Civil No219 of 1988
WITH CMP No 8572 of 1989
Under Article 139A1 of the Constitution
AND TRANSFER PETITION NOS
376 40 of 1985
Rajinder Sachar and R Vasudevan for the Petitioners in Transfer Case No 21988 and CMP No 8572 of 1989  MK Ramamurthy DS Chauhan Pinaki Misra MA Krish namoorthy HS Parihar RP Kapoor OC Mathur Ms Madhu Khatri Ms Bina Gupta DN Misra and Harish N Salve for the Respondents in Transfer Case No 2 1988 and CMP 8572 of 1989
G Ramaswamy Additional Solicitor General Anil Dev Singh NP RP Srivastava Ms A Subhashini and CVS Rao for the Petitioners in Transfer Petition No 376 40 1 of 1985
SR Seita and PK Manohar for the Respondent in Trans fer Petition Nos 386 and 376 of 1985
The Judgment of the Court was delivered by THOMMEN J
The first petitioner is a registered Central Trade Union claiming to represent about 85 per cent of the officers working in the various nationalised banks
Peti tioners 2 to 4 are principal office bearers of the first petitioner and are officers of different nationalised banks
They are aggrieved by Circular dated 2381982 Annexure A issued by the Joint Secretary to the Government of India Ministry of Finance Department of Economic Affairs Bank ing Division New Delhi
They contend that the circular is contrary to the mandate of the Banking Companies Acquisi tion and Transfer of Undertakings Act 1970 Act No 5 of 1970 hereinafter referred to as the Act  and the Natio nalised Banks Management and Miscellaneous Provisions Scheme 1980 hereinafter referred to as the Scheme 
They further contend that Clause 3 of the Scheme in terms of which the circular is purported to have been issued is ultra vires Section 9 of the Act unless the said clause is so read as to be in harmony with the Section and when so read the said clause does not justify or support the impugned circu lar
The petitioners therefore 854 seek a writ of mandamus to direct the Central Government to appoint a nominee of the majority association of each of the nationalised banks as a member of its Board of Directors
The circular in question reads As you are aware in terms of sub clause c of Clause 3 of Nationalised Banks Management and Miscellaneous Provisions Scheme 19701980 one Director from among the employ ees of the nationalised banks who are not workmen is to be appointed by the Central Government in consultation with the Reserve Bank of India on the Board of each of the Nationalised Banks
Unlike in the case of workman the Scheme does not lay down any procedure for selection of the non workman Director
The intention clearly was that in the case of Officer Director Government should have ample scope and freedom in select ing any officer of the Bank to be the non workman Director
However hitherto panel of names sent by the banks for selection of the non workman Director has been confined to office bearers of the Association of Officers
Government has recently reviewed this matter in the light of the relevant provisions of the Scheme and come to a conclusion that there is no justification for restricting the choice to the office bearers of the Associations
 The object of the circular is to clarify that the Cen tral Government no longer regards itself bound by its earli er practice of appointing a person from out of the panel of three names submitted by the respective Association repre senting the majority of the non workmenemployees of each nationalised bank
The circular makes it clear that the Government wishes to appoint any officer of proven ability and character to the Board of Directors of a nationalised bank irrespective of his affiliation with any Association
The petitioners contend that the circular is undemocratic and contrary to the letter and spirit of the Act and the Scheme insofar as it cuts at the root of the representative form of selection for appointment to the Board of Directors as contemplated by the statute
The stand of the Central Government and other respond ents as stated in their counter affidavits appears to be that the object of the circular is to neutralise and dis courage trade unionism amongst the officers and to keep the directorship above union affiliation and thus 855 encourage the growth of a management culture
Mr Rajinder Sachar supported by Mr Ramamurthi contends that there is no justification whatsoever to issue any such circular for the very object of the Act is to encourage democratic selec tion of the Directors who will truly represent the interests of the various categories of persons mentioned in the Act
To discourage trade unionism is contrary to the very spirit of the statute and repugnant to constitutional principles enshrined in Article 191c and Article 43A of the Consti tution of India
The Additional Solicitor General representing the Central Government and Mr Harish N Salve counsel for the Reserve Bank of India contend that the Act postulates both election and nomination of members of the Board of Directors and the choice between the two modes of appointment is left to the Central Government
The election or nomination has to be conducted in a manner as specified in the Scheme
The Scheme in effect postulates all appointments to be by nomi nation
In the case of workmen employees the Director is appointed by the Central Government from amongst the names of three employees furnished by the representative Union
Such appointment though made out of and restricted to the panel furnished by the Union is in effect a nomination of the one preferred by the Central Government
In the case of non workmen employees the choice is not restricted to any panel and the only condition postulated is consultation with the Reserve Bank of India
Unionisation though desirable among workmen is not a matter to be encouraged in the case of other employees for selection to the Board of Directors for the Directors must represent the interest of the bank as a whole and not of any special class of persons
The Addi tional Solicitor General also submits that appointment by election is not the only mode of representative appointment but nomination is perfectly valid and more effective from the point of view of the true institutional interest par ticularly with reference to management efficiency
In the light of these rival contentions we shall exam ine the relevant provisions of the Act and the Scheme
Section 9 of the Act provides 9
Power of Central Government to make scheme 1 The Central Government may after consul tation with the Reserve Bank make a scheme for carrying out the provisions of this Act
856 2 In particularand without preju dice to the generality of the foregoing power the said scheme may provide for all or any of the following matters namely a      b the constitution of the Board of Direc tors by whatever name called of the corre sponding new bank and all such matters in connection therewith or incidental thereto as the Central Government may consider to be necessary or expedient c       d such incidental consequential and supplemental matters as may be necessary to carry out the provisions of this Act
3 Every Board of Directors of a correspond ing new bank constituted under any scheme made under subsection 1 shall include a representative of the employees and of depositors of such bank and b such other persons as may represent the interests of each of the following categories namely farmers workers and artisans to be elected or nominated in such manner as may be specified in the scheme
 The object of Section 9 of the Act insofar as it is material is to empower the Central Government to make a scheme for the constitution of the Board of Directors so as to include representatives of the employees and other speci fied categories
Employees include workmen and non work men
The categories specified apart from the employees are depositors farmers workers and artisans
The representa tives of these classes of people are to be either elected or nominated in the manner specified by the Scheme
The legis lature has left it to the Central Government to make a scheme providing for appointment to the Board from amongst the specified categories either by election or by nomina tion
The discretion as to the mode of 857 appointment is of course left to the Central Government but it is not an unrestrained or unrestricted discretion but a discretion which must be reasonably exercised so as to give effect to the true intent of the legislature as to the composition of the Board of Directors
The object of the legislature is to give the Board a truly representative character so as to reflect the genuine interests of the various persons manning or dealing with the bank as an industry and a commercial enterprise
The object of the Act is to nationalise the banks in order to as stated in the preamble to the Act control the heights of the economy and to meet progressively and serve better the needs of development of the economy in conformi ty with the national policy and objectives
The very pur pose of that legislative exercise is to render the largest good to the largest number of people of this sovereign socialist secular democratic republic
See the preamble to the Constitution enshrining the national policy and objectives It is with this object in view that the Act has envisaged a truly representative Board of Directors chosen by election where election is feasible or by nomination where that mode is more appropriate
But the legislature has left it to the Central Government to specify by a scheme the manner in which the election or nomination is to be conduct ed bearing in mind the true character and objective of the banking industry and its distinguishing features as a highly sensitive commercial enterprise
Neither the election nor the nomination should be conducted in a manner unmindful of the distinctiveness of the banking industry
What is postu lated is such election or nomination as would lend to the Board of Directors its truly representative character in consonance and harmony with the extremely delicate vital and significant role of the banking industry in the context of the national policy and objectives and economic develop ment
The mode of election or nomination must therefore be such as would be ideally suitable and appropriate to the banking industry and the choice of the mode is generally a matter for decision by the Central Government
The Central Government must in this regard act in consultation with the Reserve Bank of India for it is the latter that has the necessary expertise and intimate knowledge in the field of banking finance and other connected matters
The Act therefore requires the Central Government to make the Scheme in consultation with the Reserve Bank of India
Any amendment or variation of the Scheme also requires consulta tion with the Reserve Bank of India
See Section 94
The Additional Solicitor General is right when he submits that it 858 is generally within the discretion of the Central Government to choose the special mode of appointment
The Government may choose election or nomination as the appropriate mode of appointment in respect of various categories
But we do not agree with him when he submits that the Central Government has a discretion to avoid election even where election is appropriate and feasible in respect of a particular category of persons
The very object of leaving the choice to the Central Government as to the mode which is election or nomination is to enable it to reasonably exercise its discretion in such a way as to give the best form of repre sentation to every category of persons mentioned in the Act
It may be possible to appoint a representative of the depos itors by election instead of nomination
It would be per fectly within the discretion of the Central Government to choose that mode
On the other hand the depositors being not an organised body of persons although easily identifia ble selection of their representative by nomination may be easier more feasible and perhaps more appropriate for the purpose of appointment to the Board
Farmers workers other than employees and artisans mentioned under subsection 3b of Section 9 are best represented by nomination they being difficult of identification and their connection with the bank being more remote than in the case of employees or even depositors
For these classes of people the discretion is entirely that of the Central Government to choose the mode of representation
In the case of employees on the other hand election is indeed the most logical the most appro priate the most democratic and certainly the most advanta geous form of representation
They are well identified well organised well motivated and interested associates and participants in the banking industry
They are as much a part of the bank as the management is
There can be no legitimate management culture foreign to their vital inter ests
There can be no valid management policy contrary to their genuine needs
The Act does not contemplate a manage ment unmindful of the true and legitimate interest of the employees
In a nationalised bank everyone is as much an employee as he is an employer
There is no antithesis be tween the management and the employees
The distinction that traditionally existed prior to nationalisation is no longer applicable
The true management culture is indeed the cul ture that represents the various interests of all persons specified under Section 9 as well as the larger and wider interests of national economy as postulated in the preamble to the Act
We will now examine the Scheme
Clause 3 of Chapter II of the Scheme provides 859 3
Constitution of the Board
As soon as may be after the commencement of this Scheme the Central Government shall by notification in the official Gazette constitute the Board of a nationalised bank consisting of  a          bi one Director from among the employees of the nationalised bank who are workmen to be appointed by the Central Government from out of a panel of three such employees fur nished to it by the representative Union within a date to be specified by the Central Government            i i                               i i i          c one Director from among the employees of the nationalised bank who are not workmen to be appointed by the Central Government after consultation with the Reserve Bank  d            e            f            g            h          
The scheme making authority appears to us to have exercised the legislative power delegated to it in making the Scheme in consonance with the Act although in a certain respect concerning the non workmen employees the intention of the delegate of the legislature could have been articu lated a little more explicitly
We say so in 560 the light of the contemporaneous construction placed on the statute by the delegate namely the Central Government as evinced by its own practice prior to the circular dated 2381982
Until the date of the circular the consistent practice of the Central Government was to appoint a non workmen Director from out of a panel of three names fur nished to it by the majority association of non workmen employees
The Central Government understood the Act and the Scheme to warrant such mode of appointment in the case of all employees
In other words the Central Government under stood sub clause c of Clause 3 regarding non workmen employees to warrant the same type of representation as in the case of workmen employees mentioned under sub clause b of Clause 3
The field of choice was thus understood by the Government to be limited to the panel of names furnished by the representative Union of workmen or Association of non workmen as the case may be
But as stated earlier sub clause c of Clause 3 is vaguely drafted and when read without regard to the legislative intent as disclosed by the Act is capable of a contrary interpretation as is now sought to be put upon it by the Central Government and that interpretation is in our view wrong and in any case out of harmony with the principle enshrined in Articles 191c and 43A of the Constitution The Additional Solicitor General poses the question whether the Scheme would not be even more defective if sub clause c were to receive the same construction as sub clause b so as to restrict the choice of appointment to the three persons specified on the panel furnished by the representative Association
The Act he says speaks of election or nomination and if election were to be construed to be the appropriate mode of choosing the representatives of the employees appointment by nomination of one person out of the panel furnished by the representative Union of workmen or Association of non workmen as the case may be would not be a perfect representation in keeping with the principle of election
That may or may not be so and there is always room for improvements but the petitioners have no complaint on that score
If the Central Government were to provide for election in the manner chosen by it so as to appoint the true representatives of the concerned employees Mr Sachat submits the petitioners would have no complaint provided the provisions laid down in that behalf are valid and reasonable
While in our view it is open to the Central Govern ment to amend the Scheme to improve on the machinery for the conduct of an appropriate election it is incumbent upon it until any such amend 561 ment is made to work the present Scheme in such a way as to give the maximum scope for the concerned employees to exer cise their choice in the selection of their representatives
That means it would be perfectly in order for the Central Government to continue the practice followed by it prior to the circular in question or to hold election of the repre sentatives of the concerned employees and if necessary to amend the Scheme suitably for that purpose
In the circumstances we declare that the circular dated 2381982 Annexure A is ultra vires the Act and the Scheme and it is therefore null and void and of no effect
The Transfer Case is accordingly disposed of
Civil Miscellane ous Petition No 8572 of 1988 and Transfer Petitions Nos 376 401 of 1985 are allowed
Parties shall bear their re spective costs
TNA Petitions allowed


Summary:
The respondent who was carrying on the business of transporting goods challenged before the High Court the imposition of supervision fee levied under Standing Order No 3 on the goods in transit through the limits of the Municipal Corporation of Baroda
Before the framing of Standing Order No 3 a transporter was required to pay octroi at the point of entry in the city and claim refund thereof at the point of exit after satisfying the authority that the goods which had entered were being taken out
Standing Order No 3 framed under section 4661Af read with section 147 of the Bombay provincial Corporations Act 1949 provided that when a transporter entered into the corporation limits with goods which were only in transit he could on payment of supervision fee carry the goods through the corporation limits under the supervision of the staff of the Corporation without payment of octroi at the point of entry
The High Court held Standing Order No 3 as illegal and without the authority of law
The High Court observed that under section 4661Af the Commissioner had the authori ty to frame standing orders only in respect of goods on which octroi was payable and as octroi was not payable on the goods which were in transit no standing orders could be framed under the Section The High Court further held that quid pro quo was not satisfied as no service was rendered to the transporter
Before this Court it was contended on behalf of the appellant that the levy of supervision fee was optional the procedure under Standing Order No 3 was introduced to avoid hardship to the transporter it was open to him to follow the normal procedure of paying the octroi and claiming refund the requirement of quid pro quo was in substance 563 satisfied and the fee was charged only to facilitate the transporter in carrying the goods in transit
Allowing the appeal this Court HELD 1 The procedure under Standing Order No 3 is not compulsory and it is the option of the transporter to take advantage of this Standing Order if he so chooses otherwise follow normal procedure of payment of octroi and claiming refund
868H 869A 2 Clause f of section 4661A contemplates that the Commissioner may by standing order prescribed the proce dure for the goods which are introduced in the city limits
for immediate exportation and also the fees which could be charged
It is clear that this provision which confers the authority on the Commissioner to frame standing orders does not talk of goods on which octroi is payable
The Commis sioner therefore had the authority under section 466 and the Standing Orders have been framed in accordance with the procedure prescribed under that section
867D E 869D 3 It appears that while taking the view that the levy could not be justified under Entry 52 of the State List which authorises the State Legislature to impose a tax on entry of goods into a local area the High Court was examin ing the fees prescribed as a tax and it was on that basis that the High Court took the view that no such tax could be levied on goods on which no octroi was payable
But as it is not a tax the imposition could not be said to be bad on the ground that the State Legislature had no authority to impose it
869E 870A 4 In order to establish a quid pro quo concept it is not necessary to establish exactly that the amount collected is spent on the services rendered
872A Sourthen Pharmaceuticals  Chemicals Trichur  Ors etc
vs State of Kerala  Ors etc
  and Sreeni vasa General Traders  Ors
vs State of Andhra Pradesh  Ors
   referred to
5 So far as the charging of supervision fee is con cerned it reasonably appears to be a charge for the serv ices rendered
The High Court was therefore not right in coming to the conclusion that this fee was not justified because according to the High Court it was not established that the fee was in consideration of the services or privi lege conferred on the transporter
872F