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Canara Bank and ors. Vs. Appellate Authority and ors. - Court Judgment

LegalCrystal Citation
SubjectBanking;Service
CourtKerala High Court
Decided On
Case NumberO.P. No. 4870 of 1975
Judge
Reported in[1978]48CompCas800(Ker); [1977(35)FLR260]; (1978)ILLJ324Ker
ActsKerala Shops and Commercial Establishments Act, 1960 - Sections 3(1); Constitution of India - Article 226; Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969
AppellantCanara Bank and ors.
RespondentAppellate Authority and ors.
Appellant Advocate T.R. Govinda Wariyar and; K. Ramakumar, Advs.
Respondent Advocate N. Dharmadan and; A.N. Kuttan, Advs.
DispositionPetition dismissed
Cases ReferredL. V. Bank v. L.S.P. Chettiar
Excerpt:
(i) banking - establishment - section 3 (1) of kerala shops and commercial establishments act, 1960 and banking companies (acquisition and transfer of undertakings) act, 1969 - whether bank is establishment owned by government or is one under reserve bank of india (rbi) and comes within exemption in section 3 (1) (c) - government and rbi have effective control over bank for safeguard of bank and interest of general public dealing with banks - mere fact that government have control or assets of bank vest in government or that some high officials of government are on governing body does not make bank establishment under government - bank has its independent existence. (ii) jurisdiction - article 226 of constitution of india - jurisdiction of high court under article 226 while dealing with.....v. khalid, j.1. the petitioners who are the canara bank, its manager of the kanhangad branch and the deputy general manager, western zone, seek the issuance of a writ of certiorari to quash ext. p-6 passed by the first respondent, namely, the appellate authority, constituted under the kerala shops and commercial establishments act, 1960, hereinafter referred to as the act, in an appeal filed by the second respondent, an employee of the bank, whose services were terminated by the bank.2. the canara bank limited was a banking company registered under the indian companies act, 1882. some of the banks were taken over under the banking companies (acquisition and transfer of undertakings) act, 1969, act no. 5 of 1970 (hereinafter referred to as ' the acquisition act'). under section 2f of the.....
Judgment:

V. Khalid, J.

1. The petitioners who are the Canara Bank, its manager of the Kanhangad branch and the deputy general manager, western zone, seek the issuance of a writ of certiorari to quash Ext. P-6 passed by the first respondent, namely, the Appellate Authority, constituted under the Kerala Shops and Commercial Establishments Act, 1960, hereinafter referred to as the Act, in an appeal filed by the second respondent, an employee of the bank, whose services were terminated by the bank.

2. The Canara Bank Limited was a banking company registered under the Indian Companies Act, 1882. Some of the banks were taken over under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, Act No. 5 of 1970 (hereinafter referred to as ' the Acquisition Act'). Under Section 2F of the Act, the Canara Bank is an ' existing bank ' which on the commencement of the Acquisition Act became a ' corresponding new bank'. The bank is a body corporate with power to sue and to be sued in its name.

3. The bank was advancing money on the security of gold. For this purpose the services of appraisers were necessary. Such work was entrusted to experienced goldsmiths. The terms of employment were reduced to writing. In this case, Ext. P-1 is the contract between the bank and the second respondent. In paragraph 2 of Ext. P-1 it is specifically provided that the second respondent is not an employee but only an independent contractor. Paragraph 3 provides that he can engage himself in his own business or trade. Paragraph 13 provides that termination of the contract is by one month's notice in writing. No salary or wages are payable to him. The stipulation is to pay him 12 paise per loan of Rs. 100. There was a subsequent revision of this commission. It is averred in paragraph 3 of the petition that the Service Code which lays down the terms and conditions of service of the employees of the bank is not applicable to the second respondent.

4. Since the bank found that there was no space to keep further gold ornaments, the issue of gold loans was suspended for some time. Therefore, there was no work for the second respondent. The bank, therefore, issued a notice under Clause 13 of Ext. P-1 to the second respondent intimating termination of his service. The notice is dated January 31, 1973. This was received by the respondent on February 6, 1973. The petitioners' case is that the contract of employment thus stood terminated with effect from March 6, 1973.

5. The second respondent filed Shop Appeal No. 13 of 1973 before the 1st respondent under Section 18 of the Act evidenced by Ext. P-2. The petitioner was not originally impleaded. Only the second petitioner was on the party array. It was contended that the Act was not applicable to the Canara Bank and that the second respondent is an independent contractor and not an employee under the bank. The second respondent filed a rejoinder, Ext. P-4. Copies of notes of arguments were supplied. The main contention raised was that the Canara Bank was an establishment under the Government and so was exempted from the provisions of the Act in view of Section 3(1)(c). The 1st respondent passed Ext. P-6 order repelling the above contention and directed re-instatement of the second respondent with back wages. It is this order that is under challenge in this writ petition.

6. The points canvassed before me are three in number : (1) The Canara Bank is an establishment owned by the Government or is one under the Reserve Bank of India and, therefore, comes within the exemption in Section 3(1)(c) of the Act; (2) that the second respondent is not an employee but an independent contractor governed by the conditions laid down in Ext. P-1 and, therefore, termination in accordance with cl, 13 of Ext. P-l cannot be questioned; and (3) if he is an employee, then he, who has passed the age of superannuation cannot invoke the provisions contained in Section 18 of the Act.

7. All these points are answered by the counsel for the State. According to him, the Canara Bank is not an establishment exempted under the Act. The second respondent is an employee. Even if he is described as an independent contractor whose service conditions are not regulated by service conditions of the employees of the bank, for the reason that he is given freedom to work elsewhere, that by itself will not debar him from invoking the provisions of the Act. The alternative plea put forward by the bank that if the petitioner is an employee, he cannot invoke Section 18 is met with the counter plea that the petitioner-bank cannot put forward mutually conflicting contentions to defeat the rightful claims of an employee. Another important objection taken is that the jurisdictional aspect now put forward has not been pointedly taken before the Appellate Authority. There is only a general ground taken that the Appellate Authority has no jurisdiction to dispose of the case. What is contained in ground ' B ' in the Original Petition has not been specifically raised before the Appellate Authority and, therefore, this court will not exercise its jurisdiction under Article 226 in favour of the petitioners, who without adequate reasons did not put forward the plea of absence of jurisdiction before the Appellate Authority.

8. I shall deal with these contentions one by one with reference to the relevant sections of the two Acts mentioned above and to the various authorities cited at the bar.

9. S. 2(4) of the Act defines a commercial establishment as follows:

'' commercial establishment' means a commercial or industrial or trading or banking or insurance establishment, an establishment or administrative service in which the persons employed are mainly engaged in office work, hotel, restaurant, boarding or eating house, cafe or any other refreshment house, a theatre or any other place of public amusement or entertainment and includes such other establishment as the Government may, by notification in the Gazette, declare to be a commercial establishment for the purposes of this Act, but does not include a factory to which all or any of the provisions of the Factories Act, 1948 (Central Act No. 63 of 1948) apply.'

10. Section 2(8) defines an establishment as follows :

' ' establishment' means a shop or commercial establishment.'

11. Section 3(1)(c) reads as follows :

' establishment under the Central or any State Government, local authorities, the Reserve Bank of India and cantonment authorities.' We are here concerned with this sub-section. This sub-section exempts from the operation of the Act, establishments under the Central or any State Government, local authorities, the Reserve Bank of India and cantonment authorities. Without this exemption clause, the definition contained in Section 2(4) extracted above will bring the Canara Bank within ' commercial establishment' contemplated therein. The question is whether the Canara Bank is an establishment under the Central Government or under the Reserve Bank of India.

For a better appreciation of this contention it is necessary to refer to some of the sections of the Acquisition Act. In the definition clause, Section 2(b) defines ' corresponding new bank ' as follows :

' ' corresponding new bank ', in relation to an existing bank, means the body corporate specified against such bank in column 2 of the First Schedule.'

12. Sections 3 and 4 read as follows :

'3. Establishment of corresponding new banks and business thereof.-

(1) On the commencement of this Act, there shall be constituted such corresponding new banks as are specified in the First Schedule......

(3) The entire capital of each corresponding new bank shall stand vested in and allotted to the Central Government.

(4) Every corresponding new bank shall be a body corporate with perpetual succession and a common seal and shall sue and be sued in its name......'

4. Undertaking of existing banks to vest in corresponding new banks.--On the commencement of this Act, the undertaking of every existing bank shall be transferred to, and shall vest in, the corresponding new bank.' From this definition it is clear that every corresponding new bank is a body corporate with perpetual succession and a common seal and shall sue and be sued in its name. Section 4 provides that on the commencement of this Act the undertaking of every existing bank shall be transferred to, and shall vest in, the corresponding new bank. Section 5 deals with the general effect of vesting and the manner in which the transfer or vesting of any asset or liability has to be effected. Section 11(1) lays down the policy to govern the corresponding new bank in the discharge of its functions. What is stated therein is that such banks shall be guided in the discharge of its functions by such directions in matters of policy involving any public interest as the Central Government may, after consultation with the Governor of the Reserve Bank, give. Section 24 deals with power to make regulations. Section 24(1) provides that the board of directors of a corresponding new bank may, after consultation with the Reserve Bank and with the previous sanction of the Central Government, make regulations, not inconsistent with the provisions of this Act and any rule or scheme made thereunder. Section 24(2)(d) deals with the conditions or limitations regarding the employees.

13. From these provisions extracted above one cannot normally come to a conclusion that these provisions declare the banks acquired under the Acquisition Act to be establishment owned by the Government. The provisions do indicate that in some measure both the Central Government and the Reserve Bank have supervision over the banks so acquired. The banks while discharging their functions have necessarily to consult the Reserve Bank and take the previous sanction of the Central Government in appropriate cases. The Act provides for these restrictions for the effective control and supervision of the banks taken over by this Act. But these restrictions do not ipso facto convert the banks as properties of the Government. All that can be said is that both the Central Government and the Reserve Bank have, as it should be, effective control over the banks for the safeguard of the banks and the interest of the general public who deal with the banks.

14. The learned counsel for the second respondent invited my attention to the following authorities in support of his contention that in spite of the fact that the Government exercise control over certain undertakings for effective discharge of their functions, those undertakings do not become properties owned by the Government. The authorities are Madras State Electricity Board v. Commissioner of Labour [1960] II LLJ 357, Madras State Electricity Board v. Commissioner of Labour [1961] 19 FJR 465; I LLJ 297, Electrical Executive Engineer v. S.P. Pankaj [1967] I LLJ 602, State Trading Corporation v. CTO, [1963] 33 Comp Cas 1057 (SC) and S.L. Agarwal v. Hindustan Steel Ltd., AIR 1970 SC 1150.

15. The relevant extract from these judgments can be referred to usefully for appreciating how the learned judges in those cases considered the aspect of the case now put forward before me. In the first two cases the Madras High Court was dealing with the case of the Electricity Board. In Madras State Electricity Board v. Commissioner oj Labour [1960] II LLJ 357, the relevant discussion is at page 361 which is as follows :

' The next question is, whether the clerical staff of the Board could be viewed as an establishment under the Central or State Government within the meaning of Section 4(1)(c) of the Shops and Establishments Act. That the Electricity Act gives the State Government a measure of control over the activities of the Board, which, subject to that control, is an autonomous body, did not admit of any doubt. I do not think it is necessary to discuss in detail the statutory provisions of the Electricity Act to examine the degree of control which the State Government could lawfully exercise. It was clear that the employees of the Board were not emyloyees of the State Government. The clerical employees of the Board constituting an establishment and a commercial establishment within the meaning of Section 2(3) of the Shops and Establishments Act, were not the clerical employees of the State Government, and, therefore, the establishment cannot be viewed as an establishment under the State Government within the meaning of Section 4(1)(c) of the Act. That the Board was under the control of the State Government did not make the employees, employees of the Government, nor did it make the establishment consisting of the clerical employees, an establishment under the State Government. It is the direct relationship of master and servant between the State Government and the persons employed in the establishment or commercial establishment that is necessary to take that establishment outside the scope of the Act under Section 4(1)(c). As I have said, that the State Government can exercise control over the activities of the Board is not enough to view the clerical staff of the Board as constituting an establishment under the State Government. Section 4(1)(c), therefore, does not apply. '

16. and in Madras State Electricity Board v. Commissioner of Labour [1961] 19 FJR 465 ; I LLJ 297, at page 301, as follows:

' The only question that remains to be considered is whether the Electricity Board comes under the exemption provided under Section 4(1)(f). Section 4(1)(f) exempts establishments which are in respect of matters dealt with in this Act governed by a separate law for the time being in force. The contention of the learned counsel for the appellant is that under Section 79 of the Madras Elecricity Supply Act the Board is empowered to make regulations, and the Board has made transitory regulations for regulation of the duties of officers and servants of the Board and their salaries, allowances and other conditionsof service......We are of opinion that the regulations framed under Section 79C of the Act, even if it can be called a separate law, upon which however we express no opinion, are not such as to bring about the exclusion of the applicability of the Madras Shops and Establishments Act'

17. In Electrical Executive Engineer v. S.P. Pankaj [1967] I LLJ 602, the Patna High Court also was dealing with the case of the employees of the Bihar Electricity Board, which was held to be not a local authority.

18. In State Trading Corporation of India Ltd. v. Commercial Tax Officer, [1963] 33 Comp Cas 1057 (SC) the case of the State Trading Corporation was considered by the Supreme Court. It was held in page 1109 that :

' The State Trading Corporation is not a department or organ of the Government of India and can claim to enforce the fundamental rights under Part III of the Constitution against the State as denned in Article 12 thereof. '

19. and in page 1129 as :

' The State Trading Corporation has been constituted not by any special statute or charter but under the Indian Companies Act as a private limited company. It may be wound up by the order of a competent court. Though it functions under the supervision of the Government of India and its directors, it is not concerned with performance of any governmental functions. Its functions being commercial, it cannot be regarded as either a department or an organ of the Government of India. It is a circumstance of accident that on the date of its incorporation and thereafter its entire shareholding was held by the President and the two secretaries to the Government of India. '

20. In S.L. Agarwal v. Hindustan Steel Ltd., AIR 1970 SC 1150, the case of the Hindustan Steel Ltd. was considered by the Supreme Court and the relevant discussion is in paragraph 10, which reads as (page 1153):

' We must, therefore, hold that the corporation which is Hindustan Steel Limited in this case is not a department of the Government nor are the servants of it holding posts under the State. It has its independent existence and by law relating to corporations it is distinct even from its members. In these circumstances, the appellant, who was an employee of Hindustan Steel Limited, does not answer the description of a holder of 'a civil post under the Union' as stated in the article.'

21. The case put forward before me by the bank is in pari materia withthe one put forward in these cases. It cannot be held that the CanaraBank is an establishment owned by the Government. From the mere factthat the Government have some control or that their assets vest in theGovernment or that some high officials of the Government are on thegoverning body, it cannot be said that the bank is an establishment underthe Government. On an analysis of the various sections extracted aboveand with reference to the principles deducible from the authorities citedabove, I am of opinion that the contention of the second respondent (sic)has to fail.

22. The counsel for the petitioners, however, brought to my notice a Division Bench ruling of this court in [1973] K.L.T. Short Notes 22, which is a judgment in A.S. No. 574 of 1972. The learned judges were dealing with the provisions of the Kerala Agriculturists Debt Relief Act, 1970. There is a passing reference in paragraph 2 that the Canara Bank is a corporation owned by the Central Government. The point that was raised in that appeal was whether the amount due is a debt or not within the meaning of Act 11 of 1970. The appeal was disposed of on the, undertaking by the judgment-debtor to pay the decree debt in two instalments. Since there was no discussion about this and the question posed before me in its particular form did not pointedly arise for decision before the Division Bench, it cannot be pressed into service to hold that the Canara Bank is a corporation owned by the Central Government. The stray observation in paragraph 2 was made in an entirely different context from the one that I have to deal with.

23. The second question that has to be considered is what is raised in ground ' B ' in the writ petition.

24. Ground ' B ' reads as follows:

' It is also submitted that the 1st petitioner is an establishment under the Reserve Bank of India within the meaning of Section 3(1)(c) of the Act. The Reserve Bank of India exercises control over the 1st petitioner under various statutes/detailed reference to which would be made at the hearing. On this ground also Section 3(1)(c) of the Act is attracted.'

25. In the counter-affidavit filed by the second respondent it is stated in paragraphs 6 and 7 that the petitioners cannot put forward the question of jurisdiction in this writ petition and that they are estopped from doing so. The second petitioner had in his written statement stated thus:

' This appellant can seek relief, if any, only against Canara Bank, a body corporate, which can sue and be sued in that name under Section 3(4) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. '

26. It is further stated that the Act is not applicable since the appellant is not an employee of the establishment. This point is met in paragraph 7 of the counter-affidavit. The reply affidavit filed by the petitioners has attempted to explain how the case was not properly pleaded before the Appellate Authority.

27. I agree that in such cases, which are not of a civil nature, the meticulous compliance with the law of pleadings cannot be insisted upon. However, it was necessary for the petitioners to have raised this point in the form in which it is raised before me, before the Appellate Authority also clearly and unambiguously. The general submission that the Appellate Authority has no jurisdiction will not be sufficient compliance with the objection that is now raised before me. The objection raised before the Appellate Authority can only be said to be a faint objection in general terms without containing the necessary ingredients. In District Co-operative Wholesale Society v. Deputy Registrar [1975] KLT 589, a Division Bench of this court had in unambiguous terms declared the law regarding the laches on the part of the petitioner in putting forward the question of lack of jurisdiction. I can do no better than extract the following sentences from paragraph 10 of the judgment :

' The decisions of this court already referred to have not, as we understand the decisions, laid down as a rule of law that this court cannot interfere when there is lack of jurisdiction. All that has been laid down is that the discretion will not be exercised in favour of an applicant who did not raise it before the Tribunal or authority and had taken the chance of a decision. We may add that in a given case a petitioner may be able to explain why he was not able to raise the want of jurisdiction before the Tribunal or authority and if this court is satisfied that the explanation is valid and acceptable this court will interfere. Excepting raising the contention that the lack of jurisdiction is a patent one no explanation has been offered by the appellant. If he was vigilant he could have raised the objection before the Deputy Registrar. He has, we think, precluded himself from raising it now by his conduct. This view is in accordance with the consistent view that this court has taken for two decades. We may add that it is difficult to say in all cases whether lack of jurisdiction is latent or patent......... '

28. Krishna Iyer J. has in J. A. Kader v. S. Gulabchand [1975] 2 SCWR 307, observed that courts will not countenance the belated attempts of the parties to put forward a new case which the other side had no clear notice of. Therefore, I hold that the objection that the jurisdictional question was not raised in due time is well founded and the explanation offered to overcome it, is not satisfactory.

29. The last question which needs consideration is whether the second respondent is an employee of the bank or only an independent contractor. The petitioners before me put forward the case alternatively, one relying on Ext. P-1 and the other, accepting the petitioner as an employee of the bank. On the terms of Ext. P-1 it was contended that the second respondent is an independent contractor. The Supreme Court had occasion to. consider the control-tests while dealing with independent contractors. The evolution of law on this aspect has been very much in favour of an employee and the tests have been succinctly laid down by Mathew J. in S.J.T. House v. C.I., Shops & Establishments, [1974] 45 FJR 54; AIR 1974 SC 37 and in much wider terms by Ray C.J. in M.G. Beedi Works v. Union of India, [1974] 45 FJR 168 ; AIR 1974 SC 1832. Mathew J. was dealing with a tailor's case and the discussion in paragraphs 30 and 38 can be usefully read:

' 30. During the last two decades the emphasis in the field has shifted and no longer rest so strongly upon the question of control. Control is obviously an important factor and in many cases it may still be the decisive factor. But it is wrong to say that in every case it is decisive. It is now no more than a factor, although an important one ; See Argent v. Minister of Social Security [1968] 1 WLR 1749 at p. 1759.

38. That the workers are not obliged to work for the whole day in the shop is not very material. There is of course no reason why a person who is only employed part time, should not be a servant and it is doubtful whether regular part-time service can be considered even prima facie to suggest anything other than a contract of service. According to the definition in Section 2(14) of the Act, even if a person is not wholly employed, if he is principally employed in connection with the business of the shop, he will be a 'person employed' within the meaning of the sub-section. Therefore, even if he accepts some work from other tailoring establishments or does not work whole-time in a particular establishment, that would not in any way derogate from his being employed in the shop where he is principally employed.'

30. The learned judge did not deny the benefit to the employee concerned there, in spite of the fact that he was doing other work elsewhere unconnected with the concern where he was employed.

31. Ray C.J. in M.G. Beedi Works v. Union of India, [1974] 45 FJR 168 ; AIR 1974 SC 1832 was dealing with the Mangalore Ganesh Beedi Works. In paragraph 39, the following tests are laid down to declare who is an employee and who an independent contractor :

' 39. Mathew J., speaking for the court, referred to the decisions of this court and English and American decisions and came to these conclusions. First, in recent years the control test as traditionally formulated has not been treated as an exclusive test. Control is an important factor. Second, the organisation test, viz., that the workers attend the shop and work there is a relevant factor. If the employer provides the equipment this is some indication that the contract is a contract of service. If the other party provides the equipment this is some evidence that he is an independent contractor. No sensible inference can be drawn from the factor of equipment where it is customary for servants to provide for their own equipment. Little weight can today be put upon the provisions of tools of minor character as opposed to plant and equipment on a large scale. Third, if the employer has a right to reject the end product if it does not conform to the instructions of the employer and direct the worker to re-stitch it, the element of control and supervision as formulated in the decisions of this court is also present. Fourth, a person can be a servant of more than one employer. A servant need not be under the exclusive control of one master. He can be employed under more than one employer. Fifth, that the workers are not obliged to work for the whole day in the shop is not very material. In the ultimate analysis, it would depend on the facts and circumstances of each case in determining the relationship of master and servant.'

32. With these authoritative pronouncements in view, I have to hold that even granting that the second respondent is an independent contractor under exhibit P-1 and even conceding that he was at liberty to work elsewhere and that he was not bound to be with the Canara Bank always during the office hours, the second respondent is entitled to benefits under the Act.

33. On merits, I may state that the Appellate Authority has discussed the matter in detail in exhibit P-6 and found that the second respondent is an employee under the bank on the evidence and materials available and the nature of work that the second respondent was doing in the Canara Bank. It is well settled that the jurisdiction of this court under Article 226 while dealing with the conclusions of a Tribunal like the Appellate Authority in this case, is limited and this court will be slow in interfering with those conclusions unless this court is satisfied that the conclusions are unreasonable or that there is a clear error of law committed by the Tribunal. I do not find any such in exhibit P-6 order.

34. The petitioners' counsel put forward a new contention at a very belated stage, through the reply-affidavit that if the second respondent is found to be an employee, then he is bound by the service conditions and since he has passed the age of superannuation he cannot invoke the provisions under Section 18 of the Act. This point, it is contended, is contained in ground 'G' of the writ petition. In ground ' G ', it is stated that the first respondent had no jurisdiction to grant relief to the second respondent contrary to the terms of exhibit P-1. In support of this reliance was placed upon L. V. Bank v. L.S.P. Chettiar, AIR 1970 Mad 487. The only answer to this contention would be that the petitioners cannot be allowed to blow hot and cold in the same breath. If the petitioners had consistently put forward the case at all stages that the second respondent was an employee under the bank and is bound by the service conditions of the bank, this contention would have been well-founded. At all relevant times they relied on exhibit P-l and put forward a case that the second respondent was an independent contractor and wanted to deny him the benefits. Not having succeeded in this attempt, it will not be proper for this court to exercise its extraordinary jurisdiction to deny the benefits under an ameliorative legislation to the second respondent on the basis of the vague plea put forward in ground ' G ', attempted to be supported by the reply-affidavit.

35. In the result, the writ petition fails and is dismissed. The parties are directed to suffer their costs.


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