C.B. Pandey vs Employees'' State Insurance Corporation and Others

This petition is directed against an order dismissing the petitioner from the service of the first respondent, Employees'' State Insurance

Corporation, by an order dated 26th August, 1968. The petitioner joined service with the first respondent on 14th October, 1958 as a record

sorter and in course of time came to be promoted as clerk in March, 1960, as cashier in May, 1964 and as upper division clerk in December,

1965 and at the relevant time, that is on 19th June, 1967, he was serving as upper division clerk and was entrusted with the work of processing

permanent disablement claims. On 19-6-67 the petitioner is alleged to have demanded a bribe from one Becharbhai Kohyabhai for taking action in

favour of him for settlement of his permanent disablement benefit claim. On that day as one Shri Gulab Singh, regular cashier, was on leave the

petitioner while making payment demanded and accepted from Becharbhai Kohyabhai an amount of Rs. 25 from his temporary disablement

benefit claim of Rs. 43.81. On a complaint by Becharbhai an inquiry was made on the same day by Shri S. A. N. Murthy, Regional Director, as

well as one Shri K. L. Gothi, Deputy Regional Director, and Shri Gothi recorded the statements of certain persons. Subsequently on the

information collected in the preliminary inquiry a charge-sheet was drawn up and was served upon the petitioner on 26th July, 1967. A regular

departmental enquiry followed and at the end of the departmental enquiry charges were held proved. After giving an opportunity to the petitioner

to show cause why he should not be dismissed from service, final order was passed by the disciplinary authority on 26th August, 1968 dismissing

the petitioner from the service of the first respondent-Corporation. The petitioner has challenged the validity of this order dismissing him from

service.

Mr. C. T. Daru, learned advocate who appeared for the petitioner, raised the following contentions at the hearing of this petition :

(1) The inquiry against the petitioner is conducted in violation of regulations framed by the first respondent-Corporation which have the force of

statute and in violation of principles of natural justice and the order passed at the conclusion of such an inquiry is void.

(2) One Shri K. L. Gothi, Deputy Regional Director, was disqualified from imposing penalty on the petitioner as he was the person who held

preliminary inquiry, was a material witness in course of the inquiry and was also disciplinary authority and, therefore, the inquiry is vitiated on

account of bias of Shri Gothi.

(3) The petitioner was the servant of the first respondent Employees'' State Insurance Corporation (hereinafter referred to as the Corporation) set

up under the Employees'' State Insurance Act, 1948. Section 97 confers powers upon the Corporation to make regulations not inconsistent with

the Act and the rules made thereunder. Relevant portion of S.97 reads as under :

(1) The Corporation may, subject to the condition of previous publication, make regulations, not inconsistent with this Act and the rules made

thereunder, for the administration of the affairs of the Corporation and for carrying into effect the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters,

namely :

* * *

(xx) the duties and powers of Inspectors and other officers and servants of the Corporation;

(xxi) the method of recruitment, pay and allowances, disciplines, superannuation benefits and other conditions of service of the officer and servants

of the Corporation other than the principal officers;

* * *

(2-A). The condition of the previous publication shall not apply to any regulations of the nature specified in clause (xxi) of sub-s. (2).

(3) Regulations made by the Corporation shall be published in the Gazette of India and thereupon shall have effect as if enacted in this Act.

Section 97 confers powers upon the Corporation to enact regulations which should not be inconsistent with the rules made under the Act and

the provisions of the Act itself for administration of the affairs of the Corporation and for carrying into effect the provisions of the Act. Without

prejudice of the generality of the powers conferred on the Corporation to enact regulations specific power has been conferred upon the

Corporation to frame regulations for method of recruitment, pay and allowances, disciplines, superannuation benefits and other conditions of

service of the officer and servants of the Corporation other than the principal officers.

Thus the Corporation has the power to frame or enact regulations for the purpose of prescribing conditions of service and especially for taking

disciplinary action. Armed with these powers, the Corporation has framed regulations styled as Employees'' State Insurance Corporation (Staff

and Conditions of Service) Regulations, 1959. Regulation 6(2) provides that the services of a permanent employee may be terminated on the

abolition of the permanent post held by him in a class or cadre, or reduction in the number of posts in a class or cadre, by the authority competent

to make appointments to the post which the employee holds, on giving three months'' notice or pay in lieu thereof, provided that this power shall be

exercised where the appointing authority is not the Director General with the approval of the Director General. It thus appears that the services of a

permanent employee can be terminated only on the grounds, namely, abolition of the permanent post held by him in a class or cadre; or reduction

in number of posts in class or cadre. A permanent employee can be dismissed or removed from service in the manner provided in the regulations.

Regulation 11 provides the nature of penalties may be imposed for good and sufficient reasons. Clause (vi) provides for removal from service

which shall not be a disqualification for future employment. Clause (vii) provides for dismissal from service which ordinarily shall be disqualification

for future employment. Regulation 12 sets up various disciplinary authorities. Regulation 13 prescribes procedure for imposing penalty. It reads as

under :

No order imposing on an employee any of the penalties specified in Regulation 11 shall be passed except in the manner and after following the

procedure laid down in the Third Schedule.

It appears from the provision contained in Regulation 13 that detailed procedure is prescribed in the Third Schedule. Broadly stated provisions

of the Third Schedule prescribed a detailed procedure for holding departmental enquiry at the conclusion of which any of the penalties prescribed

in Regulation 11 can be imposed for good and sufficient reasons. Briefly the provisions that definite charge shall be framed by disciplinary authority

and the same should be served upon the delinquent officer giving him an opportunity to submit a written statement of his defence and require him to

state whether he desired to be heard in person. Power is conferred upon the disciplinary authority either to hold inquiry himself or to entrust it to an

enquiry officer. Sub-clause (3) of Third Schedule is material. It reads as under :

The employee shall, for the purpose of preparing his defence, be permitted to inspect and take extracts from such official records as he may

specify, provided that such permission may be refused if for reasons to be recorded in writing in the opinion of the disciplinary authority such

records are not relevant for the purpose or it is against the public interest to allow him access thereto.

A delinquent officer is to be given an opportunity to cross-examine witnesses examined in support of the charges and to give evidence in person

and also to examine witnesses in support of his defence. At the conclusion of the enquiry, the enquiry officer has to submit his report recording his

finding on each of the charges together with reasons for the conclusion and then submit the entire record of the enquiry to the disciplinary authority.

The disciplinary authority is under an obligation to record its findings in respect of each charge and after recording his finding, if the disciplinary

authority is of the opinion that any of penalties specified in Regulation 11 has to be imposed, it must furnish to the delinquent officer a copy of the

report of the enquiry officer and statement of its own finding in the case of disagreement with the findings of the enquiry officer, and then to serve a

show-cause notice setting out therein penalty proposed to be inflicted and giving opportunity to the officer concerned to submit his explanation.

After taking into consideration the explanation, in any, received from the delinquent officer in response to the show-cause notice, the disciplinary

authority can either proceed to impose penalty or discharge the notice. It would appear at a glance that a detailed procedure is prescribed in the

regulations and the procedure is almost akin to one under Art. 311 of the Constitution. Bare minimum principles of natural justice to be observed in

such an inquiry have received recognition in Regulation 13 and Third Schedule of the aforementioned regulations. If the regulations, therefore, have

the force of a statute or are statutory in character, an inquiry in contravention of or in violation thereof would stand vitiated and the order made in

such an inquiry would be invalid and the officer concerned would be entitled to a declaration that he continues to be in service.

It is, therefore, necessary to examine the character and nature of the regulations. If the regulations are statutory or have the force of a statute as

understood in contradistinction to what constitutes contractual relations between employer and employee, any inquiry in contravention thereof

would be vitiated and any order passed in such an inquiry would be void and the Court will have jurisdiction to grant a declaration that the servant

concerned continues to be in service. If the regulations partake the character of a contract of service any order passed in violation thereof would

be wrongful but not ultra vires or invalid and anyone affected by the said order cannot maintain an action for a declaration that he continues to be in

service and his remedy would be by way of a suit for damages. This becomes clear from the two decisions of the Supreme Court to which I would

briefly refer. In Executive Committee, U.P. Warehousing Corporation Vs. Chandra Kiran Tyagi, , the Supreme Court observed as under :

From the two decisions of this Court referred to above, the position in law is that no declaration to enforce a contract of personal service will be

normally granted. But there are certain well-recognised exceptions to this rule and they are : To grant such a declaration in appropriate cases

regarding (1) a public servant, who has been dismissed from service in contravention of Art. 311(2), (2) Reinstatement of a dismissed worker

under industrial law by Labour or Industrial Tribunals. (3) A statutory body when it has acted in breach of a mandatory obligation imposed by

statute.

In these classes of cases, the Court has power to grant a declaration that the order dismissing the officer concerned is null and void and that he

continues to be in service. Looking to the third exception as set out above, it become distinctly clear that when a statutory status is given to an

employee and there has been violation of provisions of the statute while terminating the services of such an employee, the latter will be eligible to

get relief of 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. This statement of law was approved and affirmed in the later decision of the Supreme Court in Indian Airlines

Corporation Vs. Sukhdeo Rai, In both these cases it was contended that the concerned employee was dismissed from service without following

the procedure prescribed in the regulations framed by the Corporation in exercise of the powers conferred by the relevant statute on the said

Corporation to frame regulations prescribing conditions of service, rules of recruitment and procedure for taking disciplinary action. After

examining the power of the Corporation in the case to frame regulations, the Supreme Court was of the opinion :

The regulations contain the terms and conditions which govern the relationship between the Corporation and its employees. Though made under

the power conferred by the statute, they merely embody the terms and conditions of service in the Corporation but do not constitute a statutory

restriction as to the kind of contracts which the Corporation can make with its servants or the grounds on which it can terminate them. That being

so and the Corporation having undoubtedly the power to dismiss its employees, the dismissal of the respondent was with jurisdiction, and although

it was wrongful in the sense of its being in breach of the terms and conditions which governed the relationship between the Corporation and the

respondent it did subsist.

The question then is whether regulations framed by the first respondent-Corporation are statutory meaning thereby having force of statute or

merely contain terms and conditions which govern the relationship between the Corporation and its employees and could be said to be contractual

in nature. Section 97(3) which I have already set out above furnishes a clear answer to the question raised. It says that the regulations made by the

Corporation shall be published in the Gazette of India and thereupon shall have effect as if enacted in this Act. Now, undoubtedly power to frame

regulations is conferred on the Corporation. Regulations can be enacted by the Corporation and made effective on fulfilling the condition of prior

publication. The publication has to be in the Gazette of India. If these were the only conditions it would be difficult to say that regulations framed by

the Corporation are statutory in character. But last expression in sub-s. (3) clearly indicates legislative intendment. It says that the regulations

framed by the Corporation on being published in the Gazette of India shall have same effect as if enacted in this Act. The expression ""as if enacted

in this Act"" means only one thing namely, that once they are properly enacted after observing due formalities they are written with pen and ink in

the Employees'' State Insurance Act, 1948. Power to add to the legislation is conferred upon the Corporation. The Corporation enjoys the power

of picking pen and ink and adding to the various provisions of the Act itself. The power of the Legislature of enacting statute is thus delegated to

the Corporation and the Corporation in enjoyment of this delegated power of the legislature has enacted the regulations. Therefore, once

Corporation frames regulations and publishes it in the Gazette of India and regulations are in conformity with the provisions of the Act and rules

made thereunder, or are not inconsistent with the provisions of the Act or rules made thereunder, these regulations would themselves be integral

part of the Employees'' State Insurance Act.

If this is the correct interpretation of the expression ""as if enacted in this Act"" in sub-s. (3) of S. 97 that only means that the regulations are nothing

more nor less than provisions of the Employees'' State Insurance Act and they form part of the statute. It is redundant to say that every part of the

statute has force of the stature. Therefore, undoubtedly regulations enacted by the Corporation have the force of statute. If they have force of the

statute, they have must be strictly complied with. Any termination or dismissal or removal from service in derogation or contravention of these

statutory regulations would be ultra vires and invalid and such a case would be covered by third exception mentioned in the aforementioned cases,

namely, a statutory body when it has acted in breach of a mandatory obligation and the concerned employee would be entitled to a declaration that

the order terminating his service is void and he continues to be in service of the Corporation. Incidentally, it may be pointed out that the regulations

enacted by the Warehousing Corporation under S. 53 of the Agricultural Produce (Development and Warehousing) Corporations Act, 1956 and

by the Airlines Corporation under S. 45 of the Air Corporations Act, 1953, were not held to be statutory in the aforementioned two decisions. But

the language of S. 45 of the Air Corporations Act, 1953 and S. 53 of the Agricultural Produce (Development and Warehousing) Corporations

Act, 1956, clearly show that the power was conferred upon the Corporation to enact regulations but when enacted such regulations were not to

have the effect of having been enacted in the relevant Act and that is clearly a distinguishing feature. It, therefore, appears crystal clear that the

Employees'' State Insurance Corporation (Staff and Conditions of Service) Regulations, 1959, are part and parcel of the Employees'' State

Insurance Act, 1948 or at any rate, they have the force of statute and Court will have power to grant declaration in appropriate case that the order

dismissing the concerned servant from the service of the Corporation in violation or contravention of the regulations is void or ultra vires and a

declaration can be given to the effect that the concerned employee continues to be in the service of the Corporation.

Regulation 13 read with Third Schedule prescribes procedure for holding departmental enquiry and imposing penalty. First respondent was

required to strictly comply with the regulations. There is violation of regulations at various stages. Regulations provide for a reasonable opportunity

to be afforded to the delinquent officer to meet the charges framed against him. He must be given an opportunity to file written statement in defence

before the enquiry is held and after charge-sheet is drawn up. He must be given personal hearing and must be given an opportunity to cross-

examine witnesses examined in support of the charges. He must be given an opportunity to give his evidence and to examine witnesses in his

defence. He must either be furnished copies demanded by him or must be given an opportunity to take extracts from the relevant documents. He

must be furnished a copy of the report of the enquiry officer and if the disciplinary authority disagrees with the report of the enquiry officer, reasons

for the disagreement. He must be given a second opportunity to submit his explanation and only thereafter penalty can be imposed upon him. By its

very nature the enquiry will be a quasi-judicial inquiry and there would be a duty to act judicially. If the inquiry would be quasi-judicial in nature and

there is a duty to act judicially, ipso facto the principles of natural justice will have to be observed and one of the essential ingredients of the

principles of natural justice is that the person having bias shall not be a judge.

In this case one Mr. K. L. Gothi admittedly recorded the statements in the preliminary inquiry. He was cited by the petitioner as his witness in

the departmental enquiry and was examined as such. Ultimately, he acted as disciplinary authority. He accepted the finding recorded by the enquiry

officer and then proceeded to impose penalty. His bias would wholly vitiate the inquiry. The officer who carried out preliminary inquiry should be

wholly debarred from acting as disciplinary authority for the obvious reason that he would all throughout be conscious of the fact that he had

collected certain material at the preliminary inquiry and would be unconsciously prejudiced by the material gathered by him at the back of the

delinquent officer. Worst situation would arise when he would be a witness and his own evidence would have to be appreciated by himself. Of

course, in the facts of this case, situation is rather curious. Mr. Gothi was cited as a witness for the petitioner. If the petitioner wanted to examine

Mr. Gothi obviously it must be with a view to prove some point in his favour. If Mr. Gothi would at all be biased when he has to appreciate his

own evidence it would ordinarily be in favour of the petitioner. The petitioner has, however, alleged that there was a long cross-examination of Mr.

Gothi on behalf of the petitioner. That is something very much un-understandable. The petitioner cited Mr. Gothi as his witness and then proceeded

to cross-examine him at length as if he was treated hostile to the petitioner. I have not been able to clearly understand the motive lying behind this

attempt at calling a person, who held preliminary inquiry on the basis of which charge-sheet must have been framed, as witness for the delinquent

officer and then to tarnish him by cross-examination. But I would leave at that because in the view I am taking a further inquiry may be held against

the petitioner. The fact, however, remains that once Mr. Gothi recorded statements in the preliminary inquiry he had disqualified himself from taking

any part in imposing final penalty. It is not of the essence of the matter whether any prejudice is caused to the petitioner but the matter should be

viewed from larger perspective namely, that justice must not only be only but it must seem to be done. One has to put himself in the shoes of the

petitioner to find out how he would feel about Mr. Gothi who recorded statements in the preliminary inquiry and then proceeded to dismiss the

petitioner. It may be that Mr. Gothi may have acted in the most bona fide manner but that is not of the essence of the matter. The officers

participating in the inquiry must be wholly above board, and that there should not be even lurking suspicion that they may not be able to act free

from any bias. Such would not be the position of Mr. Gothi who was rather cryptically described as a prosecutor, a witness and a Judge rolled into

one. To the extent that Mr. Gothi acted as disciplinary authority, the inquiry is rather vitiated. It is held in contravention of the principles of natural

justice.

As a second limb of the argument, it was urged that the petitioner had made an application for giving him copies of the evidence of all the

witnesses examined in the course of the inquiry. That such demand was made is not in dispute. The petitioner was informed that he may himself

take extracts of the evidence of witnesses recorded in the inquiry. Subsequently the officers felt that while taking extracts the petitioner was

tampering with the record. On this point I do not propose to express any opinion lest it may prejudice the petitioner. The fact remains that on the

allegation that the petitioner was tampering with the record he was not further permitted to make copies of the evidence recorded in the inquiry.

The result is that the petitioner has not been given copies of the evidence of witnesses examined in the inquiry. If the allegation of tampering with the

record is kept out of consideration, any inquiry would stand vitiated if the delinquent officer is neither given copies nor given any opportunity to

make copies himself and that would be the situation here. If the enquiry officer or the disciplinary authority felt that the petitioner was likely to

tamper with the record if he was permitted to make copies or take extracts the obvious thing for them to do was to call upon the petitioner to pay

copying charges and give him copies. Copies can be refused only on two grounds mentioned in clause 3(3) of the Third Schedule namely, that the

record is not relevant or it is against public interest to allow the delinquent access to it. On no other ground copy of the evidence of a witness can

be refused. None of the two grounds exist here. The result is that in this case copies of the evidence of witnesses were not furnished to the

petitioner. Mr. Nanavati, learned Assistant Government Pleader told me that on petitioner agreeing to pay reasonable charges for the copies,

department would furnish to him copies of the evidence of witness examined in the course of the inquiry. On this point also the inquiry would stand

vitiated.

It thus becomes crystal clear that the inquiry has been conducted in contravention of Regulation 3(3) in Third Schedule and in contravention of

the principles of natural justice. Regulations being statutory the inquiry in violation thereof is vitiated and order of dismissal at the conclusion of such

an inquiry would be void and the petitioner would be entitled to a declaration that he continues to be in service of the first respondent-Corporation.

As the first ground of attack succeeds I need not examine other grounds of attack in this case. Accordingly, this petition is allowed by issuing a

writ of mandamus quashing and setting aside the order dismissing the petitioner from the service of the first respondent-Corporation dated 26th

August, 1968. It would be open to the first respondent-Corporation to continue the inquiry from the stage when the copies of the statements of

witnesses examined in the inquiry were not made available to the petitioner. Rule made absolute with costs.