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TMI Blog1986 (4) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... fringing article 14 of the Constitution incase a Government company is "the State" under article 12 of the Constitution ? Although the record of these Appeals is voluminous, the salient facts lie within a narrow compass. The first appellant in both these appeals, namely, the Central Inland Water Transport Corporation Limited (hereinafter referred to in short as "the Corporation"), was incorporated on February 22, 1967. The majority of the shares of the Corporation were at all times and still are held by the Union of India which is the second respondent in these appeals, and the remaining shares were and are held by the State of West Bengal and the State of Assam. Section 617 of the Companies Act, 1956 (Act No. 1 of 1956), provides as follows : "617. Definition of 'Government company'.-For the purposes of this Act Government company means any company in which not less than fifty-one per cent. of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary of a Government company as thus defined." As all the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article 51, the business of the Corporation is to be managed by the Board of Directors. Under article 14(a), subject to the provisions of section 252 of the Companies Act, the President is to determine in writing from time to time the number of Directors of the Corporation which, however, is not to be less than two or more than twelve and under article 14(b), at every annual general meeting of the Corporation, every Director appointed by the President is to retire but is eligible for re-appointment. Under article 15(a), the President has the power at any time and from time to time to appoint any person as an additional Director. Under article 16, the President has the power to remove any Director appointed by him from office at any time in his absolute discretion. Under article 17, the vacancy in the office of a Director appointed by the President caused by retirement, removal, resignation, death or otherwise, is to be filled by the President by fresh appointment. Article 18 provides that the Directors are not required to hold any share qualification. Under article 37, the President may from time to time appoint one of the Directors to the office of the Chairman of the Board of Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Company Limited" was carrying on very much the same business including the maintenance and running of river service as the Corporation is doing. A scheme of arrangement was entered into between the said company and the Corporation. The Calcutta High Court by its order dated May 5, 1967, approved the said scheme of arrangement and ordered the closure of the said company and further directed that upon payment to all the creditors of the said company, the said company would stand dissolved without winding up by an order to be obtained from the High Court and accordingly, upon payment to all the creditors, the said company was ordered to be dissolved. The said scheme of arrangement provided that the assets and certain liabilities of the said company would be taken over by the Corporation. The said scheme of arrangement as approved by the High Court also provided as follows : "(a)That the new company shall take as many of the existing staff or labour as possible and as can be reasonably taken over by the said transferee-company subject to any valid objection to any individual employee or employees. (b)That as to exactly how many can be employed it is left to the said transferee-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t employees are as follows: "9. Termination of employment for acts other than misdemeanour.-(i) The employment of a permanent employee shall be subject to termination on three months' notice on either side. The notice shall be in writing on either side. The company may pay the equivalent of three months' basic pay and dearness allowance, if any, in lieu of notice or may deduct a like amount when the employee has failed to give due notice. (ii) The services of a permanent employee can be terminated on the grounds of 'services no longer required in the interest of the company' without assigning any reason. A permanent employee whose services are terminated under this clause shall be paid 15 days' basic pay and dearness allowance for each completed year of continuous service in the company as compensation. In addition he will be entitled to encashment of leave to his credit." Under rule 10, an employee is to retire on completion of the age of fifty-eight years though in exceptional cases and in the interest of the Corporation, an extension may be granted with the prior approval of the Chair-man-cum-managing director and the board of directors. Rule 11 provides as follows : "11. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said rules and rule 45-A provides for a review. We are concerned in these appeals with the validity of clause (i) of rule 9 only. So far as Ganguly, the first respondent in Civil Appeal No. 4412 of 1985, is concerned, he was promoted to the post of manager (finance) in October, 1980, and also acted as general manager (finance) from November 1981 to March, 1982. On 16th February, 1983, a confidential letter was sent to him by the general manager (finance), who is the third appellant in Civil Appeal No. 4412 of 1985, to reply within twenty-four hours to the allegation of negligence in the maintenance of Provident Funds Accounts. Ganguly made a representation as also gave a detailed reply to the said show cause notice. Thereafter, by a letter dated 26th February, 1983, signed by the chairman-cum-managing director of the Corporation, a notice under clause (i) of rule 9 of the said rules was given to Ganguli terminating his service with the Corporation with immediate effect. Along with the said letter a cheque for three months' basic pay and dearness allowance was enclosed. So far as Sengupta, the first respondent in Civil Appeal No. 4413 of 1985, is concerned, he was promoted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench held that the Corporation was a State within the meaning of article 12 of the Constitution and that the said rule 9(i) was ultra vires article 14 of the Constitution. Consequently, the Division Bench struck down the said rule 9(i) as being void. It also quashed the impugned orders of termination dated 26th February 1983. It is against the said judgment and orders of the Calcutta High Court that the present appeals by special leave have been filed. The contentions raised on behalf of the Corporation at the hearing of these appeals may be thus summarized : (1)A Government company stands on a wholly different footing from a statutory corporation for while a statutory corporation is established by a statute, a Government company is incorporated like any other company by obtaining a certificate of incorporation under the Companies Act and, therefore, a Government company cannot come within the scope of the term "the State" as defined in article 12 of the Constitution. (2)A statutory corporation is usually established in order to create a monopoly in the State in respect of a particular activity. A Government company is, however, not established for this purpose. (3)Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival submissions advanced at the Bar. The word "State" has different meanings depending upon the context in which it is used. In the sense of being a polity, it is defined in the Shorter Oxford English Dictionary, Third Edition, Volume II, page 2005, as "a body of people occupying a defined territory and organized under a sovereign government". The same dictionary defines the expression "the State" as "the body politic as organized for supreme civil rule and government; the political organization which is the basis of civil government ; hence, the supreme civil power and government vested in a country or nation". According to Black's Law Dictionary, Fifth Edition, page 1262, "In its largest sense, a 'State' is a body politic or a society of men". According to Black, the term "State" may refer "either to the body politic of a nation (e.g., United States) or to an individual governmental unit of such nation (e.g., California)". In modern international practice, whether a community is deemed a State or not depends upon the general recognition accorded to it by the existing group of other States. A State must have a relatively permanent legal organization, determining its struct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute the Union of India. Part XIV of the Constitution deals with services under the Union and the States. Article 308 provides as follows: "308. Interpretation.-In this Part, unless the context otherwise requires, the expression ' State ' does not include the State of Jammu and Kashmir." This definition read with the other provisions of Part XIV shows that the word "State" applies to the federating units (other than the State of Jammu and Kashmir for the reason mentioned above) which together constitute the Union of India because in the other articles of Part XIV wherever the Union of India is referred to, it is described as "the Union". Article 366 of the Constitution defines certain expressions used in the Constitution of India. That article, however, does not contain any definition of the term "State". Under article 367(1), unless the context otherwise requires, the General Clauses Act, 1897 (Act No. X of 1897), subject to any adaptations and modifications that may be made therein by the President of India under article 372 to bring that Act into accord with the provisions of the Constitution, applies for the interpretation of the Constitution. Clause (58) of section 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the control of the Government of India. There are three aspects of article 12 which require to be particularly noticed. These aspects are : (i)the definition given in article 12 is not an explanatory and restrictive definition but an extensive definition, (ii)it is the definition of the expression "the State" and not of the term "State" or "States", and (iii)it is inserted in the Constitution for the purposes of Parts III and IV thereof. As pointed out in Craies on Statute Law, Seventh Edition, page 213, where an interpretation clause defines a word to mean a particular thing, the definition is explanatory and prima facie restrictive ; and whenever an interpretation clause defines a term to include something, the definition is extensive. While an explanatory and restrictive definition confines the meaning of the word defined to what is stated in the interpretation clause, so that wherever the word defined is used in the particular statute in which that interpretation clause occurs, it will bear only that meaning unless where, as is usually provided, the subject or context otherwise requires, an extensive definition expands or extends the meaning of the word defined to includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who live in it. Just as man by nature is dissatisfied, so is society. Just as man seeks something new, ever hoping that a change will bring about something better, so does society. Old values, old ideologies and old systems are thus replaced by new ideologies, a new set of values and a new system ; they in their turn to be replaced by different ideologies, different values and a different system. The ideas that seem revolutionary become outmoded with the passage of time and the heresies of today become the dogmas of tomorrow. What proves to be adequate and suited to the needs of a society at a given time and in particular circumstances turns out to be wholly unsuited and inadequate in different times and under different circumstances. The story of mankind is punctuated by progress and retrogression. Empires have risen and crashed into the dust of history. Civilizations have flourished, reached their peak and passed away. In the year 1625, Carew, C.J., while delivering the opinion of the House of Lords in Re the Earldom of Oxford, [1625] W.Jo. 96, 101 s.c. [1626] 82 ER 50, 53, in a dispute relating to the descent of that Earldom, said : "...and yet time hath his revolution, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pace with changing ideas and altered circumstances. Before embarking upon this task we would, however, like to quote the following passage (which has become a classic) from the opening paragraph of Justice Oliver Wendell Holmes' "The Common Law" which contains the lectures delivered by him while teaching law at Harvard and which book was published in 1881 just one year before he was appointed an Associate Justice of the Massachusetts Supreme Judicial Court; "It is something to show that the consistency of a system requires a particular result, but it is not all. The life of the law has not been logic : it has been experience. The felt necessities of the time, the prevalent moral and political theories, intuitions of public policy, avowed or unconscious, even the prejudices which judges share with their fellow-men, have had a good deal more to do than the syllogism in determining the rules by which men should be governed. The law embodies the story of a nation's development through many centuries, and it cannot be dealt with as if it contained only the axioms and corollaries of a book of mathematics. In order to know what it is, we must know what it has been, and what it tends to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese culminating in the adoption on 25th June, 1945, of the Charter of the United Nations in the Opera House of San Francisco and the affixing of signatures thereon the next day in the auditorium of the Veterans' Memorial Hall. Thereafter, in pursuance of article 68 of the Charter of the United States, the Economic and Social Council set up the Human Rights Commission in 1946. This Commission began its work in January, 1947, under the chairmanship of Mrs. Eleanore Roosevelt, the the widow of President Franklin D. Roosevelt. The Universal Declaration of Human Rights prepared by the Commission was adopted by the General Assembly on 10th December, 1948, at its session held in the Palais de Chaillot in Paris. Of the fifty-eight nations represented at that session, none voted against it, two were absent, and eight abstained from voting. It was thus in an atmosphere surcharged with human suffering and yet a firm resolve not to succumb to it that the Constituent Assembly, which was set up to frame the Constitution of India embarked upon its task on 9th December, 1946, re-assembled after the midnight of 14th August, 1947, as the sovereign Constituent Assembly for India. After Partition and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from their labours a Constitution in the strict legal sense. They were aware that there were other Constitutions which had given expression to certain ideals as the goal towards which the country should strive and which had defined the principles considered fundamental to the governance of the country. They were aware of the events that had culminated in the Charter of the United Nations. They were aware that the Universal Declaration of Human Rights had been adopted by the General Assembly of the United Nations, for India was a signatory to it. They were aware that the Universal Declaration of Human Rights contained certain basic and fundamental rights appertaining to all men. They were aware that these rights were born of the philosophical speculations of the Greek and Roman Stoics and nurtured by the jurists of ancient Rome. They were aware that these rights had found expression in a limited form in the accords entered into between the rulers and their powerful nobles, as for instance, the accord of 1188 entered into between King Alfonso IX and the Cortes of Leon, the Magna Carta of 1215 wrested from King John of England by his barons on the Meadow of Runnymede and to which he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of article 1 of the Constitution of the United States of America contained "a welfare clause" empowering the federal government to enact laws for the overall general welfare of the people. They were aware that countries such as the United States, the United Kingdom and Germany had passed social welfare legislation. The framers of our Constitution were men of vision and ideals, and many of them had suffered in the cause of freedom. They wanted an idealistic and philosophic base upon which to raise the administrative superstructure of the Constitution. They, therefore, headed our Constitution with a preamble which declared India's goal and inserted Parts III and IV in the Constitution. The preamble to the Constitution, as amended by the Constitution (Forty-second Amendment) Act, 1976, proudly proclaims: "WE, THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens: JUSTICE, social, economic and political; LIBERTY of thought, expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among them all FRATERNITY assuring the dignity of the individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rceable in law but none the less the Court cannot ignore what has been enjoined upon the State by Part IV, and though the Court may not be able actively to enforce the Directive Principles of State Policy by compelling the State to apply them in the governance of the country or in the making of laws, the Court can, if the State commits a breach of its duty by acting contrary to these directive principles, prevent it from doing so. In the working of the Constitution it was found that some of the provisions of the Constitution were not adequate for the needs of the country or for ushering in a Welfare State and the constituent body empowered in that behalf amended the Constitution several times. By the very first amendment made in the Constitution, namely, by the Constitution (First Amendment) Act, 1951, clause (6) of article 19 was amended with retrospective effect. Under this amendment, sub-clause (g) of clause (1) of article 19, which guarantees to all citizens the right to carry on any occupation, trade or business, was not to prevent the State from making any law relating to the carrying on by the State, or by a Corporation owned or controlled by the State, of any trade, busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcis-able in accordance with and for the furtherance of the directive principles of State policy prescribed by Part IV of the Constitution. The State is an abstract entity and it can, therefore, only act through its agencies or instrumentalities, whether such agency or instrumentality be human or juristic. The trading and business activities of the State constitute "public enterprise". The structural forms in which the Government operates in the field of public enterprise are many and varied. These may consist of Government departments, statutary bodies, statutory corporations, Government companies, etc. In this context, we can do no better than cite the following passage from "Government Enterprise-A comparative study" by W. Friedmann and J.F. Garner, at page 507 : "The variety of forms in which the various States have, at different times, proceeded to establish public enterprises is almost infinite, but three main types emerge to which almost every public enterprise approxis mates: (I) departmental administration; (2) the joint stock company controlled completely or partly by public authority; and, finally, (3) the public corporation proper, as a distinct type of corporation di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples of State policy. It is in the context of what has been stated above that we will now review the authorities cited at the Bar. When we consider these authorities, we will see how as constitutional thinking developed and the conceptual horizon widened new vistas, till then shrouded in the mist of conventional legal phraseology and traditional orthodoxy, opened out to the eye of judicial interpretation, and many different facets of several articles of the Constitution, including articles 12 and 14, hitherto unperceived, became visible. There, however, still remain vistas yet to be opened up, veils beyond which we today cannot see to be lifted, and doors to which we still have found no key to be unlocked. In Rai Sahib Ram Jawaya Kapur v. State of Punjab, [1955] 2 SCR 225, the State of Punjab, which used to select books published by private publishers for prescribing them as text-books and for this purpose used to invite offers from publishers and authors, altered that practice and amended the notification in that behalf so that thereafter only authors were asked to submit their books for approval as text-books. The validity of this notification was challenged inter alia on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can exercise the powers of the departmental or subordinate legislation when such powers are delegated to it by the Legislature. It can also, when so empowered, exercise judicial functions in a limited way. The executive Government, however, can never go against the provisions of the Constitution or of any law. This is clear from the provisions of article 154 of the Constitution but, as we have already stated, it does not follow from this that in order to enable the executive to function there must be a law already in existence and that the powers of the executive are limited merely to the carrying out of these laws." (emphasis supplied) In Rajasthan State Electricity Board, Jaipur v. Mohan Lal, AIR 1967 SC 1857, a Constitution Bench of this Court by a majority held that the Electricity Board of Rajasthan constituted under the Electricity (Supply) Act, 1948 (Act No. 54 of 1948), was "the State" as defined in article 12 because it was "other authority" within the meaning of that article. The Court held that the expression "other authority" was wide enough to include within it every authority created by a statute, on which powers are conferred to carry out governmental or quasi-gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other writ could lie. The Division Bench, however, held that though the writ petition was not maintainable the High Court could grant a declaration in favour of the petitioners that the impugned agreement was illegal and void and granted the said declaration. In appeal by the company, a two-Judge Bench of this Court held that the company being a non-statutory body and one incorporated under the Companies Act there was neither a statutory nor a public duty imposed on it by a statute in respect of which enforcement could be sought by means of a mandamus. So far as declaration given by the Division Bench of the High Court was concerned the Court held (at page 198): "...In our view once the writ petition was held to be misconceived on the ground that it could not lie against a company which was neither a statutory company nor one having public duties or responsibilities imposed on it by a statute, no relief by way of a declaration as to invalidity of an impugned agreement between it and its employees could be granted. The High Court, in these circumstances, ought to have left the workmen to resort to the remedy available to them under the Industrial Disputes Act by raising an industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under show that this authority is equally irrelevant. In that case, an employee of the Hindustan Steel Ltd., whose services were terminated, filed a petition under article 226 claiming that such termination was wrongful as it was really by way of punishment as the provisions of article 311(2) of the Constitution had not been complied with. This Court held that the protection of clause (2) of article 311 was available only to the categories of persons mentioned in that clause and that though the appellant held a civil post as opposed to a military post, it was not a civil post under the Union or a State and, therefore, he could not claim the protection of article 311(2). The contention which was raised on behalf of the appellant was that as Hindusthan Steel Ltd. was entirely financed by the Government and its management was directly the responsibility of the Government, the post was virtually under the Government of India. This contention was rejected by the Court holding that the company had its independent existence and by law relating to corporations it was distinct from its members and, therefore, it was not a department of the Government nor were its employees servants holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court answered both these questions in the affirmative. The statutory corporations before the Court in that case were the Oil and Natural Gas Commission established under the Oil and Natural Gas Commission Act, 1956, the Life Insurance Corporation established under the Life Insurance Corporation Act, 1956, and the Industrial Finance Corporation established under the Industrial Finance Corporation Act, 1948. Ray C.J., speaking for himself, and Chandrachud and Gupta JJ., pointed out (at page 228) that "the State undertakes commercial functions in combination with Governmental functions in a welfare State." The majority held that "the State" as defined in article 12 comprehends bodies created for the purpose of promoting economic interests of the people and the circumstance that statutory bodies are required to carry on some activities of the nature of trade or commerce does not indicate that they must be excluded from the scope of the expression "the State", for a public authority is a body which has public or statutory duties to perform and which performs those duties and carries on its transactions for the benefit of the public and not for private profit and by that fact such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is, for whose benefit was the corporation carrying on the business ? When it is seen from the provisions of that Act that on liquidation of the Corporation, its assets should be divided among the shareholders, namely, the Central and State Governments and others, if any, the implication is clear that the benefit of the accumulated income would go to the Central and State Governments. Nobody will deny that an agent has a legal personality different from that of the principal. The fact that the agent is subject to the direction of the principal does not mean that he has no legal personality of his own. Likewise, merely because a corporation has legal personality of its own, it does not follow that the corporation cannot be an agent or instrumentality of the State, if it is subject to control of government in all important matters of policy. No doubt, there might be some distinction between the nature of control exercised by principal over agent and the control exercised by government over public corporation. That, I think is only a distinction in degree. The crux of the matter is that public corporation is a new type of institution which has sprung from the new social and economi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporated. When does such a corporation become an instrumentality or agency of Government." (Emphasis supplied) After considering various factors and case law on the subject, the Court thus summed up the position (at p. 1041) : "It will thus be seen that there are several factors which may have to be considered in determining whether a corporation is an agency or instrumentality of Government. We have referred to some of these factors and they may be summarised as under : Whether there is any financial assistance given by the State, and if so what is the magnitude of such assistance, whether there is any other form of assistance given by the State, and if so, whether it is of the usual kind or it is extraordinary, whether there is any control of the management and policies of the corporation by the State and what is the nature and extent of such control, whether the corporation enjoys State conferred or State protected monopoly status and whether the functions carried out by the corporation are public functions closely related to governmental functions. This particu-larisation of relevant factors is however not exhaustive and by its very nature it cannot be because with increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956, and was deemed to be a Warehousing Corporation for a State under the Warehousing Corporation Act, 1962. In his concurring judgment, Chinnappa Reddy, J., said (at page 10): "I find it very hard indeed to discover any distinction, on principle between a person directly under the employment of the Government and a person under the employment of an agency or instrumentality of the Government or a Corporation set up under a statute or incorporated but wholly owned by the Government. It is self evident and trite to say that the function of the State has long since ceased to be confined to the preservation of the public peace, the exaction of taxes and the defence of its frontiers. It is now the function of the State to secure ' social, economic and political justice ', to preserve ' liberty of thought, expression, belief, faith and worship ', and to ensure ' equality of status and of opportunity'." (Emphasis supplied) In Ajay Hasia v. Khalid Mujib Sehravardi, [1981] 2 SCR 79, the Regional Engineering College which was established and administered and managed by a society registered under the Jammu and Kashmir Registration of Societies Act, 1898, was held to be "the State" within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government'." The right, title and interest of the Burmah Shell Oil Storage and Distributing Company of India Limited in relation to its undertakings in India were transferred to and vested in the Central Government under section 3 of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976. Thereafter, under section 7 of the said Act, the right, title, interest and liabilities of the said company which had become vested in the Central Government, instead of continuing so to vest in it, were directed to be vested in a Government company, as defined by section 617 of the Companies Act, 1956, namely, Bharat Petroleum. In Som Prakash Rekhi v. Union of India, [1980] 57 FJR 370, this Court held that Bharat Petroleum fell within the meaning of the expression "the State" used in article 12. The following passage (at pages 380-381) from the judgment in that case is instructive and requires to be reproduced : "...For purposes of the Companies Act, 1956, a government company has a distinct personality which cannot be confused with the State. Likewise, a statutory corporation consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1954. He raised a preliminary objection before the Metropolitan Magistrate, Delhi, before whom he was summoned to appear that no cognizance of the alleged offence could be taken by him for want of sanction under section 197 of the Code of Criminal Procedure, 1973. On his contention being rejected, he appealed to this Court. Under the said section 197, when any person who is or was nter alia a public servant not removable from his office save by or with the sanction of the Government is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty, no court is to take cognizance of such offence except with the previous sanction in the case of a person who is employed or, as the case may be, was at the time of commission of the alleged offence employed, in connection with the affairs of the Union or of the Central Government. As stated in the opening paragraph of the judgment in the said case, the question before the Court was whether the appellant was a public servant within the meaning of clause Twelfth of section 21 of the Indian Penal Code, 1908, for purposes of section 197 of the Code of Criminal Procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant. The second part of the question which the Court was called upon to decide in that case was whether the appellant can be said to be a person who was employed in connection with the affairs of the Union. The Court held that the Super Bazar was not an instrumentality of the State and, therefore, it could not be said that the appellant was employed in connection with the affairs of the Union within the meaning of the section 197 of the Code of Criminal Procedure. This observation was again made with reference to the argument that the appellant was employed in connection with the affairs of the Union. He undoubtedly was not employed in connection with the affairs of the Union just as a "person employed in a corporation is not and cannot be said to be holding a civil post under the Union or a State as held by this Court in S. L. Agarwal v. Hindustan Steel Ltd., [1970] 3 SCR 363. In S S. Dhonoa's case [1981] 3 SCC 431, the Court was not called upon to decide and did not decide whether a Government company was an instrumentality or agency of the State for the purposes of Parts III and IV of the Constitution and thus, "the State" within the meaning of that expression as used in articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in 1976 and, thereafter, functioned as a Government of India undertaking. The finding that it was an instrumentality of the Central Government was, however, based upon concession made by the said corporation. In West Bengal State Electricity Board v. Desk Bandhu Ghosh, [1985] 66 FJR 471, the West Bengal State Electricity Board was held to be an instrumentality of the State. As pointed out earlier, the Corporation, which is the first appellant in these appeals, is not only a Government company as defined in section 617 of the Companies Act, 1956, but is wholly owned by three Governments jointly. It is financed entirely by these three Governments and is completely under the control of the Central Government, and is managed by the chairman and board of directors appointed by the Central Government and removable by it. In every respect, it is thus a veil behind which the Central Government operates through the instrumentality of a Government company. The activities carried on by the corporation are of vital national importance. The Fifth Five Year Plan, 1974-79, states that the "outlay of Rs. 1473 crores for the next two years includes development of Raja-bagan Dockyard and operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Waterway (Allahabad-Haldia Stretch of the Ganga-Bhagirathi-Hooghly River) Act, 1982 (Act No. 49 of 1982), published in the Gazette of India, Extraordinary, Part II, section 2, dated May 6, 1982, at page 15, the Central Government had set up various committees in view of the advantages in the mode of inland water transport such as its low cost of transport, energy efficiency, generation of employment among weaker sections of the community and less pollution. These committees had recommended that the Central Government should declare certain waterways as national waterways and assume responsibility for their development. A beginning in respect of this matter was thus made by the enactment of the said Act No. 49 of 1982. Under the said Act, the said stretch was declared to be a national waterway and it was the responsibility of the Central Government to regulate and develop this national waterway and to secure its efficient utilization for shipping and navigation. In the Demands for Grant of the Ministry of Shipping and Transport 1985-86, additional provision was made for an overall increase in budget estimates 1985-86 mainly for equity participation/investment in the Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Corporation as a trading company as the appellants have attempted to do. What has been set out above is more than sufficient to show that the activities of the Corporation are of great importance to public interest, concern and welfare, and are activities of the nature carried on by a modern State and particularly a modern welfare State. It was, however, submitted on behalf of the appellants that even though the cases, out of those referred to above, upon which the appellants had relied upon were either distinguishable or inapplicable for determining the question whether a Government company, was "the State" or not, the case of A. L. Kalra v. Project and Equipment Corporation of India Ltd., [1984] 3 SCR 316, relied upon by the respondents, was based upon a concession and there was thus no direct authority on the point in issue. It was further submitted that all the other cases in which various bodies were held to be "the State" under article 12 were those which concerned either a statutory authority or a corporation established by a statute. It is true that the decision in A, L. Kalra v. Project and Equipment Corporation of India Ltd., [1984] 3 SCR 316, was based upon a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, namely, whether a Government company is "the State" within the meaning of article 12 has been discussed and decided, the above submission is correct. Does this, therefore, make any difference ? There is a basic fallacy vitiating the above submission. That fallacy lies in the assumption which that submission makes that merely because a point has not fallen for decision by the Court, it should, therefore, not be decided at any time. Were this assumption true, the law would have remained static and would have never advanced. The whole process of judicial interpretation lies in extending or applying by analogy the ratio deddendi of an earlier case to a subsequent case which differs from it in certain essentials, so as to make the principle laid down in the earlier case fit in with the new set of circumstances. The sequiter of the above assumption would be that the Court should tell the suitor that there is no precedent governing his case and, therefore, it cannot give him any relief. This would be to do gross injustice. Had this not been done, the law would have never advanced. For instance, had Rylands v. Fletcher, [1868] 3 AC 330 (HL), not been decided in the way in which it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernmental functions of vital public importance. There can thus be no doubt that the Corporation is "the State" within the meaning of article 12 of the Constitution. We now turn to the second question which falls for determination in these appeals, namely, whether an unconscionable term in a contract of employment entered into with the Corporation, which is "the State" within the meaning of the expression in article 12, is void as being viola-tive of article 14. What is challenged under this head is clause (i) of rule 9 of the said Rules. This challenge levelled by the respondent in each of these two appeals succeeded in the High Court. The first point which falls for consideration on this part of the case is whether rule 9(i) is unconscionable. In order to ascertain this, we must first examine the facts leading to the making of the said Rules and then the setting in which rule 9(i) occurs. To recapitulate briefly, each of the contesting respondents was in the service of the Rivers Steam Navigation Company Limited. Their services were taken over by the Corporation after the scheme of arrangement was sanctioned by the Calcutta High Court. Under the said scheme of arrangement, if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, in lieu of notice, and where a permanent employee terminates the employment without giving due notice, the Corporation may deduct a like amount from the amount due or payable to the employee. Under rule 11, an employee who wishes to leave the service of the Corporation by resigning therefrom is to give to the Corporation the same notice as the Corporation is required to give to him under rule 9, that is, a three months' notice in writing. Under rule 9(ii), the services of a permanent employee can be terminated on the ground of "services no longer required in the interest of the company" (that is, the Corporation). In such a case, a permanent employee, whose service is terminated under this clause, is to be paid fifteen days' basic pay and dearness allowance for each completed year of continuous service in the Corporation and he is also to be entitled to encashment of leave to his credit. Rule 36 prescribes the penalties which can be imposed, "for good and sufficient reasons and as hereinafter provided" in the said Rules, on an employee for his misconduct. Clause (a) of rule 36 sets out the minor penalties and clause (b) of rule 36 sets out the major penalties. Under sub-clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m for it was supported by mutuality inasmuch as it conferred an equal right upon both parties to terminate the contract of employment, that the grounds which render an agreement void and unenforceable are set out in the Indian Contract Act, 1872 (Act No. IX of 1872), that unconscionability was not mentioned in the Indian Contract Act as one of the grounds which invalidates an agreement, that the power conferred by rule 9(i) was necessary for the proper functioning of the administration of the Corporation, that in the case of the respondents this power was exercised by the chair-man-cum-managing director of the Corporation, and that a person holding the highest office in the Corporation was not likely to abuse the power conferred by rule 9(i). The submissions of the contesting respondents, on the other hand, were that the parties did not stand on an equal footing and did not enjoy the same bargaining power, that the contract contained in the service rules was one imposed upon these respondents, that the power conferred by rule 9(i) was arbitrary and uncanalized as it did not set out any guidelines for the exercise of that power and that even assuming it may not be void as a contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to public policy. This section further provides that every agreement of which the object or consideration is unlawful is void. Under section 24, if any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object is unlawful, the agreement is void. The agreement is, however, not always void in its entirety for it is well settled that if several distinct promises are made for one and the same lawful consideration, and one or more of them be such as the law will not enforce, that will not of itself prevent the rest from being enforceable. The general rule was stated by Willes, J., in Pickering v. Ilfracombe Ry. Co., [1868] LR 3 CP 235 at page 250 as follows : "The general rule is that, where you cannot sever the illegal from the legal part of a covenant, the contract is altogether void; but, where you can sever them, whether the illegality be created by statute or by the common law, you may reject the bad part and retain the good. " Under which head would an unconscionable bargain fall ? If it falls under the head of undue influence, it would be voidable but if it falls under the head of being opposed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of workmen and their unfair discharge from service, and control orders directing a party to sell a particular essential commodity to another. In this connection, it is useful to note what Chitty has to say about the old ideas of freedom of contract in modern times. The relevant passages are to be found in Chitty on Contracts, Twenty-fifth Edition, Volume I, in paragraph 4, and are as follows: "These ideas have to a large extent lost their appeal today. ' Freedom of contract,' it has been said, ' is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large.' Freedom of contract is of little value when one party has no alternative between accepting a set of terms proposed by the other or doing without the goods or services offered. Many contracts entered into by public utility undertakings and others take the form of a set of terms fixed in advance by one party and not open to discussion by the other. These are called ' contrats d'adhesion' by French lawyers. Traders frequently contract, not on individually negotiated terms, but on those con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conscionable term as to avoid any unconscionable result." In the comments given under that section it is stated at page 107 : "Like the obligation of good faith and fair dealing (section 205), the policy ugainst unconscionable contracts or terms applies to a wide variety of types of conduct. The determination that a contract or term is or is not unconscionable is made in the light of its setting, purpose and effect. Relevant factors include weaknesses in the contracting process like those involved in more specific rules as to contractual capacity, fraud and other invalidating causes; the policy also overlaps with rules which render particular bargains or terms unenforceable on grounds of public policy. Policing against unconscionable contracts or terms has sometimes been accomplished by adverse construction of language, by manipulation of the rules of offer and acceptance or by determinations that the clause is contrary to public policy or to the dominant purpose of the contract. Uniform Commercial Code 2-302 Comment 1.... A bargain is not unconscionable merely because the parties to it are unequal in bargaining position, nor even because the inequality results in an allocation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the judicial and legislative trend during the last 30 years in both civil and common law jurisdictions has almost brought the wheel full circle. Both courts and parliaments have provided greater protection for weaker parties from harsh contracts. In several jurisdictions this included a general power to grant relief from unconscionable contracts, thereby providing a launching point from which the courts have the opportunity to develop a modern doctrine of unconscionability. American decisions on article 2.302 of the UCC have already gone some distance into this new arena...." The expression "laesio enormis" used in the above passage refers to "laesio ultra dimidium vel enormis" which in Roman law meant the injury sustained by one of the parties to an onerous contract when he had been overreached by the other to the extent of more than one-half of the value of the subject-matter, as for example, when a vendor had not received half the value of property sold, or the purchaser had paid more than double value. The maxim "pacta sunt servanda" referred to in the above passage means "contracts are to be kept" It would appear from certain recent English cases that the courts in that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idding certain transactions and, perhaps, by requiring others. It also means that those who have been deprived of their properties by unconscionable bargains should be restored their property. All such laws may take the form of forced redistribution of wealth as a means of achieving a fair division of material resources among the members of society or there may be legislative control of unfair agreements. (Emphasis supplied.)" When our Constitution states that it is being enacted in order to give to all the citizens of India "Justice, social, economic and political", when clause (1) of article 38 of the Constitution directs the State to strive to promote the welfare of the people by securing and protecting as effectively as it may, a social order in which social, economic and political justice shall inform all the institutions of the national life, when clause (2) of article 38 directs the State, in particular, to minimize the inequalities in income, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations, and when article 39 directs the State that it shall, in particular, direct its policy towards securing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of common fairness, it is not right that the strong should be allowed to push the weak to the wall. Hitherto those exceptional cases have been treated each as a separate category in itself. But I think the time has come when we should seek to find a principle to unite them. I put on one side contracts or transactions which are voidable for fraud or misrepresentation or mistake. All those are governed by settled principles. I go only to those where there has been inequality of bargaining power, such as to merit the intervention of the court." (emphasis supplied) He then referred to various categories of cases and ultimately deduced therefrom a general principle in these words (at page 765): "Gathering all together, I would suggest that through all these instances there runs a single thread. They rest on 'inequality of bargaining power'. By virtue of it, the English law gives relief to one who, without independent advice, enters into a contract on terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement was void as it was in restraint of trade and thus contrary to public policy. In his speech, Lord Diplock, however, outlined the theory of reasonableness or fairness of a bargain. The following observations of his on this part of the case require to be reproduced in extenso (at pages 1315-1316) : "My Lords, the contract under consideration in this appeal is one whereby the respondent accepted restrictions upon the way in which he would exploit his earning power as a song writer for the next ten years. Because this can be classified as a contract in restraint of trade the restrictions that the respondent accepted fell within one of those limited categories of contractual promises in respect of which the courts still retain the power to relieve the promisor of his legal duty to fulfil them. In order to determine whether this case is one in which that power ought to be exercised, what your Lordships have in fact been doing has been to assess the relative bargaining power of the publisher and the song writer at the time the contract was made and to decide whether the publisher had used his superior bargaining power to exact from the song writer promises that were unfairly onero ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by representatives of the commercial interests involved and have been widely adopted because experience has shown that they facilitate the conduct of trade". He then proceeded to state, (at p. 1316) "If fairness or reasonableness were relevant to their enforceability the fact that they are widely used by parties whose bargaining power is fairly matched would raise a strong presumption that their terms are fair and reasonable". Referring to the other kind of standard form of contracts Lord Diplock said (at page 1316): "The same presumption, however, does not apply to the other kind of standard form of contract. This is of comparatively modern origin. It is the result of the concentration of particular kinds of business in relatively few hands. The ticket cases in the 19th-century provide what are probably the first examples. The terms of this kind of standard form of contract have not been the subject of negotiation between the parties to it, or approved by any organisation representing the interests of the weaker party. They have been dictated by that party whose bargaining power, either exercised alone or in conjunction with others providing similar goods or services, enables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Photo Production Ltd. v. Securicor Transport Ltd., [1980] AC 827, a case before the Unfair Contract Terms Act, 1977, was enacted, the House of Lords upheld an exemption clause in a contract on the defendants' printed form containing standard conditions. The decision appears to proceed on the ground that the parties were businessmen and did not possess unequal bargaining power. The House of Lords did not in that case reject the test of reasonableness or fairness of a clause in a contract where the parties are not equal in bargaining position. On the contrary, the speeches of Lord Wilberforce, Lord Diplock and Lord Scarman would seem to show that the House of Lords in a fit case would accept that test. Lord Wilberforce, in his speech, after referring to the Unfair Contract Terms Act, 1977, said (at page 843): "This Act applies to consumer contracts and those based on standard terms and enables exception clauses to be applied with regard to what is just and reasonable. It is significant that Parliament refrained from legislating over the whole field of contract. After this Act, in commercial matters generally, when the parties are not of unequal bargaining power, and when risks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the French law, is very much the same. Should then our courts not advance with the time ? Should they still continue to cling to outmoded concepts and outworn ideologies ? Should we not adjust our thinking caps to match the fashion of the day ? Should all jurisprudential development pass us by, leaving us floundering in the sloughs of nineteenth-century theories ? Should the strong be permitted to push the weak to the wall ? Should they be allowed to ride roughshod over the weak ? Should the courts sit back and watch supinely while the strong trample under foot the rights of the weak ? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in article 14. This principle is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so adjudge it and order it to be delivered up and cancelled. Is a contract of the type mentioned above to be adjudged voidable or void? If it was induced by undue influence, then under section 19A of the Indian Contract Act, it would be voidable. It is, however, rarely that contracts of the types to which the principle formulated by us above applies are induced by undue influence as denned by section 16(1) of the Indian Contract Act, even though at times they are between parties one of whom holds a real or apparent authority over the other. In the vast majority of cases, however, such contracts are entered into by the weaker party under pressure of circumstances, generally economic, which results in inequality of bargaining power. Such contracts will not fall within the four corners of the definition of "undue influence" given in section 16(1). Further, the majority of such contracts are in a standard or prescribed form or consist of a set of rules. They are not contracts between individuals containing terms meant for those individuals alone. Contracts in prescribed or standard forms or which embody a set of rules as part of the contract are entered into by the party with superio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his area. The adherents of "the narrow view" school would not invalidate a contract on the ground of public policy unless that particular ground had been well-established by authorities. Hardly ever has the voice of the timorous spoken more clearly and loudly than in these words of Lord Davey in Janson v. Driefontein Consolidated Mines Limited, [1902] AC 484, 500, "Public policy is always an unsafe and treacherous ground for legal decision". That was in the year 1902. Seventy-eight years earlier, Burrough, J., in Richardson v. Mellish, [1824] 2 Bing. 229, 252 ; SC 130 ER 294, 303 and [1824-34] All ER Reprint 258, 266, described public policy as "a very unruly horse, and when once you get astride it, you never knew where it will carry you". The Master of the Rolls, Lord Denning, however, was not a man to shy away from unmanageable horses and in words which conjure up before our eyes the picture of the young Alexander the Great taming Bucephalus, he said in Enderby Town Football Club Ltd. v. Football Association Ltd., [1971] Ch. 591, 606, "With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles". Had the timorous always held the field, not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon the illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by mis-stating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the Court, the plea of the defendant should not prevail." The types of contracts to which the principle formulated by us above applies are not contracts which are tainted with illegality but are contracts which contain terms which are so unfair and unreasonable that they shock the conscience of the court. They are opposed to public policy and require to be adjudged void. We will now test the validity of rule 9(i) by applying to it the principle fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the heading "other conditions" which followed the clauses which related to the termination of service, referred only to service rules and regulations other than those providing for termination of services and, therefore, rule 9(i) did not apply to them. It is unnecessary to decide this question in the view which we are inclined to take with respect to the validity of rule 9(i). The said rules as also the earlier rules of 1970 were accepted by the contesting respondents without demur. Here again they had no real choice before them. They had risen higher in the hierarchy of the Corporation. If they had refused to accept the said rules, it would have resulted in the termination of their services and the consequent anxiety, harassment and uncertainty of finding alternative employment. Rule 9(i) confers upon the Corporation the power to terminate the service of a permanent employee by giving him three months' notice in writing or in lieu thereof to pay him the equivalent of three months' basic pay and dearness allowance. A similar regulation framed by the West Bengal State Electricity Board was described by this court in West Bengal State Electricity Board v. Desk Bandhu Ghosh [198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks the well-known saying of Lord Acton, which has now almost become a maxim, in the Appendix to his "Historical Essays and Studies", that "Power tends to corrupt, and absolute power corrupts absolutely" As we have pointed out earlier, the said rules provide for four different modes in which the services of a permanent employee can be terminated earlier than his attaining the age of superannuation, namely, rule 9(i) , rule 9(ii), sub-clause (iv ) of clause (b) of rule 36 read with rule 38 and rule 37. Under rule 9(ii) the termination of service is to be on the ground of "Services no longer required in the interest of the company" Sub-clause (iv) of clause (b) of rule 36 read with rule 38 provides for dismissal on the ground of misconduct. Rule 37 provides for termination of service at any time without any notice if the employee is found guilty of any of the acts mentioned in that rule. Rule 9(i) is the only rule which does not state in what circumstances the power conferred by that rule is to be exercised. Thus, even where the Corporation could proceed under rule 36 and dismiss an employee on the ground of misconduct after holding a regular disciplinary inquiry, it is free to resort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to rule 9(i). The Corporation is a large organization. It has offices in various parts of West Bengal, Bihar and Assam, as shown by the said rules, and possibly in other States also. The said rules form part of the contract of employment between the Corporation and its employees who are not workmen. These employees had no powerful workmen's union to support them. They had no voice in the framing of the said rules. They had no choice but to accept the said rules as part of their contract of employment. There is gross disparity between the Corporation and its employees, whether they be workmen or officers. The Corporation can afford to dispense with the services of an officer. It will find hundreds of others to take his place but an officer cannot afford to lose his job because if he does so, there are not hundreds of jobs waiting for him. A clause such as clause (i) of rule 9 is against right and reason. It is wholly unconscionable. It has been entered into between parties between whom there is gross in equality of bargaining power. Rule 9(i) is a term of the contract between the Corporation and all its officers. It affects a large number of persons and it squarely falls within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual position of the Corporation and its employees, the argument of mutuality becomes laughable. The contesting respondents could, therefore, have filed a civil suit for a declaration that the termination of their service was contrary to law on the ground that the said rule 9(i) was void. In such a suit, however, they would have got a declaration and possibly damages for wrongful termination of service but the civil court could not have ordered reinstatement as it would have amounted to granting specific performance of a contract of personal service. As the Corporation is "the State", they, therefore, adopted the far more efficacious remedy of filing a writ petition under article 226 of the Constitution. As the Corporation is "the State" within the meaning of article 12, it was amenable to the writ jurisdiction of the High Court under article 226. It is now well-established that an instrumentality or agency of the State being "the State" under article 12 of the Constitution is subject to the constitutional limitations, and its actions are State actions and must be judged in the light of the fundamental rights guaranteed by Part III of the Constitution (see for instance, Sukhdev Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expiry of every three years in consultation with the lessee and was to be binding on the lessee. The State unilaterally revised the rate of royalty payable by the appellants and, thereafter, cancelled the lease. The Patna High Court dismissed the writ petition filed by the appellants and the appellants' appeal to this Court was also dismissed. In that case, it was held that when a State acts purely in its executive capacity, it is bound by the obligations which dealings of the State with individual citizens import into every transaction entered into in exercise of its constitutional powers, but this is only at the time of entry into the field of consideration of persons with whom the Government could contract, and after the State or its agents have entered into the field of ordinary contract the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. The Court then added (at page 255): "No question arises of violation of article 14 or of any other constitutional provision when the State or its agents, purporting to act within this field, perform any act. In this sphere, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said regulation 48, the services of a permanent employee can be terminated "without assigning any reason" by giving him thirty days' notice in writing or pay in lieu of notice. In both these cases, the services of the concerned employees were terminated under regulation 48(a). The said regulations also provided for dismissal of an employee who was found guilty of misconduct in a disciplinary inquiry held according to the procedure prescribed in the said regulations. In Muley's case, [1980] Lab IC 11, a learned single Judge of the Bombay High Court, Sawant J., held the said regulation 48(a) to be void as infringing article 14 of the Constitution. In West Bengal State Electricity Board's case, [1985] 66 FJR 471, this court stated (at page 473), "The learned Judge struck down regulation 48(a) and we agree with his reasoning and conclusion". The reasoning upon which Sawant J. reached his conclusion was that there was no guidance given anywhere in the impugned regulation for the exercise of the powers conferred by it, that it placed untrammelled power in the hands of the authorities, that it was an arbitrary power which was conferred and it did not make any difference that it was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment in that case and we did so with increasing astonishment. Though the said judgment bears the date September 18, 1981, we were unable to make out whether it was a judgment given in the year 1981 or in the year 1881 or even earlier. We find ourselves wholly unable to agree with the view taken by the Division Bench. Apart from the factual aspects of the case, as to which we say nothing, we find every single conclusion reached by the Division Bench and the reasons given in support thereof to be wholly erroneous. The Division Bench overlooked that it was not dealing with a case of a non-speaking order but with the validity of a regulation. The meaning given by it to the expression "without assigning any reason" was wrong and untenable. Starting with this wrong premise, it has gone from one wrong premise to another. In the light of what we have said earlier about the principles of public policy evolved, and tested by the principle which we have formulated, the said regulation 48(a) could never have been sustained. In West Bengal State Electricity Board's case [1985] 66 FJR 471, a three-Judge Bench of this Court said as follows (at page 473) : "The learned counsel for the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary to the Directive Principles of State Policy contained in clause (a) of article 39 and in article 41. 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. The High Court was, 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. What the Calcutta high court overlooked was that rule 9 also confers upon a permanent employee the right to resign from the service of the corporation. By entering into a contract of employment a person does not sign a bond of slavery and a permanent employee cannot be deprived of his right to resign. A resignation by an employee would however, normally require to be accepted by the employer in order to be effective. It can be that in certain circumstances an employer would be justified in refusing to accept the employee's resignation as, for instance, when an employee wants to leave in the meddle of a work which is urgent or important and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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