day to
day operations or has a pecuniary interest in the transport undertaking.
However, ex officio Directorship, by virtue of holding a public office, does
not amount to direct connection with the management in the sense
contemplated under these provisions. It has been submitted that both
respondents No. 2 and 3, have been appointed as Directors as members
of Board of Director of HRTC in the official capacity as Government
functionaries and not in any personal or executive capacity, but they are
not involved in commercial or operational management of State Transport
Undertaking, and their association with HRTC is a part of their broader
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official responsibilities to oversee transport administration in the public
interest and not as individual with a vested or conflicting interest.
18. While addressing arguments, learned Advocate General has
also placed on record instructions dated 11.12.2025, received from
Director Transport, Himachal Pradesh, wherein Sections 5, 14 and 15 of
Road Transport Corporations Act, 1950, have been reproduced with
submission that there is a clear demarcation between financial and
administrative responsibilities of the officers and servants of the
Corporation; and executive, financial and operational authority of the
Corporation is exclusively vested in Managing Director; and Additional
Chief Secretary/Principal Secretary (Transport) to Government of
Himachal Pradesh as well as Director Transport, Himachal Pradesh,
participate in the Board of HRTC only as official Directors, representing
the State Government for purposes of coordination and policy alignment.
Further that the Act does not confer upon them any exclusive power
relating to financial management, expenditure sanction, procurement,
commercial operations, fleet management, contract approvals or day to
day administration of the Corporation. It has been further stated in the
instructions that in view of the statutory framework, Additional Chief
Secretary/Principal Secretary (Transport) and Director Transport,
Himachal Pradesh, in their capacity as ex-officio members of Board of
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Directors, do not hold, exercise, or influence any exclusive power of the
Corporation, but their role is advisory, supervisory and policy oriented,
strictly limited to ensuring conformity with the government policy and
statutory obligations. They neither participate in, nor directly controlled
day to day revenue decisions, expenditure, procurement, operational
administration or any financial transaction of HRTC.
19. It has been contended by respondents that there is nothing
on record to establish that respondents No. 2 and 3 are unlawfully holding
the public office without authority, and the petitioner in no way has been
deprived from any liberty or right to undertake stage carriage operation,
subject to compliance with applicable statutory provisions.
20. Huge arrears of tax payable by HRTC, as claimed in the
petition, have been admitted by the respondents, but with submission that
these arrears do not legally or factually correlate with disqualification of
respondents No. 2 and 3 as Chairman(s) of STA or RTAs, with further
submission that matter of HRTC’s Tax Arrears and default therein, is
subject to administrative proceedings under relevant law adjudicable
before appropriate authority.
21. It has been contended by learned Advocate General that on
facts, judgment of the Apex Court in Mor Moderan Transport Company ,
is distinguishable, because in the said judgment, observations of the
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Court were based on the context, where Transport Commissioner of
Haryana, was simultaneously appointed Chairman of RTA without proper
separation of duties, whereas in present case, respondents No. 2 and 3
have acted in their official capacity, strictly as per State Government
Notification, issued by following the due process.
22. It has been contended by learned Advocate General that in
Mor Modern’s case , the members appointed were employees of the
department/undertaking, whereas in present case, respondents No. 2 and
3 are not employees of the undertaking, but are independent officers of
the State and, therefore, judgment in Mor Modern’s case is not applicable
in present case.
23. Learned Additional Advocate General submits that judgment
in Mor Modern’s case , has been distinguished in the judgment of the
Apex Court in State of Gujarat and others vs. Utility Users of Welfare
Association , reported in (2018) 6 SCC 21 , relevant paras of which are as
under:-
“61. The judgment of this Court in Mor Modern Cooperative Transport
Society Ltd. v. Financial Commissioner & Secretary to Govt. of Haryana
and Anr. 24 was also referred to. The provision in question was Section
68(2) of the Motor Vehicles Act, 1988. Section 68 of the Motor Vehicles
Act, 1988 empowered the State Government to constitute a State
Transport Authority and Regional Transport Authorities to exercise
powers and functions specified in Chapter V. Section 68(2) put a
restriction that no person who has a financial interest whether as
proprietor, employee or otherwise in any transport undertaking was to
be appointed and in case such financial interest was acquired post
appointment, the person was required to give notice in writing to the
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State Government of acquisition of such interest and would vacate
office. The Transport Commissioner and Traffic Manager working in the
Office of the General Manager of the Haryana Roadways, a State
Undertaking, were held to fall within the mischief of sub-section (2) of
Section 68 of that Act. The nature of “financial interest” as contemplated
by the said sub-section was examined in the narrower sense and it was
held to imply direct personal benefit of an economic nature while in the
wider sense it would include direct or indirect interest that a person has
in relation to the finances of an undertaking. Such an interest was held
to include the interest of an official who manages the finances of the
undertaking or on whom rests the burden of financial accountability. The
intention of the legislature was deciphered from reading the statute as a
whole.
62. We may, however, note at this stage itself that the factual matrix
in the said case dealt with the situation where a person was holding
both the offices.”
24. Referring to para 32 of judgment of the Apex Court in
Premachandran Keezhoth and another vs. Chancellor Kannur
University and others , reported in AIR 2024 SC 135 , it has been
contended by learned Advocate General that act and conduct of the
petitioner does not entitle him to seek direction for issuance of Quo
Warranto Writ for removal of respondents No. 2 and 3 from the posts of
Chairman(s) STA and RTAs. Para 32 reads as under:-
“32 . Any person may challenge the validity of an appointment of a
public office, whether any fundamental or other legal right of his has
been infringed or not. But the court must be satisfied that the person so
applying is bona fide and there is a necessity in public interest to
declare judicially that there is a usurpation of public office. If the
application is not bona fide and the applicant is a mere pawn or a man
of straw in the hands of others, he cannot claim the remedy. Though the
applicant may not be an aspirant for the office nor has any interest in
appointment, he can apply as a private relator, or an ordinary citizen.”
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25. Learned Advocate General, to justify the appointment of
Principal Secretary/Additional Chief Secretary (Transport) and Director,
Transport Himachal Pradesh as Chairman of STA and RTAs, has also
relied upon third proviso of Section 68(2) of MV Act, with submission that
for the stand taken in the reply, reiterated in the instructions dated
11.12.2025 and submissions made by him on behalf of respondents, it is
apparent that the respondents No. 2 and 3 are not officers or officials
connected directly with the management or operation of transport
undertaking and, therefore, provisions of Section 68(2) of MV Act does
not debar the appointment of respondents No. 2 and 3, as Chairman of
STA and RTAs, despite their induction as Directors in the Board of
Directors of HRTC, because they do not fall in the category of persons
prohibited from being appointed as a member of STA or RTAs.
26. It has also been pleaded by the learned Advocate General
that despite having been appointed and continuing as a Director of Board
of Directors of HRTC, a transport undertaking, they, in view of the third
proviso to Section 68(2) of MV Act, can be appointed, or continued as a
member/chairman, because they only participate in the Board of HRTC,
as official Directors representing the State Government only for purpose
of coordination and policy alignment and does not have any exclusive
power, relating to financial management, expenditure sanction,
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procurement, commercial operation, fleet arrangement, contract
approvals or day to day administration of the Corporation and thus, are
not connected directly with the management or operation of transport
undertaking, especially for performing role, which is advisory, supervisory
and policy oriented, strictly limited to ensuring conformity with the
Government policies and statutory obligations.
27. In rebuttal, apart from filing rejoinder, reiterating the stand
taken in the petition and referring provisions of Road Transport
Corporations Act, 1950, indicating the role of Board of Directors of the
HRTC, petitioner has also submitted point wise rebuttal to the instructions
and oral submissions by and on behalf of respondents.
28. Petitioner has also placed reliance upon judgment of the
Apex Court in Bhuwalka Steel Industries Ltd. Vs. Bombay Iron Steel
Labour Board and Anr, reported in (2019) 16 SCC 618 , wherein it has
been held that it is irrelevant that how the State Government officials
understood the provisions of the Act, but the provisions of the Act have to
be considered in the light of the judgment of the Apex Court in Mor
Modern Transport Company’s case.
29. In Premachandran’s case, it has been reiterated by the Apex
Court that any person may challenge the validity of appointment of a
public officer, irrespective of infringement of his fundamental or other
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legal right, however, subject to satisfaction of the Court that the persons
so applying is bonafide and there is necessity in public interest to declare
judicially that there is usurpation of public office. The petitioner should not
be a mere pawn, or man of straw in hand of others. Though, petitioner
may not be an aspirant for the office, nor has any interest in the
appointment, he can apply as a private relater, or an ordinary citizen. It
does not mean that validity of appointment of a public office can be
challenged by un-interested person, or a person, who has some interest
related to the public office in reference, is not entitled to file petition for
issuing Quo Warranto Writ, or such person has not be considered a
bonafide petitioner.
30. Nothing has been placed on record that petitioner is a mere
pawn or a man of straw in hand of others. He had and has occasion to
have dealing in the public office in reference, and mere fact that he had
filed number of petitions against the Department, cannot be a ground to
disentitle him to file a petition for Quo Warranto , with respect to
appointment of the public office, where atleast, prima-facie , a case is
made out that appointment of Chairman of STA and RTAs is in conflict
with and in violation of statutory provisions. Therefore, plea in this regard
raised on behalf of respondents, is liable to be rejected and petitioner is
held entitled to file the petition for issuance of directions Quo Warranto .
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Otherwise also, under Article 226 of Constitution of India, during judicial
review of some appointment, if any illegality or omission and commission,
by or on behalf of concerned authority, is apparent at large on the face of
the action/omission or commission, the Court is not inhibited from issuing
any other writ other than the writ or direction of Quo Warrant , as deemed
appropriate and fit, as also prayed in present petition, in the facts and
circumstances, placed before the High Court.
31. Judgment in Mor Modern Transport Company’s case was
passed by three judges’ Bench of the Apex Court, whereas judgment in
Utility Users Welfare Association’s case, has been passed by two judges’
Bench of the Apex Court.
32. Contrary to submission of learned Advocate General in Utility
Users Welfare Association’s case, the Apex Court has reiterated the
principle of law laid down in Mor Modern Transport Company’s case
with observation that in Mor Modern Transport Company’s case, nature of
financial interest, as contemplated by Section 68(2) of MV Act, was
examined in narrower sense, but holding that in wider sense, it would
include direct or indirect interest that a person has in relation to finances
of an undertaking. It was observed by the Court that such an interest was
held to include the interest of an official, who manages the finance of the
undertaking, or on whom rests the burden of financial accountability and
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the intention of the legislature was deciphered from reading the statute as
a whole and in that case, a situation was dealt with, where a person was
holding both the offices. Therefore, reliance placed by the learned
Advocate General, upon the Utility Users Welfare Association’s case to
distinguish the present case from Mor Modern Transport Company’s
judgment, is misconceived. In present case also, respondents No. 2 and
3 are holding both the offices, i.e., Director of Board of Director of HRTC
a transport undertaking as well as members/Chairmen of STA and RTAs,
and as held in Mor Modern’s case and clarified in Utility Users Welfare
Association’s case, the financial interest contemplated in Section 68(2) of
MV Act, includes direct personal benefit of an economic nature as well as
direct or indirect interest that a person has in relation to finances of an
undertaking. Nature of financial interest in Mor Modern Transport
Company was examined in narrower sense as well as in wider sense and
in the wider sense, it was held to include direct or indirect interest of
person in relation to finances of an undertaking.
33. Provisions of Sections 67 and 68 of MV Act shall be relevant
to adjudicate this matter, which reads as under:-
The Motor Vehicles Act, 1988
67. Power to State Government to control road transport.
(1) A State Government, having regard to--
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(a) the advantages offered to the public, trade and industry by
the development of motor transport;
(b) the desirability of co-ordinating road and rail transport;
(c) the desirability of preventing the deterioration of the road
system, and
(d) promoting effective competition among the transport
service providers,
may, from time to time, by notification in the Official Gazette issue
directions both to the State Transport Authority and Regional Transport
Authority regarding the passengers convenience, economically
competitive fares, prevention of overcrowding and road safety.
(2) Any direction under sub-section (1) regarding the fixing of fares
and freights for stage carriages, contract carriages and goods carriages
may provide that such fares or freights shall be inclusive of the tax
payable by the passengers or the consignors of the goods, as the case
may be, to the operators of the stage carriages, contract carriages or
goods carriages under any law for the time being in force relating to tax
on passengers and goods:
[Provided that the State Government may subject to such conditions as
it may deem fit, and with a view to achieving the objectives specified in
clause (d) of sub-section (1), relax all or any of the provisions made
under this Chapter.]
[(3) Notwithstanding anything contained in this Act, the State
Government may, by notification in the Official Gazette, modify any
permit issued under this Act or make schemes for the transportation of
goods and passengers and issue licences under such scheme for the
promotion of development and efficiency in transportation--
(a) last mile connectivity;
(b) rural transport;
(c) reducing traffic congestion;
(d) improving urban transport;
(e) safety of road users;
(f) better utilisation of transportation assets;
(g) the enhancement of economic vitality of the area, through
competitiveness, productivity and efficiency;
(h) the increase in the accessibility and mobility of people;
(i) the protection and enhancement of the environment;
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(j) the promotion of energy conservation;
(k) improvement of the quality of life;
(l) enhance integration and connectivity of the transportation
system, across and between modes of transport; and
(m) such other matters as the Central Government may deem
fit.
(4) The scheme framed under sub-section (3), shall specify the fees
to be charged, form of application and grant of a licence including the
renewal, suspension, cancellation or modification of such licence.]
68. Transport Authorities .—(1) The State Government shall, by
notification in the Official Gazette, constitute for the State a State
Transport Authority to exercise and discharge the powers and functions
specified in sub-section (3), and shall in like manner constitute Regional
Transport Authorities to exercise and discharge throughout such areas
(in this Chapter referred to as regions) as may be specified in the
notification, in respect of each Regional Transport Authority; the powers
and functions conferred by or under this Chapter on such Authorities:
Provided that in the Union territories, the Administrator may abstain from
constituting any Regional Transport Authority.
(2) A State Transport Authority or a Regional Transport Authority shall
consist of a Chairman who has had judicial experience or experience as
an appellate or a revisional authority or as an adjudicating authority
competent to pass any order or take any decision under any law and in
the case of a State Transport Authority, such other persons (whether
officials or not), not being more than four and, in the case of a Regional
Transport Authority, such other persons (whether officials or not), not
being more than two, as the State Government may think fit to appoint;
but no person who has any financial interest whether as proprietor,
employee or otherwise in any transport undertaking shall be appointed,
or continue to be, a member of a State or Regional Transport Authority,
and, if any person being a member of any such Authority acquires a
financial interest in any transport undertaking, he shall within four weeks
of so doing, give notice in writing to the State Government of the
acquisition of such interest and shall vacate office:
Provided that nothing in this sub-section shall prevent any of the
members of the State Transport Authority or a Regional Transport
Authority, as the case may be, to preside over a meeting of such
Authority during the absence of the Chairman, notwithstanding that such
member does not possess judicial experience or experience as an
appellate or a revisional authority or as an adjudicating authority
competent to pass any order or take any decision under any law:
Provided further that the State Government may,—
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(i) where it considers necessary or expedient so to do, constitute
the State Transport Authority or a Regional Transport Authority
for any region so as to consist of only one member who shall be
an official with judicial experience or experience as an appellate
or a revisional authority or as an adjudicating authority
competent to pass any order or take any decision under any law;
(ii) by rules made in this behalf, provide for the transaction of
business of such authorities in the absence of the Chairman or
any other member and specify the circumstances under which,
and the manner in which, such business could be so transacted:
Provided also that nothing in this sub-section shall be construed as
debarring an official (other than an official connected directly with the
management or operation of a transport undertaking) from being
appointed or continuing as a member of any such authority merely by
reason of the fact that the Government employing the official has, or
acquires, any financial interest in a transport undertaking.
(3) The State Transport Authority and every Regional Transport
Authority shall give effect to any directions issued under section 67 and
the State Transport Authority shall, subject to such directions and save
as otherwise provided by or under this Act, exercise and discharge
throughout the State the following powers and functions, namely:—
(a) to co-ordinate and regulate the activities and policies of the
Regional Transport Authorities, if any, of the State;
(b) to perform the duties of a Regional Transport Authority where
there is no such Authority and, if it thinks fit or if so required by a
Regional Transport Authority, to perform those duties in respect
of any route common to two or more regions;
(c) to settle all disputes and decide all matters on which differences
of opinion arise between Regional Transport Authorities; and
[(ca) Government to formulate routes for plying stage carriages;]
(d) to discharge such other functions as may be prescribed.
(4) For the purpose of exercising and discharging the powers and
functions specified in sub-section (3), a State Transport Authority
may, subject to such conditions as may be prescribed, issue
directions to any Regional Transport Authority, and the Regional
Transport Authority shall, in the discharge of its functions under
this Act, give effect to and be guided by such directions.
(5) The State Transport Authority and any Regional Transport
Authority, if authorised in this behalf by rules made under section
96, may delegate such of its powers and functions to such
authority or person subject to such restrictions, limitations and
conditions as may be prescribed by the said rules.”
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34. Following provisions of Road Transport Corporation Act,
1950 are also relevant to be referred:-
2. Definitions .—In this Act, unless the context otherwise requires,—
(a) ………………….
[(aa)“Board” means the Board of Directors of a Corporation;]
(b) “Corporation” means a Road Transport Corporation
established under section 3;
[(bb)“Director” means a member of the Board;]
(c) ………………………….
3. Establishment of Road Transport Corporations in the States. —
The State Government having regard to—
(a) the advantages offered to the public, trade and industry by
the development of road transport;
(b) the desirability of co-ordinating any form of road transport
with any other form of transport;
(c) the desirability of extending and improving the facilities for
road transport in any area and of providing an efficient and
economical system of road transport service therein,
may, by notification in the Official Gazette, establish a Road Transport
Corporation for 1 [the whole or any part of the Union territory of Delhi]
under such name as may be specified in the notification.
4. Incorporation.— Every Corporation shall be a body corporate by the
name notified under section 3 having perpetual succession and a
common seal, and shall by the said name sue and be sued.
[5. Management of Corporation and Board of Directors .
—(1)The general superintendence, direction and management of
the affairs and business of a Corporation shall vest in a
Board of Directors which, with the assistance of its
committees and Managing Director, may exercise all such
powers and do all such acts and things as may be exercised
or done by the Corporation.
(2) The Board shall consist of a Chairman and such other
Directors, being not less than five and not more than
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seventeen, as the State Government may think fit to
appoint.
(3) The State Government may, if it so thinks fit appoint one of
the other Directors as the Vice-Chairman of the Board.
(4) Rules made under this Act shall provide for the
representation, both of the Central Government and of the
State Government concerned, on the Board in such
proportion as may be agreed to by both the Government
and of appointment by each Government of its own
representatives thereto and where the capital of a
Corporation is raised by the issue of shares to other parties
under sub-section (3) of section 23, provision shall also be
made for the representation of such shareholders on the
Board and the manner in which the representatives shall be
elected by such shareholders.
(5) The term of office of and the manner of filling casual
vacancies among the Directors shall be such as may be
prescribed.]
11. Meeting of [Board].-
(1) A [Board] shall meet at such times and places and shall,
subject to the provisions of sub-sections (2) and (3), observe
such rules of procedure in regard to transaction of business
at its meeting as may be provided by regulations made
under this Act:
Provided that [Board] shall meet at least once in every three months.
(2) The person to preside at a meeting of a [Board] shall be the
Chairman thereof, or in his absence from any meeting, the
Vice-Chairman, if any, or in the absence of both the
Chairman and the Vice-Chairman, [such Director as may be
chosen by the Directors present] from among themselves to
preside.
(3) All questions at a meeting of a [Board] shall be decided by a
majority of votes of the members present, and in the case of
equality of votes, the Chairman or, in his absence, any other
person presiding shall have a second or casting vote.
14. Officers and servants of the Corporation. -
[(1) Every Corporation shall have a Managing Director, a Chief
Accounts Officer and a Financial Adviser, appointed by the
State Government:
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Provided that the same person may be appointed as the
Chief Accounts Officer and the Financial Adviser.]
(2) A Corporation may appoint [a Secretary and such other
officers and employees] as it considers necessary for the
efficient performance of its functions.
[(3) The conditions of appointment and service and the scales of
pay of the officers and employees of a Corporation shall -
(a) as respects the Managing Director, the Chief Accounts
Officer and the Financial Adviser, or, as the case may
be, the Chief Accounts Officer-cum-Financial Adviser,
be such, as may be prescribed, and
(b) as respects the other officers and employees, be such,
as may, subject to the provisions of section 34, be
determined by regulations made under this Act.]
[15. Managing Director, Chief Accounts Officer and Financial
Adviser .—
(1) The Managing Director shall be the executive head of the
Corporation and all other officers and employees of the
Corporation shall be subordinate to him.
(2) The Managing Director shall obtain the views of the Chief
Accounts Officer and the Financial Adviser or, as the case
may be, the Chief Accounts Officer-cum-Financial Adviser,
on every proposal involving revenues, or expenditure from
the fund, of the Corporation and shall cause such views to
be placed before the Board prior to the consideration of
such proposal by the Board.]
18. General duty of Corporation .—It shall be the general duty of a
Corporation so to exercise its powers as progressively to provide or
secure or promote the provision of, an efficient, adequate, economical
and properly co-ordinated system of road transport services in the
[Union territory of Delhi or part thereof] for which it is established and in
any extended area:
Provided that nothing in this section shall be construed as imposing on
a Corporation, either directly or indirectly, any form of duty or liability
enforceable by proceedings before any Court or Tribunal to which it
would not otherwise be subject.
19. Powers of Corporation .—
(1) Subject to the provisions of this Act, a Corporation shall have power
—
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(a) to operate road transport services in the 2 [Union territory of
Delhi] and in any extended area;
(b) to provide for any ancillary service;
(c) to provide for its employees suitable conditions of service
including fair wages, establishment of provident fund, living
accommodation, places for rest and recreation and other
amenities;
[(d) to authorise the issue of passes to its employees and other
persons either free of cost or at concessional rates and on
such conditions as it may deem fit to impose;
(e) to authorise the grant of refund in respect of unused tickets
and concessional passes.]
(2) Subject to the provisions of this Act, the powers conferred by sub-
section (1) shall include power—
(a) to manufacture, purchase, maintain and repair rolling stock,
vehicles, appliances, plant, equipment or any other thing
required for the purpose of any of the activities of the
Corporation referred to in sub-section (1);
Explanation.—In this clause, the expression “manufacture” does not
include the construction of the complete unit of a motor vehicle except
for purposes of experiment or research;
(b) to acquire and hold such property, both movable and
immovable, as the Corporation may deem necessary for the
purpose of any of the said activities, and to lease, sell or
otherwise transfer any property held by it;
(c) to prepare schemes for the acquisition of, and to acquire,
either by agreement or compulsorily in accordance with the
law of acquisition for the time being in force in the [Union
territory of Delhi] and with such procedure as may be
prescribed, whether absolutely or for any period, the whole
or any part of any undertaking of any other person to the
extent to which the activities thereof consist of the operation
of road transport services in [that Union territory] or in any
extended area;
(d) to purchase by agreement or to take on lease or under any
form of tenancy any land and to erect thereon such buildings
as may be necessary for the purpose of carrying on its
undertaking;
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(e) to authorise the disposal of scrap vehicles, old tyres, used
oils, [any other stores of scrap value, or such other stores as
may be declared to be obsolete in the prescribed manner].
(f) to enter into and perform all such contracts as may be
necessary for the performance of its duties and the exercise
of its powers under the Act;
(g) to purchase vehicles of such type as may be suitable for use
in the road transport services operated by the Corporation;
(h) to purchase or otherwise secure by agreement vehicles,
garages, sheds, office buildings, depots, land, workshops,
equipment, tools, accessories to and spare parts for
vehicles, or any other article owned or possessed by the
owner of any other undertaking for use thereof by the
Corporation for the purposes of its undertaking;
(i) to do anything for the purpose of advancing the skill of
persons employed by the Corporation or the efficiency of the
equipment of the Corporation or of the manner in which that
equipment is operated, including the provision by the
Corporation, and the assistance by the Corporation to others
for the provision of facilities or training, education and
research;
(j) to enter into and carry out agreements with any person
carrying on business as a carrier of passengers or goods
providing for the carriage of passengers or goods on behalf
of the Corporation by that other person at a thorough fare or
freight
(k) to provide facilities for the consignment, storage and
delivery of goods;
(l) to enter into contracts for exhibition of posters and
advertising boards on and in the vehicles and premises of
the Corporation and also for advertisement on tickets and
other forms issued by the Corporation to the public;
(m) with the prior approval of the State Government to do all
other things to facilitate the proper carrying on of the
business of the Corporation.
[(n) to determine with the previous approval of the State
Government, and in case of a road transport service
operated in any extended area, also with the previous
approval of the Government of the State within which such
extended area is situated, fares and freights for the carriage
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of passengers and goods in any road transport service
provided by the Corporation.]
(3) Nothing in this section shall be construed as authorising a
Corporation, except with the previous approval of the State
Government—
(i) to manufacture or maintain anything which is not required
directly or indirectly for use for the purpose of the
undertaking of the Corporation or to repair, store, or provide
any service for, any vehicle which does not belong to the
Corporation or is not used directly or indirectly for the
purpose of its undertaking;
(ii) to purchase any vehicle for the purpose of sale to another
person;
(iii) to sell or supply to any person lubricants, spare parts, or
equipment for or accessories to, vehicles;
(iv) to let vehicles on hire for the carriage of passengers or
goods except as expressly provided by or under this Act.
(4) Except as otherwise provided by this Act nothing in the foregoing
provisions shall be construed as authorising the Corporation to
disregard any law for the time being in force
(5) Where a Corporation acquires the whole or any part of an
undertaking of any other person, the Corporation shall, in appointing its
[officers and other employees] take into consideration the claims of
employees employed in that undertaking.
(6) The provisions of this section shall not be construed as limiting any
power of a Corporation conferred by or under any subsequent provision
of this Act.
22. General principle of Corporation’s finance .—It shall be the
general principle of a Corporation that in carrying on its undertaking it
shall act on business principles.
30. Disposal of net profits.- After making provision for payment of
interest and dividend under section 28 and for depreciation, reserve
and other funds under section 29, a Corporation many utilise such
percentage of its net annual profits as may be specified in this behalf by
the State Government for the provision of amenities to the passengers
using the road transport services, welfare of labour employed by the
Corporation and for such other purposes as may be prescribed with the
previous approval of the Central Government [and out of the balance
such amount as may, with the previous approval of the State
Government *, be specified in this behalf by the Corporation, may be
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utilised for financing the expansion programmes of the Corporation and
the remainder, if any, shall be made over to the State Government for
the purpose of road development]
31. Power of the Corporation to spend .- A Corporation shall have
power to spend such sums as it thinks fit on objects authorised under
this Act and such sums shall be treated as expenditure payable out of
the fund of the Corporation.
43. [Directors], [Officers and other employees] of a Corporation
to be public servants .—All [Directors] of a Corporation, and all
[officers and other employees] of a Corporation, whether appointed by
the State Government or the Corporation, shall be deemed, when
acting or purporting to act in pursuance of any of the provisions of this
Act or of any other law, to be public servants within the meaning of
section 21 of the Indian Penal Code (45 of 1860)002E.”
45. Power to make regulations. -
(1) A Corporation may with the previous sanction of [the State
Government and by notification in the Official Gazette], make
regulations, not inconsistent with this Act and the rules made
thereunder for the administration of the affairs of the
Corporation.
(2) In particular and without prejudice to the generality of the
foregoing power, such regulations may provide for all or any of
the following matters, namely:-
(a) …………………..
(b) …………………..
(c) the conditions of appointment and service and the
scales of pay of officers and [other employees of the
Corporation other than the Managing Director, the
Chief Accounts Officer and the Financial Adviser or ,
as the case may be, the Chief Accounts-cum-Financial
Adviser.]
d …………………..
35. Constitution of Board of Directors of HRTC, which is not in
dispute, depicts that Chairman of the HRTC is the Transport Minister,
whereas out of 14 Board of Directors, six members/directors, i.e.,
Principal Secretary (Transport), Principal Secretary to Hon’ble Chief
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Minister, Principal Secretary (Finance), Managing Director (HRTC) and
Director Transport, are officials of the Government of H.P. Therefore, out
of 14 members of Board of Directors, one is Transport Minister, 6 are
Government officials, 1 is nominee of Ministry of Road Transport and
Highways, Union of India and 7 members are nominees of the State
Government, including 1 Vice-Chairman and in case plea of learned
Advocate General is accepted, then only 8 members, including Chairman,
Vice-Chairman and 6 members nominees of the State, are the only
Directors who are directly connected with management and operation of
the transport undertaking, but all of them keep on changing, atleast on
formation of new Government after every five years, and some times,
even before five years tenure of the elected Government, because they
are appointed as nominated, at the pleasure of State Government. In
such a situation, system of Corporation/transport undertaking would
definitely crumble. There is no provision anywhere including in the Road
Transport Corporations Act, 1950, providing members of Board of
Directors of the transport undertaking, as dormant or sleeping Directors.
All Directors of Board of Directors of HRTC, are equally competent and
responsible for day to day affairs of the Corporation to be managed and
controlled through the employees of the Corporation controlled by
Managing Director, as an Executive Head of the Corporation. Therefore,
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all Board of Directors, including Principal Secretary/Additional Chief
Secretary (Transport) and Director, Transport, have equal status like
other members/Directors of Board of Director of HRTC and thus have a
direct connection with the management and operation of the transport
undertaking, which is also evident from the provisions of Road Transport
Corporations Act, 1950, some of which have been referred supra.
36. Section 67 of the MV Act empowers the State Government to
control the Road Transport, having regard to certain issues, including
promotion of effective competition among the transport service providers
and Section 68 of MV Act empowers the State to constitute State
Transport Authority and Regional Transport Authorities to exercise and
discharge powers and functions conferred by or under the provisions of
Chapter-V, dealing with Control of Transport Vehicles, which also include
coordination and regulation of activities and policies of RTAs of the State
to settle all disputes and decide all matters, on which difference of opinion
arise between Regional Transport Authorities and to grant, refusal,
cancellation and suspension of permits for plying the vehicles by transport
operators/undertakings. For ensuring constitution of independent and
impartial State Transport Authority and Regional Transport Authorities,
disqualification has been provided in Section 68(2) of MV Act, debarring
any person from appointing or continuing to be a member of State or
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Regional Transport Authorities, who has any financial interest, whether as
proprietor, employee or otherwise in any transport undertaking.
37. Section 2(b) of RTC Act provides that ‘Corporation’ means a
Road Transport Corporation, established under Section 3 and as per
Section 2(aa), ‘Board’ means Board of Directors of Corporation and 2(bb)
provides ‘Director’ means member of the Board.
38. Section 3 empowers the State to establish Road Transport
Corporations by issuing appropriate notification. As per Section 4, every
Corporation shall be a body corporate, having perpetual succession and a
common seal with name notified under Section 3 and shall, by the said
name, sue and be sued. Section 5 provides Management of Corporation
that general superintendence, direction and management of affairs and
business of Corporation shall vest in the Board of Directors, which may
exercise all such powers and do all such acts and things, as may be
exercised or done by the Corporation, but with assistance of its
Committee and Managing Director. The Board shall consist of Chairman
and such other Directors, as provided under Section 5 of the Act.
39. From these provisions, it is apparently clear that HRTC, is a
Body Corporate, having perpetual succession and common seal, being
managed and governed by Board of Directors with assistance of
Managing Director, and the acts and things to be exercised or done by
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the Corporation, are to be done by the Board of Directors and all
Directors are members of the Board, having equal say and responsibility
in the Board.
40. Section 11 clearly depicts that Meeting of Board has to be
presided by the Chairman and in his absence, by the Vice-Chairman and
in absence of both, any Director to be chosen by the Directors present
from among themselves to preside and all questions in the meeting of the
Board shall be decided by the majority of votes of members present. It
indicates that in given circumstances, any member/Director of the Board
can preside over Meeting of the Board and all the members have equal
right to vote. There is no provision indicating that Principal
Secretary/Additional Chief Secretary (Transport) or Director Transport,
are not entitled to preside over the Meeting of the Board, in case such
situation arose, or they have no right to vote in the Meeting of the Board,
or they are having right to vote only matter related to policy of the
Government and not in other matters. It is nowhere provided that these
two Directors as a Director of the Board, shall have only supervisory,
advisory and policy oriented role.
41. Section 14 provides that Managing Director along with others
shall be officer and servant of the Corporation and pay of the Managing
Director, Chief Accounts Officer and Financial Officer shall be, as may be
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prescribed, whereas pay of the other officers/employees, may be subject
to provisions of Section 34, be determined by regulations made under this
Act. Therefore, determination of pay is controlled by the Board. As per
Section 15, Managing Director shall act as an Executive Head of
Corporation and all other officers/employees shall be subordinate to him
and he shall obtain the views of Chief Accounts Officer, Financial Adviser
on every proposal, involving revenue and expenditure from the fund of the
Corporation and shall cause such view to be placed before Board, prior to
consideration of such proposal by the Board.
42. From the above provisions, it is apparent that though
Managing Director, HRTC, is also one of the Directors of the Board,
however, he is not above the Board. He has to assist the Board and he
has only one vote as a Director of the Board, but he is not the person,
who is controlling, managing or operating the Corporation. He is one
amongst other Board of Directors and as a Managing Director, he is a
subordinate to the Board of Directors. Therefore, plea of the learned
Advocate General that it is the Managing Director, who runs the
Corporation, is also misconceived.
43. Section 19 defines the Powers of the Corporation and all
these powers are to be exercised by the Corporation through Board and
constitution of Board includes Directors of the Board and, therefore,
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powers of the Corporation are to be exercised by the Directors by taking a
decision, as provided under the Act, by following the prescribed
procedure, wherein respondents No. 2 and 3 have equal say. The power
of Corporation includes manufacture, purchase, maintain and repair
rolling stock, vehicles, appliances, plant, equipment or any other thing
required for the purpose of any of the activities of the Corporation,
referred in the Act. Therefore, this power includes the power to decide the
fleet of the vehicles, the routes, where these vehicles are to be plied by
applying for such road permit to the STA and RTAs.
44. Section 30 provides disposal of net profit by the Corporation,
after making provision for payment of interest and dividend under Section
28 and for depreciation, reserve and other funds under Section 29 and
this decision of the Corporation again is to be taken by the Board,
because Corporation has to act through the Board and this net profit can
also be utilized by the Corporation for financing the expansion
programmes of Corporation, which includes increase in the fleet of
vehicles, routes, whereupon the vehicles of the Corporation are to be
plied.
45. Section 31 provides power to the Corporation to spend such
sums, as it thinks fit on object authorized under this Act. Budget is also
prepared by the Corporation, as provided under Section 32.
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46. Section 33 provides that Corporation shall maintain proper
accounts and other records and prepare an annual statement of account,
including the profits and loss account.
47. Section 35 casts duty upon Corporation to furnish the
returns, statistics and accounts.
48. Section 45 empowers the Corporation to make regulations,
including the condition of appointment and service and scale of pay of
officers, other employees of the Corporation, other than the Managing
Director and Chief Accounts Officer and Financial Adviser.
49. The aforesaid powers and duties are to be exercised and
performed by the Corporation through Board, in which respondents No. 2
and 3 are members. Therefore, respondents No. 2 and 3 are directly
connected with management and operation of transport undertaking,
which includes the financial interest of the undertaking. Therefore, plea of
learned Advocate General with respect to role and status of respondents
No. 2 and 3 in Board of Director of HRTC, is misconceived and
untenable.
50. In the ratio of law laid down in Mor Modern’s case and Utility
Users Welfare Association’s case, it is apparent that it is not only the
personal financial interest, but in wider sense, direct or indirect financial
interest, which may not be personal financial interest, shall also be cause
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of debar in appointment of any person as a member of State or Regional
Transport Authorities, as provided under Section 68(2) of MV Act.
51. Plea of the respondents that Section 68(2) of MV Act is in
two parts, wherein first part provides qualification and eligibility for
appointment of Chairman and second part provides disqualification for a
member of STA or RTAs and, therefore, for fulfilling the eligibility
conditions for appointment of Chairman of respondents No. 2 and 3 of
STA and RTAs, disqualification shall not be applicable to the appointment
of Chairman, is also misconceived. The plain reading of Sub-Section
68(1) and 68(2), unambiguously depicts that STA and RTAs shall consist
of a Chairman and such other persons, whether official or not, not being
more than four in case of State Transport Authority and not being more
than two in case of Regional Transport Authority, whether official or not.
Therefore, Chairman is also member of the STA and/or RTAs and thus,
disqualification prescribed for a member is equally applicable to the
appointment of Chairman also. In case plea of learned Advocate General,
raised on behalf of respondents, is accepted, then independent and
impartial character of STA and RTAs, shall be demolished. It is also
beyond imagination that a member of the STA and RTAs, other than the
Chairman, shall not be a person, who has any financial interest, whether
as a proprietor, employee or otherwise, in any under transport
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undertaking, but the Chairman, who is heading the State Transport
Authority or Regional Transport Authority, can be appointed, despite
having financial interest in a transport undertaking. Therefore, this plea is
liable to be rejected.
52. It is also apt to record that bar under Section 68(2) of the MV
Act, does not speak about direct financial interest or personal interest
only, rather it includes every type of financial interest, whether as a
proprietor or an employee or otherwise. The word ‘otherwise’ includes
any direct or indirect financial interest. The persons having role in
management or operation of transport undertaking with all powers to
regulate such transport undertaking are definitely covered, as a person
having financial interest otherwise, in any transport undertaking.
Therefore, respondents No. 2 and 3 being members of the Board of
HRTC, as a Director, are debarred from appointing as a
Chairman/member of STA and RTAs.
53. A careful reading of Section 68(2) of MV Act also depicts that
STA/RTAs shall consist of a Chairman and such other persons, as the
State Government may think fit to appoint. With first proviso, that in
absence of Chairman, such other person is authorized to preside over the
meeting of such authority during the absence of Chairman,
notwithstanding that such member does not possess judicial experience
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or experience as an Appellate or Revisional Authority or as an
adjudicating authority, competent to pass any order or take any other
decision under any law.
54. In this Sub-Section, constitution of STA and RTAs has not
been provided like that it shall consists of Chairman and members, but it
provides that it shall consist Chairman and such other persons, as the
Government may think fit to appoint. Meaning thereby, Chairman as well
as such other persons, so appointed by the Government, are members of
the STA or RTAs. This view is also further fortified from the second
proviso to Sub Section 2, wherein it has been provided that State
Government may constitute an STA or RTAs, for any reason, so as to
consist of only one member who shall be an official with judicial
experience and experience as an Appellate, or a revisional authority, or
as an adjudicating authority, competent to pass any order to take any
decision under any law. These qualifications are the same, as provided
under Section 68(2) of MV Act for appointment of a Chairman. Therefore,
intention of the legislature is explicit in complete reading of Section 68 of
MV Act, including the provisos to Sub-Section 2, which clearly establishes
that Chairman is also a member of STA or RTAs and there can be
STA/RTAs, consisting of only one member, i.e,. Chairman. In our view
any interpretation otherwise than this, shall create ambiguity, as for
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constitution of one member STA/RTAs, the qualification shall be that of
the Chairman, as provided under Section 68(2) of MV Act, whereas for
member to be appointed in addition to Chairman, there shall be bar to be
appointed, as provided in Section 68(2) of MV Act, for the member but not
for the Chairman and it shall amount to introduce two different parameters
for two members, i.e., Chairman and other members to be appointed in
terms of Section 68(2) of MV Act.
55. In case plea of the respondent-State is accepted, then
instead of constituting a STA or RTAs, in terms of Section 68(2) of MV
Act, the respondent-State may opt for appointment of a single member
STA/RTAs of the State, as provided in second proviso to this Sub-
Section, wherein there is no provision for debarring the Chairman of the
STA/RTAs, on account of having financial interest in any transport
undertaking, because single member STA/RTAs cannot be instituted
without Chairman, as the opening lines of the Section 68(2) of MV Act
provides that STA/RTAs shall consist of Chairman and such other
persons, to be appointed by the Government. Therefore, first pre-
condition for existence of STA/RTAs, is the existence/appointment of
Chairman. Thus, in single member STA/RTAs, there shall be Chairman
only and for that reason only, qualifications required for appointment of
Chairman, have been reiterated in second proviso, empowering the State
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to constitute the single member STA/RTAs. If plea of learned Advocate
General is accepted then single member STA/RTA shall be having that
member being Chairman who may be having financial interest in a
transport undertaking, which shall be in conflict with intention of
Legislature.
56. Third Proviso to this Sub-Section provides that an official,
other than the official connected directly with the management or
operation of a transport undertaking, can be appointed or continued as a
member of STA or RTAs, irrespective of the fact that Government
employing the official has or acquires any financial interest in a transport
undertaking, which means that all officials of the Government, except
those who are directly connected with the management and operation of
transport undertaking, can be appointed as a member of STA or RTAs,
despite the Government, who is employer of the official, has or acquires
any financial interest in a transport undertaking, which means that only
those officials of the Government are debarred from being appointed or
continuing as a member of STA or RTAs who are directly connected with
management and operation of transport undertaking, but because the
Government has or acquires any financial interest in a transport
undertaking, shall not debar the officials other than the officials connected
directly with the management and operation of the transport undertaking,
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to be appointed as a member/Chairman of the STA or RTAs. This proviso
at any stretch of imagination, does not allow the appointment or
continuation of an official as a Chairman or member of STA or RTAs, who
is connected directly with management or operation of transport
undertaking. However, any other Government official, irrespective of
having or acquiring any financial interest in a transport undertaking by the
Government, can be appointed as a Chairman/member of STA or RTAs.
Therefore, plea of the learned Advocate General, that in view of third
proviso of Sub Section 2 of Section 68 of MV Act, protects the
appointment of respondents No. 2 and 3 claiming that they are not
connected with management or operation of transport undertaking, is
misconceived.
57. Plea of the learned Advocate General to distinguish judgment
passed in Mor Modern Transport Company’s case, is also misconceived,
because Section 68(2) of MV Act does not speak about the Corporation,
but it speaks about any transport undertaking and transport undertaking
can be a Corporation or a department of the Government, involved in
transport services. The transport undertaking may be private or
Government and, therefore, whether transport activities are being
undertaken by the Government through department or through a
Corporation, are covered under the words any transport undertaking, as it
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does not include only Corporation, but also Government Department,
involved in the management and operation of a transport and also the
private transport, because the words used in Section 68(2) of MV Act are
‘in any transport undertaking’.
58. In our considered opinion, present case is also squarely
covered by Mor Modern Transport Company’s case, reported in
(2002) 6 SCC 511 .
59. In view of above discussion, we are of the opinion that
respondents No. 2 and 3 are debarred from appointment or continuing as
a Chairman of STA/RTAs and, therefore, their appointments are liable to
be quashed.
60. In case of quashing of the appointment of respondents No. 2
and 3 as Chairman of STA/RTAs, the question would arise what will be
the fate of the actions, orders, already taken or passed by the STA/RTAs
under their Chairmanship. In this regard, we are of the opinion that to
avoid any chaos or anarchy, it would be appropriate to invoke de facto
doctrine, dealing with such situations, as also laid down by the Apex
Court in following judgments:-
In case tilted Gokaraju Rangaraju vs. State of Andhra Pradesh,
reported in (1981) 3 Supreme Court Cases 132, it has been held as
under by Apex Court:-
17 . A judge, de facto, therefore, is one who is not a mere intruder or
usurper but one who holds office, under colour of lawful authority,
though his appointment is defective and may later be found to be
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defective. Whatever be the defect of his title to the office,
judgments pronounced by him and acts done by him when he was
clothed with the powers and functions of the office, albeit
unlawfully, have the same efficacy as judgments pronounced and
acts done by a Judge de jure. Such is the de facto doctrine, born
of necessity and public policy to prevent needless confusion and
endless mischief. There is yet another rule also based on public
policy. The defective appointment of a de facto judge may be
questioned directly in a proceeding to which he be a party but it
cannot be permitted to be questioned in a litigation between two
private litigants, a litigation which is of no concern or consequence
to the judge except as a judge. Two litigants litigating their private
titles cannot be permitted to bring in issue and litigate upon the
title of a judge to his office. Otherwise so soon as a judge
pronounces a judgment a litigation may be commenced for a
declaration that the judgment is void because the judge is no
judge. A judge's title to his office cannot be brought into jeopardy
in that fashion. Hence the rule against collateral attack on validity
of judicial appointments. To question a judge's appointment in an
appeal against the judgment is, of course, such a collateral attack.
18. We do not agree with the submission of the learned counsel that
the de facto doctrine is subject to the limitation that the defect in
the title of the judge to the office should not be one traceable to
the violation of a constitutional provision. The contravention of a
constitutional provision may invalidate an appointment but we are
not concerned with that. We are concerned with the effect of the
invalidation upon the acts done by the judge whose appointment
has been invalidated. The de facto doctrine saves such Acts. The
de facto doctrine is not a stranger to the Constitution or to the
Parliament and the Legislatures of the States.  Art. 71(2)  of the
Constitution provides that acts done by the President or Vice
President of India in the exercise and performance of the powers
and duties of his office shall not be invalidated by reason of the
election of a person as President or Vice President being declared
void. So also  Sec. 107(2)  of the Representation of the People Act
1951 (Act 43 of 1951) provides that acts and proceedings in which
a person has participated as a Member of Parliament or a
Member of the Legislature of a State shall not be invalidated by
reason of the election of such person being declared to be void.
There are innumerable other Parliamentary and State Legislative
enactments which are replete with such provisions. The Twentieth
Amendment of the Constitution is an instance where the de facto
doctrine was applied by the Constituent body to remove any
suspicion or taint of illegality, or invalidity that may be argued to
have attached itself to judgment, decrees sentences or orders
passed or made by certain District Judges appointed before 1966,
otherwise than in accordance with the provision of  Art. 233  and
Art 235 of the Constitution. The Twentieth Amendment was the
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consequence of the decision of the Supreme Court in  Chandra
Mohan v. State of Uttar Pradesh and Ors. , (1967) 1 SCR 77 : AIR
1966 SC 1987 : that appointments of District Judges made
otherwise than in accordance with the provisions of Arts. 233 and
235 were invalid. As such appointments had been made in many
States, in order to preempt mushroom litigation springing up all
over the country, it was apparently thought desirable that the
precise position should be stated by the Constituent body by
amending the Constitution. Shri Phadke, learned counsel for the
appellants, argued that the constituent body could not be imputed
with the intention of making superfluous amendments to the
Constitution. Shri Phadke invited us to say that it was a necessary
inference from the Twentieth Amendment of the Constitution that,
but for the amendment, the judgments, decrees etc. of the District
Judges appointed otherwise than in accordance with the
provisions of  Art. 233  would be void. We do not think that the
inference suggested by Shri Phadke is a necessary inference. It is
true that as a general rule the Parliament may be presumed not to
make superfluous legislation. The presumption is not a strong
presumption and statutes are full of provisions introduced
because abundans cautela non nocet (there is no harm in being
cautious). When judicial pronouncements have already declared
the law on the subject, the statutory reiteration of the law with
reference to the particular cases does not lead to the necessary
inference that the law declared by the judicial pronouncements
was not thought to apply to the particular cases but may also lead
to the inference that the statute-making body was mindful of the
real state of the law but was acting under the influence of
excessive caution and so to silence the voices of doubting
Thomases by declaring the law declared by judicial
pronouncements to be applicable also to the particular
cases. In  Chandra Mohan ' case (Supra) this Court held that
appointments of District Judges made otherwise than in
accordance with  Art. 233  of the Constitution were invalid. Such
appointments had been made in Uttar Pradesh and a few other
States. Doubts had been cast upon the validity of the judgments,
decrees etc. pronounced by those District Judges and large
litigation had cropped up. It was to clear those doubts and not to
alter the law that the Twentieth Amendment of the Constitution
was made. This is clear from the statement of objects and reasons
appended to the Bill which was passed as Constitution (20th
Amendment) Act. 1966. The statement said:
"Appointments of District Judges in Uttar Pradesh and a few other
States have been rendered invalid and illegal by a recent
judgment of the Supreme Court on the ground that such
appointments were not made in accordance with the provisions
of  Art. 233  of the Constitution.... As a result of these judgments, a
serious situation has arisen because doubt has been thrown on
the validity of the judgments, decrees, orders and sentences
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passed or made by these District Judges and a number of Writ
Petitions and other cases have already been filed challenging
their validity. The functioning of the District Courts in Uttar
Pradesh has practically come to a stand-still. It is, therefore,
urgently necessary to validate the judgments, decrees, orders
and sentences passed or made heretofore by all such District
Judges in those States...…"
19. In our view, the de facto doctrine furnishes an answer to the
submissions of Shri Phadke based on Sec. 9 Criminal Procedure
Code and Art. 21 of the Constitution. The judges who rejected the
appeal in one case and convicted the accused in the other case
were not mere usurpers or intruders but were persons who
discharged the functions and duties of judges under colour of
lawful authority. We are concerned with the office that the judges
purported to hold. We are not concerned with the particular
incumbents of the office. So long as the office was validly created,
it matters not that the incumbent was not validly appointed. A
person appointed as a Sessions Judge, Additional Sessions
Judge or Assistant Sessions Judge, would be exercising
jurisdiction in the Court of Session, and his judgments and orders
would be those of the Court of Session. They would continue to
be valid as the judgments and orders, of the Court of Session,
notwithstanding that his appointment to such Court might be
declared invalid. On that account alone, it can never be said that
the procedure prescribed by law has not been followed. It would
be a different matter if the constitution of the Court itself is under
challenge. We are not concerned with such situation in the instant
cases. We, therefore, find no force in any of the submissions of
the learned counsel.
( In case titled Pushpadevi vs. Jatia vs. M.L. Wadhawan, Additional
Secretary, Government of India and others, reported in 1987) 3
Supreme Court Cases 367, it has been held by Apex Court as
under:-
18. In any event, the learned counsel further contends that R.C. Singh
was clothed with the insignia of office and he was purporting to
exercise the functions and duties of a gazetted officer of
Enforcement under s. 40(1) of the FERA and therefore the de
facto doctrine was attracted. He relies upon the decision of this
Court in  Gokaraju Rangaraju v. State of Andhra Pradesh , [1981] 3
SCR 474 enunciating the de facto doctrine, born of necessity and
public policy to prevent needless confusion and endless mischief.
In other words, he contends that where an officer acts under the
law, it matters not how the appointment of the incumbent is made
so far as the validity of his acts are concerned.
19. We are inclined to the view that in this jurisdiction there is a
presumption of regularity in the acts of offi- cials and that the
evidential burden is upon him who asserts to the contrary. The
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contention that R.C. Singh was not a gazetted officer of
Enforcement within the meaning of s. 40(1) of the FERA appears
to be wholly misconceived besides being an afterthought. The
validity of appointment of R.C. Singh to be an officer of
Enforcement under this Act cannot be questioned. The Directorate
of Enforcement have along with the counter-affidavit placed on
record Establishment Order No. 87/82 dated November 24, 1982
which shows that R.C. Singh along with 25 others was appointed
by the Direc- tor to be an officer of Enforcement on an ad-hoc
basis against 30 per cent deputation quota. The subsequent
Estab- lishment Order No. 84/86 dated January 13, 1986 relied
upon by the petitioner shows that R.C. Singh along with 29 others
was appointed as an officer of Enforcement on an officiating
basis. It is not suggested that these officers were not authorised
by the Central Government to discharge the func- tions and duties
of an officer of Enforcement. Under the scheme of the  Foreign
Exchange Regulation Act , the Director- ate of Enforcement is
primarily charged with the duty of administering the Act.  S.
3  defines different classes of officers of Enforcement. The
expression 'officers of En- forcement' as defined in   s. 3  embraces
within itself not only (a) a Director (b) Additional Director (c)
Deputy Director and (d) Assistant Director of Enforcement but also
(e) such other class of officers of Enforcement as may be
appointed for the purpose of the Act. Obviously, R.C. Singh who
was Assistant Enforcement Officer having been appointed as an
officer of Enforcement on an ad-hoc basis in 1982 fell within the
category 'such other class of officers' covered by   s. 3(e) . Sub-S.
(1) of   s. 4  provides that the Central Government may appoint such
persons, as it thinks fit, to be officers of Enforcement. Sub-s. (2)
thereof provides for delegation of such power of appointment by
the Central Government to a Director of Enforcement or an Addi-
tional Director of Enforcement etc. to appoint officers of
Enforcement below the rank of an Assistant Director of
Enforcement. Sub-s. (3) of   s. 4  of the FERA provides that subject
to such conditions and limitations as the Central Government may
impose, an officer of Enforcement may exer- cise the powers and
discharge the duties conferred or im- posed on him under the Act.
Undoubtedly R.C. Singh was discharging his duties and functions
as a gazetted officer of Enforcement under s. 40(1) of the FERA
when he recorded the statements in question. In our opinion, the
expression 'gazetted officer of Enforcement' appearing in s. 40(1)
must take its colour from the context in which it appears-and it
means any person appointed to be an officer of Enforcement
under   s. 4  holding a gazetted post. There is no denying the fact
that R.C. Singh answered that description. The conten- tion that
there was no material on the basis of which the detaining authority
could have based his subjective satis- faction on the ground that
R.C. Singh was not a gazetted officer of Enforcement within the
meaning of s. 40(1) of the FERA cannot prevail.
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20. Even if the contention that R.C. Singh was not a gazet- ted officer
of Enforcement within the meaning of s. 40(1) of the FERA were
to prevail, it would be of little consequence. In this case during the
investigation statements were re- corded by B .T. Gurnsawhney,
Assistant Director of Enforce- ment and R.C. Singh. There is no
dispute regarding the competence of B.T. Gurusawhney to record
statements under s. 40(1) of the FERA and the only question is as
to whether the statements recorded by R.C. Singh under s. 40(1)
could be acted upon. If evidence is relevant the Court is not
concerned with the method by which it was obtained. In Barindra
Kumar Ghose & Ors. v. Emperor, ILR (1910) 37 Cal. 467 Sir
Lawrence Jenkins repelling the contention that the Court must
exclude relevant evidence on the ground that it was obtained by
illegal search or seizure, said at p. 500 of the Report:
"Mr. Das has attacked the searches and has urged that, even if
there was jurisdiction to direct the issue of search warrants, as I
hold there was, still the provisions of the  Criminal Procedure
Code  have been completely disre- garded. On the assumption he
has contended that the evidence discovered by the searches is
not admissible, but to this view I cannot accede. For without in
any way countenancing disregard of the provisions prescribed by
the Code, I hold that what would otherwise be relevant does not
become irrel- evant because it was discovered in the course of a
search in which those provisions were disregarded".
The question arose before the Judicial Commit- tee of the Privy
Council in the well-known case of Kuruma v. Reginam, [1955] 1
All ER 236. In dealing with the question Lord Goddard, CJ.
delivering the judgment of the Privy Council said:
"The test to be applied. both in civil and in criminal cases, in
considering whether evi- dence is admissible, is whether it is
relevant to the matters in issue. If it is, it is admissible and the
Court is not concerned with how it was obtained."
The learned Chief Justice further observed:
"In their Lordships' opinion, when it is a question of the admission
of evidence strictly it is not whether the method by which it was
obtained is tortuous but excusable, but whether what has been
obtained is relevant to the issue being tried."
Again, the House of Lords in R.V. Sang, [1979] 2 All ER 1222
reiterated the same principle that if evidence was admissi- ble it
matters not, how it was obtained. Lord Diplock after considering
various decisions on the point observed that however much the
judge may dislike the way in which a par- ticular piece of evidence
was obtained before proceedings were commenced, if it is
admissible evidence probative of the accused's guilt 'it is no part
of his judicial function to exclude it for this reason' and added:
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"He has no discretion to refuse to admit relevant admissible
evidence on the ground that it was obtained by improper or unfair
means. The court is not concerned with how it was obtained.
There is a long line of authority to support the opinion that the
Court is not concerned with how evidence is ob- tained. The rule
is however subject to an exception. The Judge has a discretion to
exclude evidence procured. after the commencement of the
alleged offence, which although technically admissible appears to
the Judge to be unfair. The classical example of such a case is
where the prejudi- cial effect of such evidence would be out of
proportion to its evidential value. Coming nearer home. this Court
in Magraj Patodia v.R.K. Birla & Ors., [1971] 2 SCR 118 held that
the fact that a document which was procured by improper or even
illegal means could not bar its admissibility provided its relevance
and genuineness were proved. In  R.M. Malkani v. State of
Maharashtra , [1973] 2 SCR 417 the Court applying this principle
allowed the tape-recorded conversa- tion to be used as evidence
in proof of a criminal charge. In Pooran Mal etc. v. Director of
Inspection (Investigation) of Income-Tax Mayur Bhavan, New
Delhi & Ors., [1974] 2 SCR 704 the Court held that the income-tax
authorities can use as evidence any information gathered from the
search and seizure of documents and accounts and articles
seized. This being the substantive law, it follows that the detaining
authority was entitled to rely upon the statements recorded by
R.C. Singh under s. 40(1) of the FERA. Even if R.C. Singh was
not competent to record such statements under s. 40(1) of the
FERA, the statements were clearly relatable to s. 39(b) of the Act.
It cannot therefore be said that there was no material on which the
detaining authority could have based his subjective satisfaction
under sub-s. (1) of   s. 3  of the Act.
21. We are unable to accept the submission of the learned counsel for
another reason. Where an office exists under the law, it matters
not how the appointment of the incumbent is made, so far as
validity of its acts are concerned. It is enough that he is clothed
with the insignia of the office, and exercises its powers and
functions. The official acts of such persons are recognised as valid
under the de facto doctrine, born of necessity and public policy to
prevent needless confusion and endless mischief. In Gokaraju
Ranga- raju's case, supra, Chinnappa Reddy, J. explained that
this doctrine was engrafted as a matter of policy and necessity to
protect the interest of the public. He quoted the follow- ing
passage from the judgment of Sir Ashutosh Mukerjee J. in Pulin
Behari v. King Emperor, [1912] 15 Cal. LJ 5 17 at p. 574:
"The substance of the matter is that the de facto doctrine was
introduced into the law as a matter of policy and necessity, to
protect the interest of the public and the individual where these
interests were involved in the official acts of persons exercising
the duties of an office without being lawful officers. The doctrine in
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fact is necessary to maintain the supremacy of the law and to
preserve peace and order in the community at large."
The learned Judge also relied upon the following passage from
the judgment of P. Govindan Nair, J. in  P.S. Menon v. State of
Kerala & Ors. , AIR (1970) Kerala 165 at p. 170;
"This doctrine was engrafted as a matter of policy and necessity
to protect the interest of the public and individual involved in the
official acts of persons exercising the duty of an officer without
actually being one in strict point of law. But although these
officers are not officers de jure they are by virtue of the particular
circumstances, officers, infact, whose acts, public policy requires
should be considered valid."
In case titled Central Bank of India vs. C. Bernard, reported in
(1991) 1 Supreme Court Cases 319, it has been observed by Apex
Court as under:-
5. Taking the last submission first we think that in the facts and
circumstances of this case the de facto doctrine can have no
application. Under paragraph 19.14 of the by- parties agreement
the Chief Executive Officer was entitled to decide which officer
should be empowered to hold an enquiry and take disciplinary
action in the case of each office or establishment. Under this
paragraph only an offi- cer of the bank could be empowered to
hold an enquiry and take disciplinary action against a delinquent.
The names of officers so empowered were required to be
published on the bank's notice board. Accordingly, Shri U.B.
Menon was ap- pointed an Enquiry Officer/Disciplinary Authority
under paragraph 19.14 of the bi-partite agreement while he was
still in service. It is indeed surprising that an officer who was due
to retire within a few days only was chosen to act as an Enquiry
Officer and Disciplinary Authority by the order dated January 9,
1979. Shri U.B. Menon was intimated about his appointment by
the letter of January 23, r979, i.e., hardly a week before his
superannuation on January 31, 1979. After his retirement from
service he proceeded with the enquiry and concluded it by the end
of 1979. The respondent was then served with a second show
cause notice on the question of punishment and thereafter the
impugned order of discharge was passed on January 14, 1980.
There is nothing on the record to show that any formal decision
was taken by the appellant to continue the services of Shri U.B.
Menon as an official of the bank. Shri Shetty is right when he
contends that an Enquiry Officer need not be an officer of the
bank; even a third party can be appointed as Enquiry Officer to
enquire into the conduct of an employee. See: Saran Motors (P)
Ltd. v. Vishwanath & Anr., [1964] 2 LLJ 139. But there can be no
doubt that a non-official cannot act as a Disci- plinary Authority
and pass an order of punishment against the delinquent-
employee. It is for this reason that the learned Single Judge of the
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High Court observed that on retirement Shri U.B. Menon was
nobody in the hierarchy of authorities to impose punishment on
the delinquent. He therefore, held that the order of punishment
was clearly incompetent and without jurisdiction. The learned
counsel for the appellant submitted that since the initial appoint-
ment of Shri U.B. Menon was valid, his actions and decisions
could not be invalidated by his subsequent retirement. According
to him he continued to function as an Enquiry Officer de facto and
hence his actions and decisions were saved. The de facto
doctrine has two requisites, namely, (i) the possession of the
office and the performance of the duties attached thereto, and (ii)
colour of title, that is, apparent right to the office and
acquiescence in the posses- sion thereof by the public. According
to this doctrine the acts of officers de facto performed within the
sphere of their assumed official authority, in the interest of the
public or third parties and not for their own interest, are generally
held valid and binding as if they were performed by de jure
officers. This doctrine dates back to the case of Abbe de Fontaine
decided way back in 1431 to which reference was made by Sir
Asutosh Mookerjee, 3. in  Pulin Behari Das v. King Emperor ,
[1911-12] 16 Calcutta Weekly Notes 1105 at 1120. Mookerjee, J.
held that as the complaint was made after complying with  section
196 , Criminal Procedure Code, by the order of or under authority
from Local Government which was de facto, the proceedings were
valid. On the same principle it was further held that the Court of
Sessions, assuming it was not the holder of a de jure office, was
actually in possession of it under the colour of title which indicated
the acquiescence of the public in its actions and hence its
authority could not be collaterally impeached in the proceedings
arising from the conviction of Pulin and his co-accused. Again,
in  Immedisetti Ramkrishnaiah Sons   v. State of Andhra Pradesh ,
AIR 1976 A.P. 193, the Govern- ment nominated nine persons on
a Market Committee which nomination was later set aside by the
High Court. However, before the High Court pronounced its
judgment, the Market Committee had functioned as if it had been
properly consti- tuted. Between the date of its constitution and the
date of the High Court decision it had taken several decisions,
issued notifications, etc., which were the subject-matter of
challenge on the ground that its constitution was ab initio bad in
law. Chinnappa Reddy, J. relying on the observations of
Mookerjee, J., in  Pulin 's case concluded that the acts of the
Market Committee de facto performed within the scope of its
assumed official authority, in the interest of the public or third
persons and not for his own benefit are generally as valid and
binding as if they were performed by a de jure Committee. The
Allahabad High Court in  Jai Kumar v. State , [1968] All. L.J. 877
upheld the judgments of the District Judges whose appointments
were later struck down by this Court on the principle that the acts
of officers defac- to are not to be questioned because of the want
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of legal authority except by some direct proceeding instituted for
the purpose by the State or by someone claiming the office de
jure, or except when the person himself attempts to build up some
right, or claim some privilege or benefit by reason of being the
officer which he claims to be. In all other cases, the acts of an
officer de facto are valid and effec- tual, while he is suffered to
retain the office, as though he were an officer by right and the
same legal consequences will flow from them for the protection of
the public and of the third parties. This Court in  Gokaraju
Rangaraju v. State of A.P. , [1981] 3 SCR 474=AIR 1981 SC 1473
was required to consider the question of the effect of the
declaration of this Court holding the appointment of an Additional
Sessions Judge invalid on judgments pronounced by him prior to
such declaration. This Court observed that the defacto doctrine is
rounded on good sense, sound policy and practical experi- ence.
It is aimed at the prevention of public and private mischief and the
protection of public and private interest. It avoids endless
confusion and needless chaos. It, there- fore, seems clear to us
that the de facto doctrine can be invoked in cases where there is
an appointment to office which is defective; but notwithstanding
the defect to the title of the office, the decisions made by such a
de facto officer clothed with the powers and functions of the office
would be as efficacious as those made by a de jure officer. The
same would, however, not be true of a total intruder or usurper of
office.
6. In our view, the submission of Shri Shetty based on the defacto
doctrine is clearly misconceived. Shri U.B. Menon can hardly be
described as a person occupying or being in possession of an
office to which certain duties affecting the members of the general
public can be said to be attached. The de facto doctrine, as
explained earlier, envisages that acts performed de facto by
officers within the scope of their assumed official authori- ty are to
be regarded as binding as if they were performed by officers de
jure. While the de facto doctrine saves official acts done by an
officer whose appointment is found to be defective the private
parties to a litigation are precluded from challenging the
appointment in any collateral proceedings. But the doctrine does
not come to the rescue of an intruder or usurper or a total stranger
to the office. Obviously the doctrine can have no application to the
case of a person who is not the holder of an office but is merely a
bank employee, for that matter an ex-employee. We, there- fore,
see no merit in this contention'.
In case tilted as Veerendra Kumar Gautam and others vs. Karuna
Nidhan Upadhyay and others, reported in (2016) 14 Supreme Court
Cases 18, it has been observed by Apex Court as under:-
33. The next submission of the appellants was that once the High
Court decided to apply the de facto doctrine, on finding that the
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members of the Commission viz. Respondents 4 to 9 in the writ
petition ceased to hold office, it ought not to have interfered with
the selection and in support of the said submission, reliance was
placed upon Gokaraju Rangaraju ( 1981) 3 SCC 132 . Para 4 of
the said judgment is relevant where the principle has been set out
which reads as under: (SCC pp. 136-37)
“4. We are unable to agree with the submissions of the learned
counsel for the appellants. The doctrine is now well established
that
‘the acts of the officers de facto performed by them within the
scope of their assumed official authority, in the interest of the
public or third persons and not for their own benefit, are generally
as valid and binding, as if they were the acts of officers de jure’
(Pulin Behari Das v. King Emperor 1911 SCC OnLine Cal 159,
(1911-12) 16 CWN 1105, SCC OnLine Cal).
As one of us had occasion to point out earlier
the doctrine is founded on good sense, sound policy and
‘
practical expedience. It is aimed at the prevention of public and
private mischief and the protection of public and private interest. It
avoids endless confusion and needless chaos. An illegal
appointment may be set aside and a proper appointment may be
made, but the acts of those who hold office de facto are not so
easily undone and may have lasting repercussions and confusing
sequels if attempted to be undone. Hence, the de facto doctrine’
(vide Immedisetti Ramkrishnaiah Sons v. State of
. ,
A.P 1975 SCC OnLine AP 198, AIR 1976 AP 193
SCC OnLine AP para 6.)”
34 . It is no doubt well settled that the acts of the officers de facto
performed by them within the scope of their assumed authority in
the interest of the public or the third persons and not for their own
benefits are generally held valid and binding as if they were the
acts of the officers de jure. A reading of the said paragraph does
not give an omnibus authority even while applying de facto
doctrine to hold that every illegal act or acts performed which
smacks of very many illegalities and incongruities should be
merely ignored and validated. It has to be kept in mind that even
while applying the de facto doctrine whether such acts performed
were aimed at the prevention of public and private mischief and
for the protection of public and private interest. The doctrine is
intended to prevent invalidation of acts, such as appointments, on
the sole ground that they were performed without de jure
authority. Therefore, keeping the well-thought out principles set
down in the said judgment in mind when we examine the
approach of the Division Bench we find that the Division Bench
having noted that Respondents 4 to 9 in the writ petition ceased to
hold office had to necessarily not deal with the challenge made to
their appointment for issuance of quo warranto. It also rightly
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applied the de facto doctrine but the approach of the Division
Bench in stating that even while applying the de facto doctrine, the
selection made required deeper scrutiny cannot be held to be
improper.
61. In present case, it is not a case that respondents No. 2 and 3
were not fulfilling eligibility condition for appointment as a Chairman
STA/RTAs, but for having financial interest in HRTC, as discussed supra,
their appointment has been found contrary to and in conflict with the
statutory provisions provided bar of such appointment under Section
68(2) of the MV Act, disentitling them to be appointed as a Chairman of
STA/RTAs. Therefore, we are of the considered opinion that the act
performed by respondents No. 2 and 3, is required to be protected and
accordingly, any act performed by these officers, acting as a Chairman of
STA/ RTAs, shall not be invalid or illegal, only on the ground that the said
act has been performed while acting as a Chairman of STA/RTAs, but
shall be treated to have been passed by exercising the power of
Chairman STA/RTAs and as such, the same shall be valid for all intents
and purposes, but subject to further challenge laid thereto, as permissible
under law and the aforesaid observation shall not give an immunity to all
acts of respondents No. 2 and 3, performed as a Chairman STA/RTAs,
from challenging/assailing the same in accordance with law, on valid
grounds. Needless to say, all such orders shall be subject to any further
order to be passed by the competent Court, as per law, as applicable.
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62. In view of above discussion, we are of the considered view
that respondents No. 2 and 3 are debarred from being appointed or
continued to be as Chairman of STA and RTAs and accordingly,
notification dated 29.05.2023 is quashed and set-aside and respondents
are directed to take effective steps for reconstitution of the STA and RTAs
in consonance with the provisions of law, as explained hereinabove, by
appointing eligible persons as a Chairman/member of STA/RTAs, on or
before 31.03.2026 . Till then, other members of STA/RTAs shall perform
day to day routine business of the STA/RTAs, which is, urgently and
necessarily, required to be performed before reconstitution of STA/RTAs
but it shall not take decision related to Policy including grant or refusal of
route permits. Respondents No. 2 and 3 shall cease to act as a Chairman
of STA/RTAs forthwith.
63. Accordingly, petition is allowed and disposed of in the
aforesaid terms. Pending applications, if any, also stands disposed of.
(Vivek Singh Thakur),
Judge.
(Ranjan Sharma),
Judge.
th
11 March, 2026
(Susheel)

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