1986 (4) TMI 271 - SUPREME COURT

Whether a Government company as defined in section 617 of the Companies Act, 1956, is "the State" within the meaning of article 12 of the Constitution ?

Whether an unconscionable term in a contract of employment is void under section 23 of the Indian Contract Act, 1872, as being opposed to public policy and, when such a term is contained in a contract of employment entered into with a Government company, is also void as infringing article 14 of the Constitution incase a Government company is "the State" under article 12 of the Constitution?

Held that:- Both these appeals fail as the Calcutta High Court was, therefore, right in quashing the impugned orders dated 26th February, 1983, terminating the services of the contesting respondents and directing the Corporation to reinstate them and to pay them all arrears of salary but however, not right in declaring clause (i) of rule 9 in its entirety as ultra vires article 14 of the Constitution and in striking down as being void the whole of that clause.

The order passed by the Calcutta High Court is modified by substituting for the declaration given by it a declaration that clause (i)of rule 9 of the "Service, Discipline and Appeal Rules, 1979" of the Central Inland Water Transport Corporation Limited is void under section 23 of the Indian Contract Act, 1872, as being opposed to public policy and is also ultra vires article 14 of the Constitution to the extent that it confers upon the Corporation the right to terminate employment of a permanent employee by giving him three months’ notice in writing or by paying him the equivalent of three months; basic pay and dearness allowance in lieu of such notice.