Full Judgment Text
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PETITIONER:
ALL INDIA BANK EMPLOYEES’ ASSOCIATION
Vs.
RESPONDENT:
NATIONAL INDUSTRIAL TRIBUNAL & OTHERS(And Connected Petition
DATE OF JUDGMENT:
28/08/1961
BENCH:
AYYANGAR, N. RAJAGOPALA
BENCH:
AYYANGAR, N. RAJAGOPALA
SINHA, BHUVNESHWAR P.(CJ)
DAS, S.K.
SARKAR, A.K.
MUDHOLKAR, J.R.
CITATION:
1962 AIR 171 1962 SCR (3) 269
CITATOR INFO :
R 1962 SC 263 (13)
APL 1962 SC1166 (4)
F 1962 SC1371 (19,75)
RF 1965 SC 40 (29)
R 1965 SC 311 (5)
R 1971 SC1737 (30)
R 1978 SC 597 (47,81)
RF 1986 SC 872 (71)
RF 1988 SC1136 (32)
ACT:
Fundamental Right--Right to form association or union--Scope
of--Stature protecting Banks from disclosure of information
regarding secret reserves etc.--Constitutionality
of--Banking Companies Act, 1949 (X of 1949), s.
34-A--Constitution of India, Arts.14, 19(1) (c).
HEADNOTE:
Section 34-A of the Banking Companies Act, 1949, introduced
in 1960, provides that no banking company shall be compelled
to produce or give inspection of its books of account or
other document or furnish or disclose any statement or in-
formation which the company claims to be of a confidential
nature and the production etc., of which would involve dis-
closure of information relating to any reserves not shown as
such in its published balance sheet or any ’particulars not
shown therein in respect of provisions made for bad and
doubtful debts and other usual or necessary provisions.
Sub-section (2) of s. 34-A provides that any authority,
before whom the question as to whether any amount out of
such reserves or provisions should be taken into account,
may refer the question to the Reserve Bank and the Reserve
Bank shall furnish to the authority a certificate stating
that the authority shall or shall not take into account the
amount specified therein. Sub-section (3) makes s. 34-A
applicable to only such banking companies whose operations
extend beyond one State. The Appellant contended
270
that s. 34-A contravened the fundamental right guaranteed to
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trade unions by Art 19(1)(c) of the Constitution as it
prevented them from effectively exercising the concomitant
right of collective bargaining in respect of wages, bonus
etc. before industrial Tribunals by shutting out important
and relevant evidence and that the section violated Art. 14
of the Constitution as it was not made applicable to all the
banking companies.
Held, that s. 34-A of the. Banking Companies Act, 1949, was
constitutionally valid and did not and either Art. 19(1)(c)
or Art. 14 of the Constitution.
The right guaranteed by Art. 19(1)(c) of the Constitution
does not carry with it a concomitant right that unions
formed for protecting the interests of labour shall achieve
their object such that any interference to such achievement
by any law would be unconstitutional unless it could be
justified,under Art. 19(4) as being in the’ interests of
Public order or morality. The right under Art. 19(1)(c)
extends only to the formation of an association or union and
insofar as the activities of the association or union are
concerned or as regards the steps which the union might take
to achieve, its object, they are subject to such laws as,
may be framed and such laws cannot be, tested under Art.
19(4). Section 34-A was, enacted to effect a i.e
conciliation between the conflicting interest of labour to
obtain proper relief in industrial arbitration and tire need
to preserved and maintain the delicate fabric of the credit
structure of the country by strengthening the as well as the
apparent credit worthiness of banks operating in the
country. It preserved industrial adjudication in respect of
disputes between the banks and their employees by entrusting
the duty of determining the surplus reserve which could be
taken into account as a part of the assets for determining
their capacity to pay to the Reserve Bank.
Ramesh Thappar v. State of Madras (1950) S.C.R. 594 Express
Newspapers (P) Ltd. v. Union of India, (1959) S.C.R. 12, Be.
The Kerala Education Bill, (1959) S.C.R. 995, National
Association for the advancement of coloured people v.
Alabama, 2 Law. Ed. Second 1488, Bates v. Little Rock, 4
Law Ed. Second 480,.National Labour Relations Board v.
Jones & Lauqhlin Steel Corporation, 81 Law. Ed. 893 and
Amalgamated Utility Workers v. Consolidated Edison Company
of New York, 84 Law. Ed. 738, referred to.
Though there were certain banks which were not entitled to
the protection of s. 34-A that was no ground for holding
that the section offended Art. 14. The complaint was not
made by the banks who were not given the protection.
Admittedly, 95% of the banking business in the country was
in the hands of
271
banks to whom s. 34-A applied and. they employed 80,000 out
of the 90,000 bank employees. The injury to the credit,
structure will only be by the disclosure of the reserve
etc.’ of the banks of this class and there is sufficient
rational connection and basis for the classification to
justify the differentiation. The exclusion of the Reserve
Bank from the operation of s. 34-A (2) also does not amount
to discrimination; in the very nature of things and on the
scheme of the provision the reserve Bank could not but be
excluded.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 154 of 1961.
Appeal by special leave from the judgment and order dated
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October 31, 1960, of the National Industrial Tribunal (Bank
Disputes), Bombay, in Reference No. 1 of 1960.
WITH
Petitions Nos. 70 80 and 82 of 1961.
Petitions Under Article 32 of the Constitution of India for
enforcement of Fundamental Rights.
A.S. R. Chari, V. G. Raw, D. P. Singh, Al. K.
Ramamurthi. R. K. Garg and S. C. Agarwal, for the appellant
and the petition (in Petn. No. 80 of 61).
M. C. Setalvad, Attorney-General of India, N. V. Phadke,
K. H. Bhabha, J. B. Dadachanji, S. N. Andley, Rameshwar Nath
and P. L. Vohra, for respondents Nos. 2-17 and 19-34 (In
appeal and Petn. No. 80 of 61).
J.B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L.
Vohra, for respondents NOS. 41-49 (In appeal and Petn. 80 of
1961).
Anand Prakash, for Respdts. Nos. 35-40 (In Petn. No. 80 of
61).
A. V. Viswanatha Sastri, D. P. Singh, M. K. Ramamurthi,
R. K. Garg and S. C. Agarwal, for Intervener No. 2.
D.S. Nargolkar and K. R. Choudhri, for Petitioners Nos.
70 and 82 of 61).
M. C. Setalvad, Attorney-General of India, C.K. Daphtary,
Solicitor-General of India, H.N. Sanyal Additional
Solicitor-General of India, J.B Dadachanji,
272
S. N. Andley, Rameshwar Nath and P. L. Vohra, for Respdt
No. 2 (In Petns. Nos. 70 and 82 of 61).
Naunit Lal .for intervener No. 3. M. C. Setalvad Attorney-
General of India and T. sen, for Intervener No. 1.
1961. August 28. The Judgment of the Court was delivered
by
AYYANGAR, J.-Civil Appeal No. 154 of 1961 has been filed on
special leave obtained from this Court Against an order of
K. T. Desai, J., functioning as the National Industrial
Tribunal (Banks Disputes) Bombay dated October 31, 1960.
The point arising for decision in the appeal is as regards
the constitutional validity of s. 34A of the Banking
Companies Act, 1949 which was enacted on August 26, 1960 as
an amendment to the parent Act (Act X of 1949). The
appellant before this Court is the All India Bank Employees’
Association which is a trade union organization of Bank
Employees of several banks operating in India The Punjab
National Bank Employees’ Union, which is a trade union with
similar objects has been committed to intervene in this
appeal in support of the appellant union The three other
Writ Petitions are by other Bank Employees’ Unions whose
description would be apparent from the cause title and all
these cases have been heard together because in the writ
petitions also the point raised is identical, viz., the
validity of s.34A of the Banking Companies Act, which will
be referred to hereafter as the impugned provision.
Section 34A whose validity is the matter in dispute in these
proceedings runs in the following terms
"34A. (1)Notwithstanding anything contained in
section 11 of the Industrial Disputes Act,
1947. or any other law for the time being in
force, no banking company
273
shall in any I proceeding under the said Act
or in any appeal or other proceeding arising
therefrom or connected therewith, be Compelled
by any authority before which such proceeding
is pending to produce, or give inspection of,
any of its books of account or other document
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or furnish or disclose any statement or
information, when the banking company claims,
that such document, statement or information
is of a confidential nature and. that: the
production or inspection of such document or
the furnishing or disclosure of such statement
or information would involve disclosure of
information relating to :
(a)any reserves not shown as such in its
published balance sheet ; or
(b)any particulars not shown therein in
respect of provisions made for bad and
doubtful debts and other usual or necessary
provisions.
(2)If, in. any such proceeding in relation
to any banking company other than the
Reserve Bank of India,, any question arises
as to whether any amount out of the reserves
or provisions referred to in sub-section (1)
,should be taken into account by the authority
before which such proceeding is pending, the
authority may, if it so thinks fit, refer the
question to the Reserve Bank and the Reserve
Bank shall after taking into account
principles of sound banking and all relevant
circumstances concerning the banking company,
furnish to the authority a certificate stating
that the authority shall not take into
account any amount as such reserves and
provisions of the banking company or may take
them into account only to the extent of the
amount specified by it in the certificate, and
the certificate of the Reserve Bank on
274
such question shall be final and shall not be
called in question in any such proceeding.
(3)For the purposes of, this section,
"banking, company" shall have the meaning
assigned to it in the Industrial Disputes Act,
Before commencing the examination of the points in
controversy and the grounds on which the legality of the
above provision is impugned. It would be helpful for a
better appreciation of the problem if we set out in very
brief outline, the history of the steps which led to the
enactment in dispute’ There was a long standing practice in
England of Banking Companies, as distinguished from
companies carrying on other commercial etc. activities, not
to disclose, in their balance sheets and Profit & Loss
accounts, bad and doubtful debts and the provision made
therefore, as well as, the secret reserves created and held
under various items a practice which received judicial
recognition by Buckley, L., J. in .Newton v. Birmingham
Small Arms Co.. Ltd. (1) This practice was followed by
several banks in India and questions arose from time to time
as to how far the practice was consistent with the statutory
provisions as to disclosure contained in the several
Companies Acts enacted from time to time.; We shall, how-
ever, add that the desirability and; even the legality of
this practice has not gone without challenge, though there
has been a considerable body of opinion which has held this
to be salutary and necessary for the preservation and
progress of a credit institution like a bank. We are not
now concerned with the desirability or ethics of the
practice which is a matter for the consideration of the
legislature but as to the steps by which accord was
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established between the practice and the law.
The Indian Companies Act of 1866 drew no distinction between
the contents of balance sheet,% of banking companies as
distinguished from those of
(1) [1906] 2 Ch. 378.
275
other companies and both were required to disclose a list of
debts owing to the concern which were considered bad or
doubtful Pro-visions on the same lines, i. e., without any,
distinction between Banking and other companies, were copied
and continued by the Indian Companies Act of 1882. When,
however, the Companies Act of 1913 was enacted, Form F’ to
the 3rd Schedule to the Act contained a note in respect of
the sub-heading’ ’book debts’ under the head Property &
Assets’ in the balance sheet, reading
"distinguishing ill the case of a bank between
those considered good and in respect of which
the bank is fully: secured and those
considered good for which the bank holds no
security other than the debtor’s personal
security; and distinguishing in all cases
between debts considered good, and debts
considered doubtful or bad. Debts due b
y
directors or other officers of the company or
any of the either severally or joint with any
other persons to be separately stated in all
cases."
It would be seen that by reason of this note the obligations
imposed upon banks as regards the classification of their;
assets and the information to: be disclosed became slightly
more detailed than in’ the case of other companies. The
practice, ’however, of bankers to which we adverted earlier
not to disclose or not to disclose to the full extent bad
and doubtful debts but to make, provision for them by
setting aside under other heads, sufficient moneys which
would operate as secret reserves, so that the credit of the
institution would not be affected while its financial
stability would remain unimpaired; was continued
notwithstanding this, change in the form. The Central Bank
of India Limited in its published, balance-sheets of the
year 1925 adopted the above practice which however, wasn’t
obviously in strict conformity with the requirements of From
’F’to the third schedule read with note. The
276
managing-director of the bank was prosecuted by one
Shamdasani who was a shareholder of the bank ,or "filing and
publishing statements which were false in material
particulars" an offence punishable under S. 282 of the
Indian Companies Act. The Magistrate acquitted the accused
on the ground that the balance-sheet was in accordance with
the usual practice of bankers and that the reserves of the
company which were shown under various heads though not as a
specific provision for bad and doubtful debts covered the
possible losses several times. Ail application for revision
was filed before the High Court of Bombay and Fawcett, J.
allowed it holding that a declared provision. of the form
cannot be allowed to be whittled down by general
considerations as to the object of a balance-sheet." This
judgment was rendered on February 28, 1927 (vide Shamdasani
v. Pochkanwala (1) and very soon thereafter the Government
of India intervened by a notification dated March 29, 1927
under s. 151 of the companies Act 1913 amending form ’F’ and
as amended banks were excluded from the requirement of
disclosing the reserve for bad and doubtful debts under the
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heading, ‘capital and Liabilities’ in the left hand side of
the balance-sheet, and in the right-hand column "book debts
which were bad and doubtful for which provision had been
made to the satisfaction of the auditors",, were not
required to be shown as part of the property and assets of a
Bank.
The provisions of the Companies Act of 1913 underwent
numerous changes by the amending Act of 1936 which included
inter alia one whereby the change effected by the
Notification, dated March 29, 1927, in Form ‘F’ were omitted
and Form ‘F’was made to retain the note which accompanied it
under the Act of 1913 without the exception in favour of
banks effected by the Notification. This was possibly
unintended, because on the day after the amending Act came
into operation, the Central Government published a
Notification on January 16, 1937
(1) A.I.R. 1927 Bom. 414 : 29 Bom. L.R. 722.
277
again under s.151 of the Companies Act restoring the
alterations in the balance-sheet Form ’F’ as had been
effected by the prior Notification ,of March 1927. The
validity of this Notification was questioned as being beyond
the powers of the Central Government by Shamdasani who filed
a complain against the Central Bank of India Limited and its
directors charging them with having issued a false balance-
sheet for the year ending December 31, 1939 a balance-sheet
which was in conformity with the form as modified by the
Notification. The Magistrate upheld the validity of the
Notification and quitted the accused. Shamdasani preferred
a revision to the High Court and a full Bench of the Bombay
High Court held that the Notification was beyond’ the powers
of the Central Government, though the order of acquittal was
affirmed upholding the plea of the accused that their act
was bona fide in that they believed the alteration in the
form to be valid (Vide Shamdasani v. The Central Bank of
India Ltd.(", Immediately after ’this judgment the Central
legislature passed Act XXX of 1943 with retrospective effect
validating the Notification and amending the relevant
sections of the Companies Act. (ss. 132,151, Art. 107) so as
to empower the Government to effect changes in the form of
the balance-sheet in the manner in which they had done in
January’ 1937.
The next event in order of date relevant to the present
context is the report of the Company, Law Amendment
Committee of the United Kingdom presided over by Mr. Justice
Cohen where the entire question of undisclosed reserves was
fully discussed. The pros and cons of the question were
elaborately considered by the Committee and it is sufficient
therefore in this connection to a short passage in the
report. In paragraph 101 the problem is thus set, out :
"The chief matter which has and controversy is
the question of undisclosed or, a.
(1) I. L. R. 1944 Bom. 302.
278
the Are, frequently called, secret or inner
reserves. An undisclosed reserve is commonly
created by using profits to write down more
than is necessary such assets as
investments,freehold and leasehold property or
plant and machinery by creating excessive
provisions for bad debts or other
contingencies by charging capital expenditure
to revenue ; or by undervaluing stock in
trade. Normally the object of creating an
undisclosed reserve is to enable a company to
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avoid violent fluctuations in its published
profits or its dividends."
The Committee made number of recommendations several of
which were adopted in’ the U. K. Companies Act of 1948, and
those relevant’ to the point under discussion served to
bring the law as to the contents of a balance-sheet of a
Banking Company unto. line with the practice of sound and
well managed banks. In India, special legislation in
relation to Banking Companies embodying several of these
recommendations was enacted in the shape of the Banking
Companies Act 1949 (Act of 1949). Section 29 of the Act
laid down the law in regard to requirements of the contents
of the balance-sheets of banks. The balance-sheet and
Profit & Loss account were to be in the form set out in the
3rd schedule to that and sub-s. (3) of that section exempted
Banking Companies from the, requirements of conforming to
the form of balance-sheet and Profit & Loss, account of
companies registered under the Indian Companies Act; and
the Central Government were empowered by sub-s. (4) to amend
the, form set out in the schedule by Notifications published
in the official., Gazette. In Form ’A’ which provided the
model of a balance-sheet ’and Profit & Loss account in the
case of banks, there was not much change as compared to the
requirements of the previous law except that in the Profit &
Loss account (Form ’B’ )I the third schedule) the provision
for bad and doubtful debts was permitted to be excluded from
the
279
income so that the amount of bad and doubtful debts did not
figure separately on the income side of the profit & loss
account. The income as required to be shown was "income
(less provision made during the year for bad and doubtful
debts)". This last item was modified by a Notification
issued under the power conferred by s.29(4) of the Act in
December 1951, so that after amendment .the beading "Income"
in the Profit & Loss Account ran: "Income (less provision
made during the year for bad and doubtful debts and other
usual and necessary provisions"). Thus so far as
shareholders of Banks and the general public including the
customers of the bank were concerned, banks were relieved
from the obligation of disclosing the entirety of their
reserves as such and also of the extent of bad or doubtful
debts and the provision made therefore.
While the law was in this state disputes arose between the
employees of banks all over India and the respective banks
with regard to wages, conditions of work etc. which were
referred by the Central Government in June 1949 to an ad hoc
Tribunal with Shri K. C. Sen, a retired Judge of the Bombay
High Court as Chairman. The Tribunal passed an award but
its validity was successfully challenged in this Court in
April 1951 on the ground that all the members of the
Tribunal who passed the award were not those who had all
inquired into the dispute. Thereafter a fresh Tribunal was
appointed in January 1952 with Shri S. Panchapages Sastri, a
retired Judge of the High Court of Madras as Chairman. The
award of this Tribunal was published in April, 1953, but it
is not necessary to state its terms. Appeals against the
award were preferred to the Labour Appellate Tribunal both
by the banks as well as by workmen. The Appellate Tribunal
which heard the appeal consisted of three members with Shri
Jeejeebhoy as president.
The claim of the workers in the appeal before the Appellate
Tribunal in great part related to a
280
demand for increased wages and salaries and the main defence
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of the banks was that they had not the capacity to pay
anything beyond what the Sastry Tribunal had granted. The
Jeejeebhoy Tribunal set out their difficulties in assessing
the plea of incapacity raised by the banks in the context of
the provisions of the Banking Companies Act and the form of
balance-sheet prescribed thereunder in the following terms
:-
"At the very outset there is an initial
difficulty in arriving at a correct estimate
of the financial position of banks. There are
two circumstances which militate against our
securing a proper insight into the financial
state of banks. We refer in particular to (a)
the undisclosed or secret reserves and (b) to
the manner in which it is permissible in law
for a banking company to exhibit its balance
sheet.
It is not in dispute that bank do have
undisclosed or secret reserves which they
acquire in a number of ways, and such undis-
closed reserves cannot be ascertained from the
balance
sheet..........................................
x x x
The other difficulty with which we are
confronted at the outset is the manner in
which a bank is permitted to present its
profit & lose account. On the income side the
form originally prescribed by the Banking
Companies Act required the banks to declare
"Income less provision made during the year
for bad and doubtful debts)" ; this has now
been altered by an amendment made by the
Central Government in exercise of the powers
conferred under sub-section 4 of section 29 of
the Banking Companies Act to read "Income
(less provision made during the year for bad
and doubtful debts and other usual or
necessary provisions)". The effect of this
alteration is that the profits as shown for
any
281
particular year are first shown not only of
bad and doubtful debts but also of ’other usua
l
or necessary provisions’ before being shown in
the balance sheet......................
It maybe that these other usual or necessary
provisions’ have been passed by the Board of
Directors, and by the auditors of the concern
and may even have been scrutinized by the
Reserve Bank of India ; but it is our duty and
function to decide the question of the
capacity of a bank to pay, and in the absence
of important information of this character our
estimate of the capacity of a concern to pay
must necessarily be incom-
plete........................ Banks feel that
they now have the form of the Banking
Companies Act to shield themselves against an
enquiry on the subject ; but insofar as we are
concerned we consider these undisclosed
reserves and these appropriations. relevant
for the purposes of our investigation and in
their absence we would have to decide as beat
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as we could from the other materials before
us; and draw such inferences as justified."
It was the contention of the workmen that an Industrial
Tribunal had the right in law to compel banks to sis,-lose
their secret reserves as well as the amount of "the bad and
doubtful debts and other necessary provisions" which bad
been excluded under the head "income" in the, Profit & Loss
Account of banks. This matter was agitated by them before
this Court in State Bank of India and others v. Their
Workmen (1) being an. appeal against the decision of the
Labour Appellate Tribunal. In view, however, of the
conclusion reached by this Court on other parts of the case
it refrained from pronouncing upon the correctness or
otherwise of this claim by the workmen.
The diputes between the employees of banks
(1)(1959), 2 L.T L. J. 205.
282
and the managements, however, continued with the result that
on March 21, 1960 the Central Government in exercise of the
powers conferred on it by sub-s. (1A) of s. 10 of the
Industrial Disputes Act referred the dispute which related
to several matters to the National Tribunal constituted by &
Notification of Government of the same date, K. T. Desai, J.
was the Tribunal so appointed. Most of the major banks in
the country were made parties to the reference including the
Reserve Bank and State Bank of India. After the Tribunal
started functioning and after the parties formulated their
respective contentions, applications were filed by the Bank
Employees Association on June 9, 1960, for directing the
respondent-banks to produce before the Tribunal for the
purposes of adjudication several documents listed in the
applications. Among the items in respect of which
production was thus sought were (1) statements showing "the
secret reserves in any form" of each bank from 1954 right
upto December 31, 1959 ; and (2) statements showing the
provision made "for bad and doubtful debts and other usual
and necessary provisions" during the years 1954 to 1959 and
the total amounts outstanding in such items in each bank in
the said years. The banks filed their reply on July 16,
1960. The production of the documents and the information
called for on several of the matters including the above two
was resisted by the Indian Banks Association (being an
association of employers) on the ground that they were by
law exempted from disclosure in the interest of the industry
and the public and claimed absolute privilege from making
the disclosure.
It was at this stage that the impugned provision was enacted
by Parliament as an amendment to the Banking Companies Act.
As several of the banks relied upon the impugned provisions
in support of their plea that they could not be compelled to
disclose either the quantum of their secret reserves or
their nature, or as regards the provision made in
283
the several years for "bad and doubtful debts and for other
reasonable and necessary provision", the bank employees
association challenged the constitutional validity of s. 34A
of the Banking Companies Act, which, if valid, could have
afforded a sufficient answer to the demand for production of
the documents in relation to these matters. This objection
was argued before the National Tribunal which upheld the
validity of the section. As we have stated earlier, Civil
Appeal No. 154 is directed against and challenges the
correctness of this decision. The Writ Petitions have been
filed by Bank Employees Associations which were not parties
to the application for production before the National
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Tribunal and are intended to support the plea of the
appellant in Civil Appeal No. 154 of 1961.
The foregoing narrative would show that the Banking
Companies Act, as it stood before the amendment now
challenged, had brought the law as to the disclosure of
secret reserves and the provision for bad and doubtful debts
etc. Into accord with the usual practice of Bankers, and
had protected these items from being compulsorily disclosed
to the shareholders of the respective companies and to the
general public. There had been a controversy as to whether
the workmen of these establishments were or were not
entitled to be placed on a different position from the
shareholders because of the bearing of these undisclosed
items on the determination of the quantum of their wage etc.
and on their conditions of work having financial
implications. Parliament had, by the impugned legislation,
extended the protection from compulsory disclosure to the
workmen as well, but with a safeguard in their cue that the
Reserve Bank would determine the amount of reserves etc.
which could be taken into account in the course of
industrial adjudication. The question before us is, is this
attempt at some approximation of the position of the workmen
to that of shareholders etc. unconstitutional ?
284
Mr. Chari, learned Counsel for the appellant in Civil Appeal
No. 154 addressed to us the main arguments in the case and
these were supplemented by learned Counsel appearing for the
petitioners in the several writ petitions and also by
learned Counsel on behalf of the Interveners both in the
appeal as well as in the petitions. Though the arguments
before us ranged over a very wide field, the attack on the
validity of the legislation was rested on two main grounds :
(1) that the impugned legislation contravened the
fundamental right guaranteed to "trade unions" by the provi-
sion contained in sub-cl. (c) of el. (1) of Art. 19; and (2)
that it violated the freedom of equality guaranteed by Art.
14 of the Constitution.
We shall consider these two points in that order : First as
to the impugned provision being obnoxious to, or in
contravention of sub-cl.(c) of cl. (1)’of Art. 19’of the’
Constitution. This Article runs, to quote only the relevant
words
"Article 19. (1) All citizens shall have the
right-
(a).............................................
(b).............................................
(c) to form associations or unions
The right is subject to the qualification
contained in cl.(4), reading :
"(4). Nothing in sub-clause (c) of the said
clause shall affect the operation of any
existing law insofar as it imposes, or prevent
the State from making any law imposing, in the
interests of public order or morality,
reasonable restrictions on the exercise of the
right conferred by the said sub-clause."
It is not the contention of any of the learned Counsel that
the right of workmen to form unions or associations which is
the right guaranteed by sub-cl. (c) of cl. (1) of Art. 19 on
its literal reading has
285
been denied by the impugned legislation. The argument,
however, was that it would not be a proper construction of
the content of this guaranteed freedom to read the text
literally but that the freedom should be so understood as to
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cover not merely a right to form an union in the sense of
getting their union registered so as to function as an
union, i.e., of placing no impediments or restrictions on
their formation which could not be justified as dictated by
public order or morality but that it extended to confer upon
unions so formed a right to effectively function as an
instrument for agitating and negotiating and by collective
bargaining secure, uphold or enforce the demands of workmen
in respect of their wages prospects or conditions of work.
It was further submitted that unless the guaranteed right
comprehended these, the right to form an Union would be most
illusory. To understand the implications of learned
Counsel’s submission in their proper perspective the several
steps in the reasoning might be set out as follows :
(1)The Constitution guarantees, by sub cl.(c) of cl. (1)
of Art. 19, to citizens in general and to workers in
particular the right to form unions. In this context it was
pointed out that the expression ‘union’ in addition to the
word ,association’ found in the Article refers to
associations formed by workmen for "trade union" purposes ;
the word "union, being specially chosen to designate labour
or Trade unions.
(2)The right to "form an union" in the sense of forming a
body carries with it as a concomitant right a guarantee that
such unions shall achieve the object for which they were
formed. If this concomitant right were not conceded, the
right guaranteed to form an union would be an idle right, an
empty shadow lacking all substance.
(3)The object for which labour unions axe brought into
being and exist is to ensure collective
286
bargaining by labour with the. employers. The necessity for
this has arisen from an incapacity stemming from the
handicap of poverty and consequent lack of bargaining power
in workmen as compared with employers which is the reason
d’etre for the existence of labour organizations.
Collective bargaining in order to be effective must be
enforceable labour withdrawing its co-operation from the
employer and there is consequently a fundamental right to
strike a right which is thus a natural deduction from the
right to form unions guaranteed by sub-cl. (c) of cl.(1) of
Art. 19. As strikes, however, produce economic dislocation
of varying intensity or magnitude, a system has been devised
by which compulsory industrial adjudication is substituted
for the right to strike. This is the ratio underlying the
provisions of the Industrial Disputes Act 1947 under which
Government is empowered in the event of an industrial
dispute which may ultimately lead to a strike or lock-out or
when such strikes or lock-outs occur, to refer the dispute
to an impartial Tribunal for adjudication with a provision
banning and making illegal strikes or lock-outs during the
pendency of the adjudication proceedings. The provision of
an alternative to a strike in the shape of industrial
adjudication is a restriction on the fundamental right to
strike and it would be reasonable and valid only if it were
an effective substitute.
(4)For an adjudication to satisfy the tests of
reasonableness and effectiveness two conditions are
necessary : (a) that the adjudicator should be enabled to
have before him all the materials which are necessary for
pronouncing upon the matter in controversy before him ; and
(b) that the adjudicator by whom the controversy between the
parties should be decided should be an impartial person or
body who would render the decision or award after fully
hearing the parties, and that no matter in controversy
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should be the subject of ex parte decision by an interested
party or without the disputants having an opportunity to
know the,
287
materials on which the decision is reached, as also an
opportunity to place their case with reference to such
material.
(5)In regard to the right of labour unions to function
effectively and to achieve the object of their existence as
set out earlier, by negotiated settlement or by compulsory
adjudication, the only limitations permitted to be imposed
by law are those set out in cl.(4) of Art. 19 and unless,
therefore, either the objects of the association or the
marmer of achieving them are contrary to, or transgress
public order or morality, for which reason alone reasonable
restrictions might be imposed upon the guaranteed right,
the. freedom guaranteed is absolute.
(6)The legislation now impugned withdraws as it were a
vital issue in dispute between the parties before the
adjudicator, viz:, the capacity of the industry to pay, from
his cognisance and vests the power of deciding that issue in
the Reserve Bank which is a biased and interested party, the
decision itself being rendered ex parte, the trade unions
being deprived even of the knowledge of facts which lead to
the decision.
It was on this line of reasoning that learned Counsel
submitted that the impugned enactment violated the freedom
guaranteed by sub-cl. (c) of el. (1) of Art. 19.
We shall now proceed to consider the soundness and
tenability of the steps in the reasoning. It is not
necessary to discuss in any detail the first step as sub-cl.
(c) of el. (1) of Art. 19 does guarantee to all citizens the
right ’,to from associations". It matters little whether or
not learned Counsel is right in his submission that the
expression "union’ in the clause has reference particularly
to Trade Unions or whether the term is used in a generic
sense to designate any association formed for any legitimate
purpose and merely as a variant of the expression
"Association" for comprehending every body of persons so
formed. It is not controverted
288
that workmen have a right to form "associations or unions"
and that any legal impediment in the way of the formation of
such unions imposed directly or indirectly which does not
satisfy the tests laid down in cl. (4) would be
unconstitutional as contravening a right guaranteed by Part
III of the Constitution
It is the second step in the argument of the learned
Counsel, viz., that the right guaranteed to form "an union"
carries with it a concomitant right that the achievement of
the object for which the union is formed shall not be
restricted by legislation unless such restriction were
imposed in the interest of public order or morality, that
calls for critical examination. We shall be referring a
little later to the authorities on which learned Counsel
rested his arguments under this head, but before doing so we
consider it would be proper to discuss the matter on
principle and on the construction of the constitutional
provision and then examine how far the authorities support
or contradict the conclusion reached.
The point for discussion could be formulated thus : When
sub-cl. (c) of cl. (1) of Art. 19 guarantees the right to
form associations, is a guarantee also implied that the
fulfilment of every object of an association so formed is
also a protected right, with the result that there is a
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constitutional guarantee that every association shall
effectively achieve the purpose for which it was formed
without interference by law except on grounds relevant to
the preservation of public order or morality set out in cl.
(4) of Art. 19? Putting aside for the moment the case of
Labour Unions to which we shall refer later, if an
association were formed, let us say. for carrying on a
lawful business such as a joint stock company or a
partnership, does the guarantee by sub-cl.(c) of the
freedom. to form the association, carry with it a further
guaranteed right to the company or the partnership to pursue
its trade and achieve its profit-making object and that the
only limitations
289
which the law could impose on the activity of the
association or in the way of regulating its business
activity would be those based on public order and morality
under cl. (4) of Art. 19? We are clearly of the opinion
that this has to be answered in the negative An affirmative
answer would be contradictory of the scheme underlying the
text and the frame of the several fundamental rights which
are guaranteed by Part III and particularly by the scheme of
the seven freedoms or groups of freedoms guaranteed by sub-
cls. (’a) to (g) of el. (1) of Art. 19. The acceptance of
any such argument would mean that while in the case of an
individual citizen to whom a right to carry on a trade or
business or pursue an occupation is guaranteed by sub-cl.
(g) of cl. (1) of Art. 19, the validity of a law which
imposes any restriction on this guaranteed right would have
to be tested by the, criteria laid down by cl. (6) of Art.
19. if however he associated with another and carried on the
same activity-say as a partnership, or as a company etc., he
obtains larger rights of a different content and with
different characteristics which include the right to have
the validity of legislation restricting his activities
tested by different standards, viz., those laid down in el.
(4) of Art. 19. This would itself be sufficient to
demonstrate that the construction which the learned Counsel
for the appellant contends is incorrect, but this position
is rendered clearer by the fact that Art. 19-as contrasted
with certain other Articles like Arts. 26, 29 and 30-grants
rights to the citizen as such, and associations can lay
claim to the fundamental rights guaranteed by that Article
solely on the basis of their being an aggregation of
citizens, i.e., in right of the citizens composing the body.
As the stream can rise no higher than the source,
associations of citizens cannot lay claim to rights not open
to citizens, or claim freedom from restrictions to which the
citizens: composing it are subject.
The resulting position way, be illustrated thus If an
association were formed’ for’ the purpose of
290
arrying on business, the right to form it would be
Guaranteed by sub-cl. (c) of cl. (1) of Art. 19 subject to
any law restricting that right conforming to cl. (4) of Art.
19. As regards its business activities, however, and the
achievement of the objects for which it was brought into
existence, its rights would be those guaranteed by sub-cl.
(g) of cl. (1) of art. 19 subject to any relevant law on the
matter conforming to el. (6) of Art. 19 ; while the property
which the association acquires or possesses would be
protected by sub-el. (f) of cl. (1) of Art. 19 subject to
legislation within the limits laid down by cl. (5) of Art.
19.
We consider it unnecessary to multiply examples to further
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illustrate the point. Applying what we have stated earlier
to the case of a labour union the position would be this :
while the right to form an union is guaranteed by sub-el.
(c), the right of the members of the association to meet
would be guaranteed by sub-el. (b), their right to move from
place to place within India by sub-cl.(d), their right to
discuss their problems and to propagate their views by sub-
cl. (a), their right to hold property would be that
guaranteed by sub-cl. (f) and so oneach of these freedoms
being subject to such restrictions as might properly be
imposed by cls. (2) to (6) of Art. 19 as might be
appropriate in the context. It is one thing to interpret
each of the freedoms guaranteed by the several Articles in
Part III a fair and liberal sense, it is quite another to
read which guaranteed right as involving or including
’Concomitant rights necessary to achieve the object which
might be supposed to under lie the grant of each of those
rights, for that construction would, by a series of ever
expanding concentric circles in the shape of rights.
concomitant to concomitant rights and so on, lead to an
almost grotesque result.
There is no doubt that in the context of the principles
underlying the Constitution and the manner in which its Part
III has been framed the
291
guarantees embodied in it are to be interpreted in a liberal
way so as to subserve the purpose for which the
constitution-makers intended them and not in any pedantic or
narrow sense, but this however does not imply that the Court
is at liberty to give an unnatural and artificial meaning to
the- expressions used based on ideological considerations.
Besides it may be pointed out that both under the Trade
Unions act as well as under the Industrial Disputes Act the
expressions ‘union signifies not merely a union of workers
but includes also unions of employers. If the fulfilment of
every object for which an union of workmen was formed were
held to be a guaranteed right, it would logically follow
that a similar content ought to be given to the same freedom
when applied to an union of employers which would result in
an absurdity. We are pointing this out not as any
conclusive answer, but to indicate that the theory of
learned Counsel that a right to, form unions guaranteed by
sub-cl. (c) of ol.(1) of Art. 19 carries with it a
fundamental right in the union so formed to achieve every
object for which it was formed with the legal consequence
that any legislation not falling within el. (4) of Art. 19
which might in any way hamper the fulfilment of those
objects, should be declared unconstitutional and void under
Art, 13 of the Constitution, is not a proposition which
could be accepted as correct.
Besides the qualification subject to which the right under
sub-cl. (c) is guaranteed, viz., the contents of el. (4) of
Art. 19 throw considerable light upon the scope of the
freedom, for the significance and contents of the grants of
the Constitution are beat understood and read in the light
of the restrictions imposed. If the right guaranteed
included not merely that which. would flow on a literal
reading of the Article, but every right which is necessary
in order that the association brought into existence fulfils
every object for which it is formed, the qualifications
therefor, would be not merely those in cl.(4) of Art, 19,
but would be. more numerous and
292
very different, restrictions which bore upon and took into
account the several fields in which associations or unions
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of citizens, might legitimately engage themselves. Merely
by way of illustration we might point out that learned
Counsel admitted that though the freedom guaranteed to
workmen to form labour unions carried with it the
concomitant right to collective bargaining together with the
right to strike, still the provision in the Industrial
Disputes Act forbidding strikes in the protected industries
as well as in the event of a reference of the dispute to
adjudication under s. 10 of the Industrial Disputes Act was
conceded to be a reasonable restriction on the right
guaranteed by sub-cl.(c) of cl.(1) of Art. 19. It would be
seen that if the right to strike were by implication a right
guaranteed by sub-cl. (c) of cl. (1) of Art. 19 then the
restriction on that right in the interests of the general
public, viz., of national economy while perfectly legitimate
if tested by the criteria in el. (6) of Art. 19, might not
be capable of being sustained as a reasonable restriction
imposed for reasons of morality or public order. On the
construction of the Article, therefore, apart from the
authorities to which we shall refer presently, we have
reached the conclusion that even a very liberal
interpretation of sub-cl. (c) of cl. (1) of Art. 19 cannot
lead to the conclusion that the trade unions have a
guaranteed right to an effective collective bargaining or to
strike, either as part of collective bargaining or
otherwise. The right to strike or the right to declare a
look-out may be controlled or restricted by appropriate
industrial legislation, And the validity of such legislation
would have to be tested not with reference to the criteria
laid down in cl.(4) of Art. 19 but by totally different
considerations.
We shall now proceed to consider the authorities, relied ion
by the learned Counsel in support of this theory of
"Concomitant right" to collective bargaining guaranteed to
labour unions. first as regards the decisions of this Court
on which learned
293
Counsel relied Romesh Thappar v. The State of Madras(1)Was
the earliest case referred to; and learned counsel placed
reliance in particular on the following passage in the
judgment of the learned Chief Justice :
"Turning now to the’ merits, there can be no
doubt that freedom of speech and expression
includes freedom of propagation of ideas, and
that freedom is ensured by the freedom of
circulation. ’Liberty of circulation is as
essential to that freedom as the liberty of
publication. Indeed, without circulation the
publication would be of little value : Ex
parte Jackson, 96 U.S. 727".
Based on this, learned Counsel submitted that if the phrase
"freedom of speech and expression’ in sub-cl. (a) of el. (1)
of Art. 19 were given this liberal construction so as to
effectuate the object for which the freedom was conferred, a
similar construction ought to be adopted of the content of
the freedom guaranteed by sub-cl. (c) of el. (1) of Art. 19.
We are, however, unable to discern any analogy between the
two cases. It is obvious that "freedom of speech" means
freedom to speak so as to be heard by others, and therefore
to convey one’s ideas to others. Similarly the very idea of
freedom of expression necessarily connotes that what one has
a right to express may be communicated to others. Unless
therefore the freedom guaranteed by sub-cl.(a) of el. (1) of
Art. 19 were read as confined to the right to speak to
oneself or to express his ideas to himself, which obviously
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they could not mean, the guaranteed freedom would mean
freedom to address others, and of conveying to others one’s
ideas by printed word, viz., freedom of circulation. We do
not see, therefore, any analogy between the case which was
considered by this Court in Romesh Thappar’s (1) case and
the one before us.
(1) 1950 S.C.R. 594 In A.
294
The observations in the judgment of Bhagwati, J. in Express
New,,?,papers (Private) Ltd. v. Union of India(1) on which
Counsel relied, in regard to the content of the ’freedom of
speech and expression that they "include within its scope
the freedom of the press", for the press with the printed
word is merely the mechanism by which the freedom is
exercised do Dot really carry the matter any ‘ further.
We were next referred to the observations of Das C. J. in
the advisory opinion Re the Kerala Education The question,
which was being considered in the passage,relied on, related
to the scope and content of cl. (1) of Art. 30 which guaran-
tees to all minorities a right to establish and administer
educational institutions of their choice. The question
debated before this Court was, whether the provision in the-
Kerala Education Bill which denied recognition by Government
to educational institutions run by minorities contravened
this freedom guaranteed to them ? Dealing with this Das C.
J. said :
"Without recognition, therefore, the edu-
cational institutions established or to be
established by the minority communities cannot
fulfil the real objects of their choice and
the rights under Art. 30(1) cannot be
effectively exercised. The right to establish
educational institutions of their choice must,
therefore, mean the right to establish real
institutions which would effectively serve the
needs of their community and the scholars who
resort to their educational institutions.
There is, no doubt, no such thing as
fundamental right to recognition by the State
but to deny recognition to’ the educational
institutions except upon terms tantamount to
the surrender of their constitutional right of
administration of the educational institutions
of their choice is
(1) 1959 S.C.R. 12. (2) 1959 S.C.R. 995.
295
in truth and in effect to deprive them of
their rights under Art. 30 (1).19
We do not consider that these observations and this
construction of el. (1) of Art. 30 assist learned Counsel in
his submission as regards the theory of concomitant rights
flowing from the freedom guaranteed by sub-cl. (c) of cl.
(1) of Art. 19. The observations of the learned Chief
Justice and the conclusions drawn are in relation to the
construction of Art. 30 and cannot be divorced from’ the
context. They do not purport to lay down any general rule
of construction for the freedoms guaranteed under the
several sub-heads of cl. (1) of Art. 19, and, indeed, what
we have pointed out earlier should suffice to indicate the
impossibility of upholding any such construction of the
freedoms guaranteed by the latter Article.
Learned Counsel also referred us to certain passages in two
judgments of the Supreme Court of the United States :
National Association for the advancement of colored people
v. Alabama,(1)and Bates v. Little Rock(2)in which the Court
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held that, freedom of speech and assembly which were
fundamental rights guaranteed by the Constitution would be
abrogated or improperly encroached upon by legislation
’which compelled the disclosure to public authorities of the
membership rolls. In the two decisions the facts were that
the associations in question were for the protection of
coloured persons and the requirement of disclosure of the
names of members was inserted in the law for the purpose of
putting a pressure upon these associations so as to dissuade
people from joining them. The argument of learned Counsel
before us was based on the dicta in these two decisions that
the I right to form an association which followed by reason
of the due process’ clause in the 14th amendment carried
with it the right to ensure that the associations were able
to maintain themselves as associations. In the two (1) 2
Law. Ed. Second 1488. (2) 4 Law. Ed. Second 480.
296
decisions referred to, the learned Judges of the Supreme
Court of the United States were not construing the content
of a provision on the lines of Art. 19(1)(c), for in
America, the right of association is not any specifically
guaranteed right, but has been derived by judicial
interpretation of the due process clause of the 14th
Amendment. But apart from this the legislation there
impugned was one which directly affected the formation of
the association and in that sense may be hit by the terms of
sub-cl.(c) of cl.(1) of Art. 19 if statutes with similar
purpose were enacted in India. The decisions cited are no
authority for the second step in the argument for which they
were cited.
Learned Counsel also referred us to two other decisions of
the Supreme Court of the United States in which the right of
employees to self-organization, to form, join and assist
labour organisations and to bargain collectively through
representatives of their own choice and to engage in
concerted Activities for the purpose of collective
bargaining or other mutual aid has been referred to as "a
fundamental right" (vide National Labor Relations Board v.
Jones and Laughlin Steel Corporation and ors., (1) and
Amalgamated Utility Workers v.. Consolidated Edison Company
of New York) (2). We do not consider the inference sought
to be drawn well-founded. What the learned Judges of the
Supreme Court were referring to as a fundamental right was
not with reference to a fundamental right as recognized or
guaranteed by the Constitution, but in the sense of a right
of the unions which enacted law. recognized or respected,
and as other decisions of the United states’ Supreme Court
show, was subject to regulation by the legislature(3). We
have, therefore, reached the conclusion that the right
guaranteed. by sub-cl.(c) of cl.(1) of Art. 19 does not
carry with it a concomitant right
(1) 81 Law. Ed. 893,909.
(2) 84 Law. Ed. 738, 741.
Vide Weaver Constitutional Law and its Administration (1
946) p. 505, referring to Dorchy v., Kansas 272 U. S. 306 :
71 L. Ed. 2A8 "Neither he common law nor the 14th Amendment
confers the absolute right to strike."
297
that the unions formed for protecting the interests of
labour shall achieve the purpose for which they were brought
into existence, such that any interference, to such
achievement by- the law of the land would be
unconstitutional unless the same could be justified as in
the interests of public order or morality. In our opinion,
the right guaranteed under sub-cl. (c) of el. (1.) of Art.
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19 extends to the formation of an association and insofar as
the activities of the association are concerned or as
regards the steps which the union might take to achieve the
purpose of its creation, they are subject to such laws as
might be framed and that the validity of such laws is not to
be tested by reference to the criteria to be found in cl.
(4) of Art. 19 of the Constitution.
In this view it is not necessary to consider the other steps
in. the argument of learned Counsel all of which proceed
upon the correctness of the step which we have just now
disposed of. Nevertheless we consider it proper to deal
with the submission that the impugned legislation (a)
withdraws an essential part of the dispute between the
parties from the jurisdiction of an impartial adjudicator
and vests the same in the Reserve Bank of India which is a
biased body ; and (b) that the adjudicator is left without
proper materials to discharge his duties by withdrawing the,
proper materials from his cognizance.
A complaint that the impugned provision withdraws the
dispute from the adjudication of an impartial arbitrator and
leaves it to the decision of another body is an obvious
overstatement of the position. The dispute between the
parties in relation either to wages, bonus or other
amenities or perquisites which involve financial obligations
on the part of the employer remain even after the impugned
provision was enacted, with the adjudicator and he alone
determines the rights of the parties subject to the
provisions of the Industrial law or other relevant
legislation, and the relief which he could award to the
employees remains
298
the same. The adjudicator alone determines’ the capacity of
the industry to pay or to bear the enhanced cost. The only
result of s. 34 A is that in regard to two itmes, viz.,
secret reserves and the provision made by banks "for bad and
doubtful debts and other necessary provisions", the
reasonable quantum which would be available for being taken
into account by the adjudicator would be estimated and
determined by an expert body which is a governmental
authority or practically a department of Government, viz.,
the Reserve Bank of India which is entrusted by law with
duty of maintaining the credit structure of the country.
From what we have ’stated earlier as the genesis of the
legislation now impugned, it would be apparent that
Government had to effect a reconciliation between two
conflicting interests : one was the need to preserve and
maintain the delicate fabric of the credit structure of the
country by strengthening the real as well as the apparent
credit worthiness of banks operating in the country. It was
really this principle which is vital to the economic life of
the community that has been responsible for the changes that
have been made from 1927 onwards as regards the form of
balancesheet and of the Profit & Loss accounts of banking
companies as distinguished from other trading and industrial
organizations. There was urgent need to protect from
disclosure certain of the items of appropriation by banks in
order to preserve them as credit institutions. On the other
hand, there was the need-an equally urgent need for enabling
the workers in these institutions not to be denied a proper
wage and other emoluments and proper conditions of service.
the question was how far information which in the interests
of national economy the banks were entitled to withhold from
their shareholders and the general public, was to be made
available for determining the capacity of the banks to pay
their employees. It was in these Circumstances that the
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impugned legislation was
299
enacted which while preserving industrial adjudication in
respect of disputes between the banks and their employees,
entrusted the duty of determining the surplus reserve which
could be taken into account as part of the assets for
determining capacity to pay, to the Reserve Bank. Thus
understood there does not appear to be anything unreasonable
in the solution which the I impugned legislation has
effected.
We do not also consider that there is any substance in the
complaint that the Reserve Bank of India is a biased body.
If it was not the Reserve Bank of India, the only other
authority that could be entrusted with the function would be
the Finance Ministry of the Government of India and that
department would necessarily be guided by the Reserve Bank
having regard to the intimate knowledge which the Reserve
Bank has of the banking structure of the country as a whole
and of the affairs of each bank in particular. In the
circumstance therefore it matters little from the point of
view of the. present argument whether it is the Finance
Ministry that was vested with the power to determine the
matters set up in s. 34-A or whether it is the Reserve Bank
that does so, as under the impugned enactment.
Learned Counsel made a further submission that the impugned
enactment was a piece of colourable legislation and that the
purported objective of securing secrecy from disclosure was
really a device adopted for depressing wages and for denying
to workmen employed in banks their legitimate rights. It
was urged that the preamble to the amending Act sought to
make out that the real purpose behind the legislation was
the ensuring of secrecy from disclosure of the reserves held
by the banks and of the bad and doubtful debts which arose
in the course of business and the provision made for these
losses and proceeded on the ratio that such disclosure would
hurt the credit of the
300
banks which would have repercussions not merely on the
individual bank but also on the banking structure of the
country as a whole. This, it was submitted, was not the
real but only the colourable object and purpose underlying
the legislation. In this connection it was stressed that s.
21 of the Industrial Disputes Act and r. 30 of the
Industrial Disputes Rules had made ample provision for
securing secrecy to the affairs of every concern in regard
to which disclosure would not be in public interest. We are
satisfied that this submission has no basis in fact and
besides even if made out does not affect the validity of the
legislation. As we have pointed out already, the impugned
legislation merely carries out to its logical conclusion the
effect of the changes in the form of the balance-sheet and
Profit and Loss accounts of Banks which starting in 1927
culminated in the notification dated December 22, 1951 under
s. 29 (4) of the Banking Companies Act amending the Forms
appended to that Act. If the construction of the "right to
form unions" under sub-cl. (c) of cl.(1) of Art. 19 put
forward by learned Counsel for impugning the validity of the
enactment is negatived, then subject to the point about Art.
14 which we shall examine presently, legislative competence
being conceded there could be no legal objection to its
validity. Objections based on colourable legislation have
relevance only in situations when the power of the
legislature is restricted to particular topics, and an
attempt is made to escape legal fetters imposed on its
powers by resorting to forms of legislation calculated to
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mask the real subject-matter. No such problem exists in the
present case and it is common ground that once the
legislation passes the test of the fundamental
rights,guaranteed by Part III, legislative competence not
being in dispute, its. validity is beyond cavil. The
question whether the secrecy assured by s. 21 of Industrial
Disputes Act is or is not sufficient to protect the
interests of I the Banks, is a matter of legislative policy
and is for Parliament
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alone-and even the fact that the Court could be persuaded
that the existing law is sufficient would be no ground for
invalidating-the ’impugned legislation. When the end which
the legislature reeks to achieve, viz ., secrecy is
competent, the enquiry as to ultra vires stops. Whether
less than what was done might have been enough, whether more
drastic provision was made than occasion demanded, whether
the same purposes could have been achieved by provisions
differently framed or by other means, these are wholly
irrelevant considerations for testing the validity of the
law. They do not touch or concern the ambit of the power
but only the manner of its exercise, and once the provisions
of Part III of the Constitution are out of the way, the
validity of the legislation is not open to challenge.
The next point urged was that the impugned provision was in
violation of Art. 14; though the several learned Counsel
who. appeared in support of the case of the workers were not
all agreed as to the precise grounds upon which it could be’
held that the impugned provision violated Art. 14.
It was first submitted that the provision was rendered
invalid because it vested an arbitrary power in. banks which
were parties to a dispute under the Industrial Disputes Act,
to claim or not to claim the privilege of not producing the
documents and that no criterion had been indicated as to the
Circumstances in which Banks could decide to make the claim.
But this, however, is answered by the provision itself which
runs
"When the banking company, claims that such
document, statement of information is of a
confidential nature and: that the production
or inspection of such document...... would
involve disclosure of’. information relating
to the matters set not-the. matters set out in
sub-clauses (a) and (b)"
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It was also submitted that sub-cl. (b) of sub-s. (1) was
vague, in that a reference was made to "provision made for
bad and doubtful debts and other usual or necessary
provisions". We do not see any substance in this point
either, because these words are taken from the form under
the Banking Companies Act and their meaning is clear in
banking circles. In fact, in the application which the
employee associations made before the adjudicator to direct
the production of information and documents from the banks
this phrase was used and it is apparent that even the Bank
Employees’ Associations understood it as having a definite
connotation.
It was next submitted on behalf of some of the interveners
that s. 34A(1) and (2) violated Art. 14 in that the
classification contained in it was impermissible as not
being based on rational grounds. It was said (1) that the
protection against a disclosure applied only to
adjudications under the industrial Disputes Act and not to
other adjudications ; (2) that it applied only to certain
banking companies and not to all banking companies; and (3)
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that by reason of s. 34A (2) the provisions of the impugned
enactment were applied in a discriminatory manner to all
banks other than the Reserve Bank. The first two points
cover the same ground and arise out of the fact that the.
impugned provision by its 3rd sub-section defines a "banking
company" referred to in it and to which its provisions
apply, as meaning a ""Banking Company" under the Industrial
Disputes Act, 1947. The Industrial Disputes Act defines a
"Banking Company" in s. 2(b) as follows:
"Banking Company means a banking company as
defined in S. 5 of the Banking Companies Act,
1949, having branches or other establishments
in more than one State and includes the State
Bank of India and the Reserve Bank of India."
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It would thus be seen that though the Banking Companies Act
applied to every banking company it is only those banks
whose operations extended beyond one State were brought
within the scope, of the definitions of a "banking company"
under the Industrial Disputes Act. The result of that was
that Banking Companies not having branches in more than one
State would be an industry so as to be within the Industrial
Disputes Act but not ,’a banking company" within its
definition. In the circumstances learned Counsel is right
in his submission that such banking companies as are not
within the definition of "a banking company" under the
Industrial Disputes Act would not be entitled to claim the
protection from disclosure conferred on "banking companies"
by the impugned provision. This, however, is no ground for
holding the legislation invalid. In the first place, the
complaint of discrimination is not by the banks who are not
on the terms of s. 34A entitled to the protection from
disclosure of their reserves etc. Secondly it is common
ground that 95 % of the banking business in this country is
in the hands of Banks which are, within the definition of
"banking companies" under s. 2(b) (b) of the Industrial
Disputes Act. Besides, these banks, employ over 80,O0O out
of the 90,000 bank-employees. In the circumstances and
seeing that the injury to the credit structure will only be
by the disclosure of the reserves etc., of the banks of this
class, there is sufficient rational connection and basis for
classification to justify the differentiation. The fact
that the legislation does not cover every banking company is
therefore no ground for holding the provision to be
discriminatory within Art. 14.
The last point about the exclusion, of the Reserve Bank of
India from the operation of s. 34A (2) has also no
substance. in the very nature of things and on the scheme of
the provision the Reserve Bank could not but be excluded
from sub-s. (3) of the impugned provision. In determining
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what reserves could properly be taken into account, the
Reserve Bank would be discharging not any quasi judicial but
only an administrative function, determining this matter
with reference to uniform business principles and it
therefore appears to us that. there is no impropriety in its
findings being final even in regard to itself. A submission
on similar lines about bias was also made in relation to the
impact of the impugned provision insofar as it related to
the industrial dispute between the State Bank of India and
its employees. It was pointed out to us that the Reserve
Bank of India owned practically the entirety of the
sharecapital of the State Bank of India, with the result
that the Reserve Bank was pecuniarily and vitally interested
in supporting the State Bank as against the latter’s
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employees in any industrial dispute and that the element of
bias which the situation involved would invalidate the
impugned provision. We consider this argument without
force. If, as we have held, the impugned provision is valid
and does not violate any of the freedoms guaranteed by Part
III of the Constitution in regard to the employees of the
Reserve Bank, the challenge to the impugned provision cannot
obviously be successful in the case of the employees of the
State Bank.
As we have stated earlier, though the arguments before us
ranged on a very wide ground, we have not thought it
necessary to deal with all of them because in view of our
conclusions on the crucial points in the case the others
which were subject of debate before us did not arise for
consideration.
The appeal fails and is dismissed with costs. The petitions
also fail and are dismissed with costs. (one hearing fee)
Appeal and Petitions dismissed.
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