SUKHDEV RATILAL PATEL Vs. CHAIRMAN BANK OF BARODA

JUDGEMENT

(1.) THE petitioner-agent, who had been serving at Santh Piply Branch, Nadiad, having been dismissed by the order, dated June 5, 1974, communicated on June 10, 1974 at Annexure E, challenges the said order in this petition. The petitioner had joined the service of the original Bank of Baroda in the year 1958 as a clerk. He was promoted as an officer and was appointed as an agent at Santh Piply Branch of the Bank of Baroda at Nadiad. In the course of duties he had purchased some foreign bills (travellers' cheques) at the Santh Piply Branch at Nadiad aggregating to a sum of Rs. 25,000. These bills had come in his possession on behalf of his Bank. He had deposited the amount of the foreign bills in the main branch at Baroda. On enquiry it was found that this was highly irregular and improper and the petitioner's explanation in this connection was, therefore sought by the letter, dated May 28, 1973, at Annexure A for ascertaining the full facts. The petitioner had addressed a letter to the chairman on August 6, 1973, where he had admitted having sold in 2 or 3 cases in unofficial market such foreign cheques. He had also admitted that as the foreign instruments were being realised through Baroda main office, he personally paid the whole cash, for these irregular transactions for rectifying the entry, to the tune of Rs. 60,000. It was also admitted in the letter these fake realisation advices were brought by himself to his branch and faked the advice. Thereafter, the Chairman of the Bank of Baroda gave a notice to the petitioner on September 25, 1973 at Annexure C, in view of the aforesaid voluntary admission because he had committed an act of serious misconduct. The petitioner submitted his explanation on October 9, 1973. Enquiry was held on June 4, 1974, where the petitioner was ably represented by another employee H. J. Manekshaw. Minutes of these proceedings had been recorded on 4th/5th June, 1974. Thereafter the impugned order had passed against the petitioner. The petitioner had, therefore, challenged the said order in this petition on the ground that the principles of natural justice were violated by the Bank and the order was in violation of the statutory Rule 8. 7. The Bank has supported the said order. The learned single Judge having referred this matter on the question whether the Bank was "state" under Art, 12, it has come before this Bench.

(2.) MR. Shelat has argued that the Bank would be a State falling within Art. 12 of the Constitution on and, therefore, Rule 8. 7 being a statutory rule binding on the Bank, the said rule having been contravened and as principles of natural justice were even violated, the dismissal order was, therefore, null and void.

(3.) THE first question which has, therefore, to be determined is whether the Bank would fall within the definition of "state" under Art. 12 of the Constitution, this Banking Corporation has been constituted under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, hereinafter referred to as "the Act". The very preamble discloses a public purpose of this acquisition and the public benefit which has been sought to be secured by constitution of this public Corporation under this Act for carrying out banking business under the Act. It is stated in the preamble that the Act was to provide for the acquisition and transfer of the undertakings of certain banking companies having regard to their size, resources, coverage and organisation, in order to control the heights of the economy and to meet progressively, and serve better, the needs of the development of the economy in conformity with national policy and objectives and for matters connected therewith or incidental thereto. Under Ss. 1 and 2 the Act is to come into force on July 19, 1969. Under S. 3 (1) it is provided that on the commencement of the Act, there shall be constituted such corresponding new Banks as are specified in the first Schedule in place of the existing Banks as shown in First Schedule, where one of the Banks is Bank of Baroda. Under S. 3 (2) the paid-up capital of every corresponding new Bank so constituted shall be equal to the paid-up capital of the existing Bank in relation to which it is the corresponding new Bank. Under S. 3 (3) the entire capital of such corresponding new Bank is vested in and allotted to, the Central Government Under S. 3 (4) every corresponding new Bank Shall be a body corporate with perpentual succession and a common seal with power, subject to the provisions of the Act, to acquire, hold and dispose of property, and to contract, and it may sue and be sued in its name. Under sub-s. (5) every corresponding new Bank shall carry on and transact the business of banking as defined in clause (b) of S. 5 of the Banking Regulations Act, 1949, and may engage in one or more forms of business specified in sub-s. (1) of S. 6 of that Act. Sub-section (6) provides for a reserve fund being constituted. Under S. 4, the undertaking of the existing Banks is transferred to and shall vest in corresponding new Banks. Section 5 provides for the general effect of this vesting. Section 6 (1) provides that every existing Bank shall be given by the Central Government such compensation in respect of the transfer under S. 4, to the corresponding new Bank of the undertaking of the existing Bank, as is specified against each such Bank in the Second Schedule. Thereafter, Chapter IV provides for management of corresponding new Bank Section 7 deals with the head office and management of affairs and business of the corresponding new Bank, which is to vest in the Board of Directors and the Central Government shall constitute the first board of directors. Section 8 provides for the corresponding new Banks to be guided in regard to policy matter involving public interest by the directions of the Central Government issued after consultation with the Governor, Reserve Bank. Section 9 provides that the Central Government may, after consultation with the Reserve Bank, make a scheme for carrying out the purposes of the Act. That scheme of management is to provide for various matters in particular mentioned in clause (2 ). Such a scheme has to be laid before each House of Parliament under sub-clause (5 ). Under S. 10 in Chapter V the provision is made as to the closure of old accounts and for the new account and their audit, and for disposal of profits. The auditor has to make a report to the Central Government upon the annual balance sheet and account. Under sub-clause (7) the surplus profits are to be transferred to the Central Government. Under sub-clause (8) of S. 10, the Central Government has to cause every auditor's report and report on the working and activities of each corresponding new Bank to be laid before each House of Parliament. Under S. 11, the corresponding new Bank shall be deemed to be an Indian company, and the company in which the public are substantially interested. Section 12 (2) in terms provides that every officer or other employee of an existing Bank shall become, on the commencement of the Act, an officer or other employee of the corresponding new Bank, and shall hold his office or service in that Bank on the same terms and conditions and with the same rights to pension, gratuity and other matters as would have been admissible to him if the undertaking of the existing Bank had not been transferred to and vested in the corresponding new Bank and continue to do so unless and until his employment in the corresponding new Bank is terminated or until his remuneration, terms or conditions are only altered by the corresponding new Bank. That is why, in subclause (4) of S. 12, no retrenchment compensation is payable under the Industrial Disputes Act, 1947, to such employees who stood statutorily transferred to the corresponding new Bank. Section 13 deals with the obligations of the employees as to fidelity and secrecy. Section 18 provides that no provision of law relating to binding up of Corporation, shall apply to a corresponding new Bank and no corresponding new Bank shall be placed in liquidation save by order of the Central Government and such manner as it may direct Section 19 which is material provides for power to make regulations. Section 19 (1) provides that the Board of Directors can make regulations not inconsistent with the provisions of the Act, or any scheme made thereunder, to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of the Act. Section 19 (2) provides for the regulations providing for all or any of the matters specified therein. Sub-section (3) provides that until any regulation is made sub-s. (1), the article of association of the existing Bank and every regulation rule, bye-law or order made by the existing Bank shall, if in force at the commencement of this Act, be deemed to be the regulations made under sub-s. (1) and shall have effect accordingly. A bare perusal of this scheme discloses great public importance of this public Corporation which had been created by acquiring at the cost of the Central Government, which paid the entire compensation under S. 6, the undertaking of the existing Bank so that the national economy could be properly served and needs of its development would be properly looked after in conformity with the national policy and objectives. That is why third public Corporation was created, under this statute for securing this public benefit and it is entirely, of the State ownership and its management, control and even the entire policy is to be laid down by the Central Government. Its dissolution is also under S. 18 not by way of ordinary winding up, but only to be as per the order of the Central Government in such manner as it directs. The provision is made for accounts being duly audited and reports submitted to the Central Government and such report is to put up before each House of Parliament and the balance profits under S. 10 (7) are to be transferred also to the Central Government. Therefore, in reality and in substance even though it is a statutory Corporation, it is State agency or instrumentality of the State which has to administer the Act, as per the statutory provisions and under the statutory limitations laid down in the relevant provisions of the Act, the scheme framed under S. 9 and under the relevant regulations under S. 19. So far as these employees are concerned they stand statutorily transferred, without retrenchment compensation on the same terms and conditions, and under S. 19 the Bank has power to lay down binding regulations. Therefore, the Corporation is not only statutory public Corporation crated as an instrumentality of the State to carry out this public function for the public benefit, but it has also to administer the Act and is made authoritative by being delegated the sovereign power of making the necessary regulations under S. 19.