Delhi Transport Corporation v D.T.C. Mazdoor Congress (1990)

This is the judgment that kills the "hire and fire" clause in public employment. A service regulation which lets a statutory corporation end the service of a permanent, confirmed employee by a month's notice or pay in lieu, without reasons and without a hearing, was held wholly arbitrary, violative of Article 14 and the principles of natural justice, void under s. 23 of the Contract Act as opposed to public policy — and, crucially, incapable of being saved by reading down.

Three separate threads make it examinable:

1. Security of tenure as a constitutional value. A statutory corporation is "State" under Article 12; its service regulations are therefore tested against Part III. The right to public employment and the right to livelihood are located by the majority under Articles 14, 16(1), 19(1)(g) and 21.
2. The limits of the doctrine of reading down. The Court refuses to rescue a clear and unambiguous provision by writing conditions into it; that is the leading modern statement on when reading down is and is not available.
3. A well-argued dissent. Mukharji CJ would have sustained the power by reading into it the requirements of relevance to efficient running of the service, objectivity, and recorded (though uncommunicated) reasons. A good answer states the dissent and says why it did not prevail.

Respondents 2 to 4 were regular employees of the Delhi Transport Corporation. They were served with notices of termination under Regulation 9(b) of the Delhi Road Transport Authority (Conditions of Appointment and Service) Regulations 1952, on the ground that they had become inefficient in their work and had started inciting other members not to perform their duties.

The three employees and their union, the D.T.C. Mazdoor Congress (respondent 1), moved the High Court challenging the constitutional validity of Regulation 9(b), which gave the management the right to terminate an employee's services by one month's notice or pay in lieu thereof. A Division Bench of the High Court struck the Regulation down, holding that it gave absolute, unbridled and arbitrary power to the management to terminate the services of any permanent or temporary employee and was violative of Article 14; it directed the Corporation to pay back the respondents' wages and benefits within three months. The Corporation appealed by special leave.

Because the same question arose on parallel provisions elsewhere, the validity of para 522 of the Shastri Award, Rule 1(i) of the District Board Rules 1926, Part V, Regulation 13 of the Indian Airlines Employees' Service Regulations, Regulation 48 of the Air India Employees' Service Regulations, and contractual clauses affecting employees of a Zilla Parishad and of the New India Assurance Company, came up in connected appeals and intervention applications.

Regulation 9, so far as material, read:

"9. Termination of service: (a) Except as otherwise specified in the appointment orders, the services of an employee of the authority may be terminated without any notice or pay in lieu of notice: (i) During the period of probation and without assigning any reason thereof. (ii) For misconduct, (iii) On the completion of specific period of appointment. (iv) In the case of employees engaged on contract for a specific period, on the expiration of such period in accordance with the terms of appointment. (b) Where the termination is made due to reduction of establishment or in circumstances other than those mentioned at (a) above, one month notice or pay in lieu thereof will be given to all categories of employees."

Clause (a) therefore covered four stated contingencies, including misconduct; clause (b) covered everything else, on a month's notice, with no condition attached at all.

The Constitution Bench framed the controversy as two questions: (i) whether Regulation 9(b) was arbitrary, illegal, discriminatory and violative of audi alteram partem, and so constitutionally invalid and void; and (ii) whether the Regulation could be interpreted and read down so as to hold that it was not discriminatory or arbitrary and did not confer unbridled and uncanalised power on the authority to terminate the service of an employee, including a permanent employee, without any reason whatsoever.

The Corporation argued that there was sufficient guideline in Regulation 9(b) if it were properly read; that guidance could be drawn from the preamble, policy and purpose of the 1950 Act and from ss. 19, 20 and 53, and from the context of Regulation 9(b) read with Regulations 9(a) and 15; that reasons could be recorded although not communicated, which would check arbitrariness and permit effective judicial review; that the power under 9(b) could be exercised only in circumstances other than those in 9(a) — that is, not where the foundation of the order was misconduct — and only for purposes germane to the statute; that natural justice is "neither a universal principle of justice nor inflexible dogma" and may be excluded where a hearing would paralyse the administrative process or where promptitude is required; and that the words "where it is not reasonably practicable to hold an enquiry" might be imported into the Regulation, on the analogy of the exceptions in the proviso to Article 311(2). Alternatively, it relied on the ordinary law of master and servant, contending that the declaration in Central Inland Water Transport Corporation Ltd v Brojo Nath Ganguly — that such a contract was void under s. 23 of the Contract Act as opposed to public policy — was not sound, and that a wrongfully dismissed employee's only remedy was damages.

For the workmen it was urged that a rule making service liable to termination on notice leaves arbitrary and uncontrolled power in the authority to select at will the person against whom action will be taken, and so contravenes Article 14; that Articles 14, 19 and 21 are inter-related; that violation of natural justice by State action is itself a violation of Article 14 and can be excluded only in exceptional circumstances; that the constitutional guarantees are for all persons, so that no distinction can be drawn between "workmen" covered by the industrial legislation and those outside it, the labour law being capable only of adding to and not detracting from Part III rights; and that Regulation 9(b) deliberately conferred a wide power of termination in addition to Regulation 15, which already provided for dismissal or removal after a disciplinary enquiry — so that the rule-making authority's intention was clear and unambiguous, the provision was not capable of two interpretations, and the question of reading down did not arise. Reading down here would involve not the interpretation of a word but the addition of a whole clause, which amounts to rewriting.

Ray J held that Regulation 9(b), conferring power to terminate a permanent and confirmed employee by notice or pay in lieu "without assigning any reasons in the order and without giving any opportunity of hearing to the employee before passing the orders is wholly arbitrary, uncanalised and unrestricted violating principles of natural justice as well as Article 14 of the Constitution." There was no guideline in the Regulations or in the parent Act as to when or in which cases such power might be used.

Government companies and public corporations carrying on trade and business activity of the State are State within Article 12; their service regulations must therefore be tested on the touchstone of Article 14, and the procedure they prescribe "must be reasonable, fair and just and not arbitrary, fanciful and unjust." The audi alteram partem rule, "which, in essence, enforces the equality clause in Article 14 of the Constitution", applies not only to quasi-judicial but to administrative orders prejudicially affecting a party, unless expressly excluded — and Regulation 9(b) did not exclude it. "Rules of natural justice do no supplant but supplement the Rules and Regulations." Regulation 9(b) was accordingly held illegal and void: arbitrary, discriminatory, without guidelines, ultra vires Article 14, and void under s. 23 of the Contract Act as opposed to public policy.

Sharma J put the matter in terms of guidelines. The rights of the parties cannot be governed by the general principle of master and servant; but public bodies must, in the interest of efficiency, have authority to terminate the employment of "undesirable, inefficient, corrupt, indolent and disobedient employees" — a power which "must be exercised fairly, objectively and independently; and the occasion for the exercise must be delimited with precision and clarity." That is possible only where the law lays down detailed guidelines in unambiguous and precise terms. Regulation 9(b) could not be upheld "for lack of adequate and appropriate guidelines."

Sawant J described clause (b) as containing "the much hated and abused rule of hire and fire reminiscent of the days of laissez faire and unrestrained freedom of contract." He rejected the "high authority" theory — that power is safe in high hands — as "neither legal nor rational". Employment under public undertakings is "a public employment and a public property"; service conditions "must be encouraging, certain and secured, and not vague and whimiscal", since capricious conditions endanger both discipline and devotion. And: "The right to life includes right to livelihood. The right to livelihood, therefore, cannot hang on to the fancies of individuals in authority. The employment is not a bounty from them nor can its survival be at their mercy." Arbitrary rules "which are also sometimes described as Henry VIII Rules, can have no place in any service conditions."

Ramaswamy J grounded security of tenure in the fundamental rights read together. A permanent employee of a statutory authority or instrumentality under Article 12 "has a lien on the post till he attained superannuation or compulsorily retired or service is duly terminated in accordance with the procedure established by law". The right to life under Article 21 "comprehends some thing more than mere animal existence", and: "The right to public employment and its concomitant right to livelihood receive their succour and nourishment under the canopy of the protective umbrella of Articles 14, 16(1), 19(1)(g)" and 21. Article 14 is the general principle while Article 311(2) is a special provision confined to the civil services, so its proviso cannot be borrowed to justify excluding natural justice in a statutory corporation's regulations. "Wider the discretion, the greater the chances of abuse"; and "Absolute discretion marks the beginning of the end of the liberty." Any procedure depriving a person of continued public employment "must be just, fair and reasonable procedure and conformable to the mandate of Articles 14 and 21"; otherwise, he held, "any law or rule in violation thereof is void." He expressly held that the ratio in Brojo Nath's case "was correctly laid and requires no reconsideration".

This is the doctrinal heart of the case. The doctrine is available in limited situations: to save a statute from unconstitutionality where two interpretations are possible, and where the provisions are vague and ambiguous so that the intention may be gathered from the object, context and purpose. "However, when the provision is cast in a definite and unambiguous language and its intention is clear, it is not permissible either to mend or bend it even if such recasting is in accord with good reason and conscience." Where that is so, the Court's "only duty is to strike it down and leave it to the legislature if it so desires, to amend it". And "The doctrine can never be called into play where the statute requires extensive additions and deletions."

Applied here, three reasons defeated the attempt. First, neither the object of the Act — the promotion of a co-ordinated system of road transport — nor the object of the service regulations had any bearing on Regulation 9(b); if anything the Act required regulations securing dedicated employees, and dedication presupposes security of employment "and not a constant hanging of the Democle's sword over their head". Secondly, "the language of regulation is so crystal clear that no two interpretations are possible to be placed on it". Thirdly, the context showed that it "is meant to be a naked hire and fire rule": clause (a) sets out elaborately the cases of termination without notice, and clause (b) follows immediately and covers everything else on a month's notice — so the rule-making authority's intention "was to give an absolute free hand without any limitations whatsoever".

Nor could the requirement of a hearing be written in. If the ground were misconduct, that situation is already taken care of by clause (a); if the grounds are other than those in clause (a), then "those grounds being unknown to the employee, cannot be met by him even if he is given a hearing". The Court could not itself enumerate the circumstances in which an enquiry is impracticable — such situations "are capable of being formulated easily and conveniently at least in general terms as is done by the Constitution-makers in the second proviso to Article 311(2)" — and to read them in would require extensive recasting, which is impermissible. Ray J made the same point in his own way: where the plain and literal meaning of a provision on a bare reading is that it confers arbitrary, uncanalised power to terminate a permanent employee without recorded reasons and without natural justice, it cannot be saved from constitutional invalidity "by bringing or adding words in the said legislation".

The Chief Justice would have sustained the conferment of power by reading it as exercisable only on reasons relevant to the efficient running of the services, objectively, with reasons recorded (though not necessarily communicated), and on the basis that it was not feasible reasonably to hold an enquiry without disclosing evidence that would hamper the running of the institution; there must be factors hampering the institution, the employee being surplus, or inefficient, disobedient and dangerous.

His reasoning was that efficiency of these undertakings is a vital consideration, that quick action is often necessary, that "It is not always possible to have enquiry because disclosure is difficult; evidence is hesitant and difficult, often impossible", and that the approach must be one of "balancing and adjustment". On construction, he held that a court must proceed on the premise that the law-making authority intended to make a valid law, and that the power to supplant and supplement the expressions used, "the concession of which if taken to the extreme is dangerous, but denial of that power would be ruinous", is an important branch of judicial power. If the Court did not read the conferment of power in that manner, he accepted, "the power is liable to be struck down as bad."

Ramaswamy J recorded his "deep regrets for my inability to agree with my learned brother, the Hon'ble Chief Justice on the applicability of the doctrine of reading down to sustain the offending provisions", agreeing instead with Ray and Sawant JJ.

1. Regulation 9(b) is unconstitutional and void. It confers unbridled, uncanalised and arbitrary power to terminate the services of a permanent employee without recording reasons and without conforming to natural justice; it violates Article 14, and is also void under s. 23 of the Contract Act as opposed to public policy.
2. Public corporations are State under Article 12, and their service rules and regulations, and the procedure they prescribe, must satisfy Article 14 — reasonable, fair and just, not arbitrary, fanciful or unjust.
3. Audi alteram partem applies to administrative orders prejudicially affecting an employee unless expressly excluded; rules of natural justice supplement, and do not supplant, the rules and regulations.
4. The doctrine of reading down cannot save the Regulation: it is unavailable where the language is clear and unambiguous and where saving the provision would require extensive additions amounting to a recasting of the rule.
5. Article 311(2) and its proviso are confined to the civil services; in respect of other employees of Article 12 bodies, Articles 14, 16(1), 19(1)(g) and 21 have full play, and the right to continued public employment is an integral part of the right to livelihood and so of the right to life.
6. Brojo Nath Ganguly was held correctly decided and not in need of reconsideration.
7. Result: in accordance with the majority, Civil Appeal No. 2876 of 1986 (Delhi Transport Corporation v D.T.C. Mazdoor Congress) was dismissed, without costs; Civil Appeal No. 1115 of 1976 (Satnam Singh v Zilla Parishad, Ferozepur) was allowed, the monetary relief granted being held reasonable, parties bearing their own costs; the remaining matters were directed to be placed before a Division Bench for final disposal in the light of the law laid down.

A service regulation of an instrumentality of the State which permits termination of a permanent employee's service at the employer's will, on notice or pay in lieu, without reasons and without a hearing, is arbitrary, violates Article 14 and the rule of audi alteram partem, offends the right to livelihood protected by Article 21 read with Articles 14, 16(1) and 19(1)(g), and is void as opposed to public policy under s. 23 of the Contract Act. Such a provision cannot be rescued by reading into it limitations that the rule-making authority plainly did not intend, because reading down is confined to ambiguous provisions and cannot extend to extensive additions that would amount to remaking the rule.