United Commercial Bank v. V. J. T. Vyali — 1977 DIGILAW 71 (CAL)

JUDGMENT Mukharji, J. Vibhakar Jyesh Taram Vyas, the respondent no.1 joined services under the then United Commercial Bank in or about May, 1948. He was promoted as an officer in the said Bank in or about July, 1963. In January, 1973 he was transferred to the Silchar Branch of the United Commercial Bank. The said respondent had been provided with accommodation in 'the staff quarters at No.1, Alipore A venue, Calcutta. He was asked to vacate the said quarters repeatedly on his transfer. He did not do so. In the premises, by a letter dated 6th of March; 1974 the said respondent's services were terminated by the Bank with immediate effect and he was offered along with the termination letter a cheque for Rs, 1,064/- by way of his emoluments in lieu of a month's notice. In the meantime the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 came into force on or about 31st of March, 1970. The said Act was to provide for the acquisition and transfer of the undertakings of certain banking companies and the United Commercial Bank was one of such banking companies. The said Act provides that all the sections of the Act except section 21 should be deemed to have come into force on the 19th of July, 1969. On the coming into operation of the- said Act, section 3 provides, that there shall be constituted such corresponding new bank as were specified in the first schedule. For the United Commercial Bank Ltd. the corresponding new bank was the United Commercial Bank. In the premises the United Commercial Bank Ltd. became what is known in popular parlance a nationalised bank. Section 4 of the said Act stipulates that on the commencement of the Act the undertaking of every existing bank shall be transferred to and shall vest in the corresponding new bank. It is not necessary to refer in detail to the other provisions of the Act. Section 5 deals with the general effect of the vesting; section 6 deals with the payment of compensation; sections 7, 8 & 9 provide for the management of the corresponding new banks; section 10 deals with the closure of accounts and disposal of profits and there were other incidental provisions. Section 5 deals with the general effect of the vesting; section 6 deals with the payment of compensation; sections 7, 8 & 9 provide for the management of the corresponding new banks; section 10 deals with the closure of accounts and disposal of profits and there were other incidental provisions. Sub-section (2) of section 12 is relevant for the present purpose and is to the following effect: "(2) Save as otherwise provided in sub-section (1) officer or other employee of an existing bank shall become, on the commencement of this Act, an officer or other employee, as the case may be, of the corresponding new bank and shall hold his office or service in that bank 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 the undertaking of the existing bank had not been transferred to and vested in the corresponding new bank and continue to do so unless and untill his remuneration, terms or conditions are duly altered by the corresponding new bank." Section 19 gave the Board of Directors of the corresponding new bank power to make regulations. Clause (d) of sub-section (2) of section 19 authorises the making of rules providing for conditions or limitations subject to which the corresponding new bank may appoint advisors, officers or other employees and fix their remuneration and other terms and conditions of service. 2. Being aggrieved by the letter of termination dated 6th of March, 1974 aforesaid the respondent no. 1 made an application under Article 226 of the Constitution and obtained a rule nisi. The said rule came up for hearing before Amiya Kumar Mookerji, J. and by a judgment delivered and order passed the learned Judge has quashed the order of termination and has made the rule nisi absolute. This appeal arises out of the aforesaid decision of the learned trial Judge. 3. In his judgment the learned trial Judge has held that in the absence of any contract the respondent no.1's services could not be terminated by one month's notice in lieu of salary without complying with the principles of natural justice. The learned Judge has, further, held that the principles of natural justice had not been complied with in the instant case. The learned Judge has, further, held that the principles of natural justice had not been complied with in the instant case. On behalf of the appellants it was contended before us that the learned trial Judge was in error in holding that the services of the respondent no.1 could not be terminated by giving one month's notice in lieu of salary without complying with the principles of natural justice. It was urged on behalf of the appellant no. 1 that the terms and conditions of the respondent no.1's employment with the United Commercial Bank were contained in Annexure A to the petition under Article 226 of the Constitution. But neither Annexure A nor any document indicated that there was any term in the contract of employment of the respondent no.1 which provided that the services of the respondent no.1 could be terminated by one month's notice or by tendering one month's salary in lieu of such notice. It appears that in this case there was no term of contract or employment providing for the contingencies or the manner of termination of employment of the respondent no. l. In these circumstances the question is was the respondent no. 1 entitled to make any grievance under Article 226 of the Constitution of the termination of his service without compliance with the principles of natural justice. On behalf of the appellant it was contended that there was no regulation, statutory or otherwise, which enjoined that rules of natural justice should be followed in case of termination of employment by the bank of its employee. Therefore, it was urged that even if the termination was wrongful the respondent was at best entitled to complain about breach of contract and claim damages in respect thereof and was not entitled to maintain any application under Article 226 of the Constitution. In aid of this submission reliance was placed on the decision in the case of (1) Indian Airlines v. Sukhdeo Rai, AIR 1971 SC 1828 where the Supreme Court held that the Air Corporation Act, 1953 did not cast any obligation upon the Indian Airlines Corporation to appoint employees under any particular type of contract or to terminate them on specific grounds. Therefore, the Supreme Court observed that the corporation employee even though dismissed in contravention of the regulation made under the Act could not get such dismissal declared as null and void. Therefore, the Supreme Court observed that the corporation employee even though dismissed in contravention of the regulation made under the Act could not get such dismissal declared as null and void. In this case we are not concerned with the questions whether regulations made by a statutory corporation have statutory effect or whether violation of such regulations can be remedied by an appropriate order under Article 226 of the Constitution. We have noticed that clause (d) of sub-section (2) of section 19 authorises the making of regulations dealing with the terms and conditions of service of the employees. Such regulations had not been made at the relevant time. Therefore, we are not concerned with the question as to what would have been the effect if there was any breach of such regulation. We have also noticed clause (2) of section 12 of the Act. It provides that the employee of an existing bank shall become employee of the corresponding new bank on the same terms and conditions and on the same rights and would continue to enjoy those terms and conditions until the employment of the employee is terminated under the new bank. The effect of clause (2) of section 12 of the Act is that until termination or until modification of the terms and conditions by proper regulation by the nationalised bank an employee of the erstwhile bank would continue to enjoy his rights and privileges of employment on the same terms. It did not specifically provide for the method of termination. From one point of view, therefore, it could be said that if the erstwhile bank had the right to terminate the services of its employee then the nationalised bank has also the same right. The only consequence would be that an employee might institute proceeding for wrongful termination if the termination is wrongful. We have noticed the purpose of the Act. It is a social legislation intended to take over the business and management of commercial banks. The employees of such banks come within the purview of public employment. In the case of (2) Sirsi Municipality v. C.K.F. Tellis, AIR 1973 SC page 855 the Supreme Court observed that employment under statutory bodies differed from ordinary private employment. The Supreme Court at page 887 of the report observed that the cases of dismissal of a servant fell under three board heads. In the case of (2) Sirsi Municipality v. C.K.F. Tellis, AIR 1973 SC page 855 the Supreme Court observed that employment under statutory bodies differed from ordinary private employment. The Supreme Court at page 887 of the report observed that the cases of dismissal of a servant fell under three board heads. The first head related to relationship of master and servant governed purely by contract of employment. Any breach of contract in such a case was enforced by suit for wrongful dismissal and damages. Just as a contract of employment was not capable of specific performance; similarly, breach of contract of employment was not capable of finding a declaratory judgment of subsistance of employment. The second type of cases of master and servant arose under the industrial law. The third category of cases of master and servant was with regard to servant in the employment of the State or other bodies or local authorities or bodies created under the statutes. It was observed that in the case of a servant of the State or of a local authority or the statutory bodies courts had declared in appropriate cases the dismissals to be invalid if the dismissals were contrary to the rules of natural justice or if the dismissal were in violation of the provisions of the statutes. The rationale for the aforesaid view is that courts prevent the use of arbitrary power by statutory bodies and one way to make them prevent using arbitrary power is to make them conform to the principles of natural justice in appropriate cases. It was, further, observed in that case that the courts kept the State and the Public authorities within the limits of their statutory power. In the case of (3) Malloch V. Aberdeen Corporation, 1971 (1) WLR 1578, Lord Wilberforce observed as follows :- "A comparative list of situations in which persons have been held entitled or not entitled to a hearing, or to observation of rules of natural justice, according to the master and servant test, looks illogical and even bizarre. A specialist surgeons denied protection which is given to a hospital doctor, a University professor, as a servant has been denied the right to be heard, a dock labourer and an undergraduate have been granted it, examples can be multiplied. A specialist surgeons denied protection which is given to a hospital doctor, a University professor, as a servant has been denied the right to be heard, a dock labourer and an undergraduate have been granted it, examples can be multiplied. One may accept that if there are relationships in which all requirements of the observance of rules of natural justice are excluded (and I do not wish to assume that this is inevitably so), these must be confined to what have been called, "pure master and servant cases," which I take to mean eases in which there is no element of public employment or service, no support by statute, nothing in the nature of an office a status which is capable of protection. If any of these elements exist, then in my opinion, whatever the terminology used, and even though in some inter partes aspects the relationship may be called that of master and servant, there may be essential procedural requirements to be observed, and failure to observe them may result in a dismissal being declared to be void." The aforesaid observations were quoted with approval by the Supreme Court in the case of (4) Sukhdev Singh v. Bhagatram, AIR 1975 SC 1331 . Having regard to the ratio of the aforesaid decision, in our opinion, after the nationalisation of the banks the respondent no 1 acquired a status as a public servant and in terminating the service of the respondent no 1 which affected the status of public employment the same must be done in consonance with the principles of natural justice. On behalf of the appellants it was contended that there was no warrant for the view that termination of contract of employment should be in conformity with the principles of natural justice. Quite apart from the question of any regulations it appears to us that employment under the nationalised bank is public employment and such an employee gets a status. (See the observations of the Supreme Court in the aforesaid case of Sukhdev Singh v. Bhagatram, AIR 1975 SC page 1331 at page 1357 paragraph 116). Termination of contracts which affect the status of employees in public employment must therefore be in consonance with the principles of natural justice. (See the observations of the Supreme Court in the aforesaid case of Sukhdev Singh v. Bhagatram, AIR 1975 SC page 1331 at page 1357 paragraph 116). Termination of contracts which affect the status of employees in public employment must therefore be in consonance with the principles of natural justice. Learned Advocate for the appellants contended, however, that in the absence of any rule for disciplinary action contract of employment could be terminated by an employer and violation of the principles of natural justice, if any, would not entitle an employee to seek relief under Article 226 of the Constitution. In this connection reliance was placed on the case of (5) Lekh Raj v. Union of India, AIR 1971 SC page 2111. There the Supreme Court held that a person holding a civilian post which was connected with the defence and for which he was paid a salary from the defence estimates could not claim protection under Article 311 of the Constitution. He was not entitled to invoke principles of natural justice even under general Jaw of master and servant. At page 2114 of the report the Supreme Court observed that as regards the applicability of the rule of natural justice it had not been shown to the Supreme Court how under the general law of master and servant, in the absence of any protection under Article 311 of the Constitution, such a rule could be invoked. Learned Advocate for the appellants relied on the aforesaid observations in aid of the submission that, in the absence of any question of protection under Article 311 of the Constitution, under the general law of master and servant the rule of natural justice has no application. It is not in dispute that in the instant case Article 311 of the Constitution has no application. It appears that in the subsequent decision of the Supreme Court to which reference has been made and which dealt with the question of status of employee in statutory corporation the aforesaid decision of the Supreme Court in the case of Lekh Raj v. Union of India, (supra) had not been referred to. It appears that in the subsequent decision of the Supreme Court to which reference has been made and which dealt with the question of status of employee in statutory corporation the aforesaid decision of the Supreme Court in the case of Lekh Raj v. Union of India, (supra) had not been referred to. It appears to us that in the said decision the Supreme Court was not concerned with the question of status of public employment and therefore where an employee does not enjoy the status of public employment under general law of master and servant perhaps no question of natural justice arises, in the absence of any specific rule. In the aforesaid background the said observations of the Supreme Court have to be understood. For the reasons mentioned hereinbefore we are, therefore, of the opinion that termination of employment in public employment or interference with the status of an employee in public employment, even in the absence of any specific rule, must be in conformity with the principles of natural justice. 4. "In the aforesaid background the next question that arises for consideration in this case is, whether there has been any violation of such principles of natural justice. Natural justice has no strait jacket. The application of the principles of natural justice would depend upon the facts and the circumstances of a particular case. The basic concept of natural justice so far as relevant for the present purpose is that no man should be condemned unheard, he should be informed of the allegations or the basis upon which action detrimental to him is proposed to be taken and he is given an opportunity of making his representation or presenting his view point to these allegations and consideration of that representation or view point before action detrimental to him is taken. In this case the facts are clear. 5. The respondent no. 1 had been allotted accommodations in the staff quarters at Alipore while he was in the employment of the bank at Calcutta. On his transfer he was required and asked to vacate that quarters. He was given an opportunity to vacate that quarters. In this case the facts are clear. 5. The respondent no. 1 had been allotted accommodations in the staff quarters at Alipore while he was in the employment of the bank at Calcutta. On his transfer he was required and asked to vacate that quarters. He was given an opportunity to vacate that quarters. He had made representation as to why he was unable to vacate his quarters namely, the difficulty of the education of his children, his own illness and illness in the family, his inability or difficulty in finding suitable accommodation at Sikhar to shift his family. The bank had this representation before the impugned letters of termination was issued. The bank or the authorities of the bank were not convinced of the genuineness or of the bonafides of the explanation and therefore decided to terminate his services. The aforesaid position could emerge if reference is made to the letters dated 29th July, 1973 (A3 to the petition, page 27 of the Paper Book), 15th November, 1973 (Annexure B to the petition, page 28 of the Paper Book), 21st November, 1973 (annexure C to the petition, page 29 of the Paper Book), 6th March 1974 (annexure X to the supplementary affidavit, page 50 of the Paper book) and 21st December, 1974 (Page 66 of the Paper Book). It further appears that the respondent no. 1 did not like his transfer to Sirchar. There was the allegation about the respondent no. 1's brother and his wife residing in the Alipore flat alloted to the said respondent. The said allegation has not been very satisfactorily denied by the said respondent. In this connection reference may be made to the statements in paragraph 4 of the affidavit in opposition of Chatur Kalachand Dalvani (page 79 to 85 of the Paper Book), paragraph 8 of the said affidavit at pages 87, 88 of the Paper Book and to the affidavit in reply of the respondent no. 1, especially paragraph 18(b) of the said affidavit at pages 106N or the Paper Book. In the aforesaid background it cannot be said that the respondent no. 1 has been condemned unheard, though no formal charge sheet or show cause notice had been issued and no formal enquiry held. In the premises, it cannot be said that there has been, in the facts and circumstances of the case, violation of any principle of natural justice. In the aforesaid background it cannot be said that the respondent no. 1 has been condemned unheard, though no formal charge sheet or show cause notice had been issued and no formal enquiry held. In the premises, it cannot be said that there has been, in the facts and circumstances of the case, violation of any principle of natural justice. This conclusion is quite apart from and independent of the question whether on the alleged ground and under the terms of employment of the respondent no.1 there could have been lawful termination of the employment of respondent no.1. Under sub-section (2) of section 12 the respondent no.1 continued to be employed on the same terms as he was before the nationalisation. He, however, as discussed above, acquired a status of an employee in public employment. That status could not be interferred with except in consonance with the principles of natural justice and in accordance with regulations if framed. In this case no regulations had been framed. But until the regulations are framed if an employee had right to claim damages for breach of contract that right remains unaffected under section 12(2) of the Act. In the aforesaid view of the matter this appeal must be allowed and the judgment of the learned trial Judge is set aside. The application under Article 226 of the. Constitution is accordingly dismissed. There will however be no order as to costs. This order, however, will not prejudice the respondent no. 1 from taking such proceeding in law as he is otherwise entitled to. No order need be passed on the connected application which shall be deemed to have been disposed of. Dutt, J. : I agree.