tition No 177 of 1987 etc
Under Article 32 of the Constitution of India
Dr LM Singhvi KK Venugopal MK Ramamurthi VM 193 Tarkunde RK Garg Ravi P Wadhwani Vrinda Grover Vandana Chak Ranjeet Kumar MN Krishnamani V Shekhar BS Maan MA Chinnaswami VJ Francis Mathai M Paikeday NM Popli MA Krishnamurthi Mrs Chandan Ramamurthi Balbir Singh Rajan Karanjawala Mrs Manik Karanjawala Ravi P Wadhwani PN Mishra Ashok Grover Ezaz Manbool and KK Mohan for the Petitioners
G Ramasvamy Additional Solicitor General Dr YS Chitale MM Abdul Khader Soli J Sorbjee KN Bhat GL Sanghi OC Mathur Miss Srieen Sethna Harish Salve HS Parihar Vipin Chandra Vijay Kr
Verma Miss Madhu Moolchandani Gopal Subramium Halida Khatoon Mrs Sushma Suri and P Parmeshwaran for the Respondents
EC Aggarwala and DD Gupta for the Intervener
The Judgment of the Court was delivered by RANGANATH MISRA J
The writ petitions under Article 32 of the Constitution and appeals by special leave are against the judgment of the Division Bench of the Kerala High Court in writ appeals have a common set of facts as also law for consideration
These matters have been heard together and are disposed of by this common judgment
Hindustan Commercial Bank  Hindustan  for short
The Bank of Cochin Ltd hereafter referred to as Cochin Bank  and Lakshmi Commercial Bank  Lakshmi  for short were private banks
Action was initiated under section 45 of the Banking Regulation Act 1949  Act  for short for amalgamation of these three banks with Punjab National Bank Canara Bank and State Bank of India respectively in terms of separate schemes drawn under that provision of the Act
Amalgamation has been made
Pursuant to the schemes 28 employees of Hindustan 21 employees of Cochin Bank and 76 employees of Lakshmi were excluded from employment and their services were not taken over by the respective transferee banks
Some of these excluded employees of the Cochin Bank went before the Kerala High Court for relief under Article 226 of the Constitution
A learned Single Judge gave them partial relief but on an appeal to the Division Bench by the transferee bank concerned the writ petitions have been dismissed
The civil appeals are against the decision of the Division Bench
The writ petitions directly filed before this Court are by some of the excluded employees of Hindustan and Lakshmi respectively
194 Though employees of the other two banks had not challenged the vires of section 45 of the Act on behalf of Lakshmi such a challenge has been made
Since the grounds of attack on this score did not Impress us at all we do not propose to refer to that aspect of the submissions involving interpretation of Article 31 A Article 16 and Article 21
It has often been said by this Court that Courts should not enter into constitutional issues and attempt interpretation of its provisions unless it is really necessary for disposal of the dispute
In our opinion this group of cases can be disposed of without reference to question of vires of some part of section 45 of the Act being examined
Counsel on behalf of the excluded employees have broadly contended that the draft schemes did not include any name of employees intended to be excluded no opportunity of being heard was afforded to them before exclusion was ordered under the schemes and the authorities concerned have not acted fairly they deny the allegation that any of them was responsible for ficticious improper or non business like advances of loan to parties thereby bringing conditions near about bankruptcy for the appropriate banking companies many other employees against whom there were definite charges already pending enquiry or even orders of dismissal had been proposed have been taken over and retained in service of the transferee banks while these excluded employees without justification have been called upon to face this unfortunate situation
The transferee banks the Reserve Bank of India hereafter referred to as RBI for short and the Union of India have appeared and filed affidavits in opposition
The Union of India has contended that the scheme in respect of each of the banks that has got amalgamated had been approved by it as required under the Act and since finality was attached to such schemes challenge was not open against the schemes particularly in view of the provisions contained in Article 3 I A of the Constitution
On behalf of the Reserve Bank of India several contentions were raised by way of opposition and shortly stated these submissions are 1 Law does not require that the draft scheme should contain the names of the employees to be excluded 2 The incorporation of the names finalised on the basis of scrutiny of the records before the schemes were placed before the RBI was sufficient compliance of the requirements of the law 195 3 the provisions of the Act did not confer any right on the employees of being heard 4 the scheme making process was legislative in character and therefore did not come within the ambit of natural justice
Alternately the action not being judicial or quasi judicial and at the most being administrative or executive was also not open to challenge on allegations of violation of rules of natural justice 5 moratorium under the statutory provisions could not be beyond six months and in view of the fact that the entire operation had to be finalised within a brief time frame the requirement of an enquiry by notice to all the officers intended to be excluded could not have been intended to be implanted into the provisions of section 45 and 6 Provision of compensation has been made for those who were excluded from the respective scheme
Each of the transferee banks generally adopted the stand taken by RBI
Before we proceed to examine the tenability of the several contentions and counter contentions advanced at the hearing it is appropriate that we refer to the relevant provisions of the Act
The entire law applicable to the facts of these cases is to be found in Part Ill of the Act and in particular in section 45
As far as relevant that section provides Notwithstanding anything contained in the foregoing provisions of this Part or in any other law or any agreement or other instrument for the time being in force
where it appears to the Reserve Bank that there is good reason so to do the Reserve Bank may apply to the Central Government for an order of moratorium in respect of a banking company
2 The Central Government after considering the application made by the Reserve Bank under sub section 1 may make an order of moratorium staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it thinks fit and proper and may 196 from time to time extend the period so however that the total period of moratorium shall not exceed six months 3        4 During the period of moratorium if the Reserve Bank is satisfied that a in the public interest or b in the interests of the depositors or c in order to secure the proper management of the banking company or d in the interests of the banking system of the country as a whole it is necessary so to do the Reserve Bank may prepare a scheme i for the reconstruction of the banking company or ii for the amalgamation of the banking company with any other banking institution in this section referred to as the transferee bank
5 The scheme aforesaid may contain provisions for all or any of the following matters namely a         b         c         d         e         f         g         h         197 i the continuance of the services of all the employees of the banking company excepting such of them as not being workmen within the meaning of the are specifically mentioned in the scheme in the banking company itself on its reconstruction or as the case may be in the transferee bank at the same remuneration and on the same terms and conditions of service which they were getting or as the case may be by which they were being governed immediately before the date of the order of moratorium Provided        j notwithstanding anything contained in clause i where any of the employees of the banking company not being workmen within the meaning of the are specifically mentioned in the scheme under clause i or where any employees of the banking company have by notice in writing given to the banking company or as the case may be the transferee bank at any time before the expiry of one month next following the date on which the scheme is sanctioned by the Central Government intimated their intention of not becoming employees of the banking company on its reconstruction or as the case may be of the transferee bank the payment to such employees of compensation if any to which they are entitled under the  and such pension gratuity provident fund and other retirement benefits ordinarily admissible to them under the rules or authorisations of the banking company immediately before the date of the order of moratorium k         I         6 a A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the banking company and also to the transferee bank and any other banking company concerned in the amalgamation for suggestions and objections if any within such period as the Reserve Bank may specify for this purpose b the Reserve Bank may make such modifications 198 if any in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the banking company and also from the transferee bank and any other banking company concerned in the amalgamation and from any members depositors or other creditors of each of those companies and the transferee bank
7 The scheme shall thereafter be placed before the Central Government for its sanction and the Centraly Government may sanction the scheme without any modifications or with such modifications as it may consider necessary and the scheme as sanctioned by the Central Government may specify in this behalf Provided         7A The sanction accorded by the Central Government under sub section 7 whether before or after the commencement of section 21 of the Banking Laws Miscellaneous Provisions Act 1963 shall be conclusive evidence that all the requirements of this section relating to reconstruction or as the case may be amalgamation have been com plied with and a copy of the sanctioned scheme certified in writing by an officer of the Central Government to be a true copy thereof shall in all legal proceedings whether in appeal or otherwise and whether instituted before or after the commencement of the said section 21 be admitted as evidence to the same extent as the original scheme
8 on and from the date of the coming into operation of the scheme or any provision thereof the scheme or such provision shall be binding on the banking company or as the case may be on the transferee bank and any other banking company concerned in the amalgamation and also on all the members depositors and other creditors and employees of each of those companies and of the transferee bank and on any other person having any right or liability in relation to any of those companies or the transferee bank   9         10 If any difficulty arises in giving effect to the provisions 199 of the scheme the Central Government may by order do anything not inconsistent with such provisions which appear to it necessary or expedient for the purpose of removing the difficulty
11 Copies of the scheme or of any order made under sub section  10 shall be laid before both Houses of Parliament as soon as may be after the scheme has been sanctioned by the Central Government or as the case may be the order has been made
12        13        14        15       
Allegations advanced on behalf of the excluded employees is that the draft scheme contemplated under sub section 6a did not specifically mention names of the excluded employees and at a later stage when the scheme was sent up by the RBI to the Central Government a schedule containing the names of the excluded employees was attached to each of the schemes
Section 45 of the Act provides a legislative scheme and the different steps required to be taken under this section have been put one after the other
A reading of this section indicates a sequence oriented pattern
What would ordinarily be incorporated in the draft scheme is indicated in sub section 5
After the requirements of sub section 5 are complied with and the scheme comes to a presentable shape sub section 6a requires a copy thereof as prepared by RBI to be sent to the banking company transferer as also to the transferer bank
Clause b of sub section 6 authorises RBI to make modifications in the draft scheme as it may consider necessary in the light of suggestions and objections received from the banking company and the transferee bank
On a simple construction of sub sections 5 and 6 and on the basis of the sequence pattern adopted in section 45 it would be legitimate to hold that the Act contemplates the employees to be excluded to be specifically named in the draft scheme
Since it is a draft scheme prepared by RBI and the right to object or to make suggestions is extended to both the banking company as also the transferee bank and in view of the fact that clause 200 i of sub section 5 specifies this item to be a matter which may be included in the scheme it must follow that the legislative intention is that the scheme would incorporate the names of such employees as are intended to be excluded in accordance with the scheme
Once it is incorporated in the scheme the banking company as also the transferee bank would be entitled to suggestobject to the inclusion of names of employees
It may be that the names of some of the employees may have been wrongly included and the banking company the hither to employer would be in a position to suggestobject to the inclusion of the names or it may even be that names of some undesirable employees which should have been left out have been omitted and the banking company as the extant employer of such employees would be most competent to deal with such a situation to bring about rectifications by exercising the power to suggestobject to the draft scheme
The contention advanced on behalf of RBI that since it is open to it under sub section 6b of section 45 to make modifications of the draft scheme even if the names were not included earlier at the stage of finalising the scheme for placing it before the Central Government as required under sub section 7 the earlier non inclusion is not a contravention is not acceptable
We are of the view that in case some employees of the banking company are intended to be excluded their names have to be specifically mentioned in the scheme at the draft stage
The requirement of specific mention is significant and the legislature must be taken to have intended compliance of the requirement at that stage
Mr Salve for the RBI adopted the stand that the provisions of section 45 did not specifically concede a right of objection or making of suggestions to employees and in sub section 6b mention was made only of members depositors or other creditors
For the reasons we have indicated above this aspect of the contention does not impress us
It is the common case of RBI as also the transferee banks that the records of service of each of the employees had been scrutinised and the names for inclusion in the scheme were picked up on the basis of materials like irresponsible action in regard to sanction of loans and accommodations to customers which affected the financial stability of the banking company concerned
Such an allegation made in the counter affidavit in this Court has been seriously disputed by the litigating excluded employees
It is their positive case that there was no foundation in such allegation and dubious loans if any had been sanctioned under instructions of the superior in the banking company and therefore did not involve any delinquency on the part of such employees
Since it is the case of the respondents that exclusion had 201 been ordered on the basis of an objective assessment and the very A foundation of the allegation upon which such assessment has been made is disputed a situation arose where facts had to be ascertained and it involved assessment
That has admittedly not been done
These employees were in employment under contract in the banking companies which were private banks
They have been excluded from service under the transferee banks and the contracts have now been terminated as a result of inclusion of their names in the schemes
It cannot be disputed nay has not been that exclusion has adversely affected this category of employees and has brought about prejudice and adverse civil consequences to them
Two contentions have been raised with reference to this aspect of the matter  1 There has been infraction of natural justice and 2 The transferee banks which are State  and RBI which has monitored the operation being admittedly State  their action in excluding some of the employees of the banking company and taking over the services of others who are similarly situated is hit by Article 14 of the Constitution
It may be pointed out that according to the excluded employees many facing similar allegations andor in worse situation have been taken over
Whether there is infraction of Article 14 of the Constitution on the allegation advanced would depend upon facts relating to the excluded employees as also the allegedly derelict employees whose services have been taken over
In the absence of an enquiry in which the excluded employees should have been given an opportunity of participation it has become difficult for us to probe into the matter further
F Admittedly the excluded employees have neither been put to notice that their services were not being continued under the transferee banks nor had they been given an opportunity of being heard with reference to the allegations now levelled against them
Learned counsel for RBI and the transferee banks have taken the stand that the scheme making process under section 45 is legislative in character and therefore outside the purview of the ambit of natural justice under the protective umbrella whereof the need to put the excluded employees to notice or enquiry arose
It is well settled that natural justice will not be employed in the exercise of legislative power and Mr Salve has rightly relied upon a recent decision of this Court being Union of India H 202  Anr
vs Cynamide India Ltd  Anr  1987 2 SCC 720 in support of such a position
But is the scheme making process legislative Power has been conferred on the RBI in certain situations to take steps for applying to the Central Government for an order of moratorium and during the period of moratorium to propose either reconstruction or amalgamation of the banking company
A scheme for the purposes contemplated has to be framed by RBI and placed before the Central Government for sanction
Power has been vested in the Central Government in terms of what is ordinarily known as a Henery 8 clause for making orders for removal of difficulties
Section 4511 requires that copies of the schemes as also such orders made by the Central Government are to be placed before both Houses of Parliament
We do not think this requirement makes the exercise in regard to schemes a legislative process
It is not necessary to go to any other authority as the very decision relied upon by Mr Salve in the case of Cynamide India Ltd supra lays down the test
In paragraph 7 of the judgment it has been indicated Any attempt to draw a distinct line between legislative and administrative functions it has been said is difficult in theory and impossible in practice 
Though difficult it is necessary that the line must sometimes be drawn as different legal rights and consequences may ensue
The distinction between the two has usually been expressed as one between the general and the particular  A legislative act is the creation and promulgation of a general rule of conduct without reference to particular cases an administrative act is the making and issue of a specific direction or the application of a general rule to a particular case in accordance with the requirements of policy  Legislation is the process of formulating a general rule of conduct without reference to particular cases and usually operating in future administration is the process of performing particular acts of issuing particular orders or of making decisions which apply general rules to particular cases 
It has also been said Rule making is normally directed towards the formulation of requirements having a general application to all members of a broadly identifiable class while an adjudication on the other hand applies to specific individuals or situations
But this is only a broad distinction not necessarily always true
 Applying these tests it is difficult to accept Mr Salve s contention that 203 the framing of the scheme under section 45 involves a legislative process
There are similar statutory provisions which require placing of material before the two Houses of Parliament yet not involving any legislative activity
The fact that orders made by the Central Government for removing difficulties as contemplated under sub clause 10 are also to be placed before the two Houses of Parliament makes it abundantly clear that the placing of the scheme before the two Houses is not a relevant test for making the scheme framing process legislative
We accordingly hold that there is no force in the contention of Mr Salve that the process being legislative rules of natural justice were not applicable
The alternate contention on this score is that the scheme making process being an executive activity or alternately an administrative matter rules of natural justice have no application
This contention has again to be rejected
Neither in Privy Council Natural Justice and Certiorari has indicated Formerly the presumption had been that there WAS obligation to give a hearing unless the statute itself indicated such an obligation now the presumption is that there is such an obligation unless the statute clearly excludes it notwithstanding the vesting of a power in subjective terms in a minister responsible to Parliament As has beer
pointed out by Wells J in Perre Brothers vs Citrus organisation Committee It is now well established and there is no need for me to canvass the innumerable authorities bearing on this point that duties responsibilities and functions of an administrative authority may be purely ministerial or they may embody some quasi or semi judicial characteristic
At one time a good deal of ingenuity and with all respect it seems to me a great deal of energy was wasted in attempting to discern whether a particular function was administrative or quasi judicial
In my view the House of Lords and now the High Court have to a very large extent set all such controversies at rest
In my opinion the test now is not so much as to whether one can fairly call something ministerial or 204 administrative or quasi judicial but whether the duties of a non judicial authority must having regard to the wording of the Act be carried out in a spirit of judicial fairness
 In Re H K an infant Lord Parker CJ found that the immigration officer was not acting in a judicial or quasi judicial capacity
Yet the learned Chief Justice held that he still had to act fairly
In that case it meant giving K an opportunity of satisfying the officer as to his age and for that purpose he had to let K know what his immediate impression was so that K could disabuse him of it
Lord Parker observed I appreciate that in saying that it may be said that one is going further than is permitted on the decided cases because heretofore at any rate the decisions of the courts do seem to have drawn a strict line in these matters according to whether there is or is not a duty to act judicially or quasi judicially
The obligation to act fairly even in administrative decision making has since been widely followed
Mulla in Fairness The New Natural Justice  has stated Natural justice co exists with or reflected a wider principle of fairness in decision making and that all judicial and administrative decision making and that all judicial and administrative decision makers had a duty to act fairly
 In the case of State of Horsily vs Dr Miss Binapani Dei  ors   this Court observed It is true that the order is administrative in character but even an administrative order which involves civil consequences as already stated must be made consistently with the rules of natural justice after informing the first respondent of the case of the State the evidence in support thereof and after giving an opportunity to the first respondent of being heard and meeting or explaining the evidence
No such steps were admittedly taken the High Court was in our judgment right in setting aside the order of the State 205 ln AK Kraipak  ors
vs Union of India  ors
  a Constitution Bench quoted with approval the observations of Lord Parker in Re H K an infant supra
Hegde J speaking for the Court stated Very soon thereafter a third rule was envisaged and that is that quasi judicial enquiries must be held in good faith without bias and not arbitrarily or unreasonablly
But in the course of years many more subsidiary rules came to be added to the rules of natural justice
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 validity of that limitation is now questioned
If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries
Often times it is not easy to draw the line that demarcates administrative enquiries from quasi judicial enquiries
Enquiries 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 enquiries as well as administrative enquiries
An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi judicial enquiry
 These observations in AK Kopak s supra case were followed by another Constitution Bench of this Court in Chandra Bhavan Boarding and Lodging Bangalore vs The State of Mysore  Anr l 19701 2 SCR 600
In Swadeshi Cotton Mills vs Union of India  a three Judge Bench of this Court examined this aspect of natural justice
Sarkaria J who spoke for the Court stated During the last two decades the concept of natural justice has made great strides in the realm of administrative law
Before the epoch making decision of the House of Lords in Ridge vs Baldwin it was generally thought that the rules of natural justice apply only to judicial or quasi judicial proceedings and for the purpose whenever a breach of the rule of natural justice was alleged Courts in England used to ascertain whether the impugned action was taken by the statutory authority or tribunal in the exercise of its 206 administrative or quasi judicial power
In India also this was the position before the decision of this Court in Dr Bina Pani Dei s case supra wherein it was held that even an administrative order or decision in matters involving civil consequences has to be made consistently with the rules of natural justice
This supposed distinction between quasi judicial and administrative decisions which was perceptibly mitigated in Bina Pani Dei s case supra was further rubbed out to a vanishing point in AK Kraipak s case supra      
On the basis of these authorities it must be held that even when a State agency acts administratively rules of natural justice would apply
As stated natural justice generally requires that persons liable to be directly affected by proposed administrative acts decisions or proceedings be given adequate notice of what is proposed so that they may be in a position a to make representations on their own behalf b or to appear at a hearing or enquiry if one is held and c effectively to prepare their own case and to answer the case if any they have to meet
Natural justice has various facets and acting fairly is one of them
RBI which monitored the three amalgamations was required to act fairly in the facts of the case
The situation necessitated a participatory enquiry in regard to the excluded employees
Since the decision to exclude them from service under the transferee banks is grounded upon a set of facts the correctness whereof they deny if an opportunity to know the allegations and to have their say had been afforded they could have no grievance on this score
The action deprives them of their livelihood and brings adverse civil consequences and could obviously not be taken on the ipse dixit of RBI officers without verification of facts
It is quite possible that a manoeuvring officer of the banking company adversely disposed of towards a particular employee of such bank could make a report against such employee and have him excluded from further service under the transferee bank
The possibility of exclusion on the basis of some mistake such as to identity cannot also be ruled out
There is all the more apprehension of this type is the process has to be completed quickly and very often the records of a large number of employees have to be scrutinised
We are of the view that rules of natural justice apply to administrative action and in the instant cases the decision to exclude a section of the employees without complying with requirements of natural justice was bad
207 It has been contended on behalf of respondents that moratorium could be for a total period of six months and that was the time allowed for the entire operation to be conducted
In view of the time frame by necessary implication it must follow that application of natural justice compliance of which would involve a time consuming process was ruled out
We do not think that there is any merit in this contention either
As a fact in respect of the three banks the total number of excluded employees is around 125
It is the common case of parties that proceedings were pending against some of them
It may be that in view of the time frame a detailed enquiry involving communication of allegations show cause opportunity to lead evidence in support of the allegations and in defence of the stand of the employees may not be possible
Keeping the legislative scheme in view perhaps a simpler enquiry for instance communication of the allegation and even receiving an explanation and in cases where the allegation was serious or there was a total denial though there was firm basis for the allegation a single personal hearing could be afforded
In this case we are not really concerned with the manner or extent of hearing as there has been no hearing at all
It must therefore be held that the action of excluding these employees in the manner done cannot be supported
Fair play is a part of the public policy and is a guarantee for justice to citizens
In our system of Rule of Law every social agency conferred with power is required to act fairly so that social action would be just and there would be furtherance of the well being of citizens
The rules of natural justice have developed with the growth of civilisation and the content thereof is often considered as a proper measure of the level of civilisation and Rule of Law prevailing in the community
Man within the social frame has struggled for centuries to bring into the community the concept of fairness and it has taken scores of years for the rules of natural justice to conceptually enter into the field of social activities
We do not think in the facts of the case there is any justification to hold that rules of natural justice have been ousted by necessary implication on account of the time frame
On the other hand we are of the view that the time limited by statute provides scope for an opportunity to be extended to the intended excluded employees before the scheme is finalised so that a hearing commensurate to the situation is afforded before a section of the employees is thrown out of employment
We may now point out that the learned Single Judge of the Kerala High Court had proposed a post amalgamation hearing to meet the situation but that has been vacated by the Division Bench
For the 208 reasons we have indicated there is no justification to think of a post decisional heading
On the other hand the normal rule should apply
It was also contended on behalf of the respondents that the excluded employees could now represent and their cases could be examined
We do not think that would meet the ends of justice
They have already been thrown out of employment and having been deprived of livelihood they must be facing serious difficulties
There is no justification to throw them out of employment and then given them an opportunity of representation when the requirement is that they should have the opportunity referred to above as a condition precedent to action
It is common experience that once a decision has been taken there is a tendency to uphold it and a representation may not really yield any fruitful purpose Amalgamation  as such saved under Article 31A1c of the Constitution is not under challenge here
Strong reliance however had been placed on the provisions of sub section 7A of section 45 of the Act
The relevant part of it is as requoted here for convenience The sanction accorded by the Central Government under sub section 7  shall be conclusive evidence that all the requirements of this section relating to   amalgamation have been complied with This provision is indeed one for purposes of evidence
In Smt
Somavanti  ors
vs State of Punjab  Ors 19631 2 SCR 774 this Court pointed out that there was no real difference between conclusive proof  provided for in section 4 of the Evidence Act and conclusive evidence  as appearing in sub section 7A
This provision does not bar the raising of a dispute of the nature received here
As we have already pointed out amalgamation is not under challenge
Parties are disputing as to what exactly are the requirements of the procedure laid down under the Act and the position that no opportunity was afforded to the excluded employees is not in dispute
To a situation as here protection of the umbrella of conclusive evidence is not attached so as to bar the question from being examined
There is therefore nothing in sub section 7A to preclude examination of the question canvassed here The writ petitions and the appeals must succeed
We set aside the impugned judgments of the Single Judge and Division Bench of the Kerala High Court and direct that each of the three transferee banks 209 should take over the excluded employees on the same terms and conditions of employment under the respective banking companies prior to moratorium
The employee would be entitled to the benefit of continuity of service for all purposes including salary and perks throughout the period
We leave it open to the transferee banks to take such action as they consider proper against these employees in accordance with law
Some of the excluded employees have not come to Court
There is no justification to penalise them for not having litigated
They too shall be entitled to the same benefits as the petitioners
Ordinarily the successful parties should have been entitled to costs but in view of the fact that they are going back to employment we do not propose to make orders of costs against their employers
We hope and trust that the transferee banks would look at the matter with an open mind and would keep themselves alive to the human problem involved in it
NPV Petitions  Appeals allowed


Summary:
The Hindustan Commercial Bank the Bank of Cochin Ltd and Lakshmi Commercial Bank were amalgamated with Punjab National Bank Canara Bank State Bank of India respectively in terms of separate schemes drawn under the Banking Regulation Act 1949 and pursuant thereto 125 employees of these banks were excluded from employment and their services were not taken over by the respective transferee banks
Some of these excluded employees filed writ petitions before the High Court which granted partial relief but on appeal by the transferee Bank the Writ Petitions were dismissed by the Division Bench
Against this appeals by Special Leave were filed before this Court
Some of the excluded employees filed writ petitions before this Court directly
It was contended on behalf of the excluded employees that the draft schemes did not include any name of employees intended to be excluded that no opportunity of being heard as afforded to them before exclusion was ordered and the authorities concerned had not acted fairly that none of them was responsible for ficticious improper or 189 on business like advances of loan to parties thereby bringing conditions nearabout bankruptcy for the appropriate banking companies that many other employees against whom there were definite charges already pending enquiry or even orders of dismissal had been proposed had been taken over and retained in service of the transferee banks while these excluded employees without justification had been called upon to face this unfortunate situation
The transferee banks the Reserve Bank of India and the Union of India filed affidavits in opposition
It was contended on behalf of the Union of India that the scheme in respect of each of the amalgamated banks had been approved by it as required under the Act and since finality was attached to such schemes the schemes could not be challenged particularly in view of the provisions contained in Article 31 A of the Constitution
It was contended on behalf of the Reserve Bank of India that law did not require that the draft scheme should contain the names of the employees to be excluded that the incorporation of the names finalised on the basis of scrutiny of the records before the schemes were placed before the RBI was sufficient compliance of the requirements of the law that the provisions of the Act did not confer any right on the employees of being heard that the scheme making process was legislative in character and therefore did not come within the ambit of natural justice and the action not being judicial or quasijudicial and at the most being administrative or executive was also not open to challenge on allegations of violation of rules of natural justice that moratorium under the statutory provisions could not be beyond six months and in view of the fact that the entire operation had to be finalised within a brief time frame the requirement of an enquiry by notice to all the officers to be excluded could not have been intended to be implanted into the provisions of section 45 and that provision of compensation had been made for those who were excluded from the respective schemes
Allowing the writ petitions and appeals this Court  HELD 1
Rules of natural justice apply to administrative action and the decision to exclude a section of the employees without complying with requirements of natural justice was bad
206H 21 Fair play is part of public policy and a guarantee for justice to citizens
In our system of Rule of Law every social agency conferred with power is required to act fairly so that social action would be just and there would be furtherance of the well being of citizens
207E 190 22 The rules of natural justice have developed with the growth of A civilization and the content thereof is often considered as a proper measure of the level of civilization and Rule of Law prevailing in the community
207E F 23 Natural justice generally requires that persons liable to be directly affected by proposed administrative acts decisions or proceedings be given adequate notice of what is proposed so that they may be in a position a to make representation on their own behalf b or to appear at a hearing or enquiry if one is held and c effectively to prepare their own case and to answer the case if any they had to meet
Even when a State agency acts administratively rules of natural justice would apply206C D 31 Section 45 of the Banking Regulations Act provides a legislative scheme and the different steps required to be taken have been put one after the other
On a simple construction of sub sections 5 and 6 and on the basis of the sequence pattern adopted in section 45 it is clear that the Act contemplates the employees to be excluded to be specifically named in the draft scheme
Since it is a draft scheme prepared by RBI and right to object or to make suggestions is extended to both the banking company as also the transferee bank and in view of the fact that clause i of sub section 5 specifies this item to be a matter which may be included in the scheme it must follow that the legislative intention is that the scheme would incorporate the names of such employees as are intended to be excluded in accordance with the scheme
Once it is incorporated in the scheme the banking company as also the transferee bank would be entitled to suggestobject to the inclusion of names of employees
199E F H 200A B 32 In case some employees of the banking company are intended to be excluded their names have to be specifically mentioned in the scheme at the draft stage
The requirement of specific mention is significant and the legislature must be taken to have intended compliance of the requirement at that stage
The excluded employees in the instant case were in employment under the contract in the banking companies which were private banks
They have been excluded from service under the transferee banks and the contracts had been terminated as a result of inclusion of their names in the schemes
This exclusion has adversely affected this category of employees and has brought about prejudice and adverse civil consequences to them
200D E 41 Natural justice cannot be employed in the exercise of legisla 191 tive power
Power has been conferred on the RBI in certain situations to A take steps for applying to the Central Government for an order of moratorium and during the period of moratorium to propose either reconstruction or amalgamation of the banking company
A scheme for the purposes contemplated has to be framed by RBI and placed before the Central Government for sanction
Power has been vested in the Central Government in terms of what is ordinarily known as a Henery 8 clause for making orders for removal of difficulties
201H 202A B 42 Section 4511 requires that copies of the scheme as also such orders made by the Central Government are to be placed before both Houses of Parliament
This requirement does not make the exercise in regard to schemes a legislative process
Framing of the scheme under section 45 does not involve a legislative process and as such rules of natural justice are applicable to the instant case
202C 43 The fact that orders made by the Central Government for removing difficulties as contemplated under sub clause 10 were also to be placed before the two Houses of Parliament makes it abundantly clear that the placing of the scheme before the two Houses is not a relevant test for making the scheme framing process legislative
203B 51 RBI which monitored the three amalgamations was required to act fairly in the facts of the case
The situation necessitated a participatory enquiry in regard to the excluded employees
If an opportunity to know the allegations and to have their say had been afforded they could have no grievance on this score
The action deprives them of their livelihood and brings adverse civil consequences and could obviously not be taken on the ipse dixit of RBI owners without verification of facts
In view of the time frame a detailed enquiry may not be possible but keeping the legislative scheme in view perhaps a simpler enquiry could be afforded
206E F 52 In the facts of the case there is no justification to hold that rules of natural justice have been ousted by necessary implication on account of the time frame
On the other hand the time limited by statute provides scope for an opportunity to be extended to the intended excluded employees before the scheme is finalised so that a hearing commensurate to the situation is afforded before a section of the employees is thrown out of employment
207F G 53 There is no justification to think of a post decisional hearing
H 192 on the other hand the normal rule should apply
The excluded employees have already been thrown out of employment and having been deprived of livelihood they must be facing serious difficulties
There is no justification to throw them out of employment and then given them an opportunity of representation when the requirement is that they should have the opportunity as a condition precedent to action
It is common experience that once a decision has been taken there is a tendency to uphold it and a representation may not really yield any fruitful purpose
208A C 6
Protection of the umbrella of conclusive evidence is not attached to a situation as in the instant case so as to bar the question regarding the requirements of the procedure laid down under the Act and the opportunity afforded to the excluded employees from being examined
There is therefore nothing in sub section 7A of section 45 to preclude examination of the question
208G Each of the three transferee banks should take over the excluded employees on the same terms and conditions of employment under the respective banking companies prior to amalgamation
The employees would be entitled to the benefit of continuity of service for all purposes including salary and perks throughout the period
It is open to the transferee banks to take such action as they consider proper against these employees in accordance with law
There is no justification to penalise some of the excluded employees who have not come to the Court
They too shall be entitled to the same benefits as the petitioners 208H 209A B Union of India  Anr
vs Cynamide India Ltd  Anr 1987 2 SCC 720 Perre Brothers vs Citrus organisation Committee  Re H K an infant  State of Orissa vs Dr Miss Binapani Dei  Ors   AK Kraipak  ors vs Union of India  Ors  Chandra Bhavan Boarding and Lodging Bangalore vs The State of Mysore  Anr 11970 2 SCR 600 Swadeshi Cotton Mills vs Union of India  and Smt
Somavanti  Ors
vs State of Punjab  Ors  referred to