Holding

The circular rationalising perquisites was void for violating natural justice, and post‑decisional hearing does not cure the defect, so the High Court’s quashing of the circular was affirmed.

Summary

The Caltex (Acquisition of Shares of Caltex Refining (India) Ltd. and of the Undertakings in India of Caltex (India) Ltd.) Act, 1977 transferred the undertaking of Caltex Oil Refinery (India) Ltd. (CORIL) to the Government and later to Hindustan Petroleum Corporation Ltd. After the takeover, the Board of Directors of CORIL issued a circular on 8 March 1978 rationalising the perquisites of its management staff. Four employees of CORIL challenged the circular, arguing that it altered their terms of service without giving them a prior opportunity to be heard, violating natural justice and Article 14. The Delhi High Court quashed the circular, holding the lack of a pre‑decision hearing fatal. On appeal, the Supreme Court affirmed the High Court, stating that post‑decisional hearings cannot cure the breach of natural justice and that any alteration of a government servant’s conditions must be made ‘duly’ with a prior hearing. Consequently, the appeals were dismissed.

Issues considered

Whether the alteration of terms and conditions of service of government employees without a prior hearing violates the principles of natural justice and Article 14 of the Constitution.
Whether a post‑decisional opportunity of hearing satisfies the requirements of natural justice.
Whether Section 11(2) of the Caltex Acquisition Act permits such alteration without complying with natural justice.

Legislation cited

Banking Regulation Act, 1949s. 45
Caltex (Acquisition of Shares of Caltex Refining (India) Ltd. and of the Undertakings in India of Caltex (India) Ltd.) Act, 1977s. 11(2), s. 23, s. 3, s. 5, s. 9

Subjects

natural justiceArticle 14government serviceprior hearingpost‑decisional hearingperquisites rationalisationCaltex Acquisition Actarbitrary power

Judgment

H.L. TREHAN AND ORS. ETC.
A
v.
UNION OF INDIA AND ORS. ETC.

NOVEMBER 22, 1988

[MURARI MOHON DUTT, S. NATARAJAN AND B
N.D. OJHA, JJ.]

The Caltex (Acquisition of shares of Caltex Refining (India) Ltd.
and of the Undertakings in India ofCaltex (India) Ltd.) Act, I977, ss. 3
and 11-Management staff-Rationalisation of perquisites and
allowances-Whether permissible without affording opportunity to C
staff.

Administrative Law-Existing conditions of service-No depriva-
tion or curtailment of any existing right, advantage or benefit enjoyed by
a government servant without affording an opportunity-Post-
decisional opportunity-Whether subserves rules of natural justice. D

The Caltex (Acquisition of Shares of Caltex Refining (India) Ltd.
and of the Undertakings in India ofCaltex llndia) Ltd.) Act 17of1977,
by Section 3 provides for the acquisition of shares of Caltex Oil Refinery
(India) Ltd. (for short CORIL). Section 11(2) of the Act provides that
subject to rules made in this behalf under section 23, every whole time E
.officer or other employee of CORIL would, on the day of acquisition,
contillue to be an officer or other employee .of CORIL on the same terms
and conditions and with the same rights to pension, gratuity and other
matters as are admissible to him immediately before that day and shall
continue to hold slicb office unless and until his employment under
CORIL is duly terminated or, until his remuneration and conditions of F
service are duly altered by that company.

Consequent upon the taking over of the CORIL on December 30,
1976, the Chairman of the Board of Directors of CORIL issued a cir-
cular dated 8th March, 1978 to the effect that the perquisites admissible
I( to the management staff of CORIL should be rationalised in the manner G
stated in the said circular. At this stage the undertaking of CORIL was
transferred and vested in the Hindustan Petroleum Corporation Ltd.-
the appellant in C.A. No. 3214of1979.

Respondent Nos. 1 to 4, employees of CORIL in the said appeal,
filed a ·.writ petition before the High Court challenging the legality and H
925
926 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A validity of the impugned circular on the ground, inter alia, that the
employees had not been given any opportunity of being heard before
altering to their prejudice the terms and conditions of service and there-
fore the impugned circular should be struck down as void being
opposed to the principles of natural justice. The High Court accepted
the aforesaid contention of the respondents and quashed the impugned
B circular. Hence this appeal by special leave. Civil Appeal 3212 of 1979
has been preferred by the respondents.

Dismissing the appeals,

HELD: 1. The High Court was perfectly justified in quashing the
C impugned circular. Even if any hearing was given to the employees
of CORIL after the issuance of the impugned circular that would
not be any compliance with the rules of natural justice or avoid
the mischief of arbitrariness as contemplated by Article 14 of the
Constitution. [932A-B]

O 2(i) It is now a well established principle of law that there can be
no deprivation or curtailment of any existing right, advantage or
benefit enjoyed by a Government servant without complying with the
rules of natural justice .bY giving the government servant concerned an
opportunity of being heard. Any arbitrary or whimsical exercise of
power prejudicially affecting the existing conditions of service of a
E government servant will offend against the proviSien of Article 14 of the
Constitution. [930F-G I

2(ii) The post-decisional opportunity of hearing does not subserve
the rules of natural justice. The authority who embarks upon a post-
decisional hearing will naturally proceed with a closed mind and there
F is hardly any chance of getting a proper consideration of the representa-
tion at such a post-decisional opportunity. [931A-B]

K.l. Shephard &. Ors. v. Union of India & Ors., JT 1987 600,
followed.

G In view of the reasons given ig the above appeals, the Court
dismissed C.A. No. 3518of1979. 1932C]

ClvtL APPELLATE JURISDICTION: Civil Appeal No. 3212
of 1979 etc.

H From the Judgment and Order dated 20.8.1979 of the Delhi High
··'~

H .L. TREHAN v. U.0.1. !DUTT, J,] 927

Court in Civil Writ Petition No. 426 of 1978.
A
. Rajinder Sachar, G.B. Pai, Narayan Shetty, K.T. Ananthara-
man, Mrs. P.S. Shroff, S. Shroff, Ms. Girija Krishan, C.C. Mathur,
A.M. Mittal, D.N. Mishra, Dalbir Bhandari, Ms. C.K. Sucharita and
Ms. A. Subhashini for the appearing parties.
B
The Judgment of the Court was delivered by

DUTT, J. Of these three appeals by special leave, we may first
of all deal with Civil Appeal No. 3214 of 1979 for, admittedly, the
disposal of that appeal will virtually mean the disposal of the other two
appeals. The said Civil Appeal No. 3214 of 1979 is directed against the
judgment of the Delhi High Court whereby the High Court has c
quashed a circular dated March 8, 1978 issued by the Board of
Directors of Caltex Oil Refinery (India) Ltd. (for short 'CORIL'), a
Government Company, on the writ petition filed by the employees of
CORIL being Writ Petition No. 426 of 1978.
D
The Caltex (Acquisition of Shares of Caltex Refining (India)
Ltd. and of the undertakings in India c;if Caltex (India) Ltd.) Act 17 of
1977, hereinafter referred to as 'the Act', was enacted by the Union
Parliament and came into force with effect from April 23, 1977, The
"I Act provides for the acquisition of shares of CORIL and for the
=i acquisition and transfer of the right, title and interest of Caltex (India) E
"' Ltd .. in relation to its Undertakings in India with a view to ensuring
~.. co-ordinated distfibution and utilisation of petroleum products.

Under section 3 of the Act, the shares in the capital of the
CORILS stood transferred to and vested in the Central Government on
the appointed day being December 30, 1976. Under section 5, the F
right, title and interest of Caltex (India) Ltd. in relation to its Under-
takings in India stood transferred to and vested in the Central Govern-
ment on the appointed day. Section 9 of the Act provides that the
Central Government may by a notification direct that the right, title
and interest and the liabilities of Caltex (Inida) Ltd. in relation to any
of its Undertakings in India shall, instead of continuing to vest in the. G
Central Government, vest in the Government Company either on the
date of the notification or on such earlier or later date not being a date
earlier than the appointed day, as may be specified in the notification.
Section 11(2) provides that subject to rules made in this behalf under
section 23, every whole-time officer or other employee of CORIL
would on the appointed day continue to be an officer or other H
928 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.

A employee of CORIL on the same terms and conditions and with the
same rights to pension, gratuity and other matters as are admissible to
him immediately before that day and shall continue to hold such office ,
unless and until his employment under CORIL is duly terminated or
until his remuneration and conditions of service are duly altered by
thaf company.
B
The Chairman of the Board of Directors of CORIL issued the
impugned circular dated Match .8, 1978, inter alia, stating therein that
consequent upon the take over of the Caltex (India) Ltd. by the
Government, the question of rationalisation of the perquisites and
allowances admissible to Management Staff had been under considera-
tion ·Of the Board for sometime, and that as an interim measure, the
c Board had decided that the perquisites admissible to the Management
Staff should be rationalised in the manner stated in the said circular.

At this stage, it may be mentioned that by the Caltex Oil Refi-
nery (India) Ltd. and Hindustan Petroleum Corporation Ltd. Amalga-
D mation Order, 1978 which was published in the Gazette of India,
Extraordinary, dated May 9, 1978, the Undertaking of CORIL was
·transferred to and vested in Hindustan Petroleum Corporation Ltd.
which thus became a Government Company referred to in section 9 of
the Act.

E After the issue of the said circular, the respondent's Nos. 1 to 4,
who were some of the employees of CORIL, filed a writ petition in the
Delhi High Court being Civil Writ Petition No. 426 of 1978 challenging
the legality and validity of the impugned order. It was submitted by the
said respondents that under the said circular the terms and conditions
of service of the employees of CORIL had been substantially and
F adversely altered to their prejudice.

At the hearing of the said writ petition before the High Court it
"'~s contended on behalf of the respondents Nos. 1 to 4 that the notifi-
cation issued under section 9 of the Act vesting the management of the
Undertakings of Caltex (India) Ltd. in CORIL was ultra vires sub-
G section (1) of section 9. It was contended that the provision of sub-
section (1) of section 11 of the Act offended against the provisions
of Articles 14, 19 and 31 of the Constitution of India and, as such, it
should be struck down. Further, it was contended that there was no
valid classification between the contracts referred to in section 11(1)
and· section 15 of the Act. It was urged that unguided and arbitrary
H powers had been vested in the official by sub-section (1) of section 11
H .L. TREHAN v. U.0.1. (DUTI, J.] 929

for the alteration of the terms and conditions of service of the A
employees. Besides the above contentions, another contefiiion was. .;
advanced on behalf of the respondents Nos. 1and4, namely, that the
employees not having been given an opportunity of being heard before
altering to their prejudice the terms and conditions of service, the
impugned circular should be struck down as void being opposed to the
principles of natural justice. 8

All the contentions except the last contention of the respondents.
Nos. 1 to 4 were rejected by the High Court. The High Court, how-
ever' took the view that as no opportunity was given to the employees
of CORIL before the impugned circular was issued, the Board of
Directors of CORIL acted illegally and in violation of the principles of
natural justice. In that view of the matter, the High Court quashed the c
impugned circular. Hence this appeal by special leave.

It is not disputed that the employees were not given any oppor-
tunity of being heard before the impugned circular dated. March 8,
1978 was issued. It is, however, submitted by Mr. Pai, learned Counsel D
appearing on behalf of CORIL, that there has been no prejudicial
alteration of the terms and conditions of service of the employees of
CORIL by the impugned circular. It is urged that nothing has been
pleaded by the respondents Nos. 1 to 4 as to which clauses of the
impugned circular are to their detriment. The High Court has. also
not pointed out such clauses before quashing the impugned circular. It E
. appears that for the first time before us such a contention is advanced
on behalf of CORIL. In this connection, we may refer to an observa-
tion of the High Court which is "Admittedly, the impugned order
adversely affects the perquisites of the petitioners. It has resulted in
civil consequences." The above observation clearly indicates that it
was admitted by the parties that the impugned circular had adversely F
affected the terms and conditions of service of the respondents Nos. 1
to 4 who were the petitioners in the writ petition before the High
Court. Mr. Sachhar, learned Counsel appearing on behalf of the re-
spondents Nos. 1 to 4, has handed over to us a copy of the writ petition
filed by the respondents Nos. 1 tD 4 before the High Court being Civil
Writ Petition No. 426 of 1978. In paragraph 12 of the writ petition it G
has been inter alia stated as follows:

"The petitioners respectfully submit that under the said
circular the terms and conditions of service of the
employees of the second respondent including the peti-
tioners hernin have been substantially and .adversely · . H
930 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

altered to the prejudice of such employees. The same
A
would be clear inlet a/ia from the statements annexed
hereto and marked as Annexure IV."

'
Annexure IV is a statement of Animal Loss in Remuneration/
Income per person/employee posted at Delhi and U .P. Nothing has
B been produced before us on behalf of CORIL or the Union of India to
show that the statements contained in Annexure IV are untrue. In the
circumstances, there is no substance in the contention made by Mr. Pai
that there has been no prejudicial alteration of the terms and condi-
tions of service of the employees of CORIL, and that nothing has been
.
i·f

pleaded by the respondents Nos. 1 to 4 as to which clauses of the
impugned circular are to their detriment.
c '
One of the contentions that was urged by the respondents Nos. 1
to 4 before the High Court at the hearing of the writ petition, as
noticed above, is that unguided and arbitrary powers have been vested
in the official by sub-section ( 1) of section 11 for the alteration of the
D terms and conditions of service of the employees. It has been observed
by the High Court that although the terms and conditions of service
could be altered by CORIL, but such alteration has to be made 'duly'
as provided in sub-section (2) of section 11 of the Act. The High Court
has placed reliance upon the ordinary dictionary meaning of the word
'duly' which, according to Concise Oxford Dictionary, means 'rightly,
E properly, fitly' and according to Stroud's Judicial Dictionary, Fourth
Edition, the word 'duly' means 'done in due course and according to
law'. In ·our opinion, the w9rd 'duly' is very significant and excludes
any arbitrary exercise of power under section 11(2). It is now a well
established principle of law that there can be no deprivation or curtail-
ment of any existing right, advantage or benefit enjoyed by a Govem-
F ment servant without complying with the rules of natural justice by
giving the Government servant concerned an opportunity of being
heard. Any arbitrary or whimsical exercise of power prejudicially
affecting the existing conditions of service of a Government servant
will offend against the provision. of Article 14 of the Constitution.
Admittedly, the employees of CORIL were not given an opportunitv of
G hearing or representing their case before the impugned circular was
issued by the Board of Directors. The impugned circular cannot,
therefore, be sustained as it offends against the rules of natural justice.

It is, however, contended on behalf of CORIL that after the
impugned circular was issued, an opportunity of hearing was given to
l;I the employees with regard to the alterations made in the conditions of
H.L. TREHAN v. U.Q.J. [DUIT, J.] 931

their service by the impugned circular. In our opinion, the post-
A
decisional opportunity of hearing does not subserve the rules of
natural justice. The authority who embarks upon a post-decisional
hearing will naturally proceed with a closed mind and there is hardly
any chance of getting a proper consideration of the representation at
such a post-decisional opportunity. In this connection, we may refer to
a recent decision of this Court in K.l. Shephard & Ors. v. Union of B
India & Ors., JT 1987 (3) 600. What happened in that case was that the
Hindustan Commercial Bank, The Bank of Cochin Ltd. and Lakshmi
Commercial Bank, which were private Banks, were amalgamated with
Punjab National Bank, Canara Bank and State Bank of India respec-
tively in terms of separate schemes drawn under section 45 of the
Banking Regulation Act, 1949. Pursuant to the schemes, certain C
employees of the first mentioned three Banks were excluded from
employment and their services were not taken over by the respective
transferee Banks. Such exclusion was made without giving the
employees, whose services were terminated, an opportunity of being
heard. Ranganath Misra, J. speaking for the Court observed as
follows: D

"We may now point out that the learned Single Judge of
the Kerala High Court had proposed a post-amalgamation
hearing to meet the situation but that has been vacated by
the Division Bench. For the reasons we have indicated,
there is no justification to think of a post-decisional hear- E
ing. On the other hand, the normal rule should apply. It
was also contended on behalf of the respondents that the
excluded employees could now represent and tli,eir cases
could be examined. We do not think that would meet the
ends of justice. They have already been thrown out of
employment and having been deprived of livelihood they F
must be facing serious difficulties. There is no justification
to throw them out of employment and then given them an
9pportunity of representation when the requirement is that
they should have the opportunity referred to above .as a
condition precedent to action. It is common experience
that once a decision has been take·1 there is a tendency to G
uphold it and a representation may not really yield any
fruitful purpose."

The view that has been taken by this Court in the above observa-
tion is that once a decision has been taken, there is a tendency to
uphold it imd a representation may not yield any fruitful purpose. H
932 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A Thus, even if any hearing was given to the employees of CORIL after
the issuance of the impugned circular, that would not be any .comp-
liance with the rules of natural justice or avoid the mischief of arbitra-
riness as contemplated by Article 14 of the Constitution. The High
Court, in our opinion was perfectly justified in quashing the impugned
circular.
B
In the result, Civil appeal No. 3214 of 1979.is dismissed.

In view of the reasons given in Civil Appeal No. 3214 of 1979,
Civil Appeal No. 3518 of 1979 is also dismissed.
\-
C Civil Appeal No. 3212 of 1979 has been preferred by the. writ
petitioners in civil Writ Petition No. 426 of 1978 filed before the High
Court. The writ petitioners succeded in getting the impugned circular
quashed by the High Court. As the High Court rejected some of the
grounds of challenge to the .jmpugned circular, the appeal has been
D preferred. There is no merit in this appeal and it is wholly miscon-
ceived. The appeal is, therefore, dismissed.

There will be no order as to costs in any of these appeals.

M.L.A. Appeal dismissed.