The Motor Transport Controller, Maharashtra State, Bombay vs Provincial Rashtriya Motor Kamgar Union, Nagpur and Ors

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 742 of 1963

Decision Date: 3 April 1964

Coram: K.C. Das Gupta, P.B. Gajendragadkar, K.N. Wanchoo

The matter before the Supreme Court of India was titled The Motor Transport Controller, Maharashtra State, Bombay versus Provincial Rashtriya Motor Kamgar Union, Nagpur and Others. The judgment was delivered on 3 April 1964. The petition was filed by the Motor Transport Controller of the State of Maharashtra, located in Bombay, and the respondents were the Provincial Rashtriya Motor Kamgar Union of Nagpur together with other parties. The case was heard by a bench consisting of Justice K.C. Das Gupta, Justice P.B. Gajendragadkar and Justice K.N. Wanchoo. The official citation of the decision appears in the 1964 All India Reports at page 1690 and in the 1964 Supreme Court Reports (seven) at page 639.

The legal issues arose under the Industrial Disputes legislation, specifically concerning the termination of service, the validity of the notice of termination, and the effect of abolishing all posts in an establishment. The statutes applicable were the Road Transport Corporations Act of 1950, as amended by Act 87 of 1956, particularly section 47‑A, and the Central Provinces and Berar Industrial Disputes Settlement Act of 1947, section 31, together with Schedule II, Item 1 of that Act. The headnote of the judgment explains that the reorganisation of states effected by the States Reorganisation Act of 1956 transferred the Vidarbha region from the State of Madhya Pradesh to the State of Bombay. Subsequent division of Bombay under the Bombay Reorganisation Act of 1950 placed Vidarbha within the newly formed State of Maharashtra. Prior to 1956, the Bombay State Road Transport Corporation and the Provincial Services created under the Road Transport Corporations Act, 1950 operated respectively in Bombay and Madhya Pradesh. In response to the territorial changes, Parliament amended the 1950 Act by inserting section 47‑A, which authorized the reconstitution, reorganisation and dissolution of corporations established under the Act. On 27 May 1961 the Central Government issued an order under section 47‑A approving a scheme that reorganised the Bombay State Road Transport Corporation and merged with it the Provincial Transport Services that, following the Reorganisation Act, had become a commercial undertaking of the State of Bombay operating in Vidarbha. Clause 9(1) of the scheme stipulated the abolition of all posts in the Provincial Transport Services and authorized the discharge of all personnel holding those posts, while offering those employees the option of continuing their service under the Maharashtra State Road Transport Corporation. Notices terminating the service of the employees of the Provincial Transport Services in Vidarbha were consequently served. Two former employees of those services, together with their union, filed an application before the Bombay High Court under Articles 226 and 227 of the Constitution of India, challenging the validity of the termination notices on the ground that the government’s action in abolishing the posts and terminating the employees contravened the provisions of section 31 of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947.

The Court examined the issue of whether abolishing every position in an establishment amounted to a reduction of posts within the meaning of Item 1 of Schedule II of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947. It held that such total abolition did not qualify as a reduction of posts under that provision. Consequently, the Government order that eliminated the positions and terminated the employees’ services did not constitute a change as defined by section 31 of the same Act. Because the action did not fall within the ambit of section 31, the Government was not obliged to follow the procedural requirements prescribed in that section. The judgment was issued in Civil Appeal No. 742 of 1963, which appealed the judgment and order dated 4 July and 5 July 1961 of the Bombay High Court, Nagpur Bench, in Special Civil Application No. 150 of 1961. Counsel for the appellants consisted of the Additional Solicitor‑General and two other counsel, while the respondent failed to appear. The judgment was dated 3 April 1964 and delivered by Justice Das Gupta. The Court noted that a concise legal question arose for determination, but that a full understanding required a detailed statement of the factual background.

In 1956, three road‑transport corporations created under the Road Transport Corporation Act, 1950 were operating in the States of Bombay, Madhya Pradesh and Hyderabad. These corporations were identified respectively as the Bombay State Road Transport Corporation, the Provincial Transport Service, and the State Transport Marathwada. The enactment of the States Reorganisation Act, 1956 redrew state boundaries, causing the former State of Bombay to lose certain territories to the newly formed State of Mysore and to the State of Rajasthan. At the same time, Bombay acquired the Marathwada region from the State of Hyderabad, the Vidarbha area from Madhya Pradesh, and additional tracts from the then‑existent States of Saurashtra and Kutch. To address the administrative consequences of these territorial adjustments, Parliament enacted the Road Transport Corporation Amendment Act, 1956, thereby amending the 1950 Act. The amendment introduced section 47‑A, which authorised the reconstitution, reorganisation, and dissolution of corporations established under section 3 of the original Act. Pursuant to this provision, on 31 December 1956 the Central Government issued an order approving a reorganisation scheme submitted by the Government of Bombay. The scheme excluded from the operational area of the Bombay State Road Transport Corporation those districts that had been transferred to Mysore and Rajasthan under the Reorganisation Act, with the changes taking effect on 1 January 1957. As another result of the reorganisation, the two commercial entities previously known as the Provincial Transport Services and the State Transport Marathwada became the commercial undertakings of the State of Bombay.

In the year 1960 the State of Bombay was again subjected to reorganisation. By virtue of the Bombay Reorganisation Act, No. II of 1960, the existing State of Bombay was split into two separate entities. The portion of the former Bombay State that lay to the west was constituted as a new State called the State of Gujarat, while the remaining territory was renamed the State of Maharashtra. As a consequence of the territorial division, the Central Government issued an order under section 47‑A of the Road Transport Corporation Act which removed certain districts from the area of operation of the Bombay State Road Transport Corporation. After this order, the transport arrangements were as follows: the State Transport of Marathwada continued to operate within the area that had become part of Maharashtra, the Provincial Transport Service remained active in the Vidarbha region, and the Bombay State Transport Corporation retained its operations in the rest of the newly formed State of Maharashtra. This distribution of responsibilities set the factual backdrop for the subsequent administrative action taken by the Central Government.

While the above arrangement was in place, the Central Government issued an order on 27 May 1961 under section 47‑A of the amending Act. That order approved a scheme for the reorganisation of the Bombay State Road Transport Corporation and for the amalgamation of that corporation with two other State‑owned transport undertakings, namely the Provincial Transport Services and the State Transport of Marathwada. The reorganised entity was to be designated as the Maharashtra State Road Transport Corporation. Clause 9, paragraph 1 of the order provided that all posts in the two former undertakings – the Provincial Transport Services and the State Transport of Marathwada – were to be abolished, and that every person holding such a post was to be discharged from service. However, the order also gave the affected persons a choice: they could either accept terminal benefits such as compensation, pension, or gratuity to which they were entitled under the applicable rules, or they could elect to continue in service from 1 July 1961 as employees of the Maharashtra State Road Transport Corporation. Sub‑clause 2 of clause 9 stipulated that any person who exercised the option to continue would be employed by the new corporation on exactly the same terms and conditions, including pay, that had applied to him immediately before the appointed day, and that his period of service in the predecessor corporations would be counted for all purposes. Sub‑clause 3 of clause 9 read: “Nothing in sub‑paragraph (2) shall be deemed to affect the right of the Maharashtra State Road Transport Corporation, subject to the provisions of section 77 of the Bombay Reorganisation Act, 1960 (Act 11 of 1960), to determine or vary after the appointed day the conditions of service of any person who is continued in the service of the Corporation.” An additional clarification stated that the conditions of service that were applicable immediately before the appointed day could not be varied to the employee’s disadvantage unless the Central Government gave its prior approval. Following the issuance of the reorganisation order, termination notices were served on the employees of the Provincial Transport Services who were working in Vidarbha. In response to those termination notices, an application was filed on 12 June 1961 invoking article 226 and article 227 of the Constitution.

The petition was filed by two former employees of the Provincial Transport Services together with the Union of the workmen of that organization, who challenged both the order of reorganisation dated 27 May 1961 and the subsequent notices of termination served on the employees. The petitioners sought three forms of relief. First, they requested that the termination notices be set aside. Second, they asked that the amalgamation of the Provincial Transport Services with the Bombay State Road Transport Corporation, which had been ordered under section 47‑A, be prevented. Third, they prayed for a writ of mandamus directing respondents 1 to 3 to comply with the obligations imposed by section 25‑F and other retrenchment provisions of the Industrial Disputes Act, 1947, as well as any other applicable law, before taking any action required by law and before acting under paragraph 9 of the reorganisation order, even on the assumption that the amalgamation order was lawful and proper.

To support these prayers the petitioners raised three distinct contentions. The first contention was that the reorganisation order of 27 May violated the provisions of section 47‑A of the Act and was therefore void. The second contention was that the proviso attached to sub‑clause 3 of clause 9 of the order ran counter to the provisions of section 77 of the Bombay Reorganisation Act. The third contention asserted that the Government’s decision to abolish certain posts and to issue termination notices to the employees was illegal, first because it contravened sub‑clauses (b) and (c) of section 25‑F of the Industrial Disputes Act, and second because it breached the provisions of section 31 of the C.P. and Berar Industrial Disputes Settlement Act, 1947.

The High Court examined each of these contentions. It rejected the first contention, holding that the reorganisation order did not infringe section 47‑A of the Act. It also rejected the petitioners’ argument that the Government’s action was unlawful on the ground of violation of sub‑clauses (b) and (c) of section 25‑F of the Industrial Disputes Act. However, the High Court opined that the proviso to sub‑clause 3 of clause 9 of the order was invalid because it conflicted with section 77 of the Bombay Reorganisation Act. The Court further concluded that the proviso was severable, and that its illegality did not affect the operation of the overall scheme. In addition, the Court agreed with the petitioners that the Government’s issuance of termination notices, following the abolition of the posts, failed to comply with section 31 of the C.P. and Berar Industrial Disputes Settlement Act, and was therefore void.

On the basis of these findings, the High Court set aside the Government resolution that abolished the posts and also quashed the termination notices that had been issued as a result. The Court further directed the Maharashtra State Road Transport Corporation not to take any action under the proviso to sub‑paragraph (3) of paragraph 9 of the reorganisation order that would vary the conditions of service to the disadvantage of any employee who was in the service of the first respondent immediately before the appointed day.

The State of Maharashtra, the Maharashtra State Road Transport Corporation and the Motor Transport Controller filed appeals against the High Court orders dated 1 July 1961. No representative of the petitioners appeared before the Court at the hearing of the appeal, and therefore the petitioners were not present to make any submissions. The parties did not challenge the High Court’s finding that the order of 27 May 1961 did not breach section 47‑A of the Act. They also left untouched the High Court’s conclusion that the Government’s action in abolishing posts and terminating employees’ services was not invalid for contravening sections 25F(b) and (c) of the Industrial Disputes Act. Consequently the Court did not examine the correctness of those determinations and said it would dispose of the appeal assuming those points were correct. The appeal argued that the High Court erred in holding that the abolition of posts and termination of employees’ services violated section 31 of the Central Provinces and Berar Industrial Disputes Settlement Act. Section 31 provided that if an employer intended to make a change in any standing orders settled under section 30 or in respect of any industrial matter listed in Schedule 11, the employer had to give fourteen days’ notice of that intention. The notice was required to be in the prescribed form and to be addressed to the recognized representative of the employees. Section 31 further required that the employer send a copy of the notice to the Labour Commissioner, the Labour Officer and to any other person prescribed. The employer also had to affix a copy of the notice in a conspicuous place at the premises where the affected employees were employed and at any other places specially directed by the Labour Commissioner. Upon receipt of such notice, the representative of the employees was required to engage in negotiations with the employer concerning the proposed change. Schedule II of the Act listed a number of matters, the first of which described a reduction intended to be of permanent or semi‑permanent character in the number of persons employed. The description also covered a reduction in the number of persons to be employed when the reduction was not due to force majeure.

The description also covered a reduction in the number of persons to be employed when the reduction was not due to force majeure, specifically when the decrease was caused by managerial decisions and not by any unavoidable external event. The High Court had accepted the argument that abolition of all posts amounted to a permanent reduction within the meaning of this item in Schedule 11, thereby treating the complete removal as a reduction. If that view were correct, the Government would have been obligated to follow the procedure laid down in section 31, which it had not observed, as required by the statute. The short question, therefore, was whether the abolition of every post of an establishment amounted to a reduction of posts. In our opinion, the term reduction could be applied only in situations where, after the reduction, some portion of the workforce or of the posts remained. Consequently, describing the complete abolition of all posts as a reduction of the whole establishment was neither sensible nor reasonable. We therefore could not agree with the High Court that the expression ‘reduction in the number of persons employed or to be employed’ in Item 1 of Schedule 11 covered abolition of all posts.

In this case the Court examined whether the phrase “to be employed” in Item 1 of Schedule 11 of the Act includes the abolition of every post in an establishment. The Court held that the Government Order, which eliminated all posts and terminated the services of the employees, did not constitute a “change” within the meaning of section 31 of the C. P. and Berar Industrial Disputes Settlement Act. Consequently the Government was not bound to observe the procedure prescribed in that section. The Court then turned to the question of the validity of the proviso attached to sub‑clause 3 of clause 9 of the Order. The workmen had contended that this proviso infringed section 77 of the Bombay Reorganisation Act. Section 77 provides that when any workman is transferred or re‑employed because of reconstitution, reorganisation, amalgamation or dissolution by any body corporate, cooperative society, commercial undertaking or industrial undertaking, the terms and conditions of service applicable after the transfer or re‑employment may not be less favourable than those that applied immediately before such transfer or re‑employment. The workmen feared that, although sub‑clause 3 of clause 9 expressly stated that the right of the Maharashtra State Road Transport Corporation to determine or vary the conditions of service of any person who remained in its service was subject to section 77, the proviso might nevertheless permit, with the approval of the Central Government, a variation of a workman’s conditions to his disadvantage, thereby contravening section 77. The Court was informed, however, that no such variation had actually taken place. The petition did not allege any specific instance of a disadvantageous variation; it only expressed a apprehension that such a change might occur in the future. In the counter‑affidavit the Government asserted that the Order, as issued in the notices, expressly guaranteed that the conditions of service would not be altered. The Court noted that if there were any reason to believe that a change in conditions of service had already occurred, or that there was a real likelihood of such a change being effected immediately on the strength of the impugned proviso, it would have been necessary to examine the validity of that proviso. Since no change appeared to have been made and there was no evident imminent threat of alteration, the Court deemed it appropriate to leave the question of the proviso’s validity open. This approach was also influenced by the fact that the workmen were not represented before the Court in this appeal, and therefore the Court had not heard full arguments on the matter from counsel for the appellant. Accordingly, the Court refrained from making a definitive determination on the validity of the proviso.

In this case the Court observed that the High Court had held the proviso to be invalid. Accordingly, that finding was set aside and the Court indicated that the question of the proviso’s validity would be examined only if a genuine necessity arose at a later stage. The Court also concluded that the High Court had been mistaken in assuming that section 31 of the Central Provinces and Berar Industrial Disputes Settlement Act was applicable to the present dispute. Because of that error, the High Court’s order that had annulled the Government’s resolution dated 29 May 1961, which directed the abolition of certain posts, could not be sustained. Likewise, the High Court’s order that had struck down the notices of termination issued under that resolution was also untenable. In consequence the appeal was allowed. The Court set aside the High Court’s order that had quashed the Government resolution of 29 May 1961 and also set aside the order that had quashed the termination notices. Since the Court also set aside the High Court’s determination that the proviso to sub‑clause 3 of clause 9 of the order was invalid and left that issue open, the direction previously issued by the High Court that no action should be taken under the proviso was likewise set aside. No order as to costs was made, and the appeal was allowed.