New India Assurance Co. Ltd. v. R. N. Chaturvedi — 1977 DIGILAW 702 (ALL)

JUDGMENT Gopi Nath, J. - This is a defendants appeal from the judgment and decree of the Civil Judge, Dehradun, dated 28-8-1975 decreeing the plaintiffs suit for declaration that an order passed by defendant No. 1 dated 7-7-1971 terminating the plaintiffs service was illegal and void and that he continued to be in the service of the defendant No. 2 in which the defendant No. 1 had merged and was entitled to his salary as its employee. The suit was further decreed for recovery of a sum of Rs. 16,750/- as salary from 16-7-1971 to 30-4-1974 and for pendente lite and future salarly on payment of necessary court fee. 2. The plaintiff was appointed on a salary of Rs. 500/- per month on the post of Development Secretary in the Orissa Co-operative Insurance Society Ltd., defendant No. 1 by an order dated 14-11-1970 passed by the Divisional Manager of the Society. The appointment was made according to the service rules of the Society and on terms and conditions set out in the letter of appointment, Ext. A-80, which inter alia, provided that the plaintiff was to conduct the business of the Society in a faithful and honest manner and was to observe the Code of conduct prescribed under Insurance Act. It was further provided that he was to transmit the premiums and other amounts received on behalf of the Society from the agents of the Society and the parties concerned to the Head Office without any delay. The service was liable to termination by one months notice or payment of one months salary in lieu thereof. The contract of service was reduced into writing and was signed by the plaintiff in token of acceptance of the terms and conditions imposed. It was to take effect from 5-11-1970. The appointment thus was a contractual one and not a statutory appointment. It was governed by the terms and conditions contained in the letter of appointment, and the Divisional Manager was the appointing authority of the plaintiff. The plaintiff conducted the business of the Society and collected premiums from its customers and issued cover notes to them. It appears that he sent a number of cover notes to the Head Office of the Society without the supporting premiums. The cover notes were accordingly cancelled. The plaintiff conducted the business of the Society and collected premiums from its customers and issued cover notes to them. It appears that he sent a number of cover notes to the Head Office of the Society without the supporting premiums. The cover notes were accordingly cancelled. The Society acted under the impression that the premiums had not been paid by the parties and they were informed accordingly. The parties protested against the cancellation of the cover notes and informed the Society that the premiums had already been paid to the plaintiff and they were not liable to pay them over again. The society was further informed that the business of such a reputed company was not to be conducted in such an irresponsible manner. The Society was asked to recover the premiums from the plaintiff, and the parties it was said were not to suffer for his negligence. The Society discovered further lapses on the part of the plaintiff in the meantime. Accordingly the Divisional Manager by an order dated 7-7-1971 terminated the plaintiffs services. The material part of the order reads as follows: "We have received a bunch of cover notes contained in your various envelopes and were surprised to note that you have sent us the various cover notes without supporting premium which is a clear violation of the Code of conduct and our repeated instructions. Your many cheques issued in favour of the society being the premium have been returned from your bankers with the remarks `refer to drawer which means that you collected the cash premium and utilised it for your own affairs. You have issued cover note No. 42135 on 25-3-1971 which has been sent to us without any supporting premium. There are general complaints against you from your various clients and agents. For your ready reference we have been informed by one of your agents P. Bakshi that you have collected the premium against various cover notes which has not been deposited in the office so far. Under the above circumstances and on account of wilful negligence of duties, breach of Code of conduct and non-deposit of premium realised from the parties, society is no more interested to have your services. Now this letter may be treated as termination of your service without notice from the date and time of receipt of this letter at your end. Your final account is under preparation. Now this letter may be treated as termination of your service without notice from the date and time of receipt of this letter at your end. Your final account is under preparation. In the meantime you are requested to please come here with all your accounts and unused cover notes and the Societys records for settlement of account. Sd/-. Divisional Manager." 3. Certain legislations in the meantime had come into force in regard to the Management of Insurance business. They were "The General Insurance (Emergency Provisions)) Ordinance No. 6 of 1971 and "The General Insurance (Emergency Provisions) Act No. 17 of 1971 vesting the management of General Insurance Business of Insurance Companies in the Central Government. The former-had come into force on 13-5-1971 and the latter on 17-6-1971. Under these statutes prior approval of the Custodian in respect of certain transactions sought to be entered into by the Undertaking had to be obtained. The Divisional Manager in the circumstances mentioned in his letter that the matter of termination of service of the plaintiff had been discussed with the Custodian and he made a note to that effect in the termination order. 4. The plaintiff challenged the order dated 7-7-1971 on the allegations that he was a confirmed employee of defendant No. 1 and had been working honestly and diligently but the Divisional Manager on account of ill-will, malice and grudge against him had passed the impugned order mala fide. It was alleged that he had first reduced the plaintiffs emoluments by an order dated 14-6-1971 and had thereafter terminated his services by the order dated 7-7-1971 with a view to harassing him. The' plaintiffs case was that no charge-sheet had been issued to him and the order though couched in terms of a termination order was in effect an order of dismissal which having been passed without a show-cause notice was void. The plaintiff further claimed that he was a public servant and entitled to the protection of Article 311 of the Constitution. He also invoked the principles of natural justice as a ground of attack to the order. The plaintiff further pleaded that under the terms of contract one months notice or one months pay in lieu thereof was necessary for an order of termination. No such notice or pay having been given to the plaintiff the order was bad for that reason as well. The plaintiff further pleaded that under the terms of contract one months notice or one months pay in lieu thereof was necessary for an order of termination. No such notice or pay having been given to the plaintiff the order was bad for that reason as well. It was further pleaded that the order passed by the Divisional Manager was without jurisdiction as he was not the competent authority to terminate the plaintiffs service in view of the provisions of Ordinance 6 and Act No. 17 of 1971: and a person authorised by the Central Government alone was competent to terminate his services. Reference was also made to "The General Insurance Business Nationalisation Act, No. 57 of 1972" in this connection. The suit was filed in May 1974. The plaintiff impleaded the Orissa Insurance Co-operative Society as defendant No. 1, the General Insurance Corporation of India in which the defendant No. 1 had merged as defendant No. 2 and the Custodian, New India-Insurance Co. Ltd. as defendant No. 3. The reliefs claimed in the suit were as follows : (i) that a declaration be made that the plaintiff continued to be in the service of the defendants or any of them as the case may be as a confirmed Development Secretary and that the order dated 7-7-1971 passed by defendant No. 1 was illegal, void and unenforceable; (ii) that a decree for Rs. 18.500/- as salary and pendente lite and future salary till the date of his actual retirement be passed in his favour; (iii) that a decree for Rs. 8,748 be passed by way of expenses and (iv) that a decree for Rs. 50,000/- be passed as damages. 5. The suit was contested by the defendants. The defence delivered was that the plaintiff was appointed on terms and conditions set out in the appointment letter dated 14-11-1970 where-under he had bound himself to follow the Rules and Regulations of the Society and to strictly observe and fulfil the Code of conduct prescribed for the employees of the Society which included faithful discharge of duties and strict honesty in the conduct of the Societys business; that the plaintiff had undertaken to introduce a minimum premium income of Rs. 1,50,000/- during the first year of his employment and to abide by and carrying out the instructions issued by the Head Office from time to time. 1,50,000/- during the first year of his employment and to abide by and carrying out the instructions issued by the Head Office from time to time. The plaintiff had failed to act according to the terms of engagement. He had not fulfilled the undertaking given by him and had further misconducted himself in the discharge of his duties. He did not maintain integrity in the conduct of business and misappropriated the funds of the Society. It was alleged that he had not furnished accounts for a cash impress of Rs. 4,344.39 which was advanced to him to meet the office expenses and had misappropriated the premiums collected. It was further alleged that the plaintiff had purchased a scooter with an advance of Rs. 2,500/- from the defendant No. 1 which he had subsequently disposed of. He had appropriated the sale proceeds which he was bound to pay to the Society.' The employees of the Society it was alleged were not Government servants and their services were liable to be terminated in accordance with the terms of employment. The defendant No. 1 was accordingly entitled to terminate the plaintiffs services. Reference to the provisions of Act No. 57 of 1972 (The General Insurance Nationalisation) (Emergency Provisions) Act was stated to be wholly irrelevant as the termination had taken place long prior to the enforcement of that Act. As regards Act No. 17 of 1971 or Ordinance No. 6 of 1971 which had vested the management of Insurance business in the Central Government, it was pleaded that they did not affect the termination order which was made by the appointing authority. It was further pleaded that the termination order was not void for want of a show-cause notice. The plaintiff could at best claim one months salary in lieu thereof. As regards the application of Article 311 of the Constitution it was pleaded that the provisions of that Article had no application to the plaintiff who did not fall under any of the categories of Civil Servants mentioned therein. It was further pleaded that the suit for specific performance of contract of personal service was not maintainable, and the plaintiff was not entitled to any of the reliefs claimed. 6. It was further pleaded that the suit for specific performance of contract of personal service was not maintainable, and the plaintiff was not entitled to any of the reliefs claimed. 6. The trial court decreed the suit for declaration, holding that the termination order dated 7-7-1971 was illegal, void and ineffective in law and that the plaintiff continued to be in the service of the defendants Nos. 1 and 2 as a confirmed employee. It further decreed the suit for the recovery of a sum of Rs. 16,750/- as salary from 16-7-1971 to 30-4-1974 and for the pendente lite and future salary at the rate of Rs. 500/- per month. The suit for damages and expenses was dismissed. The court below held that the plaintiff was a permanent employee of defendant No. 1 and his services having been terminated for wilful neglect of duties, breach of Code of Conduct, and misappropriation of Societys funds, the order was one of dismissal and could not be passed without a show-cause notice. It further held that the plaintiff was a public servant, in view of the Nationalization of Insurance business by the Central Government and was entitled to the protection of Art. 311 of the Constitution. It took into account the provisions of Act No. 57 of 1972 along with those of Ordinance No. 6 and Act No. 17 of 1971, though at the material point of time i. e., on 7-7-1971 Act 57 of 1972 had not been passed and only Act No. 17 of 1971 was in force under which the management of Insurance business of companies and undertakings had vested in the Central Government. The provisions of Act No. 57 of 1972, in our opinion could not be invoked to invalidate the impugned order. The plaintiff was found entitled to the protection of Art. 311 of the Constitution on the ground that he was entitled to the status of a public servant in view of the Nationalization of Insurance business by Act No. 57 of 1972. It was held that the defendants Nos. 1 and 2 became authorities within the meaning of Art. 12 of the Constitution after their take-over by the Central Government and their employees accordingly were entitled to the protection of Art. 311 of the Constitution. It was held that the defendants Nos. 1 and 2 became authorities within the meaning of Art. 12 of the Constitution after their take-over by the Central Government and their employees accordingly were entitled to the protection of Art. 311 of the Constitution. We have already pointed out that this Act had not come into force at the relevant time hence reference to the same was irrelevant. The court below then found that the Divisional Manager of defendant No. 1, was not the competent authority to terminate the plaintiffs service in view of the vesting of the management of insurance business in the Central Government under Act No. 17 of 1971. The Custodian through whom the undertakings were managed was held to be the competent authority to pass the impugned order. The plea of non-maintainability of the suit on the ground of un-enforceability of a contract of personal service by specific performance was repelled. The learned Judge then found that the reduction of the plaintiffs salary for non-fulfilment of the quota of business promised was unjustified and that he was entitled to his full salary. The suit was accordingly decreed for declaration and arrears of salary as mentioned above. The main grounds for holding the order dated 7-7-71 as void were : (i) that the order was one of dismissal; (ii) that the plaintiff was entitled to the protection of Article 311. (iii) that the order was passed in breach of the provisions of that Article; (iv) that the order was passed in violation of the principles of natural justice; (v) that the order was bad for lack of months notice as envisaged by the terms of the service contract; and (vi) that the Divisional Manager was not the competent authority to terminate the plaintiffs service. 7. The following questions thus arise for determination in the appeal: (i) Whether the suit for specific performance of contract of personal service was maintainable; (ii) Whether the provisions of Article 311 of the Constitution were attracted in the case; (iii) Whether the order was vitiated by non-compliance of the principles of natural justice; (iv) whether the order was bad for want of one months notice as provided by the terms of contract of service; and (v) whether the Divisional Managei was competent to terminate the plaintiffs service ? 8. 8. Before taking up the points seriatim we would like briefly to deal with the cases of dismissal of servants. "These appear to fall", said Lord Reid in Ridge v. Baldwin (1964 AC 40), "into three classes: (1) dismissal of a servant by his master; (2) dismissal from an office held during pleasure, and (3) dismissal from an office where there must be something against a man to warrant his dismissal." The first is a pure case of master and servant and in such a case "the master can terminate the contract with his servant at any time, for any reason or for none. But if he does so in a manner not warranted by the contract he must pay damages for breach of contract." To the similar effect are the observations of Lord Keith in Vine v. National Dock Labour Board ( (1957) 2 WLR 106 at p. 118) that "normally and apart from the intervention of a statute, there would never be a nullity in terminating an ordinary contract of master and servant, Dismissal might be in breach of contra'' and so unlawful but could only sound in damages". In University Council of the Vidyodaya University of Cylone v. Linus Silva (1965) 1 WLR 77 Lord Moris of Both-Y-Gest said "the law is well settled that if, where there is an ordinary contractual relationship of master servant, the master terminates the contract the servant cannot obtain an order of certiorari. If the master rightfully ends the contract there can be no complaint; if the master wrongfully ends the contract then the servant can pursue a claim for damages..............." "In a straightforward case where a master employs a servant the latter is not regarded as the holder of an office and if the contract is terminated there are ordinarily no questions affecting status or involving property rights". In Ridge v. Baldwin (supra) Lord Reid further observed that a case of dismissal of servant by a master can sometimes resemble a case of dismissal from office "where the body employing the man is under some statutory or other restrictions as to the kind of contract which it can make with its servants or the grounds on which it can dismiss them." A pure case of master and servant has to be distinguished from dismissal from office where the employment is under a statutory scheme which provides for the grounds on which alone the dismissal can take place. In Barber v. Manchaster Regional Hospital Board (1958) 1 WLR 181 Barry, J. pointed out that despite strong statutory flavour attaching to contract it could still in essence be an ordinary contract between master and servant and nothing more. In Roshan Lal Tandon v. Union of India ( AIR 1967 SC 1889 ) it was observed that origin of Government service is also contractual but the Government servant acquires status because his rights and obligations are determined by statute or statutory rules. "The hallmark of status," said Ramaswamy J. "is the attachment to a legal relationship of rights and duties imposed by the public' law and not by mere agreement of parties." In Indian Institute of Technology v. Man-gat Singh (ILR (1973) 2 Delhi 6 : (1974 Lab IC 891) (FB) it was held that employment originally and basically is a contract between the employer and the employee. This relationship gets superseded partly or wholly by status when rights and obligations of the parties are found to be determined by law. In Life Insurance Corporation of India v. Sunil Kumar Mukerji ( (1964) 5 SCR 528 : ( AIR 1964 SC 847 ) it was held that employments made by private Insurance Companies did not cease to be contractual after their take-over by the Life Insurance Corporation of India and the servants of the Private Companies did not acquire any status by the transfer of their services to the Public Undertaking. In Ved Prakash Malhotra v. State Bank of India (ILR (1974) 1 Delhi 660) it was held that the service of the petitioner in that case continued to be purely contractual in spite of the provisions of the State Bank of India being made applicable to him. 9. In Ved Prakash Malhotra v. State Bank of India (ILR (1974) 1 Delhi 660) it was held that the service of the petitioner in that case continued to be purely contractual in spite of the provisions of the State Bank of India being made applicable to him. 9. It is in this background that we have to see whether the employment of the plaintiff-respondent with the defendant No. 1 was contractual or statutory, The appointment was made under an agreement between the parties and not under any statute, or statutory scheme. It was not the plaintiffs case that the employment was statutory at its inception. What was pleaded was that it became statutory by force of statutes intervening which were ordinance No. 6 and Act No. 17 of 1971, and Act No. 57 of 1972. We have already held that Act No. 57 of 1972 had no application in the instant case as the services of the plaintiff-respondent were terminated before the commencement of that Act. Ordinance No. 6 and Act. 17 of 1971 were concerned with the vesting of the management of the Insurance business in the Central Government. They did not transfer the services of the employees of the undertakings to the Central Government with the result that the Master and Servant relationship between the employers and the employees continued. This is made clear by S. 7 of Act No. 57 of 1972 itself which had been relied upon by the learned Judge. S. 7 so far as material reads : "7. Transfer of service of existing employees in certain cases. (1) Every whole time officer or other employee of an existing insurer other, than an Indian Insurance Company who was employed by that insurer wholly or mainly in connection with his general insurance business immediately before the appointed day shall, on the appointed day, become an officer or other employee, as the case may be, of the. (1) Every whole time officer or other employee of an existing insurer other, than an Indian Insurance Company who was employed by that insurer wholly or mainly in connection with his general insurance business immediately before the appointed day shall, on the appointed day, become an officer or other employee, as the case may be, of the. Indian Insurance Company in which the undertaking of that insurer or that part of the undertaking to which the service of the officer or other employee relates has vested, and shall hold his office or service under the Indian Insurance Company 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 employment in the Indian Insurance Company in which the undertaking or part has vested is terminated or until his remuneration, terms and conditions are duly altered by that Indian Insurance Company: Provided that nothing in this sub-section shall apply to any such officer or other employee who has given in writing, notice to the Central Government or to any person nominated in this behalf by that Government before the appointed day intimating his intention of not becoming an officer or employee of the Indian Insurance Company in whom the undertaking or part thereof to which his service relates has vested." 10. By the vesting of Management of the Insurance business in the Central Government under Act No. 17 of 1971 no change was effected in the nature of employment of the employees and the Act did not have the effect of conferring any statutory status on them. See Life Insurance Corporation of India v. Sunil Kumar Mukherji ( AIR 1964 SC 847 ) (supra). 11. The employment being under an agreement and on terms and conditions set out in the letter of appointment Ext. A-30 an ordinary master and servant relationship continued between the parties and the enforcement of the Ordinance or the Act mentioned above did not have the effect of attaching any statutory flavour to the contract of service of the employees. 12. In the light of the above discussion we take up the question of maintainability of the suit. It is well settled that a contract of personal service cannot be enforced by an order for specific performance. 12. In the light of the above discussion we take up the question of maintainability of the suit. It is well settled that a contract of personal service cannot be enforced by an order for specific performance. See Ridge v. Baldwin (1964 AC 40) (supra) and University Council of the Vidyodeya University of Ceylon v. Linus Silva (1965-1 WLR 77) (supra). In Vidya Ram Misra v. Managing Committee Sri Jai Narain College, ( AIR 1972 SC 1450 ) : (1972 Lab IC 829) it was held that "when there is a purported termination of a contract of service a declaration that a contract of service ` still subsisted would not be made in the absence of special circumstances because of the principle that courts do not ordinarily enforce specific performance of contracts of service". The question was again considered by the Supreme Court in Executive Committee of Vaishya Degree College Shamli v. Luxmi Narain, ( AIR 1976 SC 888 ) : (1976 Lab IC 576) and the court by a majority laid down as follows (at p. 586 of Lab IC): "A contract of personal service cannot ordinarily be specifically enforced and a court normally would not give a declaration that the contract subsists and the employee even after having been removed from service can be deemed to be in service against the will and consent of the employer. This rule, however, is subject to three well recognised exceptions: (i) where a public servant is sought to be removed from service in contravention of the provisions of Article 311 of the Constitution of India: (ii) where a worker is sought to be re-instated on being dismissed under the industrial law, and (iii) where a statutory body acts in breach or violation of the mandatory provisions of the statute". The question of non-applicability of Article 311 of the Constitution in the instant case will be dealt with a separate point later. No question of re-instatement under the Industrial law has been pleaded or pressed. Thus the only question requiring consideration as regards the maintainability of the suit at present is whether a statutory body had acted in breach or violation of the mandatory provisions of any statute in the matter of termination of the plaintiffs service. No question of re-instatement under the Industrial law has been pleaded or pressed. Thus the only question requiring consideration as regards the maintainability of the suit at present is whether a statutory body had acted in breach or violation of the mandatory provisions of any statute in the matter of termination of the plaintiffs service. To put it more precisely the question is whether by reason of the fact that the management of Insurance business of Companies and undertakings had been taken over by the Central Government they became statutory bodies and the employees acquired a statutory status. If the plaintiff could claim a statutory right to continue in the post and the order of termination had been passed in violation of any mandatory provision of a statute the third exception to the rule would be attracted. For it two conditions had to be fulfilled : (i) that the body terminating the service was a statutory body, and (ii) the termination was in violation of a statutory rule which was mandatory in character. Neither of them existed in the instant case. A statutory body is a body created by a Statute and not merely functioning or operating under it. See Vaishya Degree College Shamli (supra) and R. Vidya Sabha Kashi v. Krishna Kumar Srivastava (1976-3 SCC 83): (1976 Lab IC 698). The General Insurance (Emergency Provisions) Act, Act 17 of 1971 which was pressed into service on behalf of the respondent was an Act to provide for the management of the General Insurance Business of the companies and undertakings by the Central Government in order to protect the interest of the policy holders of the companies. The ownership of the business still vested in the undertaking and the Act did not have the effect of constituting the companies and undertakings as bodies created by the Statute. Mere control of the Government on the conduct of business of the companies did not convert them into statutory bodies. Accordingly defendants Nos. 1 and 2 did not become such bodies in spite of the control applied to them by Ordinance No. 6 and Act No. 17 of 1971. No breach of any mandatory provision of Statute was pointed out to us by the learned counsel for the respondent in the termination of the plaintiffs services. Accordingly defendants Nos. 1 and 2 did not become such bodies in spite of the control applied to them by Ordinance No. 6 and Act No. 17 of 1971. No breach of any mandatory provision of Statute was pointed out to us by the learned counsel for the respondent in the termination of the plaintiffs services. Learned counsel referred to the provisions of Act No. 17 of 1971 only to show that the Divisional Manager of defendant No. 1 was not the competent authority to terminate the plaintiffs services. We shall deal with that point separately. 13. The case was thus a straightforward case of master and servant and no suit for declaration was maintainable. The decree passed accordingly is unsustainable in law. 14. We now come to the question of Article 311. The Court below has found the plaintiff entitled to its protection. We do not agree. The plaintiff-respondent was the servant of defendant No. 1 which had merged defendant No. 2; they were Companies incorporated under the Companies Act. They did not have statutory character. The fact that the management had been taken over by the Central Government did not result in anything more than ensuring that it would be carried on in a better manner. But the employees of the Companies did not become the employees of the Government. They continued to be the employees of the Companies. See Madan Mohan Lal v. Om Prakash ( AIR 1957 All 384 ). The Companies had their existence independent of the Government by the law relating to Corporation. These could not be regarded as departments of the Government. Article 311 of the Constitution does not apply to servants of Companies even though they may be Government companies or companies controlled by the Government. See Sabhajit Tewary v. Union of India ( AIR 1975 SC 1329 ) : (1975 Lab IC 819) Dr. S. L. Agrawal v. General Manager, Hindustan Steel Ltd. ( AIR 1970 SC 1150 ) : (1970 Lab IC 1029) and Heavy Engineering Mazdoor Union v. State of Bihar ( AIR 1970 SC 82 ) : (1970 Lab IC 212). In Sukhdev Singh v. Bhagatram ( AIR 1975 SC 1331 ) : (1975 Lab IC 881) it was held that the employees of even statutory bodies are not servants of the Union or the State. In Sukhdev Singh v. Bhagatram ( AIR 1975 SC 1331 ) : (1975 Lab IC 881) it was held that the employees of even statutory bodies are not servants of the Union or the State. The plaintiff accordingly was not entitled to the protection of Art. 311 of the Constitution. 15. This brings us to the question of natural justice. We have already discussed the nature of the plaintiffs employment. It was contractual without any statutory flavour attached to it. The dismissal was of a servant by his master, and the question is whether he had to be heard in his defence before the order was passed. It does not, in the words of Lord Reid in Ridge v. Baldwin (1964 AC 40) (supra), "at all depend on whether the master has heard the servant in his own defence, it depends on whether the facts emerging at the trial prove breach of the contract." See also University Council of the Viyodaya University of Ceylon v. Linus Silva (1965-1 WLR 77) (supra). In Ved Prakash Malhotra v. State Bank of India (ILR (1974) 1 Delhi 660) (supra) at p. 671 V. S. Deshpande, J. observed thus : "It is well established that the employer does not have to observe any rules of natural justice in dismissing an employee when the dismissal is according to contract and is not in contravention of any statutory restriction governing the power of dismissal." 16. The question of natural justice is always inextricably linked up with the question of prejudice. We have already seen that the plaintiff's services were terminated, inter alia, on grounds of misconduct involving misappropriation of companys funds. In the plaint no explanation or specific denial of the allegations relating to these charges was made. In the circumstances and in view of the law discussed above we find no force in the plea of violation of the principles of natural justice. 17. We shall now examine the question of one months notice as provided in the contract of service. Lack of such notice does not invalidate a dismissal order. In Barber v. Manchester Regional Hospital Board (1958) 1 WLR 181 at page 195 Barry, J. observed thus: "Mr. 17. We shall now examine the question of one months notice as provided in the contract of service. Lack of such notice does not invalidate a dismissal order. In Barber v. Manchester Regional Hospital Board (1958) 1 WLR 181 at page 195 Barry, J. observed thus: "Mr. Foster rightly said that it could not be suggested that a servant who, by the terms of his contract, was entitled to three months notice on dismissal, could say, if he was instantly dismissed without notice, that that dismissal was ineffective. because no lawful dismissal could take place without the giving of the requisite period of notice." In Special Appeal No. 227 of 1974 decided on 26-8-1974 (Reported in 1975 Lab IC 685) (All) a Bench of this Court held that mere non-giving of one months notice or pay in lieu thereof in terms of a service contract did not invalidate the termination order. The servant was only entitled to one months pay in lieu thereof which he could obtain in due course. In The State of U. P. v. Nisar Ahmad (1975 All LJ 664) : (1975 Lab IC 687) a similar view was taken. 18. This brings us to the last point whether the Divisional Manager was competent to terminate the plaintiffs services. 19. The appointment of the plaintiff-respondent was made by the Divisional Manager of the defendant No. 1. The power to appoint carries with it the power to terminate the services so long as that power is not taken away from the appointing authority. See Dr. Bool Chand v. Chancellor, Kurukshetra University ( AIR 1968 SC 292 ) : (1968 Lab IC 232) and S. R. Tewari v. The District Board, Agra ( AIR 1964 SC 1680 ). The common law rule has received a statutory recognition in S. 16 of the General Clauses Act. In dealing with that provision Mahajan, J. in Kutoor Vengayli Rayappan Nayanar v. Kutoor Vengayli Madhavi Amma (AIR 1950 FC 140) observed thus : "The statute has codified the well understood rule of general law as stated by Woodroffe on Receivers, Edn. 4, that the power to terminate flows naturally and as a necessary sequence from the power to create. In dealing with that provision Mahajan, J. in Kutoor Vengayli Rayappan Nayanar v. Kutoor Vengayli Madhavi Amma (AIR 1950 FC 140) observed thus : "The statute has codified the well understood rule of general law as stated by Woodroffe on Receivers, Edn. 4, that the power to terminate flows naturally and as a necessary sequence from the power to create. In other words, it is a necessary adjunct of the power of appointment and is exercised as an incident to, or consequence of, that power; the authority to call such officer into being necessarily implies the authority to terminate his functions when their exercise is no longer necessary, or to remove the incumbent for an abuse of those functions or for other causes shown." Thus under the general law the Divisional Manager who had appointed the plaintiff was competent to terminate his services. It is not the plaintiffs case that he was not so competent initially. What was pleaded and canvassed was that since the management of insurance business had vested in the Central Government under Ordinance 6 and Act No. 17 of 1971 he had ceased to remain competent to terminate the plaintiffs services who had come under the control of the Central Govt. The learned Judge held that the Divnl. Manager ceased to have the power of management and "when the Divnl. Manager ceased to manage he ceased to have even the power to terminate the services." Thus the main ground for holding the Divisional Manager as incompetent to terminate the plaintiffs service was that the management had vested in the Custodian. We have already held that by the transfer of management of business to the central business the employees of the undertaking did not cease to be employees of the companies. Ordinance 6 or Act 17 of 1971 did not have the effect of making any change in the nature of employment of the companies servants and since they continued to be employees of the Company the Divisional Manager continued to be their disciplinary authority. The Ordinance and the Act while vesting the management in the Central Government prescribed a mode in regard to execution of certain transactions. This is contained in Sections 3 and 4 of the Act, which so far as material read as under : "3. The Ordinance and the Act while vesting the management in the Central Government prescribed a mode in regard to execution of certain transactions. This is contained in Sections 3 and 4 of the Act, which so far as material read as under : "3. Management of undertakings to vest in Government on commencement of this Act (1) On and from the appointed day, the management of the undertakings of all insurers shall vest in the Central Govt, and, pending the appointment of a Custodian for the undertaking of any insurer, the persons in-charge of the management of such undertaking immediately before the appointed day, shall, on and from the appointed day, be in charge of the management of the undertaking for and on behalf of the Central Government; and the management of the undertaking of the insurer shall be carried on by them subject to the provisions contained in sub-ss. (3) and (5) and to such further directions, ;f any, as the Central Government may give to them by notice addressed and sent to the principal officer of the insurer. (2) Any contract, whether express or implied, providing for the management of the undertaking of an insurer, made before the appointed day, between the insurer and any person in charge of the management of such undertaking immediately before the appointed day, shall be deemed to have terminated on the appointed day. (2) Any contract, whether express or implied, providing for the management of the undertaking of an insurer, made before the appointed day, between the insurer and any person in charge of the management of such undertaking immediately before the appointed day, shall be deemed to have terminated on the appointed day. (3) No insurer shall, without the previous approval of the person specified by the Central Government in this behalf in respect of that insurer (hereinafter referred to as the "authorised person"), (a) make any payment or grant any loan otherwise than in accordance with the normal practice observed by him in respect of such matters immediately before the appointed day; (b) incur any expenditure from the assets appertaining to the undertaking otherwise than for the purpose of making routine payments of salaries or commissions to employees, insurance agents or for the purpose of meeting the routine day to day expenditure; (c) transfer or otherwise dispose of any such assets or create any charge, hypothecation, lien or other encumbrance thereon; (d) invest in any manner any moneys forming part of such assets; (e) acquire any immovable property out of any moneys forming part of such assets; (f) enter into any contract of service or agency, whether expressly or by implication, for purpose connected wholly or partly with the undertaking or vary the terms and conditions of any such contract subsisting on the appointed day; (g) enter into any other transaction relating to the undertaking of the insurer other than a contract relating to the transaction of general insurance business or vary the terms and conditions of any agreement relating to any such transaction subsisting at the commencement of this Act. (4) The approval of the authorised person may be given either generally in relation to certain classes of transactions of the insurer or specially in relation to any of his transactions. 4. Power of Central Government to appoint Custodian to take over the management of the undertaking of the insurer- (1) The Central Government may, as soon as it is convenient administratively so to do appoint any person as Custodian for the purpose of taking over the management of the undertaking of an insurer and the person so appointed shall carry on the management of the undertaking of the insurer for and on behalf of the Central Government. (2) On the appointment of a Custodian under sub-s. (1) the charge of management of the undertaking of the insurer shall vest in him and all persons in charge of the management of such undertaking immediately before such appointment shall cease to be in charge of such management and shall be bound to deliver to the Custodian all books of account, registers or other documents in their custody relating to the undertaking of the insurer............" These sections have to be read with reference to the preamble and in its context, in order to find out their true intent and purpose. What had vested in the Government was the management and not the ownership of business of the Undertaking. Management has been defined in Websters New International Dictionary as "the conducting or supervising of something (as a business); the executive function of planning, organizing, co-ordinating; controlling and supervising any industrial, or business project or activity with responsibility for results." The intention behind the Act thus was to substitute the Central Government through the Custodian for the managing body of the undertakings or in other words to substitute the Central Government for the managing agent of the companies, or the person or the body in whom the management had vested prior to the commencement of the Act. After its enforcement the Central Government became the managing body and the powers of the Board of Directors or the Managing Agents as given in the articles of association of the companies got affected. But the vesting of management did not have the effect of substituting the Custodian for the various functionaries acting for and on behalf of the undertakings. It is in this light that we have to examine the scope and effect of the provisions. 20. By the vesting of management by sub-s. (1) of S. 3 any contract providing for the management of the undertakings existing on the appointed day came to an end under sub-s. (2) of S. 3. Sub-sec. (3) of S. 3 then provided for the prior approval of the `authorised person in respect of execution of transactions specified in the various subclauses of the sub-section. Clause (f) deals with transactions relating to services contracts. An approval in respect of variation of terms and conditions of such contracts is required. Sub-sec. (3) of S. 3 then provided for the prior approval of the `authorised person in respect of execution of transactions specified in the various subclauses of the sub-section. Clause (f) deals with transactions relating to services contracts. An approval in respect of variation of terms and conditions of such contracts is required. Plaintiffs case was not that the order lacked the approval and hence was invalid but that it was passed by an authority other than the Custodian. 21. We have found no substance in this plea. The Divisional Manager was the disciplinary authority. He was thus competent to pass the order. He had passed it after discussing the matter with the Custodian. The note below the termination order is as follows: "Head Office for information and to please note that the above noted workers is working against the interest of the Society and there is no way except to get rid of him. The matter has been already discussed verbally with worthy Custodian Shri A. R. Srinivasan who was on tour of our office. Kindly acknowledge receipt." No particular form of approval is prescribed under the Act. It is apparent I from this note that the Custodian had `orally approved of the termination. 22. The learned Judge observed that "by verbal discussions with Custodian there could have been no dismissal and the Divisional Manager has got no power to terminate the services." This was not j a correct approach to the question. If oral approval of the Custodian was obtained to the termination, it fulfilled the I requirement of the Statute. In the pleadings also no plea was raised by the plaintiff that an approval as required by the provisions of the Act was not obtained before the termination order was passed. Thus even if the case falls under the second part of S. 3 (3) (f) the order appears to be in accordance with law. 23. As to the construction of S. 3 (3)(f) it seems to us that it does not touch on the question of constitution of disciplinary authority, it only refers to the mode of exercise of power by the insurer in regard to certain matters. These matters may include variation in the terms and conditions of a contract of service. 23. As to the construction of S. 3 (3)(f) it seems to us that it does not touch on the question of constitution of disciplinary authority, it only refers to the mode of exercise of power by the insurer in regard to certain matters. These matters may include variation in the terms and conditions of a contract of service. Such conditions as regards termination were held by the Privy Council in N. W. F. Provinces v. Suraj Narain ( AIR 1949 PC 112 ) to mean "provisions which prescribe the circumstances under which the employer is to be entitled to terminate the service." There was no alteration in any such provisions and in our opinion the order which was passed on the existing terms and conditions of employment after consultation with the Custodian did not violate the provisions of S. 3 of the Act. The Divisional Manager accordingly competently terminated the plaintiffs services. 24. The suit has been dismissed for damages and expenses by the trial Court and no appeal or cross-objection has been filed by the plaintiff in respect of that part of the decree. As regards the decree passed for declaration we have already held that the suit was not maintainable. The plaintiff is accordingly not entitled to any salary after the termination of his service. The Court below has held that the plaintiff had been paid his salary up to 15-7-1971 except for the deduction made on account of the reduction of his pay from Rs. 500/- to Rs. 350/- by the letter dated 14-6-1971 which is found to be unjustified. We do not find it necessary to consider the question of reduction, on merits as the learned counsel for the appellants has made a statement that for the purpose of this case the appellant would not make any reduction in the plaintiffs salary for the period 1-6-1971 to 7-7-1971 and would pay him at the rate of Rupees 500/- per month instead of Rs. 350/- per month and his account would be adjusted accordingly. In the circumstances and in view of the discussion made above the appeal has to succeed. 25. The appeal is accordingly allowed and the decree of the Court below is set aside. 350/- per month and his account would be adjusted accordingly. In the circumstances and in view of the discussion made above the appeal has to succeed. 25. The appeal is accordingly allowed and the decree of the Court below is set aside. The suit is dismissed except to this extent that in accordance with the undertaking given by the appellants counsel in this Court the balance of the salary of the plaintiff calculated at the rate of Rs. 500/- per month for the period 1-6-1971 to 7-7-1971 after deducting the amount already paid shall be paid to him by the defendant-appellants. In the circumstances of the case the parties shall bear their own costs. The entire court-fee which would have been payable by the plaintiff had he not been permitted to sue as pauper shall be entered in the decree and be payable by him. 26. A copy of the decree prepared shall be sent to the Collector, Dehradun, for necessary action.