Skip to content


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

LegalCrystal Citation
SubjectLabour and Industrial
CourtKerala High Court
Decided On
Judge
Reported in(1981)IILLJ189Ker
AppellantCanara Bank and ors.
RespondentAppellate Authority and ors.
Cases ReferredKarunakaran Nair v. Authority
Excerpt:
.....amalgamation of any corresponding new bank with any other new bank, and every scheme made by the central government must be placed before both the houses of parliament. 103. in the first of these decisions, it is true, the supreme court, has held that for the purpose of part iii of the constitution authorities like international air port authority, though a statutory corporation, is an agency ;or instrumentality of the government and as such authority under the control of the government within the meaning of that expression under article 12 of the constitution. therefore, we are unable to agree with the argument of the petitioner's counsel that the nationalised bank like the canara bank or the bank of india will be an establishment under the central government as that expression is..........the fact that the entire share capital of the bank belongs to the government does not make the new bank a government. it has a juristic personality distinct from the state. but at the same time it is linked with it. this is the essential feature of a state undertaking. but it will be difficult to call it an establishment under the government. further the expression 'esablishment' used in section 3 cannot be equated with the undertaking establishment can only mean the group of parsons who form the organisation managing the undertaking. in the matter of policy this establishment may have to obey the directives but in the day-to-day management the state has absolutely no control and never interferes with it. hence it cannot be said that the establishment of these nationalised banks are.....
Judgment:

Viswanatha Iyer, J.

1. One common question arises for consideration in both these cases and that is whether the Canara Bank and Bank of India both nationalised banks are 'establishments under the Central Government' exempted under Section 3(1)(c) of the Kerala Shops and Establishments Act, 1960. The question arose in both the cases because the second respondent in the writ appeal and the first respondent is the original petition moved the Appellate Authority under Section 18 of the Act against the action taken by the concerned Bank terminating their engagements. The Appellate Authority has in the appeal filed by the second res' pendent found that the Canara Bank will not come within the scope of 'establishments under the Central Government' to claim exemption of the provisions of the Act. That view has been affirmed by the learned single Judge in the original petition filed by the Canara Bank against the decision of the Appellate Authority. The Bank of India filed the original petition for a writ of prohibition against the Appellate Authority from proceeding with the appeal filed by the concerned respondent against the action taken by the Bank. They have also taken up the contention that their establishment is 'an establishment under the Central Government' and hence exempted under Section 3 from the scope of the Kerala Shops and Establishments Act. How for this contention raised by both the Banks is correct is the question.

2. According to the counsel for the Banks, under the provisions of the Banking Companies (Acquisition and Transfer of Undertakings; Act 5 of 1970, these Banks have been established and under the scheme of that Act these Banks are under the control of the Central Government and, therefore, the establishments of these Banks are 'establishments under the Central Government.' To understand their contention we have to briefly notice the scheme of the above Act before proceeding further. Under this Act new banks were established and the paid up capital of each new bank was equal to the paid up capital of the existing bank in relation to which the new bank is a corresponding bank. The entire capital of each new bank belong to the Central Government. Each bank is a body corporate with perpetual succession and a common seal with power to hold and dispose of property, to contract and to sue and be sued in its name. The undertakings of the existing banks were transferred to the new banks and the undertaking was deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable. The Head Office of each corresponding new bank shall be at such places as the Central Government may notify. The general superintendence, director and management of the affairs of the new bank shall vest in a Board of Directors constituted by the Central Government Section 3 provides for the new bank to be guided by such directions in regard to matters of policy involving public interest as the Central Government may give. Central Government is also empowered and to make a scheme for carrying out the provisions of the Act with special reference to matters like the capital structure, the constitution of the Board of Directors, the reconstitution of any new bank into two or more corporations, the amalgamation of any corresponding new bank with any other new bank, and every scheme made by the Central Government must be placed before both the Houses of Parliament. The accounts are to be audited by an Auditor appointed by the new bank and the audit report must be presented to the Government and the Central Government has to lay such report before the Parliament. For the purpose of Income-tax Act., a new bank is to be an Indian company in which the public are substantially interested, but at the same time, the provision of law regarding winding up of corporations are not made applicable to the new banks and the power to liquidate the new bank is vested only in the Central Government. This is substantially the scheme of the Banking Companies (Acquisition and Transfer of undertakings) Act, 1970. From this counsel for the new Banks argue that full control of the new banks is practically vested in the Central Government and therefore it is an establishment under the Central Government. Various decisions were cited to show that corporations constituted under legislative enactments have been treated as other authorities and therefore, State within the meaning of Article 12 of the Constitution particularly the decisions of the Supreme Court in Ramana v. I.A. Authority of India 1979-II L.L.J. 217; Som Prakash v. Union of India 1981-I L.L.J. 79 and Ajay Hasia v. Khalid Mujib 1981-I. L.L.J. 103. In the first of these decisions, it is true, the Supreme Court, has held that for the purpose of Part III of the Constitution authorities like International Air Port Authority, though a statutory corporation, is an agency ; or instrumentality of the Government and as such authority under the control of the Government within the meaning of that expression under Article 12 of the Constitution. In the third case even a society registered under the Societies Registration Act has been held to be an authority under the control of the Government for the purpose of Part III of the Constitution. If the State through the instrumentality of another agency, whether created by itself or constituted under any statute violates any provision of Part III of the constitution, that action will be taken as a state action for the purpose of considering the limitations imposed on state .' action by Part III. That is because of the wording of the Article 12 which reads as follows:

12. 'Definition. In this part, unless the context otherwise requires, 'the State ' includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.

3. The veil of the corporate personality of these new banks is not allowed to be pierced except to the extent of finding out the nature of the action taken by the State through them and to see whether that action violates Part III of the Constitution. In other words, in the matter of finding out whether the State action violates any of the fundamental rights the agency or instrumentality through which the State activity is carried on, is identified with the State. To that extent alone the veil of the corporate personality is permitted to be pierced and this is because of the definition of the expression 'State' in Article 12 of the Constitution. In all other respects the separate corporate personality of the State remains in tact. This is clear from the recent decision of the Supreme Court referred to above and also the decision in Ajay Hasia v. Khalid Mujib 1981-I L.L.J. 103.

4. The control of the Government over these nationalised banks, is only limited to matters of policy, for, Section 8 provides that in the discharge of its functions the new bank shall be guided by such directions in regard to matters of policy involving public interest as the Central Government may after consultation with the Governor of the Reserve Bank give. Beyond this provision, there is no scope for identifying a corporation constituted by this Act with the Government. The Corporation as a legal person with the right to hold and acquire property is liable to income-tax as any other Indian citizen and in the matter of day-to-day administration and appointing and dismissing officers and staff it has full freedom and it is not under the Government.

5. The Counsel for the petitioner/ appellant contended that since the capital of the new company belongs to the Government and the Government alone can order dissolution of the company, it is a property of the Government and, therefore, the establishment to manage this property is an establishment under the Government. This contention ignores the fundamental difference between the company and the share - holders of the company. The share-holders are different from the company. They have right over the shares. That does not mean they are part-owners of the company to the extent of their shares, The company has its own separate existence distinct from the share-holders and, therefore, the fact that the entire share capital of the bank belongs to the Government does not make the new bank a Government. It has a juristic personality distinct from the State. But at the same time it is linked with it. This is the essential feature of a State undertaking. But it will be difficult to call it an establishment under the Government. Further the expression 'esablishment' used in Section 3 cannot be equated with the undertaking Establishment can only mean the group of parsons who form the organisation managing the undertaking. In the matter of policy this establishment may have to obey the directives but in the day-to-day management the State has absolutely no control and never interferes with it. Hence it cannot be said that the establishment of these nationalised banks are establishments under the Government. In the Shorter Oxford English Dictionary the meaning of the word 'establishment' as 'an organised staff of employees or servants including or occasionally limited to building in which they are located' was adopted by this Court in Karunakaran Nair v. Authority under the Payment of Wages Act 1972-I LLJ 350. We find that expresses the correct idea of that word used in Section 3 of the Act. Besides this exemption there are five other exemptions and all of them convey the same idea, namely, the staff of employees or servants belonging to a certain concern. The entire concern does not come under the expression ''establishment', but only the group of persons who run the establishment. So even if the undertaking belongs to the Government, by the fact that all the shares of the company are owned by the Government the establishment of that undertaking is not an establishment under the Government. In this view the number of authorities cited at the Bar and all of which equate an instrumentality with the Government for the purpose of Part III of the Constitution have no application to the facts of this case. Therefore, we are unable to agree with the argument of the petitioner's counsel that the nationalised bank like the Canara Bank or the Bank of India will be an establishment under the Central Government as that expression is used in Section 3(1)(a) of the Act.

6. In the same clause Section 3(1)(c)-the establishment under the Reserve Bank of India is exempted. The Reserve Bank of India is also one established under Act 2 of 1934 read along with the Reserve Bank Transfer to Public Ownership Act (Act 62 of 1948). After the 1948 Act which came into force on 1-1-1949 all the shares in the capital of that Bank belonged to the Central Government and the Bank is required to conform to the control of the Government. The provisions in that Act are more or less similar to the Banking Companies (Acquisition and Transfer of under takings) Act 5 of 1970 in regard to surplus profits, liquidation and direction. The Governor and the Deputy Governor are all appointed by the Government. It is that Bank which regulates the issue of Bank notes and keeps the reserves with a view to secure the monetary stability in India, purely a Government function. If the appellant's argument is accepted the Reserve Bank is 'an establishment under the Central Government'. But the State Legislature has not understood it to be so and that is why the establishment under the Reserve Bank of India are exempted separately. That gives a clue to the content of the expression 'establishment' under the Central Government, the content being that it does not take in the establishment of the Nationalised Banks.

7. In Chamber's Dictionary the word 'under' means beneath; below or to a position lower than that of especially vertically lower. This meaning also explains the establishment exempted. Only establishments constituted by the Central Government with freedom to change the set up and also with the freedom to appoint and dismiss the staff can be establishments under the Central Government. But in the case of the Bank of India and the Canara Bank they have their own staff pattern, their own conditions of service unconnected with the Government or the service rules of the Government and so are not establishments under the Central Government. Therefore, we are unable to accept the larger contention put forward by the petitioner's counsel that the establishment of Bank of India or Canara Bank is an establishment under the Central Government To this extent we agree with the decision of Khalid, J., challenged in the writ appeal.

8. It follows the Canara Bank and the Bank of India are not exempted by the Legislature from the provisions of the shops and Commercial Establishments Act. The only point on which the writ petition, OP. 1419 of 1978, is filed by the Bank of India is that the Appellate authority under the Act has no jurisdiction to deal with the appeal filed by an employee of the Bank, That contention is not correct because the Bank is not an exempted establishment. Therefore, the Appellate authority has got jurisdiction under the Act to deal with the appeal. It follows the original petition has to be dismissed. We do so. No costs.

9. But this does not dispose of the appeal. In the writ appeal a further question arises, namely, whether the second respondent is an employee of the Bank. The Bank was advancing money on the security of gold. For this purpose the service of appraisers was necessary and that work was entrusted to experienced goldsmiths. The terms of their engagement were reduced to writing. Exhibit P1. is the contract between Bank and the second respondent. In para 2 of Ext. P-1 it is provided that the second respondent is not an employee, but only an independent contractor. Para 3 provides that he can engage himself in his own business or trade. Para 13 provides for termination of the contract by one month's notice in writing. No salary or wages is payable to him. The stipulation is to pay him at 12 Paise commission per loan amount of Rs. 100. This rate was subsequently revised. There is no age restriction or provision for termination of the engagement on his reaching a particular age. While he was attending to the jewel appraising on this contract in February, 1973, Bank found that there was no space to keep further gold ornaments the issue of gold land was suspended for some time. Therefore, there was no work for the second respondent to do. So the Bank issued notice to the second respondent intimating termination of the contract. The notice was received by the second respondent on 6-2-1973 and according to the Bank the contract of engagement terminated with effect from 6-3-1973. The employee filed an appeal before the Appellate Authority and the latter has found that the terms of Ext. P-1 and the other evidence let in the case justify a conclusion that the second respondent is an employee.

10. In holding that the Appellate Authority said that the applicant was employed principally for doing the work of jewel appraising and by the terms of the agreement he is bound to attend to the work of the Bank during such time or hours as may from time to time be determined by the Bank and notified to him. The Appellate Authority further found that the second respondent is required to attend office everyday from the commencement of the working hours just like any other employee and required to work till the time fixed for public transaction was over. The Appellate Authority also was of the view that the mere fact that the particular employee is working by a contract and receiving wages linked with the quantum of work done does not make him any the less an employee. The mode of payment, monthly, daily or piece rate according to the Appellate Authority is not the criterion to determine the status of the person. The stipulation in the contract that the appellant was not an employee cannot be a ground for concluding that he is not an employee. The fact that his name is not in the acceptance roll, attendance register or list of workman and staff for the year 1972 is according to the authority, also not a deciding factor because the Shops and Commercial Establishments Act does not contemplate that to be an employee his name should be in the said register The Bank Manager exercises control over the appellant just like in the case of other employees. Prior permission was necessary for the appellant as any other employee to avail leave. Para 4 or the contract, Ext. P1 stipulated that the appellant was obliged to observe and obey all regulations, circulars, rules, orders, directions or instructions in force in the Bank or from time to time issued by the Bank or by any person or persons placed in authority over him in respect of or in relation to the work assigned to him. According to the Appellate Authority these facts are sufficient to make him an employee within the meaning of the Act though the contract expressly mentions that he is not an employee. The further fact that the Bank Service Code will not apply to him was also held to be insufficient to hold that he is not an employee. The learned single Judge was of the view that as the Appellate Authority has discussed the materials in detail and as the scope of interference under Article 226 is limited, namely, that the Court will be slow in interfering with the conclusions unless the Court is satisfied that the conclusion are unreasonable or that there is clear error of law committed by the Tribunal, interference is not called with the finding-

11. But we are afraid that the Tribunal has not kept in mind the scope of the definition of the expression 'employee' in the Act to enter a finding that the second respondent is an employee According to the definition the person claiming to be an employee must be one wholly or principally employed in and in connection with any establishment. The terms of Ext. P-1 gives freedom to the second respondent to engage himself in his business for Ext. P-1 limits his availability for work only during certain working hours. Clause 3 of Ext. P-1 is clear on this point. If the person engaged is free to engage himself in the profession to which he belongs, namely, jewellery making or dealing in items of jewellery whether he can still be said to be a person wholly or principally employed in or in connectionwith the establishment requires consideration. The Appellate Authority's finding is only based on the fact that the second respondent has to be in the office during banking hours and he is under the control and supervision of the head of the branch. These have to be looked into in the background of other factors, namely, he is not required to mark any attendance he is not paid any wages or salary as is done to other employees, he is not required to remain in the office after the bank hours are over. Whereas the above conditions are applicable to the staff of the Bank. He is not engaged under any service order. The service Code of the Bank does not apply to him. No age limit for engagement is specified. No sum is deducted for any provident fund or other employee's welfare benefits. He is engaged under a special contract which asserts that none of the provisions of the service Code will apply to him, that he is not an employee but only an independent contractor. He is to work is a particular branch alone and cannot be asked to attend to the work of any other branch unless he agrees. What is required is an assessment of all such facts with reference to the nature of the engagement, the work done by the respondent, the consideration paid for it and the period of his service or engagement. We are not satisfied that there has been a proper consideration of the various factors which are relevant to come to the conclusion whether the 2nd respondent is an employee or not as per the provisions of the Act. This being a matter relating to the jurisdiction of the Appellate Authority we are of the view that a re-consideration of the whole question is called for by the Appellate Authority.

12. In the result this writ appeal is allowed to this extent. The order passed by the learned single Judge and the Appellate Authority are set aside and the Appeal No 13 of 1973 is sent back to the Appellate Authority for a re-consideration of the question whether the second respondent is an employee or not. In the circumstances of this case we make no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //