M.L. Kamra
Vs. Chairman-Cum-Managing Director. New India Assurance Co. Ltd. [1992] INSC 14
(17 January 1992)
Ramaswamy,
K. Ramaswamy, K. Ahmadi, A.M. (J)
CITATION:
1992 AIR 1072 1992 SCR (1) 220 1992 SCC (2) 36 JT 1992 (1) 188 1992 SCALE (1)40
ACT:
Orissa
Insurance Co-operative Society Limited Service Rules.
Rule
5-Whether arbitrary, unreasonable and void- declared to be recast.
Statutory
Interpretation.
Presumption
in favour of constitutionality of legislation-Interpretation favouring
constitutionality to be accepted.
HEAD NOTE:
While
the appellant was working as Divisional Manager at Delhi, the general insurance
business was nationalised and its management was taken over by the Central
Government under General Insurance (Emergency Provisions) Ordinance, 1971 which
was replaced by Act 57 of 1972 and vested in the Custodian of the New India
Assurance Co. Ltd. the management of Orissa Insurance Co-operative Society Ltd.
By
operation of Section 7 of the Act the services of the appellant and others stood
transferred and vested with the custodian.
The
appellant was kept under suspension from August 9,1973 pending investigation into charges
of embezzlement.
Explanation
was called for on October
16,1973 and the
appellant submitted his reply on December 7, 1974, While dropping the proceeding, the appellant was served
with a termination order dated april 17, 1975
issued by the respondent.
The
appellant challenged the aforesaid termination order in a writ petition in
Delhi High Court which was dismissed by a Single Judge on November 11,1983 and this judgment was confirmed by
the division Bench in a Letter Patent Appeal.
In the
appeal to this Court it was contended on behalf of the 221 appellant placing
reliance on the majority view in D.T.C v. D.T.C Mazdoor Congress & Ors. judgment
Today 1990(3) SC 725 that Rule 5 of the Orissa Insurance Co-operative Ltd.
services Rules is ultra vires of Article 14 of the Constitution. On behalf of
the respondent it was contended that unlike Rule 9 involved in D.T.C's case, Rule
5 in the instant case provided guidelines, and that the Board of Directors had
to take a decision, whether the need to continue the employee's service
subsists which would be based on relevant material and thus there would be
objective consideration before taking a decision, not only regarding the need
to continue the post but also the services of the Officer or the employee, and
if so construed the rule is not ultra vires of article 14.
Allowing
the appeal, this Court,
HELD:
Rule 5 of the Orissa Insurance Co-operative Society Ltd. is capable of the
interpretation that the Board of management may form an objective opinion, on
the basis of material, that the post which the officer or the employee is
occupying is no longer in need and that the post would be abolished. This would
be a policy decision depending on the exigencies. Once the Board reaches such a
decision to abolish the post, in consequence the service of the
officer/employee occupying the post could be terminated. Viewed in that light
the said rule does not become arbitrary, unreasonable or void offending Article
14 and therefore the rule is valid.
[225G-226
B] There is a presumption in favour of constitutionality of a legislation or
statutory rule unless ex facie it violates the fundamental rights guaranteed
under Part III of the constitution. If the provisions of a law or the rule is
construed in such a way as would make it consistent with the Constitution and
another interpretation would render the provision or the rule unconstitutional,
the Court would lean in favour of the former construction. [225 E] It is clear
in the instant case, that the Board of Management did not abolish the post but
put an end to the service of the appellant, obviously due to loss of confidence
as his honesty and integrity became suspicious and his continuance in service
was felt inexpedient and not in the interest of the business of the
respondents. But rule 8 was available for taking action for misconduct but was
not availed. Therefore, the order terminating the services of the appellant is
illegal. [226 C] 222 Normally the appellant is entitled to reinstatement but
the ends of justice would be met by directing the respondents to pay him Rs.
1,00,000 as compensation, instead of reinstatement and further continuance in
service. The compensation awarded would be staggered between the year 1973 till
date for the purpose of income tax and given the appropriate relief. [226D-E]
March of service jurisprudence necessitates that the respondent recast Rule 5
in tune with the Constitution and the law. [226-E]
CIVIL
APPELLATE JURISDICTION: Civil Appeal No.655 of 1986.
From
the Judgment and Order dated 23.4.1984 of the Delhi High Court in Letters
Patent Appeal No.25 of 1984.
M.K.Ramamurthy,
Ms S. Pappuh, B.P.Singh, Rishi Kesh, Raj Birbal, Sanjeev Sabharwal, B.R.Sabharwal
and M.M. Kashyap for the appearing parties.
S.S.Harlakha
appeared in person.
S.S.Onkarmal
appeared in person for the Intervener.
The
Judgment of the Court was Delivered by K. Ramaswamy, J. In this appeal by
special leave, by way of additional grounds with leave, the appellant impugnes
Rule 5 of the Orissa Insurance Co-operative Society Ltd. Service Rules (for
short "the Rules") as unconstitutional and void offending Article 14
of the Constitution of India.
The
material facts relevant to the point are that while the appellant was working
as Divisional Manager at Delhi, the general insurance business was nationalised
and its management was taken over by the Central Government under General
Insurance (Emergency Provisions) Ordinance, 1971 replaced by Act 57 of 1972
(for short "the Act") and vested in the custodian of the New India
Assurance Co. Ltd., the management of Orissa Insurance Co-operative Society
Ltd. By operation of s.7 of the Act, the services of the appellant and others
stood transferred and vested with the custodian.
Under
the Act, the Board of Directors was empowered to terminate the service of the
officer/employee of the insurer. The appellant was kept under suspension from August 9,1973 pending investigation into the
embezzlement, Explanation was called for on October 16, 1973. in response thereto the appellant submitted his reply on december 7, 1974. While dropping the 223 proceeding,
the appellant was served with termination order dated April 17,1975 issued by the respondent. The
appellant challenged it in a writ petition in Delhi High Court which was
dismissed by a learned Single Judge on November 11, 1983 and was confirmed by the Division
Bench in Letter Patent Appeal No.351/1984 dated April 23, 1984.
Section
7 of the Act provides that every whole time officer or other employee of an
existing insurer employed in connection with his General Insurance business,
immediately before the appointed day, shall become an officer/employee of the
Indian Insurance Co. in which the undertaking of the insurer to which the
service of the officer relates has vested and would hold his office on the same
terms and conditions and with the same rights to pension, gratuity and other
matters as would have been admissible to him, if there had been no such vesting
and shall continue to do so unless and until his appointment is terminated.
Section 16(1) in Chapter V provides that if the Central Govt. is of the opinion
that for the more efficient carrying on of General Insurance business, it is
necessary to do so, it may by notification, frame one or more schemes providing
for all or any of the following matter; (e) the rationalisation or revision of
pay-scales and other terms and conditions of service of officers and other
employees wherever necessary.
Pursuant
thereto, the central Govt. framed the New India Assurance Co. Ltd Merger
Scheme, 1973 with effect from December 31, 1973.
Thereunder by Rule 3, the undertaking was transferred to the respondent; under
Rule 5 the existing whole time officer etc. became the officer of the
transferee company (New Indian Assurance Co. Ltd) and could hold his office on
the same terms and conditions as would have been admissible to him if there had
been no such transfer, as referred to in paragraph 3. He shall continue to
remain an officer unless and until his employment, in the transferee company is
terminated or the terms and conditions are duly altered by any other scheme
framed under the Act. By notification dated April 29, 1976 the Central Govt.
also framed the scheme called the General Insurance (Rationalisation of
pay-scales and other Conditions of Service of Development Step) Scheme, 1976
which came into force on May 1, 1976, the details of which are not material for
the reason that service of the appellant was terminated , in terms of the
existing rule 5 of the Rules. Suffice to state that pursuant to the nationalisation
under the Act and Scheme, the appellant became the officer of the respondent.
Rule 5
read thus:
Termination
of Service:
224
"An employee whether permanent or temporary shall not leave or discontinue
his service in the Society without first giving 30 days notice in writing of
his intention to do so, to the Principal Officer, Failure to do so will entail
forfeiture of the pay of the month. In the event of the Society not having any
further need of any employee's service whether permanent or temporary, which
shall be decided by the Board, the Principal Officer shall give 30 days' notice
in writing for termination of his service or in lieu thereof pay such employee
a sum equivalent to his one month pay including allowance up to the termination
of the period of notice by way of compensation provided that nothing in these
rules shall affect the rights of the society to dismiss an employee under Rule
8 for misconduct etc. without any notice or salary in lieu of notice, in the
manner prescribed in these rules.
An
employee shall ordinarily retire from the Society's services on completion of
his 55th year unless the Board reserves to continue him in office of such
period as may be determined from time to time." It is thus manifest that
an employee, whether permanent or temporary, has an option to leave or
discontinue by giving 30 days' notice in writing of his intention to do so.
His
failure thereof shall entail forfeiture of the pay of the month. The employee
ordinarily would be superannuated on completion of his 55th year unless the
Board continues him for an extended period as may be determined from time to
time. Equally in the event of the Society not having any further need of the
employee's service, whether permanent or temporary, which should be decided by
the Board, the Principal Officer shall give 30 days' notice in writing for
termination of his service or in lieu thereof, pay one month's salary including
allowances upto the period of termination. The respondent also has the right to
dismiss an employee, under Rule 8, for misconduct in the manner prescribed in
the Rules. Admittedly, though action was initiated against the appellant for
the charges of embezzlement etc. which are misconduct, the charges were
dropped. Taking aid of Rule 5 and without conducting an enquiry or giving an
opportunity, the appellant's service was terminated by tendering one month's
salary in lieu of notice and also a direction to pay all the allowances upto
that date including the period of his suspension. It is not necessary to go
into the grounds taken in the High Court assailing the invalidity of the
termination order as they are not pressed before us. Sri Ramamurthy, the
learned Senior counsel for the appellant placing reliance on the ratio of the
majority view in D.T.C. v. D.T.C Mazdoor Congress & Ors., 225 Judgment
today (1990) 3 SC 725 contended that Rule 5 is ultra vires of Article 14 of the
Constitution. Smt. Shyamala Pappu, the learned Senior counsel for the
respondent contended that unlike Rule 9 in D.T.C's case Rule 5 provides
guidelines. The Board of Directors have to take a decision, whether the need to
continue the employee's service subsists which would be based on the relevant
material. Thereby, there would be objective consideration before taking a
decision, not only regarding the need to continue the post but also the
services of the officer or the employee. Though the rule does not provide for
prior notice, post-decisional opportunity would be read into the rule. If so
read, the rule is not ultra vires Article 14. In our view the ratio in D.T.C.'s
case has no application. Rule 9 of the rules of Delhi Transport Corporation
Service Regulation gives naked power to terminate the services of a permanent
employee by giving one month's notice or pay in lieu thereof. It was not the
contention therein, that the rule was capable of two constructions. It is
settled law that there is a presumption of constitutionality of the rule. The
court ought not to interpret the statutory provisions, unless compelled by
their language, in such a manner as would involve its unconstitutionality, Since
the legislature of the rule making authority is presumed to enact a law which
does not contravene or violate the constitutional provisions.
Therefore,
there is a presumption in favour of constitutionality of a legislation or
statutory rule unless ex facie it violates the fundamental rights guaranteed
under Part III of the constitution. If the provisions of law or the rule is
construed in such a way as would make it consistent with the constitution and
another interpretation would render the provision or the rule unconstitutional,
the court would lean in favour of the former construction. In view of this
settled legal position, the question emerges whether the language in Rule 5
would be capable to be construed consistent with the fundamental rights in Part
III. As stated earlier, the phrase "in the event of the Society not having
any further need of any employee's service whether permanent or temporary which
shall be decided by the Board" is susceptible of two interpretations.
The
one interpretation put up by Sri Ramamurty is that the Board may unilaterally
and arbitrarily decide that there is no need for the services of a particular
employee, in given facts and circumstances, though the post which the employee
is occupying may continue and would be put to an end by giving one month's
notice or pay in lieu thereof. In that event the rule per se is arbitrary
offending Article 14. The other view capable to be construed from the language
employed would be that the Board of Management may form an objective opinion,
on the basis of the material, that the post which the officer or the employee
is occupying no longer is in need. Thereby, the post would be abolished.
This
would be a policy decision depending on the exigencies.
In
consequences the service of the employee also would become 226 redundant or
surplus. In that event his service would no longer be needed. The officer or
employee may be permanent or temporary but the absence of the need for the
continuance of the post would necessitate to terminate the service of an
employee or officer. It must not be a pretext or a rouse to get rid of the
service of an inconvenient officer or of an employee. If that be so. it would
become colourable exercise of power and would be liable to be quashed as
offending Article 14. Once the Board reaches a decision to abolish the post, in
consequence the service of the officer/ employee occupying couched in Rule 5
also is capable of that interpretation. In that light we are of the opinion
that Rule 5 does not become arbitrary. unreasonable or void offending Article
14. Accordingly, we hold that the rule is valid.
But
from the facts, it is clear that the Board of Management did not abolish the
post but put an end to the service of the appellant. Obviously due to loss of
confidence as his honesty and integrity became suspicious and his continuance
in service was felt inexpedient and not in the interest of the business of the
respondents. But Rule 8 was available for taking action for misconduct but was
not availed. Therefore, the impugned order terminating the services of the
appellant is illegal. What would be the consequence? Normally the appellant is
entitled to reinstatement but in our view the ends of justice would be met by
directing the respondent to pay him Rs.1,00,000 as compensation, instead of
reinstatement and further continuance in service. The compensation awarded
would be staggered between the year 1973 till date for the purpose of income
tax and given the appropriate relief. In this view it is not necessary to deal
with other contentions or decisions cited across the bar. Before parting with
the case it is necessary to mention that march of service jurisprudence
necessitates the respondent to recast the rules in tune with the constitution
and the law. The appeal is allowed but without cost. The intervention
application filed by Sri S.S. Onkarmal Harlalka is dismissed.
S.B.
Appeal allowed.
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