Case: M.L.Kamra Vs. Chairman-Cum-Managing Director.New India Assurance Co. Ltd

In this appeal by special leave, by way of additional grounds with leave, the appellant impugnes Rule 5 of the Orissa Insurance Cooperative Society Ltd. Service Rules (for short `the Rules) as unconstitutional and void offending Article 14 of the Constitution of India. The material facts relevant to the point are that while the appellant was working as Divisional Manager at Delhi, the general insurance business was nationalised and its management was taken over by the Central Government under General Insurance (Emergency Provisioners) Ordinance, 1971 replaced by Act 57 of 1972 (for short `the Act) and vested in the custodian of the New India Assurance Co. Ltd., the management of Orissa Insurance Cooperative Society Ltd. By operation of Section 7 of the Act, the services of the appellant and others stood transferred and vested with the custodian. Under the Act, the Board of Directors was empowered to terminate the service of the officer/employee of the insurer. The appellant was kept under suspension from August 9, 1973 pending investigation into the embezzlement. Explanation was called for on October 16, 1973. In response thereto the appellant submitted his reply on December 7, 1974. While dropping the proceeding, the appellant was served with termination order dated April 17, 1975 issued by the respondent. The appellant challenged it in a writ petition in Delhi High Court which was dismissed by a learned Single Judge on November 11, 1983 and was confirmed by the Division Bench in Letters Patent Appeal No. 351/1984 dated April 23, 1984.

Reasoning:
It is settled law that there is a presumption of constitutionality of the rule. The court ought not to interpret the statutory provisions, unless compelled by their language, in such a manner as would involve its unconstitutionality, since the legislature or the rule making authority is presumed to enact a law which does not contravene or violate the constitutional provisions. Therefore, there is a presumption in favour of constitutionality of a legislation or statutory rule unless ex facie it violates the fundamental rights guaranteed under Part III of the Constitution. If the provisions of a law or the rule is construed in such a way as would make it consistent with the Constitution and another interpretation would render the provision or the rule unconstitutional, the court would lean in favour of the former construction. In view of this settled legal position, the question emerges whether the language in Rule 5 would be capable to be construed consistent with the fundamental rights in part III. As stated earlier, the phrase ``in the event of the Society not having any further need of any employees service whether permanent or temporary which shall be decided by the Board is susceptible of two interpretations. The one interpretation put up by Sri Ramumurty is that the Board may unilaterally and arbitrarily decide that there is no need for the services of a particular employee, in given facts and circumstances, though the post which the employee is occupying may continue and would be put to an end by giving one months notice or pay in lieu thereof. In that event the rule per se is arbitrary offending Article 14. The other view capable to be construed from language employed would be that the Board of Management may form an objective opinion, on the basis of the material, that the post which the officer or the employee is occupying no longer is in need. Thereby, the post would be abolished. This would be a policy decision depending on the exigencies. In consequence the services of the employee also would become redundant or surplus. In that event his service would no longer be needed. The officer or employee may be permanent or temporary but the absence of the need for the continuance of the post would necessitate to terminate the service of an employee or officer. It must not be a pretext or a rouse to get rid of the service of an inconvenient officer or of an employee. If that be so, if would become colourable exercise of power and would be liable to be quashed as offending Article 14. Once the Board reaches a decision to abolish the post, in consequence the service of the officer/employee occupying the post could be terminated. The language couched in Rule 5 also is capable of that interpretation. In that light we are of the opinion that Rule 5 does not become arbitrary, unreasonable or void offending Article 14. Accordingly, we hold that the rule is valid.But from the facts, it is clear that the Board of Management did not abolish the post but put an end to the service of the appellant. Obviously due to loss of confidence as his honesty and integrity became suspicious and his continuance in service was felt inexpedent and not in the interest of the business of the respondents. But Rule 8 was available for taking action for misconduct but was not availed. Therefore, the impugned order terminating the services of the appellant is illegal. What would be the consequence ? Normally the appellant is entitled to reinstatement but in our view the ends of justice would be met by directing the respondent to pay him Rs. 1,00,000/- as compensation, instead of reinstatement and further continuance in service. The compensation awarded would be staggered between the year 1973 till date for the purpose of income tax and given the appropriate relief. In this view it is not necessary to deal with other contentions or decisions cited across the bar. Before parting with the case it is necessary to mention that march of service jurisprudence necessitates the respondent to recast the rules in tune with the Constitution and the law.