JUDGMENT
V.D. Misra, J.
1. This judgment will dispose of Civil Writs Nos. 217 and 426 of 1978 since common questions of law have been raised by the petitioners. The parties agree that the facts relating to Civil Writ No. 426 of 1978 should be gone into and the questions of law raised in this petition decided. It is also agreed that the judgment of this petition shall govern Civil Writ No. 217 of 1978.
2. The relevant facts of Civil Writ No. 426 of 1978 may now be noticed. The petitioners are some of the employees of erstwhile Caltex (India) Ltd. Petitioner No. 1 is also the Secretary of the Delhi Regional Committee of the Coril Management Staff Association (respondent No. 3) and a member of its Managing Committee. The third respondent is registered under the Trade Unions Act, 1926.
3. Caltex Petroleum Corporation (a foreign Company) has various subsidiaries. One of its subsidiaries, namely ,the Caltex Oil Refining (India) Ltd. (referred to as “CORIL” (an Indian Company) was carrying on the business of refining crude oil and producing petroleum products in India and another of its subsidiaries, namely, the Caltex (India) Ltd. (a foreign Company) was carrying on through its undertakings in India the business of marketing and distributing petroleum products. The President of India promulgated the Caltex (Acquisition of Shares of Caltex Oil Refining (India) Limited and of the Undertakings in India of Caltex (India) Ltd.) Ordinance, 1976 (15 of 1976), on December 30, 1976. The Ordinance was replaced by Act No. 17 of 1977. This Act was given retrospective operation as it was “deemed to have come into force on the 30th day of December, 1976″ (Sub-section (2) of Section 1). The right, title and interest of Caltex (India) Limited in relation to its undertakings in India stood transferred and vested in the Central Government on December 30, 1976 (Section 5). Sub-section (1) of Section 9 empowers the Central Government to direct vesting of any of the undertakings of Caltex (India) Limited in a Government company. Pursuant to these powers the Central Government issued a notification dated December 30,1976 directing that” the right, title and interest and the liabilities of Caltex (India) Limited in relation to its under-takings in India, shall, instead of continuing to vest in the Central Government, vest with effect from the thirtieth day of December, 1976 in Caltex Oil Refining (India) Limited.” By Sub-section (1) of Section 11 services of employees of Caltex (India) Limited stood transferred on the existing terms and conditions of service to the Government company, i.e., CORIL Section 15(1) preserves the contracts entered into by Caltex (India) Limited for any service, sale or supply in India, and in force immediately before December 30 1976.
4. On March 8, 1976 CORIL issued a Procedural Order (Annexure II to the writ petition). By this order the Board of the company decided that the perquisites admissible to the management staff be nationalised in the manner stated therein. The General Secretary of the Coril Management Staff Association (respondent No. 3) by his letter dated March 13, 1978 (Annexure III to the writ petition) objected to the issuance of this order but in vain.
5. The aforesaid Procedural Order affects adversely the perquisites which were being received by the petitioners. It is assailed on various grounds which we will now notice.
6. The first contention advanced by Mr. Ramamurti learned Counsel for the petitioners is that the notification issued under Section 9 of the Act vesting the management of the undertakings of Caltex (India) Ltd. in CORIL is ultra virus of Sub-section (1) of Section 9.
7. At this stage the provisions of Section 9 of the Act may be read with advantage:
9(1) Notwithstanding anything contained in Sections 5, 6, and 7, the Central Government may, if it is satisfied that a Government company is willing to comply, or has complied, with such terms and conditions as that Government may think fit to impose, direct by notification, that the right, title and interest and the liabilities of Caltex (India) in relation to any of its undertakings in India shall, instead of continuing to vest in the Central Government, vest in the Government company either on the date of the notification or on such earlier or later date (not being a date earlier than the appointed day) as may be specified in the notification.
(2) When the right, title and interest and the liabilities of Caltex (India) in relation to its undertakings in India vest in a Government company under Sub-section (1), all the rights and liabilities of the Central Government in relation to such undertakings shall, on and from the date of such vesting, be deemed to have become the rights and liabilities, respectively, of the Government company.
(3) The provisions of Sections 5, 6, and 7 shall so far as may be, apply in relation to such Government company as they apply in relation to the Central Government and for this purpose references therein to the ‘Central Government’ shall be construed as references to such Government company.
Mr. Ramamurthi’s contention is that before the Central Government could vest the undertakings of Caltex (India) Limited in the Government company it was necessary for the Government to be satisfied that the Government company was willing to comply with such terms and conditions as it may think fit to impose. It is further contended that no satisfaction has been arrived at by the Central Government and as such it could not order the vesting in the Government company.
8. It is not denied that satisfaction required under Sub-section (1) of Section 9 is a subjective one. The notification specifically speaks about the satisfaction of the Central Government in the following terms:
MINISTRY OF PETROLEUM NOTIFICATION
New Delhi, the 30th December, 1976.
G.S. Rule 963(E), In exercise of the powers conferred by Sub-section (1) of Section 9 of the Caltex (Acquisition of Shares of Caltex Oil Refining (India) Limited and of the Undertakings in India of Caltex (India) Limited) Ordinance, 1976 (15 of 1976), the Central Government being satisfied that Caltex Oil Refining (India) Ltd. a Government Company is willing to comply with such terms and conditions as may be imposed by the Central Government hereby directs that the right, title and interest and the liabilities of Caltex (India) Limited relation to its undertakings in India, shall, instead of continuing to vest in the Central Government, vest with effect from the thirtieth day of December 1976 in Caltex Oil Refining (India) Limited.
No. F.P.–26011/1/76-IOC
Sd/- M. Ramaswami
Jt. Secretary .
Since the notification unambiguously states that the Central Government is satisfied it does not lie in the mouth of petitioners to say that the Government is not satisfied.
9. Moreover, it is not disputed before us that the Government has acquired 100% shares of Caltex Oil Refining (India) Limited. In this state of affairs it cannot be said that the Central Government cannot be satisfied that the terms and conditions which it may think fit to impose are not likely to be complied with by this company.
10. Mr. S.N. Kacker, the learned Solicitor-General, contends that the petitioners have no right to challenge the notification after a long delay of a year and a quarter. He also submits that the pattern of nationalization has consistently been to take over a company and vest it in a Government company because commercial activities are by and large being kept separate. There is a force in this contention. The delay in challenging the notification has been unreasonably long. During this period CORIL must have entered into various contracts in respect of Caltex (India) Limited resulting into rights in the third parties which are not before the Court. Even on this score we must reject the first contention of Mr. Ramamurti.
11. The second contention of Mr. Ramamurti is that the provisions of Sub-section (1) of Section 11 violate Articles 14, 19 and 31 of the Constitution of India and so it should be struck down as ultra vires. It is contended that there is no valid classification between contracts referred to in Section 11(1) and Section 15. It is also contended that unguided and arbitrary powers have been vested in the Officials by Sub-section (1) of Section 11 in altering the terras and conditions of service of the employees. Uncalled for discrimination is said to be created between Sub-sections (1) and (2) of Section 11 inasmuch as under Sub-section (2) the powers are to be exercised subject to the rules framed under Section 23, no such protection is given to the employees referred to in Sub-section (1).
12. In order to appreciate the contentions of Mr. Ramamurti it is necessary to reproduce the relevant provisions of these sections:
11(1) Every whole-time officer or other employee of Caltex (India) who was, immediately before the appointed day, employed by Caltex (India) in connection with its undertakings in India, and every whole-time officer or other employee of Caltex (India) who was, immediately before the appointed day, temporarily holding any assignment outside India shall, on the appointed day, become an officer or other employee, as the case may be, of the Central Government or the Government company (hereinafter referred to as the successor Government company) in which the right, title and interest of Caltex (India) in relation to its undertakings in India have vested under this Act and shall hold office or service under the Central Government or the successor Government company, as the case may be on the same terms and conditions and with the same rights to pension, gratuity and other matters as would have been admissible to him if there had been no such vesting and shall continue to do so unless and until his employment under the Central Government or the successor Government company is duly terminated or until his remuneration and conditions of service are duly altered by the Central Government or the successor Government company.
(2) Subject to rules made in this behalf under Section 23, every whole-time officer or other employee of Caltex Oil Refining who was, immediately before the appointed day, employed by Caltex Oil Refining in India, and every whole-time officer or other employee of Caltex Oil Refining who was, immediately before the appointed day, temporarily holding any assignment outside India shall, on and from that day, continue to be an officer or other employee of Caltex Oil Refining on the same terms and conditions and with the same rights to pension, gratuity and other matters as are admissible to him immediately before that day and shall continue to hold such office unless and until his employment under the Caltex Oil Refining is duly terminated or until his remuneration and conditions of service are duly altered by that company.
(3) If any question arises as to whether any person was a whole-time officer or other employee of Caltex (India), or as to whether any officer or other employee was employed wholly or mainly in connection with the undertakings of Caltex (India) in India immediately before the appointed day, or whether any whole-time official or other employee of Caltex (India) was temporarily holding any assignment outside India, the question shall be referred within a period of two years from the appointed day, to the Central Government which shall, after giving a reasonable opportunity of being heard to the person concerned in the matter, decide it in such manner as it thinks fit and such decision shall be final.
(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947, the Payment of Gratuity Act, 1972 or in any other law for the time being in force the transfer of the services of any officer or other employee under Sub-section (1) shall not entitle any such officer or other employee to any compensation of gratuity under these Acts or such other law, and no such claim shall be entertained by any Court, Tribunal or other authority.
15(1) Every contract entered into by Caltex (India) for any service, sale or supply in India, and in force immediately before the appointed day, shall, unless terminated under Sub-section (2) within a period of two years from the appointed day, continue to be of full force and effect against or in favor of the Central Government or as the case may be, the successor Government company.
(2) The Central Government may, if it is satisfied that any contract referred to in Sub-section (1) is unduly onerous or has been entered into in bad faith or is detrimental to the interests of that Government or the successor Government company, as the case may be, by order in writing, either terminate such contract or make such alterations or modifications therein as it may think fit.
Provided that the Central Government shall not terminate any contract or make any alteration or modification therein except after giving to the parties to the contract, a reasonable opportunity of being heard and except after recording in writing, its reasons for such termination, alteration or modification, as the case may be.
13. We may straightway deal with the contention of unjustified classification of contracts referred to in Sections 11 and 15. It will be noticed that Section 11 deals with the contracts of service of the employees of Caltex (India) Limited and CORIL as were existing immediately before December 30, 1976, By virtue of this Section the employees of the erstwhile foreign and Indian Companies come to be that of the Central Government or the Government company. It will be seen that whereas Sub-section (1) relates to the erstwhile employees of Caltex (India) Limited, Sub-section (2) relates to the employees of CORIL. The circumstances under which the conditions of service of these employees may be either terminated or altered have also been specifically referred to in this section. On the other hand, Section 15 relates to contracts “for any service, sale or supply” entered into by Caltex (India) Limited. It may be recalled that whereas CORIL was refining the crude oil and producing various types of petroleum products, it was Caltex (India) Limited which was distributing and marketing the same. It is in this context that the references of the contracts referred to in Section 15(1) have to be understood. It is elementary that these contracts are a class by themselves and have nothing in common with the contracts of service.
14. Mr. Ramamurti seeks support for his contention from a decision of the Supreme Court in re. The Special Courts Bill, 1978 A.I.R. 1979 S.C. 478. He refers to the principle stated in para 73. It reads as under:
The principle underlying the guarantee of Article 14 is not that the same rules of law should be applicable to all persons within the Indian territory or that the same remedies should be made available to them irrespective of differences of circumstances. It only means that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Equal laws would have to be applied to all in the same situation, and there should be no discrimination between one person and another if as regards the subject-matter of the legislation their position is substantially the same.
As already discussed, the employees of the companies, and the persons with whom contracts “for any service, sale or supply” of the petroleum products were entered into by Caltex (India) Limited, are not similarly circumstanced by any stretch of imagination. Obviously the subject-matter of legislation in Sections 11 and 15 is absolutely different. We find no merit in this contention and dismiss the same.
15. Now, let us see whether Section 11(1) does not contain any guidelines and confers arbitrary powers on the officials to terminate or alter the conditions of service.
16. It will be seen that whereas Sub-section (1) deals with erstwhile employees of Caltex (India) Limited (a foreign company) which was a subsidiary of Caltex Petroleums Corporation (a foreign company) Sub-section (2) deals with the erstwhile employees of CORIL an Indian Company) which was another subsidiary of Caltex Petroleum Corporation. The terms and conditions of service of the employees of the two companies were significantly different with reference to their emoluments. Moreover, if no provision was made for taking over the services of the employees of Caltex (India) Limited, admittedly they would have been thrown out of service after the acquisition of this company by the Government. In order to save their employment the Legislature decided to take them over on the conditions mentioned in Sub-section (1). Needless to repeat that employees of Caltex (India) Limited and those of CORIL form two separate groups of persons. It was for that reason that whereas in Sub-section (1) the erstwhile employees of Caltex (India) Limited were to “become” the employees of the Central Government or the Government company, the erstwhile employees of CORIL were to “continue” to be the employees of the CORIL. It is because of the employees of the two companies forming two different groups that Sub-section (3) was enacted to deal specifically with the employees of the Caltex (India) Limited. It is also for the same reason that whereas no change would be brought about in the terms and conditions of service of the employees of CORIL without complying with rules made under Section 23 of the Act. No such restriction was placed with regard to the employees of Caltex (India) Limited.
17. It is no doubt true that the ultimate authority vests in the Central Government which has directed vesting of the undertaking in a Government company. It is also true that under Section 9 the Central Government has a right to impose terms and conditions on the Government company. But then the Legislature while transferring the services of the erstwhile employees of Caltex (India) Limited on the existing terms and conditions of service, attached a condition. It was that the service and the terms and conditions of service would continue to be the same till these are “duly” terminated or “duly” altered. Now the word “duly” means “rightly, properly, fitly” (Concise Oxford Dictionary). According to Stroud’s Judicial Dictionary, 4th Edition, Volume II. p. 848, “duly” means “done in due course and according to law.” The word “duly” is the only condition precedent before any change could be brought in the terms of service of the petitioners.
18. It is now well-settled that the principles of natural justice shall be read in a statute unless these are excluded expressly or by necessary implication. Union of India v. J.N. Sinha . There is nothing in the present Act which excludes the application of the principles of natural justice. Indeed in Sub-section (3) a provision has been made for giving a reasonable opportunity of being heard to a person before the question whether he was a whole-time officer or employee, etc., of Caltex (India) Limited, is decided. In these circumstances before any alteration in the terms and conditions of service of an employee of Caltex (India) Limited to his disadvantage is made, the affected persons must be given an opportunity of being heard. It is only then that the CORIL can be said to be “duly” altering the terms and conditions of service.
19. It is contended by the learned Solicitor-General that in fact the impugned order dated March 8, 1978 rationalizes the perquisites admissible to the management staff of Caltex (India) Limited and it being an interim measure it was not necessary to grant any opportunity of hearing. We do not agree. Admittedly, the impugned order adversely affects the perquisites of the petitioners.’ It has resulted in civil consequences.
20. We cannot also accept the learned Solicitor-General’s contention that since Sub-section (1) of Section 11 confers a conditional right on the employees so the employees have to accept or reject it as a whole. The effect of this sub-section was to transfer the services of the erstwhile employees by operation of law. They had no choice. Sub-section (4) of Section 11 took away their right to claim any compensation or gratuity under the Industrial Disputes Act, 1947, the Payment of Gratuity Act, 1972, or any other law. In other words, they had no option but to become the employees of the Central Government or the Government company. It may be recalled that they had become the employees of the Government company on the very day (30th December, 1976), when the Ordinance No. 15 of 1976 was promulgated. If the contention of the learned Solicitor-General is accepted, it would mean that not only the service of the employees could be terminated but also the terms and conditions of their service could be changed to their disadvantage at the sweet will of the Government company. We cannot interpret Sub-section (1) of Section 11 to grant such arbitrary power to the Government company.
21. The learned Solicitor-General draws our attention to the fact that after the impugned order was issued, the General Secretary of the petitioners’ Association made a representation on March 13, 1978. It is stated that a dialogue ensued between the parties but the Board of CORIL found no reason to change the impugned order. It is thus contended that the petitioners were afforded adequate opportunity of being heard.
22. The question, which .now arises for our determination, is whether the principle of audi alteram partem is adequately complied with where an affected person is heard after the order is passed? Our answer is “No” What is the good of heating a person after a decision is taken and the order is made? This principle of natural justice gives one a right to an opportunity of being heard before any decision is arrived at. The opportunity granted after taking a decision and issuing an order is nothing but a farce. It is necessary that the principles of natural justice should be complied with not only in letter but also in spirit. In the instant case we find that the impugned order was marked confidential. Why it was marked confidential has not been disclosed to us. It is true that it was to come into effect on April 1, 1978 but the interregnum (between the date of the order March 8, 1978 and April 1, 1978) was not for the purpose of providing an opportunity to the affected persons to be heard. We have, therefore, no hesitation in striking down this order and setting it aside.
23. The learned Solicitor-General has contended that the views of Section 11 cannot be challenged because of the protection given to it by Article 31C read with Article 39(6) of the Constitution. For this purpose the 44th amendment to the Constitution, which takes away the right to property by deleting Clause (f) of Article 19(1) and deletes Article 31 is also relied upon. We need not go into these questions because we have held Section 11(1) intra vires. It may be noticed that the petitioners have not prayed for declaring Sub-section (1) of Section 11 ultra vires. Indeed, if this sub-section is struck down as ultra vires, the petitioners will automatically cease to be employees of CORIL.
24. It is contended on behalf of the respondents that the present petition is not maintainable because the impugned order has been issued by the Board of CORIL, a company incorporated under the Companies Act and not by a statute.
25. Now there is a well recognised distinction between those companies created by a statute and those which are registered under the Companies Act. In the case of the former, the statute not only creates a company but confers powers and lays down duties. In the case of the latter like-minded persons decide to give up to themselves a legal entity by forming a company and getting it registered under the Companies Act. Whereas the former will be an “authority” in terms of Article 12, the latter would usually not fall in this category.
26. The executive authority of the State is represented by the Government and the latter may act through the instrumentality or agency of a corporation. But how to determine whether a corporation is acting as instrumentality or agency of the Government? This question came up for decision in the Supreme Court in Civil Appeal No. 895 of 1978, Ramana Dayaram Shetty v. International Airport, Authority of India, decided on May 4, 1979, . After referring to its earlier decision as well as American decisions on the subject, it was observed thus:
It will thus be seen that there are several factors which may have to be considered in determining whether a corporation is an agency or instrumentality of Government. We have referred to some of these factors and they may be summarised as under:
Whether there is any financial assistance given by the State, and, if so, what is the magnitude of such assistance, given by the State, and, if so, whether it is of the usual kind or it is extraordinary, whether there is any control of the management and policies of the corporation by the State and what is the nature and extent of such control whether the corporation enjoys State conferred or State protected monopoly status and whether the functions carried out by the corporation are public functions closely related to Governmental functions. This particularisation of relevant of factors is however not exhaustive and by its very nature it cannot be.
In the same case the Court while answering the question:
What are the ‘other authorities’ contemplated by Article 12 which fall within the definition of ‘State’? preferred to adopt the test of Governmental instrumentality or agency as one more test and perhaps a more satisfactory one for determining whether a statutory corporation, body or other authority falls within the definition of State’.
27.We need not decide whether CORIL is an “authority” in terms of Article 12. For the purposes of this case we find that Section 11(1) has conferred a right on the petitioners to continue to serve on the existing terms and conditions of service and be the employees of the Central Government or the Government company, as the case may be. This section also casts an obligation on the Government company to continue the terms and conditions of the service of the petitioners unless and until these are “duly altered”. Irrespective of the fact whether CORIL can be said to be an “authority” as it is not created by a statute, a statutory duty has been cast on it in respect of the terms and conditions of service of the petitioners. For the purposes of enforcement of the rights of the petitioners conferred on them by Section 11(1) CORIL is to be treated as an “authority” under Article 12 and, therefore, subject to the jurisdiction of this Court. We, therefore, cannot accept the contention that since the impugned order has been passed by the Board of Directors of CORIL, so it cannot be questioned by the petitioners under Article 226 of the Constitution of India.
28. The result is, we allow the petitions, make the rule absolute and quash the impugned orders. In the circumstances of this case, we direct the parties to bear their own costs.
