T.G. Srinivasa Murthy, Etc., Etc. vs Bharat Earth Movers Ltd. Etc., … on 17 December, 1981

JUDGMENT

Rama Jois, J.

1. Three important questions arise for consideration in these four writ petitions. They are :

1. Whether, (i) The Bharat Farth Movers Limited; (ii) The Hindustan Machine Tools Limited; (iii) The Karnataka Agro Industries Corporation Limited, which are companies incorporated under the Companies Act, 1956 (Central Act 1/1956) and are Government companies as defined in S. 617 of the said Act, fall within the meaning of the word ‘State’ as defined in Art. 12 of the Constitution of India ?

2. Whether (i) Rule 17.2 of The Bharat Earth Movers Limited Service Rules;

(ii) Rule 20.1 of the Hindustan machine Tools (Conduct, Discipline and Appeal) Rules;

(iii) Rule 2.21 of the Karnataka Agro-Industries Corporation Limited (Recruitment and Promotion) Rules; and

(iv) Regulation 25(2) of the Reserve Bank of India (Staff) Regulations, 1948, (hereinafter referred to as ‘the impugned Rules’ O providing for termination of service of its permanent employees, by a simple notice, at any time, without fixing any period of service or age after which such power could be exercised, as also the orders of termination of service made under impugned rules, are violative of Art. 14 and 16(1) of the Constitution of India ?

3. Even if the Rule is valid, whether the order of termination made against each of the petitioners is valid ?

2. Briefly stated the facts in each of these cases are as follows :

(1) WP No. 14686/1981 : (i) The petitioner joined service as a Stenographer on the establishment of the Rail-Coach Division of the Bharat Earth Movers Limited (BEML for short) which is a public-sector undertaking established by and functioning under administrative control of the Government of India. He was promoted as a Store Keeper on 3-6-1970. He was thereafter promoted as Head Store Keeper on 18-7-1971. He was further promoted as Assistant Stores Officer on 31-7-1980. In this promotional post, he was placed on probation for one year. By an order made on 1-7-1981, the service of the petitioner were terminated with effect from the same date under clause 17(2) of the BEML Service Regulations.

(ii) The allegations made in the petition are as follows : The petitioner was elected as the General Secretary of the BEML Association on 24-6-1977. He was again re-elected to the same office for 1979-80. As General Secretary of the Association, which was the only trade union in existence on the establishment, the petitioner, in the discharge of his duty as a leader was espousing the causes of the employees and he was representing the workmen and placing their legitimate grievances before the management. The Management of the BEML declined to implement certain terms of settlement entered into between them and workmen, and duly registered under the Industrial Disputes Act. With the result, the relationship between him and the management got strained. An industrial dispute arose between the workmen of the public sector industries in Bangalore and their branches elsewhere and the management. The employees went on strike which lasted for nearly three months commencing from 26th December, 1980 till 14-3-1981. Thereafter the management declared a lock-out on 7-5-1981 till 2-6-1981. During the period of strike, the petitioner was one of the convenors of the Joint Action Front formed by the employees to the public-sector industries in Bangalore. The management entertained grouse against the petitioner, as he was spearheading the workers agitation. The strike and the subsequent lock-out came to an end on 2-6-1981. Thereafter the services of the petitioner have been terminated as a measure of penalty by way of victimisation invoking the impugned Rule 17.2 of the BEML rules. This is also evident from the fact that three of his juniors namely, G. Purushotham Reddy, Balasubramanyam and Srinivasa Murthy, were retained in service, whereas the services of the petitioner were terminated.

(iii) In the petition, the petitioner had prayed for quashing the order terminating his services and also prayed for striking down the rule under which his services are terminated on the ground that it is violative of Art. 14. The relevant plea in the petition regarding the challenge to the impugned rule reads :

“……. The power of termination referred to at Rule 17.2 of the Service Rules is capricious. Rule 17.2 reads as follows :

‘The services of a permanent employee may be terminated on the ground of ‘Services no longer required in the interests of the Company’ without assigning any reasons.’

Thus, under the rule, the termination of services of an officer can be brought about without any enquiry and without any enquiry and without assigning any reason. There is no qualifying age nor qualifying service for any other qualifying circumstances stipulated for the exercise of the said power. There are no guide lines given to the authorities exercising the said powers should not be used. The power conferred under the said Rule is in unconditional and absolute terms. Since the exercise of the power is not restricted or circumscribed in any manner, the authority desirous of getting rid of an employee, is, at liberty to make use of this power at his sweet will.

* * *

Thus the power conferred by the impugned rules is unguided and uncanalised and can be used arbitrarily and also unreasonably. It will be a damocles sword hanging on the head of an officer right from the day he enters as an officer or from the date of his promotion. Further, since termination can be brought about without assigning any reason, the aggrieved official cannot even challenge the action, since the employee is totally in the dark about the reason. Such a power is destructive of the very concept of permanent employment.

* * *

It is submitted that in the case of public employment courts have been anxious to ensure security of employment. This is not merely in the interest of fair-play, but also in the interest of securing an efficient service. What applied in principle to civil servants must also apply to those in public employment like the petitioner; though the protection envisaged in Art. 311 in terms may not apply to those in public employment not holding civil posts. If the object is to ensure integrity and efficiency in service, there is no valid reason why the same principles which have been evolved in the case of civil servants in the case of civil servants in the matter of security of tenure should not be made applicable to those in public employment. At any rate the basic objective of security of tenure (balancing with requirements of maintenance of discipline) it is submitted, should not be vitiated or given up solely because it is public employment and not civil service”.

The petitioner has also alleged that some of the top officers, who are on deputation are civil servants, who enjoy security of tenure and there is no rational basis to deny the same to the petitioner and other employees of the BEML.

(iv) On behalf of the management, it is pleaded as follows : The petitioner had been promoted as Assistant Stores Officer on 31-7-1980. He was placed on probation for a period of one year. During this period it was reported that the petitioner was frequently absenting from the workspot and that his work was not satisfactory. Therefore, his services were terminated under Rule 17.2 of the BEML Service Rules. The allegation that the termination of services was by victimisation and was penal in nature is not true. As regards the challenge to the impugned rule, that respondents have stated that the petitioner not being a civil servant cannot claim security of tenure as applicable to civil servants as Art. 311(2) is applicable only to them and not to the petitioner.

(v) Photostat copies of the original documents pertaining to, the period of probation and termination of service, were also produced at the time of hearing. The records disclose that there were periodical reports to the effect that the petitioner was not being found in the workspot and on several occasions it was found that he was contacting workmen. The latest report which preceded the order of termination was made on 8-6-1981. It reads :

“Sub : Sri T. G. Srinivasamurthy, Asst. Stores Officer.

Reference is invited to my confidential note dated 3-4-1981.

2. The probationery rating sheet for the months of April & May, 1981 are enclosed rating him ‘below average’. It has to be mentioned that he never attended for work from April 15, 1981 to 2nd June, 1981. He reported for duty only on 3rd June, 1981 after lifting of the lock-out. His absence upto 30-5-81 was covered by medical certificate.

3. This Officer’s attendance, indifferent attitude to work, lack of ability and other traits required of an officer have slowly but steadily affected the work. This has also affected the discipline in the department. The morale of other officers and staff not only in that section but also in the whole department is affected.

4. Even though we have been advising him periodically about his poor attendance and performance so as to improve, there has absolutely been no response; but on the other hand there has been further deterioration in the work affecting even the morale and discipline of other officers and staff.

5. In the circumstances, it is considered that he cannot be relied upon to be continued in service.

Sd/-

(RM)”

On June 10, 1981 a note was put up and on order was made by the competent authority. It reads.

“Subject : Shri T. G. Srinivasamurthy, Asst. Stores Officer.

Ref : RM’s confidential Note dt. 8-6-1981

The report made vide RM’s confidential note under reference and the earlier reports referred to therein reveal that

(a) Shri T. G. Srinivasamurthy, Asst. Stores Officer is indifferent and lacks devotion to his duty.

(b) Though he puts in attendance he is not available whenever required.

(c) He is not amenable to the advice given by his superiors.

(d) He has not accounted for his absence during the period 26-12-1980 to 14-3-1981.

(e) His total performance has affected the discipline and morale of the Department.

In the circumstances, taking into consideration reports from RM, the officer is deemed to have lost the confidence of the Management for retention in service :

“‘R’ may kindly consider if the services of Sri T. G. Srinivasamurthy can be dispensed with on grounds of “services no longer required in the interest of the company under clause 17.2 of the BEML Service Rules.

Sd/-

(RK)

I have carefully considered all the reports on this officer. It is clearly borne out that this officer has lost the confidence. I, therefore, hereby order his termination under clause 17.2 of BEML Service Rules on grounds of ‘services no longer required in the interest of the company.’

Sd/-

The Next day, i.e., on 1-7-1981 the impugned order, Annexure-A, was made which reads :

“To

RK

Copies R.M. & AR

Subject : Termination of the services of

Sri T. G. Srinivasamurthy, Asst. Stores Officer.”

The services Sri T. G. Srinivasamurthy, Asst. Stores Officer, may be terminated from the close of the shift today the 1st July, 81 on grounds of ‘services no longer required’ in the interest of the company under clause 17.2 of the BEML Service Rules.

In lieu of notice, the officer will be entitled to 3 months basic pay and dearness allowance and ad hoc compensation as provided under clause 17.2 of the BEML Service Rules.

(vi) The petitioner has produced an order dated 20th March, 1975 to counter the allegation that he was remaining absent from the place of his duty. That order issued on the subject of “Facilities to be provided to labour unions” states that office bearers would be permitted to leave the workspots to represent matters connected with their employees and also states that time spent in attending meetings with the management would be treated as duty.

(2) W.P. No. 10345/1981 : (1) The petitioner in this writ petition was appointed a Supervisor on the establishment of the Watch Factory Division of the Hindustan Machine Tools Limited (HMT for short) 24-1-1976 (vide Annexure-A). According to clause (2) of the order he was to be on probation for a period of one year which could have been either reduced or extended. The probationery period came to an end in January, 1977. It was neither reduced nor extended. According to clause 3 of the appointment order after probation, his services were liable to be terminated at any time by one months’ notice on either side. This was in effect reproduction of clause 20.1 of the HMT (C.C.A.) Rules. After he had put in more than five years of service the petitioner was discharged from service in terms of clause (3) of the appointment order read with clause 20.1 of the HMT (Control Appeal & Discipline) Rules.

(ii) The petitioner has alleged that the termination of his service was penal in nature and it was made on account of the influence brought to bear on the terminating authority by Shanmugam, the Account Officer of the company who had entertained a grouse against the petitioner on the ground that he had not provided a vehicle for his use as demanded by him on 14-3-1981.

(iii) In the statement of objections filed by the respondents, the allegations made in the petitions have been denied and it is asserted that termination of service was made in exercise of the power available under clause 20(1) of the Service Rules of the company and that the petitioner had no right to question the exercise of the power which was a term of contract of service.

(iv) Original records were produced. They disclosed that a note marked as “secret” was put up on 29-4-1981 by the Deputy Personnel Manager in which as many as 13 charges were levelled against the petitioner. The recommendation made in the note was that in view of the abundance of evidence and the description of incidents, no inquiry was necessary and that his services should be terminated under clause 20.1 of the Service Rules of the HMT. On the same date, the General Manager made an order which is marked as “confidential”, according sanction for the discharge of service and that on the same date the impugned order was made.

Aggrieved by that order the petitioner presented the petition praying for quashing the impugned order. Later he also amended the petition and added a prayer for striking down Rule 20.1 of the Service Rules of the HMT.

(3) WP No. 2167/1981; (i) The petitioner states : He was appointed on 29-1-1971 as Supervisor in the service of the Karnataka Agro Industries Corporation which is a Government Company. He had been confirmed in the post. In March, 1960 the petitioner was transferred from Mysore to Dharwar. He reported for duty at Dharwar on 27-6-1980. At the time of taking charge from one V. T. Hungund, the petitioner found several old articles instead of the new ones. Hence he made a representation to the Asst. Agro Engineer and brought to his notice the irregularities so found, on 1-7-1980 (Annexure-A) as he wanted to safeguard himself against becoming a victim of mischief committed by others. Thereafter V. T. Hungund remained unauthorisedly absent and a notice was issued to him on 24-7-1980 to hand over charge properly (Annexure-B). However, the handing over charge was not done. The petitioner had to go on Medical leave from 9-9-1980. He reported for duty on 1-12-1980. Then he was informed that his services were terminated as per memo dated 1-12-1980 (Annexure-C) as per order dated 11-11-1980 on the ground of want of confidence under clause 2.21 of the Service Rules of the corporation (Annexures D & E), Aggrieved by that order, he had presented the petition.

(ii) In the statement of objections, the corporation has asserted that the termination of the services of the petitioner had been made in accordance with the provisions in the Service Rules. The original records were also produced. They disclosed that the reason for ‘termination of the services of the petitioner was that he was unauthorisedly absent and that he had not taken charge at Dharwar. The last among the documents which gives this indication is a report dated 4-10-1980 (found at page 119 of the regards.)

(iii) The petitioner has pleaded that impugned order was penal in nature and therefore, illegal as no inquiry was held and that clause 2.21 of the service Rules of the Corporation was violative of Article 14.

(iv) The plea of the corporation was that termination of service was made under the Rules which regulates the conditions of service, it was legal as the power of the management to effect discharge simpliciter of their employment on the ground of want of confidence was a well recognised power and therefore, the rule was not violative of Art. 15.

(4) WP No. 4091/1980; (i) The petitioner has stated as follows : He was the President of the Reserve Bank of India, Class IV Employees’ Union which was a registered trade union. He was fighting against unjust actions on the part of the management in the matter of conditions of service. Entertaining a grouse against him, two criminal cases were foisted against him in 1979 : one on the allegation that he had made an attempt on the life of one Shama-Sunder Shroff, the Public Relation Officer of the Bank through unknown persons and another about alleged irregularities in the destruction of soiled currency notes. He was placed under suspension on 21-6-1979 (vide-Annexure-B) Even as he was under suspension his services were terminated by an order dated 9-2-80 (Annexure-A) made under Regulation 25(2) of the Reserve Bank of India (Staff) Regulations, 1948. In fact an attempt was made by some one on his life on 9-7-1979 and the petitioner had to undergo neuro surgery and remained an inpatient till 30-7-1979.

(ii) While no charge-sheet was filed against the petitioner, as regards the allegations against him in connection with the irregularities in the destruction of soiled currency notes, he was discharged in respect of the charge levelled against him under S. 307 IPC by an order dated 18-6-1970 made by the first Additional District & Sessions Judge, Bangalore, in S C No. 17/80 (Annexure-K) during the pendency of the writ petition.

(iii) The petitioner had pleaded that the impugned order of termination of services though innocuously worded amounted to the imposition of penalty of removal from service and, therefore, as no inquiry preceded the passing of the said order, it was illegal. The petitioner has also challenged the constitutional validity of Regulation 25(2) of the Reserve Bank of India (Staff) Regulations, 1948 on the ground that it was violative of Arts. 14 and 16(1) of the Constitution.

(iv) In the statement of objections, the respondents have stated as follows. The termination of services has been made in exercise of the power under Regulation 25(2) of the Regulations and, therefore, it was termination simpliciter. Therefore, there was no question of giving any opportunity of holding inquiry before passing the said order. Having regard to the fact that the petitioner was suspected of having caused assault of Shamsundar, Shroff and also there was a serious allegation against the petitioner in connection with the destruction of soiled currency notes, the management of the Bank lost confidence in the petitioner and, therefore, without inquiring into the charges, the management exercised its power available under Regulation 25(2) of the Regulations.

(v) The relationship between the Reserve Bank and the petitioner was contractual in nature and he had accepted the terms of the contract at the time of joining service and Regulation 25(2) which gave power to the management to terminate the services of the petitioner simpliciter, was part of the contract. The terms and conditions of service set out in the Regulations have no statutory force and they were only contractual in nature. Therefore, the contention of the petitioner that the Service Rules were violative Arts. 14 and 16(1) of the Constitution is untenable.

3. The common case put forward by the petitioners is as follows : (i) The statutory corporations or the companies established by the Central Government or the State Government as the case may be, and are wholly controlled by the Government which established the concerned company, fall within the meaning of the word (“State”) as defined in Art. 12 of the Constitution. Consequently, the Corporation/companies are bound to conform to the Fundamental Rights incorporated in Part III of the Constitution. Any rule framed by such a body providing for terminating the services of permanent employee at any time without prescribing any period or age after which such termination could be made is void offending Art. 14 read with C. (1) of Art. 16 of the Constitution.

(ii) In any event, the order of termination made against each of these petitioner though innocuously worded, was in truth, an imposition of the penalty of dismissal without inquiry and in any event, was arbitrary and capricious and the same was liable to be set aside.

4. The common case put forward by the Government companies is as follows :

(i) The companies are not authorities within the true meaning of that expression and they do not fall within the meaning of the word “State” as defined in Art. 12 of the Constitution. They are purely commercial or industrial establishments. They are not discharging any governmental functions. Therefore, the petitioners cannot invoke the protection of the Fundamental Rights and seek to enforce those rights against these companies.

(ii) Even on the basis that the Government companies fall within the meaning of the word “State” for purposes of Part III of the Constitution, the relationship between the company and its servant is contractual in nature. The service conditions are not regulated by any provisions made by or under an act of Legislature. The clause which empowers the management of each of the companies to terminate the services of any of its permanent employee, at any time, by giving the prescribed notice, is part of the terms of the contract of service. Therefore, such a term is no law and therefore cannot be challenged on the ground that, it is inconsistent with, any of the Fundamental Rights specified in part III of the Constitution.

(iii) Even if the companies are held to be “State” for purposes of Part III and consequently the Fundamental rights incorporated therein are held applicable to, and enforceable against these bodies, the impugned rules are not violative of Article 14 or Art. 16(1) of the Constitution. Though it may be open for this Court to set aside any of the impugned orders if it is found to be arbitrary or capricious or as having been made on collateral considerations. But in each of these cases, the impugned order has been made in the interest of the service of the concerned company. Hence the impugned orders are not liable to be set aside.

5. As far as the Reserve Bank of India is concerned, it being a statutory corporation established under the Reserve Bank of India Act, 1934, it is not disputed that it falls, within the meaning of the word “State” as defined in Article 12 of the Constitution. In other respects, the pleas taken on behalf of the Reserve Bank of India were the same as taken by the Government companies.

6. Sriyuths R. N. Byra Reddy, N. C. Narasimhan, H. R. Venkataramanaiah, K. Subba Rao & S. B. Swethadri, learned counsels for the petitioners, addressed arguments on their behalf Sriyuths B. R. Dolia, S. G. Sundaraswamy, R. N. Narasimhamurthy, Subramaniam, and K. Suryanarayana, learned counsels for the respondents, addressed arguments on their behalf.

7. The first question for consideration is whether the Government companies, which are respondents in these writ petitions fall within the meaning of the expression “State” as defined in Art 12 of the Constitution. In this behalf I shall first set out in brief the particulars relating to the constitution of these companies.

(i) The BEML was incorporated under the Companies Act on 11-5-1964. The share capital of the company was Rs. 15 crores divided into 1,50,000 equity shares of Rs. 1,000 each. The subscribers to the Memorandum of Association were the President of India and four other officers of the Government of India, Viz., the Secretary, the Joint Secretary, the Deputy Secretary in the Ministry of Defence Production and a Under Secretary in the Ministry of Defence Under clause 95 of the Memorandum of Association, the President of India is empowered to determine in writing the number of Directors of the company, Under clause 97 the Directors of the Company are to be appointed by the President and are to be paid such remuneration as the President may determine from time to time. Clause 97(3) says that the president has the power to remove any Director from office at any time in his absolute discretion. Under clause 98 the President is empowered to authorise such of the Directors as named by him to exercise all such powers and do all such acts and things as the company is authorised to exercise and do. Under Art. 107, the President is empowered to appoint one or more of the Directors to the officer of the Chairman of the Board of Directors or Managing Directors. Article 119 empowers the Chairman to reserve for the decision of President any proposals or decisions of the Directors in any matter which, in the opinion of the Chairman, is of such importance as to be reserved for the assent of the President. Clause (b) of Art. 119 Specifies certain matters which are bound to be reserved for the approval of the President. Among the matters so specified are (i) all appointments to posts in the pay scale of Rs. 2,500-3,000 and above per mensem and of persons who have already attained the age of 58 years (vide clause 119(b)(i); (ii) winding up of the company (vide clause 119(b) (iii)(f). Under Art. 159, the President may, from time to time, issue such directions as he might consider necessary in regard to the exercise and performance of the functions of the company in matters involving national security or substantial public interest and in like manner may vary and annul any such directions and the Directors shall duly comply with and give immediate effect to the directions so issued by the President. Thus, not only the company is wholly owned by the Government of India, but also the latter has all pervasive control over the affairs of the company.

(ii) The HMT is also a public company sponsored by Government of India with an authorised capital of Rs. 50 crores divided into 5,00,000 equity shares of Rs. 1000 each. The seven subscribers to the Memorandum of Association of the company are the President of India, the Secretary, the joint Secretary, the Deputy Secretary and the Under Secretary to the Ministry of Defence Production, Government of India, the Secretary, Ministry of Finance, Government of India and a representative of Oerlikon machine Tool Works, Buehrle & Co.. Zurich, (Switzerland). The substance of the provisions of the Memorandum of Association is substantially similar to those of the BEML. This is also a public sector industrial undertaking owned by the Government of India having full control over the affairs of the company.

(iii) The Karnataka Agro Industries Corporation was incorporated under the Companies Act on 1-9-1967. Fiftyone per cent of the share capital of the corporation is held by the Central Government and the rest by the State Government. The Corporation was constituted to take over the activities of the Agricultural Engineering Wing of the Agriculture Department of the State Government, and accordingly it took over those functions on its coming into being and with effect from the said date, the afore aid Agricultural Engineering wing was abolished. Article 5 of the Memorandum of Association requires the Corporation to have not less than three and not more than twelve Directors and provides that the Directors shall not be required to hold any qualification shares. Article 6 empowers the Governor of the State to appoint a Chairman, Vice-Chairman and Directors of the Board and one or more Managing Executives. Article 10 empowers the Governor to appoint a Financial Adviser. The State Government exercises substantial control over the Corporation. Considering these aspects, the Corporation was held to be “State” as defined in Article 12 of the Constitution in T. Rangaswamy Setty v. The Karnataka Agro Industries Corporation (1981) 2 Kar. L.J. 455.

8. (1) It is not disputed, that in the case of each of the respondent-companies the whole or substantial part of the share capital is held by the Central Government and/or the State Government, as the case may be. It is also not disputed that each one of the respondent-companies is a Government company as defined in section 617 of the Companies Act and they are all public sector undertakings established by the respective Government and that the concerned Government exercises full and effective control over these companies.

(2) However, it is strenuously contended on behalf of the respondent-companies that they do not fall within the definition of the word “State” given in Art. 12 of the Constitution on the ground that these companies are purely industrial undertakings and the activities carried on by them are purely commercial and not governmental in nature, and they have also no power to make any law or rules having the force of law.

9. I am of the view that the question as to whether the respondent-companies fall within the definition of the word “State” as given in Art. 12 of the Constitution is no longer an open question for debate before this Court in view of the three recent pronouncements of the Supreme Court in –

(i) Ramana Dayaram Setty, v. International Airport Authority, [1979-II L.L.J. 217]; (iii) Som Prakash v. Union of India, [1981-I L.L.J. 79]; and (iii) Ajay Haisa v. Khalid Mujib, [1981-I L.L.J. 103].

However, as the matter was argued at length and a serious attempt was made to pursuade me to hold that the respondent-companies were not “State” as defined in Art. 12, and that the aforesaid three pronouncements do not preclude me from taking such a view, I shall briefly indicate my reasons for rejecting the said contention.

10. (1) The constitutional provisions can broadly be divided into two portions –

(i) The constitutional manifesto; and

(ii) the constitutional machinery.

(1) The Preamble, the Fundamental Rights. The Directive principles and the Fundamental Duties, together constitute the constitutional manifesto. The Preamble sets out the aims and objects of the Constitution. In order to achieve these aims and objects, certain basic Fundamental Rights are incorporated in Part III. These are guaranteed to an individual. These rights were considered necessary for protection of every individual and the all round development of his personality, which is of utmost importance for the progress and welfare of the society itself. Certain Fundamental Directive principles have been set out in Part IV of the Constitution. These are meant for the development and welfare of the society as a whole, which in turn, enure to the benefit of the individuals. Certain Fundamental Duties of the citizens are incorporated in Part IV-A of the Constitution, the observance of which by every individual is essential to protect and safeguard the integrity and the interests of the Nation. The State is charged with the obligation to protect the Fundamental Rights, and the Duty and Responsibility to implement them is conferred on the State which includes the power to curtail every Fundamental Right of an individual to the extent it is necessary to protect and advance the interests of the society as a whole. No fundamental right is, therefore, absolute. No individual can claim to exercise his right to the prejudice of other individuals, i.e., society, or can be permitted to exploit the society to achieve his selfish desires. Such curtailment to a reasonable extent is absolutely essential for the establishment of an egalitarian society. But, within those reasonable limits Fundamental Rights are required to be protected to the fullest extent. Failure to do so, would be injurious to the all sided development of the individuals which in turn would be injurious to the society. The independence of the Fundamental Rights conferred on an individual and the Directive Principles laid down for the welfare of the society which has got its own personality is comparable to the correlation between the soul and the body; i.e., one cannot exist without the other as indeed the soul without the body is a ghost and the body without soul is a corpse, but both together constitute life. Therefore, it is said that Fundamental Rights and Directive principles together constitute the life of the Constitution, just as individual and the society together constitutes National life. In other words, the interest of individual is inseparable from the interest of the society and vice versa.

(2) The Constitution, therefore, has created an obligation on the part of the State to protect the Fundamental Rights to the fullest permissible extent and a duty to implement the Directive Principles, if necessary, curtailing the Fundamental Rights within the maximum permissible limits.

(3) In order to specify the organs of the State on which the said obligations and the duty coupled with power are conferred, the Constitution has incorporated a special and extended definition of the word “State” in Art. 12 of the Constitution. It reads :

“12. In this Part, unless the context otherwise requires ‘the State’ includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.”

This definition is made applicable only to Parts III and IV of the Constitution.

(2) The other Parts of the Constitution can be considered as the machinery provisions. They provide for the establishment of the Legislature, the Executive and the Judiciary, for purposes of implementing the constitutional aims and objectives especially those set out in Part IV, the Legislature by legislation, the executive by execution and the judiciary through adjudication. For the purpose of the implementation of the constitutional objectives, the Constitution empowers the Union and the States to establish any instrumentality or agency, statutory or otherwise for the purpose of fulfilling its obligation to implement the Directive Principles. Thus it is competent for the Legislature to make law for the establishment of local self-Government and various other statutory authorities and to vest in them and entrust to them such obligatory and discretionary functions as the Legislature considers necessary and also to confer powers essential for their effective implementation and all ancillary powers to administer the provisions of the law under which the body is constituted. Similarly, it is open for the Executive to establish companies, societies or any other corporate body and entrust to them any specified functions. In other words, there is no compulsion under the Constitution that any instrumentality or agency of the State must be established only by law. Further, there is no limitation on the State to confine its activities to any specified spheres. The State can enter into any field of activity which it considers necessary for the development and welfare of the nation,

11. Article 38 of the Constitution reads as follows :

“38. The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.”

While other Articles incorporated in Part IV of the constitution specify certain basic objectives which are required for the welfare of the society, the wording of Art. 38 is all embrasive. By that Article, the State is charged with the responsibility of ensuring justice, social, economic and political, to the people of this country. Therefore, to say that, the State, when it functions through a department of the Government or through a statutory corporation established by or under the authority of law enacted by the Legislature alone is bound to conform to the Fundamental Rights set out in Part III, but the State, when is chooses to function through a company registered under the Companies Act or a society registered under the Societies Registration Act or through any other body, it is freed from the obligations to conform to the Fundamental Rights would tantamount to play hide and seek with the Constitution. No such “double acting” by the “State” is envisaged by the provisions of the Constitution. Therefore, the State cannot be freed of its obligation to conform to the Fundamental Rights when it chooses to function, through the agency of a company. It is in order to place this aspect beyond any controversy that a wider definition was given to the word “State” in Art. 12. Whatever doubt was there about the scope and ambit of Article 12 earlier the same has been clarified by the three pronouncements of the Supreme Court in the cases of Ramana Dayananda Setty, [1979-II L.L.J. 217], Som Prakash, [1981-I L.L.J. 103], which constitute an important land mark in the history of the interpretation of the Constitution. In these decisions, the scope of Article 12 has been fully expounded.

12. (1) In the case of R. D. Shetty. (supra) Supreme Court traced the genisis of the formation of the Government companies and held that they were the instrumentalities or the agencies of the State and were bound to conform to the Fundamental Rights in the same manner as the Legislature and the executive. The relevant portion of the judgment reads :

“So far as India is concerned, the genesis of the emergence of corporations as instrumentalities or agencies of Government is to be found in the Government of India Resolution on Industrial policy dated 6th April, 1948 where it was stated inter alia that ‘management of State enterprise will as a rule be through the medium of public corporation under the Statutory control of the Central Government who will assume such powers as may be necessary to ensure this ‘. It was in pursuance of the policy envisaged in this and subsequent resolutions on Industrial Policy that corporations were created by Government for setting up and management of public enterprises and carrying out other public enterprises and carrying out other public functions. Ordinarily these functions could have been carried out by Government departmentally through its service personnel, but the instrumentality or agency of the corporations was resorted to in these cases having regard to the nature of the task to be performed. The corporations acting as instrumentality or agency of Government would obviously be subject to the same limitations in the field of constitutional and administrative law as Government itself, though in the eye of the law, they would be distinct and independent legal entities. If Government acting through its officers is subject to certain constitutional and public law limitations, it must follow a fotiorari that Government acting through the instrumentality or agency of corporations should equally be subject to the same limitations.”

The Court also laid down the criteria to find out as to whether a company or body was an instrumentality or agency of the State.

(2) These criteria were reiterated in the case of Som Prakash, [1981-I L.L.J. 79]. In that case, the question for consideration was whether Bharat Petrolium Corporation Limited was State within the meaning of Art. 12 Considering this question, it was held as follows :

“… In exercise of the powers conferred by sub-s. (1) of S. 7 of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (2 of 1976), the Central Government being satisfied that Burmah Shell Refineries 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 Burmah Shell Oil Storage and Distributing Co., of India Ltd., in relation to its under takings in India shall, instead of continuing to vest in the Central Government vest with effect from the twentyfourth day of January, 1976, in Burmah Shell Refineries Ltd. This is the well-worn legal strategy for Government to run economic and like enterprises. We live in an era of public Sector corporations, the State being the reality behind, Law does not hoodwink itself and what is but a strategy cannot be used as a stratagem :

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25. Constitutional law is not a game of hide and seek but practical real life conclusions. So viewed, we are constrained to hold that Burmah Shell, a government company though, is but the alter ego of the Central Government and must, therefore, he treated as definitionally caught in the net of ‘State’ since a juristic veil worn for certain legal purposes cannot obliterate the true character of the entity for the purposes of constitutional law.

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40. Let us cull out from Airport Authority. [1979-II L.L.J. 217] (supra) the indicia of “other authorities … under control of the Government of India’ bringing a corporation within the definition of ‘the State ‘. The following factors have been emphasised in that ruling as telling, though not clinching. These characteristics convert a statutory corporation, a Government company, a co-operative society and other registered society or body into a State and they are not confined to statutory corporations alone. We may decoct the tests for ready reference :

1. “One thing is clear that if the entire share capital of the corporation is held by the Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of Government.”

2. “Existence of deep and pervasive State Control may afford an indication that the corporation is a State agency or instrumentality.”

3. “It may be a relevant factor … Whether the corporation enjoys monopoly status which is State conferred or State protected.”

4. “If the functions of the corporation are of public importance and, closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government.”

5. “Specifically, if a department of Government is transferred to a corporation it would be a strong factor supportive of this inference” of the corporation being an instrumentality or agency of Government.

41. The finale is reached when the cumulative effect of all the relevant factors above set out is assessed and once the body is found to be an instrument or agency of Government, the further conclusion emerges that it is ‘State’ and is subject to the same constitutional limitations as Government.

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54. Imagine the possible result of holding that a government company being just an entity created, under a statute, not by a statute, it is not ‘State’, Having regard to the directive in Art. 38 and the amplitude of the other Articles in Part IV Government may appropriately embark upon almost any activity which in a non-socialist republic may fall within the private sector. Any person’s employment, entertainment, travel, rest and leisure, hospital facility and funeral service may be controlled by the State. And if all these enterprises are executed through Government company bureaus, societies councils, institutes and homes. The citizen may forfeit his fundamental freedoms vis-a-vis these strange being which are Government in fact by corporate in form. If only fundamental rights were forbidden access to corporations, companies, bureaus, institutes, councils and kindred bodies which act as agencies of the Administration, there may be a large sector of governmental activity carried on under the guise of ‘jural persons’. It may be pave the way for a new tyranny by arbitrary administrators operated from behind by Government but unaccountable to Part III of the Constitution. We cannot assent to an interpretation which leads to such a disastrous conclusion unless the language of Art. 12 offers no other alternative.

55. It is well-known that “corporation have neither bodies to be kicked, nor souls to be damned” and Government Corporations are mammoth organisations. If Part III of the constitution is halted at the gates of corporations, Justice Louis D. Brandeiss’ observation will be proved true :

“The main objection to the very large corporation is that it makes possible and in many cases makes inevitable the exercise of industrial absolutism.

It is dangerous to exonerate corporations from the need to have constitutional conscience; and so, that interpretation. Language permitting, which makes governmental agencies, whatever their mien, amenable to constitutional limitations must be adopted by the Court against the alternative of permitting them to flourish as an imperium in imperio.

The commonsense signification of the expression “other authorities under the control of the Government of India” is plain and there is to reason to make exclusions on sophisticated grounds such as that the legal person must be a statutory, corporation, must have power to make laws must be created by and not under a statute and so on. The jurisprudence of Third World countries cannot afford the luxury against which Salmond cavilled, (Salmond, Jurispurudence, 10th Edn. P. 51).

Applying the above principles, the question was answered in the affirmative.

(3) Again these principles have been reiterated by the Supreme Court in Ajay Hasia, [1981-I L.L.J. 103]. This case is more apposite to the present cases, as in that case, unlike in the case of Ramana, D. Setty [1979-II L.L.J. 217], in which, the body held to be state was a statutory corporation, and in the case of Som Prakash, [1981-II L.L.J. 79], the company held to be State was formed after statutory acquisition of a private company, the body held to be State was only a Society registered under the Societies Registration Act. It was held to be “State” within the meaning of Art. 12, as it was found to be an instrumentality or agency of the Government. The relevant portion of the judgment reads :

“But before we proceed to consider the merits of this ground of challenge, we must dispose of a preliminary objection raised on behalf of the respondents against the maintainability of the writ petition. The respondents contended that the college is run by a society which is not a corporation created by a statute but is a society registered under the Jammu & Kashmir Societies Registration Act, 1898 and it is, therefore, not an ‘authority’ within the meaning of Art. 12 of the Constitution and no writ petition can be maintained against it, nor can any complaint be made that it has acted arbitrarily in the matter of granting admissions and violated the equality clause of the constitution.

Obviously the Society cannot be equated with the Government of India or the Government of any State nor can it be said to be a local authority and therefore, it must come within the expression ‘other authorities’ if it is to fall within the definition of ‘State ‘. That immediately leads us to a consideration of the question as to what are the “other authorities” contemplated in the definition of ‘State’ in Art. 12.” ….. It is the Fundamental Rights which along with the Directive Principles constitute the life force of the Constitution and they must be quickened into effective action by meaningful and purposive interpretation. If a corporation is found to be a mere agency or surrogate of the Government “in fact owned by the Government, in truth controlled by the Government and in effect in incarnation of the Government”, the Court must not allow the enforcement of Fundamental Rights to be frustrated by taking the view that it is not the Government, and, therefore, not subject to the constitutional limitations. We are clearly of the view that where a corporation is an instrumentality or agency of the Government, it must be held to be an ‘authority’ within the meaning of Art. 12 and hence subject to the same basic obligation to obey the Fundamental Rights as the Government.”

(4) Thus it is clear that the form of corporation of a body is not decisive of the question. Therefore, the only point for consideration in relation to the first question is whether each of the three companies concerned in these cases is an instrumentality of the concerned Government applying the tests laid down by the Supreme Court.

13. (1) Out of the three companies, it is an admitted fact that BEML and HMT are the undertakings of the Government of India and are subject to all pervading control of the Central Government. Therefore, both these companies answer the first two tests laid down by the Supreme Court.

(2) As regards the Karnataka Agro Industries Corporation, 51 per cent of its shares are held by the Central Government and the balance by the State Government. The activities entrusted to it were being performed by the Agricultural Engineering Wing of the State Government and that wing was transformed into a Corporation. Hence, it answers tests 1 and 5 and is “State” as defined in Art. 12 and for these reasons it was so held in the case of Rangaswamy Setty. (1981) Kar. L.J. 455.

(3) It was, however, argued by the learned counsel for the respondent-companies that as the companies could not be dissolved by the concerned Government and the proceedings for winding up could be and would have to be, taken only under the provisions of the Companies Act, it could not be regarded as a body created by the Central Government. The clauses in the Memorandum of Association indicate that any resolution of wind up the company requires the approval of the Government. In any event, in my view, by the mere fact that winding up of these companies could be made in accordance with the provisions of the Companies Act they do not ceases to be instrumentalities of agencies of the Government which brought them into being and over the affairs of which, it exercises all pervasive control. Hence, I find no substance in this submission.

For the reasons set out above, I answer the first question in the affirmative and hold that the BEML, the HMT and the Karnataka Agro Industries Corporation are bodies which fall within the definition of the word ‘State’ as defined in Art. 12 of the Constitution.

14. (1) The second question for consideration is whether the rule framed by each of the companies and the Reserve Bank of India providing for termination of services of its permanent employees at any time by giving a simple notice, under which the services of the petitioners have been terminated does or does not violate the Fundamental Rights guaranteed under Arts. 14 and 16(1) of the Constitution.

(i) The BEML, the Agro-Industries Corporation and the Reserve Bank have fixed the age of superannuation for their employees in the service rules and they have also incorporated a compulsory retirement rule which empowers the premature retirement of any of its employee after he has put in the prescribed years of service or age. The HMT has also prescribed the age of retirement for all its employees by an administrative order, a copy of which has been produced (Annexure-R1).

(ii) Everyone of the companies and the Bank have also prescribed the rule compliance with which is made condition precedent for imposing the penalty of removal or dismissal against its employees, except in cases which are specified.

It is common ground that in respect of temporary employees, the service rules provide for simple termination of service and in respect of probationers, the rules provide for their discharge on grounds of unsuitability and the validity of such a rule is beyond doubt. In these cases, the petitioners question the validity of another rule which confers power on the concerned authority to terminate the services of even permanent employees, by a simple notice at any time, which has been incorporated in the service rules of each of the companies and the Bank on the ground that such rules are violative of Arts. 14 and 16(1) of the Constitution.

(3) The challenge to the constitutional validity of the impugned rules is vehemently resisted by the respondents. The points urged by the learned counsel for the respondents fall under the following heads :

(i) The relationship is contractual. Hence no writ petition is maintainable.

(ii) The impugned rule in each of the cases was a term of contract and, therefore, binds the concerned employee and, therefore, he cannot question the constitutional validity of term of contract.

(iii) The impugned rules give right to both the contracting parties, namely, the company and its servant to determine the contract of service by giving of notice and, therefore, the petitioners cannot complain.

(iv) Simpliciter termination of the services of the permanent employees. In a commercial or industrial establishment is a recognised method of termination of service and such terminations have been upheld in a services of decisions and, therefore, the rule providing for such termination is beyond reproach.

(v) The rules do not confer arbitrary powers to terminate the services as it could be exercised only in public interest. Therefore, this Court can set aside the termination in any given case if it is found to be arbitrary, capricious or mala fide.

Learned counsel for the petitioners contend that there is no substances in any of these points.

15. I shall now proceed to consider the points one by one.

Point (i) Whether the relationship is contractual or one of status ?

(1) It was contended for the respondents that the writ petitions are not maintainable as in each of the case there was an offer of employment and the terms and conditions of the contract included those set out in the rules framed by each of the companies and the Bank and that the petitioner had accepted the offer and had become employees of the concerned company or the Reserve Bank of India, as the case may be, and, therefore, the relationship was purely contractual. In support of this submission reliance was placed on the decision of the Delhi High Court in A. R. Joshi v. State Bank of India, Delhi, [1978-I L.L.J. 48] (Delhi) and a decision of the Calcutta High Court in Reserve Bank Employees’ Association v. Union of India, (1980) 2 S.L.R. 167, per contra it is contended petitioners that once each of the companies is held to be “State” “State” as defined in Art. 12 of the Constitution, the employment becomes public employment and there is no scope for treating the employment and there is no scope for treating the employment between the company and its employees as merely a pure contract of service.

(2) In considering the validity of the rival views on the point, the first aspect which should be noticed is that there is an essential difference between the relationship between a private employer and his employee and the relationship between the public employee. The former is purely a contract of service and in the latter case, though the relationship commences with a contract, namely the offer of employment by the public employer and its acceptance by the person, who intendeds to become its employee, once he is appointed to the post, the relationship becomes one of status and not of contract. This principle has been laid down by the Supreme Court in the case of Roshanlal Tandon v. Union of India, [1968-I L.L.J. 576]. The relevant portion of the judgment reads.

“…….. It is true that the origin of Government service is contractual. There is an offer and acceptance in every case. But once appointed to his post or office the Government servant acquires a status and his rights and obligations are no longer determined by consent of both parties, but by statute or statutory rules which may be framed and altered unilaterally by the Government. In other words, the legal position of a Government servant is more than one of status than of contract. The hall-mark of status is the attachment to a legal relationship of rights and duties imposed the public law and not by mere agreement of the parties. The emolument of the Government servant and his terms of service are governed by statute or statutory rules which may be unilaterally altered by the Government without the consent of the employee. It is true that Article 311 imposes constitutional restrictions upon the power of removal granted to the President and Governor under Art. 310. But it is obvious that the relationship between the government and its servant is not like an ordinary contract of service between a master and servant. The legal relationship is something entirely different, something in the nature of status. It is much more than a purely contractual relationship voluntarily entered into between the parties. The duties or status are fixed by the law and in enforcement of these duties society has an interest. In the language of jurisprudence status is a condition of membership of a group of which powers and duties are which powers and duties are exclusively determined by law and not by agreement between the parties concerned.”

It was, however, contended for the respondents that the above principle had application only to Government servants and not to the employees of a statutory Corporation or a company.

(3) It is true that the above principle has been laid down by the Supreme Court with reference to Government servants but on principle, I do not find any difference between the relationship of government and its employees and the relationship between those bodies, who answer the description of the word “State” under Art 12 of the Constitution and their employees.

(4) As far as the statutory corporations are concerned, the conditions of service of their employees are also governed by the provisions of the Act under which they are constituted or the rules framed thereunder, which can be made and altered by them unilaterally. Therefore, the relationship is certainly one of status and not contract. The power to lay down the conditions of service is also subject to the Fundamental Rights incorporated in Part III of the Constitution.

(5) Even as regards Government companies, once it is held that a company is an instrumentality or agency of the Union or any of the States and, therefore, “State” for purposes of Part III of the Constitution, the employment under the said body becomes an employment under the State in respect of which equal opportunity in all matters relating to employment guaranteed under clause (1) of Art. 16 and prohibition against discrimination on ground only of race, caste, sex, descent, place of birth, residence or any of them in respect of employment under such body as provided in clause (2) of Art. 16, becomes automatically applicable. Further clause (4) of Art. 16 of the Constitution which provides for the reservation of posts in respect of persons belonging to Backward Classes not adequately represented in the services of the State also get attracted. It is not disputed, that in the exercise of it powers under clause (4) of Art. 16, the concerned Government has given the directions to all the government companies to effect reservation of posts to the extent and as provided in the relevant Government orders while making appointments to posts in the services of these companies. (See Central Government letter dated 19-6-76 produced as Annexure-D along with the reply statement in W.P. No. 14686-81). Thus it may be seen, the provisions relating to recruitment and conditions of service of persons appointed to the service (under these companies must conform to the Fundamental Rights, in particular to Arts. 16 and 14, of the Constitution which is the basic public law of the land. Thus the employment under the companies is employment under the State. Just because the power to frame rules regulating the conditions of service of its employees, is not conferred on these bodies under a provision of an Act, or Legislature, it cannot be said that the relationship is merely contractual. This aspect of the matter was specifically considered by the Supreme Court in the case of Sukhdev v. Bhigatram, [1975-I L.L.J. 399]. The relevant observations made by Justice Mathew read as follows :

‘The second question for consideration is whether an order of removal or dismissal from service contrary to the regulations framed by these corporations in the exercise of power conferred in that behalf would enable an employee to a declaration against them for continuance in service or would give rise only to a claim for damages.

This will depend upon the question whether the regulations framed by these corporations would have the force of law and even if they have not the force of law, whether the employment is public employment and, for that reason, the employee would obtain a status which would enable him to obtain the declaration.

The learned Chief Justice has dealt with the questions in his judgment whether the regulations framed by the corporations have the force of law and he has arrived at the conclusion that the regulations being framed under statutory provisions would have the force of law.

Even assuming that the regulations have no force of law, I think since the employment under these corporations is public employment, an employee would get a status, which would enable him to obtain declaration for continuance in service if he was dismissed or discharged contrary to the regulations.”

This principle has been elaborated by the Supreme Court in the case of U. P. Warehousing Corporation v. Vijayanarayana, [1980-I L.L.J. 222], to which a detailed reference will be made later. Therefore, in my view, except in the case of special post which forms a class by itself in respect of which a Government company or a statutory corporation may enter into a specific contract of service on special terms and conditions having regard to its nature of duties and duration, in respect of persons appointed to its regular service and posts, the conditions of service of persons appointed to such posts have to be governed by the rules which may be framed and altered unilaterly by each of the companies having due regard to the exigencies of public employment and applied to its employees, which of course must conform to the Fundamental Rights. In fact such a differentiation is made in the services rules of the BEML. Rules 3.2. 3.3, and 3.4 of its Service Rules classify and define, permanent employee, probationer and temporary employee, respectively, to whom the service rules are made applicable. The said rules are extracted later at an appropriate place. Rule 3.5 defines contractual appointments. It reads :

“3.5 An employee on contract or foreign service means an employee who has been engaged on contract by the company for a specified period or an employee deputed by some other organisation for training or service of the company and who is likely to be reverted to that organisation.”

The above definitions indicate the distinction between regular employees and persons appointed on special contract. Therefore, except those appointed on contract basis to any special post for a specified period, the relationship between all others appointed on its regular establishment is one of status and not contract. The companies and the Bank being “State” for purposes at Part III, in regulating the recruitment and conditions of service of persons appointed to their services must conform to Art. 14 and a specific fact of it incorporated in Art. 16.

16. The scope of Art. 16(1) has been expounded by the Supreme Court in the case of General Manager, S. Rly. v. Rangachari, [1970-I L.L.J. 289]. The relevant portion reads :

“Article 16(1) reds thus : “There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State.”

In deciding the scope and ambit of the fundamental right of equality of opportunity guaranteed by this Article it is necessary to bear in mind that in construing the relevant Article a technical or pedantic approach must be avoided. We must have regard to the nature of the fundamental right guaranteed and we must seek to ascertain the intention of the Constitution by construing the material words in a broad and general way. If the words used in the Article are wide in their import they must be liberally construed in all their amplitude. Thus construed it would be clear that matters relating to employment cannot be confined only to the initial matters prior to the Act of employment. The narrow construction would confine the Application of Art. 16(1) to the initial employment and nothing else; but that clearly is only one of the matters relating to employment. The other matters relating to employment would inevitably be the provision as to the salary and periodical increments therein, terms as to leave, as to gratuity, as to pension and as to the age of superannuation. These are all matters relating to the employment and they are, and must be deemed to be included in the expression ‘matters relating to employment’ in Art. 16(1).

….. What Art. 16(1) guarantees is equality of opportunity to all citizens in respect of all the matters relating to employment illustrated by us as well as to an appointment to any office as explained by us.

…. In this connection it may be relevant to remember that Art. 16(1) and (2) really give effect to the equality before law guaranteed by Art. 14 and to the prohibition of discrimination guaranteed by Art. 15(1). The three provisions form part of the same constitutional code of guarantees and supplement each other. If that be so, there would be no difficulty in holding that the matters relating to employment must include all matters in relation to employment both prior, and subsequent, which are incidental to the employment and form part of the terms and conditions of such employment.”

Therefore, a body which is “State” as defined in Art. 12 cannot discriminate against any of its employees similarly situated in the matter of everyone of the conditions of service. It can unilaterally fix and alter the condition of service as the exigencies of its service demand. Therefore, even in the absence of any statutory rules the body has to conform to Arts. 14 and 16(1) in fixing and applying the conditions of service of its employees. Therefore, the relationship between such employees and the company is one of status and not contract.

17. (1) As far as the Reserve Bank of India is concerned, S. 58 of the Reserve Bank of India Act, 1934, specifically empowers the Reserve Bank to frame regulations and it was not disputed that the power includes the power to frame regulations, regulating recruitment and condition of service of its employees. Therefore, it is clear that such conditions of service can be framed and altered by the Reserve Bank of India and therefore, the relationship between the Reserve Bank and its employees is one of status and not contract. It was however, contended by Sri S. G. Sundara Swamy, learned counsel appearing for the Bank, that the regulations which are not in operation are not framed with the previous sanction of the Central Government as prescribed in S. 58 of the Act and therefore, they have no statutory force and as the petitioner in W.P. No. 4091 of 1980 has accepted the terms of the regulations while entering the service, the relationship is contractual. I see no force in the submission. As stated earlier, even though the conditions of service of the employees of the bodies which are “State” for purposes of Part III of the Constitution are not regulated by the provisions of an Act of Legislature or rules made under it, they acquire vitality and become enforceable by the Force of Art. 16(1) because such bodies are under an obligation to ensure equality before law and equal opportunity in matters relating to employment under them to their employees, by virtue of the mandate of Arts. 14 and 16(1) They have no choice to apply the rules to one and not to another among them, i.e., they are not free to extend different scales of pay and other conditions of service to persons and posts similarly situated by entering into agreement with each of them incorporating different conditions of service. Thus the relationship essentially governed by law and consequently it would be one of status, and no conractual.

(2) The aforesaid aspects have not been considered by the Delhi High Court in A. R. Joshis’s case, [1978-I L.L.J. 48] and by the Calcutta High Court in the case of Reserve Bank’s Employees’ Association, (1980) 2 S.L.R. Cal.) in which the view taken is the relationship between the employees and bodies which are ‘State’ for purposes of Art. 12 is contractual. For the reasons set above 1 respectfully disagree with that view. The decision in A. R. Joshi has been reversed on appeal by the Division Bench. (See : A. R. Joshi v. State Bank of India (1980) (56) F.J.R. 532.

(3) In a later decision, the Full Bench of the Delhi High Court itself in R. M. Joshi v. Reserve Bank of India, (1981) 42 F.L.R. 210, has taken the view that even though the relationship is contractual, the employees are entitled to seek enforcement of the Fundamental Rights.

(4) Alternatively, it cannot also be said that the rules framed by the Reserve Bank have no statutory force. Under S. 58 of the Act the Reserve Bank is given the power to frame rules for giving effect to the provisions of the Act and for the Constitution and management of its staff. This power includes the power to frame rules regulating the recruitment and conditions of service of its employees, with the approval of the State Government. Under S. 7 of the same Act, the administrative control over the Reserve Bank is vested in its Central Board. Therefore, when the rules have not been framed in conformity with S. 58 of the Act, it is competent for the Central Board to frame rules, in exercise of its executive or administrative power on matters in respect of which it has got the power to make statutory rules and the rules so framed will have efficacy in the same manner as statutory rules until such statutory rules are framed. (See : Union of India v. K. P. Joseph, . Mruthyunjaya v. Town Municipal Council, Shiralkoppa, (1973) I Ker. L.J. 470, and Mys. S. R. T. Corpn. v. Gopinath, [1968-II L.L.J. 144].

For the above reasons, I hold that the employment under the Government companies and the Bank is public employment and not private. The relationship between these bodies and their employees is essentially one of status though its origin is in contract.

Point (ii) Whether the petitioners are not entitled to challenge the validity of the impugned rules as the impugned rule in each of the cases was one of the terms of contract ?

18. It was strenuously contended for the companies and the Reserve Bank that as every one of these petitioners had accepted to become an employee of the concerned company or the Reserve Bank, as the case may be, accepting the terms and conditions as set out in the rules, and as the impugned provision providing for termination of service by a mere notice was part of those rules, the petitioners cannot be permitted to question the validity of the impugned rule as it amounts to questioning the legality of a term of a contract.

19. In my view, the conclusion that the respondent-companies and the Reserve Bank of India are “State” for purposes of Part III of the Constitution, must also conclude this point against the companies and the Reserve Bank. Once it is held that each of the companies and the Reserve Bank is “State” and the petitioners are employees of the “State” and they have the right to invoke the rights guaranteed to them under Arts. 14 and 16(1) of the Constitution, it follows that they would be entitled to question the constitutional validity of the rule providing for termination of service of permanent employees by a simple notice. To a petition challenging the constitutional validity of the rule, the plea that such a rule was part of the contract of service is no defence. The constitutional guarantee cannot be taken away or whittled down by any terms of contract. This is so, because the obligation on the part of the State to ensure and accord to every citizen equality before law and equal protection of the laws enshrined in Arts. 14 and 16, is on the plain language of the Articles, an injunction to the State and that obligation towards a citizen, cannot be avoided, or does not get dispensed with, even if the citizen had agreed to abide by a clause in a contract signed by him, which turns out to be violative of his right to equality. This aspect has been clearly laid down by the Supreme Court in the Basherharnath v. Commissioner of Income Tax, , Interpreting the scope of Art. 14, S. R. Das, Chief Justice speaking for the Court said :

“It is the first of the five Articles grouped together under the heading ‘Right to Equality’. The underlying object of this Article is undoubtedly to secure to all persons. Citizens or non-citizens, the equality of status and of opportunity referred to in the glorious preamble of our Constitution. It combines the English doctrine of the rule of law and the equal protection clause of the 14th Amendment to the American Federal Constitution which enjoins that no State shall ‘deny to any person within its jurisdiction the equal protection of the laws’. There can, therefore, be no doubt or dispute that this Article is founded on a sound public policy recognised and valued in all civilised States. Coming then to the language of the Article it must be noted, first and foremost that this Article is, in form, an admonition addressed to the State and does not directly purport to confer any right on any person as some of the other Articles e.g., Art., 19. The obligation thus imposed on the State no doubt, ensures for the benefit of all persons, for, as a necessary result of the operation of this Article, they all enjoy equality before the law. That is, however, the indirect though necessary and inevitable, result of the mandate. The command of the Article is directed to the State and the reality of the obligation thus imposed on the State is the measure of the fundamental right which every person within the territory of India is to enjoy.

* * *

Such being the true intent and effect of Art. 14 the question arises, can a breach of obligation imposed on the State be waived by any person ? In the face of such an unequivocal admonition administered by the Constitution, which is the supreme law of the land, is it open to the State to disobey the constitutional mandate merely because a person tells the State that it may do so ? If the Constitution asks the State as to why the State did not carry out its behest, will it be any answer for the State to make that ‘true, you directed me not to deny any person equality before the law, but this person said that I could do so, for he had no objection to my doing it.

* * *

“…. On the language of Art. 14 that it is a command issued by the Constitution to the State as a matter of public policy with a view to implement its object of ensuring the equality of status and opportunity which every welfare State, such as India, is by her Constitution expected to do and no person can, by any act or conduct, relieve the State of the Solemn obligation imposed on it by the Constitution. Whatever breach of other fundamental right, a person or a citizen may or may not waive, he cannot certainly give up or waive a breach of the fundamental right that is indirectly conferred on him by this constitutional mandate directed to the State.”

This aspect, i.e., the right of an employee of the State to question the constitutional validity of a rule regulating his conditions of service notwithstanding the fact that it was a term of the contract which he had signed at the time of entering service, is also specifically covered by the decision of the Supreme Court in the case of Motiram Deka v. General Manager, N.E.F. Railway, [1964-II L.L.J. 467]. In that case, the constitutional validity of Rules 148(3) and 149(3) contained in the Indian Railway Establishment Code which empowered the railway authorities to terminate the service of persons in permanent pensionable and non-pensionable posts, respectively, by giving a simple, three months’ notice, was questioned. It was urged on behalf of the Railways that the employees, who had challenged the validity of the rules had entered into a contract of service with the Railways and Rules 148(3) and 149(3) were one of the terms of contract and, therefore, they had no right to question the validity of the rules. Rejecting the said contention, Gajendragadkar, J., as he then was, stated as follows :

“It has, however, been urged that the railway servants who entered service with the full knowledge of these Rules cannot be allowed to complain that Rules contravene Art. 311 and are, therefore, invalid. It appears that under R. 144 (which was originally R. 143), it was obligatory on railway servants to execute a contract in terms of the relevant Railway Rules. That is how the argument based on the contract and its binding character arises. If a person while entering service executes a contract containing the relevant Rule in that behalf with open eyes, how can be heard to challenge the validity of the said Rule, or the said contract ? In our opinion, this approach may be relevant in dealing with purely commercial cases governed by rules of contract; but it is wholly inappropriate in dealing with a case where the contract or the rule is alleged to violate a constitutional guarantee afforded by Art. 311(2); and even as to commercial transactions, it is well known that if the contract is void, as for instance, under S. 23 of the Indian Contract Act, the plea that it was executed by the party would be of no avail. In any case, we do not think that the argument of contract and its binding character can have validity in dealing with the question about the constitutionality of the impugned Rules”

Again the above principle was reiterated by the Supreme Court in Government Branch Press v. D. B. Belliyappa, [1964-II L.L.J. 467]. The relevant portion of the judgment reads :

‘Another fact of Mr. Veerappa’s contention is that the respondent had voluntarily entered in to a contract of service on the terms of employment offered to him. One of the terms of that contract, embodied in the letter of his appointment is that his service was purely temporary and was liable to termination at the will and pleasure of the appointing authority, without reason and without notice. Having willingly accepted the employment on terms offered to him, the respondent cannot claim against the impugned action taken in accordance with those mutually agreed terms. The argument is wholly misconceived. It is borrowed from the archaic common law concept that employment was a matter between the master and servant only. In the first place, this rule in its original absolute form is not applicable to Government servants, Secondly, even with regard to private employment, much of it has passed into the fossils of time. This rule held the field at the time when the master and servant were taken more literally than they are now and when, as in early Roman Law, the rights of ‘the servant, like the right of any other member of the house-hold, were not his own but those of his pater families”. The overtones of this ancient doctrine are discernible in the Anglo-American jurisprudence of the 18th Century and the first half of the 20th century which rationalised the employer’s absolute right to discharge the employee. “Such a philosophy” as pointed but by K. K. Mathew J. (vide his treatise; Democracy, Equality and Freedom, page 326) “of the employer’s dominion over his employee may have been in tune with the restic simplicity of bygone days. But that philosophy is incompatible with these days of large, impersonal, corporate employers.” To bring it in tune with vastly changed and changing socio economic conditions and moores of the day, much of this old antiquated and unjust doctrine has been worded by judicial decisions and legislation, particularly in its application to persons in public employment, to whom the constitutional protection of Arts. 14, 15, 16 and 311 is available. The argument is, therefore, overruled.”

Applying the above ratio, I hold that even though the impugned rule in each of the petitions providing for termination of service by a mere notice was part of the contract entered into by each of the petitioners, they are not disentitled from questioning its constitutional validity.

Point (iii) Whether the validity of the impugned rules cannot be questioned by the petitioners as they give right to both the parties to terminate the service ?

20. The material question which arises for consideration is whether an instrumentality or agency of the State which falls within the meaning of the word “State” as defined in Art. 12 of the Constitution can frame a rule providing for termination of permanent employees simpliciter before they reach the age of superannuation and without prescribing any period of service or age after which such termination could be made. To the said question, the fact that an employee has the right to resign or terminate the contract of service at any time, is not at all a relevant factor. A similar question was also raised in the case of Moti Ram Deka’s, case and it was repelled in the following words :

“It is true that the termination of service authorised by R. 148(3) or R. 149(3) contemplates the right to terminate on either side. For all practical purpose, the right conferred on the servant to terminate his services after giving due notice to the employee does not mean much in the present position of unemployment in this country; but apart from it. The fact that a servant has been given a corresponding right cannot detract from the position that the right which is conferred on the railway authorities by the impugned Rules is inconsistent with Art. 311(2), and so, it has to be struck down in spite of the fact that similar right is given to the servant concerned.”

Therefore, I do not find any substance in this point also.

Point (iv) Whether the termination “of service by simple notice is a well recognised power and, therefore, cannot be held to be invalid.”

21. It was strenuously contended for the companies and the Reserve Bank that the legality of termination of service by a mere notice has come up for consideration in large number of cases and terminations have been held to be lawful and, therefore. It is no longer open for the petitioners to contend that a similar rule is violative of Articles 14 and 16(1) of the Constitution. In support of the above contention, reliance was placed on the following judgments of the Supreme Court.

(i) Delhi Transport Undertaking v. Balbir Saran Goel, [1970-II L.L.J. 70] (ii) Air India Corporation v. V. A. Rebellow [1972-I L.L.J. 501] (iii) Andhra University v. V. Subba Reddy (iv) Bombay Municipality v. P. S. Mavalankar; and [1978-II L.L.J. 168] (v) Vaish Degree College v. Lakshminarayan, [1976-II L.L.J. 163].

Reliance was also placed on the following judgments of the High Courts.

(i) P. Christopher Jobez v. Indian Bank. [1979-II L.L.J. 274] and (ii) P. L. Bharadwaj v. State Bank of India, [1981-I L.L.J. 501].

It is true that in all these cases, the legality of termination of service, by a mere notice had been the subject-matter for decision. The termination of service of the persons concerned in those cases was found to be in the bona fide exercise of the power given under the relevant rule. In the case of Subba Reddy, A.I.R. 1976 S.C.R. 2049, one other question raised was that the rule which empowered the University to terminate the services of a teacher by the issue of a notice was ultra vires the provisions of the Act under which it was made. It was held that the power conferred under the Act was wide enough to empower the Syndicate to frame such a rule and on facts, the termination was found to be justified under the relevant rule. But in none of these cases, the constitutional validity of a rule providing for termination of service of a permanent employee of State at any time without assigning any reason had been questioned. A decision that a termination order was not ultra vires the rule under which it was made, would not ipso facto mean that the rule was held to be not violative of the provisions of the constitution when its validity was not called in question and decided. Therefore, the submission made for the respondent companies and the Reserve Bank that those decisions conclude the question of constitutionality of the impugned rules, in their favour is untenable, as such a question was neither raised nor considered in those cases.

Point (v) Whether the impugned rules are void as offending Articles 14 and 16(1) of the Constitution ?

22. The fifth and the most important point which arises for consideration is whether the impugned rule of each of the companies and the reserves Bank which confers power to terminate the service of its permanent employees at any time, by a mere notice is violative of Articles 14 of the Constitution.

23. (1) This is the appropriate stage at which, it is necessary to refer to the rules regulating the conditions of services of each of the companies and the reserve Bank of India. They are :

(i) Re. The Beml : (a) the Bharat Earth Movers Limited Service Rules.

(b) The Bharat Earth Movers Conduct and discipline Rules, 1976.

(ii) Re. The Hmt : The Hindustan Machine Tools Conduct and Discipline Rules (HMT C D & A Rules for short.)

(iii) Re : The Reserve Bank :

The Reserve Bank of India (Staff) Regulations, 1918.

(iv) Re. The Agro Industrial Corporation :

The Karnataka Agro-Industries Corporation Limited recruitment and promotion Rules.

A perusal of the service rules of the companies and the Reserve Bank indicate that their employees are classified into three well known categories in service parlance. They are –

(i) Temporary

(ii) Probationers

(ii) Permanent.

It is sufficient to refer to classification made in the rules of the BEML. The relevant rules are :

“3.2. A permanent employee is an employee who has been engaged on a permanent basis and includes any person who has been duly confirmed in his appointment after he has satisfactorily completed the probationary period in the same or any other occupation in the services of the company.

3.3. A probationer is an employee who is a provisionally employed with a view to being considered for employment of longer duration than the period of probation. A probationary employee shall be closely watched by his superiors in regard to his ability, conduct attendance and adaptability to the job assigned to him and if he does not measure up to the requirements, his services are liable to be terminated without notice during or at the end of probationary period. In the case of a permanent employee appointed as probationer in a new higher post, he may at any time, during the probationary period or at the end of the probationary period, be reverted to his permanent post if his work is found unsatisfactory. The period of probation originally fixed may be extended at the discretion of the Management. A probationer shall be deemed to continue is as such until he is expressly confirmed in writing.

3.4. A temporary employees is an employee who has been engaged for work which is essentially of a temporary nature likely to be finished within a limited period.

The classification of employees on the above lines is similar to the classifications recognised and made in the civil services of the Union and the States.

There are specific rules providing for, termination of the services of a temporary employee as also for the discharge of a probationer. These provisions are not relevant to these cases, as all the petitioners were, before the termination of their services, permanent employees. The impugned rules under which their services have been terminated and other relevant service rules in respect of case of the companies and the Bank are as set out in the statement below :

—————————————————————————

Sl.  Rules               The BEML                    The HMT


No.


---------------------------------------------------------------------------


      1.                    2.                          3.


---------------------------------------------------------------------------


1.  Rule regulating     18.1. The age of            2. Retirement


    age of retirement   superannuation will         Superannuation.


    and premature       be 58 years. The


    retirement rule.    employer, however           Under the


                        may require an              existing practice,


                        employee to retire          an employee


                        after he attains the        retires/superannuates


                        age of 50 years on          on the exact date


                        3 months' notice or         arrived at after


                        pay in lieu thereof,        completing 58 years


                        without assigning           from his date of


                        any reason. The             birth.


                        employee may also,


                        after attaining the         It is now proposed


                        age of 50 years,            to adopt the procedure


                        voluntarily retire          of superannuating


                        after giving 3 months       the employees from


                        notice to the employer.     the last date of the


                                                    month in which they


                                                    attain age of


                                                    superannuation.


                                                    Illustration :


                                                    If an employee


                                                    attains the age


                                                    of 58 years-say on


                                                    15th October, he


                                                    will supperannuate


                                                    with effect from


                                                    31st October instead


                                                    of from 15th October


                                                    as per existing


                                                    practice.


2. Rule re-imposition   Rule 26. Procedure for      19. Procedure for


   of major penalty     imposing major              disciplinary Actions :


   (removal or          penalties :


   dismissal.)


                        (a) No order imposing       19.1 When the competent


                        any of the major            authority is satisfied


                        penalites specified         that there is a prima


                        in Clauses (e), (f)         facie case against the


                        and (g) of Rule 24          employee, he may issue


                        shall be made except        a charge sheet specifying


                        after an enquiry is         the misconduct and asking


                        held in accordance          for an explanation of


                        with this rule.             the employee.


                                                    19.2 After receiving the


                                                    explanation from the


                                                    employee and if the


                                                    explanation is not


                                                    satisfactory, he may


                                                    appoint any officer


                                                    of the company as an


                                                    Enquiry officer to


                                                    inquire into the alleged


                                                    misconduct/s.


                                                    19.3 Enquiry Officer


                                                    after conducting the


                                                    enquiry, shall put


                                                    up his findings to the


                                                    competent authority.


                                                    After considering


                                                    the finding of the


                                                    enquiry Officer, the


                                                    competent Authority


                                                    shall take a decision


                                                    regarding the quantum


                                                    of punishment.


3. Exceptional cases    Rule 31 Special             20. General :


in which inquiry        procedure in  certain


could be dispensed      cases.                      20.1 *    *


with.


                        Where an officer            20.2 Nothing contained


                        has been convicted for      in Clause 19 shall apply


                        a criminal offence          to retirement on medical


                        in a Court of Law or        grounds.


                        Where the Disciplinary


                        Authority is satisfied


                        for reasons to be


                        recorded by


                        it in writing that


                        it is not reasonably


                        practicable to hold


                        an enquiry in the


                        manner provided for


                        in these rules or


                        Where the Disciplinary


                        Authority is satisfied


                        that in the interest of


                        security it is not


                        expedient to hold an


                        enquiry the Disciplinary


                        Authority may consider


                        the circumstances of


                        the case and make such


                        orders thereon,


                        as it deems fit.


4. Impugned Rule        17. Termination of          20. General :


                        Employment :


                                                    20.1 Notwithstanding


                        17.1 *     *                anything contained in


                                                    Class 19 above, the


                        17.2 The services           competent authority


                        of a permanent employee     may decide to discharge


                        may be terminated on        the employee from the


                        the ground of 'Services     service of the company


                        no longer required          under the terms of


                        in the interests of         appointment or for any


                        the company without         other reasons in the


                        assigning any reason.       interests of the company


                        An employee whose           for which an enquiry


                        services are terminated     is not necessary.


                        under this clause,


                        shall be given 3


                        months' notice in


                        writing or 3 months


                        basic pay and dearness


                        allowance in lieu of


                        notice and also ad hoc


                        compensation at the rate


                        of half months' basic pay


                        for every completed year


                        of service or part


                        thereof not being less


                        than 6 months.


----------------------------------------------------------------------


----------------------------------------------------------------------


Sl. The Agro Industries           The Reserve Bank


No.    Corporation


-----------------------------------------------------------


           4.                          5.


-----------------------------------------------------------


1.  2.23. Superannuation             26. (1) An employee,


    and Retirement :                 other than an employee


                                     in Class IV,


    (1)(a) Every employee            shall retire at 58


    appointed to the                 years of age and


    service of the                   an employee in


    Corporation shall                Class IV at 60


    retire when he                   years of age !


    attains the age of


    55 years.                        Provided that in the case


                                     of an employee in


    (b) **       **                  Class IV who has


                                     reached the age of


    (2) Notwithstanding              55 years the Bank


    anything contained               may, in its discretion,


    in clause (1) any                retire him after giving


    employee be required             two months notice in


    by the competent                 writing if in the opinion


    authority or permitted           of the competent authority


    at his request to                his efficiency is found


    retire from the                  to have been impaired.


    service of the


    Corporation on                   Provided further that


    completion of 25                 the Bank may, in


    years service in                 its discretion, retire


    the Corporation                  an employee, other


    with all benefits.               than an employee in


                                     Class IV, at any time


                                     after completion of


                                     50 years of age.


                                     Provided further in


                                     the case of an


                                     employee in Class IV,


                                     who has attained the


                                     age of 55 years,


                                     his continuance in


                                     service up to the


                                     age of 58 years


                                     shall be subject to


                                     his being found


                                     suitable to be


                                     retained in service.


2.  8.6. Procedure for               47. (1)  *        *


    imposing major penalties :


                                     (2) No employee shall be


    1) Before the imposition         subjected to the penalties


    of penalties specified in        (b), (c), (d) or (e) of


    Clause (v) to (vii) of           subregulation (1) except


    Rule 8.2 are taken the           by an order in writing


    following procedure shall        signed by the Governor


    be adopted.                      in the case of an officer


                                     other than an officer


        *         *                  Grade A, or the Manager


                                     in the case of other


    (Sub-rules (2) to (6)            employees, and no such


    prescribe the procedure          order shall be passed


    for imposing penalties).         without the charge or


                                     charges being formulated


         *         *                 in writing and given to


                                     the said employee so that


    7) If the Disciplinary           he shall have reasonable


    Authority having regard          opportunity to answer them


    to its findings on the           in writing or in person,


    charges, is of the               and in the latter case his


    opinion that any of              defence shall be taken


    the penalties specified          down in writing and


    in clauses (v) to (vii)          read to him :


    of rule 8.3 should be


    imposed it shall.


    a) furnish to the


    employee a copy of the


    report of the Enquiry


    Authority and where the


    Disciplinary Authority


    is not the Inquiry


    Authority, a Statement


    of its findings


    together with


    brief reason


    disagreement, if any,


    with the findings


    of the Inquiry


    Authority and


    b) give him a notice


    stating the action


    proposed to be


    taken in regard to


    him and calling upon


    him to submit within a


    specified time such


    representation as he


    may wish to make


    against the


    proposed action.


    c) On receipt of the


    representation, if any


    received from the


    employee, the


    Disciplinary Authority


    shall impose penalty


    on the employee and


    pass appropriate


    orders on the case.


    8) If the Disciplinary


    Authority having regard


    to its findings is of


    the opinion that any of


    the penalties specified


    in clause (i) to (iv)


    of Rule 8.3 shall


    be imposed it shall pass


    appropriate orders in


    the case.


3.  2.23 Superannuation and          Proviso to Regulation


    Retirement :                     47(2).


    (1) *    *                       Provided that the


                                     requirements of this


    (2) *    *                       sub-regulation may be


                                     waived if the facts


    (3) Nothing contained in         on the basis of which


    clause (1) and clause (2)        action is to be taken


    shall affect the right of        have been established


    the competent authority          in a court of law or


    to retire an employee            Court Martial or where


    without notice or pay in         the employee has


    lieu thereof on his being        absconded or where it


    certified by a medical           is for any other reason


    examiner to be nominated         impracticable to


    for the purpose by such          communicate with him or


    authority as being in            where there is difficulty


    capacitated for a further        in observing them and


    period of continuous             the requirements can be


    service due to his               waived without injustice


    continued illness or             to the employee. In


    accident.                        every case where all or


                                     any of the requirements


                                     of this subregulation


                                     are waived, the reasons


                                     for so doing shall be


                                     recorded in writing.


4.  2.21. Termination of             125. (1) *   *


    service and discharge


                                     (2) Subject to the


    (1) The service of any           provisions of Regulation


    employee who has been            22 the Bank may


    regularly appointed to           determine the service of


    any post in the                  any employee on giving him.


    Corporation and has


    satisfactorily completed         (a) three months' notice or


    his period of probation          pay in lieu thereof if he is


    may be termination by the        an employee in Class I, and


    competent authority on


    giving such employee.            (b) One month's notice or pay


                                     in lieu thereof if he is an


    (a) 90 days notice or pay        employee in any other class.


    in lieu thereof if he is


    an employee belonging to         The power to determine the


    Category I or Category II.       service of an employee shall


                                     be exercised by the Governor


    (b) 30 days notice or pay        with the prior approval of


    in lieu thereof if he is         the Central Board in the


    an employee belonging to         case of an officer and by


    Category III or                  the Manager with the prior


    Category IV.                     approval of the Governor


                                     in the case of other


                                     employees.


---------------------------------------------------------------------------- 



 

 (2) The contents of the rules indicate the following aspects :  
   

(i) The rules mentioned at Sl. No. 1 indicate the age of superannuation or retirement, except in the case of the HMT, the latter part of the same rules provided that premature retirement of a permanent employee could be ordered only after he attains the prescribed age or puts in the prescribed number of years of services, as the case may be. The validity of such a rule is not and cannot be disputed, in view of the decisions of the Supreme court in Motiram Deka’s case and reiterated by subsequent decisions to which I shall make a reference at an appropriate place.

(ii) The rules mentioned at Sl. No. 2 prescribed the procedure for imposing the penalty of removal or dismissal from services. There is no controversy that the procedure so prescribed is fair and just.

(iii) The rules mentioned at Sl. No. 3 dispense with the requirement to observe the procedure prescribed at Sl. No. 2 before removing or dismissing any employee from service under certain special circumstances specified in those rules. There is no quarrel about the lawful object and purpose of these rules and their validity.

(iv) The rule mentioned at Sl. No. 4 are the impugned rules. Under these rules the services of a permanent employee can be terminated at any time without inquiry, and without assigning any reason.

24. Learned counsels for the petitioners submitted that the rules set out at Sl. No. 1 which fix the age of retirement and the conditions imposed for ordering premature retirement and the rules set out at Sl. No. 2 which prescribe the procedure for imposing the penalty of removal or dismissal from service after inquiry except in cases specified in the rules set out at Sl. No. 3 in which the inquiry is dispensed with, are intended to ensure security of tenure to the employees in public interest and the impugned rules which confer arbitrary power to terminate the services of permanent employees at any time are void as offending Arts. 14 and 16(1). In support of this submission they mainly relied on the judgment of the Supreme Court in Motiram Deka’s case (Supra) in which Rules 148(3), 149(3) of the Railway Establishment Code which were similer to the impugned rules were struck down and the judgment of the Bombay High Court in S. S. Muley v. J. R. D. Tata and others [1980-II L.L.J. 1] in which Regulation 48 of the Air India Employees Service Regulations (‘Air India Regulations’ for short) which was similar to the impugned rules was struck down as offending Art. 14 following the judgment of Das Gupta, J., in Motiram Deka, (Supra).

25. (1) Learned counsels for the respondents resisted the submissions made for the petitioners with great vehemence. They submitted that the ration of the majority judgment in Motiram Deka (supra) did not cover the point as it related to civil servants governed by Articles 311(2) of the Constitution and that judgment of Dasgupta, J., which supports the contentions of the petitioners was not the law declared by the Supreme Court. They also relied on a recent, yet unreported, Division Bench judgment of the Bombay High Court in Manohar P. Kharkar and another v. Raghu Raj since reported in [1981-II L.L.J. 459] and another judgment in W. P. No. 658 of 1981 in which judgment of Sawani J., Sawnant, J., in Muley’s case, [1980-II L.L.J. 1], had been reversed and the validity of Regulation 48 of Air India was upheld, as also a Division Bench judgment of the Gujarat High Court in Amarsing v. G. S. R. T. Corporation, (1980) XXI G.L.R. 500 in which Rule 61 of the Gujarat State Transport Employees Services Regulations, 1961, which was similar to the impugned, upheld.

(2) They also submitted that the power conferred under the impugned rules was exercisable in public interest and, therefore, not arbitrary and even on the basis that the petitioners could invoke Arts. 14 and 16, the impugned orders would be open for judicial review by this Court and if an order made under the impugned rule was found to be arbitrary, capricious or a case of colour, able exercise of power, it could be set aside but the rule itself was not liable to be struck down.

26. I shall now proceed to examine the validity of the rival contentions on the fifth point.

27. The petitioners in the present cases are not civil servants. Though each of the companies and the Reserve Bank are ‘State’ as defined in Articles 12 as held by me earlier, there can be no doubt that its employees are not civil servants of the Union or of the State, whose instrumentality or agency, the company or the Bank is and, therefore, the provisions contained in Part XIV of the Constitution (Articles 309 to 314) are inapplicable. (See T. S. Verghese v. Reserve Bank) [1980-II L.L.J. 57], in fact, very rightly, no such contention was advanced for the petitioners.

28. The decision of the Supreme Court in Motiram Deka (supra) is, however, relevant as Rules 148(3) and 149(3) of the Railway Establishment Code, which were similar to the impugned rules, were struck down by the Supreme Court not only on the ground that they were violative of Art. 311(2) but also on the ground that they were violative of Art. 14 and as the companies and the Bank are ‘State’ as defined under Articles 12 and to petitioners are their employees, they are certainly entitled to invoke the Fundamental Rights guaranteed under Arts. 14 and 16, and as certain other Seminal principles which are applicable to these cases to which I shall make reference at appropriate place, were also laid down.

29. (1) For a proper understanding of, and to appreciate the point under consideration, it is necessary, in the first instance to trace the history of the development of law on the question of the validity of termination of service simpliciter of permanent civil servants of State and of the rules under which such terminations were being decision in Motiram Deka’s case.

(2) Prior to Motiram Deka’s case, the Supreme Court had taken the view that when the service of even a permanent civil servant were terminated simpliciter at any time before retirement pursuant to rule framed under the proviso to Art. 309 of the constitution but not as a measure of penalty, it was neither removal nor dismissal from service within the meaning of the expression used in Art. 311(2) of the Constitution and, therefore, neither the rule providing for such premature termination nor a termination made under such a rule, was invalid.

(3) There were two types of cases decided by the Supreme Court.

(i) The first type were cases of compulsory or premature retirements made under rules, which empowered the concerned competent authority, to retire permanent civil servants by a simple notice before they reached the age or superannuation, but after the concerned civil servant had attained the prescribed age or had put in the prescribed period of qualifying service. Such retirements, though they resulted in the determination of the tenure of the concerned civil servant were upheld on the ground that they did not amount to removal or dismissal within the meaning of those expressions used in Art. 311(2). It is on these reasoning that such retirements as also the rules under which they were made were held to be not violative of Art. 311(2). Those cases are –

(i) Shyamlal v. State of U. P. [1954-II L.L.J. 139], (ii) State of Bombay v. Saubhagchand M. Doshi, , (iii) Dalip Singh v. State of Punjab, .

(ii) The second type of cases were terminations made in exercise of power under the services rules, or under the terms of contract which gave the power of right to terminate the services of a temporary or permanent civil Servant, as the case might be at any time by a simple notice. Termination of services of a temporary civil servant in accordance with rules or terms of contract was held to be valid and not violative of Art. 311(2) or Article 14 in the case of Satischandra v. Union of India, . In the case of P. L. Dhingra v. Union of India, [1958-I L.L.J. 544], the Supreme Court reviewed all its earlier decisions referred to above and considered exhaustively the extent of the rights of permanent and temporary civil servants and or probationers.

As far as permanent civil servants are concerned, the Court held :

(i) The termination of services of a permanent civil servant even by an innocuous order which did not cast any stigma to his character or conduct would per se be penal in nature and would amount to imposition of penalty of removal or dismissal and consequently would be violative of Art. 311(2) but

(ii) if, the termination of service of a permanent civil servant –

(a) was made in exercise of the power conferred under a rule governing the service condition or a term of contract, or

(b) was made by way of retirement on superannuation or by an order of premature retirement made in exercise of the power conferred under a rule governing the conditions, or

(c) was made or brought about consequent on the abolition of post.

Such termination of service would not be regarded as penal in nature and would not amount to removal or dismissal from service within the meaning of these expressions used in Art. 311(2) and would be valid (See paragraph 28 of the judgment).

3. Following the ratio in P. L. Dhingra’s case the validity of rules which empowered to terminate the services of a permanent Railway servant at any time by a simple notice was upheld in the case of P. Balakotaiah v. Union of India, . The rules concerned in that case were Rule 148(3) of the Railway Establishment code and Rule 3 of the Railway Services (Safeguarding of National Security) rules, 1949. The relevant portion reads :

“……. The question as to what would be amount to punishment for purposes of Art. 311 was also fully considered in Purshotam Lal Dhingra’s case. It was therein held that if a person had a light to continue in office either under the service rules or under a special agreement, a premature termination of his services would be a punishment. And likewise, if the order would result in loss of benefits already earned and accrued, that would be also be punishment. In the present case, the terms of employment provide for the services being terminated on a proper notice, and so, no question of premature termination arises. Rule 7 of the Security Rules preserves the rights of the employees to all the benefits of pension, gratuities and the like to which they would be entitled under the rules. Thus, there is no forfeiture of benefits already acquired. It was stated for the appellants that a person who was discharged under the rules was not eligible for re-employment, and that that was punishment. But the appellants are unable is to point any rule imposing that disability. The order of terminating the services under R. 3 of the Security Rules stands on the same footing as an order of discharge under R. 148, and it is neither one of dismissal nor of removal within the meaning of Art. 311. This contention also must be overruled.”

30. In Motiram Deka’s case, (supra) once again the constitutional validity of Rule 148 (3) of the Railway Establishment Code which empowered the competent authority to terminate the services of permanent (non-pensionable) servants at any time, by giving a simple notice and a similar Rule 149 (3) which conferred similar power in respect of permanent and pensionable servants, (See paragraph 6 of the judgment) came up for consideration.

(2) Having regard to the important constitutional questions involved, the case was referred to a larger Bench of seven Judges, Before the seven Judges Bench, the following contentions were urged :

(i) Rules 148 (3) and 149 (3) of the Railway Establishment Code were violative of Article 14 of the Constitution.

(a) as they conferred arbitrary power to pick and choose any permanent railway employee for premature retirement; and

(b) as there was no such rule framed in respect of any other department of the Central Government.

(ii) Rules 148 (3) and 149 (3) were violative of Art. 311(2) of the constitution.

(3) The majority judgment in the case was delivered by Gajendragadkar, J., as he then was, on his behalf and on behalf of K. N. Wanchoo, M. Hidayatulla (as he then was) and N. Rajagopala Iyengar, JJ. The majority opinion was that termination of service of a permanent employee except by way of

(i) retirement on superannuation;

(ii) Premature retirement in public interest provided, the power was made exercisable only after the concerned civil servant had attained the prescribed age or had put in prescribed number of years of service, provided further, the age or period fixed for that purpose under the rule was reasonable; and

(iii) on abolition of post.

Would per se be removal or dismissal from service and, therefore, illegal and even if a provision was made under Article 309 enabling the State to terminate the services of permanent civil servant in that manner, such a rule would be violative of Article 311(2) of the Constitution.

(4) (i) Thus, the view taken in the cases of P. L. Dhingra and Balakotaiah was modified …. The modification was that the termination of service of a permanent civil servant simpliciter even though made in exercise of the power conferred under a service rule, which was regarded as no removal or dismissal, according to earlier decisions was held to be per se removal or dismissal from service. On this view, it was held, not only such termination, but also the rule authorising each such termination, were violative of Art. 311(2).

(ii) On the above view, the two rules were struck down on the ground that they were violative of Art. 311(2). The majority also held that the two rules were violative of Art. 14.

(5) Subba Rao, J., as he then was, in his concurring judgment agreed that the two rules impugned in that case were liable to be struck down as violative of Arts. 14 and 311(2), though he expressed his dissent, about the reservation made in the majority judgment which was in favour of the validity of a rule providing for compulsory retirement after a reasonable period of service or age.

(6) Dasgupta J., in his separate judgment agreed with the majority that Rules 148 (3) and 149 (3) were liable to be struck down, but he was of the view that it was liable to be struck down only on the ground of violation of Art. 14.

(7) Justice Shah, as he then was, in his separate judgment, was of the opinion that the two rules were violative of Art. 14 nor Art. 311(2).

(8) Thus out of seven Judges constituting the Bench, six were of the view that the rules were violative of Article 14 and five were of the view that the two rules were also violative of Art. 311(2). As Part XIV of the Constitution is not attracted to the cases of employees of the companies and the Reserve Bank, the ratio of the judgment in so far it relates to the striking down of the Rules 148 (3) and 149 (3), on the ground of their violating Art. 311(2), is not apposite to these cases. But the decisions in so far it relates to the striking down of Rules 148(3) and 149(3) of the Railway Establishment Code on the ground that they were violative of Article 14 and the view taken, as to the real nature of termination of service simpliciter of permanent civil servants are relevant for these cases.

31. Now I shall proceed to consider the challenge to the validity of the impugned rules on the ground that they are violative of Arts 14 and 16(1), There are two aspects of the ratio of the judgment in Motiram Deka’s (supra) case on the basis of which the validity of the impugned rules has got to be tested. They are –

(1) Rules 148(3) and 149 (3) of the Railway Establishment Code, which empowered the Railway department to terminate the services of permanent railway employees by a simple notice were struck down on the ground that they were violative of Art. 14. In particular, Dasgupta, J., in his judgment held that the said rules conferred arbitrary power, and on that ground his Lordship struck down two rules as violative of Article 14.

The impugned rules are similar to rules 148 (3) and 149 (3) of the Railway Establishment Code. The petitioners are the employees of the companies and the Reverse Bank, which are “State” for purposes of Part III of the Constitution. Therefore, they can invoke the Fundamental Right guaranteed under Art. 14. The question for consideration is, applying the said ratio, whether or not the impugned rules are violative of Articles. 14.

(2) In Motiram Deka’s case, the Supreme Court held that termination of service simpliciter of permanent civil servants made even in exercise of power under a rule which is incorporated in the service rules was per se penal in nature and, therefore, tantamounts to removal or dismissal within the meaning of those expressions used in Art. 311(2).

(3) The petitioner in each of these case was a permanent employee of the concerned company or the Reserve Bank, as the case may be. The question for consideration is whether or not the termination of their service simpliciter under the impugned rules, would, on the same analogy as those of permanent civil servants, per se amount to removal or dismissal from service ? If it has to be so regarded, then the further question for consideration is, whether the impugned rules which deprive the petitioners and others who are permanent employees, of the procedural safeguards incorporated in the service rules (set out at S1. No. 2 of the statement) which are required to be observed before imposing such penalty, are liable to be struck down as violative of Arts. 14 and 16(1).

32. (1) It was, however, pointed out for the respondent that the majority judgment in Motiram Deka’s case held that the two rules were violative of Art. 14, because no similar rules had been framed in respect of other services of the union and there was no special reason for having such a rule only for the Railway Department and did not express any opinion, on the alternative contention that the rules conferred arbitrary power and, therefore, violative of Art. 14 and submitted that as the impugned rule in each of the cases is applicable to all the employees of that particular body, there is no violation of Art. 14 of the Constitution and the ratio of the majority judgment in Motiram Deka’s case is not applicable to these cases.

(2) Their further submission was, that the petitioners not being civil servants did not enjoy any security of tenure, therefore, their position was only equal to that of temporary civil servants or probationers and, therefore, the termination of their service simpliciter, furnished no cause of action to them as no right of their is was violated. In support of this submission, strong reliance was placed on the judgment of the Bombay High Court in Manohar, P. Kharkar’s case. (supra)

33. I shall now consider the first of the two aspects set out above. It is true that in the majority judgment, out of the two grounds urged for invalidating Rules 148 (3) and 149 (3) of the Railway Establishment Code set out earlier, the majority struck down the rules only on the second ground, namely, that there was no similar rule framed in respect of any of the services of the Central Government, but did not express any opinion on the first ground. However, Dasgupta, J., in his separate judgment considered the first ground and held that Rules 148 (3) and 149 (3) of the Railway Establishment Code were violative of Art. 14 and liable to be struck down on the ground that they conferred arbitrary power. The relevant portion of the judgment reads :

“It is necessary now to consider the second ground urged by the appellants, via., that R. 148 (3) contravenes Art. 14 of the Constitution. Two contentions are urged in support of this ground. First it is urged that the Rule gives no guidance to the authority who would take action on it as regards the principle to be followed in exercising the power. Secondly, it is urged that the rule discriminate between railway servants and other Public Servants. In my opinion, there is considerable force in the first contention.

* * *

……. I find on scrutiny of the Rule that it does not lay down any principle or policy for guiding the exercise of discretion by the authority who will terminate the service in the matter of selection or classification. Arbitrary and uncontrolled power is left in the authority to select at its will any person against whom action will be taken. The rule, thus enables the authority concerned to discriminate between two railway servants to both of whom R. 148(3) equally applied by taking action in one case and not thinking it in the other. In the absence of any guiding principle in the exercise of the discretion by the authority the Rule has, therefore, to be struck down as contravening the requirements of Art. 14 of the Constitution.”

(2) Subba Rao, J., (as he then was) in his separate judgment, agreeing with the majority, stated :

“I agree that the impugned rules infringe both Art. 14 and Art. 311(2) of the Constitution and are, therefore, void. On Art. 14, I have nothing more to say. But on the impact of the said rules on Art. 311 of the Constitution, I would prefer to give my own reasons.”

Thus Subba Rao, J., held that the two rules were violative of Art. 14. There can be no doubt that His Lordship agreed with the ground on which majority struck down the two rules as violating Art. 14. Though His Lordship did not expressly state that he was agreeing with the aforesaid view of Dasgupta, J. also for striking down the two rules, there are clear indications in the judgment, that he was agreeing with that view also. As pointed out earlier, Subba Rao, J., did not agree with the reservation made by th majority in favour of the validity of the rule permitting premature retirement, even if the power was made exercisable after a civil servant had put in specified period of service, or had attained the prescribed age, both of which were reasonably fixed and thereby assuring security of tenure prior to such age or service. His Lordship while pronouncing that such a rule also conferred arbitrary power said thus :

“The effect of the two rules is the same; the difference is only superficial, which lies more in clever drafting than in their content. Take for instance the following two rules; (i) the Government may terminate the services of a permanent Government servant at any time or after a specified period but before the normal superannuation age, by way of compulsory retirement, and (ii) the Government may terminate the services of a permanent civil servant by giving him 15 days’ notice, Arbitrariness is writ large on both the rules, enable the Government to deprive a permanent civil servant of his office without enquiry. Both violate Art. 311(2) of the constitution. But must be bad or more at all.”

Thus, Subba Rao, J., categorically declared that a rule providing for termination simpliciter was arbitrary.

(3) The ground on which Dasgupta, J., struck down Rule 148 (3) and 149 (3) of the Railway Establishment code which received implied concurrence from the judgment of Subba Rao, J., lent support to the challenge made as to the validity of the impugned rules on the ground that it confers arbitrary power.

(4) The rationale of that judgment is the conferment of power without guidelines which enables a Government authority to take arbitrary action against an individual to his prejudice would be hit by Art. 14. That, Art. 14 has such dimension, is no longer open to question after the decisions of the Supreme Court in E. P. Rayappa v. State of Madras, [1974-I L.L.J. 172] and Maneaka Gandhi v. Union of India . In these decisions, the Supreme Court examined and expounded the true scope and ambit of Art. 14. The Court held that Art. 14 stands violated not only by a discriminatory provision, but also by an arbitrary provision. The relevant observations made by Bhagawati, J., in Rayappa’s case (supra) read;

“….. Art. 14 is the genus while Art. 16 is a species. Article 16 gives effect to the doctrine of equality in all matters relating of equality in all matters relating to public employment. The basic principle which, therefore, informs both Arts. 14 and 16 equality and inhibition against discrimination. Now, what is the content and reach of this great equalising principle ? It is a founding faith, to use the words of Bose, J.,”a way of life”, and it must not be subjected to a narrow pedantic or lexicographic approach.

“…… From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional Law and is, therefore, violative of Art. 14 and if it affects any matter relating to public employment, it is also violative of Art. 16. Articles 14 and 16 strike at arbitrariness in State action and ensure fairness and equality of treatment.”

This view was reiterated in the case of Maneka Gandhi (supra). The relevant part of that judgment reads :

“……. Now, the question immediately arises as to what is the requirement of Art. 14 what is the content and reach of the great equalising principle enunciated in this article ? There can no doubt that it is a founding faith of the constitution. It is indeed the pillar on which rests securely the foundation of our democratic republic And therefore, it must not be subjected to a narrow pedantic or lexicographic approach. No attempt should be made to truncate its all embracing scope and meaning, for to do so would be to violate its activist magnitude. Equality is as dynamic concept with many aspects and dimensions and it cannot be imprisoned within traditional and doctrinaire limits.”

After reiterating the principles laid down in Rayappa’s case (supra) the Court said :

“……… Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. The principle of treatment. The principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non-arbitrariness pervades Art. 14 like a brooding omnipresence”.

With particular reference to the inhibition contained in Arts. 14 and 16(1), against arbitrary termination of service, confirming a Division Bench decision of this Court setting aside an order of termination of service of a temporary employee in the service of State Government, the Supreme Court, in the case of Government Branch press v. D. B. Belliappa, [1979-I L.L.J. 156], said :

“……. Bereft of rationality and fairness, discretion degenerates into arbitrariness which is the very antithesis of the rule of law on which our democratic polity is founded : Arbitrary invocation or enforcement of a service condition terminating the service of a temporary employee may itself constitute denial of equal protection and offend the equality clause in Arts. 14 and 16(1). Article 16(1) guarantees ‘equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State ‘. Moreover, according to the principle underlying S. 16 of the General Clauses Act, the expression ‘appointment’ used in Art. 16(1) will include termination or removal from service, also.

It is now well settled that the expression ‘matters relating to employment’ used in Art. 16(1) is not confined to initial matters prior to the act of employment, but comprehends all matters in relation to employment both prior, and subsequent, to the employment which are incidental to the employment which are incidental to the employment and form part of the terms and conditions of such employment and form part of the terms and conditions of such employment such as, provisions as to salary, increments, leave, gratuity, pension age of superannuation, promotion and even termination of employment It is further well established that Arts. 14, 15(1) and 16(1) form part of the same constitutional code of guarantees and supplement each other. If any authority is needed for the above enunciation, reference may be made to the observations made by Gajendragadkar, J., as he then was in General Manager, Southern Railway v. Rangachari, [1970-II L.L.J. 289]. In the recent judgment of the Supreme Court in Air India v. Nargesh Meerza, [1981-II L.L.J. 314], after reviewing the earlier decisions on the scope of Art. 14, the Supreme Court said thus –

“In view of our recent decision explaining the scope of Art. 14, it has been held that any arbitrary or unreasonable action or provision made by the State cannot be upheld.

 *                   *                 * 



 

 In State of Andhra Pradesh v. Nalla Raja Reddy . This Court made the following observations :  
   

‘Official arbitrariness is more subversive of the doctrine of equality than statutory discrimination. In respect of a statutory discrimination one knows where he stands, but the wand of official arbitrariness can be waved in all directions indiscriminatelly.’ ………………..

The impugned provisions appear to us to be a clear case of official arbitrariness”.

In view of these pronouncements, when the validity of a provision of law is challenged on the ground that it confers arbitrary power on any authority or agency of the State to take any action to the prejudice of person, and it is manifestly unreasonable and unjust and therefore, it violates Art. 14, the plea that the power under it can be exercised against all the persons similarly situated is no defence, because the very fact that it empowers the authority to pick and choose any of the persons for taking action against him at its sweet will and pleasure is per se discriminatory and falls within the mischief of the injunction not to discriminate, incorporated in Art. 14.

34. The next aspect for consideration is whether the impugned rules confer arbitrary power ? It was argued for the respondents, that the object and purpose of the conferment of the power was a legitimate one, namely, to get rid of persons, whose further retention in service was not in the interest of the company or the Bank, as the case may be and the fact that the power was exercisable in the interest of the company means that the powers is exercisable in public interest and this itself constitutes sufficient guidance for the exercise of the power.

35. The companies are public companies and employment under them is public employment. Therefore, the expression interest of the company means “public interest”. The impugned rules of the BEML and the HMT expressly state that the power under the rules is exercisable in the interest the company. The impugned rules of the Bank and the Agro-Industries Corporation submitted that even in the absence of the use of such an expression, the power is exercisable only in public interest, as every public authority is required and expected to exercise every power vested in it only in and in my view, very rightly, contested for the petitioner, because that would be the correct position. Just as principles of natural justice must be considered as superadded to any provision of law authorising to take action against a person which would result in civil or evil consequences against him, unless expressly or by necessary implication the compliance with the same is dispensed with, the requirement to exercise power in “public interest” must be considered as, superadded to every provision of law conferring power on public authorities, even in the absence of use of that expression in the provision. In fact, even the question, as to whether such a requirement has been excluded in a given case, does not arise at all, because there can be no power conferred on a public authority which is not in public interest.

36. Therefore, I shall proceed on the basis that the impugned rules in all the four cases provide that the concerned authority has the power to terminate the service of a permanent employee in public interest. The expression “public interest” cannot also be dubbed as a vague one. This is evident from the observations contained in paragraph 65 of the judgment in Maneka Gandhi’s case. (supra) They read :

“……. The words “in the interest of the general public” have a clearly well defined meaning and the courts have often been called upon to decide whether a particular action is ‘in the interests of the general public’ or in ‘public interest’ and no difficulty has been experienced by the Courts in carrying out this exercise.

….. We are clearly of the view that sufficient guidelines provided by the words “in the interests of the general public” and the power conferred on the Passport Authority to impound a passport cannot be said to be unguided or unfettered.

….. When power is vested in a high authority like the Central Government, abuse of power cannot be lightly assumed. And in any event, if there is abuse of power, the arms of the Court are long enough to reach it and to strike it down. The power conferred on the Passport Authority to impound a passport under S. 10(3)(c) cannot, therefore, be regarded as discriminatory and it does not fall foul of Art. 14″.

Relying on the above paragraph, learned counsels for the respondents asked me to hold that the impugned rules are not violative of Art. 14, and the impugned actions are only liable for judicial review.

37. The submission, though at first sight appears to be attractive and an effective answer to the challenge made to the impugned rule, a closer scrutiny of it, which I shall take up at once, exposes the lack of substance in it and shows that the submission is no answer at all to the challenge made by the petitioners as to the validity of the impugned rules.

38. The learned counsels for the petitioners contend that the power conferred under the impugned rules to terminate the services of permanent employees of the companies and the Bank, was detrimental to public interest and just because the wording of the rules makes it appear that the power under them could be regarded as valid, as, in truth and substance, they confer arbitrary power which defeats public interest. Elaborating this point, learned counsels submitted that security of tenure to the persons in public employment was vital, to ensure the independence and integrity of the services, as security of tenure alone enables them to discharge their duties and responsibilities without fear or favour, which as of utmost importance to safeguard and protect public interest. They submitted that the object of the rule which fixed the age of retirement and the rule which prescribed the procedure for imposing penalty of removal or dismissal from service was to achieve that purpose, but the impugned rules frustrate that object. In other words, their case is that the impugned rules defeat public interest. In support of the submission that security of tenure was in public interest and must be protected also, they relied on the judgment of the Supreme Court in the case of Motiram Deka (supra).

39. The learned counsels for the respondents submitted that in Motiram Deka’s case (supra) the Supreme Court had no doubt held that security of tenure was essential for civil servants in public interest but the Court said so only because of Art. 311(2) which was applicable to civil servants and hence the petitioners cannot receive any assistance from that judgment in support of that plea.

40. The relevant portions of the judgment Motiram Deka’s case unmistakably indicate that the Court recognised the absolute necessity of security of tenure to persons, who are members of the civil service to ensure and protect public interest, and it is that principle which constituted the basis for the Supreme Court to depart from the earlier view that simpliciter termination of permanent civil servants was no removal or dismissal within the meaning of Art. 311(2), and to hold that an innocuous order of termination of service of a permanent civil servant made even in exercise of the power conferred under a rule enacted under Article 309 would also have to be regarded as amounting to be regarded as amounting to the imposition of penalty of removal or dismissal within the meaning of Article 311(2) and, therefore, the Article stands violated by such termination. The relevant portion reads :

“Reverting then to the nature of the right which a permanent servant has under the relevant Railway Rules, what is the true position ? A person who substantively holds a permanent post has a right to continue in service, subject of course, to the rule of superannuation and the rule as to compulsory retirement. If for any other reason that right is invaded and he is asked to leave his service, the termination of his service must inevitably mean the defeat of his right to continue in service and as such, it is in the nature of penalty and amounts to removal. In other words, termination of the services of a permanent servant otherwise than on the ground of superannuation or compulsory retirement, must per se amount to his removal, and so, if by R. 148 (3) or R 149 (3) such a termination is brought about, the Rule clearly contravenes Art. 311(2) and must be held to be invalid”.

(2) Having taken the above view, in the next paragraph the Court held, that rule making power under Article 309 cannot be exercised so as to frame a rule which enable the termination of service of permanent civil servants in the way the said Rules 148 (3) and 149 (3) did and such an exercise was impermissible, as it would be violative of Art. 311(2). Then the Supreme Court proceeded to declare the importance of security of tenure in public service and is purpose and how a rule providing for simple termination of service defeats the purpose and thereby injurious to public interest. It reads :

“At this stage, we ought to add that in a modern democratic State the efficiency and incorruptibility of public administration is of importance that it is essential to afford to civil servants adequate production against capricious action from their superior authority. If a permanent civil servant is guilty of misconduct, he should no doubt be proceeded against promptly under the relevant disciplinary rules, subject, of course, to the safeguard prescribed by Art. 311(2); but in regard to honest, straight-forward and efficient permanent civil servants. It is of utmost importance even from the point of view of the State that they should enjoy a sense of security which alone can make them independent, and truly efficient. In our opinion, the sword of Damocles hanging over the heads of permanent railway servants in the form of Rule 148 (3) or R. 149 (3) would inevitably create a sense of insecurity in the minds of such servants and would invest appropriate authorities with very wide powers which may conceivably be abused.”

Thus great emphasis has been laid on the importance of security of tenure, for protecting the public interest.

(3) In this behalf a passage in American jurisprudence (36A) American jurisprudence 2nd Edn. Vol. 15, P. 464. It says :

“purpose of civil service laws.

The unlimited authority of the chief executive in public office to appoint and remove subordinate officials, which prevailed throughout this country during the first century of its existence, resulted in the general adoption of the spoils system, under which public office was made the reward for political work, with the resulting evils of inefficiency, extravagance, interruption of public business by place hunters, corruption of the electoral franchise; and political assessments. The civil service system rests on the principle of application of the merit system instead of the spoils system in the matter of appointment and tenure of office. Civil service laws are not penal in nature, but are designed to eradicate the system of making appointments primarily from political considerations with its attendant evils, to eliminate as far as practicable the element of partisanship and personal favoritism in making appointments, to establish a merit system of fitness and efficiency as the basis of appointments and to prevent discrimination in appointments to public service based on any consideration other than fitness to perform its duties. While security of tenure in office is an important object of the civil service system, and it has been said that civil service legislation was enacted for the security of the faithful employee by giving him permanence of employment, at least for the period prescribed by law and to free such employee from the political and personal prejudices of reprisal. Civil service laws were intended as protection for the public as well as for the individual employee. Stated otherwise, civil service was not established for the sole benefit of public employees, In fact, it has been said that the primary purpose of civil service is to enable State, country, and municipal government to render more efficient services to the public by enabling them to obtain efficient public servants.”

41. Learned counsels for the respondents asked me to say that the above observations were relevant only for civil servants, and not for the employees of the companies and the Bank because Art. 311(2) of the Constitution was not applicable to the latter.

42. Learned counsels for the petitioners argued that the observations were relevant to their cases also as employment under the companies and the Bank was public employment and they were the instrumentalities or agencies of the State. They emphasised that the object, purpose and absolute necessity of ensuring security of tenure of civils servants enunciated by the Supreme Court must, in the nature of things, apply to public sector employees also, and when the Supreme Court has emphatically said that the security of tenure is essential in public interest, in respect of the services under the Union and the States, the argument advanced for the respondents that security of tenure was in public interest only for the services under the Union and the States and not to the employment under the companies and the Bank, which are only Instrumentalities or agencies of the Union and the States, is fallacious and untenable.

43. After giving careful consideration to the submission, I find it difficult to persuade myself to agree with the submission made for the respondents. In my opinion it would be illogical to say that the security of tenure which is considered by the Supreme Court to be of utmost public importance in respect of Government servants, is irrelevant and of no consequence to the employees of the public sector undertakings or statutory corporations just because Art. 311(2) is not applicable to them. Just as the officers and employees of the Government are required to discharge their duties without fear or favour the officers and employees of the bodies which are instrumentalities or agencies of the Union or the States are also required to discharge their duties without fear or favour. Having regard to the vast national resources placed at the disposal of such bodies and enormous powers conferred on them in the respective filed of activity, those very weighty reasons assigned by the Supreme Court as to the necessity of security of tenure for Government employees would apply with equal force to the employees of these bodies. The Supreme Court in the case of R. D. Shetty, [1979-II L.L.J. 217], after adverting to the vast scope of the activities of the modern Government, the insufficiency of the frame work of the civil service to carry out all such activities and the inevitable entrustment of various such activities to the instrumentalities or agencies of the Government, stressed the necessity of subjecting such bodies to like constitutional restrictions as those imposed on the exercise of the powers by the Government. The relevant portions read :

“To-day the Government, in a welfare State is the regulater and dispenser of special services and provider of a larger number of benefits, including jobs, contracts, licences quotas, mineral rights, etc. The Government pours forth wealth, money, benefits, services, contracts, quotas and licences. The valuables dispensed by Government take many forms, but they all share one characteristic. They are steadily taking the place of traditional forms of wealth. These valuables which derive from relationships to Government are of many kinds. They comprise social security benefits, cash grants for political sufferers and the whole scheme of State and local welfare.

* * *

Now, it is obvious that the Government which represents the executive authority of the State, may act through the instrumentality or agency of natural persons or it may employ the instrumentality or agency of juridical persons to carry out its functions. In the early days, when the Government had limited functions, it could operate effectively through natural persons constituting its civil service and they were found adequate to discharge governmental functions, which were of traditional vintage. But as the tasks of the Government multiplied with the advent of the welfare State, it began to be increasingly felt that the framework of civil service was not sufficient to handle the new tasks which were often of specialised and highly technical character. The inadequacy of the civil service to deal with these new problems came to be realised and it became necessary to forge a new instrumentality or administrative device for handling these new problems. It was in these circumstances and with a view to applying this administrative need that the public corporation came into being as the third are of the Government.

* * *

“The corporations acting as instrumentality or agency of Government would obviously be subject to the same limitations in the field of constitutional and administrative law as Government itself, though in the eye of the law, they would be distinct and independent legal entitles. If Government acting through its officers is subject to certain constitutional and public law limitations, it must follow a fortiori that Government acting through the instrumentality or agency or corporations should equally be subject to the same limitations”.

These observations read with the reasoning inherent in the principle enunciated by the Supreme Court in Motiram Deka’s case (supra) as to necessity of security of tenure to the civil servants, the same must apply with equal force to other spheres of public employment, i.e., employment not directly under the Union or the State, but under its instrumentalities and agencies, over which, the same democratic system of Government exercises all pervading control. In fact even this aspect of the matter is also concluded by a recent decision of the Supreme Court.

44. (1) A question, as to the extent of protection required for the tenure an conditions of service of the employees of an instrumentality of the State came up for consideration in the case of U. P. Warehousing Corporation v. Vijayanarayan, [1980-I L.L.J. 222], before a Division Bench of the Supreme Court consisting of Sarkaria and Chinnappa Reddy, JJ. The legality of the respondent therein by the U.P. Warehousing Corporation was questioned. No statutory rules had been framed by the Corporation. The Supreme Court held that though statutory rules regulating conditions of service had not been framed, the relationship between the Corporation and the respondent therein was one of status and the same could not be determined except in accordance with law and as in the said case no rule had been framed, the principles of natural justice were applicable and as they had not been complied with, the termination of service of the respondent therein was set aside and a declaration that he continued to be in the service of the Corporation was granted.

(2) In particular, as regards the question as to whether the employees of an instrumentality of a State should be given the protection to the same extent as the employees of the Union or the State Governments, Sarkaria, J., observed as follows :

“….. The employees of public corporation are not civil servants. In so far as public corporations fulfil public tasks on behalf of Government, they are public authorities and, as such subject to control by Government. The public corporation being creation of the State is subject to the constitutional limitation as the State itself”.

(3) Chinnappa Reddy, J., in his separate Judgment while concurring with the views expressed by Sarkaria, J., dealt with the matter in greater detail and said;

“I find it very hard indeed to discover any distinction on principle, between a person directly under the employment of Government and a person under the employment of an agency or instrumentality of the Government or a Corporation, set up under a statute or incorporated but wholly owned by the Government. It is self evident and trite to say that the function of the State has long has deletrious and baneful effect to public interest. The extent of damage it causes to public interest is enormous and incalculable. Most of the servants of a public body would have no courage to speak or act fearlessly to resist or expose, activities, which are injurious to the interests of the body, of which they are the employees, particularly when such activities are being carried on by those who have the power or influence to cause termination of their service as they would be conscious of the fact that a rule, such as the impugned rule could be a convenient weapon which could be used by such selfish but powerful individuals to harm them. As a result, they would, as human nature is, prefer to toe line of least resistance. They would try to save their job than public interest, i.e., the interest of the body whose employees they are. It is obviously for this reason that the Supreme Court said in Motiram Deka’s case (supra) that in order to ensure a fearless and favourless independent and efficient civil service that security of tenure was essential and that reasoning applies with all its force to the employees of the agencies or instrumentalities of Union and the States. Therefore, it appears to me that the existence of the rule itself has a great demoralizing effect on the services, and further even a single termination of service of a permanent employee under the impugned rules is sufficient to make all the employees fear sticken and as a result the object of having and independent, fearless and favourless service personnel to guard public interest would be defeated. For these reasons I do not think that sparing use of the rule, can, in any way, mitigate the vice inherent in the rule.

6. The statement furnishing the extract of the rules given earlier shows that each of the companies concerned in these cases and the Reserve Bank have prescribed :

(i) the rules fixing the age of retirement and except the HMT the other bodies have prescribed the preconditions to effect premature retirement (vide Sl. No. 1);

(ii) the procedure which must be complied with before imposing the penalty of removal or dismissal from service (vide Sl. No. 2) and

(iii) the exception incorporated to the said procedure (vide Sl. No. 3).

These rules correspond to the provision regulating the conditions of service of civil servants of the Union and the States :

(i) fixing age of superannuation and the rules governing premature retirement;

(ii) the procedure prescribed under Art. 311(2) and the relevant rules governing disciplinary proceedings for imposing penalties of removal or dismissal from service; and,

(iii) the exceptions to the aforesaid procedure incorporated under clause (a) to (c) to the proviso to Art. 311(2).

What are the objects sought to be achieved by such provisions ? The answer is not far to seek. They are –

(i) The period of tenure of service gets fixed, i.e., when a person is appointed at a particular age, the difference between the age and the age of retirement fixed by the rules would be the period of his tenure of service.

(ii) The rules confer a right to every permanent employee to continue in service till he attains that age unless he is dismissed or removed earlier as a measure of penalty or prematurely retired, after he had put in the prescribed number of years of service or age, on the formation of the opinion by the competent authority that the concerned employees has out-lived his utility at that stage itself. In other words the fixation of retirement age read with rules prescribing the mandatory procedure for imposing penalty of removal or dismissal from service confers security of tenure.

(iii) The rule fixing the age of retirement is intended to specify the super age limit after which an employee cannot be retained in service. This is done having due regard to the age at which generally a person is likely to lose his utility for the service and thereby becomes unsuitable to be retained in employment.

Shortly put, the three-fold objects sought to be achieved by fixing the age of retirement read with the rule that no person shall be removed or dismissed from service without holding an inquiry are : Fixity, Security and Utility in the matter of, the period of service or tenure of the employees.

(7) The impugned rules, at one stroke, defeat the first and second second objects sought to be achieved by the rules by fixing the age of retirement and prescribing the procedure for imposing the penalty of removal or dismissal from service, as by virtue of those rules the services of permanent employees can be terminated at any time without inquiry and without assigning any reason. Thus the security of tenure which is one of the objects and the most important one indeed, sought to be achieved by fixing the age of retirement stands frustrated by the impugned rules and it gets reduced to a mere outer age limit after which, an employee, cannot be retained in service.

45. (1) It is true that if a provision of law conferring power provides that the power conferred thereunder is exercisable in public interest it could normally be regarded as giving sufficient guidelines for the exercise of the power. But in the present case though the impugned rules of the BEML and the HMT are expressly made exercisable in public interest and on behalf of the Agro Industries Corporation and the Reserve Bank, the stand taken is that the power under the impugned rules contained in their service rules are also exercisable in public interest, paradoxically the power conferred under all these rules itself is injurious to public interest, as they destroy security of tenure, to the service personnel of those bodies, as pointed out above, and, therefore, cannot be regarded as a power exercisable in public interest.

(2) At this stage a reference to the judgment of the Supreme Court in the case of State of Mysore v. S. R. Jayaram. , though it arose in the context of recruitment, is profitable. The recruitment rules concerned in the said case provided for a common selection to be made by the Public Service Commission for appointment to the Gazetted posts in a few of the services of this State. But the last part of Rule 9(2) thereof conferred power on the Government to appoint any selected candidate, to any of the services, whom it considered more suitable for such cadre. The respondent therein, who had been selected with high ranking, at a common selection was allotted to a cadre which was not of his choice. That part of the rules which gave the discretion was struck down and while doing so, the Court said :

“The principle of recruitment by open competition aims at ensuring equality of opportunity in the matter of employment and obtaining the services of the most meritorious candidates. Rules 1 to 8, 9(1) and the first Part of Rule 9(2) seek to achieve this aim. The last part of Rule 9(2) subverts and destroys the basic objectives of the preceding rules. It vests in the Government an arbitrary power of patronage. Though R. 9(1) requires the appointment of successful candidates to Class I posts in the order of merit and thereafter to Class II posts in the order of merit, Rule 9(1) is subject to Rule 9(2) and under the cover of Rule 9(2) the Government can even arrogate to itself the power of assigning a Class 1 post to a less meritorious and Class 1I post a more meritorious candidate. We hold that the last part of Rule 9(2) gives the Government an arbitrary power of ignoring the just claims of successful candidates for recruitment to offices under the State. It is violative of Arts. 14 and 16(1) of the Constitution and must be struck down.”

Since ceased to be confined to the preservation of the public peace, the exaction of taxes and the defence of its frontiers. It is now the function of the State to secure social, economic and political justice’, to preserve ‘liberty of thought, expression, belief, faith and worship’, and to ensure ‘equality of status and of opportunity’. That is the proclamation of the people in the preamble to the Constitution. The desire to attain these objectives has necessarily resulted in intense Governmental activity in manifold ways. Legislative and executive activity have reached very far and have touched very many aspects of a citizen’s life. The Government, directly or through the Corporations, set up by it or owned by it, now owns or manages, large number of industries and institutions. It is the biggest builder in the country. Mammoth and minor irrigation projects, projects of various kinds are undertaken by the Government. The Government is also the biggest trader in the country. The State and the multitudinous agencies and corporations set up by it are the principal purchasers of the produce and the products of our country and they control a vast and complex machinery of distribution. The Government, its agencies and instrumentalities, Corporations set up by the Government under statutes and Corporations incorporated under the Companies Act but owned by the Government have thus become the biggest employers in the country. There is no good reason why, if Government is bound to observe the equality clauses of the Constitution in the matter of employment and in its dealings with the employees the Corporations set up or owned by the Government should not be equally bound and why, instead, such Corporations could become citadels of patronage and arbitrary action. In a country like ours which teems with population, where the State, its agencies, its instrumentalities and its Corporations are the biggest employers and where millions seek employment and security, to confine the applicability of the equality clauses of the Constitution, in relation to matters of employment, strictly to direct employment under the Government is perhaps to mock at the Constitution and the people. Some element of public employment is all that is necessary to take the employee beyond the reach of the rule which denies him access to a Court to enforce a contract of employment and denies him the protection of Arts. 14 and 16 of the Constitution. After all employment in the public sector has grown to vast dimensions and employees in the public sector often discharge as onerous duties as civil servants and participate in activities vital to our country’s economy. In growing realisation of the importance of employment in the public sector, Parliament and the Legislature of the States have declared persons in the service of local authorities, Government companies and statutory corporations as public servants and, extended to them by express enactment the protection usually extended to civil servants from suits and prosecution. It is therefore, but right that the independence and integrity of those employed in the public sector should be secured as much as the independence and integrity of civil servants.

In the above paragraph the Supreme Court has laid down in very clear terms that the independence and integrity of the employees of the instrumentalities of the State must be protected in the same manner and to the same extent as the employees of the Union and the State Governments. This can be ensured only by affording security of tenure as pointed out in Motiram Deka’s case.

5. The view taken in Vijayanarayan’s case, [1980-I L.L.J. 222], has also been endorsed by the Supreme Court in Ajay Hasia’s case, [1981-I L.L.J. 103]. Speaking for the constitution Bench, Bhagavathi, J., said :

“While considering this question it is necessary to bear in mind that an authority falling within the expression ‘other authorities’ is, by reason of its inclusion within the definition of ‘State’ in Art. 12, subject to the same constitutional limitations as the Government and is equally bound by the basic obligation to obey the constitutional mandate of the Fundamental Rights enshrined in Part III of the Constitution.

* * *

We find that the same view has been taken by Chinnappa Reddy, J in a subsequent decisions of this Court in the U.P. Warehousing Corporation v. Vijaya Narain, [1980-I L.L.J. 222] and the observations made by the learned Judge in that case strongly reinforced the view we are taking particularly in the matrix of our constitutional system”.

Thus, the Supreme Court has declared in unequivocal language, that independence and integrity of employees of the bodies who answer the description of “State” as defined in Article 12 must be ensured and protected to the same extent as those of civil servants of the Unions and the States.

6. In view of the aforesaid pronouncements the contentions urged for the companies and the Bank, that as their employees are not governed by Part XIV of the Constitution, they do not have security of tenure, in the same manner and to the same extent as those of the Government servants, cannot be accepted as sound.

46. The impugned rules empower the companies and the Bank to terminate the services of any of its permanent employee at any time without assigning any reasion. Therefore, notwithstanding the rules of the BEML and the HMT specifically stating that such terminations could be made in the interest of the service of the company and notwithstanding the stand taken on behalf of the Agro Industries Corporation and the Reserve Bank that the power under the impugned rules of their service rules also, is exercisable in public interest, the fact remains that the effect of each of the impugned rules is to deny security of tenure to the employees of each of the companies and the Bank.

(2) That the denial of security of tenure to persons in public employment, is injurious to public interest, is not open to question in view of the decision of the Supreme Court in Motiram Deka’s case. (supra)

(3) The independence and integrity of the members of the service of the bodies which are instrumentalities and agencies of the Union or the States must be secured as much as those of civil servants is again not open to question in view of the judgment of the Supreme Court in Vijayanarayan’s case reiterated in Ajay Hasia’s case. (supra)

(4) The existence of rules such as the impugned rules, as part of service rules, as observed by the Supreme Court, would create a sense of insecurity in the minds of the employees of the public bodies, and is detrimental to public interest. When, on this ground the Supreme Court had dubbed Rules 148(3) and 149(3) of the Railway Establishment Code as Damocles sword hanging over the head of permanent railway servants, and as injuries to public interest, the impugned rules which are similar to those rules and therefore, are swords as long and as sharp as those rules were, cannot be held to be umbrella held over the heads of the employees and that they are meant to protect public interest. To do so, in my opinion, would be subversion of logic and truth.

(5) The learned counsels for the respondents in their attempt to save the rules argued that the power is being used very sparingly. It might be so. But that by itself is no answer to the challenge to the constitutional validity of the impugned rules. In my view, the very existence of the power under the impugned rules as par, of the service rules, let alone its exercise, has deleterious and baneful effect to public interest. The extent of damage it cause to publice interest is enormous and incalculable. Most of the servent of a public body would have no courage to speak or act fearlessly to resist or expose, activities, which are injurious to the interest of the body, of which they are the employees, particularly when such activities are being carried on by those who have the power of influence to cause termination of their service as they would be conscion of the fact that a rule, such as the impugned rule could be a convenient weapon which could be used by such selfish but powerful individuals to harm them. As a result, they would, as human nature is, prefer to the line of least resistance. They would try to save their job than public interest, i.e., the interest of the body whose employees they are. It is obviously for this reason that the Supreme Court said in Motiram Deka’s case (supra) that in order to ensure a fearless and favourless independent and efficient civil service that security of tenure was essential and that reasoning applies with all its force to the employees of the agencies or instrumentalities of Union and the States. Therefore, it appears to me that the existence of the rule itself has a great demoralizing effect on the services, and further even a single termination of service of a permanent employee under the impugned rule is sufficient to make all the employees fear sticken and as a result the object of having and independent, fearless and favourless service personnel to guard publice interest would be defeated. For these reason I do not think that sparing use of the rule, can, in any way, mitigate the vice inherent in the rule.

6. The statement furnishing the extract of the rule given earlier shows that each of the companies concerned in these cases and the Reserve Bank have prescribed :

(i) the rules fixing the age of retirement and except the HMT the other bodies have prescribed the preconditions to effect premature retirement (vide Sl. No. 1);

(ii) the procedure which must be complied with before imposing the penalty of removal or dismissal from service (vide Sl. No. 2) and

(iii) the exception incorporated to the said procedure (vide Sl. No. 3).

These rule correspond to the provision regulating the conditions of service of civil servants of the Union and the States :

(i) fixing age of superannuation and the rules governing premature retirement;

(ii) the procedure prescribed under Art. 311(2) and the relevant rules governing disciplinary proceedings for imposing penalties of removal or dismissal from service; and,

(iii) the exceptions to the aforesaid procedure incorporated under clause (a) to (c) to the proviso to Art. 311(2).

What are the objects sought to be achieved by such provisions ? The answer is not far to seek. They are –

(i) The period of tenure of service gets fixed i.e., when a person is appointed at a particular age, the difference between the age and the age of retirement fixed by the rules would be the period of his tenure of service.

(ii) The rules confer a right to every permanent employee to continue in service till he attains that age unless he is dismissed or removed earlier as a measure of penalty or prematurely retired, after he had put in the prescribed number of years of service or age, on the formation of the opinion by the competent authority that the concerned employees has out-lived his utility at that stage itself. In other words the fixation of retirement age read with rules prescribing the mandatory procedure for imposing penalty of removal or dismissal from service confers security of tenure.

It may be seen that notwithstanding the use of the word “suitable” in that rule, which is a well understood term indicative of a guideline in the matter of selection for appointment, the rule was struck down because that part of he sub-rule subverted the whole scheme of the rules and for that reason it was held to be violative of Arts. 14 and 16(1). Suppose instead of the word “suitable” the word “public interest” was used in that rule, would it have become valid ? Certainly not.

(2) Therefore, it appears to me that if a rule is found to defeat the object and purpose of the rules of which it is a part and confers wide power, to pick and choose to favour or discriminate against, any individual among many, it cannot be saved on account of the use of the word “public interest”.

(3) In the present case also, the mischief of the impugned rules is, as was the position in Jayaram’s case (supra). They subvert the object of the rules fixing the age of retirement read with the rule prescribing the procedure for imposing the penalty of removal or dismissal from service, namely, affording of security of tenure to the employees.

(4) In my view, indubitably the impugned rules which destroy security of tenure and create a sense of insecurtity in the minds of the employees of the companies and the Bank defeat public interest. Therefore, the mere use of the word “public interest” in the impugned rules, is no ground to uphold it. A self destructive situation, i.e., a rule which states that the power under it is exercisable in public interest, the existence of it, let alone its exercise, defeats public interest, is the one created by each of the impugned rules.

47. (1) At this state, it is also appropriate to note that the trend in recent times has been that the power to terminate the services of a permanent employee even in private sector without assigning any reason, is considered arbitrary and impermissible. In the case of S. S. Rly Co. v. Workers Union, [1969 – I L.L.J. 734], the authority functioning under the Industrial Employment Standing Orders Act, modified the standing order of the company at the instance of the respondent-union in respect of a few matters. One such modification was the addition of requirement to give reasons even in the case of discharge simpliciter. The legality of this modification was challenged by the company. Upholding the modification, the Supreme Court said :

“……… As regards the first modification, the contention was that an employer has under the law of master and servant the right to terminate the services of his employee by a discharge simpliciter after giving a month’s notice or a month’s wages in lieu thereof, and is not required to give reasons for such an order. The Industrial Disputes Act also does not lay down any fetter to that right by requiring him to give reasons to the employee concerned and industrial adjudication has so far recognised such a right. To impose such a fetter by a change in the standing orders is, therefore, not warranted by any statute, and, therefore cannot be said to be either fair or reasonable. It must, however, be borne in mind that the right to contract in industrial matters is no longer an absolute right and statutes dealing with industrial matters abound with restrictions on the absolute right to contract. The doctrine of hire and fire, for instance, is now completely abrogated both by statutes and by industrial adjudication, and even where the services of an employee are terminated by an order discharge simpliciter the legality and propriety of such an order can be challenged in Industrial Tribunals. These restrictions on the absolute right to contract are imposed evidently because security of employment is more and more regarded as one of the necessities for industrial peace and harmony and the contentment it brings about is a pre-requisite of social justice. During the last decade, or so statutes have been passed such as the Bihar Shops and Establishments Act, 1953 which require a reasonable cause for dispensing with the services of an employee by an order of discharge simpliciter. If reasons for discharging an employee are furnished to the employee concerned, he not only has the satisfaction of knowing why his services are dispensed with but it becomes easy for him in appropriate cases to challenge the order on the ground that it is either not legal or proper which in the absence of knowledge of those reasons it may be difficult, if not impossible for him to do. In these circumstances if the authorities under the Act have come to the conclusion that such a modification is fair and reasonable we would hardly be justified to interfere with such a decision.

That is the view taken by the Supreme Court even in respect of private employment. Apart from this, the modern legislative trend is to provide statutory procedural at safeguard even in respect of private employment in terms similar to Art. 311(2). For example, S. 6 of the Karnataka Private Educational Institutes (Discipline and Control) Act, 1975, reads –

“6. Termination of service and procedure for imposing penalties :-

(1) No employee shall be dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges and where it is proposed after such inquiry to impose on him such penalty, until he has been given a reasonable opportunity of making representations on the penalty proposed, but only on the basis of the evidence adduced during such inquiry.

Provided that the provisions of this sub-section shall not apply where an employee is dismissed or removed or reduced in rank on the ground of conduct which has led to his conviction on a criminal charge”.

In fact such a safeguard is provided for, to the employees of the companies and the Bank under the rules which are set out at Sl. No. 2 of the statement supra. The impugned rule enables the competent authority deny an individual employee, the procedural safeguard given in those rules. Can it be said that such a rule which confers power to terminate the services of a permanent employee of the State without assigning any reason and to deny him the reasonable opportunity to deny him the reasonable opportunity to defend himself is a reasonable one and not arbitrary ? The answer to the question must, in my opinion, be in the negative.

(2) There is an important distinguishing feature, as between private employment and public employment. In the former case, the self interest of the owner of the private enterprise is by itself sufficient to safeguard and protect its interest. There would be no conflict of interest and duty. But in public employment, the self interest or selfishness when generated in an individual, who is expected to protect and safeguard its interest, would have an adverse effect as there arises a conflict of interest and duty. In order to check and counter such situations and to protect public interest, security of tenure to all the employees in public employment is a must.

(3) It is also pertinent to note that the security of tenure in private employment is mainly meant for the benefit of individual employee and incidentally for the society, but in public employment it is mainly to ensure independence and integrity of the employees and thereby enable them to discharge their duties and functions without fear or favour, which in the nature of things is in public interest and the benefit which the individual employee secures thereby is only incidental. Therefore, it is essential that the tenure of service personnel of the instrumentalities or agencies of the Union and the States should be fully protected. But the impugned rules deprive these employees the security of tenure, as the power under them is exercisable at any time.

48. At this stage, reference to some of the cases which arose after Motiram Deka’s case (supra) is profitable, as a clear guideline is available as regards the point under consideration. Shortly after the Supreme Court made a compulsory retirement rules exercisable after a civil servant had attained the prescribed age or put in the prescribed number of years of service, the Supreme Court was called upon decide the validity of Regulation 9.1, second proviso of Pepsu Service Regulations which permitted retirement of a permanent public servant who had put in only ten years of service, in the case of Gurudev Singh v. State of Punjab, [1965-I L.L.J. 323] The Supreme Court struck down the rule. It said :

“In this connection, it is hardly necessary to emphasise that for the efficient administration of the State, it is absolutely essential that permanent public servants should enjoy a sense of security of tenure. The safeguard which Art. 311(2) affords to permanent public servants is no more than this that in case it is intended to dismiss, remove or reduce them in rank, a reasonable opportunity should be given to them of showing cause against the action proposed to be taken in regard to them.

* * *

Therefore, it seems that only two exceptions can be treated as valid in dealing with the scope and effect of the protection afforded by Art. 311(2). If a permanent public servant is asked to retire on the ground that he had reached the age of superannuation which has been reasonably fixed, Art. 311(2) does not apply, because such retirement is neither dismissal nor removal of the public servant. If a permanent public servant is compulsorily retired under the rules which prescribe the normal age of superannuation and provide for a reasonably long period of qualified service after which alone compulsory retirement can be ordered, that again may not amount to dismissal or removal under Art. 311(2) mainly because that is the effect of a long series of decisions of this Court. But where while reserving the power to the State to compulsorily retire a permanent public servant, a rule is framed prescribing a proper age of superannuation, and another rule is added giving the power to the State to compulsorily retire a permanent public servant at the end of 10 years of his service, that cannot, we think, be treated as falling outside Art. 311(2). The termination of the service of a permanent public servant under such a rule, though called compulsory retirement, is in substance, removal under Art. 311(2). It is because it was apprehended that rules of compulsory retirement may purport to reduce the prescribed minimum period of service beyond which compulsory retirement can be forced against a public servant that the majority judgment in the case of Motiram Deka (supra) clearly indicated that if/such a situation arose, the validity of the rule may have to be examined, and in doing so, the impugned rule may not be permitted to seek the protection of the earlier decisions of this Court in which the minimum qualifying period of service was prescribed as high as 25 years, or the age of the public servant at 50 years. We are, therefore, satisfied that Mr. Bhandari is right in contending that the effect of the majority decision in this case of Motiram Deka’s (supra) clearly is that the impugned Art. 9.1 contravenes Art. 311(2) of the Constitution and must be struck down as invalid”.

This was also a case of civil servant governed by Article 311(2) and the rule was struck down as violative of that Article. But what is of importance is, the principle on which the rule was struck down, namely, that it denied security of tenure for a reasonably long period. This principle must hold good in respect of the employees of instrumentalities or agencies of the State, as held by the Supreme Court in Vijayanarayan’s case (supra).

49. I shall now refer to the cases in which the Supreme court rejected the challenge to the rules providing for premature retirement when the validity of such rules were questioned on the ground that they were in volative of Art. 14, as the reason given for upholding the validity, of those rules throw considerable light on the point arising for consideration in these cases. After the Supreme Court declared in Motiram Deka’s case, (supra) that a rule providing for premature retirement would not be violative of Art. 311(2) if a reasonable period of security of tenure was guaranteed, i.e., if the power was exercisable only after the civil servant had crossed the prescribed age or period of service, if both of them were reasonable, validity of such rules were violative of Article 14. The Supreme Court held that such rules were not violative of Article 14. The cases are :

(1) The cases of Shivacharan Singh and another v. State of Mysore, [1967-II L.L.J. 246], were Art. 32 petitions in which the validity of Note 1 to Rule 285 of the Mysore Civil Services Rules was challenged only on the ground that the power given under that rule to prematurely retire a civil servant of this State, before he reached the age of superannuation at 55 years was violative of Art. 14. The rule was upheld on the ground that the power was exercisable only after a civil servant had attained 50 years, of age or had put in 25 years of qualifying service and that gave as reasonably long period of secured tenure. After referring to Motiram Deka’s case (supra) and other cases, the Court said :

“….. the law in relation to the validity of the Rules permitting compulsory premature retirement of Government servants must be held to be well settled by those decisions and need not be reopened. The only exception the majority judgment made in that behalf was that it may be necessary to consider whether such a rule of compulsory retirement would be valid if having fixed a proper age of superannuation, it permits permanent servant to be retired at a very early stage of his career. This consideration does not arise in the present case because, as we have already seen note 1 to R. 285 requires that the Government servant against whom an order of compulsory retirement is proposed to be passed must have completed either 25 years of active service or attained 50 years of age”.

(2) In the case of Tarasingh v. State of Rajastan, of Rajastan Civil Service Rules which empowered the Government to retire any of its employee in public interest after he had put in 25 years, of qualifying service, was challenged on the ground that it was violative of Article 14. The Supreme Court while upholding the rule reiterated the ratio in the case of Shivacharan Singh (supra). It reads :

“In T. C. Shivacharan Singh v. The State of Mysore, [1967-II L.L.J. 246], R. 285 of the Mysore Civil Service Rules, 1958 which conferred power on the Government to retire compulsorily a Government servant in public interest on his completing twenty five years of qualifying service or attaining fifty years of age, though the age of normal superannuation under R. 95(a) was fixed at fifty five years was upheld on the ground that the rule laid down a reasonably long period of qualifying service.

(3) In the case of P. R. Naidu v. Govt. of A.P., , rejecting the challenge to the premature retirement of the petitioner therein on the ground that it was violative of Art. 14, the Supreme Court observed thus :

“Equality of opportunity for all citizens in matters relating to employment is not violated by provisions for compulsory retirement of Government servants in public interest after the completion of a certain period of qualifying service or attainment of certain age.”

In the above judgments, the rules permitting compulsory retirement in public interest were held to be not violative of Art. 14 because the rules in addition to the requirement that compulsory retirement could be made in public interest, ensured security of tenure for a reasonable period by imposing the further condition that the power was exercisable only after the concerned civil servant crossed a particular age or had put in the prescribed number of years of service, both of which were considered reasonable. The period fixed was 25 years, of service or 50 years of age. The clear implication available from the judgment of the Supreme Court in Motiram Deka’s case (supra) and the above judgments is that if a rule permits premature retirement or termination though in public interest, but without fixing a reasonable period of service after which the power could be exercised, such a rule would be violative of Art. 14.

50. It was, however, argued for the respondents that security of tenure means protection to lazy, inefficient, and useless officers, which is not conducive to the efficient functioning of the companies and the Bank. I am not impressed by this submission. In fact this aspect of the matter is also answered by the Supreme Court in the case of Gurudev Singh (supra). The Court observed thus :

“… A claim for security of tenure does not mean security of tenure for dishonest, corrupt, or inefficient public servants. The claim merely insists that before they are removed, the permanent public servants should be given an opportunity to meet the charge on which they are sought to be removed.”

Thus, it is always open to the respondents to remove any of its employees at any time after holding an inquiry in the prescribed manner.

51. In the light of the principles emerging from the above four decisions, and those laid down in Motiram Deka’s case (supra) it appears to me that conferment of power to terminate the services of permanent employees of public bodies at any time by a simple notice by the impugned rules, is arbitrary, unreasonable and discriminatory as the exercise of the power is not made subject to any further condition, namely, the power under the rules could be invoked only after the employee had attained the prescribed age or had put in a prescribed number of years of service, both of which are reasonable, so that security of tenure in a large measure was guaranteed and, therefore, the impugned rules would have to meet the same fate as the Rules 148(3) and 149(3) of the Railway Establishment Code did in Motiram Deka’s case, (supra) when tested on the touchstone of Arts. 14 and 16(1) of the Constitution.

52. (1) Now I shall consider the second aspect, viz., that the impugned rules, which deny to the petitioners, the procedural safeguard in the matter of removal or dismissal from service, they are violative of Art. 14 read with Art. 16(1).

(2) Clause (1) of Article 16, which is a species of the genus, viz., the right to equality guaranteed in Art. 14, is specially incorporated as a Fundamental Right to ensure to all the citizens equal opportunity in matters relating to employment under the State. The companies and the Bank being “State” for purposes of part III are under an obligation not to deny the right guaranteed under Art. 16(1) to its employees. This right extends to all matters including termination of service is beyond doubt. (See : Rangachari’s case (supra) and Belliappa’s case (supra).

(3) Therefore, the procedural safeguard provided in the rules, the compliance with which is obligatory before passing an order imposing the penalty of removal or dismissal from service, against a permanent employee of the companies and the Bank, cannot be deprived to any of its permanent employees. Such deprivation at once violates the mandate of Art. 16(1).

(4) (i) As pointed out earlier, the Supreme Court in the case of Motiram Deka (supra) has held that the determination of service of a permanent civil servant, otherwise than by retirement or premature retirement, even if it was made in exercise of the power given under service rules per se amounts to removal or dismissal within the meaning or those words used in Art. 311(2). It is on this basis that termination simpliciter made under Rules 148(3) and 149(3) of the Railway Establishment Code were held to be violative of Art. 311(2).

(ii) What follows from that principle is that, termination of service of permanent employees of the companies and the Reserve Bank otherwise than by retirement or premature retirement would be per se removal or dismissal within the meaning of the service rules of the companies and the Bank which could be inflicted only after following the procedure prescribed under the rule, (see : Sl. No. 2 of the statement supra), which procedure is similar to the one prescribed in Art. 311(2) applicable for civil servants.

(iii) The petitioners were all permanent employees. The service rules of the companies and the Bank have fixed the age of retirement. Except in the case of the HMT, the other bodies have also incorporated a rule empowering to order premature retirement with the necessary safeguard. The three exceptions, namely, that an employee could be removed from service after dispensing with an inquiry –

(a) When the penalty is to be imposed on the basis of the conduct which had led to his conviction, or

(b) where the holding of inquiry, is found impracticable, or

(c) where the holding of inquiry is not in the interest of security of the State, have been incorporated in the Service Rules of the BEML and the Reserve Bank. (See Sl. No. 2 of the statement supra).

These are similar to three exceptions incorporated in the proviso to Article 311(2). The rules of the HMT and the Agro-industries provide for dispensing with the inquiry when an employee is certified to be medically unfit to continue in employment. (See : rules set out at Sl. No. 3 of the statement supra). These are similar to rule 3015 of the Railway Establishment Manual the validity of which was upheld by the Gujarat High Court (See : Modji Ladhuji v. Nambeesan) [1971-I L.L.J. 155]. Such exceptions are well recognised. They are valid and are in public interest. Unless the termination of service falls under anyone of those rules, the termination of service of permanent employees per se amounts to removal or dismissal. The impugned rules deny to the permanent employees the procedural safeguard incorporated in the service rules before passing such an order which is per se penal and, therefore, the impugned rules offend Arts. 16(1) and 14.

53. The difference between the case of permanent civil servants and permanent employees of bodies which are instrumentalities or agencies of State is only this.

(i) In the case of permanent employees of the Union and the States, such a rule and a termination of service thereunder would be violative of both Arts. 311(2) and 16(1) read with Art. 14 of the Constitution.

(ii) Whereas a similar rule and a termination made thereunder, is so far it relates to the employees of the agencies or instrumentalities of the Union or the States would be violative of Art. 16(1) read with Art. 14 only, but not Art. 311(2) as the latter does not apply to them.

54. (1) Alternatively, the learned counsels for the respondent-companies and the Bank submitted that though in each of the impugned rules specific grounds on which the termination simpliciter of the services of a permanent employee could be brought about have not been specified the rule may be read down instead of being struck down holding that the power under the rule could be exercised on well recognised grounds on which termination of service simpliciter has been upheld by the Courts in cases arising out of industrial disputes and the Court may proceed to examine in each of these cases as to whether termination of service was justified. One such well recognised ground, according to them, was the termination of service of a permanent employee on the basis of loss of confidence by the master in the concerned employee.

(2) As against the above submission made for the respondents, the learned counsels for the petitioners argued that termination of service on the ground that the master had lost confidence in his servant, was an evolution in the law relating to private master and servant in which the nature of relationship was personal, unlike the relationship between the public body and its servants which was impersonal, as can be seen from the relevant observations made by the Supreme Court in Belliappa’s case (supra) extracted earlier and, therefore, the termination of service on the ground that the management had lost confidence cannot be made in public employment, i.e., in the services either under the Union and the States or the services under their instrumentalities or agencies.

(3) The principle that a provision of law should be read down and not struck down, would come into play only in a case where two constructions on it are reasonably possible and the acceptance of one of them renders the provision unconstitutional. In such a case the alternative construction which does not meet with such result has got to be accepted. In the present case, the language of the impugned rules is clear and is not susceptible to more than one construction. They do not specify any particular ground for terminating the services. The court cannot specify or determine the grounds on which the termination of service could be made by the respondents under the impugned rules which would amount to the rewriting of the rules which is not the function of the Courts.

(4) In any event, the point raised is merely academic because the ground on which I have held that the impugned rules are liable to be struck down is that as the rules provide for termination of service simpliciter of permanent employees at any time without fixing the age or period of service in a reasonable manner, after which the power could be exercised they are violative of Art. 14. Therefore, the question of reading down the rule and holding that the power under the rules could be exercised on any specified ground does not arise.

(5) In fact, premature retirement rules incorporated by the BEML, the Agro-Industries Corporation and the Reserve Bank (see vide rules set out at Sl. No. 1 of the statement supra) have provided for ordering premature retirement of an employee in public interest after attains prescribed age or puts in the prescribed number of years of service, which have been reasonably fixed. The validity of such rules is not open to challenge in view of the judgment of the Supreme Court in the case of Motiram Deka (supra) just as the validity of the impugned rules cannot be sustained in view of the principles decided in that case as the impugned rules do not ensure a reasonable period of security of tenure. Therefore, from any approach, the impugned rules are liable to be struck down.

55. The learned counsels for the respondents placed strong reliance on the judgment of the Division Bench of the Bombay High Court in the the case of Manohar P. Kharkar (supra) in which the validity of Rule 48 of the Air India, which is similar to the impugned rules, has been upheld overruling the judgment of Sawant, J., in the case of S. S. Muley (supra) as also on the Gujarat High Court in the case of the Gujarat High Court in the case of Amarsingh (supra) in which the validity of Rule 61 of Gujarat State Transport Corporation Regulation has been upheld, which rule is similar to the impugned rules.

56. (1) In the case of S. S. Muley (supra) Sawant, J., struck down Rule 48 of AIR India Rules on the ground that it was violative of Article 14, mainly relying on the judgment of Dasgupta, J., in Motiram Deka’s case.

(2) The Division Bench consisting of V. S. Deshpande, Chief Justice and Sharad Manohar, J., in their judgment in the case of Manohar P. Kharkar (supra) have upheld the validity of that Rule 48 overruling the judgment of Sawant, J., in S. S. Muley’s case (supra).

(3) The judgment of Division Bench indicates that the two reasons on the basis of which, the validity of Rule 48 of Air India Rules was upheld are.

(i) The employees of a statutory corporation have no right to security of tenure and they could derive no support from Motiram Deka’s case (supra) in that behalf, as it related to civil servants governed by Art. 311(2).

(ii) The position of permanent employees of the statutory corporation is equivalent to that of temporary civil servants or probationers and, therefore, their services can be terminated at any time by a simple notice.

(4) With utmost respect to Their Lordships after giving careful consideration to the view expressed in the judgment, I am not persuaded to agree with that view.

(5) On the first point set out above, their Lordships held that employees of agencies or instrumentalities of the Union or the States have no security of tenure, and the ratio of the judgment in Motiram Deka’s case was applicable only to the case of civil servants to whom security of tenure was given by Art. 311(2) which Article has no application to them. This matter has been discussed by me at length earlier and I have shown how the observations in Motiram Deka’s case (supra) apply with equal force to these cases also. I have also referred to the judgment of the Supreme Court in Vijayanarayan’s case (supra) in which the Supreme Court has uneqivocally declared that independence and integrity of the service personnel of the instrumentalities or agencies of the Union and the States themselves and that this view has been reiterated in Ajay Hasia’s case. (supra).

(6) In addition, I may also point out that even in respect of civil servants, the age of superannuation is not fixed by Art. 311 or any other provision of the Constitution. In respect of civil servants also it could be fixed only by rules made by the President or the Governor, as the case may be, under the proviso to Art. 309 of the Constitution or by any law made by the appropriate Legislature. The question for consideration in Motiram Deka’s case (supra) was whether the rule-making authority having fixed the age of superannuation by framing an appropriate rule could incorporate another rule as part of the conditions of service under which the services of a civil servant could be terminated simpliciter at any time. The view which had been taken by the Supreme Court prior to Motiram Deka’s case (supra) was that termination simpliciter of the services of a civil servant in accordance with the rules governing his conditions of service, was no removal or dismissal from service within the meaning of those words used in Art. 311(2) and consequently Art. 311(2) would not be violated by such a rule or by an order of termination of service made thereunder, vide Balakotaiah’s case. It was this view which came up for reconsideration by a larger Bench in Motiram Deka’s case, (supra).

(7) The Supreme Court departed from the earlier view and held that once an age of superannuation is legitimately fixed for a civil servant by a rule or law made under Article 309 of the Constitution, if any other rule incorporated as part of condition of service were to permit the termination of service simpliciter by an innocuous order prior to the age of retirement it would be per se penal in nature and tantamounts to dismissal without complying with the procedure prescribed in Article 311(2) of the Constitution and consequently such a rule would be bad on the ground of violation of that Article.

(8) The whole basis for coming to this conclusion as discernible from paragraph 28 of the judgment was that security of tenure in the public service of a democratic form of Government was considered to be of utmost importance in public interest and the fixation of age of retirement was meant to achieve the said object and that the said object could not be defeated by conferment of power by framing another rule permitting simpliciter termination of service at any time prior to the age of retirement so fixed !

(9) In the Division Bench judgment neither the general observations made in para 28 of the judgment in Motiram Deka’s case (supra) as to the necessity of security of tenure for employees in a democratic system of Government to ensure them independence ands efficiency, which apply with equal force to the employees of the instrumentalities or agencies of the Union and the states which are subject to an all pervading control by the latter had been noticed, nor the specific and unequivocal declaration made by the Supreme Court in the case of Vijayanarayan to the effect that independence and integrity of the employees of the agencies or instrumentalities of the Union and the States must be protected to the same extent as those of the Union and the States have been brought to their notice. Similarly, the relevant observations of the Supreme Court in the case the case of Shivacharansingh, (supra) Tarasingh (supra) and P. R. Naidu (supra) in which, in the Supreme Court has observed that rule providing for premature retirement in public interest, were being held to be not violative of Article 14, because there was an additional condition to the effect that the power was exercisable only after 25 years of service or 50 years of age, have also not been brought to their notice.

(10) As already pointed out the principle deducible from the judgment in Motiram Deka’s case (supra) which applies with equal force to the employees of the agencies or instrumentalities of the Union or the States is that once the service rules framed by them fix an age of retirement and an age or period after which premature retirement could be ordered in public interest as part of condition of service applicable to the permanent employees and the procedure, the compliance with which is a condition precedent for imposing the penalty of removal or dismissal is also fixed, the termination of service of a permanent employee, at any time otherwise than by retirement or premature retirement, though brought about by an innocuous order made even under a service rule, would amount to removal or dismissal from service. Therefore, a rule of that type, if framed by the Union or the States for its framed by the Union or the States for its civil servants would offend Arts. 14, 16(1) and 311(2) of the Constitution and a similar rule framed by the instrumentalities or agencies or agencies of the Union or the States would be violative of Arts. 14 14 and 16(1) only, as Art. 311(2) has no application to the case of the latter. These aspects have not been argued or considered in that case.

(11) The second ground on which Rule 48 of the Air India was held valid was that the position of permanent employees of Air India was equivalent to those in civil service, who were appointed on temporary basis or on probation. This is evident from paragraph 60 of the judgment. It reads :

“The cases of the employees of the Corporation, such as the one under consideration, do not stand on any different basis. As seen earlier, like probationers and temporary Government servants, employees of the Corporation also do not possess any security of tenure, their right to remain in service being defeasible by the act of the Corporation permissible under Regulation 48 thereof. If, therefore, the Corporation chooses to act under Regulation 48, and the action is not mala fide, arbitrary or capricious, the question of its having acted in colourable exercise of the power cannot and does not arise.”

(12) The classification of employees as permanent, temporary and probationers, is not peculiar to civil service. Such classification, as shown earlier, has been made by the companies and the Bank which are instrumentalities or agencies of the Union and the States. The same distinction as among them, as made in the Civil services, is also made among the three categories of employees of these public bodies.

(13) The position regarding the three categories of employees both in the services of the State and the services of the Public bodies is as follows :

(i) As far as the temporary employees are concerned, they have no right to the post to which they are appointed. Their services are terminable in conformity with the rules providing for their termination. Therefore, unless the concerned authority proposes to terminate the services of a temporary employee on the grounds of misconduct, negligence, etc., there is no necessity to hold any inquiry. Therefore, in their cases, termination of service simpliciter could be made and it would be valid. This is, however, subject to not violating Articles 14 and 16(1). (See D. B. Belliappa’s case) (supra).

(ii) The position regarding probationers is similar to temporary employees until confirmation.

(iii) As far as permanent employees are concerned, they stand entirely on a different footing. If the first appointment of a civil servant itself is substantive or if he had been appointed on temporary basis or on probation, if he is subsequently confirmed in the post, he gets a right to hold the post. His services could be determined at the instance of the State only in the following methods :

(a) Retirement on reaching the age of superannuation;

(b) Premature retirement ordered in conformity with a valid rule, if any providing for premature retirement of a civil servant after he has attained the prescribed age or had put in the prescribed period of qualifying service, both of which must be reasonable;

(c) By dismissal or removal; and

(d) Abolition of post.

If termination of service of permanent employee is brought about in any other manner even by an innocuous order prior to the age of retirement or premature retirement, even if made under a service rule, it would amount to an imposition of penalty of removal or dismissal from service. Both the rule and the termination would be void as offending Arts. 14 and 16(1).

(14) Thus it may be seen, the permanent employees stand entirely on a different footing and belong to a separate class than those, who are appointed, either on a temporary basis or as probationers.

(15) (i) The learned Judges of the Bombay High Court equated the status of permanent employees of Air India to those of temporary employees and probationers in civil service and then proceeded to apply the ratio in the cases of Ram Gopal v. State of M.P. [1970 – I L.L.J. 367], State of Maharashtra v. V. R. Saboji, [1979-II L.L.J. 393] and Oil and Natural Gas Commission v. Iskandar Ali, [1980 – II L.L.J. 155], which are all cases relating to termination of temporary or officiating service. The rule upheld in Ram Gopal’s case (supra) related to termination of service of a temporary employee.

(ii) In the case of termination of service of a temporary employee or discharge of a probationer, when challenged before the Court by the employee concerned, the following questions arise for consideration :

(a) Whether it was termination simpliciter ? or

(b) Whether it attached stigma to the character or conduct to the employee and, therefore, penal in nature ?

(c) Whether it was discriminatory ?

All these are questions of fact to be decided by the Court in each case. The limited extent to which alone it would be competent for the Court to probe into the matter is also laid down in the aforesaid judgments, vide Rama Gopal, [1970-I L.L.J. 367], V. R. Saboji, [1979-II L.L.J. 393], Oil and Natural Gas Commission, [1980-II L.L.J. 155]. But such an investigation becomes unnecessary in the case of termination of service of a permanent employee, as such termination even by an innocuously worded order and even in exercise of power under a service rule per se, i.e., by itself, is penal in nature and tantamounts to removal or dismissal from service which the ratio of Motiram Deka’s case. (supra)

(16) As shown earlier, the employees under the companies and the Reserve Bank are also classified into three categories, namely, permanent, temporary and probationers. It is not disputed that status of temporary employees and probationers in the service of these bodies is equivalent to temporary employees and probationers in Government service. I find no basis to agree with the view taken by their Lordships that the status of permanent employees of the statutory corporations and other bodies which are instrumentalities of the State is similar to the status of temporary employees and probationers in Government service.

(17) In my view, such an equation would demolish the well recognised difference between permanent employees and temporary employees and probationers, in service parlance and consequently it would result in the treatment of dissimilarly situated persons equally, which would be a violation of the content of equality before law and equal opportunity in matters relating to employment under the State guaranteed under Articles 14 and 16 of the Constitution.

(18) Sawant, J., had struck down Regulation 14 of the Air India Rules following the judgment of Dasgupta, J., in Motiram Deka’s case (supra). The Division Bench, relying on the judgment of the Supreme Court in Jit Ram Shivkumar v. State of Haryana, (supra) was of the view expressed by Dasgupta, J., in Motiram Deka’s case (supra) was not binding on the High Court as the law declared by the Supreme Court. The learned counsels for the respondents in these cases also submitted that the judgment of Dasgupta, J., was not binding on this Court as it was not law declared under Art. 141. Learned counsels for the petitioners maintained that as the majority had left open that question, the judgment of Dasgupta, J., was also the ratio of the judgment and in any event even as obiter dicta it was binding on this Court.

(19) It is unnecessary for me to settle the said controversy in this case as there is no declaration of law to the contrary made by any judgment of this Court, which I am bound to follow, in the absence of law declared by the Supreme Court which has the effect of overruling such a binding decision. The view expressed by Dasgupta, J., irrespective of the question, whether it amounts to law declared under Article 141 or not, coming as it does from a Judge of the highest Court of the land, is entitled to great weight and of high persuasive value. The judgment is backed by forceful ratiocination which pursuades me to agree with that view, which I do most respectfully. I also respectfully agree with the view taken by Sawant, J., in the case of S. S. Muly (supra) in preference to the view taken by the Division Bench in the case of Manohar P. Kharkar (supra). Apart from the said judgment I have also, shown that the impugned rules are liable to be struck down on the basis of the ratio of the majority judgment in Motiram Deka (supra).

For the various reason set out earlier, I am firmly of the view that the impugned rules, of the companies are still born, as no validity could have been infused into them in the presence of Arts. 14 and 16(1) in the Fundamental Rights Chapter and of the Reserve Bank, void as offending the two articles.

57. In the case of Amarsingh (supra) also, the various aspects and the decisions of the Supreme Court referred to by me have not been considered. Therefore, I respectfully disagree with the view taken by the Gujarat High Court also, in that case.

58. To sum up :

(1) The utmost importance of ensuring the security of tenure to the employees of the State, so as to enable them to discharge their duties without fear or favour and to make them truly independent and efficient as laid down by the Supreme Court in Motiram Deka’s case; (supra)

(2) The necessity of ensuring the independence and integrity of the employees of the instrumentalities or the agencies of State in the same manner and to the same extent as those of the Government employees as laid down by the Supreme Court in Vijayanarayan’s case (supra) and reiterated in Ajay Hasia’s case (supra).

(3) The view taken in Motiram Deka’s case (supra) that termination of service simpliciter of a permanent civil servant even in exercise of power under a service rule, otherwise than by retirement or premature retirement, is per se penal and amounts to imposition of penalty of removal or dismissal from service, which view applies with equal force to the permanent employees of bodies which are State as defined in Article 12 of the Constitution and the effect of the impugned rules being to deny that procedural safeguard to the permanent employees of the companies and the Bank before termination of their service in that manner which offends Article 16(1) read with Article 14;

(4) The view expressed by Dasgupta, J., in Motiram Deka’s case (supra) to the effect that Rules 148(3) and 149(3) of the Railway Establishment Code, which were similar to the impugned rules, were violative of Article 14 of the Constitution on the ground that they conferred arbitrary power; and

(5) The reason given by the Supreme Court in the cases of Shivacharan Singh, (supra) Tara Singh (supra) and P. R. Naidu (supra) for holding that the compulsory retirement rules concerned in those cases, were not violative of Art. 14, because the power under those rules was exercisable only after the prescribed period of service or age, which was found to be reasonable and the absence of such a condition in the impugned rules, impel me to hold that the impugned rules are violative of Articles 14 and 16(1) of the Constitution.

59. Before concluding, it is necessary to refer to the special features in W.P. 4091 of 1980 and W.P. 14686 of 1981.

(1) In W.P. 4091 of 1980, the petitioner has raised an additional plea. The plea is that he was a workman as defined in the Industrial Disputes Act and, therefore, termination of his service which amounts to retrenchment, was void as the mandatory precondition contained in S. 25F of that Act was not complied with. The fact that the petitioner is a workman is not disputed on behalf of the respondent-Bank. On the other hand, an objection has been taken in the statement of objections to the effect that the petitioner has an alternative remedy before the Industrial Court as he was a workman. The respondent-Bank does not dispute that the mandatory requirements of S. 25F of the I.D. Act were not complied with. As this is a pure question of law and the matter is already covered by a judgment of this Court in Papanna v. Union of India, (1981) (2) Kar. L.J. 164), the petitioner is entitled to succeed on this additional ground also.

(2) In W.P. 14686 of 1981, learned counsel for the BEML submitted that the petitioner therein T. G. Srinivasamurthy, was only a probationer and, therefore, he had no right to hold the post and consequently it was permissible for the management of the BEML to discharge him from service.

From the facts stated earlier, it is seen that the petitioner joined service of the BEML as a Stenographer on 3-5-1965. He was promoted as senior clerk on 3-6-1970 and as Head Store Keeper on 18-12-1977. It is not disputed that in the post of Head Store Keeper he had already been confirmed and, therefore, he held the said post substantively. In fact, in the statement of objections, the respondents have categorically stated that the petitioner was a permanent employee in the lower post and that he was promoted as Assistant Stores Officer on 31-7-1980 and in that post he was on probation. It is true that in the post of Assistant Stores Officer he was placed on probation for a period of one year. The original records, produced in the case to which reference has already been made while narrating the facts of the case, no doubt indicate that the management was not satisfied with the work of the petitioner during the period of probation as Assistant Store Officer. Even so, in view of Rule 3.2 of the service rules, the only course open for the management was to revert him to his substantive post of Head Store Keeper. (See : P. V. Naik v. Syndicate Bank, [1979-II L.L.J. 176]. It should also be pointed out that as the petitioner held the lower post on permanent basis, if he had been reverted to the post of Head Store Keeper, he would have been a workman as defined in the Industrial Disputes Act and in which event, the services of the petitioner could not have been terminated without complying with the conditions set out in S. 25F of the Industrial Disputes Act. As the impugned rule, under which the services of the petitioner had been terminated is liable to be struck down, as a consequence, the impugned order of termination is also liable to be quashed. I should, however, make it clear that this order does not in any way preclude the management of the BEML to revert him to the lower post if they consider it expedient to do so.

60. In the result, I answer the first two questions set out in the affirmative and hold …

(1) (i) The Bharat Earth Movers Limited; (ii) the Hindustan Machine Tools Limited; (iii) The Karnataka Agro Industries Corporation Limited, which are companies incorporated under the Companies Act, 1956 (Central Act 1 of 1956) and are Government companies as defined in Section 617 of the said Act, fall within the meaning of the word “State” as defined in Article 12 of the Constitution of India.

(2) (i) Rule 17.2 of The Bharat Earth Movers Limited Service Rules; (ii) Rule 20.1 of The Hindustan Machine Tools Conduct, Discipline and Appeal Rules; (iii) Rule 2.21 of the Karnataka Agro Industries Corporation Limited Recruitment and Promotion Rules; and (iv) Regulation 25(2) of the Reserve Bank of India (Staff Regulations) 1948, providing for termination of service of its permanent employees, by a simple notice, at any time, without fixing any period of service or age after which such power could be exercised, as also the orders of termination of service made under the impugned rules, are violative of Arts. 14 and 16(1) of the Constitution of India and are, therefore, void.

61. In view of my above conclusions the third question does not survive for consideration.

62. In the result I make the following order :

(1) Rule made absolute.

(2) (i) Rule 17.2 of The Bharat Earth Movers Limited Service Rules :

(ii) Rule 20.1 of The Hindustan Machine Tools Conduct, Discipline and Appeal Rules;

(iii) Rule 2.21 of the Karnataka Agro Industries Corporation Limited Recruitment and Promotion Rules; and

(iv) Regulation 25(2) of the Reserve Bank of India (Staff Regulations), 1948 are declared void and are struck down.

(3) The impugned order in each of the petitions is quashed.

(4) Each of the petitioners shall be entitled to all the benefits flowing from the quashing of the impugned order.

(5) No costs.