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Report No. 199

Delhi Transport Corporation's case: (AIR 1991 SC 101):

The ratio of Central Inland Water case, above referred to, was upheld per majority in Delhi Transport Corporation v. D.T.C. Mazdoor Corporation. The central question involved in the group of cases was whether the clauses permitting the employers or the authorities concerned to terminate the employment of the regular or permanent employees by giving reasonable notice or pay in lieu of notice but without holding any enquiry are constitutionally valid? If not, what would be the consequences of termination by virtue of such clauses or powers, and further whether such powers and clauses could be so read down with such implied conditions which would make such powers constitutionally and legally valid.

In that case, the respondents who were permanent employees, allegedly became inefficient in their works and started inciting other staff members not to perform their duties. They were served with termination notices under Regulation 9(b) of the Delhi Road Transport Authority (Conditions of Appointment and Service) Regulations, 1952. In the writ petition, the constitutional validity of the Regulation was challenged. The Constitution Bench held that Regulation 9 (b) whereby service of a permanent employee could be terminated by issuing a month's notice without assigning any reasons was arbitrary, unfair, unjust and unreasonable. It was also opposed to public policy and thereby void under Section 23 of the Indian Contract Act, 1872.

Reliance was placed by the court on the decision in West Bengal State Electricity Board v. Desh Bandhu Ghosh 1985 (3) SCC 116, where the court was concerned with Regulations of the West Bengal State Electricity Board which said that in the case of a permanent employee, his services may be terminated by serving 3 month's notice or on payment of salary for the corresponding period in lieu thereof. The court was of the view that it was naked "hire and fire" rule, and thus struck down Regulation 34. However, the Court was cautious to let the question of unreasonableness, inequality of bargaining power and public policy remain flexible and observed that the meaning and scope of these may change by passage of time.

Unfair (Procedural and Substantive) Terms in Contract Back

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