3.8.¢.R. SUPREME COURT REPORTS 269 should do something in the discharge of his own duty and thereby obtain a valuable thing or pecaniary advantage.
These observations dispose of the present appeal and it must be held that there is no merit in the contentions raised in support of the appeal. As the only point raised in support of the appeal fails, it is accordingly dismissed.
Appeal dismissed.
ALL INDIA BANK EMPLOYEES’ ASSOCIATION Vi
NATIONAL INDUSTRIAL TRIBUNAL & OTHERS (And Connected Petitions)
(B. P. Sinwa, C. J., S. K. Das, A. K. Sarkar, N. RagAGOPALA AYYANGAR and J. R. MupHoiKar, JJ.)
Fundamental Right—Right to form association or unton— Scope of—Stature protecting Banks from disclosure of information regarding secret reserves etc.—Constitutionality of—Banking Companies Act, 1949 (X of 1949), 8. 34-A—Constttution of India, Arts. 14, 19(1)(c).
Section 34-A of the Banking Companies Act, 1949, introduced in 1960, provides that no banking company shall be compelled to produce or give inspection of its books of account or other document or furnish or disclose any statement or information which the company claims to be of a confidential nature and the production etc., of which would involve disclosure of information relating to any reserves not shown as such in its published balance sheet or any particulars not shown therein in respect of provisions made for bad and doubtful debts and other usual or necessary provisions, Sub-section (2) of s. 34-A provides that any authority, before whom the question as to whether any amount out of such reserves or provisions should be taken into account, may refer the question to the. Reserve Bank and the Reserve Bank shall furnish to the authority a certificate stating that the authority shall or shall not take
*<.into account the amount specified therein, Sub-section (3)
makes s. 34-A applicable to only such banking companies whose operations extend beyond one State. The Appellant contended
Dhaneshwar Narain Saxena ve The Deths Adminiatration
Sinka C.J.
August 28.
ee
£06] that s. 34-A contravened the fundamental right guaranteed to All India] trade unions.by Art. 19(1')(c)' of the Constitution as it prevented ~« India Bank : o.. : te Employees’ them from effectively éxercising the concomitent right of Aseoctation collective bargaining in respect of wages, bonus ete. oe before Industrial Tribunals by shutting out important ard re- National Industrial y levant evidence and that thé section violated Art. 14 of the Constitution as it was not made applicable to all the banking~ companies,
‘a Held, that s. 34-A ofthe Banking Companies Act, 1949, ' was constitutionally valid and did not'offend either Art. 19(1)(c) or Art. 14 of the Constitution.
arybunal
The right guaranteed by Art. 19(1)(c) of the Constitution does not carry with.it a concomitant right that unions formed s for protecting the interests of labour shall achieve their object such that any interference to such achievement by any law would be-uncdrstitutioral ‘urilesg'it could +bé ‘justified under Art. 19(4) as being in the interests of Public order or morality. The right under Art. 19(1)(c) extends only to the formation of s an akso¢iation or ynion apd inspfar,as the activities of the asso- on ciation or union are concerned or ,as regards the steps whic the union might take to achieve its object, they are subject to such laws as may be framed fand such Jaws cannot be! (ested under Art. 19(4). Section 34-A was enacted to effect a reconciliation between the conflicting interest of labour 10 obtain proper relief in industrial arbitration and the need to preserve and maintain the delicate fabrit ofthe credit structure of the country by strengthening the real as well as the apparent credit worthiness of banks ‘operating in the country. It preserved industrial adjudication in respect ‘cf ‘disputes between the banks and their employees by entrusting the duty of defermining the surplus reserve which,caquid be taken jpto account as a part of the assets for determining their capacity to pay to the Reserve Bank, . '
Romesh Thdppar v.State of Madras (1950) S.C.R. 594 Ezpreas Newspapers (P) Lid: v. Union of Indu, (1959)5.C.R. 12, Re. The Kerala Education Bill, (1959) S.C.R. 995, National Association for the advancement of coloured people v. Alabama, 2 Law. Ed. Second 1488; Bates -v. Little Rock, 4 Law Ed. Second 480, National Labour Relations Board v. Jones d> Laughlin Steel Corporation, 81 Laws Ed. 893: and Amalgamated Utility Workers v. Consolidated! Edison Company of ‘New York, 84 Law. Ed. 738, referred to. oo» 1 :
a? iar n i Bs ‘ ... Though there were certain, banks which were not entitled tothe protection of s. 34-A that,was-no ground for holding that the, section offended Art. 14. The compiaint was not.made by _)-< the banks who were not given,the protection. Admittedly, 95%, ofthe, -banking bysipess. in the, cguntry. was: in the hands of
»
\
3 8.0.R. SUPREME COURT REPORTS 271 banks to whom s, 34-A applied and they employed 80,000 out of the 90,000 bank employees, The injury to the credit structure will only be by the disclosure of the reserve etc. of the banks of this class and there is sufficient rational connection and basis for the classification to justify the differenciation. The exclusion of the Reserve Bank from the operation of s. 34-A (2) also does not amount to discrimination; in the very nature of things and on the scheme of the provision the reserve Bank could not but be excluded.
Crviz APPELLATE JURISDICTION: Civil Appeal No. 154 of 1961.
Appeal by special leave from the judgment and order dated October 31, 1960, of the National Industrial Tribunal (Bank Disputes), Bombay, in Reference No. 1 of 1960.
WITH Petitions Nos. 70, 80 and 82 of 1961.
Petitions Under Article 32 of the Constitution of India for enforcement of Fundamental Rights.
A. SR. Chari, V.G. Raw, D.P. Singh, M.K. Ramamurtht. &. K. Garg and 8. C. Agarwal, for the appellant and the petition (in Petn. No. 80 of 61).
M. C. Setalvad, Attorney-General of India, N. V. Phadke, K.H. Bhabha, J. B. Dadachanji,. S.N. Andley, Rameshwar Nath and P. L. Vohra, for respondents Nos. 2-17 and 19-34 (In appeal and Petn. No. 80 of 61). .
J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, for respondents Nos. 41-49 (In appeal and Petn. 80 of 1961).
Anand Prakash, for Respdts. Nos. 35-40 (In Petn. No. 80 of 61).
A. V. Viswanatha Sastri, D. P. Singh, M. K. Ramamurthi, R. K. Garg and 8. C. Agarwal, for Intervener No. 2.
D. S. Nargolkar and K. R. Choudhri, for Petitioners Nos. 70 and 82 of 61).
M. C. Setalvad, Attorney-General of India, C.K. Daphtary, Solicitor-General of India, H.N. Sanyal, Additional Solicitor-General of India, J.B. Dadachanji,
Au India Bank Employees’ Association
S.N. Andley, Rameshwur Nath and P. L. Vohra, for Respdt No. 2 (In Petns. Nos. 70 and 82 of 61).
Nounit Lal, for intervener No, 3.
M. C. Setalvad, Attorney-General of India and T. M. Sen, for Intervener No. 1,
1961. August 28. The Judgment of the Court was delivered by
AyyanGar, J.—Civil Appeal No. 154 of 1961 has been filed on special leave obtained from this Court against an order of K. T. Desai, J., functioning as the National Industrial Tribunal (Banks Disputes) Bombay dated October 3], 1960. The point arising for decision in the appeal is as regards the constitutional validity of s.34A of the Banking Companies Act, 1949 which was enacted on August 26, 1960 as an amendment to the parent Act (Act X of 1949). The appellant before this Court is the All India Bank Employees’ Association which is atrade union organization of Bank Employces of several banks operating in India. The Punjab National Bank Employees’ Union, which is a trade union with similar objecte has been permitted to intervene in this appeal in Support of the appellant union. The three other Writ Petitions are by other Bank Employees’ Unions whose description would be apparent from the cause title and all these cases have been heard together because in the writ petitions also the point raised is identical, viz., the validity of s.34A of the Banking Com. panies Act, which will be referred to hereafter as the impugned provision.
Section 834A whese validity is the matter in dispute in these proceedings runs in the following terms :——
“34A. (1) Notwithstanding anything contained in section ll of the Industrial Disputes Act, 1947, or any other law for the time being in force, no banking company
3 S.C.R. SUPREME COURT REPURTS 273 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 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 disclousure of such statement or information would involve disclosure of information relating to:
(a) any reserves not shown as such in its published balance sheet ; or
(b) any particulars not shown therein in respect of provisions made for bad and doubtful debts and other usual or necessary provisions. .
(2) If, i any such proceeding in relation to any banking company other than the Reserve Bank of India, any question arises as to whether any amount out of the reserves or provisions referred to in sub-section (1) should be taken into account by the authority before which such proceeding is pending, the authority may, if it so thinks fit, refer the question to the Reserve Bank and the Reserve Bank shall after taking into accont principles of sound banking and all relevant circumstances concerning the banking company, furnish to the authrity a certificate stating that the authority shall not take into account any amount as such reserves and provisions of the banking company or may take them into account only to the extent of the amount specified by it in the certificate, and the certificate of the Reserve Bank on y. ) ational Industriat
Tribunal
7 aT SUPREME court REPORTS [1962]
I such question shall be final and shall not be AM India Bank called in ‘question i in any such proceeding.
Employees’ ibs...
Association - oS, =(3) For - the . ‘purposes . ‘of this: _ Section,
. Ves Sg . National Industrial on banking ‘company’ shall have ‘the meaning « Pribunat os, assigned ‘to it in the Industrial Disputes Act,
— ‘ ys : | Aunenger J. aaa 1947’ °
Vo Sete “Before ct commencing 1 the examination of the points ‘in controversy and the grounds on which the legality ae - of -the? above ‘provision ;is impugned. , It would be \. heloful for a better. appreciation of the: problem if ‘we set ‘out, in very brief. outline, the history of the rsteps whieh led to the enactment in dispute. There Was a long standing: practice. in England of: Banking - Companies, ‘as distinguished” ‘from: companies carry- “ing on other commercial ete. activities,* not: to _:disclose, , in their balance sheets and Profit & Loss ~ accounts, bad and doubtful -debts and the. provision .made therefore,” as well as the secret reserves creat- ‘ed and held under ‘various 'items—a practice which -Yeceived “judicial recognition’: by Buckley, L., J. in “Neato v. Birmingham Small Arms Co., Lid. () This _,, Practice was followed by.several banks in India and “* questions arose from'time to time'as'to how far the “spractics was consistent with the statutory provisions . ‘as to disclosure contained in the ‘several Companies’ ‘Acts enacted from time. to time. “We shall, how- ‘ever, add that the ‘desirability and even the legality i of this practice: has not’: gone ° without : challenge, though there has been a considerable body of opinion 7;which -has held: this’ to-be salutary: and: necessary u!for the preservation and progress of a credit institu- ‘ition like a bank. We are not now concerned with the “stdesirability: or ethics: of‘the ‘practice ‘which is a --timatter’ for the.!consideration of the: legislature but *?asito the steps by which ‘accord v was s established betan) -ween the’ practice and the law. ers
Str DA ©
“EEL The, Indian’ Companies Act of: 1866, “drow no .
- distinction between , the contents . of : ‘balance’ sheets 3 of: banking companies as-distinguished from those of © i: “0 (Ds 1190612 Ch. 97 oe Ma oe a jaa: gif aad ae, other companies and both were required to disclose a list of debts owing to the concern which were considered bad or doubtful. Provisions on the same lines, ¢. ¢., without any distinction between Banking and other companies, were copied and continued by the Indian Companies Act of 1882. When, however, the Companies Act of 1913 was enacted, Form ‘F’ to the 3rd Schedule to the Act contained a note in respect of the sub-heading ‘book debts’ under the head ‘Property & Assets’ in the balance sheet, readiag :
“distinguishing in thé case of a bank bet-- ween those considered good and in respect of which the bank is fully secured and those.
considered good for which the bank holds no security other than the debtor’s personal security; and distinguishing in al] cases between debts considered good and debts considered doubtful or bad. Debts due by directors or other officers of the company or any of them either severally or jointly with any other persons to be separately stated in all cases.”
It would be seen that by reason of this note the obligations imposed upon banks as regards the classification of their assets and the information to be disclosed became slightly more detailed than in the case of other companies. The practice, however, of bankers to which we adverted earlier not to dis-_ close or not to disclose to the full extent, bad and doubtful debts but to make provision for them by setting aside under other heads, sufficient moneys which would operate as secret reserves, so that the credit of the institution would not be affected while its financial stability would remain unimpaired, was continued notwithstanding this change in the form. The Central Bank of India Limited in its published balance-sheets of the year 1925 adopted the above practice which, however, was not obviously in strict conformity with the requirements of Form ‘F’ to the third schedule read with the note. The
1961 BE:
All India Bank Employces’ Association v. National Industrial, Tribunal
Ayyangar 7.
196!
AU india Bank Employees’ Asecciation managing-director of the bank was prosecuted by one Shamdasani who was a shareholder of the bank for “filing and publishing statements which were false in material particulars”, an offence punishable under s. 282 of the Indian Companies Act. The Magistrate acquitted the accused on the ground that the balanee-sheet. was in accordance with the usual practice of bankers and that the reserves of the company which were shown under various heads though not as a specific provision for bad and doubtful debts covered the possible losses several times. An application for revision was filed before the High Court of Bombay and Fawcett, J. allowed it holding that “a declared provision of the form cannot be allowed to be whittled down by general considerations as tu the object of a balance-sheet.” This judgment was rendered on February 28, 1927 (vide Shamdasani v. Pochkanwila (1) and very soon thereafter tho Government of India intervened by 2 notification dated March 29, 1927 under 8. 151 of the companies Act 1913 amending form ‘EF’ and as amended banks were excluded from the requirement of disclosing the reserve for bad and doubtful debts under the heading ‘Capital and Liabilities’ in the lefthand side of the balance-sheet, and in the right-hand column “book debts which were bad and doubtful for which provision had been made to the satisfaction of the auditors”, were not required to be shown as part of the property and assets of a Bank.
The provisions of the Companies Act of 1913 underwent numerous changes by the amending Act of 1936 which included inter alia one whereby tho change effected by the Notification, dated March 29, 1927, in Form ‘F’ were omitted and Form ‘I was made to retain the note which accompanied it under the Act of 1913 without the exception in favour of banks effected by the Notification. This was possibly unintended, because on the day after the amending Act came into operation, the Central Government published a Notification on January 16, 1937
(l) ALR. 1927 Bom. 414: 29 Bom. LR. 722.
Ay
3.8.C.R. SUPREME COURT REPORTS 277 again under s.15! of the Companies Act restoring the alterations in the balance-sheet Form ‘F’ as had been effected by the prior Notification of March 1927. The validity of this Notification was questioned as being beyond the powers of the Central Government by Shamdasani who filed a complaint against the Central Bank of India Limited and its directors charging them with having issued a false balance-sheet for the year ending December 31,1939, a balance-sheet which was in conformity with the form as modified by the Notification. The Magistrate upheld the validity of the Notification and aquitted the accused. Shamdasani preferred a revision to the High Court anda full Bench of the Bombay High Court held that the Notification was beyond the powers of the Central Government, though the order of acquittal was affirmed upholding the plea of the accused that their act was bona fide in that they believed the alteration in the form to be valid (Vide Shamdasani v. The Central Bank of India Ld.(*) Immediately after this judgment the Central legislature passed Act XXX of 1943 with retrospective effect validating the Notification and amending the relevant sections of the Companies Act. (ss. 132,151, Art. 107) soas to empower the Government to effect changes in the form of the balance-sheet in tne manner in which they had done in January 1937.
The next event in order of date relevant to to the present cotext is the report of the Company Law Amendment Commitee of the United Kingdom presided over by Mr. Justice Cohen where the entire question of undisclosed reserves was fully discussed. The pros and cons of the question were elaborately considered by the Committee and it is sufficient to .
refer in this connection toa short passage in the report. In paragraph 101 the problem is thus set out : “The chief matter which has aroused controversy is the question of undisclosed or, as (i) LL, R. 1944 Bom. 302.
v. National Industriab fribunal
_ i961
All India Bank
278". ‘SUPREME‘ COURT ‘REPORTS % 1963]
" they’ are frequently called, “seoret or inner resér: - “bves, An undisclosed reserve is commonly crea...
Adtctatio i * ted by using profits to write down moré’ than
‘ , is necessary such ‘assets as ‘investments, freehold ! f Nati satu Wontes and leasehold : property !or plant and: machi. : . we 'nery; by creating” excessive provisions for bad °
Ayyangir I: , debts: orother - contingencies by charging capi- tal; ‘expenditure * to :revente ;:'or by .under-:. “Avalaing -stock‘in ‘trade: +: ‘Normally: the object * of, creating an: undisclosed réserve is to enable “a ‘company to avoid ° violent fluctuations i in its ~ Sablished profits ‘ or-its dividends.” :
The - ‘Coniniittee. made’ number™ “of: secommendations several of which were. .adopted ‘in the U: K. Compa: =.
' nies’; Act of 1948, and - those televant ‘to the point.
under’ ‘discussion | served to ;bring’ the ‘law as to the © contents of a balance-sheet ‘of a Banking Company —
. into‘line with the practice of sound.and well managed *- banks. In (India; ‘special legislation” in relation. to” Banking . Companies. cembodying | several of these _ recommendations ‘was.enacted'‘in the ‘shape of the’ Banking’ CompaniestAct. 1949'(Act Xfof 1949). Section. ' 29° of . the Act, ’laid’. down ‘‘'the law in’ regsrd- to ' requirements ’ of.the ‘contents ‘of the ’ balance-sheets ‘’ of., banks: ‘The | balance-sheet, ‘and Profit: & Loss account. were to be ‘in the form. set out in the 3rd schedule to that and sub-s. (3) of that section exem..
_ pted Banking Companies from the requirements of. :
conforming. to the form of balance-sheet and Profit & Loss ‘account of companies: registered : under the:
‘Indian Companies Act; and the Central Government.’
were empowered by’sub-s,(4) to.amend the form set out. in the schedulé by Notifications ‘published in the . * official ‘ Gazette: “In ‘Form ‘A”' which: provided the
7 model, ofa ‘balancé-sheet ‘and Profit & Loss account -- in the Cqse | of banks, ' there'was: ‘not much change as ;
~ compared ‘to‘the requirements <of the previous law -:
except that in the Profit & Loss account (Form ‘B’ . of the third-:schedule) ‘the provision: for. bad and
_ doubtful debts was permitted to-be excluded from the
Foe
3.8.C.R. SUPREME COURT REPORTS 279 income so that the amount of bad and doubtful debts did not figure separately on the income side of the profit & loss account. The income as required to be shown was “income (less provision made during the year for bad and doubtful debts)”. This last item was modified by a Notification issued under the power conferred by 8.29(4) of the Act in December 1951, so that after amendment the heading “Income” in the Profit & Loss Account ran: “Income (less provision made during the year for bad and doubtful debts and other usual and necessary provisions’). Thus so far as shareholders of Banks and the general public including the customers of the bank were concerned, banks were relieved from the obligation of disclosing the entirety of their reserves agsuch and also of the extent of bad or doubtful debts and the provision made therefor,
While the law wan in this state disputes arose between the employees of banks aii over India and the respective banks with regard to wages, conditions of work etc. which were referred by the Central Government in June 1949 to an ad hoc Tribunal with Shri K.C. Sen, a retired Judge of the Bombay High Court as Chairman. The Tribunal passed an award but its validity was successfully challenged in this Court in April 1951 on the ground that all the members of the Tribunal who passed the award were not those who had all inquired into the dispute. Thereafter a fresh Tribunal was appointed in January 1952 with Shri S. Panchapagesa Sastri, a retired Judge of the High Court of Madras as Chairman. The award of this Tribunal was published in April, 1952, but it is not necessary to state its terms. Appeals against the award were preferred to the Labour Appellate Tribunal both by the banks as well as by workmen. The Appellate Tribunal which heard the appeal consisted& of three members with Shri Jeejeebhoy as president.
The claim of the workers in the appeal before the Appellate Tribunal in great part related to a
1a6f
All India Bank Employees’. Association
¥, National Industriat
Tribunal
Ayyanyar J,
All India Bank Employees’ Aszocietron
Ayyengar J.
demand for increased wages and salaries and the main defence of the banks was that they had not the capacity to pay anything bevond what. the Sastry ‘Iribunal had granted. The Jeejeebhoy Tribunal set out their difficulties in assessing the plea of incapacity raised by the banks in the context of the provisions of the Banking Companies Act and the form of balance-sheet prescribed thereunder in the following terms :—
“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 bank do have undisclosed or secret reserves which they acquire in a number cf ways, and such undisclosed reserves cannot be ascertained from the balance sheet... cece eseeesereeeeeees Le eeeeee ees x x x
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 Ceniral 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 aa
- m
35.0.R. SUPREME COURT REPORTS 281 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
Coho neaeotosnrcceegesere
It may be that these ‘other usual or necessary provisions’ have been passed by the Board of Directors, and by the auditors of the concern and may even have been scrutinized by the Reserve Bank of India ; but it is our duty and function to decide the question of the capacity of a bank to pay, and in the absence of important information of this character our estimate ofthe capacity of «a concern to pay must necessarily be incom- Plete......ccccceeceeceneenes Banks feel that they now have the form of the Banking Companies Act to shield themselves against an enquiry on the subject ; but insofar as we are concerned we consider these undisclosed reserves and these appropriations relevant for the purposes of our investigation and in their absence we would have to decide as best as we could from the other materials before us and draw such inferences as justified.”
It was the contention of the workmen that an Industrial Tribunal had the right in law to compel banks to disclose their secret reserves as well as the amount of “the bad and doubtful debts and other necessary provisions” which had been excluded under the head “income” in the Profit & Loss Account of banks. This matter was agitated by them before this Court in Stite Rank of India and others v. Their Workmen (1) being an appeal against the decision of the Labour Appellate Tribunal. In view, however, of the conclusion reached by this Court on other parts of the case it refrained from pronouncing upon the correctness or otherwise of this claim by the workmen.
The diputes between the employees of banks (1) (1959), 2 LAL. J. 205,
All India Ban' Hmployees’ Association ve . Nation ‘l Industrial Pribunal
282. SUPREME COURT REPORTS [1962]
16E and the managements, however, continued with the
All india Bank ==‘ Tesult that on March 2], 1960 the Central Govern-
Umployees’ ment in exercise of the powers conferred on it by Nationat “testy sub-s. (1A) of s. 10 of the Industrial Disputes Act » Nation sndustrial referred the dispute which related to several matters to the National Tribunal constituted by a Notification of Government of the same date, K. T. Desai, J. was the Tribunal so appointed. Most of the major banks in the country were made parties to the reference including the Reserve Bank and State Bank of India. After the Tribunal started functioning and after the parties formulated their respective contentions, applications were filed by the Bank Employees Association on June 9, 1960, for directing the respondent-banks to produce before the Tribunal for the purposes of adjudication several documents listed in the applications. Among the items in respect of which production was thus sought were (1) statements showing “the sccret reserves in any form” of each bank from 1954 right upto December 31, 1959 ; and (2) statements showing the provision made “for bad and doubtful debts and other usual and necessary provisions” during @ the years 1954 to 1959 and the total amounts outstanding in such items in each bank in the said years. The banks filed their reply on July 16, 1960. The production of the documents and the information called for on several of the matters including the above two was resisted by the Indian Banks 4 Association (being an association of employers) on * the ground that they were by law exempted from disclosure in the interest of the industry and the public and claimed absolute privilege from making the disclosure.
Tt was at this stage that the impugned provision was enacted by Parliament as an amendment to the Banking Companies Act. As several of the banks relied upon the impugned provisions in-support ~” of their plea that they could not be compelled to disclose either the quantum of their secret reserves or their nature, or as regards the provision made in
As
+
”
the several years for “bad and doubtful debts and for other reasonable and necessary provision”, the bank employees association challenged the constitutional validity of s. 34A of the Banking Companies Act, which, if valid, could have afforded a sufficient answer to the demand for production of the documents in relation to these matters. This objection was argued before the National Tribunal which upheld the validity of the section. As we have stated earlier, Civil Appeal No. 154 is directed against and challenges the correctness of this decision. The Writ Petitions have been filed by Bank Employees Associations which were not parties to the application for production before the National Tribunal and are intended to support the plea of the appellant in Civil Appeal No. 154 of 1961.
The foregoing narrative would show that the Banking Companies Act, as it stood before the amendment now challenged, had brought the law as to the disclosure of secret reserves and the provision for bad and doubtful debts etc. Into accord with the usual practice of Bankers, and had protected these items from being compulsorily disclosed to the shareholders of the respective companies and to the general public. There had been a controversy as to whether the workmen of these establishments were or were not entitled to be placed on a different position from the shareholders because of the bearing of these undisclosed items on the determination
‘of the quantum of their wage etc. and on_ their conditions of work having financial implications. Parliament had, by the impugned legislation, extended the protection from compulsory disclosure to the workmen as well, but witha safeguard in their case that the Reserve Bank would determine the amount of reserves etc. which could be taken into account inthe course of industrial adjudication.
he question before us is, is this attempt at some approximation of the position of the workmen to that of shareholders etc. unconstitutional ?
All India Bank Employees” Association v. National Industrial Pribunal
284 SUPREMECOURTREPORTS [1962]
. a 1961 _ _. Mr. Chari, learned Counsel for the appellant All India Bank in Civil Appeal No. 154 addressed to us the main
Employees’ : ‘Ataycition arguments in the case and these were supple- Notionat “dustrin mented by learned Counsel appearing for the peti- Tribunal «toners in the several writ petitions and also by
—- learned Counsel on behalf of the Interveners both Ayyangar J. in the appeal as well as in the petitions. Though tho arguments before us ranged over a very wide * field, the attack on the validity of the legislation was rested on two main grounds: (1) that the impugned legislation contravened the fundamental right guaranteed to “trade unions” by the provision contained in sub-cl. (c) of el. (1) of Art. 19; and (2) that it violated the freedom of equality guaranteed by Art. 14 of the Constitution.
We shall consider these two points in that order : First as to the impngned provision being obnoxious{to, or in“contravention of sub-cl.(c) of el. (1)’of Art."19°of the; Constitution. This Article runs, to quote only the relevant words :
“Article 19. (1) All citizens shall have the right— a
(c) to form associations or unions.; ”
The right is subject to the qualification contained in cl.(4), reading :
a
“(4). Nothing in sub-clause (c) of the said clause shall affect the operation of anv existing law insofar as it imposes, or prevent 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.”
Tt is not the contention of any of the learned Cony * sel that the right of workmen to form unions or associations which is the right guaranteed by sub-cl. (c) of cl. (1) of Art. 19 on its literal reading has
3S.C.R. SUPREME COURT REPORTS — 285 ween denied by the impugned legislation. The argument, however, was that it would not be a proper construction of the content of this guaranteed freedom to read the text literally but that the freedom should be so understood as to cover not merely a right to form an union in the sense of getting their union registered so as to function as an union, ie., of placing no impediments or restrictions on
Ytheir formation whick could not be justified as dictated by public order or morality but that it extended to confer upon unions so formed a right to effectively function as an instrument for agitating and negotiating and by collective bargaining secure, uphold or enforce the demands of workmen in respect of their wages, prospects or conditions of work. It was further submitted that unless the guaranteed right comprehended these, the right to form an union would be most illusory. To understand the implications of learned Counsel’s submission in their proper perspective the several steps in the reasoning might be set out as follows :
(1) The Constitution guarantees, by sub cl.(c)
wot cl. (1) of Art. 19, to citizens in general and to workers in particular the right to form unions. In this context it was pointed out that the expression ‘union’ in addition to the word ‘association’ found in the Article refers to associations formed by workmen for “trade union” purposes ; the word ‘union’
being specially chosen to designate labour or Trade “unions.
(2) The right to “form an union” in the sense of forming a body carries with it as a concomitant right a guarantee that such unions shall achieve the object for which they were formed. If this concomitant right were not conceded, the right guaranteed to form an union would be an idle right, an empty shadow lacking all substance. 7 te
(3) The object for which labour unions are brought into being and exist is to ensure collective
L961
Ayyangar d.
1961 bargaining by labour with the employers. The
All india Bank ecessity for this has arisen from an incapacity
Fmplapets" stemming from the handicap of poverty and conse- v. quent lack of bargaining power in workmen as National Induatrial compared with employers which is the reason d’etre for the existence of labour organizations. Collective
Awagar J. —_ bargaining in order to bo effective must be enforce- able labour withdrawing its co-operation from the employer and there is consequently a fundamental + right to strike a right which is thus @ natural deduction from the right to form unions guaranteed by sub-cl. (c) of cl(1) of Art. 19. As strikes, however, produce economic dislocation of varying intensity or magnitude, a system has been devised by which compulsory industrial adjudication is substituted for the right to strike. This is the ratio underlying the provisions of the Industrial Disputes Act 1947 undor* which Government is ompowered in the event of an industrial dispute which may ultimatcly lead to a strike or lock-out or when such strikes or lock-outs occur, to refer the dispute to an impartial Tribuual for adjudication with a provision banning and making illegal strikes or lock-outs during the pendency of the adjudication proceedings. The provision of, an alternative to a strike in the shape of industrial adjudication is a restriction on the fundamental tight to strike and it would be reasonable and valid ouly if it were an effective substitute.
(4) For an adjudication to satisfy the tests of reasonablenoss and effectiveness two conditions are, necessary: (a) that the adjudicator should be enabled to have before him all the materials which are necessary for pronouncing upon the matter in controversy before him ; and (b) that the adjudicator by whom the controversy between the parties should be decided should be an impartial person or body who would render the decision or award after fully hearing the partics, and that no matter in controversy should be the subject of ex pacte decision by an interested party or without the disputants having an opportunity to know the
38.C.R. SUPREME COURT REPORTS — 287 materials on which the decision is reached, as also an opportunity to place their case with reference to such material.
(5) In regard to the right of labour unions to function effectively and to achieve the object of their existence as set out earlier, by negotiated settlement or by compulsory adjudication, the only limitations permitted to be imposed by law are those set out in cl.(4) of Art. 19 and unless, therefore, either the objects of the association or the manner of achieving them are contrary to, or transgress public order or morality, for which reason alone reasonable restrictions might be imposed upon the guaranteed right, the freedom guaranteed is absolute.
(6) The legislation now impugned withdraws as it were a vital issue in dispute between the parties before the adjudicator, viz., the capacity of the industry to pay, from his cognisance and vests the power of deciding that issue in the Reserve Bank which is a biased and interested party, the decision itself being rendered ex parte, the trade unions being deprived even of the knowledge of facts which lead to the decision.
It was on this line of reasoning that learned Counsel submitted that the impugned enactment violated the freedom guaranteed by sub-cl. (c) of el. (1) of Art. 19.
We shall now proceed to consider the soundness and tenability of the steps in the reasoning. It is not necessary to discuss in any detail the first step as sub-cl. (c) of cl. (1) of Art. 19 does guarantee to all citizens the right “to from associations’. It matters little whether or not learned Counsel is right in his submission that the expression ‘union’ in the clause has reference particularly to Trade Unions or whether the term is used in a generic sense to designate any association formed for any legitimate purpose and merely as a variant of the expression “Association” for comprehending every body of persons so formed. It is not controverted
All India Bank Employees’ Assoctation
All India Bank Employees’ Assoctalton
Ayvangar J,
288 SUPREME COURT REPORTS [19627 that workmen have a right to form “associations or unions” and that any legal impediment in the way of the formation of such unions imposed directly or indirectly which does not satisfy the tests laid down in cl. (4) would be unconstitutional as contravening & right guaranteed by Part III of the Constitution.
It is the second step in the argument of the- learned Counsel, viz., that the right guaranteed -to form “an union” carries with it a concomitant right that the achievement of the object for which the union is formed shall not be restricted by legislation unless such restriction were imposed in the interest of public order or morality, that calls for critical examination. We shall be referring a little later to the authorities on which learned Counsel rested his arguments under this head, but before doing so we consider it would be proper to discuss the matter on principle and on the construction of the constitutional provision and then examine how far tho authorities support or contradict the cunclusion reached.
The point for discussion could be furmulated thus : When sub-cl. (c) of cl. (1) of Art. 19 guarantees the right to form associations, is a guarantee also implied that the fulfilment of every object of an association so formed is also a protected right, with the result that there is a constitutional guarantee that overy association shall effectively achieve tho purpose for which it was formed without interference by law except on grounds relevant to the preservation of public order or morality set out in cl. (4) of Art. 19? Putting aside for the moment the case of Labour Unions to which we shall rofer later, if an association were formed, lect us say for catrying on a lawful business such as a joint stock company or 4 partnership, does the guarantee by sub-cl.(c) of the freedom to form the association, carry with it a further guaranteed right to the company or the partnership to pursue its trade and achieve its profit-making object and that the only limitations
~» which the law could impose on the activity of the association or in the way of regulating its business activity would be those based on public order and morality under el. (4) of Art. 19? We are clearly of the opinion that this has to be answered in the negative. An affirmative answer would be contradictory of the scheme underlying the text and the frame of the several fundamental rights which are guaranteed by Part III and particularly by the scheme of the seven freedoms or groups of freedoms guaranteed by sub-cls. (a) to (g) of cl. (1) of Art. 19. The acceptance of any such argument would mean that while in the case of an individual citizen to whom a right to carry ona trade or business or pursue an occupation is guaranteed by sub-cl. (g) of cl. (1) of Art. 19, the validity ofa law which imposes any restriction on this guaranteed right would have to be tested by the criteria laid down by cl. (6) of Art. 19., if however he associated with another and carried on the same activity—say as a partnership, or as a company etc., he obtains larger rights of a different content and with different characteristics which include the right to have the validity of legislation ‘ restricting his activities tested by different standards, viz., those Jaid down in cl. (4) of Art. 19. This would itself be sufficient to demonstrate that the construction which the learned Counsel for the appellant contends is incorrect, but this position is rendered ¢learer by the fact that Art. 19—as contrasted with certain other Articles like Arts. 26, 29 and 30—grants rights to the citizen as such, and associations can lay claim to the fundamental rights guaranteed by that Article solely on the basis of their being an aggregation of citizens, 7.e., in right of the citizens composing the body. As the stream can rise no higher than the source, associations of citizens cannot lay claim to rights not open to citizens, or claim freedom from restrictions to which the citizens composing it are subject.
The resulting position may be illustrated thus : If an association were formed for the purpose of
~ All India Bank ‘Employees’ Association.
AY ational y dustrial - Tribunal
Ay yyangar J...
; : ‘the shape ‘of ‘rights ” concomitant to concomitant a
290. . - SUPREME COURT REVORTS- ‘[1962)
carrying on business, the right to form it would be guaranteed by sub- cl. (co) of el. (1) of Art. 19 subject
‘ to: any: law’ restricting that right conforming ' to
_ el. (4) of Art. 19.-° As regards its business activities, however; and: the. achievement of the objects: for.
cy Which it was brought into existence, its rights would be’: those. guaranteed - -by. sub-cl. (g) - ‘of el. (1) of Art. 19 subject to any relevant:law ou’ the‘ matter ‘ conforming to cl. (6) of Art. 19 ; while the property which the association acquires or possesses would be protected by sub-cl. (f) of cl. (1) of Art. 19 subject to legislation within the limits laid down: by. cl. 0), of - Art. WD: ley ta ea We é consider it unnecessary: to 6 niuitiphy: examples to further illustrate the point. | Applying what we have stated earlier to thé case of a labour union the position, would be this ; while the right - to form an union is ‘guaranteed by sub-cl. {c), the right of the’ members of the association’ to meet would be, guaranteed _by sub-cl. (b), their right to move from place to’ place within India by sub-cl. (d), their, right to discuss their problems’ and to propagate - their views by sub-cl. (a), their right’ to hold property
-would be that gaaranteed by. sub-cl. ‘(f) and so on— each’ of: these freedoms being subject to such 1éstri- -etions as might properly be imposed | by els. (2) to .(6) of Art. 19 as might be appropriate in the : context. It is one thing ‘to interpret each of the free- * doms guaranteed by the several Articles in Part III in a fair and liberal sense, it is quite another to read ‘each guaranteed right: as involving or including -concomitant rights necessary to achieve the object “which might be supposed .to under lie the grant: of ‘each! of those tights, | for. that construction would, - ‘ by’a'series of ever’ expanding concentric. circles in rights and so on, lead to an almost grotesque, result, ee ‘There ia no doubt, that in the:.context of the ~ principles underlying , the Constitution -and the. , manner, in which its 3 Part III has been framed the
Lid etd ah Ohae i om
3 $.C.R. SUPREME COURT REPORTS — 291 guarantees embodied in it are to be interpreted in a liberal way so as to subserve the purpose for which the constitution-makers intended them and not in any pedantic or narrow sense, but this however does not imply that the Court is at liberty to give an unnatural and artificial meaning to the expressions used based on ideological considerations. Besides it may be pointed out that both under the Trade Unions act as well as under the Industrial Disputes Act the expression ‘union’ signifies not merely a union of workers but includes also unions . of employers. Ifthe fulfilment of every object for which an union of workmen was formed were held to be a guaranteed right, it would logically follow that a similar content ought to be given to the same freedom when applied to an union of employers which would result in an absurdity. We are pointing this out not as any conclusive answer, but to indicate that the theory of learned Counsel that a right to form unions guaranteed by sub-cl. (c) of el.(1) of Art.19 carries with it a fundamental right in the union so formed to achieve every object for which it was formed with the legal consequence that any legislation not falling within cl. (4) of Art. 19 which might in any way hamper the fulfilment of those objects, should be declared unconstitutional and void under Art, 13 of the Constitution, is not a proposition which could be acoepted as correct.
Besides the qualification subject to which the right under sub-cl. (c) is guaranteed, viz., the contents of cl. (4) of Art. 19 throw considerable light upon the scope of the freedom, for the significance ‘and contents of the grants of the Constitution are best uuderstood and read in the light of the restrictions imposed. If the right guaranteed included not merely that which would flow on a literal reading of the Article, but every right which is necessary in order that the association brought into existence fulfils every object for which it is formed, the qualifications therefor would be not merely those in al.(4) of Art. 19, but would be more numerous and
196L t
1 eo a. ~ tN 7
— x ‘
292. -\ SUPREME COURT REPORTS _ [1962f 81 . very: different, restrictions- which bore ‘upon and - Jn. India Bank took into account the several fields in which associa- moployees
‘Anoerrtion tions or unions of citizens might legitimately: engage “tionit “Tadusiigd themselves. Morely by way of illustration we aii peat might point out that learned Counsel- admitted that though the freedom guaranteed .to workmen to form labour unions carried with it the concomitant. right _ to collective bargaining together with the right to __ Strike, still the provision in the Industrial Disputes “Act forbidding strikes in the protected industries as _ _ well as in the event of a reference of the dispute to
~ adjudication under s. 10 of ‘the Industrial “Disputes” Act was conceded to be a reasonable restriction on the right guaranteed by sub-cl.(c) of cl.(1) of Art.19. It ‘would’ “be ~seen™ that if. the right to strike. were by implication a right guaranteed by sub-cl. (c)
. Of el. (1) of Art.-19,then the restriction°on that tight in the interests of the general’ public, viz.,- of
. national economy while perfectly. legitimate if tes-
_ ted by the criteria in cl. (6) of Art. 19, might not be capable of being sustained as "a reasonable restiction imposed ‘for ‘reasons of morality or public order. -On' the construction of the Article, there-
. fore, apart from the authorities to which we shall
- refer presently, we have reached the conclusion that ‘even a very liberal ‘interpretation _of sub-cl.. (c) of el, (1) of Art. 19 cannot lead to the conclusion that. ithe trade’ unions have’ a ‘guaranteed right to an ‘ effective collective bargaining or to strike, either as
‘‘part of collective. bargaining. or ., otherwise. The
4; right to strike or the right to declare a lock-out may ' t.be.controlled or restricted by appropriate industrial ~..... legislation, and the validity of such legislation would have to. be tested not with reference to the. criteria laid down in cl.(4) of Art. 19 but by totally different ‘considerations, ©) wears -\.. &1 "We shall now’ proceed to consider the authori- © ‘ties relied on by ‘the learned Counsel in support of | - this‘ theory of :“concomitant right”. to- collective .» bargaining guaranteed to labour unions. First as ', } regards.the decisions of this Court on which learned
Counsel relied, Romesh Thappar v. The State of Madras(‘) was the earliest case referred to and learned counsel placed reliance in particular on the following passage in the judgment of the learned Chief Justice :
“Turning now to the merits, there can be no doubt that freedom of speech and expression includes freedom of propagation of ideas, and that freedom is ensured by the freedom of circulation. ‘Liberty of circulation is as essential to that freedom as the liberty of publication. Indeed, without circulation the publication would be of little value’: Ex parte Jackson, 96 U.S. 727”.
Based on this, learned Counsel submitted that if the phrase ‘freedom of speech and expression’ in sub-cl. (a) of el. (1) of Art. 19 were given this liberal construction so as to effectuate the object for which the freedom was conferred, a similar construction ought to be adopted of the content of the freedom guaranteed by sub-cl. (c) of cl. (1) of Art. 19. We are, however, unable to discern any analogy between the two cases. It is obvious that “freedom of speech” means freedom to speak so as to be heard by others, and therefore to convey one’s ideas to others. Similarly the very idea of freedom of expression necessarily connotes that what one has a right to express may be communicated to others. Unless therefore the freedom guaranteed by sub-cl.(a) of ol. (1) of Art. 19 were read as confined to the right to speak to oneself or to express his ideas to himself, which obviously they could not mean, the guaranteed freedom would mean freedom to address others, and of conveying to others one’s ideas by printed word, viz., freedom of circulation. We do “not see, therefore, any analogy between the case which was considered by this Court Romesh Thappar’s (') case and the one before us. (1) 1950 $:C.R. 594 In A.
in
All India Bank Envployees’ Association
All Indiz Bank Employees’ Association v, National Industrial Tribunal
Azyungar J.
294 SUPREME COURT. REPORTS [1962]
The observations in the judgment of Bhagwati, J. in Express Newspapers (Private) Ltd. v. Union of India(') on which Counsel relied, in regard to the content of the ‘freedom of speech and expression’ that: they “include within its scope the freedom of the press”, for the press with the printed word is merely the mechanism hy which the freedom is exercised do not really carry the matter any further.
We were next referred to the observations of Das C.J. inthe advisory opinion Re the Kerala Education Bill). The question, which was being considered in the haseage relied on, related to the scope and content of cl. (1) of Art. 30 which guarantees to all minorities a right to establish and administer educational institutions of their choice. The question debated before this Court was, whether the provision in the Kerala Education Bill which denied recognition hy Government to educational institutions run by minorities contravened this freedom guaranteed to them? Dealing with this Das C. J. said:
‘Without recognition, therefore, the educational institutions estaklished or to be established hy the minority communities cannot fulfil the real objects of their choice and the rightsunder Art. 30(1) cannot be effectively exercised. The right to establish educational institutions of their choice must, therefore, mean the right to establish real institutions which would effectively serve the needs of their community and the scholars who resort to their educational institutions. There is, no doubt, no such thing as fundamental right to recognition by the State but to deny recognition to the educational institutions except upon terms tantamount to the surrender of their constitutional right of administration of the educational institutions of their choice is
Ld 1959S.C.R. 12, (2) 1959 8.C.R. 995, in truth and in effect to deprive them of their rights under Art. 30 (1).”
We do not consider that these observations and ‘this construction of cl. (1) of Art. 30 assist learned Counsel in his submisrion as regards the theory of concomitant rights flowing from the freedom guarantced by sub-cl. (c) of cl. (1) of Art. 19. The observations of the learned Chief Justice and the conclusions drawn are in relation to the construction of Art. 30 and cannot be divorced from the context. They do not purport to lay down any general rule of construction for the freedoms guaranteed under the several sub-heads of cl. (1) of Art. 19, and, indeed, what we have pointed out earlier should suffice to indicate the impossibility of upholding any such construction ofthe freedoms guaranteed by the latter Article.
Learned Counsel also referred us to certain passages in two judgments of the Supreme Court of the United States: National Association for the advancement of colored people v. Alabama,(1)and Bates v. Litile Rock(?)in which"the’Court held that freedom of speech and assembly which were fundamental rights guaranteed by the Constitution would be abrogated or improperly encroached upon by legislation which compelled: the disclosure to public authorities of the membership rolls. In the two decisions the facts were that the associations in question were for the protection of coloured persons and the requirement of disclosure"of the names of members was inserted in the law for the purpose of putting a pressure upon these associations so as to dissuade people from joining them. The argument .
of learned Counsel before us was based on the dicta in these two decisions that the right to form an association which followed by reason of the ‘due process’ clause in the 14th amendment carried with it the right to ensure that the associations were able to maintain themselves as associations. In the two (1) 2 Law. Ed. Second 1488. (2) 4 Law. Ed. Second 480.
All India Bank Lmployeee’ Association v. National {ndustrial Tribunal
Ay angar J, decisions referred to, the learned Judges of the Supreme Court of the United States were not construing the content of a provision on the lines of Art. 19(1)fe), for in America, the right of associa- tion is not any specifically guaranteed right, but has been derived by judicial interpretation of the due process clause of the 14th Amendment. But apart from this the legislation there impugned was one which directlv affected the formation of the association and in that sense mav he hit by the terms of sub-cl.(c) of cl.(1) of Art. 19 if statutes with similar purpose were enacted in India. The decisions cited are no authoritv for the second step in the argument for which thev were cited.
Learned Counsel also referred us to two other dicisions of the Supreme Court of the United States in which the right of emplovees to self-organization, to form, join and assist labour organisations and to bargain collectively through representatives of their own choice and to engage in concerted activities for the purpose of collective bargaining” or other mutual aid has beenreferred to ~as “a fundamental right” (vide National Labor Ralations Board v. Jones and Laughlin Steel Corporation and ors.,(‘) and Amalgqamated Utility Workers v. Consolidated Edison Company of New York) (@). We do not consider the inference sought to be drawn well-founded. What the learned Judges of the Sunreme Court were referring to as a fundamental right was not with reference toa fundamental right as recognized or guaranteed by the Constitution, but in the sense of aright of the unions which enacted law recognized or respected, and as other decisions of the United States’ Supreme Court show, was subject to regulation by the Iegislature(*). Wo have, therefore, reached the'conclusion that the right"guaranteed by “sub-cl.(c) of cl.(1) of Art. 19 does not carry with it a concomitant right.
(4) 81 Law. Fd. 893, 909.
a) R4 Law. Ed. 738, 741. > Vide Weaver Constituti >a! Law and its Naminisiration (1944) p. 505, referring to Dorchy «. Kansas 272 U.S. 306: . Ed, 248 “Neither “he common law nor the {4th Arendment conters the absolute right 10 «trike,”
that the unions formed for protecting the interests of labour shall achieve the purpose for which they were brought into existence, such that anv interferenee, to such achivement by the law of the land would be unconstitutional unless the same could be justified as in the interests of public order or morality. Tn our opinion, the right guaranteed under sub-cl. (c) of cl. (1) of Art. 19 extends to the formation of an association and insofar as the activities of the association are concerned or as regards the steps which the union might take to achieve the purpose of its creation, they are subject to such laws as might be framed and that the validity of such laws is not to be tested by reference to the criteria to be found in cl. (4) of Art. 19 of the Constitution.
In this view it is not necessary to consider the other steps in the argument of learned Counsel all of which proceed upon the correctness of. the sten which we have just now dispos-d of. Nevertheless we consider it proper to deal with the submission that the impugned legislation (a) withdraws an essential part of the dispute between the paities from the jurisdiction of -an impartial adjudicator and vests the same in the Reserve Bank of India which is a biased body ; and (b) that the adjudicator is left without proper materials to discharge his duties by withdrawing the proper materials from his cognizance.
A complaint that the impugned provision withdraws the dispute from the adjudication of an impartial arbitrator and leaves it to the decision of another body is an obvious over-statement of the position. The dispute between the parties in relation either to wages, bonus or other amenities or perquisites which involve financial obligations on the part of the employer remain even after the impugned provision was enacted, with the adjudicator and he alone determines the rights of the parties subject to the provisions of the Industrial law or other relevant legislation, and the relief which he could award to the employees remains
Employees’ Association
Vv. National Industral Tribunal
298 SUPREME COURT REPORTS __ [1962)
the same. The adjudicator alone determines the capacity of the industry to pay orto bear the enhanced cost. The only result of s. 34 A is that in regard to two itmes, ziz., secret reserves and the provision made by banks “for bad and doubtful debts and other necessary provisions”, the reasonable quantum which would be available for being taken into account by the adjudicator would be estimated and determined by an expert body which is a governmental authority or practically a department of Government, viz., the Reserve Bank of India which is entrusted by law with duty of maintaining the credit structure of the country.
From what we have stated earlier as the genesis of tho legislation now impugned, it would be apparent that Government had to effect a reconciliation between two conflicting interests: one was the need to preserve and maintain the delicate fabric of the credit atructure of the country by strengthening the real as well as the apparent. credit worthiness of banks operating in the country. It was really this principle which is vital to the economic life of the community that has been responsible for the changes that have been made from 1927 onwards as regards the form of balancesheet and of the Profit & Loss accounts of banking companies as distinguished from other trading and industrial organizations. There was urgent need to protect from disclosure certain of the items of appropriation by banks in order to preserve them as credit institutions. On the otier hand, there was the need—an_ equally urgent need for enabling the workers in these institutions not to be denieda proper wage and other emoluments and_ proper conditions of service. The question was how far information which in the interests of national economy the banks were entitled to withhold from their sharcholders and tho general public, was to be made available for determining the capacity of the banks to pay their employees. It was in these circumstances that the impugned legislation was
35.0R. SUPREME COURT REPORTS 299 enacted which while preserving industrial adjudication in respect of disputes between the banks and their employees, entrusted the duty of determining the surplus reserve which could be taken into account as part of the assets for determining capacity to pay, to the Reserve Bank. Thus understood there doe» not appear to be anything unreasonable in the solution which the impugned legislation has effected.
We do not also consider that there is any substance in the complaint that the Reserve Bank of India is a biased body. If it was not the Reserve Bank of India, the only other authority that could be entrusted with the function would be the Finance Ministry ofthe Government of India and that department would necessarily be guided by the Reserve Bank having regard to the intimate knowledge which the Reserve Bank has of the banking structure of the country as a whole and of the affairs of each bank in particular. In the circumstance therefore it matters little from the point of view of the present argument whether it is the Finance Ministry that was vested with the power to determine the matters set up ins. 34-A or whether it is the Reserve Bank that does so, as under the impugned enactment.
Learned Counsel made a further submission that the impugned enactment was a piece of colourable legislation, and that the purported objective of securing secrecy from disclosure was really a device adopted for depressing wages and for denying to workmen emploved in banks their legitimate rights. It was urged that the preamble to the amending Act sought to make out that the real purpose behind the legislation was the ensuring of secrecy from disclosure of the reserves held by the banks and of the bad and doubtful. debts which arose in the course. of business and the provision made for these losses and proceeded on the ratio that such disclosure would hurt the credit of the v. National Ind :str:al Tritunal
Vv. National Industricl Tribunal alyyangar J.
banks which would have repercussions not merely on the individual bank but also on the banking structure of the country asa whole. This, it was submitted, was not the.real but only the colourable object and purpose underlying the legislation. In this connection it was stressed thats. 21 of the Industrial Disputes Act and r. 30 of the Industrial Disputes Rules had made ample provision for securing secrecy to the affairs of every concern in regard to which disclosure would not be in public interest. We are satisfied that this submisston has no basis in fact and besides even ifmade out does not affect the validity of the legislation. As we have pointed out already, the impugned legislation merely carries out to its logical conclusion the effect of the changes in the form of the balance-sheet and Profit and Loss accounts of Banks which starting in 1927 culminated in the notification dated December 22, 1951 under s. 29 (4) of the Banking Companies Act amending the Forms appended to that Act. If the construction of the “right to form unions” under sub-cl. (c) of c].(1) of Art. 19 put forward by learned (‘ounsel for impugning the validity of the enactment is negatived, then subject to the point about Art. 14 which we shall examine presently, legislative competence being conceded there could be no legal objection to its validity. Objections based on colourable legislation have relevance only in situations when the power of the legislature is restricted to particular topics, and an attempt is made to escape legal fetters imposed on its powers by resorting to forms of legislation calculated to mask the real subject-matter. No such problem exists in the present case and it is common ground that once the legislation passes the test of the fundamental rights guaranteed by Part III, legislative competence not being in dispute, its validity is beyond cavil. The question whether the secrecy assured by s. 21 of Industrial Disputes Act is or is not sufficient to protect the interests of the Banks, is a matter of legislative policy—and is for Parliament
> te,
3 S.C.R. SUPREME COURT REPORTS — 301 alone—and even the fact that the Court could be persuaded that the existing law is sufficient would be no ground for invalidating the impugned legislation. When the end which the legislature seeks to achieve, vtz ., secrecy is competent, the enquiry asto ultra vires stops. Whether less than what was done might have been enough, whether more drastic provision was made than occasion demanded, whether the same purposes could have been achieved by provisions differently framed or by other means, these are wholly irrelevant considerations for testing the validity of the law. They do not touch or concern the ambit of the power but only the manner of its exercise, and once the provisions of Part III of the Constitution are out of the way, the validity of the legislation is not open to challenge.
The next point urged was that the impugned provision was in violation of Art. 14; though the several learned Counsel who appeared in support of the case of the workers were not all agreed as to the precise grounds upon which it could,be held that the impugned provision violated Art. 14.
It was first submitted that the provision was rendered invalid because it vested an arbitrary power in banks which were parties to a dispute under the Industrial Disputes Act, to claim or not to claim the privilege of not producing the documents and that no criterion had been indicated as to the circumstances in which Banks could decide to make the claim. But this, however, is answered by the provision itself which runs :
“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...... would involve disclosure of information relating to the matters set not—the matters set out in sub-clauses (a) and (b).”
All India Bank Lmployees’ Association
Ayyangur J,
302 SUPREME COURT REPORTS (1962)
It was also submitted that sub-cl. (b) of sub-s. (1) was vague, in that a reference was made to “provision made for bad and doubtful debts and other usual or necessary provisions”. We do not gec any substance in this point either, because these words are taken from the form under the Banking Companies Act and their meaning is clewr in banking circles. In fact, in the application which the employee associations made before the adjudicator to direct the production of information and documents from the banks this phrase was used and it. is apparent that even the Bank Employees’ Associations understood it as having a definite connotation.
It was next submitted on behalf of some of the interveners that s. 34A(1) and (2) violated Art. 14 in that the classification contained in it was impermissible as not being based on rational grounds. It was said (I) that the protection against a disclosure applied only to adjudications under the industrial Disputes Act and not to other adjudications ; (2) that it applied only to certain banking companies and not to all banking companies; and (3) that by reason of s. 34A (2) the provisions of the impugned enactment were applied in a discriminatory manner to all banks other than the Reservo Bank. The first two points cover the same ground and arise out of the fact that the impugned provision by its 3rd_sub-soction defines a ‘“‘banking company’ referred to in it and to which its provisions apply, as meaning a “Banking Company’ under the Industrial Disputes Act, 1947. The Industrial Disputes Act defines a “Banking Company” in s. 2(b) as_ follows:
“Banking Company means 2 banking company as defined in s. 5 of the Banking Companies Act, 1949, having branches or other establishments in more than one State and includes the State Bank of India and the Reserve Bank of India.”
$S.UK. SUPREME COURT REPORTS 303
It would thus be seen that though the Banking Companies Act applied to every banking company, itis only those banks whose operations extended beyond one State were brought within. the scope of the definitions of a “banking company” under the Industria! Disputes Act. The result of that was that Banking Companies not having branches in more than one State would be an industry so as to be within the Industrial Disputes Act but not “a banking company” within its definition. In the circumstances learned Counsel is right in his submission that such banking companies as are not within the definition of ‘fa banking company” under the Industrial Disputes Act would not be entitled to claim the protection from disclosure conferred on “banking companies” by the impugned provision. This, however, is no ground for holding the legislation invalid. In the. first place, the complaint of discrimination is not by the banks who are not on the terms of s. 34A entitled to the protection from disclosure of their reserves ete. Secondly it is common ground that 95% of the banking business in this country isin the hands of Banks which are within the definition of ‘banking companies” under s. 2(b) (b) of the Industrial Disputes Act. Besides, these banks employ over 80,000 out of the 90,000 bank-employees, In the circumstances and seeing that the injury to the credit structure will only be by the disclosure of the reserves etc., of the banks of this class, there is sufficient rational connection and basis for classification to justify the differentiation. The fact ‘that the legislation does not cover every banking’ company is therefore no ground for holding the provision to be discriminatory within Art. 14.
The last point about the exclusion of the Reserve Bank of Indja from the operation of s. 34A (2) has also no substance. In the very nature of things and on the scheme of the provision the Reserve Bank could not but be excluded from sub-s. (3) of the impugned provision. In determining
All India Bunk Employees* Association vy. . National Industrial Tribunal
All India Bank Employees Association, v. Nattonal Induatrial Tribunal
304 SUPREME COURT REPORTS (1962;
what reserves could properly be taken into account, the Reserve Bank would be discharging not any quasi judicial but only an administrative function, determining this matter with reference to uniform business principles and it therefore appears to us that there is no ‘impropriety in its findings being final even in regard to itself. A submission on similar lines about bias was also mace in relation to the impact of the impugned provision insofar as it related to the industrial dispute between the State Bank of India and-its emplovees. It was pointed out to us that the Reserve Bank of India owned practically the entirety of the sharecapital of the State Bank of India, with the result that the Reserve Bank was pecuniarily and vitally interested in supporting the State Bank as against the latter’s omployees in any industrial dispute and that the element of bias which the situation involved would invalidate the impugned provision. We consider this argument without force. If, as we have held, the impugned provision is valid and does not violato any of the freedoms guaranteed by Part III of the Constitution in regard to the employees of the
_ Reserve Bank, the challenge to the impugned pro- vision cannot obviously be successful in the case of the employees of the State Bank.
As we have stated earlier, though the arguments bofore us ranged on a very wide ground, we have not thought it necessary to deal with all of them because in view of our conclusions on the crucial points in the case the others which were subject of debate before us did not ariso for consideration.
Tho appeal fails and is dismissed with costs. The petitions also fail and are dismissed with costs. (one hearing fee)
Appeal and Petitions dismissed.