# [1975] 3 S.C.R. 619

- **Citation:** [1975] 3 S.C.R. 619
- **Court:** Supreme Court of India
- **Decided:** 1975-02-21
- **Bench:** A. N. Ray, K. K. Mathew, Y. v. CHANDRACHUD, A. Alagir!Swami, A. c. GUPTA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1975-3-s-c-r-619-6459
- **Pages:** 67

## Headnote

Stal1aory Corporations-Regulations made by, whether have force of law-.
Wlwthcr employees of corporation are servants of Union or State.
Constitution of. India. Art. 12-WJiether statutory corporations are 'State'
or 'authority',
The Oil and Natural Gas Com'mission, the Industrial Finance Corporation
~nd the Life Insurance Corporation are .:reated by statutes. The Oil and
'C.!'l·ral Gas Commission is owned by the Government, the management is by
the Government and it could be dissolved only by the Government. The
p1w. isions of the Oil and Natural Gas Commission Act, 1954, creatil}g it. show
that it acts as 1an agency of the cen~ral Government. The provisions of the
Jndu·strial Finance Corporation Act, 1948, creating the Industrial Fina,nce Corporation show that the Corporation is under the complete contl'ol and managemwt
~f the Central Government. Provisions of the Life Insurance Act, 1956, whi:h
creates the Life Insurance Corporation, show that this Corporation is also ari
agency of the Government carrying on the exclusive business of Life ,Insurance.
The Corporation is owned and managed by the Government and it can be
dissolved only by the Government.
All the three statutes constituting the three
statutory corporations enabled them to male regulations which provide, il!ll'r
a/ia, for the terms and conditions of ·employment and '3ervices of their employees.
On the question whether, (i) the regulations have the for.:e of law, and (ii)
whether the statu.tory corporations are 'State' within the meaning o'f Art. 12
of the Constitution,
HELD: (Per A. N'. Ray, CJ., Y. V. Chandrachud and A. C. Gupta, JJ.)
The regulations have the for~-e of law and the employees arc entitled lo the
declamtion of being in employment when their dismissal or
removal
is
in
contravention of the regulations.
[642E-F]
(a) Regulations under an Act are framed in exercise of a specific power
conferred by the statute to make regulations. The
authority
making
the
regulations must specify the sources of its specific power. The essen:e of Jaw
is that it is made by the law makers in exerci·3e of specific authority. The
vires of such of law is capa,ble of being challenged if the power is absent or
has been exceeded by the authority making ru.les or regulations.
The manner
and procedure adopted in making the regulations in the instant case, by the
three statutory corporations, have this characteristic of law.
[629G-A]
(b) Another characteristic of law is its content. Law is a rule of general
conduct while administrative instructions relate to a particular person.
[630A]
(c) Broadly stated the distinction between rules and regulations on one
hand, and administrative instructions on the other, is that rules and regulations
can be made· only after reciting the sour.:e of power whereas administrative
instructions are not issued after reciting the sou.rce of power. There is, however,
no substantial difference between rules and regulations inasmuch as both are
subordinate legislation under powers conferred by the statute. A regulation
framed under statute applies uniform treatment to everyone or to aJl members
of some group of class. [630G; 6330]
(d) The regulations in the present case are, inter alia, for the purpose of
defining the duties, conduct and conditions of service of officers and other
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SUPREME COURT REPORTS
[1975] 3 S.C.R.
employees.
They contain the terms and conditions of aippointment which are
imperative. The
form
and
content
of the contract with
a
particular
employee is prescriptive and statutory.
The notable feature is that these statutory bodies have no free hand in framing the conditions and temis of service
of their employees.
They are bound to apply the terms and conditions as laid
down in tile regulations.
These regulaitions are not only binding on the authority
but nl5o on the public.
They imposed obligations on the statutory authorities.
The statutory authorities cannot deviate from the conditions of service.
Any
deviation will b.t; enforced b

## Text

_Characters 0–39,690 of 212,104. This is a partial read: ask again with offset=39690 for what follows._

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619
SUKHDEV SINGH & ORS.
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BHAGA TRAM SARDAR SINGH RAGHUVANSHI AND ANR;
February 21, 1975
[A. N. RAY, C.J., K. K. MATHEW, Y. v. CHANDRACHUD,
A. ALAGIR!SWAMI AND A. c. GUPTA, JJ.]
Stal1aory Corporations-Regulations made by, whether have force of law-.
Wlwthcr employees of corporation are servants of Union or State.
Constitution of. India. Art. 12-WJiether statutory corporations are 'State'
or 'authority',
The Oil and Natural Gas Com'mission, the Industrial Finance Corporation
~nd the Life Insurance Corporation are .:reated by statutes. The Oil and
'C.!'l·ral Gas Commission is owned by the Government, the management is by
the Government and it could be dissolved only by the Government. The
p1w. isions of the Oil and Natural Gas Commission Act, 1954, creatil}g it. show
that it acts as 1an agency of the cen~ral Government. The provisions of the
Jndu·strial Finance Corporation Act, 1948, creating the Industrial Fina,nce Corporation show that the Corporation is under the complete contl'ol and managemwt
~f the Central Government. Provisions of the Life Insurance Act, 1956, whi:h
creates the Life Insurance Corporation, show that this Corporation is also ari
agency of the Government carrying on the exclusive business of Life ,Insurance.
The Corporation is owned and managed by the Government and it can be
dissolved only by the Government.
All the three statutes constituting the three
statutory corporations enabled them to male regulations which provide, il!ll'r
a/ia, for the terms and conditions of ·employment and '3ervices of their employees.
On the question whether, (i) the regulations have the for.:e of law, and (ii)
whether the statu.tory corporations are 'State' within the meaning o'f Art. 12
of the Constitution,
HELD: (Per A. N'. Ray, CJ., Y. V. Chandrachud and A. C. Gupta, JJ.)
The regulations have the for~-e of law and the employees arc entitled lo the
declamtion of being in employment when their dismissal or
removal
is
in
contravention of the regulations.
[642E-F]
(a) Regulations under an Act are framed in exercise of a specific power
conferred by the statute to make regulations. The
authority
making
the
regulations must specify the sources of its specific power. The essen:e of Jaw
is that it is made by the law makers in exerci·3e of specific authority. The
vires of such of law is capa,ble of being challenged if the power is absent or
has been exceeded by the authority making ru.les or regulations.
The manner
and procedure adopted in making the regulations in the instant case, by the
three statutory corporations, have this characteristic of law.
[629G-A]
(b) Another characteristic of law is its content. Law is a rule of general
conduct while administrative instructions relate to a particular person.
[630A]
(c) Broadly stated the distinction between rules and regulations on one
hand, and administrative instructions on the other, is that rules and regulations
can be made· only after reciting the sour.:e of power whereas administrative
instructions are not issued after reciting the sou.rce of power. There is, however,
no substantial difference between rules and regulations inasmuch as both are
subordinate legislation under powers conferred by the statute. A regulation
framed under statute applies uniform treatment to everyone or to aJl members
of some group of class. [630G; 6330]
(d) The regulations in the present case are, inter alia, for the purpose of
defining the duties, conduct and conditions of service of officers and other
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SUPREME COURT REPORTS
[1975] 3 S.C.R.
employees.
They contain the terms and conditions of aippointment which are
imperative. The
form
and
content
of the contract with
a
particular
employee is prescriptive and statutory.
The notable feature is that these statutory bodies have no free hand in framing the conditions and temis of service
of their employees.
They are bound to apply the terms and conditions as laid
down in tile regulations.
These regulaitions are not only binding on the authority
but nl5o on the public.
They imposed obligations on the statutory authorities.
The statutory authorities cannot deviate from the conditions of service.
Any
deviation will b.t; enforced by legal sanction of courts to invalidate actions in
violation of rules and regulations. The existence of rules and regulations u:nder
the :itatnte is to ensure regμlar condll'Ct with a distinctive attitude to that conduct
as a ·standard.
The statutory regulations in the instant case give the employees
a statutory sta•tus and impose restrictions on the employer and the empl<lyee
with 110 option to vary the conditions. An ordinary individual, in the case
of muster and servant contract1rnl relationship, enforces breach of contract. the
remedy being damages because pe1•sonal service is not capable of enforcement.
Jin the case of stautory bodies, however, there is no personal element whatsoever
because of the impersonal character of the bodies.
In their case the element
of public employment and service and the support of statute require observance
of rules and regufations.
Failure to observe requirements of the regulation by
~.tatutory bodies i> enforced by courts by declaring the dismissal in violation of
rules and regulations to be void.
Whenever a man's rights are affected by a
decision under statutory powers the court would resume the existence of a duty
to observe the rules of natmal justice and compliance with rules and regulations
imposed by statut,~. [630C-D; 633H; 634A-DJ
( e) Further the executive power of a 'state' is not authorhed to frame mks
under Art. 162.
[630G]
( f) The rules and regulatians in the present case cannot be equated t,1 the
regulation framed by a company incorpora.ted under the Companies Act. A
company incorporated under the Companies Act is not created by the Companies
Act but comes into existence in accordance with the provisions of that Act.
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lt is not a statute body because it is not created by statu.te itself. A cumpany
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mak;:s rules and regulations in accordance with the provisions of the Companies
Act whereas the source of the power for making rules and regulations the
c:ase of corporatiMs created by statute is the statute itself. A statutory body
when it makes rules and regulations does so under the
powers
conferred
by statute creating it.
[631B-D]
(g) In U.P. State Warehousing Corporation Case (1970] 2 S.C.R. 250 anG
llldian Airlines Corporation Case [)971] 2 S.C.C. 192 tbe temis of the regulations
were treated as terms and conditions of relationship between th~ corporation
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and its empolyees.
Bu.t that could not lead to the condusion that they art: of
the same nature :ind quality as the temis and conditions laid down in a contract
of employmer.t.
Those terms and conditions not being contractual are impmed
by one kind of subordinate: legislation, viz., regulations made in exercise of the
pewer conferred by the statute which constitute .the corporation. Terms of the
regulation are not temis of contra:t. A corporation had no power to alter or
modify or rescind the provisions of the regulations at its discretion which it
could do in respect of the terms of contract that it may wish to enter with its
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employees independent of these regulations,
So far as the terms of the regulations are concerned the actions of the corporation are controlled by the Owtrnl
Government.
The decisions, therefore, in U.P. Warehousing Corporation and
Indian Airlines Corporation are in dire~t conflict with the decision of this Court
in 1'arai11das Barot Divisional Co111ro//er S.T.C., [1966] 3 S.C.R. 40 and are
wrongly decided.
[633B-D]
The Sirsi M1111icipa/ity
v.
Cecelia Kom Francis,
[1973] 1 S.C.C.
409,
followed.
·
(2) The statut9ry bodies are authorities within the meaning of Art. 12 of the
Constitution though their employees are not the servants of ihe Union or of a
State.
[642F]
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SUJCHDEV V. BHAGATRAM
(3 21
(a) The State undertakes commercial functions in combination with governmental fonctions in a welfare Stil:te. It must be able to impose decisions by or
under law with authority.
An element of authority is of binding character.
The rules ancj regulations are authoritative because these rules and regulations
direct and control not only the exercise of the powers by the corporation but
also of persons who deal with these corporations.
The State itself is cnvi5aged
under Art. 298 as having the right to carry on trade and .business.
The State
as defined in Art. 12 comprehended bodies created for the purpose of promc1ting
economic interests of the people.· The cfocumstance that the »tatutory bodies
required to carry on some adivities of the nature of trade or commerce does
not indicate that it must be excluded from the scope of the word 'State'.
A
public autiiurity is a body which, has public or statutory duties to perform nnd
which performs those duties and carries out its transactions for the benefit of the
public and not for private profit.
Such an authority is not precluded from
makinii a profit for the public benefit, [634F; H; 635A-B & G]
(b) The power to give directions, the disobedience of which wou.ld be
punishable as. criminal offences would furnish· ·one of the reasons for ch~1rac
terising the body as an authority within the meaning of Art. 12. · The Oil and
Natural Gas Commi»ion Act confers power of entry on employees of the
Commission upon any land or premises for the purposes of lawfully ·:ar;-ying
out works by the commission. The members and employees of the Commission
are public servant'5 within the meaning of s. 21 'of the Indian Penal Code.
The Commission enjoys protection of action taken under the Act.
The Life
Insurance Act provides that if any person wilfully withholds or fails to deliver
to the corporation any properly \yhich has been transferred and vested in the
corporation and wilfully applies them to purposes other than those expressed or
authorised by the Act. he shall. on the complaint of the Corporation, be punishable with imprisonment.
The Corporation also enjoys protection of action taken •
under the A:t. The Industrial Finance Corporation Act states that whoeYe:· in
any bill of lading, warehouse, receipt or other instrument given to the Corpo:-.1tion whereby security is given to the Corporation for accommodation granted
by it wilfully makes any false statement or knowingly permits any false sla!em~11t
to be made shall be punishable with imprisonment.
Further, whoever. without
the consent in writing of the Corporation, uses its name in any prospectus or
advertisements shall also be punishable with imprisonment.
The corpo:·arion
also enjoys protection of action taken under the Act.
A company incorporated
under the Indian Companies Act does not enjoy these privileges. [641F; 64~A-D]
(c) The
fa~t that a statutory corporation is not granted immunity from
taxation and therefore is under liability to be taxed would not indicate that the
corporaion is not a state authority.
Art. 289 of the Constitution empowers the
Union of India to impose a tax in respect of trade or business carried on by
on behalf of the State.
[641G·H]
Per Mathew J. (Concurring)
The concept of State has undergone drastic changes in recent years.
Today
State cannot be conceived of simply as a coercive
machinery
wielding
the
thunderbolt of authority. It has to be viewed mainly as a service Corporntion.
A State is an abstract entity.
It. can only act through the instrumentality or
agency of naturnl or juridical persons.
There is nothing strange in the notion
of the State acting through a Corporation and making it an agency or insrn1mentality of the State.
With the advent of a welfare State the framework
of civil service administration became in:re_asingly insr!.fficient for handling the
new tasks which were ofte~ of a specialised and highly technical character.
"lhe distrust of Governme::' by civil service was a powerful factor in the
developm~nt of a policy of public administration through separate Corporntions
which would operate largely according to business principles and be sep,irately
nccountable.
The Public Corporation, therefore, became a third arm of the
GO\·ernment.
The employees of public Corporation are not civil
~en·ants.
In .so far as public corporations fulfil public tasks on behalf of governm~n,,
!hey are public authorities and as such. subject to control by Government.
The
public Corporation being a :reation of the State h subject to the constitutional
limitation as the State itself.
The governing power wherever located must be
622
SUPREME COURT REPORTS
[1975] 3 s.c.R.
subject to the fundamental constitutional limitations. The ultimate question
which is relevant for our purpose is whether the Corporation is an agency or
instrumentality of the Government for carrying on a business for the benefit
of the public.
[644E; 645B; G; 646C; 647B]
A finding of State financial support plus an unusual degree of control ovf:r
the management and policies might lead one to characterize an operation as
state action.
Another factor which might be considered is whether the operation
is an important public function.
In America corporations or associations, pnvate
in character, but dealing with public rights, have been held subject to constitutiomtl
standards.
Activitie·.' which are too fundamental to the society are by definition
too important not to be :onsidered government function.
The State today
has an aftirmative duty of seeing that all essentials 6f life are made available to
al! persons.
[650B-C; 65 lD-G]
·it is clear from these provisions of the statute·; in question that the Central
GoH!rnment has contributed the original capital of the Corporation. that part
o[ the profit of the Corporation goes to that Government, that the Central
Government exercises control over the policy of the Corporation, thact lh1:
Cor)lQration carries on a business having great public importance and that it
enjoys a monopolv in the business.
These
corporations
are
agencies
or
instrumentalities of the 'state' and are, therefore, 'state' within the meaning
of Art. 12.
The fact that these corporations have independent personalities in
the eye of law doe~ not mean that they are not subject to the :ontrol o:f
gol'ernment or that they are not instrumentalities of the government. Thesi:
corporatioll'.i are instrnmentalities or agencies of the state for carrying on busi ..
nesses which otherwise would have been run by the state departmentally. II'
th~ state had chosen to carry on these businesses through the medium of govern ..
meni departments. there would have been no question that actions of tliese:
departments be 'state actions'.
Why then should be actions of corporations be:
not state actions? [653H; 654A-C]
ThP. ultimate question which is relevant for our purpose is whether such a
corporation is an agency or instrumentality of the government for carrying on a.
business for the benefit of the public. In other words, the question is, for 'Vhose
benefit was the coroc)ration carrying on the business ? When it is seen from
the provisions of that Act that on liquidation of the
Corporation,
its
assets
shot•ld be dcvided among the shareholders, namely,
the Central
and
State
governments and others, if any. the implication is clear that the benefit of the
accumulated income would go to the Central and State governments.
Nobody
will den)' that an agent has a legal personality different from that of the prin··
cipal.
The fact that the agent is subject to the direction of the principal does
not mean that he has no legal personality of his own.
Likewise, merely because:
a corporation has legal personality of its own, it does not follow that the Cor··
poration cannot be an agent or instrumentality of the state, if, it is subject to
control of government in all important matters of policy.
No
doubt,
there
might be some distinction between tne nature of control exercised by principal
over agent and the control exercised by government over public
corporation.
That, I think is only a distinction in degree.
The crux of the matter is
that
public corporation is a new type of institution which has sprung from the new
~ocial and economic functions of 2overnment and that it therefore
does
not
neatly fit into old legal categories.
Instead of forcing it into them, the
latter
should be adopted to the needs. of changing times and conditions. [654F-H]
(ii) The learned Chief Justice has dealt with the question in his judgment
whether the regulations framed by the corporations have the force of Jaw and
he has arrived at the conclusion that the regulations being framed under statutory provisions would have the force of law.
I agree with
that conclusion.
Even assuming '.hat the regulations have no force of law, I
think since
the
employm1:nt under these corporations is public employment, an employee would
get a status which would enable him to obtain declaration for continuance in
sen ice if he was dismissed or discharged contrary to the regulations.
[6SSE-F]
· (iii) If a job is re11arded as analogous to property, it ought to be recognized
that a man is entitled to a particular job just as the courts of Equity acknowledged his right to a particular piece of property. Where a public authority is
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SUKHDEV V. BHAGATRAM
623
concerned, this can be illll)lement~d by a declaration .. In the case of private
~mp!oyment English law has devised no suitable remedy. That this is possible
is sho~n by the example. of _other. countries. The Court must, therefore, adopt
the attitude that declaration 1s the normal remedy for a wrongful dismissal in
case of public employees which will only be refused in exceptional
circumscances.
The remedy of declaration should be a
readv-made
instrument
to
proyide :einstatement in ~ublic sector.
One~ it is accepted. that a man's job
is hke h18 property of which he can be depnved of for specific
reasons
this
remedy becomes the primary one though it will need to be reinforced 'where
imvate individuals are being sued. The law of master and servant has not kept
pace ~vit~ the modern co~ditions and the mandate of ·equality embodied in the
Const;<;;t10n. The law still attaches to the servant a status of inferiority and
subjection to his master. Though fundamental reforms can only emanate from
the legisla.ture,. the princ!ples fashioned by p~blic law if applied .to master servant relat10nsh1p cart bnn2 about a change m law to accord with
the
social
conditions of the 20th century.
[6580-G]
[Per Alagiriswami. J. (Dissenting)]
(i) In order that an Institution must be an "authority'' it should exercise
part of the sovereign power or authority of the State. Port Trust is given the
power to make regulations· and Jo provide that breach of its regulations would
be punishaole. In such a case, it is undoubtedly exercising part of the power
of the State. The whole purpose of the Part III of the Constitution is to confer fundamental rights on the citizen, as against the power of the State or those
exercising the power of the State. In the present case none of the Corporations
exercise the power of the State anc:, therefore, cannot be the State or Autho·
rity. The regulations framed by these Corporations have no force
of
law.
The employees of these statutory bodies have no statutory status and they are
not entitled to declaration of being in employment when
their dismissal
or
removal is in contravention of 'tatutory provisions.
[670A; 67 IA-C]
(ii) Under the Indian Legislative practice Governments make the rules and
regulations are made by any institution or organisation established by a Statute
and where it is intended that the regulation should have effect
as
law.
the
Statute itself says so.
Administrative instructions are not necessarily in rela·
uon to the particular persons.
They may relate to a whole class
of persons
even as rules and regulations do.
To say that because the regulations contained
the terms and conditions of appointment they are statutory is to beg the question.
An institution like the 1.1.C. which has its offices and employees all over
the country has necessarily got to have a standard set of conditions of service
for its various classes of employees.
It is not correct to say that the statutory
bodic~ have no free hand in framing the conditions and terms of serv!ce of their
employees. They are the authorities to make the regulations and, therefore,
can make any regulations regarding the conditions and terms of service of their
employees and also change them as they please. It cannot, therefore. be said
tha! they are bound by these terms and conditions of service.
[668E-H; 669H]
(iii) There is no hllacy in equating rules and regulations of a Company with
rules and reiiulations framed by a . statut_ory body.
Where an institution or
organisation 1s established by a Statute or under a Statute in principle there is
no difference between their powers. [6700-F]
(iv) While rules are generally made9bv the Government. the
rP.gulations
are made by a body which is a creature of the statute itself with its
powers
limited by the statute. While rules apply to all matters covered by the statute,
the scope of the regulations is narrower being usually confined to internal matters
of the statutory body s•1ch as the conditions of service of its employees. When
regulations standardise the condi~iom· of sen:ice of the employees or purpoi:t to
formulate them. their character IS further diluted by the nature of the subJectmatter. For, service or employment is basically a contract which is deeply rooted
in private law.· A mere standardisation or enumeration of the terms of a ser·
vice contract is not, therefor~. ordinarily sufficient to convert it into a statutory
status.
[669B·DJ
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SUPREME COURT REPORTS
[19'/5] 3 S.C.R.
C1v1L APPELLATE JURISDICTION : Civil Appeal No. 2137 of 1972.
From the Judgment and order da:ed the 14th July, 1972 of the
Gujarat High Court in Spl. Civil Appln. No. 1470 of 1968.
ClVIL APPEAL NO. 1655 OF 1973
Appeal by special leave from the Judgment and order dated .the
15th October, 1973 of the Gujarat High Court in L.P.A. No. 95 of
1973.
CIVIL APP.EAL NO. 1879 OF 1972 AND
CIVIL APPEAL NO. 115 of 1974
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Appeal by special leave from the Judgment dated the 29th Januarv, c
1973; of the Delhi High Court in LPA No. 155 of 1972.
F. S. Narima11, Addi. Sol. Gen (In CA. No. 2137 /72), A. K.
Sen (In CA 1655/73), B. Dutta for the Appellants.
Pramod Swarup for the appellant (In CA No. 1879 /72).
M. K. Ramwnurthy, Janardan Sharma and Jitendra Sharma for
D
Appellant in C.A. No. 115/74.
R. K. Garg, S. c. Agarwala, S. S.
Bhatnagar,
V. J.
Francis.
Ramamurthy & Co. for Respondent No. 1.
M. K. Ramamurthy J. Ramamurthy for Respondents (In CAs.
Nos. 1655/73 and 1879/72 and for Interv<:ner (In CA No. 1655/
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73).
F. S. Nariman, Addi. Sol. Gen. of India, /. N. Shroff for Respondent No. 1( In CA. 115 of 1974).
P. K. Pillai for Intervener (In CA No. 2137/72).
F. S. Narima11, Addi.
Sol. Gen. of India,
V. J. Taraporewala,
0. C. Mathur, Moha11 Prasad Jha and K. J. John for the Applicant/
Intervener (Air India).
The following Judgments were delivered
RAY, C.J.-There are two questions for consideration in these
appeals. First, vi'hether an order for removal from service contrary to
regulations framed under the Oi~ and Natural Gas Commission Act
1959; the Industrial Finance Corporation Act, 1948; and the Lif/:
Insuran~e Corp.oration Act, 1956 would t:nable the employees to ~
dechrat10n agamst the statutory
corporation
of
continuance
in
service or would only give rise to a claim
for
damages.
Seco,1d
whether an employee of a statutory corporation is entitled to cla:im
protection. of .Articles 14 and 16 againlst tlie Corporation. In short
th.e .quest10n 1s . whether these statutory corporations are authorities
w1thm the meanmg of Article 12.
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625
The statutes for consideration are the Oil and Natural Gas Commis<ion Act, 1956; the lndutrial Finance Corporation Act, 1948; and
the Life Insurance Corporation Act, 1956. The question which really
talis for decision i& whether regulations framed under these statutes
have the force of law.
The Oil and Natural Gas Commission Act,
1959
hereinafter
referred to as the 1959 Act established the Commission as a body
corporate having perpetual succession and a common seal. The composwon of the Comm1ss1on is the Chairman, and not less than two,
and not more than eight, other members appointed by the Central
Government. One of the members shall be
a
whole-time
Finance
Member in charge of the financial matters relating to thi Commission.
The Central Government may, if it thinks fit, appoint one
of the
members as Vice-Chairman of the Commission. Under section 12 of
the 1959 Act the Commission may, for the purpose of performing
its functions or exercising _its powers,
appoint
such
number
of
employees as it may consider necessary. The functions and the terms
and conditions of service of such employees shall be such as may be
provided by regulations made under the 1959 Act. There was
an
existing organiswti:on set up in pursuance of a resolution of the Government of India No. 22/29/55-0 & G dated 14th August,
1956.
Everv person employed by the said existing organisation before the
establishment of the Commission became an employee of the Corporation in accordance with the provisions contained in section 13 o~
the 1959 Act.
Sections 31 and 32
of
the
1959
Act
are
important.
Section 31 states that the Central Government may,
by
notification in the Official Gazette, make rules to give effect to the provisions
of the Act. The rules provide inter alia for the term of office of, Jllld
the manner of filling casual vacancies among the members, and their
conditions of service; the disqualifications for membership
of
the
Commission and the procedure to be followed in removing a member
who is or becomes subject to any
disqualification; the procedure to
be followed in the discharge of functions by members; the conditions
subject to which and the mode in which contracts may be
entered
into by or on behalf of the Commission and some other
matters.
Every rule made under section 31 of the 1959 Act shall be laid as
soon as may be before each House of Parliament as mentioned in
the section. Both Houses may agree to or annul the rule or modify
it.
Under section 32 of the 1959 Act the Commission may, with
the pn~vious approval of the Central Government, by notification in
the Official Gazette, make regulations not inconsistent with the
Act
and the rules made thereunder, for enabling it to discharge its functions under the Act. The regulations provide inter alia for the terms
and conditions of appointment and service and the scales of pay of
emplovees of the Commission: the time and place of meetings of the
Commission. the procedure to be followed in regard to the transaction
o[ business at such meetings: the maintenance of mbutes of meetings of the Commission and the transmission of copies thereof to the
62:6
SUPREME COURT REPORTS
[1975] 3 S.C.R.
Central Government; the persons by whom, and the manner in whicb
payments, deposits and investments may be made on behalf of the
Commission; the custody of moneys required and the maintenanc<~ of
accounts. The Central Government may amend, very or rescind any
regulation which it has approved, and thereupon the regulation shall
have effect accordingly but without prejudice to the exercise of the
powers of the Commission under sub-section ( 1) of section 32.
The Life Insurance Corporation Act, 1956 hereinafter referred to
as the 1956 Act established the Corporation under section 3 of the
Act. Under section 11 of the 1956 Act existing employees of an insurer whose controlled business was transferred to and vested in the
Corporation and who were employed by the insurer wholly or m~in
ly in connection with his controlled business immediately before the
appointed day became on and from the appointed day an employee
of the Corporation. Section 11 of the 1956 Act further states that
the employees of the Corporation would hold office upon the same
on the appointed day. These employees were
further to continue
terms and with the same rights and duties as they would have hi~ld
under the 1956 Act unless and until their employment was
termiaated or until the remuneration, terms and conditions
were
duly
altered lly the Corporation.
The two important sections of 1956 Act are sections 48 and 49.
Section 48 states that the Central Government may, by notification in
the Official Gazette, make rules to carry out the purposes of this Act.
The rules inter alia provide for the term of office and the conditions
o[ service of members; the !urisdiction of the Tribunals
constituted
urnder section 17 of the Act,' the manner in which and the persons to
whom, any compensation under this Act mit) be paid; the conditions
subject to which the Corporation may appoint employees. All rules
made shall be laid as started in the section bt:fore both Houses ot
Parliament and shall be subject to such modification as Parliament
may make.
Section 49 of the 1956 Act states that the Corporation may, with
foe previous approval of the Central Government, by notification in
the Gazette of India, make regulations not inconsistent with the Act.
and the rules made thereunder to provide for all matters for whic:h
p~·~vision is expedient for the purpose of giving effect to
the prov1s10ns of this Act. The regulations may provide inter alia for
the
powers and functions of the Corporation which may be delegated to
the Zonal Managers; the method of recruitment of employees
and
agents of the Corporation and the terms and conditions of service of
such employees or agents; the terms and conditions of service
<>f
~ersons who have become employees of the Corporation under section ! I of the Act; the number, term of office and conditions of
service of members of Boards constituted under section 22 of the
A~t; the ma~ner in which the Fund of the Corporation shall be main.·
tamed; the form and manner in which policies may be issued and
contracts binding on the Corporation may be executed.
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SUKHDEV V, BHAGATRAM (Ray, C,J,)
027
The Industrial
Finance
Corporation
Act,
1948·
hereinafter
referred to as tlte 1948 Act establishes the Corporation under section
3 of the Act. The ~uperintendence of the business of the Corporation
shall be entrusted to a Board of Directors. Section 42 of the 1948
Act enacts 'that the Central Government may make rules in consultation with the Development Bank not inconsistent with the
provisions of this Act and to give effect to the provisions of the Act and
where there is aiJy inconsistency with rules and regulations the rules
shali prevail. The rules under the Act are to be laid before each
House of Parliament in the same manner as in the Oil and Natural
Gas Commission Act. Section 43 of the 1948 Act enacts that the
Board may with the previous approval of the Development Bank make
regulations not inconsistent with the Act and the rules made thereunder to provide for all matters for which provision is necessary or
expedient for the purpose of giving effect to the provisions of this
Act. The Development Bank means the Industrial Development Bank ·
established under the Industrial Development Act, 1964. The shares
of the Central Government in the Corporation shall stand transferred
to the Development Bank when the Central Government
shall
so
notify. The regulations provide inter alia for the holding and conduct
of elections under this Act including the final decision of doubts or
disputes regarding the validity of the election; the manner in which
and the conditions subject to which the shares of the Corporation
may be held and .transferred; the manner in which general meetings
shall be convened, the procedure to be followed thereat; the duties
and conduct, salaries, allowances
and
conditions
of
service of
officers and other employees and of advisers and agents of the Corporation.
The contentions on behalf of the State are these. Regulations are
framed under powers given by the statute affecting matters of internal
management. Regulations do not have a statutory binding character.
Terms and conditions of employees as laid down in the regulations
are not a matter of statutory obligations. Regulations are binding not
as. law but as contract. Regulations have no force of law. Regulations
provide the terms and conditions of employment and thereafter thP.
employment of each person is con:tractual,
The contentions on behalf of the employees are these. Regulations
are made under the statute. The origin and source of the power to
make regulations is statutory. Regulations are self binding in character. Regulations have the force of law inasmuch as the
statutory
authorities have no right to make any departure from the regulations.
Rules, Regulations,
Schemes,
Bye-laws,
orders
made
under
statutory
powers
are
all
comprised
in
tlelegated
legislation
The need for delegated legislation is that statutory ruies are framed
with care and minuteness when the statutory authority making the
rules is after the coming into force of the Act in a better position to
adapt the Act to special circumstances. Delegated legislation permits
utilisation of experience and consultation with interests affected by
the practical operation of statues.
SUPREME COTJRT REPORTS
(1975) 3 S.C.R.
ln England the Statutory Instruments
(Confirmatory
Pow<:rs)
01dcr, 1947 contemplates orders in Council o~ o0er
instrun:;~n.ts
which are described as orders. The Rules Pubhcat10n Act 189.• m
Englallid defines "rule making authority" to include every authority
authorised to make any statutory rules. Statutory rules are defin.ed
there as rules, ·regulations or by-laws ·made under any Act of ~a_r!1a
ment, in England. Orders are excluded from the statutory defimt1on
of statutory rules as being administrative. In England regulation is
the term most popularly understood and the one favoured by . the
Committee on Ministers' Powers, who
suggested
that regulations
should be used for substantive law and
rules for procedural law,
while orders should be reserved to describe the exercise of ex-ecutive
power or the taking of a judicial or quasi judicial decision
(See
Craies on Statute Law, 7th Ed, at p. 303). The validity of statutory
instruments is generally a question of vires, i.e., whether or not the
enabling power has been exceeded or otherwise wrongfully exerci:ied.
Subordinate legislation is made by a person or body by virtuf: of
the powers conferred by a statute. By-laws are made in the main by
local authorities or similar bodies or by statutory or other undert:;icings for regulating the conduct of persons within their areas
or
resorting to their undertakings. Regulations may determine the class
of cases in which the exercise of the statutory power by any such
authority constitutes the making of statutory rule. '
The words "rules" and "regulations" are used in an Act to limit
the power of the statutory authority. The powers of statutory bodies
are derived, controlled and restricted by the statutes
which
cn:<rte
them and the rules and regulations framed thereunder. Any action
of such bodies in excess of their power or in violation of the restrictiom, placed on their powers is ultra vires. The reason is that it goes
to the root of the power of such corporations and the declaration of
nuliity is the only relief that is granted to the aggrieved party.
In England subordinate legislation has, if validly made, the full
forct: and effect of a statute, but it differs from a statute in that its
Yalidity whether as respects form or substance is normally open
to
challenge in the Courts.
Subordinate legislation has, if validily made, the full force and
effect of a statute. That is so whether or not the statute under which
it is made provides expressly that it is to have effect as if enacted
therein. If an instrument made in the exercise of delegated powers
directs or forbids the doing of a particular thing the result of a
breach thereci'fo. is, in the absence of provision to the contran·.
the
s:.ane as if the command or prohibition had been contained· in the
e:iabiing statute itself. Similarly, if such an instrument authorises or
requires the doing of any act, the principles to be applied in deter-
'.11ining whether a .P~rson injured bY_ the act has any right of action
m respect of the rn.iury are not different
from
those
applicable
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SUKHDEV V. BHAGATRAM (Ray, CJ.)
.629
whelher damage results fro~ an act done under ~\lirect &llthority
of a statute, Re Langlois and Biden, (1891) 1 Q.B. 349and1'111# v.
Johnson, (1898) 2 Q.B. 91.
.
The authority of a statutory body or public administrative body
er agency ordinarily includes tlie power to make or adopt ru!ea l!lld .
regulations. with respect .to matte.rs within the _prov_~ce of ~h body
provided such rules and regulations aro not lllCOllSIStent with .the
relevant law. In America a "public agency" has been &lined as :m
agency endowed with governmental or public functions. It has been
held that the authority to act with the sanction of Gov~ent behind
it determines whether or not a governmental agency eX1Sts. The rules
and regulations comprise those actions of the statutory er public
bodies in which the legislative element predominates. These statutory
bodies cannot use the power to make rules and regulatioD&. to enlarge
the powers beyond the scope intended by the legislature. Rules and
regulations made by rea•on of the specific power conferred on the .
statute to make rules and regulations establish the pattern of conduct to be followed. Rules are duly made relative to the ·subject
. matter on which the statutory. bodies act subordinate to the terms
of the statute under which they are promulgated. Regulations are in
aid of the enforcement of the provisions of the statute. Rules and .
regulations have been distinguished from orders or determination of
statutory bodies in the sense that the orders or determination are
. actions in which there is more of the judicial function and which
deal with a particnlhr present situation. Rnles and regulations on th"'
other hand are actions in which the legislative element predominates. ·
The process of legislation by departmental regulations saves time
'and is intended to deaJ- with local variations and the power to legislate
by statutory instrument in the form of rules· and regulations is conferred
by Parliament and ca!a be taken away by Parliament. The legislative
function is the making of rules. Some Acts of Parliament decide
particular issues and do not lay down general rules.
The justification for delegated legislation in threefold. First, there
is pressure on parliamentary time. Second, the technicality of subjectmatter necessitates prior consultation and expert advice on interests
concerned. Third, the need for flexibility is established because · it.
is not possible to foresee every administrative difficulty that may arise
to make adjustment that may be called for after the statute has begun
, to operate.
Delegated legislation fills those needs.
The characteristic of law .is the. ma!Ller and procedure adopted .
in many forms of sub.:lrdinate legislation. The authority making rules
and regulation must specify the source of the rule and regulation mak-.
ing authority. To illustrate, rules are always framed in exercise of
tho specific power conferred by the statute to make rules. Similarly,
regulations are framed in exercise of specific power conferred by the
statute to make reg-1lations.
The essence of law is that it is made by·
the law-makers in exercise of specific authority.