Indian Airlines Corporation Vs.
Sukhdeo Rai  INSC 129 (27 April 1971)
CITATION: 1971 AIR 1828 1971 SCR 510 1971 SCC
Air Corporation Act, 1953-Sections 44,
45-Regulation framed under the Act providing terms and conditions of service of
employees--Termination of service in breach of regulationsRelationship between
Corporation and its employees that of master and servant--Therefore, only
entitled to damages.
Regulations-Framed under Air Corporation Act,
Master and Servant-Employees of statutory
corporationRegulations framed under statute only embody terms and conditions of
The appellant is a Corporation set up under
the Air Corporation Act, 1953. The Act authorises the corporation to appoint
officers and, other employees and make regulations providing the terms and
conditions of service of such officers and employees.
The respondent employed as a motor driver was
dismissed from the service of the Corporation in breach of the procedural
safeguards provided under the regulations. He filed a suit for a declaration
that the dismissal was illegal and void.
The trial court granted the declaration. On
appeal the High Court affirmed the decree holding that the Corporation was
under a statutory obligation to observe the procedure laid down in the
regulations and that not having been done the order of dismissal was illegal
and void and the respondent continued to be in the employment of the
Corporation as if there was no termination of service. On the question whether
the declaration given by the trial court and upheld by the High Court could be
HELD: (1) When there is a purported
termination of a contract of service, a declaration that the contract of
service still subsisted would not be made in the absence of special
circumstances, because of the principle that courts do not ordinarily grant
specific performance of service.
This is so, even in cases where the authority
appointing an employee was acting in exercise of statutory authority. The
relationship between the person appointed and the employer would, in such
cases, be contractual i.e., as between a master and servant, and the
termination of that relationship would not entitle the servant to a declaration
that his employment had not been validly determined. [512H] Francis v.
Municipal Councillors of Kuala Lumpur,  3 All E.R. 633, Barber v.
Manchester Regional Hospital Board,  1 All E.R. 322 and Ridge v. Baldwin,
 A.C. 40, referred to.
But the court would grant a declaration of
nullity where the action complained of is ultra vires or where the appointment
is to an office or status. [513E-F] Vine v. National Dock Labour Board, 
A.C. 488, Bool Chand v. The Chancellor,  1 S.C.R. 434 and Vidyodaya
University v. Silva,  3 All E.R. 865, referred to.
511 (ii) The fact that the appellant
Corporation was one set up under and was regulated by a statute would not take
away, without anything more, the relationship between the Corporation and its
employees from the category of purely master and servant relationship. [514E]
Vidyodaya University v. Silva,  All E.R. 865 and Dr. S. B. Dutt v.
University of Delhi,  S.C.R. 1236, referred to.
(iii)The employment of the respondent is not
one to an office or status and neither the Act nor the rules made under s. 44
by the Central Government lay down any obligation or restriction as to the
power of the Corporation to terminate the employment of its employees or any
procedural safeguards subject to which only such power could be exercised.
[516E] (iv) This Court has held that there are only three wellrecognised
exceptions to the general rule under the law of master and servant where a
declaration would be issued, viz., (i) cases of public servants falling under
article 311(2) of the Constitution; (ii) cases falling under the industrial law
and (iii) cases where acts of statutory bodies are in breach of a mandatory
obligation imposed by a statute. [517B] S. R. Tewari v. District Board, Agra,
 3 S.C.R. 55, Bank of Baroda v. Mehrotra,  2 L.L.J. 54, Ram Babu
Rathaur v. Life insurance Corporation, A.I.R. 1961 All. 502, Life Insurance
Corporation v. N. Banerjee, (1971] 1 L.L.J.
1, Dr. Gupta v. Nathu,  1 S.C.R. 721,
Kruse v. Johnson,  2 Q.B.D. 91 and Rajasthan State Electricity Board v.
Mohan Lal,  3 S.C.R. 377, referred to.
Life Insurance Corporation of India v.
Mukherjee,  5 S.C.R. 528, distinguished.
Barot v. S. T. Corporation,  3 S.C.R.
(V) Though made under the power conferred by
statute, the regulations merely embody the terms and conditions of service in
the Corporation but do not constitute a statutory restriction as to the kind of
contracts which the Corporation can make with its servants or the grounds on
which it can terminate them. That being so, and the Corporation having
undoubtedly power to dismiss its employees, the dismissal of the respondent was
with jurisdiction and although it was wrongful in the sense of its being in
breach of the terms and conditions which governed the relationship between the
Corporation and the respondent, it did subsist. [520D] (vi) The present case,
therefore, did not fall under any of the three well-recognised exceptions laid
down by this Court; hence the respondent was only entitled to damages and not
to the declaration that his dismissal was null and void.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
1171 of 1967.
Appeal from the judgment and decree dated
September 27, 1966 of the Calcutta High Court in Appeal from Appellate Decree
No. 195 of 1964.
G. B. Pai, O. C. Mathur, J. B. Dadachanji, C.
S. Sreenivasa Rao and Bhajan Ram Rakhini, for the appellant.
Urmila Kapoor, Janardan Sharma and R. K.
Khanna, for respondent.
512 The Judgment of the Court was delivered
by shelat J.-Prior to August 1953, the respondent was employed as a motor
driver in Airways (India) Ltd. On the passing of the Air Corporation Act, XXVII
of 1953, and consequent thereupon of the taking over of the existing air
companies, including the Airways (India) Ltd., by the appellantCorporation, he
became the employee of the appellantCorporation. On January 13, 1956, he was
suspended on certain charges. On being found guilty of those charges after an
enquiry had been held, he was dismissed by an order dated February 6, 1956.
The respondent filed a suit alleging that the
enquiry had been conducted in breach of the procedure laid down by the
Regulations made by the Corporation under sec. 45 of the Act, and that therefore,
the dismissal was illegal and void.
The Trial Court accepted the contention and
granted a declaration that his service continued as the order dismissing him
was null and void. That decree was upheld by the first appellate court. In a
second appeal in the High Court, it was conceded that the Regulations applied
to the respondent's case, and that the procedure therein laid down for
terminating his service was not complied with. The Corporation's contention,
however, was that the only relief to which the respondent was entitled to was
damages and that a declaration, such as the one granted by the Trial Court,
could not be given. The High Court rejected that contention holding, that the
Corporation was under a statutory obligation to observe the procedure laid down
in the Regulations, and that not having been done, the order of dismissal was
illegal and void and the respondent continued to be in the employment of the
Corporation as if there was no termination of service. This appeal, founded on
a certificate granted by the High Court, is directed against its aforesaid judgment
It being an admitted fact that the
respondent's service was terminated in breach of the procedural safeguards
provided in the Regulations, the question for determination is whether in
cases, such as the one before us, a declaration given by the Trial Court and
upheld by the High Court could be granted.
It is a well settled principle that when
there is a purported termination of a contract of service, a declaration, that
the contract of service still subsisted, would not be made in the absence of
special circumstances because of the principle that courts do not ordinarily
grant specific performance of service. This is so, even in cases where the
authority appointing an employee was acting in exercise of statutory authority
The relationship between the person appointed and the employer would in such
cases 513 be contractual, i.e., as between a master and servant, and the
termination of that relationship would not entitle the servant to a declaration
that his employment had not been validly determined. (see A. Francis v.
Municipal Councillors of Kuala Lumpur and Barber v. Manchester Regional
Hospital Board (2).
"Cases of dismissal fall into three
classes", said Lord Roid in Ridge v. Baldwin. (3) firstly, dismissal of a
servant by his master, secondly, dismissal from office held during pleasure,
and thirdly, dismissal from office where there must be something against a man
to warrant his dismissal.
It is in the third category of cases that an
employee cannot be dismissed without first letting him know what is alleged
against him and hearing his defence or explanation. He added that in a case of
purely master and servant relationship, the servant is not entitled to say that
he was not heard by his master before his dismissal. Such a question of being
heard or not can only arise where the authority employing the servant is under
some statutory or other restriction as to the kind of contract which it can
make with its servants or the grounds on which it can dismiss them. Ile
question, therefore, would be whether the relationship between the Corporation
and the respondent was anything else than that of master and servant, or
whether the Corporation was under some statutory limitation or obligation by
reason of which it could not terminate his service except by complying with
such an obligation. The decision in Vine v. National Dock Labour Board (4)
illustrates a case where the court would grant a declaration of nullity. That
was a case of lack of power in the Board to delegate its disciplinary function
to a committee which dismissed the employee-an action which was held ultra
vires, and therefore, a nullity. A similar consequence also follows where the
appointment is to an office or status, such as the vice-chancellorship of a
university, as was the case in Bool Chand v. The Chancellor (5), where this
Court held that the tenure of office held by the appellant could not be
terminated without informing him of the allegations made against him and
without hearing him or giving him an opportunity to give an explanation.
There is, on the other hand, the case of
Vidyodava University v. Silva (6) where a teacher appointed by the University
was found not to be holding such an office or status and where it was held that
the University, though established under a statute, was under no statutory
obligation or restriction, subject to which only it could terminate the service
of the teacher. The service (1) [196213 All E.R. 633.
(3)  A.C. 40 at 65.
(5) 1 S.C.R. 434.
33-1S.C.India 71 (2)  1 All E.R. 322.
(4)  A.C. 488.
(6)  3 All E.R. 865.
514 of the respondent was brought to an end
by a resolution of the University Council set up under the statute establishing
the University. The resolution was admittedly passed without hearing the
teacher. Under the statute, the Council was empowered to institute
professorships and every appointment was to be by an agreement in writing
between the University and the professor and was to be for such period and on
such terms as the Council might resolve. Under sec. 18(e) of the Act, the
Council had the power to dismiss an officer or a teacher on grounds of
incapacity or conduct which in the opinion of not less Than two-thirds of the
members of the Council rendered him unfit to be an officer or a teacher of the
University. Such a resolution with the requisite majority was passed. The Act
gave no right to the teacher of being heard by the Council. The Privy Council
held that the mere circumstance that the University was established by the
statute and was regulated by statutory enactments contained in the Act did not
mean that the contracts of employment made with teachers, though subject to
sec. 18(e), were other than ordinary contracts of master and servant, and
therefore, the procedure of being heard invoked by the respondent was not
available to him and no writ could be issued against the University. (see also
Dr. S. B. Dutta. v. University of Delhi (1) The fact, therefore, that the
appellant-Corporation was one set up under and was regulated by Act XXVII of
1953 would not take away, without anything more, the relationship between it
and its employees from the category of purely master and servant relationship.
Are there then in the Act any provisions
which impose upon the Corporation any statutory restriction or obligation which
limits its power of terminating that relationship ? The Act was passed to
facilitate acquisition by the Air Corporations of undertakings belonging to
certain existing air companies and to make further and better provisions for
the operation of air transport services. By sec. 3, two corporations, the
Indian Airlines and Air India International, were set up as bodies corporate,
having perpetual succession. Sec. 8(1) provides that for purposes of
discharging its functions under the Act each of the corporations shall appoint
a general manager and subject to such rules as may be prescribed in this behalf
may also appoint such number of officers and employees as it may think necessary.
Its second sub-section provides that:
"Subject to the provisions of section
20, every person employed by each of the Corporations shall be subject to such
conditions of service and shall be entitled to such remuneration and privileges
as may be determined (1)  S.C.R. 1236, at 1244.
515 by regulations made by the Corporation by
which he is employed." Sec. 20 provides that:
"Every officer or other employee of an
existing air company-employed by that company prior to the first day of July,
1952, and still in its employment immediately before the appointed date
shall-become as from the appointed date an officer or other employee, as the
case may be, of the Corporation in which the undertaking has vested and shall
hold his office or service therein by the same tenure, at the same remuneration
and upon the same terms and conditions and with the same rights and privileges
as to pensions and gratuity and other matters as he would have held the same
under the existing air company if its undertaking had not vested in the Corporation
and shall continue to do so unless and until his employment in the Corporation
is terminated or until his remuneration, terms or conditions are duly altered
by the Corporation." Sec. 44(1) empowers the Central Government to make
rules to give effect to the provisions of the Act and sub-s. (2) thereof
empowers it, in particular and without prejudice to the generality of that
power, to make rules, inter alia, providing the terms and conditions of service
of the general manager and such other categories of officers as may be
specified from time to time under s. 8(1). Sec. 45 authorises each of the two
Corporations with the approval of the Central Government and by notification in
the Government gazette to make regulations not inconsistent with the Act or the
rules made under s. 44 "for the administration of the affairs of the
Corporation and for carrying out its functions" and in particular
providing the terms and conditions of service of officers and other employees
of the Corporation other than the general manager and officers of any other
categories referred to in s. 44.
The effect of these provisions, briefly, is,
(1) that sec. 8(1) authorises the Corporation to appoint officers and other
employees, (2) that under s. 8(2) the Corporation is empowered, subject to s.
20, to lay down the terms and conditions of service of such officers and
employees as it may determine by regulations made under s. 45, and (3) that by
virtue of s. 20 the officers and employees of the existing air companies, whose
undertakings were taken over by the Corporations, became, by whom the operation
of the Act, the employees of the Corporation in On a Particular undertaking was
vested. The section ensures that on their so 516 becoming the employees of the
Corporation they would be governed by the same terms and conditions of service
by which they were governed immediately before the appointed date until the
Corporation altered those terms and conditions by regulations The power to
appoint its employees. except to the extent of the employees of the existing
air companies becoming by operation of s. 20 its employees, is vested in each
of the two Corporations Each of them has also the power to lay down the terms
and conditions of service of its employees by regulations and thereby even
alter the terms and conditions, which those who became by operation of law its
employees had in their respective existing companies, and which, until such
alteration, were ensured to them. Indeed, the power of the Corporation to terminate
the employment of its officers and other employees was no where disputed; the
only dispute raised was as to the manner in which it could be exercised. It is
necessary to observe in this connection that neither the Act nor the rules made
under sec. 44 by the Central Government lay down any obligation or restriction
as to the power of the Corporation to terminate the employment of its employees
or any procedural safeguards, subject to which only, such power could be
exercised. The reason is that under the scheme of the Act such procedural
safeguards and other terms and conditions of service were to be provided for in
the regulations made by the Corporation under sec. 45.
The employment of the respondent not being
one to an office or status and there being no obligation or restriction in the
Act or the rules subject to which only the power to terminate the respondent's
employment could be exercised, could the respondent contend that he was
entitled to a, declaration that the termination of his employment was null and
void ? A case of an analogous nature arose in U. P. State Warehousing
Corporation Ltd. v. Tyagi. (1) The Agricultural Produce (Development and
Warehousing) Corporation Act, XXVIII of 1956, with which the Court there was
concerned, provided for the incorporation and regulation of corporations for
development and warehousing of agricultural produce on cooperative principles.
See. 28 empowered State Governments to set up such corporations.
Sec. 52 authorised the appropriate Government
to make rules and ss. 53 and 54 gave power to the Board set up under the Act
and the corporations respectively to make regulations consistently with the
provisions of the Act and the rules The respondent there was dismissed from
service without following the procedure laid down in regulation 16(3).
There was no (1)  2 S.C.R. 250.
517 question or doubt about the power of the
Corporation to terminate his service. The question was, whether a declaration
to the effect that the termination was invalid and void on the ground of
non-compliance of regulation 16(3), could be granted in the suit filed by the
This Court, after examining a number of
decisions, followed the decision in S. R. Tewari v. District Board Agra (1)
which laid down that there were only three well recognized exceptions to the
general rule under the law of master and servant where such a declaration would
be issued, namely, (1) cases of public servants falling under Art. 311(2) of
the Constitution, (2) cases falling under the industrial law, and (3) cases
where acts of statutory bodies are in breach of a mandatory obligation imposed
by a statute, and held that the case before it did not fall under any one of
the said three exceptions, that the dismissal was wrongful inasmuch as it was
in breach of the terms and conditions of employment embodied in the regulations
and not one of breach of a statutory restriction or obligation, subject to
which only the power to terminate the relationship depended. (see also Bank of
Baroda v. Mehrotra (2) In S. R. Tewari's case (1) this Court noticed with
approval the decision of the High Court of Allahabad in Ram Babu Rathaur v.
Life Insurance Corporation (3) that though the Corporation was a statutory
body, the relations between it and its employees were governed by contract and
were of master and servant and not subject to any statutory obligation although
the Corporation had framed under its power under the Act regulations containing
conditions of service in the Corporation.
A similar view has recently been taken by the
High Court of Calcutta in Life Insurance Corporation v. N. Banerjee (4).
Counsel for the respondent, however, sought
assistance from the decision in the Life Insurance Corporation of India v. Mukherjee
(5). That decision is clearly distinguishable and can, therefore, give no
assistance. Prior to the passing of the Life Insurance Corporation Act, 1956
the respondent there was an employee of one of the insurance companies taken
over under the Act. Under his contract of employment, his service was liable to
be terminated without notice if he was found guilty of fraud, misappropriation
etc. but was entitled to 30 days' notice if it was terminated for any other
reason. His service was terminated admittedly without giving him an opportunity
to be heard. With the transfer of the controlled business from the insurer to
the Corporation, the employees of the former became the employees of the latter
and (1)  3 S.C.R. 55. (2)  II L.L.J. 54.
(3) A.I.R. 1961 All. 502. (4)  1 L.L.J.
(5)  5 S.C.R. 528.
518 were governed under S. 11 (1) of the Act
by the same terms and conditions as before. But under sec. 11 (2), the Central
Government had the power to alter those terms and conditions. Under this power,
the Government issued an order reducing the remuneration payable to the
development officers and revising their other terms and conditions. Cl.
(10) of this order empowered the Corporation
inter alia to terminate the services of such an officer, (a) after giving him
an opportunity of showing cause, or (b) without assigning any reason but with
the prior approval of the Chairman of the Corporation and after giving three
months' notice. Cl. (11) of the order provided that the actual pay admissible
to an officer would be determined in accordance with the regulations which the
corporation would make under the power reserved to it by the Act. It is thus
clear that, except for the pay and allowances admissible to an officer, the
Order was a self-contained code as regards the other terms and conditions of
service including disciplinary action. In the meantime, two circulars had been
issued by the managing director which provided that in certain circumstances
the services of an officer could be terminated. As contemplated by cl. (II) of
the said Order, the Corporation framed regulations under sec. 49 of the Act.
Regulation 4(3) incorporated the said
circulars as part of the regulations for purposes of determining the pay
admissible to and the fitment of the development officers.
Thus, the circulars became part of the
regulations though when they were issued they were merely administrative in
character and without any sanction of the Act. The Corporation claimed that
under regulation 4(3), which incorporated the said circulars, it had the power
to terminate the service of Mukherjee without assigning any reason.
Negativing that contention, this Court held
that s. 11(2) was paramount and would override any provision of the Order passed
by the Central Government if it was contrary to it.
Next would come the Order, and lastly the
regulations which were subject to the Act and the Order, and therefore, if the
regulations were to be inconsistent with the provisions of S. 11(2) or the said
Order, the regulations would be to that extent invalid. Therefore, even if the
regulations provided for termination of services they would have to be read
subject to the Order of the Government, and consequently, the order terminating
the service of an officer would have to be in consonance with the provisions of
the said Order.
Consequently, an order terminating the
service of an officer without giving him an opportunity of being heard, as
provided by cl. (10) of the said Order, would be without power, and therefore,
invalid. The Court held the impugned dismissal as invalid also for the reason
that regulation 4(3) provided for determination of pay and allowances and the
fitment of officers in accordance with the principle laid down in the said
circulars, and therefore, the service of an officer could not be determined
under the guise of 519 fitment. That could, therefore, be done only under cl.
(10) of the Order and in accordance with the procedure laid down in that
clause. The order declaring the dismissal invalid thus was based on the ground
that the regulations and the Order of the Central Government must be read
harmoniously and when so read, the Central Government's Order gave power to
terminate the service of an officer after following the procedure there laid
down, and consequently, the impugned dismissal made inconsistently with the
provisions of the said Order was without jurisdiction, and therefore, a
nullity. It is clear that this decision was based on different facts and on
different principles and cannot be legitimately invoked by the respondent. But
the decision in Barrot v. S. T. Corporation (1) would seem to support the
respondent. There, the order of termination of the appellant's service by the
Corporation, a body set up under the Road Transport Corporations Act, 1950, was
held to be bad in law on account of its being in contravention of cl. 4(b) of
the Regulations containing service conditions framed by the Corporation under
the power given to it by the Act.
But the question whether the said Regulations
constituted a statutory obligation subject to which only the power to terminate
the employment could be exercised or not, or the question whether they took the
employment out of master and servant relationship was not canvassed. Neither
the decision in S. R. Tewari's case (2) nor any other similar decision was also
it seems, brought to the notice of the Court.
Nor can counsel derive any aid, from the
decision in Dr. Gupta v. Nathu (3) where the Court was dealing with a by-law
made by the Central Government under powers conferred on it by the Forward
Contracts (Regulation) Act, 1952 which compulsorily amended the bye-laws of the
association recognized under the Act and which vested certain powers on
authorities external to the association. The bye-law in question was not
limited in its application to the members of the association but to all those
who entered into forward contracts and were governed by its by-laws. But all
rules and regulations made by authorities ill pursuance of a power under a
statute do not necessarily have the force of law.
In Kruse v. Johnson. (4) while considering
the validity of a bye-law made by a country council. Lord Russell described a
bye-law having the force of law as one affecting the public or some section of
the public, imposed by some authority clothed with statutory powers, ordering
something to be done or not to be done and accompanied by some sanction or
penalty for its non-observance. It validly made such a byelaw has the force of
law within the sphere of its (1)  3 S.C.R. 40.
(3)  1 S.C.R. 721.
(2)  3 S. C. R. 55.
(4)  2 Q.B. 91, at 96.
520 legitimate operation. The function of
such bye-laws is to supplement the general law by which the legislature
delegates its own power to make them. In Rajasthan State Electricity Board v.
Mohan Lal (1) where this Court held the Board, set up under the Electricity
(Supply) Act, 54 of 1948, as a State within the meaning of Art. 12 of the
Constitution against which mandamus could issue under Art. 226, emphasised the
fact that the Act contained provisions which empowered the Board to issue
directions, the disobedience of which was punishable as a penal offence. As
observed earlier, under sections 8(2) and 20, the appellant Corporation has
been given the power to employ its own officers and other employees to the
extent it thinks necessary on terms and conditions provided by it in regulations
made under sec. 45. The regulations contain the terms and conditions which
govern the relationship between the Corporation and its employees. Though made
under the power conferred by the statute, they merely embody the terms and
conditions of service in the Corporation but do not constitute a statutory
restriction as to the kind of contracts which the Corporation can make with its
servants or the grounds on which it can terminate them. That being so, and the
Corporation having undoubtedly the power to dismiss its employees, the
dismissal of the respondent was with jurisdiction, and although it was wrongful
in the sense of its being in breach of the terms and conditions which governed
the relationship between the Corporation and the respondent, it did subsist.
The present case, therefore, did not fall under an of the three well recognized
exceptions, and therefore, the respondent was only entitled to damages and not
to the declaration that his dismissal was null and void.
In our view, the High Court was in error in
upholding the declaration granted by the Trial Court. The appeal by the
Corporation, therefore, succeeds and is allowed with the result that the
judgment and decree passed by the High Court is set aside. In the circumstances
of the case, however, there will be no order as to costs.
K. B. N.
(1)  3 S.C.R. 377.