ORDER
V. Gopala Gowda, J.
Page 1464
1. The first petitioner is the KSRTC Staff & Workers Federation and the 2nd petitioner is the Secretary of Death-cum-Retirement Benefit Fund and an employee of KSRTC. They have filed this writ petition seeking the following prayers:
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33. Wherefore, it is prayed that this Hon’ble Court may, after calling for the records, be pleased to issue a Writ of Certiorari or any other proper writ or order or direction quashing the Government Order dated 23/2/1997 bearing No. HTD 127 TRA 96 dated 22/2/1997 and RTD TRA 96 dated 7/8/1997 produced as Annexures-A and B respectively, and to direct the Government to take all other steps for improving the well being of the KSRTC, as pointed out by various Committees of Legislature. It is further prayed that this Hon’ble Court may be pleased to issue further direction quashing the Notification dt. 10/9/1997 bearing No. HTD 127 TRA 96; Notification dt.29/5/1999 bearing No. HTD 127 TRA 96 and the Notification dated 4/8/2000 bearing No. HTD 65 TRA 99 passed by the 1st respondent, produced as Annexures-B1, B2 & B3 respectively.
34. It is further prayed that a direction be issued to the Central Government to evolve uniform policies in respect of the Corporations and also to help RTCs to solve the problems facing them financially administratively and in other fields.
35. It is further prayed that this Hon’ble Court may be pleased to hold that Section 17-A of the R.T.C. Act, 1950 is inoperative and invalid, and any action thereunder would also be invalid;
36. That, without prejudice to the above, it is alternatively prayed that the provision in the impugned Government Order regarding deputation of all the workmen to BMTC/NWKRTC/NEKRTC from KSRTC may be held to be invalid and inoperative from the commencement of the impugned Govt. Orders and to declare that all the employees/workmen on the rolls of BTS and other respective divisions of the erstwhile KSRTC are to be treated as full-fledged workmen of the respective Corporations (BMTC, NWKRTC, NEKRTC) with a permanent status and with continuity of service, as if there were no interruption of service in the undertaking concerned etc. It is also submitted that this would include all those transferred from BMTC area to outside between the date of the two impugned Govt. Orders (i.e. between 22/1/1997 and onwards). They shall all be transferred back to their original divisions, now coming under the new Corporation. This Hon’ble Court may be pleased to grant such other relief to the concerned workmen, as it deem fit, in the circumstances of the case, in the interest of justice and equity.
2. The brief facts that gave rise for filing this writ petition are briefly stated herein below to consider the same with reference to the rival legal contentions urged on behalf of the parties and answer the same:
i) The 2nd respondent Karnataka State Road Transport Corporation (herein after in short called as ‘KSRTC’) was established under Section 3 of the Road Transport Corporation Act, 1950 (hereinafter referred to as ‘the Act’) on 1-8-1961 as a single transport corporation in the state of Karnataka. It was the biggest corporation in Page 1466 the Country as a whole. The various transport services in the State were brought under its control. As on the date of filing the writ petition, the KSRTC had 62,000 employees, 10,500 buses plying across the State coveting about 26.92 lakh Kms. It is the case of the KSRTC that it was unable to cope-up with the increased need of its services on account of various factors, including huge losses incurred by it.
ii) In order to avoid financial losses to the K.S.R.T.C and to improve the transport service, the Government thought of converting KSRTC into smaller corporations. In that view of the matter, the Government has set-up various committees. One of the committees so appointed on 21/12/1987 was an Expert Committee comprising top officers of various departments. The said committee submitted its report on 11/7/1988 recommending the mammoth organisation into four or five smaller bodies. Thereafter, the Government constituted another Expert Technical Committee on 18/7/1991 and it was asked to make an in-depth study and need for bifurcation of KSRTC. The said committee submitted its report on 24/9/1992 recommending to liquidate KSRTC and in its place to constitute eight corporations. The Government thereafter constituted a Legislature Committee headed by the 3rd respondent Sri P.G.R. Scindia, who was the Opposition Leader at that time. The said committee submitted its report on 13/5/1994 inter-alia recommending for bifurcation of KSRTC with Bangalore Transport Service (BTS) as its subsidiary corporation and to establish two more corporations at Hubli and Gulbarga. Thereafter, a Cabinet Sub-committee was appointed by the Cabinet on 20/10/1995 to formulate passenger transport policy for the State. The said committee submitted its report on 22/1/1997.
iv) Based on the recommendations made by the Cabinet Sub-committee, the Government passed the impugned order at Annexure-A dated 22/2/1997, the operative portion of which is extracted hereunder:
In the background of the details enumerated in the preamble it is ordered that Karnataka State Road Transport Corporation is bifurcated as under:
1) Bangalore Transport Company;
2) Corporation for 4 districts of Dharwad, Karwar, Belgaum and Bijapur districts.
3) Corporation for Bidar, Gulberga Raichur and Bellary districts.
4) Corporation for the remaining districts of Old Mysore and the nationalised areas.
The modalities of setting up of new Company/Corporations will be worked out by K.S.R.T.C.
It was followed by the impugned order at Annexure-B dated 7-8-1997 by exercising the so-called power by the State Government under Section 34 Page 1467 of the Act. Being aggrieved by the same, the petitioners have filed this writ petition seeking the reliefs as extracted in the first paragraph of this order.
3. After filing of this writ petition, the Government issued the impugned notifications at Annexures-B1, B2 and B3. Under Annexure-B1 dated 10/9/1997 the Government established 6th respondent North West Karnataka Road Transport Corporation for Belgaum, Dharwad, Gadag, Haveri, Brjaprur, Bagalkaot and Uttara Kannada. Under Annexure-B2 dated 29/3/1997 Bangalore Metropolitan Transport Corporation was established for the whole of Bangalore City. Under Annexure-B3 dated 4/8/2000 the 7th respondent North Eastern Karnataka Road Transport Corporation was established. Consequently, the newly established Corporations have been impleaded as respondents 5 to 7 and additional prayer was made to quash Annexures-B1, B2 and B3.
4. Separate statement of objections have been filed by respondents 1, 2, 3 and 5. The 6th respondent adopted the statement of objections of respondents 2 and 5. Rejoinder is filed by the petitioners to the objection statements.
5. i) In the objections statement filed on behalf of the first respondent State, the back-ground relating to passing the impugned orders and issuing impugned notifications are narrated. The locus standi of the petitioners for filing this petition is seriously questioned. The petition averments are traversed and denying the case sought to be made-out by the petitioners, the first respondent has prayed for dismissal of the writ petition.
ii) In the statement of objections filed on behalf of 2nd respondent inter-alia it is stated that the corporations created under Annexures-B1, B2 and B3 are not subsidiary corporations created under Section 17-A of the Act. Justifying the impugned order/action of the State Government, 2nd respondent also prayed for dismissal of the writ petition. In the amended objections filed, it is stated that the impugned order/action in a Government policy and since the Government has acted in a fair and responsible manner, the petitioners have no right to contest the same and this Court need not interfere with the same. It is further stated that Government has taken every step to protect the interests of workmen. It is also stated that the State Road Transport system should be run by a single corporation or by several corporations, is a matter of policy of the State Government and petitioners, the same cannot be the matter for judicial scrutiny of this Court.
iii) The 3rd respondent P.G.R. Scindia has filed counter Affidavit denying the allegations made against him. Defending the impugned order/action, he also prayed to dismiss the petition.
iv) In the objections statement filed on behalf of 5th respondent, while adopting the statement of objections of 2nd respondent, it is further stated that since the action taken by the State Government is a policy decision and the same cannot be the subject matter of judicial review by this Court. The grievance of the petitioners is that creation of multiple corporations will not benefit either the commuters or the employees is Page 1468 termed as mis-conception. Justifying the decentralisation of power of the KSRTC in bifurcating it and forming three new corporations by the State Government, the 5th respondent has prayed for dismissal of the writ petition.
6. Originally, the petitioners have sought to treat this as Public Interest Litigation. Subsequently, an amendment application I.A.II was filed to delete the sentence relating to PIL in the Writ Petition. The said application was allowed by this Court by order dated 1/3/1999 and petitioners were permitted to delete the words Public Interest Litigation from the facts of the Writ Petition. The 2nd respondent herein has challenged the correctness of the said order in W.A.Nos. 2014-15/1999. Since the said appeals were not pressed by the appellants and there is no objection for the single Judge to deal with the writ petition, the Division Bench of this Court dismissed the same by order dated 15/9/2003. Accordingly, this writ petition is heard by me.
7. Heard Sri M.C. Narasimhan, learned Sr.Counsel for the petitioners, Mr. B.T. Partha Sarathy, learned Advocate General for respondents No. 1 and 3, Mr. A.N. Jayaram, learned Sr. counsel for 2nd respondent, Sri. Sangee P. Ahuja, learned Counsel for 3rd respondent, Sri. S.N. Rajendra, learned Addl.Central Government Standing Counsel for R4 and Sri. L. Govindaraj, learned Counsel for respondents No. 5 to 7. The legal contentions urged and the decisions relied upon by the learned Sr. Counsels and other counsels are not narrated in the portion of the order where their submissions are noted, as they will be dealt with in due course of the order while answering the contentious points that are framed in this case.
8. Before proceeding to decide the case on merits the prayer made in paragraph 35 of the Writ Petition to hold that Section 17(A) of the Act, is inoperative, invalid and any action thereunder by the State Government would also be invalid, is superfluous and there is no need to pass any order thereon and therefore the prayer of the petitioners in this regard is not examined and answered by this Court, as the same was not seriously pressed into service.
9. On the basis of the pleadings and the legal contentions urged by the respective learned Sr. counsels and other counsels, the following points will arise for our consideration to answer the same in this case on behalf of the parties:
1. Whether the petitioners have got locus standi to challenge the impugned orders and notifications and are they ‘aggrieved persons’ to file the writ petition?
2. Whether the impugned orders and notifications bifurcating KSRTC and establishing 3 separate Corporations is traceable to Section 3 of the Act?
3. Whether Section 17-A of the Act is applicable to the fact situation?
4. Whether judicial review power can be exercised by this Court in this petition at this juncture?
5. What order?
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10. POINT No. 1: This point pertains to the locus-standi of the petitioners to challenge the impugned orders and the notifications passed and issued by the State Government. In order to do so, they must be ‘aggrieved persons’. It is not in dispute that 1st petitioner is a Registered Trade Union registered under the provisions of Indian Trade Unions Act of 1926. The workmen of KSRTC and respondents No. 5 to 7 are its members. No doubt the 2nd petitioner may not have locus standi to challenge the impugned order/action, as he is the Secretary of death-cum-retirement benefit fund. He has no individual recognition or role to espouse the cause of the workmen. But the 1st petitioner being a registered Trade Union, which is recognised by the management of second respondent can certainly challenge the impugned order/action of either State Government or second respondent corporation because it is the grievance of the first petitioner that by virtue of the impugned order/action, the service conditions of the workmen vary, thereby the statutory rights conferred under the provisions of the Industrial Disputes would be affected, apart from the fundamental rights guaranteed under Articles 14, 16, 19 and 21 will also be deprived to the concerned workmen, as the same are applicable to the KSRTC as it is being a statutory corporation owned, managed and administered by the State Government. Therefore they have been put to great hardship and agony. For the purpose of improving the service conditions of its members, the 1st petitioner placed Charter of Demands with the management, conducted bipartite negotiations and arrived at various bipartite settlements pertaining to wage revision, payment of various allowances, medical benefits, matters pertaining to service conditions of the concerned workmen such as suspension, termination, dismissal etc. Such bipartite settlements are binding between the Management of the corporation and the Workmen under the provisions of Section 12(1) read with 18(1) of Industrial Disputes Act, 1947. Since the impugned order/action affects the service conditions of the employees of the corporation who are members of the first petitioner, this petition is filed as it has got a statutory obligations under the provisions of Section 36 of the I.D. Act and Trade Unions Act as a collective bargaining agent in the best interest of the corporation. All the employees of the corporation cannot rush to the court in a matter like this. For the aforesaid reasons, certainly the 1st petitioner is an ‘aggrieved person’ in a matter like this to challenge the impugned order/notification. Mr. M.C. Narasimhan learned Sr. counsel for the petitioners has rightly relied upon the Constitutional Bench decision of the Apex Court (Fertilizer Corporation Kamgar Union v. Union of India) wherein the words ‘person aggrieved’ has been interpreted by the Apex Court. The relevant paragraphs 29-30, 37, 41 and 42 are extracted in this order as the legal principles laid down in the said case squarely answers the quiery regarding locus standi of the petitioners to challenge the impugned orders/notification.
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29-30. x x x x x Two questions incidentally arise: Have the workers locus standi under Article 32, winch is a special jurisdiction confined to enforcement of fundamental rights: What, if any, are the fundamental rights of workmen affected by the employer’s sale of machinery whose mediate impact may be conversion of permanent employment into precarious service and eventual exit? Lastly, but most importantly where does the citizen stand, in the context of the democracy of judicial remedies, absent an ombudsman? In the face of (rare, yet real) misuse of administrative power to play ducks and drakes with the public exchequer, especially where developmental expansion necessarily involves astronomical expenditure and concomitant corruption, do public bodies enjoy immunity from challenge save through the post-mortem of Parliamentary organs. What is the role of the judicial process, read in the light of the dynamics of legal control and corporate autonomy? This juristic field is virgin but is also heuristic challenge, so that law most meet life in this critical yet sensitive issue. The active co-existence of public sector autonomy, so vital to effective business management, and judicial control of public power tending to berserk, is one of the creative claims upon functional jurisprudence.
37. Assuming that the Government company has acted mala fide, or has dissipated public funds, can a common man call into question in a Court the validity of the action by invocation of Article 32 or 226 of the Constitution? Here, we come up on the crucial issue or access to justice and the special limitations of Article 32 which is the passport to this Court.
41. Law, as I conceive it, is a social auditor and this audit function can be put into action only when some one with real public interest ignites the jurisdiction. We cannot be scared by the fear that all sundry will be litigation happy and waste their time and money and the time of the Court through false and frivolous cases. In a society where freedom suffers from atrophy and activism is essential for participative public justice, some risks have to be taken and more opportunities opened for the public minded citizen to rely on the legal process and not be repelled from it by narrow pendentry now surrounding locus standi.
42. Schwartz and H.W.R. Wade wrote in Legal Control of Government:
Restrictive rules about standing are in general inimical to a healthy system of administrative law. If a plaintiff with a good case is turned, away, merely because he is not sufficiently affected personally, that means that some Government agency is left free to violate the law, and that is contrary to the public interest. Litigants are unlikely to expend their time and money unless they have some real interest at stake. In the rare cases where they wish to sue merely out of public spirit, why should they be Page 1471 discouraged? (Professors Bernard Schwartz and H.W.R. Wade, O.C., in Legal Control of Government (1972), p.291).
They further observed:
The problem of standing, or locus standi is inherent in all legal systems…. But in the United States, perhaps because of the constitutional basis which the subject has acquired in federal law it can be discussed as a single topic. In Britain it is a thing of shreds and patches, made up of various differing rules which apply to various different remedies and procedures. It is atypical product of the untidy system of remedies, each with its own technicalities, which all British administrative lawyers would like to see reformed. (Ibid).
We have no doubt that having regard to the conditions in Third World Countries, Cappelletti is right in his stress on the importance of access:
The right of effective access to justice has emerged with the new social rights. Indeed, it is of paramount importance among these new rights since, clearly, the enjoyment of traditional as well as new social rights presupposes mechanisms for their effective protection. Such protection, moreover, is best assured by a workable remedy within the framework of the judicial system. Effective access to justice can thus be seen as the most basis requirement – the most basic requirement – the most basic “human right – of a system which purports to guarantee legal rights.” (M. Cappelletti, Rabels Z (1976) 669 at 672).
The need for a radial approach has been understood in New Zealand by Black:
…today it is unreal to suggest that a person looks to the law solely to protect his interests in a narrow sense. It is necessary to do no more than read the newspapers to see the breadth of the interests that today’s citizen expects the law to protect – and he expects the Court where necessary to provide that protection. He is interested in results, not procedural niceties. (Black, “The Right to be Heard, “New Zealand LJ No. 4, 1977, 66).
Apart from taking steps for the welfare of the employees, a statutory duty is also cast upon the Trade Union to see that the properties of KSRTC are safeguarded when there is agitation and violence by the employees and its Management by the Board. Under these circumstances it cannot be said that if not 2nd petitioner, the 1st petitioner has no locus standi to challenge the impugned order. Learned Sr. Counsel Mr. M.C. Narasimhan also relied upon the decision reported in 2006(3) AIR KAR R 26 (B.D.K. Process Controls Pvt. Ltd. and Anr. v. Bharatiya Mazdoor Sangha) wherein a Division Bench of this Court has held that transfer of employees from parent company to subsidiary company amounts to change in service conditions of employees and held that Writ Petition filed by the Union is maintainable. That is what precisely happened in this case also by virtue of the impugned orders/action and therefore the first petitioner Trade Union is espousing the cause of the Page 1472 employees as provided under Section 36 of the I.D Act as a Registered Trade Union recognised by the Management of KSRTC, hence it has got every right to question the same before this Court.
11. Mr. Narasimhan has also cited, the decision reported in ILR 2002 KAR 2435 (Karnataka Urban Water Supply and Drainage Employees Association v. State of Karnataka, Dept. of Housing and Urban Development), wherein this Court has considered the issue regarding locus standi of the petitioner therein after referring to various decisions of the Apex Court, Madras High Court and held that the Association/petitioner in that case has got focus standi to file Writ Petition and that the petition filed by it was held to be maintainable in law. The same is the position in this case also and therefore the reliance placed upon the above decision is correct.
12. By the bifurcation of KSRTC and establishment of respondents No. 5 to 7 as separate entities, the total membership of the 1st petitioner is drastically reduced as its members are being transferred or allotted to respondents No. 5 to 7, which are claimed to be separate and independent corporations under the Act according to the respondents. If that is so, on the one hand virtually the 1st petitioner Union cannot function as a collective bargaining agent on behalf of other corporations, established by the State Government. According to the respondents by the impugned order at Annexure-‘A’ the KSRTC is bifurcated and in its place separate Corporations are established. If the case of the respondents justifying the bifurcation of KSRTC and formation of three independent corporations is accepted the service conditions of members of 1st petitioner Onion will be adversely affected. In this view of the matter also the 1st petitioner is an ‘aggrieved person’ and it can question the impugned orders and action of the State Government.
13. In the light of the discussions made above, I hold that though not the 2nd petitioner, the 1st petitioner is an ‘aggrieved person’ and it has got locus standi to maintain this Writ Petition.
14. POINT Nos. 2 & 3: Since these two points are inter-related they are taken up together and answered. These points raise a common question of fact and law as to whether the impugned order/action is traceable to Section 3 of the Act or whether Section 17-A is applicable to the fact, situation. The respondents claim that the establishment of respondents No. 5 to 7 Corporations is under Section 3 of the Act. The creation of respondents 3, 5 to 7 have been done after bifurcating the KSRTC. It is pertinent to note that in the impugned order at Annexure-‘A’ the Government has not mentioned the provision of law trader which it has bifurcated the KSRTC. Whatever action taken must be traceable to the power conferred under the provisions of the Act. In the entire Act there is no provision for bifurcating an existing Corporation and in its place to establish one or more separate and independent Road Transport Corporations. To understand the case properly it is necessary to look into some of the relevant provisions of the Act, which will throw light upon the Scheme provided for in the Act.
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15. Under Section 3 of the Act the State Government can establish a Road Transport Corporation for the whole or any part of the State. As per Section 4 a Corporation so established is a body corporate by the name notified having a perpetual succession and a common seal. Under Section 5(1), the general superintendence, direction, management and business of the Corporation shall vest in a Board of Directors. As per Sub-section (2) the Board shall consist of a Chairman and other Directors not leas than 5 and not more than 17. The important provision with which we are concerned is Section 17(A) of the Act and the relevant portion of it reads thus:
17A(1). Where a Corporation (hereafter in this section referred to as the parent corporation) is satisfied that it is expedient or necessary so to do for the more efficient discharge of its functions under this Act, it may, with the concurrence of the State Government and the Central Government, frame by notification in the Official Gazette a scheme or schemes providing for the establishment of one or more subsidiary corporations.
(2) A scheme framed under Sub-section (1) shall specify the subsidiary corporation or corporations which shall become established thereunder, the date or dates with effect from which they shall be so established, the powers and functions of the parent Corporation which such subsidiary corporation or corporations may exercise and discharge, the conditions and limitations subject to which such powers may be exercised, the management of the affairs of each such subsidiary corporation by a Board of Directors, the capital of each such subsidiary corporation and all other matters relating to such subsidiary corporations corresponding to the various matters for which provisions have been made in this Act with respect to the parent Corporation:
As per Clause (d) thereof a subsidiary Corporation shall have Managing Director, a Chief Accounts Officer and a Financial Advisor or Chief Accounts Officer cum Financial Advisor and such other officers. Under Section 19 of the Act the Corporation shall have the following powers:
(a) to operate road transport services in the State 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.)
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Under Section 23(1) of the Act the Central Government and the State Government provide capital to a Corporation in the agreed proportion. As per Clause-5 of Sub-section 2(A) of Section 23 the shares of the Corporation are not transferable except in accordance with the Rules framed under the Act. A Corporation can be superceded by the State Government under Section 38 of the Act. Under Section 68(C) of the Motor Vehicles Act 1939 (now repealed and in its place enacted Motor Vehicles Act of 1988) the Corporation can have monopoly over the notified routes in the State of Karnataka. Keeping in view these provisions of the Act, I will proceed to examine the two issues under consideration.
16. In the impugned order at Annexure-A the reasons assigned for bifurcating the KSRTC are stated and the same as extracted hereunder:
2a). The Committee noted the growth of KSRTC for the last 30 years of its existence and also reviewed its performance so far. The organisation has become huge and unweildy and is not able to devote full attention to the needs of the commuters in the fully nationslised districts of Hubli-Dharwad, Belgaum, Karwar, Bijapur, Gulbarga, Bidar, Raichur and Bellary.
b). These areas are totally dependent on the State Road transport Corporation for their daily travel. They need to be provided with other amenities for the convenience of the travelling public and the time has now come to have separate Corporation for these area. Having its central office in Bangalore which is at a distance of 300 to 600 kms from the mid point of the State and its northern end, effective supervision is the first casualty. Centralised administrative control is detrimental to efficiency and quality service. The central office is away from the nationalised 9 districts of Northern Karnataka. It was therefore, decided that separate corporations be formed one for Bombay-Karnataka area, one for Hyderabad-Karnataka area and one for the remaining districts of the State.
The main causes for bifurcation of KSRTC is narrated in the statement of objections filled by the 1st respondent at paragraph 2 as under:
2. …The fleet strength has been increasing from time to time to cater to the needs of the travelling public throughout the State of Karnataka. Despite the steady increase of fleet strength the Corporation was not able to neutralise its losses due to various factors. The issue relating to financial losses suffered by the corporation and the imperative need to improve operational efficiency have engaged the attention of the Government. The Government therefore, felt that there was immediate need to study these problems in depth and to come up with measures to improve the system for the benefit of the general public. On a careful examination and analysis of the problems to be solved, the Government was of the opinion that the question whether the Corporation, with its steady growth would be an unwieldy organisation affecting the Page 1475 efficiency of operations resulting in poor performance and mounting financial losses required examination. One of the aspects which the Government felt required consideration was whether the Corporation should be converted into smaller viable corporations which would facilitate more efficient management of the resources at its command.
From the underlined portion it is clear that the need occasioned for providing efficient transport service and to eliminate poor performance and financial losses. As already stated above, there is no provision at all in the Act for bifurcation of a Corporation (KSRTC) established under Section 3 of the Act. The option provided under the Act is either to create subsidiary corporations under Section 17A of the Act or to supersede the existing corporation under Section 38 or else to liquidate the Corporation under Section 39 by the State Government.
17. The wordings of Section 17A off the Act are clear and they are “where it is expedient or necessary for the corporation so to do for the more efficient discharge of the functions under the Act, it can frame schemes for establishing one or more subsidiary Corporations. In the Instant case the State Government has established KSRTC way back in the year 1961 under Section 3 of the Act inter-alia for extending and improving the road transport facility and for providing efficient and economical system to the commuters in the State. Any further improvement in transport service in the State could have been augmented by creating Subsidiary Corporations under Section 17A of the Act. Instead of doing so, the State Government went to the extent of bifurcating KSRTC without any power or authority in law to do so. Bifurcation of existing Corporation is impermissible under the provisions of the Act. On this ground alone the impugned orders at Annexures-‘A’ and ‘B’, ‘B1’ series notification are liable to be quashed.
18. The KSRTC was established by the State Government under Section 3 of the Act in the State with the main object of extending and improving the facilities for road transport and for providing efficient and economical system of road transport service to the commuters as provided in Clause-(c) of Section 3 of the Act. As provided in Section 17-A(1) of the Act, if the second respondent corporation found that it is expedient or necessary for the more efficient discharge of its functions, it could have formed subsidiary corporations by obtaining the concurrence of both State and Central Governments which is mandatory in nature. The concurrence of Central Government is not obtained for the scheme by the State Government before passing the impugned orders. That is the illegality committed in the instant case. For this reason also the orders and notifications are void abinito in law as held by the Apex Court at para 31 and 32 in the case of Babu Verghese v. Bar Council of Kerala which paragraphs are extracted hereunder:
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31. It is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any Statute, the act must be done in that manner or not at all. The origin of this rule is traceable to the decision in Taylor v. Taylor (1875) 1 Ch.D 426 which was followed by Lord Roche in Nazir Ahmad v. King Emperor 63 Ind App 372 : AIR 1936 PC 253 who stated as under:
Where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all.
32. This rule has since been approved by this Court in Rao Shiv Bahadur Singh v. State of Vindhya Pradesh and again in Deep Chand v. State of Rajasthan . These cases were considered by a Three Judge Bench of this Court in State of Uttar Pradesh v. Singhara Singh and the rule laid down in Nazir Ahmad’s case (supra) was again upheld. The rule has since been applied to the exercise of jurisdiction by Courts and has also been recognised as a salutary principle of administrative law.
Though it is categorically asserted and claimed by the respondents that the establishment of respondents 5 to 7 are under Section 3 of the Act, in reality they are nothing but subsidiary corporations which were required to be established under Section 17A of the Act after following the mandatory procedure as contained in the said section. Otherwise, the employees transferred to those corporations from KSRTC will lose their lien in the parent department and their membership ceases in the first petitioner federation. If respondents 5 to 7 are treated as subsidiary corporations of Parent Corporation KSRTC, the KSRTC will have full management and control over the subsidiary corporations and the members of 1st petitioner federation remain intact. The 1st petitioner can also retain its right of bargaining power on behalf of its members as a collective bargaining agent on behalf of the employees of the second respondent corporation throughout the State. If respondents 5 to 7 are considered as independent corporations, the 1st petitioner has no right of bargaining with them and its right to Trade Union activities and membership of the employees would be confined only to KSRTC and not beyond that. Such a situation is not permissible in law. So, viewed from any angle, it has to be held that the impugned action of the State Government is not traceable to Section 3 of the Act but Section 17A of the Act is applicable to the fact situation. Accordingly, Points 2 and 3 are answered.
19. Apart from the above reasons there is heavy financial burden upon the respondents No. 3, 5 to 7 by creating separate infrastructures, such as separate Board of Directors, Managing Directors, Chief Accounts Officer Page 1477 and other incidental expenditure to be incurred are unnecessary and heavy which will not be in public interest. Both the interests of the public and employees will be affected. On account of heavy expenditure of crores of rupees required to be incurred by the above respondents towards its infrastructure facilities, gradually they will be suffering loses, and they have to be either superseded or liquidated. In that event the object of the Act will be defeated and public and employees interest will be adversely affected. It is pleaded by the petitioners that KSRTC is not running under losses whereas one or two other corporations are running under loss, but it is not on account of it, but for the reason that it has been discharging Governmental duties in providing free passes to the freedom fighters, concessional passes to senior citizens and students whose expenditure has to be borne by the State Government and the same shall be reimbursed to the Corporation.
20. Point No. 4: The question is whether Judicial Review power can be exercised by this Court at this juncture is examined by this Court with reference to the rival legal contentions urged on behalf of the parties. The contention of the respondents is that respondents 5 to 7 are working independently for the last 10 years and therefore judicial review is not permissible in law at this stage in this case. No doubt, this Court has not granted any interim relief to the petitioners and respondents 5 to 7 are operating independently as of today. The KSRTC has got monopoly over the notified routes in the entire State and private operators are prohibited to operate on this monopoly route. Since the KSRTC was established under Section 3 for providing efficient, cheaper and adequate transport facility to the commuters with the prerogative of monopoly, the same should be continued. That benefit cannot be deprived of. If respondents 5 to 7 are given independent status, the monopoly right acquired by KSRTC over the notified routes will be lost. Even though the magnitude of its fleets is enormous, the magnitude can be divested with the subsidiary corporations without affecting the parentship of KSRTC. Only thing to be complied is the consent of Central Government has to be obtained as required under Section 17A of the Act. If the second respondent corporation satisfies that, establishment of subsidiary corporations is expedient in the public interest. If, independent status is accorded to respondents 5 to 7, and if, any of them suffer loss, the same cannot be filled-up with the profit earned by other corporations, in such event the corporations running under loss have to be closed. That will result in hardship to the public and employees which would defeat the objects of the RTC Act and M.V. Act. If respondents 5 to 7 are treated as subsidiary corporations, such a situation can be meted out by allocating funds by the parent corporation or funding from the profit making corporations. Even the service conditions of the employees of the corporation also can be kept intact and uniform. That apart, in view of the feet that Points No. 2 and 3 are answered in favour of the petitioners judicial review power has to be exercised in this case for the reasons stated supra. In this regard, paras 34 and 36 of the decision reported to Page 1478 (Fertilizer Corporation Kamgar Union v. Union of India) are relevant and the same are extracted hereunder:
34. Our national reconstruction involves an enormous increase in public sector operations in fulfillment of the paramount directives of Part IV of the Constitution. In a society in which the State had thrust upon it the imperative of effectuating massive transformation of economy and social structure the demands upon the legal order to inhibit administrative evils and engineer developmental progress are enormous, though novel. The present case, whatever the merits and the ultimate conclusion, does raise the deeper issue of the dynamics of social justice vis-a-vis the role of the Rule of Law where the public sector occupies the commanding heights of the national economy and yet asserts a right to be free from judicial review. That cannot be, while it is unnecessary for us to spell out in greater detail the emergence of a new branch of administrative law in relation to the national plan and the public sector of the economy. It is important to underscore the vital departure from the pattern of judicial review I the Anglo-American legal environment because the demands of development obligated by Part-IV compel creative extensions to control jurisprudence in many fields, including business, administrative law, contract law, penal law, fiscal law and the like.
36. A pragmatic approach to social justice compels us to interpret constitutional provisions, including those like Articles 32 and 226, with a view to see that, effective policing of the corridors of power is carried out by the Court until other ombudsman arrangements – a problem with which Parliament has been wrestling for too long – emerges. I have dwelt at a little length of this policy aspect and the Court process because the learned Attorney General challenged the petitioner’s locus standi either qua worker of qua citizen to question in Court the wrong doings of the public sector although he maintained that what had been done by the Corporation was both bona fide and correct. We certainly agree that judicial interference with the administration cannot be meticulous in our Montesquien system of separation of powers. The Court cannot usurp or abdicate, and the parameters of judicial review must be clearly defined and never exceeded. If the Directorate of a Government company has acted fairly, even if it has faltered in its wisdom, the Court cannot, as a super auditor, take the Board, of Directors to task. This function is limited to testing whether the administrative action has been fair and free from the taint of unreasonableness and has substantially complied with the norms of procedure set for it by rules of public administration.
21. It is to be noted that the Central Government has also contributed its shares for the establishment of KSRTC. Its funds or assets in KSRTC cannot be diverted or transferred to other corporations if they are treated as Page 1479 independent corporations. Since Central Government concurrence is not obtained by the State Government before passing the impugned order and issuing the notification, there is violation of statutory provisions of the Act and rule of law. Mr. M.C. Narasimhan has rightly relied upon the decision (Ashok Marketing Ltd. v. Punjab National Bank) in support of the legal contention that the assets of the corporation shall not be transferred in favour of respondents 5 to 7, the relevant paragraph 16 is attracted hereunder:
16. In English law a corporation has been defined as “a body of persons or an office which is recognised by the law has having a personality which is distinct from the separate personalities of the members of the body or personality of the individual holder for the time being of the office in question.” (See Volume.9, Para 1201). Generally speaking, corporations are of two kinds; corporation aggregate and corporation sole. A corporation aggregate has been described as an incorporated group of co-existing persons and a corporation sole as an incorporated series of successive persons, (Salmond on Jurisprudence, 12th Edition P.308). The distinctive feature of a corporation are that it has the capacity of continuous existence and succession, notwithstanding changes in its membership and it possess the capacity of taking, holding and conveying property, entering into contracts, suing and being sued, and exercising such other powers and privileges conferred on it by law of its creation just as a natural person may (See S.S. Dhanoa v. Municipal Corporation, Delhi ). Corporations aggregate may be public or private. A public corporation is a corporation formed for a public purpose e.g. local Government authorities, and it is usually incorporated by a public general Act of Parliament. A private corporation is a corporation formed for profit e.g. a limited company, and it is usually incorporated under a statutory enactment. After the second world war there has been development of a new pattern of public corporations in England as an instrument of planning in the mixed economy. The general characteristics of such a public corporation is that it as normally created by a special statute; it has no shares and no share-holders either private or public, and its share-holder, in the symbolic sense, is the nation represented through Government and Parliament; the responsibility of the public of the public corporation is to the Government, represented by the competent Minister and through the Minister to Parliament; the administration of the public corporation is entirely in the hands of a board which is appointed by the competent Minister; and it has the legal status of a corporate body with independent legal personality. (See W. Friedman. The New Public Corporations and the Law (1947) 12 Mod L R 234-236). There is a similar Page 1480 growth, of this type of public corporation in other countries. This trend is also evident in our country since independence and a number of such public corporations have been constituted by Acts of Parliament.
(Emphasis Supplied)
22. Under the Karnataka Government (Transaction of Business) Rules 1977, Transport Department is an independent department. The department is under the control of Transport Ministry. As per Rule-12, the matters referred to in the First Schedule shall be placed before the cabinet. In Item No. 16 of First Schedule, creation, of new corporations is included. Further, the establishment of either corporations or subsidiary corporations is a policy matter for the State Government and it will have serious financial obligations of crores of rupees upon the State Government and therefore the approval of the cabinet is required under the Business Transaction Rules. In Item No. 17 the proposals regarding regulating the recruitment and conditions of service of persons serving in connection with the affairs of the State is also included. Undoubtedly, KSRTC is an instrumentality of the State under Article 12 of the Constitution. Therefore, the proposal affecting the service conditions of the employees and creation of corporations should have been placed before the Cabinet before passing the impugned orders that has not been done, therefore the same are vitiated in law.
23. In order to find out whether the matter was placed before the Cabinet or not, records were called for from the State Government. The same is not made available by the first respondent to this Court. The learned Government Pleader has received a letter from the Government stating that records are not available. What happened, to the records is not forthcoming in the said letter. Therefore, this Court is constrained to draw adverse inference in the matter as held by the Apex Court in the case reported in AIR 1968 SC 1314.
24. For the foregoing reasons, the writ Petition is allowed. The impugned orders and notifications are quashed. It is open to the State Government to establish respondents 3 and 5 to 7 as subsidiary corporations after following the mandatory procedure under Section 17A of the Act.
25. After dictating the order Mr. L. Govindraj, learned Counsel for respondents 5 to 7 made an oral application to stay the operation of this order for a period of six weeks to enable them to take up the matter in appeal Learned Sr. counsel Mr. Narasimhan appearing on behalf of the petitioners has strongly opposed the same contending that this Court, after recording valid reasons passed the order in favour of the petitioners. Therefore, there is no need for this Court to stay this order. Even if it is not stayed no hardship and prejudice would be caused to the above respondents as they can function under second respondent. After hearing the submissions made on behalf of the parties, this Court is of the opinion that to enable the respondents to prefer appeal, the operation of this order has to be stayed for a period of six weeks.
26. Accordingly the operation of this order is stayed.