All India Bank Employees vs National Industrial Tribunal

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 154 of 1961

Decision Date: 28 August 1961

Coram: N. Rajagopala Ayyangar, Bhuvneshwar P. Sinha, S.K. Das, A.K. Sarkar, J.R. Mudholkar

In this matter the Supreme Court of India delivered its judgment on 28 August 1961. The case was styled All India Bank Employees’ Association versus National Industrial Tribunal and others, and it was authored by Justice N. Rajagopala Ayyangar. The bench comprised Justices N. Rajagopala Ayyangar, Bhuvneshwar P. Sinha, S. K. Das, A. K. Sarkar, J. R. Mudholkar and the Chief Justice. The principal petition was filed by the All India Bank Employees’ Association and the respondents included the National Industrial Tribunal along with other connected parties. The judgment bears the citations 1962 AIR 171 and 1962 SCR (3) 269, and it appears in several law reports as listed under the citator information.

The dispute centered on the constitutionality of section 34‑A of the Banking Companies Act, 1949. That provision, introduced in 1960, prohibits a banking company from being compelled to produce or allow inspection of its books, documents, statements or any information it deems confidential when such production would disclose reserves not shown in the published balance sheet or particulars concerning provisions for bad and doubtful debts and other necessary provisions. Sub‑section (2) of the same section authorises any authority faced with a question of whether an amount drawn from such reserves or provisions should be taken into account to refer the matter to the Reserve Bank of India. The Reserve Bank is then required to issue a certificate indicating whether the authority should consider the specified amount. Sub‑section (3) limits the application of section 34‑A to banking companies whose operations extend beyond a single State.

The appellant argued that section 34‑A infringed the fundamental right guaranteed to trade unions under Article 19(1)(c) of the Constitution because it impeded the unions’ ability to effectively engage in collective bargaining before industrial tribunals by excluding relevant evidence. The appellant further contended that the provision violated Article 14 of the Constitution because it was not uniformly applicable to all banking companies. The Court examined these contentions and held that section 34‑A of the Banking Companies Act, 1949, was constitutionally valid. The Court concluded that the right under Article 19(1)(c) does not entail an automatic entitlement for unions to achieve their objectives without any legislative restriction, unless such restriction can be justified. Accordingly, the Court found that the provision did not transgress Article 19(1)(c) or Article 14.

The Court observed that the freedom guaranteed by Article 19 sub‑clause (1) (c) of the Constitution is limited to the right to form an association or trade union. Activities undertaken by such an association, including the steps it may take to achieve its objectives, are subject to legislation that may be enacted in the interests of public order or morality under Article 19 sub‑clause (4). Consequently, legislative restrictions on the functions of a union cannot be judged on the ground that they violate Article 19 sub‑clause (4). Section 34‑A of the Banking Companies Act, 1949 was enacted to reconcile the competing interests of labour, which seeks effective relief through industrial arbitration, and the need to preserve the stability of the nation’s credit structure by maintaining the perceived creditworthiness of banks. The provision therefore preserved industrial adjudication of disputes between banks and their employees by assigning the task of determining the surplus reserve that may be counted as part of a bank’s assets for assessing its capacity to meet obligations to the Reserve Bank. In support of its reasoning, the Court referred to several authorities, including Ramesh Thappar v. State of Madras (1950) SCR 594, Express Newspapers (P) Ltd. v. Union of India (1959) SCR 12, The Kerala Education Bill (1959) SCR 995, and several decisions of United States courts such as National Association for the Advancement of Colored People v. Alabama, Bates v. Little Rock, National Labour Relations Board v. Jones & Lawrence Steel Corporation and Amalgamated Utility Workers v. Consolidated Edison Company of New York. The Court noted that the fact that certain banks were not covered by Section 34‑A did not render the provision violative of Article 14, because the grievance was not raised by those excluded banks. It further observed that about ninety‑five percent of banking business in the country was conducted by the 271 banks to which Section 34‑A applied, and these banks employed roughly eighty‑thousand of the ninety‑thousand bank employees. The potential injury to the credit structure would arise only from the disclosure of reserves of banks falling within this class, and there existed a rational nexus between the classification and the purpose of the statute. The exclusion of the Reserve Bank of India from the operation of Section 34‑A(2) was also held not to be discriminatory, as the nature and scheme of the provision necessarily required such exclusion.

The matter before the Court was Civil Appeal No. 154 of 1961, filed by special leave against the judgment and order dated 31 October 1960 of the National Industrial Tribunal (Bank Disputes), Bombay, in Reference No. 1 of 1960. The appeal was accompanied by Petitions Nos. 70, 80 and 82 of 1961, which were filed under Article 32 of the Constitution for enforcement of fundamental rights. Counsel for the appellant and the petitioner in Petition No. 80 of 1961 represented the party, while the Attorney‑General of India appeared on behalf of the respondent. The Court’s judgment addressed the constitutional validity of Section 34‑A and the applicability of Articles 19 and 14 to the statutory scheme, ultimately affirming the legislation’s consistency with the Constitution.

The parties were represented by counsel as follows: N. V. Phadke, K. H. Bhabha, J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra appeared for respondents numbered 2 through 17 and 19 through 34 in the appeal and Petition No. 80 of 1961. The same counsel, namely J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, also represented respondents numbered 41 through 49 in the appeal and Petition No. 80 of 1961. Anand Prakash acted for respondents numbered 35 through 40 in Petition No. 80 of 1961. Counsel A. V. Viswanatha Sastri, D. P. Singh, M. K. Ramamurthi, R. K. Garg and S. C. Agarwal were retained for Intervener No. 2. D. S. Nargolkar and K. R. Choudhri appeared for Petitioners numbered 70 and 82 of 1961. The Attorney‑General of India, M. C. Setalvad, together with the Solicitor‑General, C. K. Daphtary, the Additional Solicitor‑General, H. N. Sanyal, and again J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, represented Respondent No. 2 in Petitions numbered 70 and 82 of 1961. Naunit Lal acted for Intervener No. 3, while M. C. Setalvad, in his capacity as Attorney‑General of India, and T. Sen represented Intervener No. 1.

The judgment was delivered by Justice Ayyangar on 28 August 1961. Civil Appeal No. 154 of 1961 had been filed on special leave, challenging an order dated 31 October 1960 of Justice K. T. Desai, who was then functioning as the National Industrial Tribunal (Banks Disputes) in Bombay. The central issue for determination was the constitutional validity of section 34A of the Banking Companies Act, 1949, which had been introduced as an amendment to the parent Act (Act X of 1949) on 26 August 1960. The appellant before the Court was the All India Bank Employees’ Association, a trade union representing employees of several banks operating throughout India. The Punjab National Bank Employees’ Union, a trade union with comparable objectives, sought to intervene in support of the appellant union. Three additional writ petitions were filed by other bank‑employees’ unions; their full titles could be discerned from the cause titles. All the petitions were heard together because each raised the identical question of the validity of section 34A, hereinafter referred to as the impugned provision.

Section 34A, whose validity was contested, reads as follows: “34A. (1) Notwithstanding anything contained in section 11 of the Industrial Disputes Act, 1947, or any other law for the time being in force, no banking company shall, in any proceeding under the said Act or in any appeal or other proceeding arising therefrom or connected therewith, be compelled by any authority before which such proceeding is pending to produce, or give inspection of, any of its books of account or other document or to furnish or disclose any statement or information, when the banking company claims that such document, statement or information is of a confidential nature and that the production or inspection of such document or the furnishing or disclosure of such statement or information would…”

The provision stipulated that a banking company could be required to keep certain information confidential. Specifically, the company could refuse to produce or allow inspection of any books of account, document, or statement that it claimed were confidential, if the disclosure would involve information relating to (a) any reserves that were not displayed as reserves in the published balance sheet, or (b) any particulars that were not shown in the balance sheet concerning provisions made for bad and doubtful debts and other usual or necessary provisions. The provision further provided that, in any proceeding concerning a banking company other than the Reserve Bank of India, if a question arose as to whether any amount out of the reserves or provisions mentioned in sub‑section (1) should be taken into account by the authority before which the proceeding was pending, the authority might, at its discretion, refer the question to the Reserve Bank. Upon such reference, the Reserve Bank, after considering principles of sound banking and all relevant circumstances of the banking company, was required to issue a certificate to the authority. The certificate would either direct the authority not to take into account any amount as reserves and provisions of the banking company, or it would permit the authority to take them into account only to the extent specified in the certificate. The certificate issued by the Reserve Bank on such questions was declared final and not open to challenge in any such proceeding. For the purposes of the section, the term “banking company” was defined as the meaning assigned to it in the Industrial Disputes Act.

Before examining the points of controversy and the grounds on which the legality of the provision was challenged, the Court found it helpful to outline briefly the historical steps that led to the enactment of the disputed provision. Historically, there had been a long‑standing practice in England among banking companies, distinct from companies engaged in other commercial activities, not to disclose in their balance sheets and profit and loss accounts the amounts of bad and doubtful debts, the provisions made for such debts, or the secret reserves created and held under various headings. This practice received judicial recognition in the case of Newton v. Birmingham Small Arms Co. Ltd., where Justice Buckley acknowledged the confidentiality of such information. The same practice was adopted by several banks in India, and from time to time questions arose regarding its consistency with the statutory disclosure requirements contained in the various Companies Acts that had been enacted. While there was a substantial body of opinion that considered the practice salutary and necessary for the preservation and progress of a credit institution such as a bank, the desirability and legality of the practice had also been challenged. The Court noted that it was not concerned in this judgment with the desirability or ethical aspects of the practice, which were matters for the legislature, but rather with the steps by which the law accommodated the practice. The Indian Companies Act of 1866 made no distinction between the balance‑sheet contents of banking companies and those of other companies, a position that persisted until later legislative developments.

In the judgment, it was observed that the Indian Companies Act of 1866 made no distinction between the balance‑sheet contents of banking companies and those of other companies, and that both categories were required to disclose a list of debts deemed bad or doubtful. The same requirement was reproduced without change in the Companies Act of 1882. However, when the Companies Act of 1913 was enacted, the form identified as ‘F’ in the third Schedule of that Act incorporated a specific note under the sub‑heading “book debts” within the head “Property & Assets”. The note instructed that, in the case of a bank, a distinction be made between debts that were fully secured and those that were secured only by the debtor’s personal security, and that in all instances a separation be drawn between debts considered good and those considered doubtful or bad. It further required that debts owed by directors or other officers of the company, whether held severally or jointly with any other persons, be stated separately in every case.

The judgment explained that, because of this note, the obligations imposed on banks with respect to classification of their assets and the information to be disclosed became slightly more detailed than those imposed on other companies. Nevertheless, the banking practice previously identified—namely, the deliberate non‑disclosure or incomplete disclosure of bad and doubtful debts and the setting aside of sufficient sums under other heads to create secret reserves so that the institution’s credit would remain unaffected while its financial stability would be preserved—continued despite the change in the balance‑sheet form. The Central Bank of India Limited, in its published balance‑sheets for the year 1925, adopted this practice, although the presentation was not in strict conformity with the requirements of Form F together with the accompanying note.

Subsequently, the managing‑director of the bank was prosecuted by a shareholder named Shamdasani on the allegation of filing and publishing statements that were false in material particulars, an offence punishable under section 282 of the Indian Companies Act. The magistrate acquitted the accused on the ground that the balance‑sheet complied with the usual banking practice and that the reserves shown under various heads, though not labelled as a specific provision for bad and doubtful debts, adequately covered possible losses. An application for revision was filed before the High Court of Bombay, and Justice Fawcett allowed the revision, holding that a declared provision in the balance‑sheet could not be reduced by general considerations regarding the purpose of a balance‑sheet. This judgment was rendered on 28 February 1927 (see Shamdasani v. Pochkanwala (1)). Shortly thereafter, the Government of India issued a notification on 29 March 1927, under section 151 of the Companies Act 1913, amending Form F and, as amended, excluding banks from the requirement to disclose a reserve for bad and doubtful debts under the heading “Capital and Liabilities” on the left‑hand side of the balance‑sheet, and to list “book debts which were bad and doubtful for which provision had been made to the satisfaction of the auditors” on the right‑hand side as part of the property and assets of a bank.

In the earlier rule the bank was not required to display, in the left‑hand side of the balance‑sheet under the heading “capital and liabilities”, any reserve that had been created for bad and doubtful debts. Likewise, on the right‑hand side the bank was not obliged to list “book debts which were bad and doubtful for which provision had been made to the satisfaction of the auditors” as part of its property and assets. The Companies Act of 1913 was later altered many times by the Amending Act of 1936. One of those alterations removed the change that had been introduced by the Notification dated 29 March 1927 in Form “F”, and Form “F” was consequently required to retain the original note that accompanied it under the 1913 Act, without the special exception that had been granted to banks by the earlier Notification. It appears that this omission may have been accidental, because on the very next day after the Amending Act became effective, the Central Government issued another Notification on 16 January 1937, again under section 151 of the Companies Act. That later Notification restored the modifications to Form “F” that had been made by the March 1927 Notification, thereby reinstating the altered presentation of the balance‑sheet for banks.

The legality of the 1937 Notification was challenged by Shamdasani, who argued that the Central Government had acted beyond its authority when it issued the Notification. He filed a complaint against the Central Bank of India Limited and its directors, alleging that they had prepared a false balance‑sheet for the year ending 31 December 1939, a balance‑sheet that conformed to the form as altered by the Notification. The magistrate accepted the validity of the Notification and acquitted the accused. Shamdasani then appealed for revision before the High Court. A full bench of the Bombay High Court held that the Notification exceeded the Government’s powers, but it nonetheless affirmed the acquittal because the accused had acted in good faith, believing that the alteration to the form was lawful (see Shamdasani v. The Central Bank of India Ltd.). Shortly after this judgment, the legislature enacted Act XXX of 1943 with retrospective effect. That Act validated the earlier Notification and amended the relevant sections of the Companies Act (sections 132, 151 and Article 107), thereby authorising the Government to make changes to the balance‑sheet form in the manner it had done in January 1937. The next significant development relevant to the present matter was the report of the Company Law Amendment Committee of the United Kingdom, chaired by Mr Justice Cohen. The Committee examined in depth the issue of undisclosed reserves, discussing both advantages and disadvantages. For the purpose of this case, a brief extract from paragraph 101 of the report suffices: “The chief matter which has created controversy is the question of undisclosed or, as they are frequently called, secret or inner reserves.”

In this passage, the Court described how an undisclosed reserve was commonly created. It explained that a company could form such a reserve by using its profits to write down assets more than was necessary. This practice involved undervaluing items such as investments, freehold and leasehold property, or plant and machinery. It also included creating excessive provisions for bad debts or other contingencies, charging capital expenditure to revenue, or undervaluing stock in trade. The Court noted that the normal object of creating an undisclosed reserve was to enable the company to avoid large fluctuations in its published profits or its dividends.The Court then referred to the Committee’s report, which made a number of recommendations. Several of those recommendations were adopted in the United Kingdom Companies Act of 1948. The recommendations relevant to the present point were intended to bring the law governing the contents of a bank’s balance‑sheet into line with the practice of sound and well‑managed banks. In India, special legislation embodying many of those recommendations was enacted as the Banking Companies Act of 1949. Section 29 of that Act prescribed the requirements concerning the contents of banks’ balance‑sheets. The balance‑sheet and profit‑and‑loss account were required to be in the form set out in the third schedule to the Act. Sub‑section (3) of Section 29 exempted banking companies from having to conform to the balance‑sheet and profit‑and‑loss formats prescribed for companies registered under the Indian Companies Act. Sub‑section (4) empowered the Central Government to amend the form laid down in the schedule by issuing notifications in the Official Gazette.The Court observed that Form ‘A’, which provided the model balance‑sheet for banks, was not substantially different from the requirements of the earlier law. However, Form ‘B’ in the third schedule, which dealt with the profit‑and‑loss account, permitted the provision for bad and doubtful debts to be excluded from the income figure so that the amount of bad and doubtful debts would not appear separately on the income side. Accordingly, the income to be shown was described as “income (less provision made during the year for bad and doubtful debts)”. This wording was later modified by a notification issued under the power conferred by Section 29(4) of the Act in December 1951. After the amendment, the heading “Income” in the profit‑and‑loss account read: “Income (less provision made during the year for bad and doubtful debts and other usual and necessary provisions)”.Consequently, as far as the shareholders of banks, the general public and the banks’ customers were concerned, the law relieved banks from the obligation to disclose the entire amount of their reserves or the full extent of bad or doubtful debts and the provisions made therefor. The Court noted that while the law stood in this manner, disputes arose between bank employees throughout India and their respective banks regarding wages, conditions of work and related matters, which were subsequently referred by the Central Government to an ad hoc Tribunal.

In June 1949 an ad hoc Tribunal was constituted to hear the dispute, with Shri K. C. Sen, a retired judge of the Bombay High Court, appointed as Chairman. That Tribunal issued an award, but the award was successfully challenged before this Court in April 1951 on the ground that the members who rendered the award were not the same individuals who had originally investigated the dispute. Consequently, a new Tribunal was constituted in January 1952, this time chaired by Shri S. Panchapages Sastri, a retired judge of the Madras High Court. The award of the Sastri Tribunal was published in April 1953, although the precise terms of that award are not reproduced here. Both the banks and the workmen filed appeals against that award before the Labour Appellate Tribunal. The Appellate Tribunal hearing those appeals comprised three members, with Shri Jeejeebhoy presiding as President. The workers’ appeal largely concerned a demand for higher wages and salaries, while the banks contended that they lacked the capacity to pay anything beyond what the Sastri Tribunal had already granted.

The Jeejeebhoy Tribunal examined the banks’ claim of incapacity in the context of the provisions of the Banking Companies Act and the format of the balance‑sheet required by that statute. It observed that “at the very outset there is an initial difficulty in arriving at a correct estimate of the financial position of banks. There are two circumstances which militate against our securing a proper insight into the financial state of banks. We refer in particular to (a) the undisclosed or secret reserves and (b) to the manner in which it is permissible in law for a banking company to exhibit its balance sheet. It is not in dispute that banks do have undisclosed or secret reserves which they acquire in a number of ways, and such undisclosed reserves cannot be ascertained from the balance sheet….” The Tribunal further noted that “the other difficulty with which we are confronted at the outset is the manner in which a bank is permitted to present its profit & loss account. On the income side the form originally prescribed by the Banking Companies Act required the banks to declare ‘Income less provision made during the year for bad and doubtful debts’; this has now been altered by an amendment made by the Central Government in exercise of the powers conferred under sub‑section 4 of section 29 of the Banking Companies Act to read ‘Income (less provision made during the year for bad and doubtful debts and other usual or necessary provisions)’. The effect of this alteration is that the profits as shown for any particular year are first shown not only of bad and doubtful debts but also of ‘other usual or necessary provisions’ before being shown in the balance sheet….” These observations form the basis of the Tribunal’s assessment of the banks’ capacity to meet the workers’ wage demands.

The Board of Directors and the auditors of each bank may have examined the accounts, and the Reserve Bank of India may also have scrutinized them; however, it remained the Court’s duty to determine whether a bank possessed sufficient capacity to meet its liabilities. In the absence of such crucial information, any assessment of a bank’s ability to pay would necessarily be incomplete.

Although banks argued that the provisions of the Banking Companies Act insulated them from inquiries into undisclosed reserves, the Court considered those hidden reserves and related appropriations relevant to its investigation. When such information was not made available, the Court would have to draw the best possible inferences from the remaining material before it.

The workmen asserted that an Industrial Tribunal possessed the legal authority to compel banks to disclose both their secret reserves and the amounts allotted for bad and doubtful debts and other necessary provisions that were excluded from the income heading in the profit and loss account. This claim was raised before the Court in the matter of State Bank of India and Others v. Their Workmen, which was an appeal against a decision of the Labour Appellate Tribunal.

Because the Court had already reached conclusions on other aspects of that case, it refrained from passing judgment on whether the workmen’s claim was correct or not.

Disputes between bank employees and the management continued, and on 21 March 1960 the Central Government, exercising the powers conferred by subsection (1A) of section 10 of the Industrial Disputes Act, referred the dispute—covering several issues—to the National Tribunal created by a government notification issued on the same day. Justice K. T. Desai was appointed as the Tribunal’s chairman.

Most of the major banks in the country, including the Reserve Bank of India and the State Bank of India, were made parties to the reference. After the Tribunal commenced its work and the parties presented their respective contentions, the Bank Employees Association filed applications on 9 June 1960 seeking orders that the respondent banks produce specific documents before the Tribunal for adjudication.

The applications requested, first, statements showing “the secret reserves in any form” of each bank for the period from 1954 up to 31 December 1959; and second, statements indicating the provisions made “for bad and doubtful debts and other usual and necessary provisions” during the years 1954 to 1959, together with the total amounts outstanding in those categories for each bank in each of those years.

The banks responded to these applications on 16 July 1960, filing their replies. The Tribunal then considered the production of the requested documents and the information sought on several of the matters, including the

In the matter before the Tribunal, the Indian Banks Association, which represented the employers, opposed the production of the two categories of documents by asserting that the law exempted such disclosures in the interest of the banking industry and the public, and it claimed an absolute privilege against being compelled to provide the information. At that juncture Parliament enacted the provision that is now under challenge as an amendment to the Banking Companies Act. Several banks relied on that amendment to argue that they could not be forced to disclose either the amount or the nature of their secret reserves, nor the amounts set aside each year for bad and doubtful debts and for other reasonable and necessary provisions. The association of bank employees therefore questioned the constitutional validity of section 34A of the Banking Companies Act, contending that if the section were held valid it would answer the demand for production of the documents concerned. The objection was presented before the National Tribunal, which affirmed the validity of the contested section. The present civil appeal, identified as Appeal No. 154, is directed against that decision and seeks to overturn it. The writ petitions were filed by bank employees’ associations that had not been parties to the original application for production before the Tribunal; these petitions were intended to lend support to the appellant’s case in Appeal No. 154 of 1961. The preceding narrative demonstrates that, before the amendment, the Banking Companies Act had aligned the rules on disclosure of secret reserves and the provision for bad and doubtful debts with the customary practice of bankers, thereby shielding those items from compulsory disclosure to shareholders and to the public. A controversy arose as to whether the workmen of the banks should be placed in a position different from that of the shareholders, given that the undisclosed items could influence the calculation of their wages and other conditions of work that have financial consequences. By means of the impugned legislation Parliament extended the protection from compulsory disclosure to the workmen as well, but incorporated a safeguard whereby the Reserve Bank would determine the amount of reserves that could be taken into account in industrial adjudication. The question that now arises for the Court is whether this effort to approximate the position of the workmen to that of the shareholders is unconstitutional. Mr Chari, learned counsel for the appellant in Appeal No. 154, presented the principal arguments, and those arguments were further elaborated by counsel appearing for the petitioners in the various writ petitions and by counsel representing the interveners in both the appeal and the petitions. Although the submissions covered a broad spectrum, they were essentially directed at attacking the validity of the impugned provision.

The petitioners contested the legislation on two principal foundations: first, that the impugned enactment infringed the fundamental right accorded to “trade unions” by the provision contained in sub‑clause (c) of clause (1) of Article 19; and second, that it transgressed the guarantee of equality enshrined in Article 14 of the Constitution. The Court examined these contentions sequentially, beginning with the alleged clash between the impugned provision and sub‑clause (c) of clause (1) of Article 19. Article 19, as quoted for relevance, states: “Article 19. (1) All citizens shall have the right‑ (a) ……………………………………… (b) ……………………………………… (c) to form associations or unions.” This right is qualified by clause (4), which provides: “(4) Nothing in sub‑clause (c) of the said clause shall affect the operation of any existing law insofar as it imposes, or prevents the State from making any law imposing, in the interests of public order or morality, reasonable restrictions on the exercise of the right conferred by the said sub‑clause.” None of the counsel argued that the legislation denied workers the literal right to form unions or associations as guaranteed by sub‑clause (c). Rather, the counsel maintained that a purely literal construction of the guaranteed freedom would be improper; the freedom, they asserted, must be interpreted to encompass more than merely the ability to register a union and avoid unjustifiable impediments to its formation. It should also bestow upon duly formed unions the substantive capacity to act as instruments for agitation, negotiation, and collective bargaining, thereby enabling them to secure, uphold, or enforce the demands of workers concerning wages, prospects, or conditions of work. The counsel further submitted that, without such an expansive view, the right to form a union would be illusory. To clarify the implications of this submission, the counsel outlined several logical steps. First, the Constitution, by sub‑clause (c) of clause (1) of Article 19, guarantees to all citizens and particularly to workers the right to form unions. In this context, it was highlighted that the term “union” alongside “association” in the Article signifies associations created by workmen for trade‑union purposes, with “union” being deliberately chosen to denote labour or trade unions. Second, the right to “form a union” in the sense of establishing a body carries a concomitant right that such unions will be permitted to achieve the objectives for which they were constituted; if this accompanying right were denied, the guarantee would be rendered ineffective.

The Court observed that if the constitutional guarantee to form a union were interpreted without giving the union any effective power, the guarantee would amount to a mere idle right, an empty shadow lacking any substance. The Court explained that the purpose for which labor unions are created and continue to exist is to secure collective bargaining between workers and employers. This purpose arises because workers, being disadvantaged by poverty and a consequent lack of bargaining strength, cannot negotiate on equal terms with employers; that disparity forms the very reason for the existence of labor organizations. For collective bargaining to be truly effective, it must be enforceable, and workers must be able to withhold their cooperation from the employer, which gives rise to a fundamental right to strike. The Court further held that the right to strike naturally follows from the constitutional guarantee to form unions under sub‑clause (c) of clause (1) of Article 19. However, because strikes can cause varying degrees of economic disruption, the legislature has created a system in which compulsory industrial adjudication serves as a substitute for the right to strike. This system is embodied in the provisions of the Industrial Disputes Act, 1947, which empower the Government, when an industrial dispute appears likely to lead to a strike or lock‑out, or when such a strike or lock‑out actually occurs, to refer the dispute to an impartial tribunal for adjudication and to prohibit any strike or lock‑out while the adjudication proceedings are pending. The Court noted that this alternative to striking constitutes a restriction on the fundamental right to strike and that such a restriction would be reasonable and valid only if it provides an effective substitute. To meet the standards of reasonableness and effectiveness, the Court said two conditions must be satisfied: first, the adjudicator must be furnished with all material necessary to decide the controversy; and second, the adjudicator must be an impartial person or body who decides the dispute only after giving both parties a full hearing, ensuring that no issue is decided ex parte or by an interested party without the disputants having the opportunity to know the material on which the decision is based and to present their case accordingly. Regarding the ability of labor unions to function effectively and achieve their purpose—whether through negotiated settlement or compulsory adjudication—the Court affirmed that only the limitations expressly listed in clause (4) of Article 19 may be imposed by law. Unless the objects of an association or the means of achieving them are contrary to public order or morality, reasonable restrictions cannot be placed on the guaranteed freedom, which is thus absolute. Finally, the Court observed that the legislation under challenge removed a vital issue from the adjudicator’s consideration, namely the industry’s capacity to pay, by vesting the power to decide that issue in the Reserve Bank, an entity that is biased and interested, thereby rendering the decision ex parte and depriving trade unions of knowledge of the facts that led to the decision.

In the matter before the Court, it was observed that the power to decide the payment issue had been placed within the jurisdiction of the Reserve Bank, an entity described as biased and having an interest in the outcome. The decision had been taken ex parte, and the trade unions had not been given any information about the facts that led to that decision. On that basis, counsel for the petitioner argued that the challenged statute infringed the freedom guaranteed by sub‑clause (c) of entry (1) of Article 19. The Court then indicated that it would examine the validity and durability of the arguments presented. It held that it was unnecessary to analyse the first proposition in detail because sub‑clause (c) of entry (1) of Article 19 already conferred upon every citizen the right to form associations. The Court noted that it was irrelevant whether counsel was correct in contending that the term “union” in the provision referred specifically to trade unions or whether it was used in a broader sense to denote any association formed for a legitimate purpose and serving as a synonym for “association” to encompass every collective body of persons. The Court recognised that it was not disputed that workers possessed the right to create “associations or unions” and that any legal obstacle—direct or indirect—to the formation of such unions, which failed to meet the criteria laid down in clause (4), would be unconstitutional as it would contravene a right guaranteed by Part III of the Constitution. The second stage of counsel’s argument, according to the Court, was that the right to form a union also included a concomitant right that the union’s purpose could not be curtailed by legislation unless such restriction was justified on grounds of public order or morality. The Court said that this contention required careful scrutiny. While it would later refer to the authorities on which counsel relied, the Court first deemed it appropriate to discuss the principle involved and to interpret the constitutional provision before assessing whether precedent supported or contradicted the conclusion reached. The issue for consideration was framed as follows: when sub‑clause (c) of clause (1) of Article 19 guarantees the right to form associations, does that guarantee also imply that the fulfillment of every objective of a formed association is itself a protected right, thereby establishing a constitutional guarantee that an association may achieve its purpose without legal interference except on grounds related to public order or morality as specified in clause (4) of Article 19? Setting aside for the moment the specific situation of labour unions, which would be addressed later, the Court posed a hypothetical: if an association were created, for example, to conduct a lawful business such as a joint‑stock company or a partnership, would the guarantee under sub‑clause (c) of the freedom to associate likewise ensure that the company or partnership could pursue its trade and attain its profit‑making objective, with the only permissible legal limitations being those based on public order or morality under clause (4) of Article 19?

In this case, the Court considered whether the Constitution, by guaranteeing the right to form an association under clause (c) of clause (1) of Article 19, also guarantees a further right to the association—such as a company or partnership—to pursue its trade and to achieve its profit‑making objectives, and whether the only limitations that law could impose on the association’s activities would be those based on public order and morality under clause (4) of Article 19. The Court expressed a clear view that the answer to that proposition must be negative. An affirmative answer would clash with the overall scheme of the constitutional text and with the framework of the several fundamental rights set out in Part III, particularly with the arrangement of the seven freedoms enumerated in sub‑clauses (a) to (g) of clause (1) of Article 19. Accepting the proposition would imply that, while an individual citizen enjoys the right to carry on a trade, business or occupation under sub‑clause (g) of clause (1) of Article 19, and any restriction on that right must be examined according to the test laid down in clause (6) of Article 19, a person who joins with others to carry on the same activity as a partnership or a company would acquire a larger and different set of rights. Those rights would be subject to a distinct standard of scrutiny, namely the criteria provided in clause (4) of Article 19. This illustration demonstrates that the construction advanced by the learned counsel for the appellant is untenable. The Court further noted that Article 19, when compared with other constitutional provisions such as Articles 26, 29 and 30, confers rights upon the individual citizen. Associations may claim the fundamental rights of Article 19 only because they are aggregates of citizens, and therefore they can rely on the rights belonging to their members. Just as a stream cannot rise higher than its source, an association of citizens cannot claim rights that are not available to the citizens themselves, nor can it claim immunity from restrictions that apply to those citizens. Accordingly, the Court articulated the position as follows: if an association is formed for the purpose of carrying on a business, the right to form the association is guaranteed by sub‑clause (c) of clause (1) of Article 19, subject to any law that restricts that right in accordance with clause (4) of Article 19. Regarding its business activities and the achievement of its objects, the association is protected by the right guaranteed under sub‑clause (g) of clause (1) of Article 19, subject to any relevant law that conforms to clause (6) of Article 19. Moreover, the property acquired or possessed by the association is safeguarded by the right guaranteed under sub‑clause (f) of clause (1) of Article 19.

The Court explained that Article 19 was subject to legislation within the limits laid down by clause (5) of Article 19 and that it was unnecessary to multiply examples to illustrate the principle further. Applying this principle to a labour union, the Court said that the right to form a union was guaranteed by sub‑clause (c); the right of the members to meet was guaranteed by sub‑clause (b); the right to move from place to place within India was guaranteed by sub‑clause (d); the right to discuss their problems and to propagate their views was guaranteed by sub‑clause (a); and the right to hold property was guaranteed by sub‑clause (f). Each of these freedoms was subject, however, to any restrictions that could properly be imposed under clauses (2) to (6) of Article 19 as might be appropriate in the particular context. The Court noted that it was one matter to interpret each of the freedoms guaranteed by the various provisions in Part III in a fair and liberal sense, but it was quite another matter to read every guaranteed right as automatically including “concomitant rights” necessary to achieve the object purportedly underlying that right. Such a construction, the Court warned, would create a series of ever‑expanding concentric circles of rights, leading to an almost grotesque result. The Court affirmed that, in keeping with the principles underlying the Constitution and the manner in which Part III was framed, the guarantees must be interpreted liberally so as to serve the purpose intended by the constitution‑makers, and not in a pedantic or narrow way. However, the Court cautioned that this liberal approach did not give the Court licence to give an artificial or ideological meaning to the expressions used. It was also observed that, under both the Trade Unions Act and the Industrial Disputes Act, the term “union” included not only unions of workers but also unions of employers. If the fulfilment of every object for which a workers’ union was formed were held to be a guaranteed right, the same logic would have to be applied to an employers’ union, which the Court said would be absurd. The Court made clear that this observation was not a final answer, but it was intended to indicate that the argument advanced by counsel—that the right to form unions under sub‑clause (c) of clause (1) of Article 19 carried with it a fundamental right for the union to achieve every object for which it was formed, and that any legislation not falling within clause (4) of Article 19 which might hamper those objects should be declared unconstitutional and void under Article 13—was not a proposition that could be accepted as correct.

In the view expressed, such an interpretation could be accepted as correct. However, the qualification that qualifies the right guaranteed by sub‑clause (c), namely the contents of element (4) of Article 19, sheds considerable light on the scope of that freedom, because the significance and substance of constitutional grants are best understood when read in the context of the restrictions imposed upon them. If the guaranteed right were to include not only what follows from a literal reading of the article but also every right necessary for an association to achieve each object for which it was created, then the qualifications applicable would extend beyond those listed in clause (4) of Article 19 and would become more numerous and substantially different, taking into account the various fields in which citizens’ associations or unions may lawfully operate. For example, counsel for the petitioner acknowledged that although the freedom granted to workmen to form labour unions carries with it the associated right to collective bargaining and the right to strike, the provision in the Industrial Disputes Act that forbids strikes in protected industries and that bars strikes when a dispute is referred for adjudication under section 10 of that Act was conceded to be a reasonable restriction on the right guaranteed by sub‑clause (c) of clause (1) of Article 19. It follows that if the right to strike were deemed by implication to be a right assured by sub‑clause (c) of clause (1) of Article 19, the restriction on that right in the interest of the general public, namely the protection of the national economy, would be perfectly legitimate when examined against the criteria in element (6) of Article 19, yet it might not survive as a reasonable restriction justified on grounds of morality or public order. Consequently, after considering the relevant authorities, the Court concluded that even a very liberal construction of sub‑clause (c) of clause (1) of Article 19 does not lead to the conclusion that trade unions possess a guaranteed right to effective collective bargaining or to strike, whether as part of collective bargaining or otherwise. The right to strike or to declare a lock‑out may be regulated or limited by appropriate industrial legislation, and the validity of such legislation must be assessed not by reference to the criteria set out in clause (4) of Article 19 but by entirely different considerations. The Court then turned to the authorities relied upon by counsel in support of the theory that a “concomitant right” to collective bargaining is guaranteed to labour unions, beginning with the decisions of this Court cited by counsel, the earliest of which was Romesh Thappar v. State of Madras, and focusing on the specific passage from the judgment of the learned Chief Justice that was highlighted by counsel.

In addressing the merits, the Court quoted a passage that emphasized that the freedom of speech and expression necessarily includes the freedom to propagate ideas, and that such propagation requires the freedom of circulation. The quoted passage observed that liberty of circulation is as essential to the freedom of expression as liberty of publication, noting that without circulation a publication would have little value, and it cited Ex parte Jackson, 96 U.S. 727. Relying on this passage, counsel argued that if the expression “freedom of speech and expression” in sub‑clause (a) of clause (1) of Article 19 is to be given a liberal construction so as to fulfil the purpose for which the freedom was conferred, then the same liberal construction should be applied to the content of the freedom guaranteed by sub‑clause (c) of the same clause. The Court, however, found no analogy between the two matters. It observed that “freedom of speech” means the freedom to speak so that one’s ideas are heard by others, and that “freedom of expression” likewise entails the right to communicate one’s ideas to others. The Court explained that unless the freedom under sub‑clause (a) were limited to speaking or expressing ideas only to oneself – which would be absurd – the guaranteed freedom necessarily includes the right to address others and to convey ideas through printed words, that is, the freedom of circulation. Consequently, the Court could not see any similarity between the Romesh Thappar case (1950 S.C.R. 594) and the present matter, and therefore rejected the counsel’s attempt to extend the reasoning of the former to the present issue concerning sub‑clause (c) of Article 19.

The Court then turned to the observations cited by counsel from the judgment of Bhagwati, J. in Express Newspapers (Private) Ltd. v. Union of India (1959 S.C.R. 12), where it was held that the freedom of speech and expression includes the freedom of the press because the press, by way of the printed word, is the mechanism through which the freedom is exercised. The Court considered that these remarks did not add any further substance to the argument. Next, counsel relied upon the observations of Das, C.J. in the advisory opinion Re the Kerala Education Bill (1959 S.C.R. 995), which dealt with the scope of clause (1) of Article 30 guaranteeing minorities the right to establish and administer educational institutions of their choice. Das, C.J. had observed that without government recognition, minority‑run institutions could not fulfill the real objects of their choice and that the right to establish institutions must therefore mean the right to establish real institutions that can effectively serve the community. The Court held that these observations were specific to the construction of Article 30 and were inseparable from the context of minority educational rights. Consequently, they could not be used to support a general rule of construction for the freedoms guaranteed under Article 19, nor could they assist counsel’s theory of concomitant rights flowing from sub‑clause (c) of clause (1) of Article 19.

The Court explained that the right guaranteed by clause (1) of Article 30 requires minorities to be able to establish genuine educational institutions that effectively meet the needs of their own community and of the students who attend those institutions. The Court observed that there is no fundamental right to obtain state recognition, but that refusing to recognise an institution except on conditions that amount to surrendering the constitutional right to administer the institution of the minority’s choice is, in substance, a deprivation of the rights protected by Article 30(1). The Court cited the authorities reported in 1959 S.C.R. 12 and 1959 S.C.R. 995 to illustrate that such denial effectively curtails the minority’s constitutional entitlement. The Court stated that these observations and the interpretation of clause (1) of Article 30 do not support the learned counsel’s submission concerning the theory of concomitant rights that would flow from the freedom guaranteed by sub‑clause (c) of clause (1) of Article 19. The observations of the learned Chief Justice and the conclusions drawn relate specifically to the construction of Article 30 and cannot be separated from the factual and legal context in which they were made. Moreover, the Court held that those observations do not constitute a general rule of construction for the freedoms secured under the various sub‑headings of clause (1) of Article 19, and that, as previously indicated, it is impossible to uphold any such broad construction of the freedoms guaranteed by Article 19.

The learned counsel further referred the Court to passages in two United States Supreme Court decisions, namely National Association for the Advancement of Colored People v. Alabama and Bates v. Little Rock. In those cases the Court held that freedom of speech and assembly, recognized as fundamental rights under the United States Constitution, would be improperly infringed by statutes that compelled organizations to disclose their membership rolls to public authorities. The facts in those decisions involved associations formed for the protection of coloured persons, and the disclosure requirement was intended to pressure those associations and discourage membership. Counsel argued, relying on dicta from those decisions, that the right to form an association—derived from the due‑process clause of the Fourteenth Amendment—carries with it a right to preserve the existence of the association. The Court noted that, as reported in the Law Reports, the United States judges were not interpreting a provision analogous to sub‑clause (c) of clause (1) of Article 19, because in the United States the right of association is not expressly guaranteed by the Constitution but has been inferred from due‑process jurisprudence. Nonetheless, the legislation challenged in the American cases directly affected the formation of the associations, and therefore, in that sense, could be examined under the principles of sub‑clause (c) of clause (1) of Article 19.

The Court noted that even if statutes having a similar purpose were enacted in India, the American decisions cited by counsel could not be treated as authority for the second stage of the argument for which they were relied upon. Counsel also referred the Court to two further United States Supreme Court cases in which the right of employees to organise themselves, to form, join and assist labour organisations, to bargain collectively through representatives of their own choice, and to engage in concerted activities for collective bargaining or other mutual aid had been described as “a fundamental right.” The two cases mentioned were National Labor Relations Board v. Jones and Laughlin Steel Corporation and Others (1) and Amalgamated Utility Workers v. Consolidated Edison Company of New York (2). The Court expressed the view that the inference sought to be drawn from those authorities was not well founded. The judges in the United States had used the phrase “fundamental right” not to refer to a right expressly recognised or guaranteed by the Constitution, but rather to describe a right of the unions that the legislature had enacted, recognised, or respected. Moreover, as other United States Supreme Court decisions demonstrate, that right was subject to regulation by the legislature (3). Consequently, the Court concluded that the right guaranteed by sub‑clause (c) of clause (1) of Article 19 of the Indian Constitution does not automatically include a corresponding right for unions to achieve all purposes for which they were created. The Court cited earlier authorities, including 81 Law Ed. 893, 909 and 84 Law Ed. 738, 741, and referred to Weaver’s Constitutional Law and its Administration (1946) p. 505, which in turn quoted Dorrance v. Kansas, 272 U.S. 306, 71 L.Ed.2d 28, stating that neither common law nor the Fourteenth Amendment confers an absolute right to strike. The Court therefore held that any interference by the law of the land with a union’s ability to fulfil its protective purpose would be unconstitutional unless such interference could be justified on grounds of public order or morality. In the Court’s opinion, the right under sub‑clause (c) of clause (1) of Article 19 extends only to the formation of an association; the activities of that association and the steps the union may take to achieve its purpose are subject to legislation that may be enacted, and the validity of such legislation must not be assessed by reference to the criteria laid down in clause (4) of Article 19. Accordingly, the Court found it unnecessary to examine the remaining steps of counsel’s argument, all of which depended on the correctness of the step just rejected. Nevertheless, the Court chose to address the contention that the impugned legislation (a) removes an essential part of the dispute from the jurisdiction of an impartial adjudicator and places it with the Reserve Bank of India, which is alleged to be a biased body, and (b) leaves the adjudicator without the necessary materials to perform his duties.

The Court observed that if the necessary documents were removed from the adjudicator’s knowledge, the adjudicator would be left without the proper materials required to discharge his duties. A grievance was raised that the impugned provision removed the dispute from the jurisdiction of an impartial arbitrator and transferred it to another body, but the Court described this claim as an obvious exaggeration of the actual effect. The Court held that disputes between the parties concerning wages, bonuses, or other amenities and perquisites that create financial obligations for the employer continue to exist even after the impugned provision was enacted. The industrial adjudicator alone determines the parties’ rights in accordance with the relevant industrial statutes and any other applicable legislation, and the relief that the adjudicator may grant to the employees remains unchanged. Moreover, the adjudicator alone assesses the capacity of the industry to meet or absorb any increased cost. The only consequence of Section 34‑A is that, for two specific items—namely secret reserves and the provisions made by banks for bad and doubtful debts and other necessary provisions—the reasonable amount that may be taken into account by the adjudicator is to be estimated and determined by an expert body that is effectively a governmental authority, that body being the Reserve Bank of India, which by law is charged with maintaining the nation’s credit structure.

The Court further explained that the origin of the legislation now under challenge reveals that the Government sought to balance two competing interests. The first interest was the necessity of preserving and maintaining the delicate fabric of the country’s credit structure by strengthening both the actual and apparent creditworthiness of banks operating in the nation. This principle, regarded as vital to the economic welfare of the community, has motivated changes since 1927 in the form of balance‑sheets and profit‑and‑loss accounts of banking companies, distinguishing them from other trading and industrial entities. There was an urgent need to protect certain items of bank appropriation from disclosure so that banks could continue to function as credit institutions. The second, equally urgent, interest was to ensure that workers in these institutions were not denied proper wages, other emoluments, and suitable conditions of service. The Court noted that the central question was how far information that banks, in the interest of the national economy, were entitled to withhold from shareholders and the public should be made available for assessing the banks’ capacity to pay their employees. In this context, the impugned legislation was enacted. While it preserved the role of industrial adjudication in disputes between banks and their employees, it assigned the duty of determining the surplus reserve that could be considered part of the assets for assessing capacity to pay to the Reserve Bank of India. Viewed in this light, the Court found no unreasonable aspect in the solution effected by the legislation.

The Court observed that there is nothing unreasonable in the solution that the impugned legislation has effected. It further stated that it does not find any substance in the allegation that the Reserve Bank of India is a biased body. The Court explained that if the Reserve Bank of India were not the authority to perform the function, the only other body that could be entrusted with that function would be the Finance Ministry of the Government of India, and that ministry would necessarily be guided by the Reserve Bank because of the Reserve Bank’s intimate knowledge of the country’s banking structure as a whole and of the affairs of each individual bank. Consequently, the Court said that, for the purpose of the present argument, it matters little whether the power to determine the matters set out in section 34‑A is vested in the Finance Ministry or in the Reserve Bank, as the impugned enactment provides for the latter. Counsel for the petitioner then made a further submission that the impugned enactment was a piece of colourable legislation and that its purported objective of securing secrecy from disclosure was in reality a device intended to depress wages and to deny bank workmen their legitimate rights. Counsel urged that the preamble to the amending Act was crafted to show that the real purpose behind the legislation was to ensure secrecy concerning the reserves held by banks and the bad and doubtful debts that arose in the course of business, contending that such disclosure would damage the credit of the banks and would have repercussions not only for the individual bank but also for the banking structure of the country as a whole. According to counsel, this was not the genuine purpose but only a colourable object underlying the legislation. In support of this claim, counsel stressed that section 21 of the Industrial Disputes Act and rule 30 of the Industrial Disputes Rules already made ample provision for securing secrecy in the affairs of any concern where disclosure would not be in the public interest. The Court expressed that it is satisfied that this submission has no basis in fact and, even if it were proved, it would not affect the validity of the legislation. The Court further noted that, as previously pointed out, the impugned legislation merely carries to its logical conclusion the effect of changes in the form of the balance‑sheet and profit‑and‑loss accounts of banks that began in 1927 and culminated in the notification dated 22 December 1951 under section 29(4) of the Banking Companies Act, which amended the forms appended to that Act. Finally, the Court observed that if the construction of the “right to form unions” under sub‑clause (c) of clause (1) of Article 19, as advanced by counsel in challenging the validity of the enactment, is rejected, then, subject to the point concerning Article 14 that will be examined presently, legislative competence being conceded, there could be…

The Court stated unequivocally that there was no legal objection to the validity of the impugned legislation in this matter. It explained that objections based on colourable legislation are relevant only when the legislature’s power is limited to specific subjects. It added that a legislature attempts to circumvent those limits by using a form of legislation that disguises the true subject‑matter. The Court found that no such situation existed here, and it was accepted as common ground that once a law satisfies the test of the fundamental rights guaranteed by Part III, its validity cannot be doubted. The Court further observed that the issue of whether the confidentiality protection provided by section 21 of the Industrial Disputes Act is adequate to safeguard the banks’ interests is a matter of legislative policy. It added that such policy matters belong exclusively to Parliament. Even if the Court were convinced that the existing law was sufficient, that perception would not constitute a basis for striking down the impugned legislation. The Court noted that when the legislature’s purpose, namely the attainment of secrecy, is within its competence, any inquiry into ultra vires jurisdiction ceases. The Court held that questions such as whether a lesser measure would have been adequate, or whether a more drastic provision was unnecessary, are irrelevant to the test of validity. It also held that whether the same objective could have been achieved by differently framed provisions or alternative means does not affect the validity of the law. Such considerations pertain not to the scope of the legislative power but to the manner of its exercise, and once the constraints of Part III are satisfied, the legislation is not open to challenge. The Court then turned to the argument that the impugned provision violated article 14. It observed that the counsel supporting the workers did not agree on the precise grounds for alleging a violation of article 14. The first ground advanced was that the provision vested an arbitrary power in banks that were parties to a dispute under the Industrial Disputes Act, allowing them to claim the privilege of not producing documents. It also allowed them to refuse to claim that privilege, and the provision did not set any defined criteria for such a decision. The Court answered that the provision itself contains a safeguard. It permits a banking company to claim confidentiality only when the document or information is of a confidential nature and its production would disclose matters listed in sub‑clauses (a) and (b). The Court also considered the contention that sub‑clause (b) of subsection (1) was vague because it referred to “provision made for bad and doubtful debts and other usual or necessary provisions.” The Court found no merit in this submission, observing that those terms are taken from the form prescribed under the Banking Companies Act and have a clear meaning within banking practice. Consequently, the Court concluded that the alleged vagueness did not affect the provision’s validity. In fact, in the application which

In the proceedings before the adjudicator, the employee associations requested that the banks produce certain information and documents, and the phrase “production of information and documents from the banks” was employed. It was evident that even the Bank Employees’ Associations interpreted this phrase to have a specific meaning. Some of the interveners then argued that sections 34A(1) and 34A(2) infringed article 14 because the classification created by those provisions was not based on rational grounds. Their contentions were three‑fold: first, that the protection against disclosure applied solely to adjudications under the Industrial Disputes Act and not to other adjudications; second, that the protection was limited to certain banking companies and not to all banking companies; and third, that through section 34A(2) the impugned enactment was applied in a discriminatory manner to every bank except the Reserve Bank of India. The first two points essentially overlapped, arising from the fact that the impugned provision, in its third sub‑section, defined a “banking company” as the term used in the Industrial Disputes Act, 1947. Under section 2(b) of that Act, a “banking company” means a banking company defined in section 5 of the Banking Companies Act, 1949, having branches or other establishments in more than one State, and it includes the State Bank of India and the Reserve Bank of India. Consequently, while the Banking Companies Act covered all banking companies, only those whose operations extended beyond a single State fell within the definition of “banking company” for the purposes of the Industrial Disputes Act. This meant that banking companies without multi‑state branches were part of the industry covered by the Industrial Disputes Act but were not “banking companies” under its definition, and therefore they could not claim the protection from disclosure granted by the impugned provision. Counsel’s submission that such banks could not enjoy the protection was correct, but this observation did not constitute a basis for declaring the legislation invalid.

The argument of discrimination, however, could not be sustained because the banks that were excluded from the protection were precisely those that were not entitled to it under section 34A. Moreover, it was undisputed that about ninety‑five percent of the country’s banking business was conducted by banks that fell within the definition of “banking companies” in section 2(b) of the Industrial Disputes Act, and these banks employed more than eighty thousand of the ninety thousand bank‑employees nationwide. In view of this, any injury to the credit structure would arise only from the disclosure of the reserves and related information of this substantial class of banks, establishing a sufficient rational nexus for the legislative classification. Therefore, the fact that the legislation did not encompass every banking company did not render the provision discriminatory under article 14. The final point concerning the exclusion of the Reserve Bank of India from the operation of section 34A(2) also lacked merit. By the very nature and scheme of the provision, the Reserve Bank was intended to be excluded from subsection 3, as its function in determining reserves was administrative rather than quasi‑judicial, and its findings could justifiably be final even when concerning itself. A similar allegation of bias was raised regarding the impact of the impugned provision on the industrial dispute between the State Bank of India and its employees, but this submission was likewise found to be without substance.

The Court observed that the classification used by the legislation to differentiate among banking companies was intended to justify the distinction. It held that the fact the legislation did not encompass every banking company could not, by itself, render the provision discriminatory under Article fourteen of the Constitution. The Court further examined the argument that the exclusion of the Reserve Bank of India from the operation of section thirty‑four A clause two lacked merit. It noted that, by the very nature of the provision and its design, the Reserve Bank necessarily fell outside the scope of subsection three of the impugned provision. In determining which reserves could appropriately be considered, the Court explained that the Reserve Bank performed only an administrative function, not a quasi‑judicial one. The Court stated that the Reserve Bank applied uniform business principles in making its determination and therefore found no impropriety in allowing its findings to be final even when it concerned its own interests. A similar allegation of bias was raised with respect to the effect of the impugned provision on the industrial dispute between the State Bank of India and its employees. Counsel argued that the Reserve Bank owned almost all of the share capital of the State Bank, making the Reserve Bank financially and vitally interested in supporting the State Bank against its employees, and that such bias would invalidate the provision. The Court considered this argument and rejected it, holding that it lacked persuasive effect and could not overturn the earlier conclusion that the provision was valid. It added that, because the Court had already held the impugned provision to be valid and not in violation of any fundamental rights guaranteed by Part three of the Constitution for employees of the Reserve Bank, the same provision could not be successfully challenged on behalf of the State Bank employees. The Court further explained that although the parties had raised a wide range of issues, it was unnecessary to address every point, since the decisive conclusions already resolved the core matters of the dispute. Consequently, the Court dismissed the appeal and ordered the appellant to bear the costs of the proceedings. It also dismissed the petitions and directed that the petitioners pay the costs, noting that a nominal hearing fee was also payable. The final order reflected the dismissal of both the appeal and the petitions.