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Full Case Details
M.M. DUTT, J. – The said Civil Appeal No. 3214 of 1979 is directed against the judgment of
the Delhi High Court whereby the High Court has quashed a circular dated 8-3-1978 issued
by the Board of Directors of Caltex Oil Refinery (India) Ltd. (‘CORIL’), a Government
Company, on the writ petition filed by the employees of CORIL being Writ Petition No. 426
of 1978.
- The Caltex [Acquisition of Shares of Caltex Refining (India) Ltd. and of the
Undertakings in India of Caltex (India) Ltd.] Act, 17 of 1977 was enacted by the Union
Parliament and came into force with effect from 23-4-1977. The Act provides for the
acquisition of shares of CORIL and for the acquisition and transfer of the right, title and
interest of Caltex (India) Ltd. in relation to its Undertakings in India with a view to ensuring
co-ordinate distribution and utilization of petroleum products. - Under Section 3 of the Act, the shares in the capital of the CORIL stood transferred to
and vested in the Central Government on the appointed day being 30-12-1976. Under Section
5, the right, title and interest of Caltex (India) Ltd. in relation to its Undertakings in India
stood transferred to and vested in the Central Government on the appointed day. Section 9 of
the Act provides that the Central Government may by a notification direct that the right, title
and interest and the liabilities of Caltex (India) Ltd. in relation to any of its Undertakings in
India shall, instead of continuing to vest in the Central Government, vest in the Government
Company either on the date of the notification or on such earlier or later date not being a date
earlier than the appointed day, as may be specified in the notification. Section 11(2) provides
that subject to rules made in this behalf under Section 23, every whole time officer or other
employee of CORIL would on the appointed day continue to be an officer or other employee
of CORIL on the same terms and conditions and with the same rights to pension, gratuity and
other matters as are admissible to him immediately before that day and shall continue to hold
such office unless and until his employment under CORIL is duly terminated or until his
remuneration and conditions of service are duly altered by that company. - The Chairman of the Board of Directors of CORIL issued the. impugned circular dated
8-3-1978, inter alia, stating therein that consequent upon the takeover of the Caltex (India)
Ltd. by the government, the question of rationalization of the perquisites and allowances
admissible to Management Staff had been under consideration of the Board for some time,
and that as an interim measure, the Board had decided that the perquisites admissible to the
Management Staff should be rationalized in the manner stated in the said circular. - At this stage, it may be mentioned that by the Caltex Oil Refinery (India) Ltd. and
Hindustan Petroleum Corporation Ltd. Amalgamation Order, 1978 which was published in
the Gazette of India, Extraordinary, dated 9-5-1978, the Undertaking of CORIL was
transferred to and vested in Hindustan Petroleum Corporation Ltd. which thus became a
Government Company referred to in Section 9 of the Act. - After the issue of the said circular, the respondents 1 to 4, who were some of the
employees of CORIL, filed a writ petition in the Delhi High Court being Civil Writ Petition
224
No. 426 of 1978 challenging the legality and validity of the impugned order. It was submitted
by the said respondents that under the said circular the terms and conditions of service of the
employees of CORIL had been substantially and adversely altered to their prejudice. - At the hearing of the said writ petition before the High Court it was contended on
behalf of respondents 1 to 4 that the notification issued under Section 9 of the Act vesting the
management of the Undertakings of Caltex (India) Ltd. in CORIL was ultra vires subsection
(1) of Section 9. It was contended that the provision of sub-section (1) of Section 11 of the
Act offended against the provisions of Articles 14, 19 and 31 of the Constitution of India and,
as such, it should be struck down. Further, it was contended that there was no valid
classification between the contracts referred to in Section 11(1) and Section 15 of the Act. It
was urged that unguided and arbitrary powers had been vested in the official by subsection (1)
of Section 11 for the alteration of the terms and conditions of service of the employees.
Besides the above contentions, another contention was advanced on behalf of Respondent 1 to
4, namely, that the employees not having been given an opportunity of being heard before
altering to their prejudice the terms and conditions of service, the impugned circular should be
struck down as void being opposed to the principles of natural justice. - All the contentions except the last contention of respondents 1 to 4 were rejected by the
High Court. The High Court, however, took the view that as no opportunity was given to the
employees of CORIL before the impugned circular was issued, the Board of Directors of
CORIL acted illegally and in violation of the principles of natural justice. In that view of the
matter, the High Court quashed the impugned circular. Hence this appeal by special leaves. - It is not disputed that the employees were not given any opportunity of being heard
before the impugned circular dated 8-3-1978 was issued. It is, however, submitted by Mr Pai,
learned counsel appearing on behalf of CORIL, that there has been no prejudicial alteration of
the terms and conditions of service of the employees of CORIL by the impugned circular. It is
urged that nothing has been pleaded by Respondents 1 to 4 as to which clauses of the
impugned circular are to their detriment. The High Court has also not pointed out such
clauses before quashing the impugned circular. It appears that for the first time before us such
a contention is advanced on behalf of CORIL. In this connection, we may refer to an
observation of the High Court which is: “Admittedly, the impugned order adversely affects
the perquisites of the petitioners. It has resulted in civil consequences.” The above
observation clearly indicates that it was admitted by the parties that the impugned circular had
adversely affected the terms and conditions of service of Respondents 1 to 4 who were the
petitioners in the writ petition before the High Court. Mr. Sachar, learned counsel appearing
on behalf of Respondents 1 to 4, has handed over to us a copy of the writ petition filed by
Respondents 1 to 4 before the High Court being Civil Writ Petition No. 426 of 1978. In
paragraph 12 of the writ petition it has been inter alia stated as follows:
“The petitioners respectfully submit that under the said circular the terms and
conditions of service of the employees of the second respondent including the
petitioners herein have been substantially and adversely altered to the prejudice of
such employees. The same would be clear inter alia from the statements annexed
hereto and marked as Annexure IV.”
225 - Annexure IV is a statement of Annual Loss in Remuneration/ Income per
person/employee posted at Delhi and U.P. Nothing has been produced before us on behalf of
CORIL or the Union of India to show that the statements contained in Annexure IV are
untrue. In the circumstances, there is no substance in the contention made by Mr Pai that there
has been no prejudicial alteration of the terms and conditions of service of the employees of
CORIL, and that nothing has been pleaded by Respondents 1 to 4 as to which clauses of the
impugned circular are to their detriment. - One of the contentions that was urged by Respondents 1 to 4 before “the High Court
at the hearing of the writ petition, as noticed above, is that unguided and arbitrary powers
have been vested in the official by sub-section (1) of Section 11 for the alteration of the terms
and conditions of service of the employees. It has been observed by the High Court that
although the terms and conditions of service could be altered by CORIL, but such alteration
has to be made ‘duly’ as provided in sub-section (2) of Section 11 of the Act. The High Court
has placed reliance upon the ordinary dictionary meaning of the word ‘duly’ which, according
to Concise Oxford Dictionary, means ‘rightly, properly, fitly’ and according to Stroud’s
Judicial Dictionary, 4th Edn., the word ‘duly’ means ‘done in due course and according to
law’. In our opinion, the word ‘duly’ is very significant and excludes any arbitrary exercise of
power under Section 11(2). It is now a well established principle of law that there can be no
deprivation or curtailment of any existing right, advantage or benefit enjoyed by agovernment servant without complying with the rules of natural justice by giving the
government servant concerned an opportunity of being heard. Any arbitrary or whimsical
exercise of power prejudicially affecting the existing conditions of service of a government
servant will offend against the provision of Article 14 of the Constitution. Admittedly, the
employees of CORIL were not given an opportunity of hearing or representing their case
before the impugned circular was issued by the Board of Directors. The impugned circular
cannot, therefore, be sustained as it offends against the rules of natural justice. - It is, however, contended on behalf of CORIL that after the impugned circular was
issued, an opportunity of hearing was given to the employees with regard to the alterations
made in the conditions of their service by the impugned circular. In our opinion, the postdecisional opportunity of hearing does not sub-serve the rules of natural justice. The authority
that embarks upon a post-decisional hearing will naturally proceed with a closed mind and
there is hardly any chance of getting a proper consideration of the representation at such a
post-decisional opportunity. In this connection, we may refer to a recent decision of this Court
in K.I. Shephard v. Union of India [(1987) 4 SCC 431]. What happened in that case was that
the Hindustan Commercial Bank, the Bank of Cochin Ltd. and Lakshmi Commercial Bank,
which were private banks, were amalgamated with Punjab National Bank, Canara Bank and
State Bank of India respectively in terms of separate schemes drawn under Section 45 of the
Banking Regulation Act, 1949. Pursuant to the schemes, certain employees of the first
mentioned three banks were excluded from employment and their services were not taken
over by the respective transferee banks. Such exclusion was made without giving the
employees, whose services were terminated, an opportunity of being heard. Ranganath Misra,
J. speaking for the court observed as follows:
226
“We may now point out that the learned Single Judge for the Kerala High Court
had proposed a post-amalgamation hearing to meet the situation but that has been
vacated by the Division Bench. For the reasons we have indicated, there is no
justification to think of a post-decisional hearing. On the other hand the normal rule
should apply. It was also contended on behalf of the respondents that the excluded
employees could not represent and their case could be examined. We do not think
that would meet the ends of justice. They have already been thrown out of
employment and having been deprived of livelihood they must be facing serious
difficulties. There is no justification to throw them out of employment and then give
them an opportunity of representation when the requirement is that they should have
the opportunity referred to above as a condition precedent to action. It is common
experience that once a decision has been taken, there is a tendency to uphold it and a
representation may not really yields any fruitful purpose.” - The view that has been taken by this Court in the above observation is that once a
decision has been taken, there is a tendency to uphold it and a representation may not yield
any fruitful purpose. Thus, even if any hearing was given to the employees of CORIL after
the issuance of the impugned circular, that would not be any compliance with the rules of
natural justice or avoid the mischief of arbitrariness as contemplated by Article 14 of the
Constitution. The High Court, in our opinion, was perfectly justified in quashing the
impugned circular. In the result, Civil Appeal No. 3214 of 1979 is dismissed.
