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CASE NO.: Appeal (civil)  4767 of 2006

PETITIONER: Indian Airlines Ltd

RESPONDENT: Prabha D. Kanan

DATE OF JUDGMENT: 10/11/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T (Arising out of SLP(C) No.22189 of 2005) WITH CIVIL APPEAL NO.4768 OF 2006 (Arising out of SLP(C) No. 6997 of 2006) Prabha D. Kanan                                                 \005Appellant Versus Indian Airlines Ltd. & Anr.                                     \005Respondent

S.B. SINHA, J.

       Leave granted in S.L.Ps.

       Constitutionality and/ or validity of Regulation 13 of the Indian  Airlines (Flying Crew) Service Regulations (for short "the Regulations") is  in question in these appeals which arise out of a judgment and order dated  30th August, 2005 passed by the High Court of Bombay in Writ Petition No.  2030 of 2003.

       Indian Airlines Ltd. (Corporation) was constituted under the Air  Corporation Act, 1953 (for short "the 1953 Act).  Regulations were framed  by Appellant No. 1 in the year 1994 by Act No. 13 of 1994.  The Parliament  enacted Air Corporations (Transfer of Undertakings and Repeal) Act, 1994  (for short "the 1994 Act") whereby and whereunder, the right, title and  interest of Indian Airlines were transferred to Indian Airlines Limited.  In  terms of Section 45 of the 1953 Act, the Corporation made Regulations.   Regulation 13 of the said Regulations is in the following terms:

"13.The services of an employee may be  terminated without assigning any reasons to  him/her and without any prior notice but only on  the following grounds not amounting to  misconduct under the Standing Orders, namely: (a)     If he/she is, in the opinion of the Company  (the Board of Directors of Indian Airlines)  incompetent and unsuitable for continued  employment with the Company and such  incompetence and unsuitability is such as to make  his/her continuance in employment detrimental to  the interest of the Company; OR         if his/her continuance in employment  constitutes, in the opinion of the Company (the  Board of Directors of Indian Airlines), a grave  security risk making his/her continuance in service  detrimental to the interests of the Company;

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OR         if in the opinion of the Company (the Board  of Directors of Indian Airlines) there is such a  justifiable lack of confidence which, having regard  to the nature of duties performed, would make it  necessary in the interest of the Company, to  immediately terminate his/her services.         (b)     No employee shall resign from the  employment of the Company without giving six  months notice in writing to the Company of his/  her intention to resign; Provided that Managing Director of the Company  may dispense with or reduce the period of six  months on grounds of continued ill-health of the  employee or such other compelling or  extraordinary circumstances which in the opinion  of the Managing Director warrant such dispensing  with or reduction in the period of notice:

Provided further that the Company will be at  liberty to refuse to accept termination of his/ her  services by an employee where such termination is  sought in order to avoid disciplinary action  contemplated or taken by the Management."

         Different provisions of the Regulations took effect from different  dates, viz., 1.4. 1977, 1.3.1993 and 17.3.1993.

       The question as regards the validity of Rule 9 of the Central Inland  Water Transport Corporation Ltd. Service Discipline and Appeal Rules,  1979 came up for consideration before this Court in Central Inland Water  Transport Corporation Limited and Another v. Brojo Nath Ganguly and  Another [(1986) 3 SCC 156], the relevant portion whereof was as under:

"9. Termination of employment for Acts other than  misdemeanour.\027 (i) The employment of a  permanent employee shall be subject to  termination on three months’ notice on either side.  The notice shall be in writing on either side. The  Company may pay the equivalent of three months’  basic pay and dearness allowance, if any, in lieu of  notice or may deduct a like amount when the  employee has failed to give due notice\005"

         Constitution of India contains a provision for dispensing with an  inquiry in terms of proviso (b) appended to clause (2) of Article 311 of the  Constitution of India in regard to commission of a misconduct on the  grounds specified therein.

       The question as to whether services of a permanent employee can be  terminated on the ground that it was no longer expedient to continue to  employ the employee concerned initially came up for consideration in the  case of Workmen of Hindustan Steel Ltd. and Another v. Hindustan Steel  Ltd. and Others [1984 Supp SCC 554].  A Division Bench of this Court  while comparing the said provisions with the proviso (b) appended to clause  (2) of Article 311 of the Constitution of India opined:

 "\005Power to dispense with inquiry is conferred for  a purpose and to effectuate the purpose power can  be exercised. But power is hedged in with a  condition of setting down reasons in writing why

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power is exercised. Obviously therefore the  reasons which would permit exercise of power  must be such as would clearly spell out that the  inquiry if held would be counter-productive. The  duty to specify by reasons the satisfaction for  holding that the inquiry was not reasonably  practicable cannot be dispensed with. The reasons  must be germane to the issue and would be subject  to a limited judicial review. Undoubtedly sub- article (3) of Article 311 provides that the decision  of the authority in this behalf is final. This only  means that the court cannot inquire into adequacy  or sufficiency of reasons. But if the reasons ex  facie are not germane to the issue namely of  dispensing with inquiry the court in a petition for a  writ of certiorari can always examine reasons ex  facie and if they are not germane to the issue  record a finding that the prerequisite for exercise  of power having not been satisfied, the exercise of  power was bad or without jurisdiction. If the court  is satisfied that the reasons which prompted the  concerned authority to record a finding that it was  not reasonably practicable to hold the inquiry,  obviously the satisfaction would be a veneer to  dispense with the inquiry and the court may reject  the same. What is obligatory is to specify the  reasons for the satisfaction of the authority that it  was not reasonably practicable to hold such an  inquiry. Once the reasons are specified and are  certainly subject to limited judicial review as in a  writ for certiorari, the court would examine  whether the reasons were germane to the issue or  was merely a cloak, device or a pretence to  dispense with the inquiry and to impose the  penalty. Let it not be forgotten what is laid down  by a catena of decisions that where an order casts a  stigma or affects livelihood before making the  order, principles of natural justice namely a  reasonable opportunity to present one’s case and  controvert the adverse evidence must have full  play. Thus even where the Constitution permits  dispensing with the inquiry, a safeguard is  introduced that the concerned authority must  specify reasons for its decision why it was not  reasonably practicable to hold the inquiry."

         It was observed:

"\005It is time for such a public sector undertaking  as Hindustan Steel Ltd. to recast S.O. 32 and to  bring it in tune with the philosophy of the  Constitution failing which it being other authority  and therefore a State under Article 12 in an  appropriate proceeding, the vires of S.O. 32 will  have to be examined. It is not necessary to do so in  the present case because even on the terms of S.O.  32, the order made by the General Manager is  unsustainable."

       The validity or otherwise of the said proviso came up for  consideration before this Court in Union of India and Another v. Tulsiram  Patel [(1985) 3 SCC 398] wherein inter alia it was held:

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"\005Much as this may seem harsh and oppressive to  a government servant, this Court must not forget  that the object underlying the second proviso is  public policy, public interest and public good and  the Court must, therefore, repel the temptation to  be carried away by feelings of commiseration and  sympathy for those government servants who have  been dismissed, removed or reduced in rank by  applying the second proviso. Sympathy and  commiseration cannot be allowed to outweigh  considerations of public policy, concern for public  interest, regard for public good and the peremptory  dictate of a constitutional prohibition\005"

       It was further observed:

"\005Those who formed the Constituent Assembly  were not the advocates of a despotic or dictatorial  form of government. They were the persons who  enacted into our Constitution the Chapter on  Fundamental Rights. The majority of them had  fought for freedom and had suffered imprisonment  in the cause of liberty and they, therefore, were not  likely to introduce into our Constitution any  provision from the earlier Government of India  Acts which had been intended purely for the  benefit of a foreign imperialistic power. After all,  it is not as if a government servant is without any  remedy when the second proviso has been applied  to him. There are two remedies open to him,  namely, departmental appeal and judicial review.  The scope and extent of these remedies will be  considered later in the course of this judgment\005"

       In Brojo Nath Ganguly (supra), Clause (i) of Rule was termed to be a  ’the Henry VIII Clause’.  It was held that it conferred arbitrary and unguided  power upon the Corporation.  It was found to be violative of audi alteram  partem rule of natural justice which was implicit in Article 14 of the  Constitution of India.  It was held to enable the Corporation to discriminate  between the employees and employees.   

       This Court rejected a contention raised on behalf of Appellant therein  that the same pertains to contract and held that even if that be so it was  violative of Section 23 of the Indian Contract Act being containing an  unconscionable term.

       This Court took note of the fact that there were 970 government  companies and its agencies and instrumentalities and they constitute the  largest employer in the country and, thus, a clause like Rule 9(i) in a contract  of employment affecting large sections of the public is harmful and injurious  to the public interest.

       This Court held that no opportunity whatever of a hearing is at all to  be afforded to the permanent employee whose services are to be terminated  in exercise of power.  It rejected the contention that the Board of Directors  would not exercise this power arbitrarily or capriciously as it consists of  responsible and highly placed persons stating:

"\005This submission ignores the fact that however  highly placed a person may be, he must necessarily  possess human frailties\005"

       It, however, appears that it specially referred to the case of Air India  Regulations which had a similar clause.

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       It was observed:

"\005Undoubtedly, in certain circumstances the  principles of natural justice can be modified and,  in exceptional cases, can even be excluded as  pointed out in Tulsiram Patel case.  Rule 9(i),  however, is not covered by any of the situations  which would justify the total exclusion of the audi  alteram partem rule."

       Air India and Indian Airlines who have similar regulations thereafter  amended Regulation 13.   

       A similar question came up for consideration before this Court in  Delhi Transport Corporation v. D.T.C. Mazdoor Congress and Others [1991  Supp (1) SCC 600] wherein this Court specifically referred to Regulation  9(b) of Delhi Road Transport Authority (Conditions of Appointment and  Service) Regulations.   

       Sabyasachi Mukharji, CJ who delivered the minority opinion noticed  the regulation framed by Indian Airlines in the following terms:

"13. The services of an employee are terminable at  30 days on either side or basic pay in lieu: Provided, however, the Corporation will be at  liberty to refuse to accept the termination of his  service by an employee where such termination is  sought in order to avoid disciplinary action  contemplated or taken by the management."

         The learned Chief Justice noticed that the Board of Directors of Indian  Airlines have approved the amendment carried out in Regulation.

       In para 109 of the judgment, the learned Chief Justice opined:

 "109. Efficiency of the administration of these  undertakings is very vital and relevant  consideration. Production must continue, services  must be maintained and run. Efficacy of the  services can be ensured only if manned by  disciplined employees or workers. Discipline,  decency and order will have to be maintained.  Employees should have sense of participation and  involvement and necessarily sense of security in  semi-permanent or quasi-permanent or permanent  employment. There must be scope for  encouragement for good work. In what manner and  in what measure, this should be planned and  ensured within the framework of the Constitution  and, power mingled with obligations, and duties  enjoined with rights, are matters of constitutional  adjustment at any particular evolved stage of the  philosophy of our Constitution."

         B.C. Ray, J. speaking for the majority, however, declared the said rule  to be ultra vires inter alia on the premise that it conferred unbriddled,  uncanalised and arbitrary power without conforming to audi alteram partem  rule of principle of natural justice which was violative of Section 23 of the  Indian Contract Act.

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       Sawant, J. opined:

"233. Both the society and the individual  employees, therefore, have an anxious interest in  service conditions being well defined and explicit  to the extent possible. The arbitrary rules, such as  the one under discussion, which are also  sometimes described as Henry VIII Rules, can  have no place in any service conditions."

       It has been observed:

"In fact, one of the public undertakings, viz.,  Indian Airlines has come out with such regulation  being amended Regulation 13 of its Employees’  Service Regulations, and the same has been placed  on record by them. What is necessary to note in  this connection is that the reading of such  circumstances in the existing regulation would  require its extensive recasting which is  impermissible for the court to do. I know of no  authority which supports such wide reading down  of any provision of the statute or rule/regulation.  For all these reasons the doctrine of reading down  is according to me singularly inapplicable to the  present case and the arguments in support of the  same have to be rejected."

         Sawant, J. while considering the doctrine of reading down noticed:

"\005In fact, one of the public undertakings, viz.,  Indian Airlines has come out with such regulation  being amended Regulation 13 of its Employees’  Service Regulations, and the same has been placed  on record by them. What is necessary to note in  this connection is that the reading of such  circumstances in the existing regulation would  require its extensive recasting which is  impermissible for the court to do. I know of no  authority which supports such wide reading down  of any provision of the statute or rule/regulation.  For all these reasons the doctrine of reading down  is according to me singularly inapplicable to the  present case and the arguments in support of the  same have to be rejected."

         Sawant, J. and Ramaswamy, J. adopted the reasonings of Ray, J.

       The learned Judges, however, did not deal with the question as to  whether Regulation 13 could be said to be ultra vires.

       Amended Regulation also came up for consideration before this Court  in Hari Pada Khan v. Union of India and Others [(1996) 1 SCC 536] wherein  while referring to Hindustan Steel Ltd. (supra) and Tulsiram Patel (supra),  this Court opined:

"5. The doctrine of principle of natural justice has  no application when the authority concerned is of  the opinion that it would be inexpedient to hold an  enquiry and that it would be against the interest of  security of the Corporation to continue in

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employment the offender-workman when serious  acts are likely to affect the foundation of the  institution. In Union of India v. Tulsiram Patel, a  Constitution Bench of this Court upheld the  validity of the similar provisions under Article 311  of the Constitution. Recently, in SLP (C) No.  11659 of 1992 the matter had come up before this  Court on 13-11-1995, where the validity of a pari  materia provision was questioned. This Court  upheld the validity stating that the above clause  will operate prospectively. 6. A contention has been raised by Mr  Krishnamani that in Tulsiram Patel case this Court  had upheld the validity of the rule subject to the  principle of natural justice. It is needless to  mention that the principle of natural justice  requires to be modulated consistent with the  scheme of the rules. It is settled law that the  principle of natural justice cannot supplant but can  supplement the law. In that view of the matter, the  rule having been made to meet specified  contingency the principle of natural justice by  implication, stands excluded. We do not think that  the rule is ultra vires of Articles 14 and 21 as  stated earlier."

       In the amended Regulation 13, care had been taken to set out the  circumstances in which the services of an employee can be terminated by  way of discharge without holding enquiry and it took stock of eventualities  which do not constitute misconduct and yet retention of an employee in the  service by the management for any one of the grounds mentioned in the said  regulation might be considered as detrimental for the management or against  public interest.   

       The question again came up for consideration before this Court in  Basudeo Tiwary v. Sido Kanhu University and Others [(1998) 8 SCC 194]  wherein Rajendra Babu, J. opined:

"9. The law is settled that non-arbitrariness is an  essential facet of Article 14 pervading the entire  realm of State action governed by Article 14. It has  come to be established, as a further corollary, that  the audi alteram partem facet of natural justice is  also a requirement of Article 14, for natural justice  is the antithesis of arbitrariness. In the sphere of  public employment, it is well settled that any  action taken by the employer against an employee  must be fair, just and reasonable which are the  components of fair treatment. The conferment of  absolute power to terminate the services of an  employee is an antithesis to fair, just and  reasonable treatment. This aspect was exhaustively  considered by a Constitution Bench of this Court  in Delhi Transport Corpn. v. D.T.C. Mazdoor  Congress1.  11. In the light of these principles of law, we have  to examine the scope of the provision of Section  35(3) which reads as follows: "35. (3) Any appointment or promotion made  contrary to the provisions of the Act, statutes, rules  or regulations or in any irregular or unauthorised  manner shall be terminated at any time without  notice."

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12. The said provision provides that an  appointment could be terminated at any time  without notice if the same had been made contrary  to the provisions of the Act, statutes, rules or  regulations or in any irregular or unauthorised  manner. The condition precedent for exercise of  this power is that an appointment had been made  contrary to the Act, rules, statutes and regulations  or otherwise. In order to arrive at a conclusion that  an appointment is contrary to the provisions of the  Act, statutes, rules or regulations, etc., a finding  has to be recorded and unless such a finding is  recorded, the termination cannot be made, but to  arrive at such a conclusion necessarily an enquiry  will have to be made as to whether such  appointment was contrary to the provisions of the  Act etc. If in a given case such exercise is absent,  the condition precedent stands unfulfilled. To  arrive at such a finding necessarily enquiry will  have to be held and in holding such an enquiry, the  person whose appointment is under enquiry will  have to be issued a notice. If notice is not given to  him, then it is like playing Hamlet without the  Prince of Denmark, that is, if the employee  concerned whose rights are affected is not given  notice of such a proceeding and a conclusion is  drawn in his absence, such a conclusion would not  be just, fair or reasonable as noticed by this Court  in D.T.C. Mazdoor Sabha case1. In such an event,  we have to hold that in the provision, there is an  implied requirement of hearing for the purpose of  arriving at a conclusion that an appointment had  been made contrary to the Act, statute, rule or  regulation etc. and it is only on such a conclusion  being drawn, the services of the person could be  terminated without further notice. That is how  Section 35(3) in this case will have to be read."

         Yet again in Uptron India Ltd. v. Shammi Bhan and Another [(1998)  6 SCC 538] Saghir Ahmad, J opined that the principles of natural justice  must be complied with and the employee concerned must be informed of the  grounds for which action was proposed to be taken against him for  overstaying the leave.  [See also State of Punjab v. Jagir Singh, (2004) 8  SCC 129 & V.C. Banaras Hindu University and Ors. v. Shrikant, 2006 (6)  SCALE 66]

       Keeping in view the aforementioned legal principles, we may notice  the factual matrix of the matter.

       Prabha D. Kanan (Respondent) joined service of the Corporation as an  Air Hostess on 28th September, 1977.  She was promoted as Deputy  Manager in Inflight Service Department.  On 18th June, 2002.  She was put  on duty in Flight IC-617-961 operating on sector Mumbai \026 Hyderabad \026  Bangalore \026 Sharjah.  When the flight landed at Hyderabad, she along with  other crew members went for customs clearance from the Departure Hall to  board the connecting flight being Flight No. 961 from Hyderabad to Sharjah  via Bangalore.  Immediately after take off, it was called back at the request  of the Customs Authorities.  Respondent was asked to deplane by Custom  Authorities.  She was arrested for carrying Indian currency amounting to Rs.  22,07,978/- along with foreign currency, viz., 180 UAE Dirhams, 13>  Kuwaiti Dirhams, 3 Bahraini Dirhams and 20 Nepali Rupees.  She is said to  have made a confessional statement before the Custom Authorities in terms  of Section 108 of the Customs Act that she had been carrying unauthorisedly

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the said amount.  Her husband on the basis of her statement was also  arrested.  The arrest of Respondent and her involvement in a racket of  dealing in foreign exchange in violation of Foreign Exchange and  Regulation Act was extensively reported in newspapers on 19th June, 2002.   Respondent was released on bail on 3rd July, 2002.  Her services were  terminated invoking Regulation 13 of the Regulations by the Board of  Directors of the Corporation by a letter dated 9th August, 2002 stating:

"This is to inform you that the Board of Directors  of Indian Airlines Ltd. has decided to terminate  your services with immediate effect under  Regulation 13 of Service Regulations applicable to  you.  Accordingly, your services stand terminated  with immediate effect from 09.08.2002.  Though  you are not entitled to any notice or salary in lieu  thereof in terms of Regulation 13, however, a  cheque No. 354551 dated 09.08.2002 for Rs.  21,734/- is enclosed."

       A writ petition was filed by Respondent before the High Court of  Delhi.  In its judgment dated 30th August, 2005, while rendering Regulation  13 as ultra vires, it was held:

"We have noted the relevant judgments.  We have  to note that the incident leading to termination is  not denied by the petitioner, she had accepted the  guilt at least initially and the criminal trial is still  pending.  Considering that the serious allegations  are found worthy of acceptance by the Board of  Directors, we do not think that we should compel  the Board of Directors to reinstate such an  employee in whom they have obviously lost  confidence.  She will, however, have to be  compensated monetarily.  By now, the rates of  interest have gone down considerably and nearly  to half of what is mentioned in O.P. Bhandari’s  case (supra).  This being so, if the petitioner is to  be adequately compensated, we direct that she be  paid six years’ salary towards both back wages as  well as for loss of employment in future.  This will  be on the basis of her last drawn basic pay and  dearness allowance.  Respondents will pay the  petitioner the amount refunded by her towards the  provident fund and gratuity also with interest at the  rate provided under the statutes governing them.   This should be the appropriate compensation for  the termination of her services and loss of  employment considering that she has about 10  years of service hereafter\005"

       Mr. Arun Jaitley and Mr. Lalit Bhasin, learned senior counsel  appearing on behalf of the Corporation would submit:

(i)      that the High Court committed a manifest error in holding   Regulation 13 to be unconstitutional insofar as it failed to take into  consideration that the same does not confer any unguided or arbitrary  power.   (ii)    Regulation 13, it was pointed out, does not speak of misconduct.  It  speaks of justifiable lack of confidence having regard to (a)  incompetence, (b) unsuitability and (c) security.  Regulation, thus,  provides for the specific contingencies specified therein.   (iii)   An assessment of such contingencies is required to be made by the  highest available authority.  What would be the material for arriving at

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a conclusion is a reasonable apprehension that the act on the part of  the employee would be detrimental to the interest of the country.   (iv)    The High Court also failed to take into consideration the history of the  precedents of this Court as also how the Regulation was amended  having regard to the directions issued by this Court in Hindustan Steel  Ltd. (supra).  Strong reliance in this behalf has been placed on Ajit  Kumar Nag v. General Manager (PJ) Indian Oil Corporation Ltd.  Haldia and Others [(2005) 7 SCC 764].  

       Mr. Uday Umesh Lalit, learned senior counsel appearing on behalf of  Respondent, per contra would submit:

(i)     that Regulation of Air India was not saved by Section 8 of the 1994  Act.   (ii)    Reference of the amended Regulation in Delhi Transport Corporation  (supra) itself would not be a ground for upholding the validity thereof.   (iii)   Regulation 13 is arbitrary as no reason is required to be assigned as to  which of the provisions had been applied.   (iv)    When an extraordinary power has been conferred keeping in view the  objective criteria laid down therein, it was obligatory on the part of  the Corporation to spell out as to how they were invoking the said  extraordinary rule which was not rule.   (v)     It was in that sense contended that not only reasons were required to  be assigned but opportunity was also required to be given for making  a representation.   (vi)    Extraordinary power cannot be invoked except in a case of security  risk.  It may not be permissible to invoke the said power only on the  purported ground of "justifiable lack of confidence".   (vii)   Only because power has been conferred upon a high authority, the  same by itself is not a ground to uphold the constitutionality of the  provision.  Had there been a provision for complying with the  principles of natural justice, the same would have been a solace to the  employee.  Our attention was drawn to a decision of this Court in  Institute of Chartered Accountants of India v. L.K. Ratna and Others  [(1986) 4 SCC 537] wherein the provisions of Chartered Accountants  Act, 1949 were upheld opining that although no hearing was required  to be given but such a hearing had been provided for by the Appellate  Authority.  (viii)  The question as regards the applicability of the principles of natural  justice would depend upon the facts and circumstances of each case.   Strong reliance in this behalf has been placed on Babubhai & Co. and  Others v. State of Gujarat and Others [(1985) 2 SCC 732]. (ix)    In any event, even in relation to quantum of compensation, the High  Court should have taken into consideration that she had put in 20  years of service.  While doing so, the attending circumstances were  also required to be considered, viz., she had checked in her baggage;  she was already in the cabin; the suit case was found in the baggage  handling area; and she was said to be the owner of the unclaimed suit  case which was denied and disputed.  She although had made  confession but the same was retracted.  She was found to be not guilty  not only in the adjudicating proceedings but also in the criminal case.

       In that view of the matter, she should be directed to be reinstated in  service with full backwages.

       Respondent was holding a very high ranking post.  She was incharge  of a flight.  Admittedly, a suit case was found which was booked by her,  which, however, remained unclaimed.  The Custom Authorities found the  same.  Only Respondent was singled out as the owner of the suit case.  It is  not in dispute that the suit case contained a large sum of money including  foreign currencies.  Whoever be the owner thereof did not make any  declaration is regard thereto.  Rs. 22 lakhs were recovered.  She was arrested  only on her confession.  Thereafter only, the impugned order was passed.

       The Board of Directors consisting of five directors, viz., Shri Sunil

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Arora , Chairman & Managing Director, IAL, Shri V. Subramanian, Jt.  Secretary & Financial Advisor, Ministry of Civil Aviation, Shri J.N. Gogoi,  Offg. Managing Director, Air India, Shri S.K. Narula, Chairman, Airports  Authority of India and Shri P.P. Vora, Chairman, IDBI, passed the  impugned order.   

       Evidently, there is no provision for appeal since the decision is taken  by the highest authority of the corporate entity, viz., Board of Directors  which includes the Chairman also.  Appellant is a body corporate.  No   appeal can be made against the order passed by the Chairman and the Board  of Directors.  The order being passed by a highest authority, the question of  providing for appeal would not arise.  Even in Tulsiram Patel (supra), this  Court held that no appeal would be available from an order passed by the  President of India.  Regulation 13 is invoked when the termination of the  services is effected by reason of some act on the part of the employee which  does not amount to misconduct.  It can be invoked:

(i)     where an employee is rendered incompetent and unsuitable. (ii)    where continuance in employment may also constitute a grave  security risk. (iii)   where there is justifiable lack of confidence. (iv)    where lack of confidence must have a direct correlation to the  nature of duties performed. (v)     where the Board must consider it to be necessary in the interest of  the Corporation to immediately terminate the services of the  employee concerned.

       The provisions, therefore, provide for inbuilt safeguards.   

       In Ajit Kumar Nag (supra), a Three-Judge Bench of this Court had the  occasion to construe Standing Order 20(vi) of the Certified Standing Orders  of Indian Oil Corporation which reads as under:  

"Where a workman has been convicted for a  criminal offence in a court of law or where the  General Manager is satisfied for reasons to be  recorded in writing, that it is neither expedient nor  in the interest of security to continue the workman,  the workman may be removed or dismissed from  service without following the procedure laid down  under III of this clause."

         The court noticed that standing Order No. 32 in Hindustan Steel Ltd.  (supra) was more or less similar to Standing Order 20(vi) of the certified  standing of Respondent, therein.  Strong reliance was placed by Appellant  for advancing the contention that the said clause was ultra vires in Hari Pada  Khan (supra).  This Court, however, opined:

 "26. We are unable to accept the contention. It is  true that in Hari Pada Khan this Court upheld the  order of dismissal by expressly observing that it  would be subject to result of trial but what Mr Rao  forgets is that in Hari Pada Khan the power was  exercised by the General Manager not under the  second part of Standing Order 20(iv), but under the  first part thereof, which covered cases of  conviction of a workman for a criminal offence.  The second part dealt with satisfaction of the  General Manager about the expediency of not  keeping a workman in service. Since the power  was exercised by the General Manager on the first  part and the basis was registration of a criminal  case against the workman, obviously, this Court

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was justified in observing that when the action was  taken on the basis of pendency of a criminal case,  the action of dismissal of the workman must abide  by the result of the trial. The facts of the case  before us are totally different. In this case, the  General Manager has exercised the power under  the second part of Standing Order 20(vi) which  empowered him to take action on satisfaction for  reasons to be recorded in writing that it was not in  the interest of security to continue the workman in  service. The direction in Hari Pada Khan therefore,  does not apply to the factual matrix of the present  case for claiming relief by the appellant."           Referring to Tulsiram Patel (supra), this Court held that as security of  a State is not involved and a limited power is conferred upon the General  Manager being the highest administrative head of the Corporation, it cannot  be contended that the power had been conferred upon a petty officer of the  Corporation.  It was further opined:   "35. We are equally not impressed and hence  unable to uphold the contention that clause (vi) of  Standing Order 20 confers a blanket or uncanalised  power on the General Manager. In our judgment,  sufficient guidelines and safeguards have been  provided in the Standing Orders themselves, such  as (i) the power is conferred on the highest  administrative head of the Corporation; (ii)  eventualities have been specifically and expressly  stated in clause (vi) of Standing Order 20; (iii)  satisfaction of the General Manager that such an  eventuality has arisen; (iv) recording of reasons in  writing; and (v) right of appeal against the decision  of the General Manager. Such a provision, in our  considered view, cannot be held arbitrary or  unreasonable, violative of Article 14 of the  Constitution."

         The Court further opined that even in absence of an appeal, the  employee is not remediless as a power of judicial review would be  applicable.

       As has been held by this Court in Ajit Kumar Nag (supra), per se, the  provisions cannot be held to be arbitrary or discriminatory.

       Although all persons comprising of the Board of Directors would have  human frailties, as has been observed by this Court in Brojo Nath Ganguly  (supra) but a provision for appeal cannot be made from the highest  authorities.   

       Regulation provides for simpliciter discharge.  It does not debar any  employee from being reappointed.  By such simpliciter discharge, the  employee concerned would not be debarred from obtaining appointment  elsewhere.  Power can be exercised only in interest of the company.  In a  case of this nature, requirements to comply with principles of natural justice  as such may not be practicable.   

       In Institute of Chartered Accountants of India (supra), it was stated:  

 "14. Our attention has been invited to the  difference between the terms in which Section  21(3) and Section 21(4) have been enacted and, it  is pointed out, that while in Section 21(4)

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Parliament has indicated that an opportunity of  being heard should be accorded to the member,  nowhere in Section 21(3) do we find such  requirement. There is no doubt that there is that  difference between the two provisions. But, to our  mind, that does not affect the questions. The  textual difference is not decisive. It is the  substance of the matter, the character of the  allegations, the far-reaching consequences of a  finding against the member, the vesting of  responsibility in the governing body itself, all these  and kindred considerations enter into the decision  of the question whether the law implies a hearing  to the member at that stage."

         It was further observed:

"17. It is then urged by learned counsel for the  appellant that the provision of an appeal under  Section 22-A of the Act is a complete safeguard  against any insufficiency in the original proceeding  before the Council, and it is not mandatory that the  member should be heard by the Council before it  proceeds to record its finding. Section 22-A of the  Act entitles a member to prefer an appeal to the  High Court against an order of the Council  imposing a penalty under Section 21(4) of the Act.  It is pointed out that no limitation has been  imposed on the scope of the appeal, and that an  appellant is entitled to urge before the High Court  every ground which was available to him before  the Council. Any insufficiency, it is said, can be  cured by resort to such appeal. Learned counsel  apparently has in mind the view taken in some  cases that an appeal provides an adequate remedy  for a defect in procedure during the original  proceeding. Some of those cases as mentioned in  Sir William Wade’s erudite and classic work on  Administrative Law 5th Edn. But as that learned  author observes (at p. 487), "in principle there  ought to be an observance of natural justice  equally at both stages", and "If natural justice is violated at the first stage, the  right of appeal is not so much a true right of appeal  as a corrected initial hearing: instead of fair trial  followed by appeal, the procedure is reduced to  unfair trial followed by fair trial." And he makes reference to the observations of  Megarry, J. in Leary v. National Union of Vehicle  Builders. Treating with another aspect of the point,  that learned Judge said: "If one accepts the contention that a defect of  natural justice in the trial body can be cured by the  presence of natural justice in the appellate body,  this has the result of depriving the member of his  right of appeal from the expelling body. If the rules  and the law combine to give the member the right  to a fair trial and the right of appeal, why should he  be told that he ought to be satisfied with an unjust  trial and a fair appeal? Even if the appeal is treated  as a hearing de novo, the member is being stripped  of his right to appeal to another body from the  effective decision to expel him. I cannot think that  natural justice is satisfied by a process whereby an

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unfair trial, though not resulting in a valid  expulsion, will nevertheless have the effect of  depriving the member of his right of appeal when a  valid decision to expel him is subsequently made.  Such a deprivation would be a powerful result to  be achieved by what in law is a mere nullity; and it  is no mere triviality that might be justified on the  ground that natural justice does not mean perfect  justice. As a general rule, at all events, I hold that a  failure of natural justice in the trial body cannot be  cured by a sufficiency of natural justice in an  appellate body." The view taken by Megarry, J. was followed by  the Ontario High Court in Canada in Re Cardinal  and Board of Commissioners of Police of City of  Cornwall. The Supreme Court of New Zealand  was similarly inclined in Wislang v. Medical  Practitioners Disciplinary Committee, and so was  the Court of Appeal of New Zealand in Reid v.  Rowley."

       In Babubhai & Co. (supra), this Court held:

"6. It cannot be disputed that the absence of a  provision for a corrective machinery by way of  appeal or revision to a superior authority to rectify  an adverse order passed by an authority or body on  whom the power is conferred may indicate that the  power so conferred is unreasonable or arbitrary but  it is obvious that providing such corrective  machinery is only one of the several ways in which  the power could be checked or controlled and its  absence will be one of the factors to be considered  along with several others before coming to the  conclusion that the power so conferred is  unreasonable or arbitrary; in other words mere  absence of a corrective machinery by way of  appeal or revision by itself would not make the  power unreasonable or arbitrary, much less would  render the provision invalid. Regard will have to  be had to several factors, such as, on whom the  power is conferred \027 whether on a high official or  a petty officer, what is the nature of the power \027  whether the exercise thereof depends upon the  subjective satisfaction of the authority or body on  whom it is conferred or is it to be exercised  objectively by reference to some existing facts or  tests, whether or not it is a quasi-judicial power  requiring that authority or body to observe  principles of natural justice and make a speaking  order etc.; the last mentioned factor particularly  ensures application of mind on the part of the  authority or body only to pertinent or germane  material on the record excluding the extraneous  and irrelevant and also subjects the order of the  authority or body to a judicial review under the  writ jurisdiction of the Court on grounds of  perversity, extraneous influence, mala fides and  other blatant infirmities. Moreover all these factors  will have to be considered in the light of the  scheme of the enactment and the purpose intended  to be achieved by the concerned provision. If on an  examination of the scheme of the enactment as  also the purpose of the concerned provision it is

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found that the power to decide or do a particular  thing is conferred on a very minor or petty officer,  that the exercise thereof by him depends on his  subjective satisfaction, that he is expected to  exercise the power administratively without any  obligation to make a speaking order then, of  course, the absence of a corrective machinery will  render the provision conferring such absolute and  unfettered power invalid. But it is the cumulative  effect of all these factors that will render the  provision unreasonable or arbitrary and liable to be  struck down. In three of the decisions referred to  by counsel where the concerned provision was  struck down the cumulative effect of several  factors that were present in each was taken into  consideration by the Court, while in C.R.H.  Readymoney case the provision was held to be  valid."   

       But, in a case of this nature although there is no provision for appeal,  but even in a judicial review, the court may require the employer to produce  the records, on a perusal whereof the court may come to a finding as to  whether the order passed by the Board of Directors was bona fide or not.

        A judicial review of such an order would be maintainable.  In a case  of judicial review, where no appeal is provided for, the High Court in  exercise of its jurisdiction under Article 226 of the Constitution of India  would not confine its jurisdiction only to the known tests laid down therefor,  viz., illegality, irrationality, procedural impropriety.  It has to delve deeper  into the matter.  It would require a deeper scrutiny.

       We may notice that keeping in view the situational changes and,  particularly, outsourcing of the sovereign activities by the State, this Court  has been expanding the scope of judicial review.  It includes the misdirection  in law, posing a wrong question or irrelevant question and failure to consider  relevant question.  On certain grounds judicial review on facts is also  maintainable.  Doctrine of unreasonableness has now given a way to  doctrine of proportionality.

       In S.N. Chandrashekar v. State of Karnataka [(2006) 3 SCC 208], this  Court observed:  

"33. It is now well known that the concept of error  of law includes the giving of reasons that are bad  in law or (where there is a duty to give reason)  inconsistent, unintelligible or substantially  inadequate. (See de Smith’s Judicial Review of  Administrative Action, 5th Edn., p. 286.) 34. The Authority, therefore, posed unto itself a  wrong question. What, therefore, was necessary to  be considered by BDA was whether the  ingredients contained in Section 14-A of the Act  were fulfilled and whether the requirements of the  proviso appended thereto are satisfied. If the same  had not been satisfied, the requirements of the law  must be held to have not been satisfied. If there  had been no proper application of mind as regards  the requirements of law, the State and the Planning  Authority must be held to have misdirected  themselves in law which would vitiate the  impugned judgment. 35. In Hindustan Petroleum Corpn. Ltd. v. Darius  Shapur Chenai this Court referring to Cholan  Roadways Ltd. v. G. Thirugnanasambandam6

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held: (SCC p.   637, para 14) "14. Even a judicial review on facts in certain  situations may be available. In Cholan Roadways  Ltd. v. G. Thirugnanasambandam this Court  observed: (SCC p.       253, paras 34-35) ’34. \005 It is now well settled that a quasi-judicial  authority must pose unto itself a correct question  so as to arrive at a correct finding of fact. A wrong  question posed leads to a wrong answer. In this  case, furthermore, the misdirection in law  committed by the Industrial Tribunal was apparent  insofar as it did not apply the principle of res ipsa  loquitur which was relevant for the purpose of this  case and, thus, failed to take into consideration a  relevant factor and furthermore took into  consideration an irrelevant fact not germane for  determining the issue, namely, that the passengers  of the bus were mandatorily required to be  examined. The Industrial Tribunal further failed to  apply the correct standard of proof in relation to a  domestic enquiry, which is "preponderance of  probability" and applied the standard of proof  required for a criminal trial. A case for judicial  review was, thus, clearly made out. 35. Errors of fact can also be a subject-matter of  judicial review. (See E. v. Secy. of State for the  Home Deptt.) Reference in this connection may  also be made to an interesting article by Paul P.  Craig, Q.C. titled "Judicial Review, Appeal and  Factual Error" published in 2004 Public Law,  p.788."

       Yet again in State of U.P. v. Sheo Shanker Lal Srivastava [(2006) 3  SCC 276], this Court observed:

"24. While saying so, we are not oblivious of the  fact that the doctrine of unreasonableness is giving  way to the doctrine of proportionality. 25. It is interesting to note that the Wednesbury  principles may not now be held to be applicable in  view of the development in constitutional law in  this behalf. See, for example, Huang v. Secy. of  State for the Home Deptt. wherein referring to R.  v. Secy. of State of the Home Deptt., ex p Daly it  was held that in certain cases, the adjudicator may  require to conduct a judicial exercise which is not  merely more intrusive than Wednesbury, but  involves a full-blown merit judgment, which is yet  more than ex p. Daly requires on a judicial review  where the court has to decide a proportionality  issue."

         Although it is of not much relevance but the history in relation to such  regulation assumes importance in view of the fact that this Court in  Hindustan Steel Ltd. (supra) directed framing of Regulation in the light of  proviso (b) appended to Clause (2) of Article 311 of the Constitution of  India.  Regulation 13 has been amended accordingly.   

       So far as the justifiability of the impugned order is concerned, we are  of the opinion that the following facts are required to be taken into  consideration.   

       Respondent was holding a post of trust and confidence.  She had been

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issued a ’Red Airport Entry Pass’ which gave unrestricted access to all civil  airports in India and flying to other countries on the network of Indian  Airlines.  Any doubt on the integrity of the person holding such a post of  trust and confidence may shake the confidence of the employer.  If such  activities are permitted, the same in a given case may provide for risk not  only to the aircraft but also to a large section of people.  The subjective  satisfaction of the Board of Directors was based on the confession she made  and the evidences collected by the Directorate of Enforcement.  The fact that  subsequently she had been exonerated or she had been discharged from the  criminal case may not be of much significance as the validity of the order  must be judged having regard to the fact situation as was obtaining on the  day on which the same was passed.  We have noticed in the final order dated  13th December, 2005, the Custom Excise and Service Tax Appellate  Tribunal, South Zonal Branch at Bangalore exonerated Respondent.

       However, having regard to the fact that there was no evidence as to  why she carried the suit case from Mumbai or she had been handed over the  suitcase at Hyderabad and keeping in view the nature of investigation carried  out by the Customs Authorities, the penalties imposed on her under Section  114 (i) of the Customs Act was held to be not sustainable stating:

"Summing up, we find:- (i)     The investigation into this episode is not  very thorough; (ii)    The reason for abandoning the currency has  not been brought out; (iii)   There is no evidence to establish that the  Appellants made an attempt to export the currency. (iv)    The statements do not appear to have been  given voluntarily; (v)     The currency was neither seized from the  possession of the Appellants nor from the aircraft; (vi)    The test to prove an ’attempt’ to illegally  export as laid down in the case of Mohd. Yakub  has not been proved."

       In the criminal case, no charge was framed.  Respondent was  discharged only on the ground that she had not been found liable in the civil  proceedings.   

       Appellant in the said proceedings had no role to play.  We, therefore,  are of the opinion that Regulation 13 is intra vires.  We are bound by the  decision of this Court in Ajit Kumar Nag (supra).  The Board of Directors, in  the aforementioned fact situation, must be held to have public interest in  mind.       

       In Kanhaiyalal Agrawal and Others v. Factory Manager, Gwalior  Sugar Company Ltd. [(2001) 9 SCC 609], whereupon Mr. Lalit placed  strong reliance, this Court upheld the findings of the Industrial Court as also  the High Court that the principles for invoking loss of confidence in the  employee based on  objective criteria , viz., (i) that the workman is holding a  position of trust and confidence; (ii) by abusing such position, he commits  acts which results in forfeiting the same; and (iii) to continue him in service  would be embarrassing and inconvenient to the employer or would be  detrimental to the discipline or security of the establishment; stood satisfied.

       True, loss of confidence cannot be subjective but there must be  objective facts which would lead to a definite inference of apprehension in  the mind of the employer regarding trustworthiness of the employee and  which must be alleged and proved.  But, then all the criteria mentioned  therein are present in the instant case.

        The question which now arises is as to whether the Regulation 13 is  applicable to the case of Respondent.  Section 45 of the 1953 Act provides  for regulation making power of the Corporation.  It extends to the terms and

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conditions of service of officers and other employees of the Corporation  other than the Managing Director and officers of any other categories  referred to in Section 44 of the 1953 Act.  Regulations were framed pursuant  to or in furtherance of the said regulation making power.  Regulation 13, as  it stood earlier, did not contain any power in the Board of Directors to  terminate the services of an employee.  Regulation 13 speaks of lack of  confidence.  Regulation 13 came into force with effect from 1.3.1993.   Respondent indisputably was appointed prior thereto.

       A question arose as to whether by reason of the repealing provisions  contained in the 1994 Act, the Regulations framed under the 1953 Act  survives and consequently the exercise of powers under Regulation 13 shall  be void ab initio.

       Our attention has been drawn to a decision of this Court in Air India  v. Union of India and Ors. [JT 1995 (5) SC 578] wherein it was held:

"Section 8 of the 1994 Act does not in express  terms save the said Regulations, nor does it  mention them. Section 8 only protects the  remuneration, terms and conditions and rights and  privileges of those who were in Air India’s  employment when the 1994 Act came into force.  Such saving in undoubtedly "to quieten doubts" of  those Air India employees who were then in  service. What is enacted in Section 8 does not  cover those employees who joined Air India’s  service after the 1994 Act came into force. The  limited saving enacted in Section 8 does not, in our  opinion, extent to the said Regulations."

       The said decision was rendered when a question was raised as to  whether standing orders framed under Industrial Employment (Standing  Orders) Act, 1946 survives the regulation making power.  It was held that  the regulations have ceased to be effective on 29th January, 1994 and, thus,  regulation making power no longer survives.

       Mr. Bhasin would submit that the provisions of the Regulations would  apply to Respondent as:

(i)     She never disputed the application of the Regulations. (ii)    A Special Leave Petition covering the same area being SLP (C) No.  2230-31 of 2005 is pending before this Court.

       As at present advised, we do not intend to enter into the said  controversy.  The judgment of this Court in Air India (supra) is binding on  us.  We have, therefore, no other option but to hold that Regulation 13 would  not apply to the case of Respondent.  However, despite the same, we are of  the opinion that the interest of justice would be subserved if the nature of  relief to Respondent granted by the High Court is upheld.

       We, therefore, hold that although Regulation 13 is not  unconstitutional but the same is not applicable in case of Respondent.   However, we are furthermore of the opinion that in the peculiar facts and  circumstances of this case and keeping in view the fact that she had put in 20  years of service she be paid eight years’ salary towards both back wages as  well as for loss of employment in future.  This will be on the basis of her last  drawn basic pay and dearness allowance.  The Corporation will pay  Respondent the amount refunded by her towards the provident fund and  gratuity at the rate of interest provided under the Statutes governing them.   The relief granted to Respondent shall, in our opinion, subserve the interest  of justice.

       Both the appeals are allowed in part and to the extent mentioned

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hereinbefore.  No costs.