All India Bank Employees' Association
Vs. National Industrial Tribunal & Ors  INSC 254 (28 August 1961)
28/08/1961 AYYANGAR, N. RAJAGOPALA AYYANGAR,
N. RAJAGOPALA SINHA, BHUVNESHWAR P.(CJ) DAS, S.K.
CITATION: 1962 AIR 171 1962 SCR (3) 269
CITATOR INFO :
R 1962 SC 263 (13) APL 1962 SC1166 (4) F 1962
SC1371 (19,75) RF 1965 SC 40 (29) R 1965 SC 311 (5) R 1971 SC1737 (30) R 1978
SC 597 (47,81) RF 1986 SC 872 (71) RF 1988 SC1136 (32)
Fundamental Right--Right to form association
or union--Scope of--Stature protecting Banks from disclosure of information
regarding secret reserves etc.--Constitutionality of--Banking Companies Act,
1949 (X of 1949), s. 34-A--Constitution of India, Arts.14, 19(1) (c).
Section 34-A of the Banking Companies Act,
1949, introduced in 1960, provides that no banking company shall be compelled
to produce or give inspection of its books of account or other document or
furnish or disclose any statement or information which the company claims to be
of a confidential nature and the production etc., of which would involve disclosure
of information relating to any reserves not shown as such in its published
balance sheet or any 'particulars not shown therein in respect of provisions
made for bad and doubtful debts and other usual or necessary provisions.
Sub-section (2) of s. 34-A provides that any
authority, before whom the question as to whether any amount out of such
reserves or provisions should be taken into account, may refer the question to
the Reserve Bank and the Reserve Bank shall furnish to the authority a
certificate stating that the authority shall or shall not take into account the
amount specified therein. Sub-section (3) makes s. 34-A applicable to only such
banking companies whose operations extend beyond one State. The Appellant
contended 270 that s. 34-A contravened the fundamental right guaranteed to
trade unions by Art 19(1)(c) of the Constitution as it prevented them from
effectively exercising the concomitant right of collective bargaining in
respect of wages, bonus etc. before industrial Tribunals by shutting out
important and relevant evidence and that the section violated Art. 14 of the
Constitution as it was not made applicable to all the banking companies.
Held, that s. 34-A of the. Banking Companies
Act, 1949, was constitutionally valid and did not and either Art. 19(1)(c) or
Art. 14 of the Constitution.
The right guaranteed by Art. 19(1)(c) of the
Constitution does not carry with it a concomitant right that unions formed for
protecting the interests of labour shall achieve their object such that any
interference to such achievement by any law would be unconstitutional unless it
could be justified under Art. 19(4) as being in the' interests of Public order
or morality. The right under Art. 19(1)(c) extends only to the formation of an
association or union and insofar as the activities of the association or union
are concerned or as regards the steps which the union might take to achieve,
its object, they are subject to such laws as, may be framed and such laws
cannot be, tested under Art.
19(4). Section 34-A was, enacted to effect a
i.e conciliation between the conflicting interest of labour to obtain proper
relief in industrial arbitration and tire need to preserved and maintain the
delicate fabric of the credit structure of the country by strengthening the as
well as the apparent credit worthiness of banks operating in the country. It
preserved industrial adjudication in respect of disputes between the banks and
their employees by entrusting the duty of determining the surplus reserve which
could be taken into account as a part of the assets for determining their
capacity to pay to the Reserve Bank.
Ramesh Thappar v. State of Madras (1950)
S.C.R. 594 Express Newspapers (P) Ltd. v. Union of India, (1959) S.C.R. 12, Be.
The Kerala Education Bill, (1959) S.C.R. 995,
National Association for the advancement of coloured people v. Alabama, 2 Law.
Ed. Second 1488, Bates v. Little Rock, 4 Law Ed. Second 480,.National Labour
Relations Board v. Jones & Lauqhlin Steel Corporation, 81 Law. Ed. 893 and
Amalgamated Utility Workers v. Consolidated Edison Company of New York, 84 Law.
Ed. 738, referred to.
Though there were certain banks which were
not entitled to the protection of s. 34-A that was no ground for holding that
the section offended Art. 14. The complaint was not made by the banks who were
not given the protection.
Admittedly, 95% of the banking business in
the country was in the hands of 271 banks to whom s. 34-A applied and. they
employed 80,000 out of the 90,000 bank employees. The injury to the credit,
structure will only be by the disclosure of the reserve etc.' of the banks of
this class and there is sufficient rational connection and basis for the
classification to justify the differentiation. The exclusion of the Reserve
Bank from the operation of s. 34-A (2) also does not amount to discrimination;
in the very nature of things and on the scheme of the provision the reserve
Bank could not but be excluded.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 154 of 1961.
Appeal by special leave from the judgment and
order dated October 31, 1960, of the National Industrial Tribunal (Bank
Disputes), Bombay, in Reference No. 1 of 1960.
WITH Petitions Nos. 70 80 and 82 of 1961.
Petitions Under Article 32 of the
Constitution of India for enforcement of Fundamental Rights.
A.S. R. Chari, V. G. Raw, D. P. Singh, Al. K.
Ramamurthi. R. K. Garg and S. C. Agarwal, for the appellant and the petition
(in Petn. No. 80 of 61).
M. C. Setalvad, Attorney-General of India, N.
V. Phadke, K. H. Bhabha, J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P.
L. Vohra, for respondents Nos. 2-17 and 19-34 (In appeal and Petn. No. 80 of
J.B. Dadachanji, S. N. Andley, Rameshwar Nath
and P. L. Vohra, for respondents NOS. 41-49 (In appeal and Petn. 80 of 1961).
Anand Prakash, for Respdts. Nos. 35-40 (In
Petn. No. 80 of 61).
A. V. Viswanatha Sastri, D. P. Singh, M. K.
Ramamurthi, R. K. Garg and S. C. Agarwal, for Intervener No. 2.
D.S. Nargolkar and K. R. Choudhri, for
Petitioners Nos. 70 and 82 of 61).
M. C. Setalvad, Attorney-General of India,
C.K. Daphtary, Solicitor-General of India, H.N. Sanyal Additional
Solicitor-General of India, J.B Dadachanji, 272 S. N. Andley, Rameshwar Nath
and P. L. Vohra, for Respdt No. 2 (In Petns. Nos. 70 and 82 of 61).
Naunit Lal .for intervener No. 3. M. C.
Setalvad Attorney General of India and T. sen, for Intervener No. 1.
1961. August 28. The Judgment of the Court
was delivered by AYYANGAR, J.-Civil Appeal No. 154 of 1961 has been filed on
special leave obtained from this Court Against an order of K. T. Desai, J.,
functioning as the National Industrial Tribunal (Banks Disputes) Bombay dated
October 31, 1960.
The point arising for decision in the appeal
is as regards the constitutional validity of s. 34A of the Banking Companies
Act, 1949 which was enacted on August 26, 1960 as an amendment to the parent
Act (Act X of 1949). The appellant before this Court is the All India Bank
Employees' Association which is a trade union organization of Bank Employees of
several banks operating in India The Punjab National Bank Employees' Union,
which is a trade union with similar objects has been committed to intervene in
this appeal in support of the appellant union The three other Writ Petitions
are by other Bank Employees' Unions whose description would be apparent from
the cause title and all these cases have been heard together because in the
writ petitions also the point raised is identical, viz., the validity of s.34A
of the Banking Companies Act, which will be referred to hereafter as the
Section 34A whose validity is the matter in
dispute in these proceedings runs in the following terms "34A.
(1)Notwithstanding anything contained in section 11 of the Industrial Disputes
Act, 1947. or any other law for the time being in force, no banking company 273
shall in any I proceeding under the said Act or in any appeal or other
proceeding arising there from or connected therewith, be Compelled by any
authority before which such proceeding is pending to produce, or give
inspection of, any of its books of account or other document or furnish or
disclose any statement or information, when the banking company claims, that
such document, statement or information is of a confidential nature and. that:
the production or inspection of such document or the furnishing or disclosure
of such statement or information would involve disclosure of information
relating to :
(a)any reserves not shown as such in its
published balance sheet ; or (b)any particulars not shown therein in respect of
provisions made for bad and doubtful debts and other usual or necessary
(2)If, in. any such proceeding in relation to
any banking company other than the Reserve Bank of India,, any question arises
as to whether any amount out of the reserves or provisions referred to in sub-section
(1) ,should be taken into account by the authority before which such proceeding
is pending, the authority may, if it so thinks fit, refer the question to the
Reserve Bank and the Reserve Bank shall after taking into account principles of
sound banking and all relevant circumstances concerning the banking company,
furnish to the authority a certificate stating that the authority shall not
take into account any amount as such reserves and provisions of the banking
company or may take them into account only to the extent of the amount
specified by it in the certificate, and the certificate of the Reserve Bank on
274 such question shall be final and shall not be called in question in any
(3)For the purposes of, this section,
"banking, company" shall have the meaning assigned to it in the Industrial
Disputes Act, Before commencing the examination of the points in controversy
and the grounds on which the legality of the above provision is impugned. It
would be helpful for a better appreciation of the problem if we set out in very
brief outline, the history of the steps which led to the enactment in dispute'
There was a long standing practice in England of Banking Companies, as
distinguished from companies carrying on other commercial etc. activities, not
to disclose, in their balance sheets and Profit & Loss accounts, bad and
doubtful debts and the provision made therefore, as well as, the secret
reserves created and held under various items a practice which received
judicial recognition by Buckley, L., J. in .Newton v. Birmingham Small Arms
Co.. Ltd. (1) This practice was followed by several banks in India and
questions arose from time to time as to how far the practice was consistent
with the statutory provisions as to disclosure contained in the several
Companies Acts enacted from time to time.; We shall, however, add that the
desirability and; even the legality of this practice has not gone without
challenge, though there has been a considerable body of opinion which has held
this to be salutary and necessary for the preservation and progress of a credit
institution like a bank. We are not now concerned with the desirability or
ethics of the practice which is a matter for the consideration of the
legislature but as to the steps by which accord was established between the
practice and the law.
The Indian Companies Act of 1866 drew no
distinction between the contents of balance sheet,% of banking companies as
distinguished from those of (1)  2 Ch. 378.
275 other companies and both were required to
disclose a list of debts owing to the concern which were considered bad or
doubtful Pro-visions on the same lines, i. e., without any, distinction between
Banking and other companies, were copied and continued by the Indian Companies
Act of 1882. When, however, the Companies Act of 1913 was enacted, Form F' to
the 3rd Schedule to the Act contained a note in respect of the sub-heading'
'book debts' under the head Property & Assets' in the balance sheet,
reading "distinguishing ill the case of a bank between those considered
good and in respect of which the bank is fully: secured and those considered
good for which the bank holds no security other than the debtor's personal security;
and distinguishing in all cases between debts considered good, and debts
considered doubtful or bad. Debts due b y directors or other officers of the
company or any of the either severally or joint with any other persons to be
separately stated in all cases." It would be seen that by reason of this
note the obligations imposed upon banks as regards the classification of their;
assets and the information to: be disclosed
became slightly more detailed than in' the case of other companies. The
practice, 'however, of bankers to which we adverted earlier not to disclose or
not to disclose to the full extent bad and doubtful debts but to make,
provision for them by setting aside under other heads, sufficient moneys which
would operate as secret reserves, so that the credit of the institution would
not be affected while its financial stability would remain unimpaired; was
continued notwithstanding this, change in the form. The Central Bank of India
Limited in its published, balance-sheets of the year 1925 adopted the above
practice which however, wasn't obviously in strict conformity with the
requirements of From 'F'to the third schedule read with note. The 276
managing-director of the bank was prosecuted by one Shamdasani who was a
shareholder of the bank ,or "filing and publishing statements which were
false in material particulars" an offence punishable under S. 282 of the
Indian Companies Act. The Magistrate acquitted the accused on the ground that
the balance-sheet was in accordance with the usual practice of bankers and that
the reserves of the company which were shown under various heads though not as
a specific provision for bad and doubtful debts covered the possible losses
several times. Ail application for revision was filed before the High Court of Bombay
and Fawcett, J.
allowed it holding that a declared provision.
of the form cannot be allowed to be whittled down by general considerations as
to the object of a balance-sheet." This judgment was rendered on February
28, 1927 (vide Shamdasani v. Pochkanwala (1) and very soon thereafter the
Government of India intervened by a notification dated March 29, 1927 under s.
151 of the companies Act 1913 amending form 'F' and as amended banks were
excluded from the requirement of disclosing the reserve for bad and doubtful
debts under the heading, `capital and Liabilities' in the left hand side of the
balance-sheet, and in the right-hand column "book debts which were bad and
doubtful for which provision had been made to the satisfaction of the auditors",,
were not required to be shown as part of the property and assets of a Bank.
The provisions of the Companies Act of 1913
underwent numerous changes by the amending Act of 1936 which included inter
alia one whereby the change effected by the Notification, dated March 29, 1927,
in Form `F' were omitted and Form `F'was made to retain the note which
accompanied it under the Act of 1913 without the exception in favour of banks
effected by the Notification. This was possibly unintended, because on the day
after the amending Act came into operation, the Central Government published a
Notification on January 16, 1937 (1) A.I.R. 1927 Bom. 414 : 29 Bom. L.R. 722.
277 again under s.151 of the Companies Act
restoring the alterations in the balance-sheet Form 'F' as had been effected by
the prior Notification ,of March 1927. The validity of this Notification was
questioned as being beyond the powers of the Central Government by Shamdasani
who filed a complaint against the Central Bank of India Limited and its
directors charging them with having issued a false balancesheet for the year
ending December 31, 1939 a balance-sheet which was in conformity with the form
as modified by the Notification. The Magistrate upheld the validity of the
Notification and quitted the accused. Shamdasani preferred a revision to the
High Court and a full Bench of the Bombay High Court held that the Notification
was beyond' the powers of the Central Government, though the order of acquittal
was affirmed upholding the plea of the accused that their act was bona fide in
that they believed the alteration in the form to be valid (Vide Shamdasani v.
The Central Bank of India Ltd.(", Immediately after 'this judgment the
Central legislature passed Act XXX of 1943 with retrospective effect validating
the Notification and amending the relevant sections of the Companies Act. (ss.
132,151, Art. 107) so as to empower the Government to effect changes in the
form of the balance-sheet in the manner in which they had done in January'
The next event in order of date relevant to
the present context is the report of the Company, Law Amendment Committee of
the United Kingdom presided over by Mr. Justice Cohen where the entire question
of undisclosed reserves was fully discussed. The pros and cons of the question
were elaborately considered by the Committee and it is sufficient therefore in
this connection to a short passage in the report. In paragraph 101 the problem
is thus set, out :
"The chief matter which has and
controversy is the question of undisclosed or, a. (1) I. L. R. 1944 Bom. 302.
278 the Are, frequently called, secret or
inner reserves. An undisclosed reserve is commonly created by using profits to
write down more than is necessary such assets as investments ,freehold and
leasehold property or plant and machinery by creating excessive provisions for
bad debts or other contingencies by charging capital expenditure to revenue ;
or by undervaluing stock in trade. Normally the object of creating an
undisclosed reserve is to enable a company to avoid violent fluctuations in its
published profits or its dividends." The Committee made number of
recommendations several of which were adopted in' the U. K. Companies Act of
1948, and those relevant' to the point under discussion served to bring the law
as to the contents of a balance-sheet of a Banking Company unto. line with the
practice of sound and well managed banks. In India, special legislation in
relation to Banking Companies embodying several of these recommendations was
enacted in the shape of the Banking Companies Act 1949 (Act of 1949). Section
29 of the Act laid down the law in regard to requirements of the contents of
the balance-sheets of banks. The balance-sheet and Profit & Loss account
were to be in the form set out in the 3rd schedule to that and sub-s. (3) of
that section exempted Banking Companies from the, requirements of conforming to
the form of balance-sheet and Profit & Loss, account of companies
registered under the Indian Companies Act; and the Central Government were
empowered by sub-s. (4) to amend the, form set out in the schedule by
Notifications published in the official., Gazette. In Form 'A' which provided
the model of a balance-sheet 'and Profit & Loss account in the case of
banks, there was not much change as compared to the requirements of the
previous law except that in the Profit & Loss account (Form 'B' )I the
third schedule) the provision for bad and doubtful debts was permitted to be
excluded from the 279 income so that the amount of bad and doubtful debts did
not figure separately on the income side of the profit & loss account. The
income as required to be shown was "income (less provision made during the
year for bad and doubtful debts)". This last item was modified by a
Notification issued under the power conferred by s.29(4) of the Act in December
1951, so that after amendment .the beading "Income" in the Profit
& Loss Account ran: "Income (less provision made during the year for
bad and doubtful debts and other usual and necessary provisions"). Thus so
far as shareholders of Banks and the general public including the customers of
the bank were concerned, banks were relieved from the obligation of disclosing
the entirety of their reserves as such and also of the extent of bad or
doubtful debts and the provision made therefore.
While the law was in this state disputes
arose between the employees of banks all over India and the respective banks
with regard to wages, conditions of work etc. which were referred by the
Central Government in June 1949 to an ad hoc Tribunal with Shri K. C. Sen, a
retired Judge of the Bombay High Court as Chairman. The Tribunal passed an
award but its validity was successfully challenged in this Court in April 1951
on the ground that all the members of the Tribunal who passed the award were
not those who had all inquired into the dispute. Thereafter a fresh Tribunal
was appointed in January 1952 with Shri S. Panchapages Sastri, a retired Judge
of the High Court of Madras as Chairman. The award of this Tribunal was
published in April, 1953, but it is not necessary to state its terms. Appeals
against the award were preferred to the Labour Appellate Tribunal both by the
banks as well as by workmen. The Appellate Tribunal which heard the appeal
consisted of three members with Shri Jeejeebhoy as president.
The claim of the workers in the appeal before
the Appellate Tribunal in great part related to a 280 demand for increased
wages and salaries and the main defence of the banks was that they had not the
capacity to pay anything beyond what the Sastry Tribunal had granted. The
Jeejeebhoy Tribunal set out their difficulties in assessing the plea of
incapacity raised by the banks in the context of the provisions of the Banking
Companies Act and the form of balance-sheet prescribed there under in the
following terms :"At the very outset there is an initial difficulty in
arriving at a correct estimate of the financial position of banks. There are
two circumstances which militate against our securing a proper insight into the
financial state of banks. We refer in particular to (a) the undisclosed or
secret reserves and (b) to the manner in which it is permissible in law for a
banking company to exhibit its balance sheet.
It is not in dispute that bank do have
undisclosed or secret reserves which they acquire in a number of ways, and such
undisclosed reserves cannot be ascertained from the balance
x x x The other difficulty with which we are
confronted at the outset is the manner in which a bank is permitted to present
its profit & lose account. On the income side the form originally
prescribed by the Banking Companies Act required the banks to declare
"Income less provision made during the year for bad and doubtful
debts)" ; this has now been altered by an amendment made by the Central
Government in exercise of the powers conferred under sub-section 4 of section
29 of the Banking Companies Act to read "Income (less provision made
during the year for bad and doubtful debts and other usual or necessary
provisions)". The effect of this alteration is that the profits as shown
for any 281 particular year are first shown not only of bad and doubtful debts
but also of 'other us ua l or necessary provisions' before being shown in the
It maybe that these other usual or necessary
provisions' have been passed by the Board of Directors, and by the auditors of
the concern and may even have been scrutinized by the Reserve Bank of India ;
but it is our duty and function to decide the question of the capacity of a
bank to pay, and in the absence of important information of this character our
estimate of the capacity of a concern to pay must necessarily be incomplete........................
Banks feel that they now have the form of the Banking Companies Act to shield
themselves against an enquiry on the subject ; but insofar as we are concerned
we consider these undisclosed reserves and these appropriations. relevant for
the purposes of our investigation and in their absence we would have to decide as
beat as we could from the other materials before us; and draw such inferences
as justified." It was the contention of the workmen that an Industrial
Tribunal had the right in law to compel banks to sis,-lose their secret
reserves as well as the amount of "the bad and doubtful debts and other
necessary provisions" which bad been excluded under the head
"income" in the, Profit & Loss Account of banks. This matter was
agitated by them before this Court in State Bank of India and others v. Their
Workmen (1) being an. appeal against the decision of the Labour Appellate
Tribunal. In view, however, of the conclusion reached by this Court on other
parts of the case it refrained from pronouncing upon the correctness or
otherwise of this claim by the workmen.
The diputes between the employees of banks
(1)(1959), 2 L.T L. J. 205.
282 and the managements, however, continued
with the result that on March 21, 1960 the Central Government in exercise of
the powers conferred on it by sub-s. (1A) of s. 10 of the Industrial Disputes
Act referred the dispute which related to several matters to the National
Tribunal constituted by & Notification of Government of the same date, K.
T. Desai, J.
was the Tribunal so appointed. Most of the
major banks in the country were made parties to the reference including the
Reserve Bank and State Bank of India. After the Tribunal started functioning
and after the parties formulated their respective contentions, applications
were filed by the Bank Employees Association on June 9, 1960, for directing the
respondent-banks to produce before the Tribunal for the purposes of
adjudication several documents listed in the applications. Among the items in
respect of which production was thus sought were (1) statements showing
"the secret reserves in any form" of each bank from 1954 right upto
December 31, 1959 ; and (2) statements showing the provision made "for bad
and doubtful debts and other usual and necessary provisions" during the
years 1954 to 1959 and the total amounts outstanding in such items in each bank
in the said years. The banks filed their reply on July 16, 1960. The production
of the documents and the information called for on several of the matters
including the above two was resisted by the Indian Banks Association (being an
association of employers) on the ground that they were by law exempted from
disclosure in the interest of the industry and the public and claimed absolute
privilege from making the disclosure.
It was at this stage that the impugned
provision was enacted by Parliament as an amendment to the Banking Companies
As several of the banks relied upon the
impugned provisions in support of their plea that they could not be compelled
to disclose either the quantum of their secret reserves or their nature, or as
regards the provision made in 283 the several years for "bad and doubtful
debts and for other reasonable and necessary provision", the bank
employees association challenged the constitutional validity of s. 34A of the
Banking Companies Act, which, if valid, could have afforded a sufficient answer
to the demand for production of the documents in relation to these matters.
This objection was argued before the National Tribunal which upheld the validity
of the section. As we have stated earlier, Civil Appeal No. 154 is directed
against and challenges the correctness of this decision. The Writ Petitions
have been filed by Bank Employees Associations which were not parties to the
application for production before the National Tribunal and are intended to
support the plea of the appellant in Civil Appeal No. 154 of 1961.
The foregoing narrative would show that the
Banking Companies Act, as it stood before the amendment now challenged, had
brought the law as to the disclosure of secret reserves and the provision for
bad and doubtful debts etc. Into accord with the usual practice of Bankers, and
had protected these items from being compulsorily disclosed to the shareholders
of the respective companies and to the general public. There had been a
controversy as to whether the workmen of these establishments were or were not
entitled to be placed on a different position from the shareholders because of
the bearing of these undisclosed items on the determination of the quantum of
their wage etc.
and on their conditions of work having
financial implications. Parliament had, by the impugned legislation, extended
the protection from compulsory disclosure to the workmen as well, but with a
safeguard in their cue that the Reserve Bank would determine the amount of
which could be taken into account in the
course of industrial adjudication. The question before us is, is this attempt
at some approximation of the position of the workmen to that of shareholders
etc. unconstitutional ? 284 Mr. Chari, learned Counsel for the appellant in
Civil Appeal No. 154 addressed to us the main arguments in the case and these
were supplemented by learned Counsel appearing for the petitioners in the
several writ petitions and also by learned Counsel on behalf of the Interveners
both in the appeal as well as in the petitions. Though the arguments before us
ranged over a very wide field, the attack on the validity of the legislation
was rested on two main grounds :
(1) that the impugned legislation contravened
the fundamental right guaranteed to "trade unions" by the provision
contained in sub-cl. (c) of el. (1) of Art. 19; and (2) that it violated the
freedom of equality guaranteed by Art.
14 of the Constitution.
We shall consider these two points in that
order : First as to the impugned provision being obnoxious to, or in
contravention of sub-cl.(c) of cl. (1)'of Art. 19'of the' Constitution. This
Article runs, to quote only the relevant words "Article 19. (1) All citizens
shall have the right(a).............................................
(c) to form associations or unions The right
is subject to the qualification contained in cl.(4), reading :
"(4). Nothing in sub-clause (c) of the
said clause shall affect the operation of any existing law insofar as it
imposes, or prevent the State from making any law imposing, in the interests of
public order or morality, reasonable restrictions on the exercise of the right
conferred by the said sub-clause." It is not the contention of any of the
learned Counsel that the right of workmen to form unions or associations which
is the right guaranteed by sub-cl. (c) of cl. (1) of Art. 19 on its literal
reading has 285 been denied by the impugned legislation. The argument, however,
was that it would not be a proper construction of the content of this
guaranteed freedom to read the text literally but that the freedom should be so
understood as to cover not merely a right to form an union in the sense of
getting their union registered so as to function as an union, i.e., of placing
no impediments or restrictions on their formation which could not be justified
as dictated by public order or morality but that it extended to confer upon
unions so formed a right to effectively function as an instrument for agitating
and negotiating and by collective bargaining secure, uphold or enforce the
demands of workmen in respect of their wages prospects or conditions of work.
It was further submitted that unless the
guaranteed right comprehended these, the right to form an Union would be most
illusory. To understand the implications of learned Counsel's submission in
their proper perspective the several steps in the reasoning might be set out as
(1)The Constitution guarantees, by sub cl.(c)
of cl. (1) of Art. 19, to citizens in general and to workers in particular the
right to form unions. In this context it was pointed out that the expression
`union' in addition to the word ,association' found in the Article refers to
associations formed by workmen for "trade union" purposes ;
the word "union, being specially chosen
to designate labour or Trade unions.
(2)The right to "form an union" in
the sense of forming a body carries with it as a concomitant right a guarantee
that such unions shall achieve the object for which they were formed. If this
concomitant right were not conceded, the right guaranteed to form an union
would be an idle right, an empty shadow lacking all substance.
(3)The object for which labour unions axe
brought into being and exist is to ensure collective 286 bargaining by labour
with the. employers. The necessity for this has arisen from an incapacity
stemming from the handicap of poverty and consequent lack of bargaining power
in workmen as compared with employers which is the reason d'etre for the
existence of labour organizations.
Collective bargaining in order to be
effective must be enforceable labour withdrawing its co-operation from the
employer and there is consequently a fundamental right to strike a right which
is thus a natural deduction from the right to form unions guaranteed by sub-cl.
(c) of cl.(1) of Art. 19. As strikes, however, produce economic dislocation of
varying intensity or magnitude, a system has been devised by which compulsory
industrial adjudication is substituted for the right to strike. This is the
ratio underlying the provisions of the Industrial Disputes Act 1947 under which
Government is empowered in the event of an industrial dispute which may
ultimately lead to a strike or lock-out or when such strikes or lock-outs
occur, to refer the dispute to an impartial Tribunal for adjudication with a
provision banning and making illegal strikes or lock-outs during the pendency
of the adjudication proceedings. The provision of an alternative to a strike in
the shape of industrial adjudication is a restriction on the fundamental right
to strike and it would be reasonable and valid only if it were an effective
(4)For an adjudication to satisfy the tests
of reasonableness and effectiveness two conditions are necessary : (a) that the
adjudicator should be enabled to have before him all the materials which are
necessary for pronouncing upon the matter in controversy before him ; and (b)
that the adjudicator by whom the controversy between the parties should be
decided should be an impartial person or body who would render the decision or
award after fully hearing the parties, and that no matter in controversy should
be the subject of ex parte decision by an interested party or without the
disputants having an opportunity to know the, 287 materials on which the
decision is reached, as also an opportunity to place their case with reference
to such material.
(5)In regard to the right of labour unions to
function effectively and to achieve the object of their existence as set out
earlier, by negotiated settlement or by compulsory adjudication, the only
limitations permitted to be imposed by law are those set out in cl.(4) of Art.
19 and unless, therefore, either the objects of the association or the manner
of achieving them are contrary to, or transgress public order or morality, for
which reason alone reasonable restrictions might be imposed upon the guaranteed
right, the. freedom guaranteed is absolute.
(6)The legislation now impugned withdraws as
it were a vital issue in dispute between the parties before the adjudicator,
viz:, the capacity of the industry to pay, from his cognisance and vests the
power of deciding that issue in the Reserve Bank which is a biased and
interested party, the decision itself being rendered ex parte, the trade unions
being deprived even of the knowledge of facts which lead to the decision.
It was on this line of reasoning that learned
Counsel submitted that the impugned enactment violated the freedom guaranteed
by sub-cl. (c) of el. (1) of Art. 19.
We shall now proceed to consider the
soundness and tenability of the steps in the reasoning. It is not necessary to discuss
in any detail the first step as sub-cl.
(c) of el. (1) of Art. 19 does guarantee to
all citizens the right ',to from associations". It matters little whether
or not learned Counsel is right in his submission that the expression
"union' in the clause has reference particularly to Trade Unions or
whether the term is used in a generic sense to designate any association formed
for any legitimate purpose and merely as a variant of the expression
"Association" for comprehending every body of persons so formed. It
is not controverted 288 that workmen have a right to form "associations or
unions" and that any legal impediment in the way of the formation of such
unions imposed directly or indirectly which does not satisfy the tests laid
down in cl. (4) would be unconstitutional as contravening a right guaranteed by
Part III of the Constitution It is the second step in the argument of the
learned Counsel, viz., that the right guaranteed to form "an union"
carries with it a concomitant right that the achievement of the object for
which the union is formed shall not be restricted by legislation unless such
restriction were imposed in the interest of public order or morality, that
calls for critical examination. We shall be referring a little later to the
authorities on which learned Counsel rested his arguments under this head, but
before doing so we consider it would be proper to discuss the matter on
principle and on the construction of the constitutional provision and then
examine how far the authorities support or contradict the conclusion reached.
The point for discussion could be formulated
thus : When sub-cl. (c) of cl. (1) of Art. 19 guarantees the right to form
associations, is a guarantee also implied that the fulfillment of every object
of an association so formed is also a protected right, with the result that
there is a constitutional guarantee that every association shall effectively
achieve the purpose for which it was formed without interference by law except
on grounds relevant to the preservation of public order or morality set out in
(4) of Art. 19? Putting aside for the moment
the case of Labour Unions to which we shall refer later, if an association were
formed, let us say. for carrying on a lawful business such as a joint stock
company or a partnership, does the guarantee by sub-cl.(c) of the freedom. to
form the association, carry with it a further guaranteed right to the company
or the partnership to pursue its trade and achieve its profit-making object and
that the only limitations 289 which the law could impose on the activity of the
association or in the way of regulating its business activity would be those
based on public order and morality under cl. (4) of Art. 19? We are clearly of
the opinion that this has to be answered in the negative An affirmative answer
would be contradictory of the scheme underlying the text and the frame of the
several fundamental rights which are guaranteed by Part III and particularly by
the scheme of the seven freedoms or groups of freedoms guaranteed by subcls.
('a) to (g) of el. (1) of Art. 19. The acceptance of any such argument would
mean that while in the case of an individual citizen to whom a right to carry
on a trade or business or pursue an occupation is guaranteed by sub-cl.
(g) of cl. (1) of Art. 19, the validity of a
law which imposes any restriction on this guaranteed right would have to be
tested by the, criteria laid down by cl. (6) of Art.
19. if however he associated with another and
carried on the same activity-say as a partnership, or as a company etc., he
obtains larger rights of a different content and with different characteristics
which include the right to have the validity of legislation restricting his
activities tested by different standards, viz., those laid down in el. (4) of
Art. 19. This would itself be sufficient to demonstrate that the construction
which the learned Counsel for the appellant contends is incorrect, but this
position is rendered clearer by the fact that Art. 19-as contrasted with
certain other Articles like Arts. 26, 29 and 30-grants rights to the citizen as
such, and associations can lay claim to the fundamental rights guaranteed by
that Article solely on the basis of their being an aggregation of citizens,
i.e., in right of the citizens composing the body.
As the stream can rise no higher than the
source, associations of citizens cannot lay claim to rights not open to
citizens, or claim freedom from restrictions to which the citizens: composing
it are subject.
The resulting position way, be illustrated
thus If an association were formed' for' the purpose of 290 anying on business,
the right to form it would be Guaranteed by sub-cl. (c) of cl. (1) of Art. 19
subject to any law restricting that right conforming to cl. (4) of Art.
19. As regards its business activities,
however, and the achievement of the objects for which it was brought into
existence, its rights would be those guaranteed by sub-cl.
(g) of cl. (1) of art. 19 subject to any
relevant law on the matter conforming to el. (6) of Art. 19 ; while the
property which the association acquires or possesses would be protected by
sub-el. (f) of cl. (1) of Art. 19 subject to legislation within the limits laid
down by cl. (5) of Art.
We consider it unnecessary to multiply
examples to further illustrate the point. Applying what we have stated earlier
to the case of a labour union the position would be this :
while the right to form an union is
guaranteed by sub-el.
(c), the right of the members of the
association to meet would be guaranteed by sub-el. (b), their right to move
from place to place within India by sub-cl.(d), their right to discuss their
problems and to propagate their views by subcl. (a), their right to hold
property would be that guaranteed by sub-cl. (f) and so on each of these
freedoms being subject to such restrictions as might properly be imposed by
cls. (2) to (6) of Art. 19 as might be appropriate in the context. It is one
thing to interpret each of the freedoms guaranteed by the several Articles in
Part III a fair and liberal sense, it is quite another to read which guaranteed
right as involving or including 'Concomitant rights necessary to achieve the
object which might be supposed to under lie the grant of each of those rights,
for that construction would, by a series of ever expanding concentric circles
in the shape of rights.
concomitant to concomitant rights and so on,
lead to an almost grotesque result.
There is no doubt that in the context of the
principles underlying the Constitution and the manner in which its Part III has
been framed the 291 guarantees embodied in it are to be interpreted in a
liberal way so as to sub serve the purpose for which the constitution-makers
intended them and not in any pedantic or narrow sense, but this however does
not imply that the Court is at liberty to give an unnatural and artificial
meaning to the expressions used based on ideological considerations.
Besides it may be pointed out that both under
the Trade Unions act as well as under the Industrial Disputes Act the
expressions `union signifies not merely a union of workers but includes also
unions of employers. If the fulfilment of every object for which an union of
workmen was formed were held to be a guaranteed right, it would logically
follow that a similar content ought to be given to the same freedom when
applied to an union of employers which would result in an absurdity. We are
pointing this out not as any conclusive answer, but to indicate that the theory
of learned Counsel that a right to, form unions guaranteed by sub-cl. (c) of (1)
of Art. 19 carries with it a fundamental right in the union so formed to
achieve every object for which it was formed with the legal consequence that
any legislation not falling within el. (4) of Art. 19 which might in any way
hamper the fulfilment of those objects, should be declared unconstitutional and
void under Art, 13 of the Constitution, is not a proposition which could be
accepted as correct.
Besides the qualification subject to which
the right under sub-cl. (c) is guaranteed, viz., the contents of el. (4) of
Art. 19 throw considerable light upon the scope of the freedom, for the significance
and contents of the grants of the Constitution are beat understood and read in
the light of the restrictions imposed. If the right guaranteed included not
merely that which. would flow on a literal reading of the Article, but every
right which is necessary in order that the association brought into existence
fulfils every object for which it is formed, the qualifications there for,
would be not merely those in cl.(4) of Art, 19, but would be. more numerous and
292 very different, restrictions which bore upon and took into account the
several fields in which associations or unions of citizens, might legitimately
engage themselves. Merely by way of illustration we might point out that
learned Counsel admitted that though the freedom guaranteed to workmen to form
labour unions carried with it the concomitant right to collective bargaining
together with the right to strike, still the provision in the Industrial Disputes
Act forbidding strikes in the protected industries as well as in the event of a
reference of the dispute to adjudication under s. 10 of the Industrial Disputes
Act was conceded to be a reasonable restriction on the right guaranteed by
sub-cl.(c) of cl.(1) of Art. 19. It would be seen that if the right to strike
were by implication a right guaranteed by sub-cl. (c) of cl. (1) of Art. 19 then
the restriction on that right in the interests of the general public, viz., of
national economy while perfectly legitimate if tested by the criteria in el.
(6) of Art. 19, might not be capable of being sustained as a reasonable
restriction imposed for reasons of morality or public order. On the
construction of the Article, therefore, apart from the authorities to which we
shall refer presently, we have reached the conclusion that even a very liberal
interpretation of sub-cl. (c) of cl. (1) of Art. 19 cannot lead to the
conclusion that the trade unions have a guaranteed right to an effective
collective bargaining or to strike, either as part of collective bargaining or
otherwise. The right to strike or the right to declare a look-out may be
controlled or restricted by appropriate industrial legislation, And the
validity of such legislation would have to be tested not with reference to the
criteria laid down in cl.(4) of Art. 19 but by totally different
We shall now proceed to consider the authorities,
relied on by the learned Counsel in support of this theory of "Concomitant
right" to collective bargaining guaranteed to labour unions. first as
regards the decisions of this Court on which learned 293 Counsel relied Romesh
Thappar v. The State of Madras(1)Was the earliest case referred to; and learned
counsel placed reliance in particular on the following passage in the judgment
of the learned Chief Justice :
"Turning now to the' merits, there can
be no doubt that freedom of speech and expression includes freedom of
propagation of ideas, and that freedom is ensured by the freedom of
circulation. 'Liberty of circulation is as essential to that freedom as the
liberty of publication. Indeed, without circulation the publication would be of
little value : Ex parte Jackson, 96 U.S. 727".
Based on this, learned Counsel submitted that
if the phrase "freedom of speech and expression' in sub-cl. (a) of el. (1)
of Art. 19 were given this liberal construction so as to effectuate the object
for which the freedom was conferred, a similar construction ought to be adopted
of the content of the freedom guaranteed by sub-cl. (c) of el. (1) of Art. 19.
We are, however, unable to discern any
analogy between the two cases. It is obvious that "freedom of speech"
means freedom to speak so as to be heard by others, and therefore to convey
one's ideas to others. Similarly the very idea of freedom of expression
necessarily connotes that what one has a right to express may be communicated
to others. Unless therefore the freedom guaranteed by sub-cl.(a) of el. (1) of
Art. 19 were read as confined to the right to speak to oneself or to express
his ideas to himself, which obviously they could not mean, the guaranteed
freedom would mean freedom to address others, and of conveying to others one's
ideas by printed word, viz., freedom of circulation. We do not see, therefore,
any analogy between the case which was considered by this Court in Romesh
Thappar's (1) case and the one before us.
(1) 1950 S.C.R. 594 In A.
294 The observations in the judgment of
Bhagwati, J. in Express New,,?,papers (Private) Ltd. v. Union of India(1) on
which Counsel relied, in regard to the content of the 'freedom of speech and
expression that they "include within its scope the freedom of the press",
for the press with the printed word is merely the mechanism by which the
freedom is exercised do Dot really carry the matter any ` further.
We were next referred to the observations of
Das C. J. in the advisory opinion Re the Kerala Education The question, which
was being considered in the passage, relied on, related to the scope and
content of cl. (1) of Art. 30 which guarantees to all minorities a right to
establish and administer educational institutions of their choice. The question
debated before this Court was, whether the provision in the Kerala Education
Bill which denied recognition by Government to educational institutions run by
minorities contravened this freedom guaranteed to them ? Dealing with this Das
C. J. said :
"Without recognition, therefore, the educational
institutions established or to be established by the minority communities
cannot fulfil the real objects of their choice and the rights under Art. 30(1)
cannot be effectively exercised. The right to establish educational institutions
of their choice must, therefore, mean the right to establish real institutions
which would effectively serve the needs of their community and the scholars who
resort to their educational institutions.
There is, no doubt, no such thing as
fundamental right to recognition by the State but to deny recognition to' the
educational institutions except upon terms tantamount to the surrender of their
constitutional right of administration of the educational institutions of their
choice is (1) 1959 S.C.R. 12. (2) 1959 S.C.R. 995.
295 in truth and in effect to deprive them of
their rights under Art. 30 (1).19 We do not consider that these observations
and this construction of el. (1) of Art. 30 assist learned Counsel in his
submission as regards the theory of concomitant rights flowing from the freedom
guaranteed by sub-cl. (c) of cl.
(1) of Art. 19. The observations of the
learned Chief Justice and the conclusions drawn are in relation to the
construction of Art. 30 and cannot be divorced from' the context. They do not
purport to lay down any general rule of construction for the freedoms
guaranteed under the several sub-heads of cl. (1) of Art. 19, and, indeed, what
we have pointed out earlier should suffice to indicate the impossibility of
upholding any such construction of the freedoms guaranteed by the latter
Learned Counsel also referred us to certain
passages in two judgments of the Supreme Court of the United States :
National Association for the advancement of
colored people v. Alabama,(1)and Bates v. Little Rock(2)in which the Court held
that, freedom of speech and assembly which were fundamental rights guaranteed
by the Constitution would be abrogated or improperly encroached upon by
legislation 'which compelled the disclosure to public authorities of the
membership rolls. In the two decisions the facts were that the associations in
question were for the protection of coloured persons and the requirement of
disclosure of the names of members was inserted in the law for the purpose of
putting a pressure upon these associations so as to dissuade people from
joining them. The argument of learned Counsel before us was based on the dicta
in these two decisions that the I right to form an association which followed
by reason of the due process' clause in the 14th amendment carried with it the
right to ensure that the associations were able to maintain themselves as
associations. In the two (1) 2 Law. Ed. Second 1488. (2) 4 Law. Ed. Second 480.
296 decisions referred to, the learned Judges
of the Supreme Court of the United States were not construing the content of a
provision on the lines of Art. 19(1)(c), for in America, the right of
association is not any specifically guaranteed right, but has been derived by
judicial interpretation of the due process clause of the 14th Amendment. But
apart from this the legislation there impugned was one which directly affected
the formation of the association and in that sense may be hit by the terms of
sub-cl.(c) of cl.(1) of Art. 19 if statutes with similar purpose were enacted
in India. The decisions cited are no authority for the second step in the
argument for which they were cited.
Learned Counsel also referred us to two other
decisions of the Supreme Court of the United States in which the right of
employees to self-organization, to form, join and assist labour organisations
and to bargain collectively through representatives of their own choice and to
engage in concerted Activities for the purpose of collective bargaining or
other mutual aid has been referred to as "a fundamental right" (vide
National Labor Relations Board v.
Jones and Laughlin Steel Corporation and
ors., (1) and Amalgamated Utility Workers v.. Consolidated Edison Company of
New York) (2). We do not consider the inference sought to be drawn
well-founded. What the learned Judges of the Supreme Court were referring to as
a fundamental right was not with reference to a fundamental right as recognized
or guaranteed by the Constitution, but in the sense of a right of the unions
which enacted law. recognized or respected, and as other decisions of the
United states' Supreme Court show, was subject to regulation by the
legislature(3). We have, therefore, reached the conclusion that the right
guaranteed. by sub-cl.(c) of cl.(1) of Art. 19 does not carry with it a
concomitant right (1) 81 Law. Ed. 893,909.
(2) 84 Law. Ed. 738, 741.
Vide Weaver Constitutional Law and its
Administration (1 946) p. 505, referring to Dorchy v., Kansas 272 U. S. 306 :
71 L. Ed. 2A8 "Neither he common law nor
the 14th Amendment confers the absolute right to strike." 297 that the
unions formed for protecting the interests of labour shall achieve the purpose
for which they were brought into existence, such that any interference, to such
achievement bythe law of the land would be unconstitutional unless the same
could be justified as in the interests of public order or morality. In our
opinion, the right guaranteed under sub-cl. (c) of el. (1.) of Art.
19 extends to the formation of an association
and insofar as the activities of the association are concerned or as regards
the steps which the union might take to achieve the purpose of its creation,
they are subject to such laws as might be framed and that the validity of such
laws is not to be tested by reference to the criteria to be found in cl.
(4) of Art. 19 of the Constitution.
In this view it is not necessary to consider
the other steps in. the argument of learned Counsel all of which proceed upon
the correctness of the step which we have just now disposed of. Nevertheless we
consider it proper to deal with the submission that the impugned legislation
(a) withdraws an essential part of the dispute between the parties from the
jurisdiction of an impartial adjudicator and vests the same in the Reserve Bank
of India which is a biased body ; and (b) that the adjudicator is left without
proper materials to discharge his duties by withdrawing the, proper materials
from his cognizance.
A complaint that the impugned provision
withdraws the dispute from the adjudication of an impartial arbitrator and
leaves it to the decision of another body is an obvious overstatement of the
position. The dispute between the parties in relation either to wages, bonus or
other amenities or perquisites which involve financial obligations on the part
of the employer remain even after the impugned provision was enacted, with the
adjudicator and he alone determines the rights of the parties subject to the
provisions of the Industrial law or other relevant legislation, and the relief
which he could award to the employees remains 298 the same. The adjudicator
alone determines' the capacity of the industry to pay or to bear the enhanced
cost. The only result of s. 34 A is that in regard to two it mes, viz., secret
reserves and the provision made by banks "for bad and doubtful debts and
other necessary provisions", the reasonable quantum which would be
available for being taken into account by the adjudicator would be estimated
and determined by an expert body which is a governmental authority or
practically a department of Government, viz., the Reserve Bank of India which
is entrusted by law with duty of maintaining the credit structure of the
From what we have 'stated earlier as the
genesis of the legislation now impugned, it would be apparent that Government
had to effect a reconciliation between two conflicting interests : one was the
need to preserve and maintain the delicate fabric of the credit structure of
the country by strengthening the real as well as the apparent credit worthiness
of banks operating in the country. It was really this principle which is vital
to the economic life of the community that has been responsible for the changes
that have been made from 1927 onwards as regards the form of balance sheet and
of the Profit & Loss accounts of banking companies as distinguished from
other trading and industrial organizations. There was urgent need to protect
from disclosure certain of the items of appropriation by banks in order to
preserve them as credit institutions. On the other hand, there was the need-an
equally urgent need for enabling the workers in these institutions not to be
denied a proper wage and other emoluments and proper conditions of service.
the question was how far information which in
the interests of national economy the banks were entitled to withhold from
their shareholders and the general public, was to be made available for
determining the capacity of the banks to pay their employees. It was in these
Circumstances that the impugned legislation was 299 enacted which while
preserving industrial adjudication in respect of disputes between the banks and
their employees, entrusted the duty of determining the surplus reserve which
could be taken into account as part of the assets for determining capacity to
pay, to the Reserve Bank. Thus understood there does not appear to be anything
unreasonable in the solution which the I impugned legislation has effected.
We do not also consider that there is any
substance in the complaint that the Reserve Bank of India is a biased body.
If it was not the Reserve Bank of India, the
only other authority that could be entrusted with the function would be the
Finance Ministry of the Government of India and that department would
necessarily be guided by the Reserve Bank having regard to the intimate
knowledge which the Reserve Bank has of the banking structure of the country as
a whole and of the affairs of each bank in particular. In the circumstance
therefore it matters little from the point of view of the. present argument
whether it is the Finance Ministry that was vested with the power to determine
the matters set up in s. 34-A or whether it is the Reserve Bank that does so,
as under the impugned enactment.
Learned Counsel made a further submission
that the impugned enactment was a piece of colourable legislation and that the
purported objective of securing secrecy from disclosure was really a device
adopted for depressing wages and for denying to workmen employed in banks their
legitimate rights. It was urged that the preamble to the amending Act sought to
make out that the real purpose behind the legislation was the ensuring of
secrecy from disclosure of the reserves held by the banks and of the bad and
doubtful debts which arose in the course of business and the provision made for
these losses and proceeded on the ratio that such disclosure would hurt the
credit of the 300 banks which would have repercussions not merely on the
individual bank but also on the banking structure of the country as a whole.
This, it was submitted, was not the real but only the colourable object and
purpose underlying the legislation. In this connection it was stressed that s.
21 of the Industrial Disputes Act and r. 30
of the Industrial Disputes Rules had made ample provision for securing secrecy
to the affairs of every concern in regard to which disclosure would not be in
public interest. We are satisfied that this submission has no basis in fact and
besides even if made out does not affect the validity of the legislation. As we
have pointed out already, the impugned legislation merely carries out to its
logical conclusion the effect of the changes in the form of the balance-sheet
and Profit and Loss accounts of Banks which starting in 1927 culminated in the
notification dated December 22, 1951 under s. 29 (4) of the Banking Companies
Act amending the Forms appended to that Act. If the construction of the
"right to form unions" under sub-cl. (c) of cl.(1) of Art. 19 put
forward by learned Counsel for impugning the validity of the enactment is
negatived, then subject to the point about Art.
14 which we shall examine presently,
legislative competence being conceded there could be no legal objection to its
validity. Objections based on colourable legislation have relevance only in
situations when the power of the legislature is restricted to particular
topics, and an attempt is made to escape legal fetters imposed on its powers by
resorting to forms of legislation calculated to mask the real subject-matter.
No such problem exists in the present case and it is common ground that once
the legislation passes the test of the fundamental rights,guaranteed by Part
III, legislative competence not being in dispute, its. validity is beyond
cavil. The question whether the secrecy assured by s. 21 of Industrial Disputes
Act is or is not sufficient to protect the interests of I the Banks, is a
matter of legislative policy and is for Parliament 301 alone-and even the fact
that the Court could be persuaded that the existing law is sufficient would be
no ground for invalidating-the 'impugned legislation. When the end which the
legislature reeks to achieve, viz ., secrecy is competent, the enquiry as to
ultra vires stops. Whether less than what was done might have been enough,
whether more drastic provision was made than occasion demanded, whether the
same purposes could have been achieved by provisions differently framed or by
other means, these are wholly irrelevant considerations for testing the
validity of the law. They do not touch or concern the ambit of the power but
only the manner of its exercise, and once the provisions of Part III of the
Constitution are out of the way, the validity of the legislation is not open to
The next point urged was that the impugned
provision was in violation of Art. 14; though the several learned Counsel who.
appeared in support of the case of the workers were not all agreed as to the
precise grounds upon which it could be' held that the impugned provision
violated Art. 14.
It was first submitted that the provision was
rendered invalid because it vested an arbitrary power in. banks which were
parties to a dispute under the Industrial Disputes Act, to claim or not to
claim the privilege of not producing the documents and that no criterion had
been indicated as to the Circumstances in which Banks could decide to make the
But this, however, is answered by the
provision itself which runs "When the banking company, claims that such
document, statement of information is of a confidential nature and: that the
production or inspection of such document...... would involve disclosure of'.
information relating to the matters set not-the. matters set out in sub-clauses
(a) and (b)" 302 It was also submitted that sub-cl. (b) of sub-s. (1) was
vague, in that a reference was made to "provision made for bad and
doubtful debts and other usual or necessary provisions". We do not see any
substance in this point either, because these words are taken from the form
under the Banking Companies Act and their meaning is clear in banking circles.
In fact, in the application which the employee associations made before the
adjudicator to direct the production of information and documents from the banks
this phrase was used and it is apparent that even the Bank Employees'
Associations understood it as having a definite connotation.
It was next submitted on behalf of some of
the interveners that s. 34A(1) and (2) violated Art. 14 in that the classification
contained in it was impermissible as not being based on rational grounds. It
was said (1) that the protection against a disclosure applied only to
adjudications under the industrial Disputes Act and not to other adjudications
; (2) that it applied only to certain banking companies and not to all banking
companies; and (3) that by reason of s. 34A (2) the provisions of the impugned
enactment were applied in a discriminatory manner to all banks other than the
Reserve Bank. The first two points cover the same ground and arise out of the
fact that the.
impugned provision by its 3rd sub-section
defines a "banking company" referred to in it and to which its
provisions apply, as meaning a ""Banking Company" under the Industrial
Disputes Act, 1947. The Industrial Disputes Act defines a "Banking Company"
in s. 2(b) as follows:
"Banking Company means a banking company
as defined in S. 5 of the Banking Companies Act, 1949, having branches or other
establishments in more than one State and includes the State Bank of India and
the Reserve Bank of India." 303 It would thus be seen that though the
Banking Companies Act applied to every banking company it is only those banks
whose operations extended beyond one State were brought within the scope, of
the definitions of a "banking company" under the Industrial Disputes
Act. The result of that was that Banking Companies not having branches in more
than one State would be an industry so as to be within the Industrial Disputes
Act but not ,'a banking company" within its definition. In the
circumstances learned Counsel is right in his submission that such banking
companies as are not within the definition of "a banking company"
under the Industrial Disputes Act would not be entitled to claim the protection
from disclosure conferred on "banking companies" by the impugned
provision. This, however, is no ground for holding the legislation invalid. In
the first place, the complaint of discrimination is not by the banks who are
not on the terms of s. 34A entitled to the protection from disclosure of their
reserves etc. Secondly it is common ground that 95 % of the banking business in
this country is in the hands of Banks which are, within the definition of
"banking companies" under s. 2(b) (b) of the Industrial Disputes Act.
Besides, these banks, employ over 80,O0O out of the 90,000 bank-employees. In
the circumstances and seeing that the injury to the credit structure will only
be by the disclosure of the reserves etc., of the banks of this class, there is
sufficient rational connection and basis for classification to justify the
differentiation. The fact that the legislation does not cover every banking
company is therefore no ground for holding the provision to be discriminatory
within Art. 14.
The last point about the exclusion, of the
Reserve Bank of India from the operation of s. 34A (2) has also no substance.
in the very nature of things and on the scheme of the provision the Reserve
Bank could not but be excluded from sub-s. (3) of the impugned provision. In
determining 304 what reserves could properly be taken into account, the Reserve
Bank would be discharging not any quasi judicial but only an administrative
function, determining this matter with reference to uniform business principles
and it therefore appears to us that. there is no impropriety in its findings
being final even in regard to itself. A submission on similar lines about bias
was also made in relation to the impact of the impugned provision insofar as it
related to the industrial dispute between the State Bank of India and its
employees. It was pointed out to us that the Reserve Bank of India owned
practically the entirety of the share capital of the State Bank of India, with
the result that the Reserve Bank was pecuniarily and vitally interested in
supporting the State Bank as against the latter's employees in any industrial
dispute and that the element of bias which the situation involved would
invalidate the impugned provision. We consider this argument without force. If,
as we have held, the impugned provision is valid and does not violate any of
the freedoms guaranteed by Part III of the Constitution in regard to the
employees of the Reserve Bank, the challenge to the impugned provision cannot
obviously be successful in the case of the employees of the State Bank.
As we have stated earlier, though the arguments
before us ranged on a very wide ground, we have not thought it necessary to
deal with all of them because in view of our conclusions on the crucial points
in the case the others which were subject of debate before us did not arise for
The appeal fails and is dismissed with costs.
The petitions also fail and are dismissed with costs. (one hearing fee) Appeal
and Petitions dismissed.