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K. Chelliah Vs. Chairman Industrial Finance Corporation of India and anr. - Court Judgment

LegalCrystal Citation
SubjectService
CourtChennai High Court
Decided On
Case NumberWrit Petition No. 1162 of 1970
Judge
Reported inAIR1973Mad122
ActsIndustrial Finance Corporation Act, 1948 - Sections 10, 41-A and 43; ;Constitution of India - Article 226
AppellantK. Chelliah
RespondentChairman Industrial Finance Corporation of India and anr.
Cases ReferredNageswara Rao v. State of Andhra Pradesh
Excerpt:
service - natural justice - sections 10, 41-a and 43 of industrial finance corporation act, 1948 and article 226 of constitution of india - appeal against termination of service dismissed by director board of company - decision to terminate petitioner's service taken by chairman - chairman also member of board which considered appeal - impugned proceeding vitiated by non observance of principles of natural justice - impugned decision set aside. - - nangia, the chairman of the corporation, after scrutinizing the report of the enquiry officer, was satisfied that the findings of the enquiry officer as to the commission of acts of misconduct by the petitioner were correct and found the petitioner guilty of certain charges, gave him the benefit of doubt in respect of certain other charges.....order1. the petitioner was last serving as inspector in the industrial finance corporation of india, he having joined the service of the corporation in 1950 as a clerk. on june 24, 1965, an order of suspension was served on him and he was so suspended on the alleged ground that he committed acts of criminal misconduct by claiming the cost of the ticket for travel after inspection of sree rajendra mills limited. salem in september, 1964, even though the company had paid the same. thereafter, on december 26, 1966, he was served with a memorandum of charges and as many as eight charges were leveled against him and he was called upon to explain. according to the respondents, the petitioner violated regulation 20 (i) of the staff regulations of the industrial finance corporation and other.....
Judgment:
ORDER

1. The petitioner was last serving as Inspector in the Industrial Finance Corporation of India, he having joined the service of the Corporation in 1950 as a Clerk. On June 24, 1965, an order of suspension was served on him and he was so suspended on the alleged ground that he committed acts of criminal misconduct by claiming the cost of the ticket for travel after inspection of Sree Rajendra Mills Limited. Salem in September, 1964, even though the company had paid the same. Thereafter, on December 26, 1966, he was served with a memorandum of charges and as many as eight charges were leveled against him and he was called upon to explain. According to the Respondents, the petitioner violated Regulation 20 (i) of the Staff Regulations of the Industrial Finance Corporation and other rules governing the services, Sri M. N. Khushu was constituted as the Enquiry Officer. He enquired into the charges and, after giving adequate opportunity to the petitioner and after examining several witnesses ultimately gave his report on May 13, 1968, wherein he found the petitioner guilty of certain charges and exonerated him on the rest. Sri N. D. Nangia, the Chairman of the Corporation, after scrutinizing the report of the Enquiry Officer, was satisfied that the findings of the Enquiry Officer as to the commission of acts of misconduct by the petitioner were correct and found the petitioner guilty of certain charges, gave him the benefit of doubt in respect of certain other charges and exonerated him on one charge.

According to Mr. Nangia, the acts of misconduct for which the petitioner was held guilty reflected seriously on his integrity and honesty, as well as loyalty to the institution and in his opinion, proved himself unworthy of holding a responsible position in the Corporation. Accordingly he dismissed the petitioner from service in terms of Regulation 20(i)(e) of the Industrial Finance Corporation of India Staff Regulations. The petitioner preferred an appeal as provided in Regulation 21 to the Board of Directors of the Corporation. After entertaining the appeal the Board desired that the appointing authority against whose order the appeal has been filed, should render his remarks. The result was that the memorandum of appeal was once again referred to Mr. Nangia for his remarks. Mr. Nangia made elaborate comments on every ground of appeal preferred to by the petitioner, dealt with the contentions of the petitioner and gave his relevant comments thereon pointwise. As a matter of fact in the matter of the punishment awarded, his comment was as follows:--

'This is a matter for the Appellate Authority to decide, taking into account all the attendant circumstances. In my opinion, the punishment in a case where an officer of the financial institution indulged in dishonest practices, should be deterrent'.

The Board of Directors, at its meeting held on November 6, 1969, considered the appeal of the petitioner as against the order of dismissal passed by the Chairman. It is common ground that Sri Nangia took part as Chairman of the Board and participated in the Board meeting. The order impugned reads thus:

'* * * * 2. After carefully going through the appeal with reference to the report of the Enquiry Officer, the comments of the Chairman and other relevant documents, and after ascertaining the position regarding the nature of reports received on the employee in the past, the Board came to the conclusion that there was no justification for interfering with the order passed by the Chairman dismissing Shri K. Chelliah from the service of the Corporation. The Board however, decided that having regard to the over-all circumstances of the cases, Shri Chelliah need not be denied the benefits of provident fund and gratuity which would otherwise be admissible to him but for his dismissal. The Board accordingly decided that no direction be issued under Regulation 14(b) of the I. F. C. Employees' Provident Fund Regulations for the deduction of any part of the contributions made to his account.

3. The Board further requested the Chairman to examine, in view of the allegations made in the proceedings, whether sufficient evidence was available against any other official of the corporation referred to in the report of the Enquiry Officer, as would justify action being taken against him'.

It is as against this order of the Board that the present Writ Petition has been filed. The principle contention urged before me by Mr. V. P. Raman, learned counsel for the petitioner, is that the order is vitiated by violation of the principles of natural justice. As the Industrial Finance Corporation of India is a statutory body, it should be deemed to exercise quasi judicial functions and as the Chairman who passed the order of dismissal also participated actively in the Board meeting which confirmed the order of dismissal, the entire proceedings are vitiated by bias and opposed to the normal principles of natural justice. He did not take me through the merits, but rested his contention that the order of the Board has to be set aside as it is violative of the principles of natural justice and as it should be deemed to be biased. In fact, it was made clear than an independent Board, without Mr. Nangia participating therein, is certainly competent to hear the appeal and pass necessary orders thereon; but the challenged order being otherwise has to be set aside, is the contention.

2. But Mr. V. K. Thiruvenkatachari, learned counsel for the respondent raises a preliminary objection that no writ of certiorari can issue against an order of a body which is purely exercising the functions of a master as against its own servant. The decision made by the Board being one which is the concern of a master and as it is the authority to determine its own code of conduct relating to matters concerning contracts of service between itself and its employees, the Board cannot be said to be acting in a quasi judicial capacity. As no rights as such are involved this Writ Petition itself is not maintainable. According to him, the Board is not a public authority and its decision does not affect rights of parties and in any event the complaint that the order is biased is illfounded. His preliminary objection is that the Board not being a public authority is not bound by the general rule of law or the principles of natural justice; it is entitled to pass its orders in relation to its employees under the regulation governing such service and such orders can only be characterized as norms set by it for its own conduct and such decisions not being orders of quasi judicial bodies involving the decision on rights of parties cannot be the subject-matter of judicial review.

3. As the main argument revolves on the maintainability of the writ petition and the impact of the principles of natural justice over the procedure adopted by an administrative body, though functioning under a statute, it is necessary to deal with the arguments compendiously as they overlap.

4. It has to be decided in the first instance whether the Board functioning under the Industrial Finance Corporation Act, 1948, is a public authority. It is not easy of conception that such a Corporation which is an instrument of the State and which is a creature of statute cannot be said to be a public authority, but merely an institution which satisfied the status of a master as understood under the common law principles of master and servant. The Act created the Industrial Finance Corporation of India and the Corporation shall be a body corporate having perpetual succession and a common seal, with powers envisaged in the Act. The general superintendence and direction of the affairs and business of the Corporation are rested in the Board which may exercise all powers and do all acts and things which may be exercised or done by the Corporation. Such affairs of the Corporation include the appointment of a General Manager, officers employees and other advisers as it considers necessary for the efficient performance of its functions under the Act.

Section 10 provides that the Board of Directors shall consist of the following. namely:

'(a) a Chairman to be appointed by the Central Government after consultation with the Development Bank;

(aa) four Directors nominated by the Development Bank;

(b) two Directors nominated by the Central Government;

(c) two Directors elected in the prescribed manner by the scheduled banks who are shareholders of the Corporation;

(d) Two Directors elected in the prescribed manner by the shareholders of the Corporation, other than the Development Bank, the scheduled banks and co-operative banks;

(e) two Directors elected in the prescribed manner by the co-operative banks who are shareholders of the Corporation'.

Section 41-A speaks to the effect of the Act on other laws, and it runs as follows:--

'The provisions of this Act and of any rules or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid the provisions of this Act shall be in addition to and not in derogation of any other law for the time being applicable to an industrial concern'.

Under this section, unless there is anything inconsistent with the acts, rules or orders, the law for the time being applicable to an industrial concern would apply to the Corporation as well. It is not stated that the regulations framed under Section 43 of the Act in relation to the duties and conduct, the conditions of service of officers and other employees of the Corporation are in any way in derogation of any other law for the time being applicable to an industrial concern. In fact, the Corporation is deemed to be a bank for certain purposes, and deemed to be a company for tax purposes. These statutory features which govern the affairs of the Corporation by themselves create a reasonable impression that the Board, which is the organ or functionary of the Corporation, exercises very responsible functions as an administrative body. In disciplinary proceedings certain regulations are framed by the Board which govern the procedure to be adopted in such inquiries. In the instant case, several charges of misconduct were enquired into by the inquiry officer. He had examined 9 witnesses, scrutinized 69 exhibits, and ultimately he gave a report consisting of about 180 pages of typed matter. The enquiry occupied the time between November, 1967 and January, 1968. I have only referred to this to show the magnum of the nature of the enquiry conducted by the enquiry officer with all serenity. This report of the enquiry officer was scrutinized by the appointing authority namely, the Chairman, who once again sifted the evidence and passed an order accepting the enquiry officer's report and findings and dismissing the petitioner from the service of the Corporation in terms of the Staff Regulations. He finds that the acts of misconduct for which the petitioner is held guilty reflects seriously on his integrity and honesty as well as loyalty to the institution and that the petitioner proved himself unworthy of holding a responsible position in the Corporation and deserves exemplary punishment.

The petitioner preferred an appeal against the order of dismissal made by the Chairman, as contemplated by the regulations. The full Board is the appellate authority and the Chairman of the Board is the Chairman of the Corporation who passed the order of dismissal. The memorandum of appeal was passed on by the Board to the Chairman Mr. Nangia who passed the order of dismissal after expressing himself so strongly, and he had occasion to make meticulous comments on the grounds of appeal submitted by the petitioner. The Chairman's comments on the appeal are set out in 28 pages of typed matter. The Board considered the Chairman's memorandum and the enclosures thereto dealing with the appeal preferred by the petitioner, went carefully through the comments of Mr. Nangia who was presiding over the Board, and ultimately came to the conclusion that there was no justification for interfering with the order passed by the Chairman dismissing the petitioner from the service of the Corporation. The argument is that such an order cannot be called the decision of a judicious body as is popularly understood, but is merely an administrative order passed by a master as against his servant. The petitioner is virtually characterized as a person guilty of reprehensible conduct unbecoming of a public servant of a responsible State organization. The Board and the Chairman of the Board who passed the original challenged order badged the petitioner with the insignia of impropriety amounting to dishonesty which in their view merited a dismissal from public service. Their view undoubtedly resulted in causing prejudice to the petitioner and has of course affected his rights, besides causing an indelible stigma or imputation on the official character of the petitioner. But it is said that such a stigma should be taken without protest, clamor or agitation and the only remedy is to sue for damages for breach of any well laid condition or regulation of service. If the record discloses that the ultimate view of the Board was arrived at without offending the principles of natural justice and if the conclusion is well supported by cogent material on record, then possibly the contention of the respondents might gain ground.

5. But in the instant case the objection lays at the threshold. The point made out is that the Board was completely led by the forcible remarks, which are almost vituperative, made by the Chairman on the memorandum of appeal preferred by the petitioner and who was indeed the officer who accepted the enquiry officer's report and passed the order of dismissal. It is this person who as Chairman dismissed the petitioner, participated in the same capacity in the Board at the appellate stage. The argument is that such participation by itself creates the impression that the petitioner's apprehension that there is likelihood of unjust treatment at the appellate level is not totally a suspicion or a bare fear. The fact that such a person remained impartial without exercising his mind on the other members of the appellate Board is not so much relevant. The point is whether in such a situation a reasonable apprehension could be entertained by the aggrieved petitioner that the appeal which he filed was an empty formality as he might not be in a position to obtain real and practical justice in their hands in view of the fact that the authority which passed the order of dismissal was the Chairman of the appellate Board as well.

6. In my view the conspectus of events clearly project a situation where the petitioner's rights have been prejudiced by the decision of the Board. Undoubtedly, the Board is a public authority as it is functioning as an instrument of the State and under a statute of Parliament. It is in complete control of the affairs of the Corporation including the right to take disciplinary action against its employees. It is an industrial concern for all purposes unless there is any provision in the Act or in the rules which takes it out of it. No such provision has been shown to me. Once it is an industrial concern as is popularly understood, then it is a public body and the orders passed by it are decisions involving or affecting rights of parties. In S. V. Raman v. Madras State Warehousing Corporation. : AIR1971Mad431 . Palaniswamy, J., had occasion to consider whether Madras State Warehousing Corporation is an authority which is enjoined with certain quasi-governmental functions. The learned Judge held that a public authority includes all bodies created by a statute on which powers are conferred to carry out Governmental or quasi-Governmental functions. Notwithstanding the fact that the Warehousing Corporation is a body corporate, it is nonetheless an authority enjoined with certain quasi-Governmental functions and the High Court, under Article 226, can interfere if there is breach of any statutory duty governing a public body even though the relationship between the aggrieved person and the statutory body may be that of an employee-employer under a contract of service. Reliance was placed by the learned Judge on the decisions of the Supreme Court in Life Insurance Corporation v. Sunil Kumar Mukherjee, : (1968)2MLJ21 I am in entire agreement with the conclusion of the learned Judge in the above case, which is based on accepted and well-known decisions of the Supreme Court as well as this Court. The Board in the instant case, no doubt has set its own regulations dealing with the conditions of service of its officers and employees. But whilst applying the said regulations, if it happens that the principles of natural justice are in any way violated then the arm of law can extend to reach such conclusions and decisions arrived at by an administrative body if a right thinking person reasonably comes to the conclusions that there has been a flagrant violation of the principles of natural justice.

7. Having thus come to the conclusion that the Board is a public authority and its order is a decision which is susceptible to judicial review, the point remains whether such decision of an administrative body can be interfered with by the issue of a writ under Article 226 of the Constitution. This was not squarely argued before Palaniswamy, J. in the above case. But a catena of decisions has been placed before me by counsel appearing for both parties and it is therefore for me to consider this aspect.

8. Administrative law in recent times has assumed such expansive dimensions that its impact on the well set norms of ordinary law or vice versa has become significant. The modern rule of law is not a bare sentinel to keep up orthodox traditions but is expected to be an active participant interfering in almost every sphere of activity in society in the changed role of a Service State and a Welfare State. The influence of the doctrine of natural justice over such functions of the State or its instrumentalities reflects the interactive functions of case and statute laws and the growing influence of sociological Jurisprudence over our legal thinking. The concept of rights has undergone a radical change due to forward and progressive ideals with which the community is publicly charged. Such an explosive rationalism in the understanding of rights of citizens all round which has become deep-rooted in society cannot lightly be ignored or allowed to be engulfed in the halo of orthodox traditionalistic judicial dicta, convention or Jurisprudence. If this progression is borne in mind, it is indisputable that even the orders passed by a body like the 2nd Respondent which is but an instrumentality of the State and which is functioning under a particular statute is also bound to look after and protect the rights of citizens with whom it comes across. It cannot on the bare assertive principle of master and servant act beyond the pale of the norms set and accepted to be applicable to proceedings before such bodies and functionaries, and consider the rights of persons before them to their detriment. It may be that the body may have the discretion to deal with such problems. But such discretion should be exercised judiciously and judicially so that the parties appearing before them may not be unduly affected and prejudiced.

If the argument of Mr. V. K. Thiruvenkatachari that the Government functionary under a statute is beyond the pale of law and the visitorial jurisdiction of this Court under Article 226 of the Constitution is accepted, then courts in all circumstances ought to be a judicial echo to administrative decisions, however partial, improper or illegal they may be. If this is a fair appraisal of the present situation in the instant case, then all the elements of fair hearing evolved on Jurisprudence such as the maxim of neutrality, the maxim of opportunity, the maxim of notice, the rule against surprise, the rule of adequate legal representation, the rule of adequate legal representation, the rule of tested evidence, the rule of facility, the rule of reasoned decision and the rule of reasoned decision and the rule of balancing variable human judgments are all to be shelved in oblivion. This cannot be. A well-know authority regards administrative law as the law governing the powers and procedures of administrative agencies including particularly the law governing the judicial review of administrative action. According to that definition, administrative agency is the Governmental authority, other than a Court or a Legislature which affects the rights of private parties through either adjudication or rule making. Equally another authority on Administrative Law defined it as that part of the public law which fixes the organizations and determines the competence of the administrative authorities and further indicates to the individual, remedies for the violation of his rights.

Once the High Court or a superior Court has the power to issue any direction or order under Article 226 of the Constitution, the jurisdiction is broad and wide enough. It therefore follows that under the judicial statesmanship directions and orders can be issued by Courts for correction of errors in the merits of an administrative action or administrative decision and for giving relief to the aggrieved citizen or State which he or it has failed to get in the existing system of jurisprudence. In Board of High School and Intermediate Education, U. P., Allahabad v. Ghanshyam Das Gupta, : AIR1962SC1110 , the Supreme Court observed as follows :--

'If a statutory authority has power to do any act which will prejudicially affect the subject then, although there are not two parties apart from the authority and the contest is between the authority proposing to do the act and the subject opposing it, the final determination of the authority will yet be a quasi-judicial act provided the authority is required by the Statute to act judicially.

The statute is not likely to provide in so many words that the authority passing the order is required to act judicially; that can only be inferred from the express provisions of the statute in the first instance in each case and no one circumstance alone will be determinative of the question whether the authority set up by the statute has the duty to act judicially or not. The inference whether the authority acting under a statute where it is silent has the duty to act judicially will depend on the express provisions of the statute read along with the nature of the rights affected, the manner of the disposal provided the objective criterion if any to be adopted, the effect of the decision on the person affected and other indicia afforded by the statute. A duty to act judicially may arise in widely different circumstances which it will be impossible and indeed inadvisable to attempt to define exhaustively.'

In the light of the observations as above and the decision of the highest Court of the land, I am unable to agree with Mr. V. K. Thiruvenkatachari that there is absolutely no duty on the part of the Board to act judicially in the instant case. The nature of the right affected, the manner in which the Board should decide on such rights which might prejudice the opposite party, afford an indicia to this Court that the statute which created the Board and the Board which functions as a quasi-Governmental institution, should act judicially and ought not to violate at least the accepted and well-known principles of natural justice.

9. But the argument is that in the circumstances of this case the Board could only be said to have acted as a master in relation to its employees, having scrutinized the regulations and conditions of service under which the employee was working and therefore if the resultant decision is a bona fide exercise of power derived from the contract of service to terminate the employment, then no writ or direction or order can issue. No doubt, in core and in substance if the punishment is imposed after following the usual principles governing natural justice and that punishment is legally and properly inflicted in the disciplinary jurisdiction of an administrative functionary, who is expected to act quasi-judicially while dealing with such matters then possibly, if an unimpeachable impression can be gained from the circumstances of the case that it was a contract which was being interpreted by the Board and the decision of theirs in punishing their employee was in terms of the contract of service, the argument of the respondent might hold good. We shall now refer to the decisions cited by counsel so as to appreciate the real position.

10. In the admitted facts of this case if it could be shown that the appellate order challenged by the petitioner springs from the exercise of power traceable solely to a contract of service. then, even though the formality of an enquiry was gone through by an administrative body, before passing the order the employee cannot seek for a declaration that the order of termination of service has to be set aside. Even this observation is subject to the exception that in the course of the enquiry there has been no violation of the principles of natural justice. Assuming that every thing was normal, the aggrieved employee in such cases can have recourse only to an action for damages for wrongful dismissal. This is the ratio in the two Supreme Court cases cited by Mr. V. K. Thiruvenkatachari, In Uttar Pradesh Warehousing Corporation Limited v. Chandra Kiran Tyagi, : (1970)ILLJ32SC a suit was filed challenging the order of dismissal on the ground that the enquiry was contrary to the principles of natural justice without giving him an opportunity to place his defense and was held in disregard to Regulation 16 of the regulations framed by the Uttar Pradesh Warehousing Corporation Limited.

11. In those circumstances the Supreme Court held that a contract for personal service could not be enforced by an order for specific performance, nor would it be open for a servant to refuse to accept the repudiation of a contract of service by his master and say that the contract has never been terminated. The remedy of the employee is a claim for damages for wrongful dismissal or for breach of contract. But where a statutory status is given to an employee and there has been violation of the provisions of the statute while terminating the services of such an employee, the latter will be eligible to get the relief of the declaration that the order is null and void and that he continues to be in service as it will not then be a mere case of a master terminating the services of a servant. On a finding of fact the Supreme Court said that the order of dismissal was passed by the authority which could pass the order of dismissal. It has to be noted that in this case the question whether the jurisdiction of the High Court under Article 226 of the Constitution to rescrutinise the decision of an administrative body, if it is hopelessly violative of the principles of natural justice did not come up for consideration. Even so Indian Airlines Corporation v. Sukhdeo Rai, : (1971)ILLJ496SC was a case where the Supreme Court was deciding whether a regular suit could be filed by a dismissed employee alleging that the enquiry was conducted in breach of the procedure laid down by the regulations prescribed by the Corporation. In those circumstances the Supreme Court said:

'The relationship between the person appointed and the employer would in such cases be contractual, i.e., as between a master and servant, and the termination of that relationship would not entitled the servant to a declaration that his employment had not been validly determined.'

Here again the scope of the jurisdiction of superior Courts to issue directions and orders under Article 226 of the Constitution in cases of flagrant violation of the principles of natural justice whilst the decision is arrived at by the administrative body, was not considered, as there was no occasion to do so.

12. In Lakshmiah Reddiar v. Sriperumbudur Taluk Co-operative Marketing Society Ltd., : AIR1962Mad169 Rajamannar, C. J. was dealing with the case of a Co-operative Society. He held that the Board of Directors of a Co-operative Society in considering the objections to the nominations for the election of members of the Board of Directors is not a statutory Tribunal with authority to determine the rights of parties. This decision does not squarely apply to the instant case as this is a case where the employee is complaining against the employer's decision, which, according to the employee offends the principles of natural justice and consequently his rights. As a matter of fact in the above decision the learned Chief Justice quoted with approval the observations of Lord Goddard, C. J. in R. v. Disputes Committee of the National Joint Council for the Craft of Dental Technicians,(1953) 1 All ER 327. The learned Law Lords said :

'The bodies to which in modern times the remedies of these prerogative writs have been applied are all statutory bodies on whom Parliament has conferred statutory powers and duties the exercise of which may lead to the detriment of subjects..............'

It is thus seen that if the exercise of power by an administrative body is likely to result in the detriment of subjects as in this case, then the above pronouncement of the Law Lord and the acceptance of the same by the learned Chief Justice supports the view that such decisions and Administrative Bodies are susceptible to judicial review in the writ jurisdiction of this Court. The decision reported in Lakshmi v. Neyveli Lignite Corporation Limited, : AIR1966Mad399 stands on a different footing and is not apposite to the case because there the question was whether Neyveli Lignite Corporation Limited was a statutory body and whether its orders could be considered as one passed by an administrative body functioning under statutory authority. In that case it was not denied that Neyveli Lignite Corporation Limited is not a body created by a statute. That is not the case here and hence the ratio could not strictly apply.

13. Anantanarayanan, C. J., in V. Ramiah v. The State Bank of India (1967) 80 MLW 616, has clearly explained the dichotomy between a statutory body dealing with subjects arising under a contract and the same body dealing with matters resulting in punishment after due enquiry as required under law. While dealing with the scope of interference under Article 226 in matters where a servant or employee of the State Bank of India was terminated by the Board, the learned Chief Justice said :

'the order is the result of the exercise of power under the contract, as it purports to be. Any employer, even a statutory body, may initiate a proceeding hold an enquiry, and come to certain conclusions. But at that stage, it may be faced with the choice of two alternatives. It may choose to punish the employee on a finding of misconduct or it may choose, for what may seem to the authority to be valid reasons to terminate the employment under contract, instead.............. If the order................ is to be construed as a bona fide exercise of the power derived from contract to terminate the employment, it cannot be struck down in writ jurisdiction. It is not as if the appellant is without his remedies. He has his remedies in common law, for damages for wrongful dismissal...................... If the order is, in core and substance, a punishment in disciplinary jurisdiction, then the respondent Bank would have to act quasi-judicially; it must certainly observe the norms of natural justice. If it has not done so, the order is liable to be struck down, even if the State Bank of India Rules are not statutory in character. If the order terminates the employment, by virtue of the contract, the matter is at an end, so far as writ jurisdiction is concerned.'

14. The above dichotomy so explicitly made by the learned Chief Justice, if borne in mind, squarely applies to the facts of this case. The petitioner has been punished for misconduct. He has been characterized as a dishonest person and not suitable for public service. It cannot therefore be fairly and reasonably said that the order of termination passed by the original authority and confirmed by the appellate authority is referable to the contract of service and the decision itself flows therefrom. It is in this respect that the latest pronouncement of the Supreme Court in A. K. Kraipak v. Union of India, : [1970]1SCR457 which practically lays down the modern understanding of the scope of interference of this Court under Article 226 is well settled and set. While dealing with the dividing line between an administrative power and a quasi-judicial power, Hegde, J., who gave the leading judgment, laid down the following dicta :

'..................... In a welfare State like India which is regulated and controlled by the rule of law it is inevitable that the jurisdiction of the administrative bodies is increasing at a rapid rate. The concept of rule of law would lose its validity if the instrumentalities of the State are not charged with the duty of discharging their functions in a fair and just manner. The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously. The procedures which are considered inherent in the exercise of judicial power are merely those which facilitate if not ensure a just and fair decision. In recent years the concept of quasi-judicial power has been undergoing a radical change. What was considered as an administrative power some years back is now being considered as a quasi-judicial power.

With the increase of the power of the administrative bodies it has become necessary to provide guidelines for the just exercise of their power. To prevent the abuse of that power and to see that it does not become a new despotism, courts are gradually evolving the principles to be observed while exercising such powers. In matters like these, public good is not advanced by a rigid adherence to procedure. Now problems call for new solutions. It is neither possible nor desirable to fix the limits of a quasi-judicial power.

The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years.

In the past only two rules were recognized but in course of time many more subsidiary rules came to be added to these rules. Till very recently it was the opinion of the Courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validly of that limitation is not questioned. If the purpose of the rules of natural justice is to prevent miscarriage of justice there is no reason why those rule should be made inapplicable to administrative inquiries. Often times it is not easy to draw the line that demarcates administrative inquiries from quasi-judicial inquiries. Inquiries which were considered administrative at one time are now being considered as quasi-judicial in character. Arriving at a just decision is the aim of both quasi-judicial inquiries as well as administrative inquiries. An unjust decision in an administrative enquiry may have more far-reaching effect than a decision in a quasi-judicial enquiry.

The rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the frame-work of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a Court that some principle of natural justice had been contravened the Court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.'

15. Thus fortified with the pronouncement of the highest Court of the land I am unable to agree with Mr. V. K. Thiruvenkatachari that an order passed by a master against his servant, though apparently in the administrative exercise of his power, has to be accepted without demur, though it is unjust and the consequences resulting from the said order, which affects and prejudices the petitioner, are far-reaching. The complaint here is that the appellate Board was biased when the order has been passed and therefore one of the principles of natural justice has been contravened. Following the dicta of Hegde, J., in the above Supreme Court decision, such a complaint has to be enquired into by this Court to find whether the observance of that rule was necessary for a just decision on the facts of this case. The complaint in the instant case is that the Board was biased since the Chairman who was the original authority, participated in the Board and gave his own comments on the memorandum of appeal and therefore there is a violation of the principles of natural justice. Nemo debet esse judex in propria sua causa, a man cannot be a judge in his own cause, and the judge cannot be the prosecutor. This is the maxim of neutrality. The petitioner's case is that the challenged order suffers from a patent defect that it offends the rule of bias, the rule of fair hearing and demonstrably the order cannot be said to be fair or just having regard to the nature of the process adopted by the Board and the manner in which it conducted the appellate proceedings. It is therefore obligatory on the part of this Court to enquire into such a complaint against the abuse of natural justice. Even if the resultant action of the employer is prima facie attributable to the regulations or conditions of service, its exercise in abuse of natural justice has to be treated as a failure to exercise the power in the normal and accepted way and accordingly the decision arrived at by the authority has to be scrutinized and reviewed by judicial authority. The prayer to prevent a power being abused rather than being acceded cannot be lightly rejected and brushed aside. In the instant case we are only concerned with the way and manner in which the appeal has been dealt with. If it is found that the manner of exercise of such appellate power does not appear to a reasonably instructed mind to be fair or just, then Court's interference in such matters is possible and is indeed imperative by reason of the decisions above.

16. Such interference is made possible and plausible even while the Court exercises jurisdiction under Article 226 of the Constitution. I am unable therefore to accept the extreme view contended for by Mr. V. K. Thiruvenkatachari that this Court cannot issue a rule under Article 226 in the instant case.

17. If, therefore, the Board, which functions as an instrumentality of the State and as a statutory body, is a public authority and has made a decision affecting the rights of the petitioner, and if this court can scrutinize the said decision to see whether it satisfies every known principle of natural justice then the substantial question which arises in this case is whether the order suffers from bias.

18. Mr. Raman's contention is that as the Chairman was the original punishing authority and as he expressed himself strongly even when he rendered his decision to remove the petitioner from service and as for a second time he made comments on the memoranda of appeal preferred by the petitioner and as the order appealed against together with the remarks made on the appeal memorandum was before the Board and as the Board ultimately rested its decision on the above material, the petitioner's apprehension that the order is vitiated by bias is not ill-conceived. Mr. Thiruvenkatachari on the other hand would state that mere participation of the original authority in the Board cannot give an automatic impression that the proceedings are vitiated by bias as every other person constituting the Board is an independent citizen who is not likely to be weighed by the presence of Mr. Nangia or his remarks on the appeal memorandum. As pointed out by the Supreme Court in Nanak Lal v. Dr. Prem Chand, : [1957]1SCR575 :

'In such cases the test is not whether in fact a bias has affected the judgment; the test always is and must be whether a litigant could reasonably apprehend that a bias attributable to a member of the tribunal might have operated against him in the final decision of the tribunal. It is in this sense that it is often said that justice must not only be done but must also appear to be done.'

Bias is not something which is susceptible of easy and clinching proof. If is a matter for a well instructed mind to make a reasonable inference of its existence from the totality of the circumstances and facts in each case. The very foundation of the acceptance of the impact of bias on decisions of administrative bodies exercising powers dealing with or affecting rights of citizens or administrative bodies is the existence of an atmosphere of a well laid but reasonable suspicion that things could have been different if the subject was not dealt with as challenged. Bias is of two kinds, official and personal. In the instant case, we are not concerned with personal bias. The complaint is that the presence of a responsible officer like the Chairman, who had everything to do with the subject-matter under consideration, creates the impression that all is not well. As bias springs from the well known doctrine of natural justice, it follows that a person who tries a cause or who is per force compelled to participate in a subject which should lead to an obvious decision by him and others should be able to deal with matter objectively, fairly and impartially and should be manifestly shown to have acted so. As no one can act justly and fairly if his previous conduct gives ground for believing that he cannot act in an open mind, then this aspect looms large to render a decision whether a particular situation is vitiated by bias.

If there is a reasonable danger about the fairness of the enquiry, then the proceedings are vitiated by it. A doctrinaire approach on the doctrine of bias will not serve the real purpose. The appraisal by a Court in such circumstances should be broad-based, and if there is material to entertain a suspicion, which is reasonable that the expectation of the party affected in such proceedings that it is biased is not illfounded, then the Court should compulsively act and interfere. As Lord Halsbury says 'where the interest of the person adjudicating is not pecuniary, the order will not be granted unless it is shown that his interest is substantial and of such character that will give rise to a real likelihood of bias.'

19. No doubt, the constitution of the Board, as was seen, consists of independent persons nominated by the Development Bank, Central Government and persons elected by the scheduled banks who are share-holders of the Corporation, etc. But then the challenged order takes much of its resource from the report of the enquiry officer and the comments of the Chairman. This having been done, it cannot be said that the petitioner's apprehension that the order is biased, is not substantial and it is not of a character which would give rise to a real likelihood of bias. In a similar situation Ismail, J., in Gunasekaran v. State Housing Board (W. P. No, 1653 of 1967 (Mad.)), considering the nature of bias in relation to an order of the State Housing Board, which is equally a statutory body consisting of independent persons and constituted under the Madras State Housing Board Act (Madras Act 17 of 1961), observed that the participation of the Chairman at the appellate level did vitiate the entire proceedings. The learned Judge said that 'no litigant should have the slightest fear or apprehension that an individual who may be said to be biased, in any degree, against him, is allowed to participate in the judicial proceedings which deals with and disposes of his case. It is not necessary, for application of this principle, that the petitioner must be in a position to prove that in actual practice, the Chairman influenced the other members and the ultimate decision of the Board is the consequence of such influence. All that is required is the apprehension that may be reasonably entertained by a individual, that by the participation of the person whose order is under appeal, the entire appellate proceedings have gone against that individual or to his prejudice. It may be, in this particular case, the other members who participated were not subordinates and were in no way obliged to the Chairman. Whether there was any attempt on the part of the Chairman to influence the other members or not, the fact remains that he was present there and was probably presiding over the meeting.' In the above circumstances he issued a rule and relied upon Frome United Breweries Co. v. Bath Justice 1926 AC 586 which was cited in : [1957]1SCR575 and also on Nageswara Rao v. State of Andhra Pradesh : [1960]1SCR580 , and ultimately came to the conclusion that he did not have the slightest hesitation in holding that the appeal has not been properly disposed of. Whilst I respectfully adopt the reasoning of the learned Judge, I am equally not hesitant to make the rule absolute in this case. It would be impossible for the petitioner to establish as a fact that the Chairman did influence the Board. But his presence in the Board while the subject was being discussed and decided upon, certainly creates a reasonable impression in the party whose rights are being adjudicated, that there may be a likelihood of bias. This is sufficient in law. The Chairman having participated, the decision should be deemed to be or reasonably held to be hit by the principle of bias. The fact that the other members are independent members, does not really govern the issue. The impugned order exfacie shows that the Chairman's original order and his remarks did have a great play in the ultimate decision. In this view, the petitioner is entitled to succeed.

20. The impugned order cannot be said to be valid. The result of this is that the Board will have to dispose of the appeal of the petitioner afresh without Mr. Nangia being associated in the proceedings of the Board. I make it clear that I have not touched upon the merits as they were not even referred to before me. This Writ Petition is allowed but there will be no order as to costs.

21. Petition allowed.


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