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PETITIONER: H.L. TREHAN AND ORS. ETC.

       Vs.

RESPONDENT: UNION OF INDIA AND ORS. ETC.

DATE OF JUDGMENT22/11/1988

BENCH: DUTT, M.M. (J) BENCH: DUTT, M.M. (J) NATRAJAN, S. (J) OJHA, N.D. (J)

CITATION:  1989 AIR  568            1988 SCR  Supl. (3) 925  1989 SCC  (1) 764        JT 1988 (4)   464  1988 SCALE  (2)1376  CITATOR INFO :  RF         1992 SC 248  (79)

ACT:     The  Caltex  (Acquisition of shares of  Caltex  Refining (India)  Ltd.  and of the Undertakings in  India  of  Caltex (India)  Ltd.) Act, 1977, ss. 3  and 11--Management  staff-- Rationalisation   of  perquisites  and   allowances--Whether permissible without affording opportunity to staff. %     Administrative  Law--Existing conditions of  service--No deprivation  or curtailment of any existing right, advantage or benefit enjoyed by a government servant without affording an opportunity-Post-decisional opportunity-Whether subserves rules of natural justice.

HEADNOTE:     The  Caltex  (Acquisition of Shares of  Caltex  Refining (India)  Ltd.  and of the Undertakings in  India  of  Caltex (India) Ltd.) Act 17 of 1977. by Section 3 provides for  the acquisition  of shares of Caltex Oil Refinery  (India)  Ltd. (for  short CORIL). Section 11(2) of the Act  provides  that subject to rules made in this behalf under section 23, every whole time officer or other employee of CORIL would, on  the day  of  acquisition,  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.     Consequent upon the taking over of the CORIL on December 30,1976,  the  Chairman of the Board of Directors  of  CORIL issued a circular  dated 8th March, 1978 to the effect  that the perquisites admissible to the management staff of  CORIL should  be  rationalised in the manner stated  in  the  said circular.  At  this  stage  the  undertaking  of  CORIL  was transferred   and   vested  in   the   Hindustan   Petroleum Corporation Ltd.-the appellant in C.A. No. 3214 of 1979.     Respondent  Nos. 1 to 4, employees of CORIL in the  said appeal,  filed  a  writ  petition  before  the  High   Court

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challenging  the  legality  and  validity  of  the  impugned                                                   PG NO 925                                                   PG NO 926 circular  on the ground, inter alia, that the employees  had not  been  given  any  opportunity  of  being  heard  before altering  to  their prejudice the terms  and  conditions  of service  and  therefore   the impugned  circular  should  be struck  down  as  void being opposed to  the  principles  of natural  justice.  The  High Court  accepted  the  aforesaid contention  of  the  respondents and  quashed  the  impugned circular.  Hence this appeal by special leave. Civil  Appeal 3212 of 1979 has been preferred by the respondents. Dismissing the appeals,     HELD:  1.  The  High Court was  perfectly  justified  in quashing  the  impugned circular. 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. [932A-B]     2(i) It is now a well established principle of law  that there  can he no deprivation or curtailment of any  existing right, advantage or benefit enjoyed by a Government  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 condition of service of a  government servant will offend against the  provision  of Article 14 of the Constitution.[930F-G]     2(ii)  The post-decisional opportunity of  hearing  does not subserve the rules of natural justice. The authority who 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.[931A-B]     K.I.  Shephard & Ors. v. Union of India & Ors., JT  1987 600, followed.     In  view of the reasons given in the above appeals,  the Court dismissed C.A. No. 3518 of 1979. [932C]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3212  of 1979 etc.     From the Judgment and Order dated 20.8.1979 of the Delhi High Court in Civil Writ Petition No. 426 of 1978.                                                   PG NO 927     Rajinder   Sachar,  G.B.  Pai,  Narayan   Shetty,   K.T. Anantharaman,   Mrs.  P.S.  Shroff, S.  Shroff,  Ms.  Girija Krishan,  C.C.  Mathur,  A.M. Mittal,  D.N.  Mishra,  Dalbir Bhandari,  Ms. C.K. Sucharita and Ms. A. Subhashini for  the appearing parties.     The Judgment of the Court was delivered by     DUTT, J. Of these three appeals by special leave. we may first  of all deal with Civil Appeal No. 3214 of  1979  for. admittedly, the disposal of that appeal will virtually  mean the disposal of the other two appeals. 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  March  8,  1978  issued  by  the  Board  of Directors  of  Caltex Oil Refinery (India) Ltd.  (for  short ‘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

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(India)  Ltd.  and of the undertakings in  India  of  Caltex (India)  Ltd.)  Act 17 of 1977, hereinafter referred  to  as ‘the Act’, was enacted by the Union Parliament and came into force with effect from April Z3. 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-ordinated distribution and  utilisation of petroleum products.     Under section 3 of the Act, the share in the capital  of the  CORILS stood transferred to and vested in  the  Central Government  On  the appointed day being December  30,  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 (Inida) 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                                                   PG NO 928 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 March 8,  1978,  inter  alia, stating  therein that consequent upon the take over  of  the Caltex  (India)  Ltd.  by the Government,  the  question  of rationalisation of the perquisites and allowances admissible to  Management  Staff had been under consideration   of  the Board  for  sometime, and that as an  interim  measure,  the Board  had  decided that the perquisites admissible  to  the Management Staff should be rationalised 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  May 9,  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  respondent’s Nos. 1 to 4, who were some of the employees of CORIL,  filed a  writ  petition in the Delhi High Court being  Civil  Writ Petition  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 the respondents Nos.  I 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

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section 9. It was contended that the provision of subsection (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 of official by sub-section (1) of section 11  for the                                                   PG NO 929 alteration  of  the terms and conditions of service  of  the employees. Besides the above contentions, another contention was  advanced  on behalf of the respondents Nos.  1  and  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  the respondents Nos. 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 leave.     It is not disputed that the employees were not given any opportunity   of  being heard before the  impugned  circular dated March 8, 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  the respondents Nos. 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  consequence".  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 the respondents Nos. 1     to 4 who were  the petitioners in the writ petition before  the  High Court.  Mr. Sachhar learned Counsel appearing on  behalf  on the  respondents spondents Nos. 1 to 4. has handed  over  to us a copy of the writ petition filed by the respondents Nos. 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 tollows:    "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                                                   PG NO 930 prejudice  of such employees. The same would be clear  inter alia  from  the  statements annexed  hereto  and  marked  as Annexure IV."     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

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been  no prejudicial alteration of the terms and  conditions of  service of the employees of CORIL, and that nothing  has been  pleaded  by the respondents Nos. 1 to 4  as  to  which clauses of the impugned circular are to their detriment.     On of the contentions that was urged by the  respondents Nos.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 Fourth Edition, 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  well established   principle  of  law  that  there  can   be   no deprivation or curtailment of any existing right,  advantage or benefit enjoyed by a Government 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 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   was  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                                                   PG NO 931 circular.  In our opinion, the post-decisional   opportunity of  hearing does not subserve the rules of natural  justice. The  authority  who 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 & Ors. v. Union of  India & Ors.,  JT 1987  (3)  600.  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:     "We  may now point out that the learned Single Judge  of 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

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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  now represent and their  case    could  be examined.  We  do  not think that would  meet  the  ends  of justice. They have already been thrown our of employment and having  been  deprived of livelihood they   must  be  facing serious  difficulties. I here is no justification  to  throw them out of employment and then given 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 yield 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.                                                   PG NO 932     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.     In view of the reasons given in Civil Appeal No. 3214 of 1979, Civil Appeal No. 3518 of 1979 is also dismissed.     Civil Appeal No. 3212 of 1979 has been preferred by  the writ  petitioners  in civil Writ Petition No.  426  of  1978 filed  before the High Court. The writ petitioners  succeded in getting the impugned circular quashed by the High  Court. As the High Court rejected some of the grounds of  challenge to  the  impugned circular, the appeal has  been  preferred. There  is  no  merit  in  this  appeal  and  it  is   wholly misconceived. The appeal is, therefore, dismissed.     There  will  be  no order as to costs in  any  of  these appeals. M.L.A.                             Appeal dismissed.