Holding

Regulation 13 is constitutionally valid but does not apply to the respondent because she was appointed before its commencement; nevertheless, she is entitled to compensation for loss of employment.

Summary

Prabha D. Kanan, an air hostess promoted to Deputy Manager at Indian Airlines Ltd., was arrested in 2002 for allegedly carrying undeclared foreign currency and her services were terminated on 9 August 2002 under Regulation 13 of the Indian Airlines (Flying Crew) Service Regulations, which allows discharge without enquiry on grounds such as incompetence, security risk or loss of confidence. She challenged the termination, alleging that Regulation 13 was unconstitutional, arbitrary, and that principles of natural justice required a hearing. The Supreme Court examined the constitutional validity of Regulation 13 under Articles 14, 21 and 311(2) proviso (b) and held it intra vires, but found that it could not be applied to an employee appointed before the regulation came into force. The Court also considered whether the regulation survived the 1994 Transfer of Undertakings Act and concluded it did not apply to the respondent, though the power itself was valid. In view of the respondent’s 20 years of service and the circumstances, the Court awarded compensation equivalent to eight years’ salary, along with provident fund and gratuity amounts, rather than reinstatement. Both appeals were partly allowed.

Issues considered

The constitutionality and intra vires nature of Regulation 13 of the Indian Airlines (Flying Crew) Service Regulations.
Whether Regulation 13 can be applied retrospectively to an employee appointed before its commencement and whether it survived the Air Corporations (Transfer of Undertakings and Repeal) Act, 1994.
The applicability of the principles of natural justice and the right to a hearing in termination under Regulation 13.
The validity of the Board of Directors' decision to terminate without enquiry in the factual context of the arrest and confession.
The appropriate relief: reinstatement versus monetary compensation.

Legislation cited

Air Corporations Act, 1953s. Section 44, s. Section 45
Air Corporations (Transfer of Undertakings and Repeal) Act, 1994
Constitution of Indias. Article 14, s. Article 21, s. Article 311(2) proviso (b)
Customs Acts. Section 108, s. Section 114
Foreign Exchange Regulation Act

Subjects

service terminationpublic sector undertakingnatural justiceArticle 311trust and confidencejudicial reviewcompensationregulatory validity

Judgment

INDIAN AIRLINES LID. A
v.
PRABHA D. KANAN
..
NOVEMBER I 0, 2006

[S.B. SINHA AND DALVEER BHANDARI, JJ.] B

Service Law.

Termination-Indian Airlines (Flying Crew) Service Regulations, C
1994-Regulation 13-Provision for termination of service without holding
enquiry-Employee on flight duty arrested by custom authorities for
unauthorisedly carrying currency-Termination of services invoking the said
regulation-Employee discharged in criminal proceedings-Termination and
validity of service regulation challenged-Held, regulation setting out
circumstances under which the services of an employee can be terminated by D
way of discharge without holding enquiry-Regulation does not confer
arbitrary power hut contains inbuilt safeguards-Regulation provides for
simpliciter discharge-Termination is not on the grounaof misconduct but
lack of confidence having regard to the specific contingencies specified in
the regulation-Requirements to comply with principles of natural justice E
held not practicable-Regulation is not arbitrary or discriminatory and is
intra vires-However, in the facts, held, regulation not applicable to
emmp/oyee appointed prior to amended regulation coming into force-.
Employee holding post of trust and confidence and doubt on the integrity of
person shaking confidence of employer-Jn the facts, termination not set F
aside but employer directed to pay to employee eight years' salary towards
both back wages as well as for loss of employment in future to subserve the
ends of justice-Constitution of India, 1950-Artic/es 14, 21 and Article 311
(2) proviso (b)-Air Corporation Act, 1953-Sections 44 and 45.

Respondent joined service of the appellant - Corporation as an Air G
Hostess and was later on promoted as Deputy Manager in Inflight Service
Department On 18.6.2002, the respondent was put on duty in Flight operating
on sector Mumbai - Hyderabad - Bangalore - Sharjah. However, the connecting
flight from Hyderabad to Sharjah via Bangalore was called back immediately
after take off at the request of the Customs Authorities. Respondent was asked H
1027
1028 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A to deplane by Custom Authorities and she was arrested for carrying Indian
currency amounting to Rs. 22,07,978/- along with foreign currency, viz., 180
UAE Dirhams, 133/4 Kuwaiti Dirhams, 3 Bahraini Dirhams and 20 Nepali
Rupees. Respondent is said to have made a confessional statement before the
Custom Authorities in terms of Section 108 of the Customs Act that she had
B been carrying unauthorisedly the said amount Husband of respondent was
also arrested on the basis of her statement. Respondent was released on bail
on 3. 7.2002. The services of respondent were terminated invoking Regulation
13 of the Indian Airliness (Flying Crew) Service Regulations by the Board of
Directors of the Corporation by order/later dated 9.8.2002 with immediate
effect. Respondent filed writ petition challenging her termination and also
C the constitutionality and I or validity of Regulation 13. High Court held said
Regulation 13 as ultra vires but instead of reinstatement of respondent
directed monetary compensation be paid by corporation to respondent equaling
to six years' salary on the basis of her last drawn basic pay and dearness
allowance towards both back wages as well as for loss of employment in future
D and also directed payment of amount refunded by respondent towards provident
fund and gratuity with interest. Aggrieved by the order of the High Court,
both the parties have appealed to this Court.

Appellant-Corporation contended that High Court committed a manifest
error in holding Regulation 13 to be unconstitutional insofar as it failed to
E take into consideration that the same does not confer any unguided or
arbitrary power; that Regulation 13 does not speak of misconduct but only .
speaks of justifiable lack of confidence having regard to the specific
contingencies specified therein; that an assessment of such contingencies is
required to be made by the highest available authority; and that High Court
p failed to take into consideration the history of the precedents of this Court as
also how the said Regulation 13 was amended.

Respondent contended that Regulation of Air India was not saved by
Section 8 of the 1994 Act; that Regulation 13 is arbitrary as no reason is
required to be assigned as to which of the provisions had been applied; that
G when an extmordinary power has been conferred keeping in view the objective
criteria laid down therein, it was obligatory on the part of the Corporation to
spell out as to how they were invoking the said extraordinary rule, which was
not rule; that not only reasons were required to be assigned but opportunity
was also required to be given for making a representation; that an
H · extraordinary power cannot be invoked except in a case of security risk and
it may not be permissible to invoke the said power only on the purported ground
INDIAN AIRLINES LTD. v. PRABHA D. KANAN l 029
of"justifiable lack of confidence"; that only because power has been conferred A
upon a high authority, the same by itself is not a ground to uphold the
constitutionality of the provision ; that applicability of the principles of natural
justice would depend upon the facts and circumstances of each case; and that

- even in relation to quantum of compensation, the High Court should have taken
into consideration that the respondent had put in 20 years of service; and B
that respondent should have been directed to be reinstated in service with full
back wages.

Partly allowing both the appeals, the Court.
HELD: 1.1. Constitution of India contains a provision for dispensing with
an inquiry in terms of proviso (b) appended to clause (2) of Article 311 of the C
Constitution of India in regard to commission of a misconduct on the grounds
specified therein. This court in Workmen of Hindustan Steel ltd. and Anr. v.
Hindustan Steel Ltd. and Ors., (19841 Supp SCC 554 directed framing of such
Regulation in the light ofproviso(b) appended to Clause ~2) of Article 311 of
the Constitution oflndia. Regulation 13 of the Indian Airlines (Flying Crew) D
Service Regulations has been amended accordingly. In the amended Regulation
13, care had been taken to set out the circumstances in which the services of
an employee can be terminated by way of discharge without holding enquiry
and it took stock of eventualities which do not constitute misconduct and yet.
retention of an employee in the service by the management for any one of the E
grounds mentioned in the said regulation might be considered a detrimental
for the management or against public interest. Regulation 13 is invoked when
the termination of the services is effected by reason of some act on the part
· of the employee which does not amount to misconduct. It can be invoked: (i)
where an employee is rendered incompetent and unsuitable, (ii) where
continuance in employment may also constitute a grave security risk, (iii) F
where there is justifiable lack of confidence, (iv) where lack of confidence
must have a direct correlation to the nature of duties performed, (v) where
the Board must consider it to be necessary in the interest of the Corporation
to immediately terminate the services of the employee concerned. The
provisions, therefore, provide for inbuilt safeguards. Regulation provides for G
simpliciter discharge. It does not debar any employee fronr being reappointed.
By such simpliciter discharge, the employee concerned would not be debarred
from obtaining appointment elsewhere. Power can be exercised only in interest
of the company. In a case of this nature, requirements to comply with principles
of natural justice as such may not be practicable.
(1034-D, E, F; 1040-D; 1045-G; 1046-A-B; 1047-G; 1048-A\ H
1030 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R .

.A 1.2. Evidently, there is no provision for appeal since the decision is taken
by the highest authority of the corporate entity, viz., Board of Directors which
includes the Chairman also. Appellant is a body corporate. No appeal can be
made against the order passed by the Chairman and the Board of Directors.
The order being passed by a highest authority, the question of providing for
B appeal would not arise. A judicial review of such an order would be
maintainable. But, in a case of this nature although there is no provision for
appeal, but even in a judicial review, the court may require the employer to
produce the records, on a perusal whereof the court may come to a finding as
to whether the over passed by the Board of Directors was bona fide or not.
(1045-E, F; 1051-A)
c
1.3. Regulation 13 cannot be held to be arbitrary or discriminatory and
is intra vires.
Workmen of Hindustan Steel Ltd. and 4Ju. v. Hindustan Steel Ltd and
Ors., (1984) Supp SCC 554, Union of India andAnr. v. Tulsiram Patel, (1985)
.D 3 SCC 398, Central Inland Water Transport Corporation Limited and Anr. v.
Brojo Nath Ganguly and Anr., [ 1986] 3 SCC 156, Delhi Transport
Corporation v. D. T.C. Mazdoor Congress and Ors., f 1991) Supp 1 SCC 600,
Hari Pada Khan v. Union ofIndia and Ors., [1996( 1 SCC 536 and Ajit Kumar
Nag v. General Manager (PJ) Indian Oil Corporation Ltd. Haldia and Ors.,
E 1200517sec764, relied on.

Basudeo Tiwary v. Sido Kanhu University and Ors., [1998) 8 SCC 194,
Uptron India Ltd v. Shammi Bhan and Anr., (1998) 6 SCC 538,State of Punjab
v. Jagir Singh, (2004) 8 SCC 129, V.C. Banaras Hindu University and Ors. v.
Shrikant, (2006] 6 SCALE 66, Institute of Chartered Accountants of India v.
F L.K. Ratna and Ors., (1986] 4 SCC 537 and Babubhai & Co. and Ors. v. State
of Gujarat and Ors., (1985) 2 SCC 732, referred to.
2. In a case of judicial review, where no appeal is provided for, the High
Court in exercise of its jurisdiction under Article 226 of the Constitution of
India would not confine its jurisdiction only to the known tests laid down
G therefor, viz., illegality, irrationality, procedural impropriety. It has to delve
deeper into the matter. It would require a deeper scrutiny. Keeping in view
the situational changes and, particularly, outsourcing.of the sovereign
activities by the State, this Court has been expanding the scope of judicial
review. It includes the misdirection in law, posing a wrong question or
H irrelevant question and failure to consider relevant question. On certain
grounds judicial review on facts is also maintainable. Doctrine of
INDIAN AIRLINES LTD. v. PRABHA D. KANAN 1031

unreasonableness has now given way to doctrine of proportionality. A
(1051-A, B, CJ
S.N. Chandrashekar v. State of Karnataka, (2006) 3 sec 208 and State
of UP. v. Sheo Shanker Lal Srivastava, [2006) 3 SCC 276, relied on.
3.1. Respondent was holding a post of trust and confidence. She had been
issued a 'Red Airport Entry Pass' which gave unrestricted access to all civil B
airports in India and flying to other countries on the network of Indian
Airlines. Any doubt on the integrity of the person holding such a post of trust
and confidence may shake the confidence of the employer. If such activities
are permitted, the same in a given case may provide for risk not only to the
aircraft but also to a large section of people. The subjective satisfaction of C
the Board of Directors was based on the confession she made and the evidences
collected by the Directorate of Enforcement. The fact that subsequently she
had been exonerated or she had been discharged from the criminal case may
not be of much significance as the validity of the order must be judged having
, regard to the ract situation as was obtaining on the day on which the same D
was passed. hi the criminal case, no charge was framed. Respondent was
discharged only on the ground that she had not been found liable in the civil
proceedings. Appellant in the said proceedings had no role to play. The Board
of Directors, in the aforementioned fact situation, must be held to have publiC
interest in mind. (1053-B, C, D; 1054-A-B-C)
E
Kanhaiyalal Agarwal and Ors. v. Factory Manager, Gwalior Sugar
Company Ltd, (2001) 9 SCC 609, relied on.

3.2. True, loss of confidence cannot be subjective but there must be
objective facts which would lead to a definite inference of apprehension in the
mind of the employer regarding trustworthiness of the employee and which F
must be alleged and proved. (1054-EI
4. Indian Airliness Ltd. (Corporation) was constituted under the Air
Corporation Act, 1953. Regulations were framed by Appellant No. 1 in the
year 1994 by Act No. 13of1994. The Parliament enacted Air Corporations
(Transfer of Undertakings and Repeal) Act, 1994 whereby ~nd whereunder, G
the right, title and interest of Indian Airlines were transferred to Indian
Airlines Limited. Section 45 of the 1953 Act provides for regulation making
; power of the Corporation. It extends to the terms and conditions of service of
officers and other employees of the Corporation other than the Managing
Director and officers of any other categories referred to in Section 44 of the H
1953 Act. Regulations were framed pursuant to or in furtherance of the said·
1032 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A regulation making power. Regulation 13, as it stood earlier, did not contain
any power in the Board of Directors to terminate the services of an employee.
Regulation 13 speaks of lack of confidence. Regulation 13 came into force
with effect from 1.3.1993. Respondent indisputably was appointed prior thereto.
Regulation 13 would not apply to the case of Respondent. However, despite
B the same, the interest of justice would be subserved if the nature ofrelief to
Respondent granted by the High Court is upheld.
[1033-A-B; 1054-F-H; 1055-G)
Air India v. Union of India and Ors., JT (1995) 5 SC 578, relied on.

5. It is, therefore, held that although Regulation 13 is not
C unconstitutional but the same is not applicable in case of Respondent However,
in the peculiar facts and circumstances of this case and keeping in view the
fact that the respondent had put in 20 years of service she be paid eight years'
salary ,towards both back wages as well as for loss of employment in future.
This wlil b~ on the basis of her loast drawn basic pay and dearness allowance.
D The Corporation will pay Respondent the amount refunded by her towards the
provident fund and gratuity at the rate of interest provided under the Statutes
governing them. The relief granted to Respondent shall subserve the interest
of justice. (1055-H; 1056-A-B]

CIVIL APPELLATE JURISDICTION: Civil Appel No. 4767 of2006.
E
From the Judgment and Order dated 30.8.2005 of the High Court of
Judicature at Bombay in Writ Petition No. 2030/2003.

WITH

F C.A. No. 4768 of2006.

Aron Jaitely, Uday U. Lalit, Lalit Bhasin, Nina Gupta, Shweta Chadha,
Akanksha, Bina Gupta, Aant Bhushan Kanade, Ravi Goenka and Aribam
Guneshwar Sharma for the appearing parties.

G The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted in S.L.Ps.

Constitutionality and/ or validity of Regulation 13 of the Indian Airlines
(Flying Crew) Service Regulations (for short "the Regulations") is in question
H in these appeals which arise out of a judgment and order dated 30th August,
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] 1033
2005 passed by the High Court of Bombay in Writ Petition No. 2030 of2003. ~

Indian Airlines Ltd. (Corporation) was constituted under the A.ir
Corporation Act, 1953 (for short "the 1953 Act). Regulations were framed by
Appellant No. l in the year 1994 by Act No. 13 of 1994. The Parliament
enacted Air Corporations (Transfer of Undertakings and Repeal) Act, 1994
(for short "the 1994 Act") whereby and whereunder, the right, title and B
interest of Indian Airlines were transferred to Indian Airlines Limited. In terms
of Section 45 of the 1953 Act, the Corporation made Regulations. Regulation
l3 of the said Regulations is in the following terms:

"13.The services of an employee may be terminated without assigning
any reasons to him/her and without any prior notice but only on the C
following grounds not amounting to misconduct under the Standing
Orders, namely:

(a) If he/she is, in the opinion of the Company (the Board of Directors
of Indian Airlines) incompetent and unsuitable for continued D
employment with the Company and such incompetence and
unsuitability is such as to make his/her continuance in e~ployment
detrimental to the interest of the Company; OR

if his/her continuance in employment constitutes, in the opinion
of the Company (the Board of Directors of Indian Airlines), a grave E
security risk making his/her continuance in service detrimental to the
interests of the Company; OR

ifin the opinion of the Company (the Board of Directors oflndian
Airlines) there is such a justifiable lack of confidence which, having
-~ regard to the nature of duties performed, would make it necessary in F
the interest of the Company, to immediately terminate his/her services.

(b) No employee shall resign from the employment of the Company
without giving six months notice in writing to the Company of his/ her
intention to resign;

Provided that Managing Director of the Company may dispense with G
or reduce the period of six months on grounds of continued ill-health
of the employee or such other compelling or extraordinary
circumstances which in the opinion of the Managing Director warrant
such dispensing with or reduction in the period of notice:
G
1034 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A Provided further that the Company will be at liberty to refuse to
accept termination of his/ her services by an employee where such
termination is sought in order to avoid disciplinary action contemplated
or taken by the Management."

Different provisions of the Regulations took effect from different dates,
B viz., 1.4. 1977, 1.3.1993 and 17.3.1993.

The question as regards the validity of Rule 9 of the Central Inland
Water Transport Corporation Ltd. Service Discipline and Appeal Rules, 1979
came up for consideration before this Court in Central Inland Water Transport
C Corporation Limited and Anr. v. Brojo Nath Ganguly and Anr., [1986] 3 SCC
156, the relevant portion whereof was as under:

"9. Termination of employment for Acts other than misdemeanour. (i)
The employment of a permanent employee shall be subject to
termination on three months' notice on either side. The notice shall
be in writing on either side. The Company may pay the equivalent of
D three months' basic pay and dearness allowance, if any, in lieu of
notjce or may deduct a like amount when the employee has failed to
give due notice"

Constitution of India contains a provision for dispensing with an inquiry
E in terms of proviso (b) appended to clause (2) of Article 311 of the Constitution
of India in regard to commission of a misconduct on the grounds specified
therein.

The question as to whether services of a permanent employee can be
terminated on the ground that it was no longer expedient to continue to
F employ the employee concerned initially came up for consideration in the case
of Workmen of Hindustan Steel Ltd. and Anr. v. Hindustan Steel Ltd. and
Ors., [l 984] Supp SCC 554. A Division Bench of this Court while comparing
the said provisions with the proviso (b) appended to clause (2) of Article 311
of the Constitution of India opined:

G " ... Power to dispense with inquiry is conferred for a purpose and to
effectuate the purpose power can be exercised. But power is hedged
in with a condition of setting down reasons in writing why power is
exercised. Obviously therefore the reasons which would permit exercise
of power must be such as would Clearly spell out that the inquiry if
held would be counter-productive. The duty to specify by reasons the
H
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] 1035
satisfaction for holding that the inquiry was not reasonably practicable A
cannot be dispensed with .. The reasons must be germane to the issue
and would be subject to a limited judicial review. Undoubtedly sub-
article (3) of Article 311 provides that the decision of the authority in
this behalf is final. This only means that the court cannot inquire into
adequacy or sufficiency of reasons. But if the reasons exfacie are not
germane to the issue namely of dispensing with inquiry the court in B
a petition for a writ of certiorari can always examine reasons ex facie
and if they are not germane to the issue record a finding that the
prerequisite for exercise of power having not been satisfied, the exercise
of power was bad or without jurisdiction. If the court is satisfied that
the reasons which prompted the concerned authority to record a C
finding that it was not reasonably practicable to hold the inquiry,
obviously the satisfaction would be a veneer to dispense with the
inquiry and the court may reject the same. What is obligatory is to
specify the reasons for the satisfaction of the authority that it was not
reasonably practicable to hold such an inquiry. Once the reasons are
specified and are certainly subject to limited judicial review as in a writ D
for certiorari, the court would examine whether the reasons were
germane to the issue or was merely a cloak, device or a pretence to
dispense with the inquiry and to impose the penalty. Let it not be
forgotten what is laid down by a catena of decisions that where an
order casts a stigma or affects livelihood before making the order, E
principles ofnatural justice namely a reasonable opportunity to present
one's case and controvert the adverse evidence must have full play.
Thus even where the Constitution permits dispensing with the inquiry,
a safeguard is introduced that the concerned authority must specify
reasons for its decision why it was not reasonably practicable to hold
~~~ F
It was observed:

" .. .It is time for such a public sector undertaking as Hindustan Steel
Ltd. to recast S.O. 32 and to bring it in tune with the philosophy of
the Constitution failing which it being other authority and therefore G
a State under Article 12 in an appropriate proceeding, the vires ofS.O.
32 will have to be examined. It is not necessruy to do so in the present
case because even on the terms of S.O. 32, the order made by the
General Manager is unsustainable."

H
1036 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A The validity or otherwise of the said proviso came up for consideration
before this Court in Union of India and Anr. v. Tulsiram Patel, [ 1985] 3 SCC
398 wherein inter alia it was held:

" ... Much as this may seem harsh and oppressive to a government
servant, this Court must not forget that the object underlying the
B second proviso is public policy, public interest and public good and
the Court must, therefore, repel the temptation to be carried away by
feelings of commiseration and sympathy for those government servants
who have been dismissed, removed or reduced in rank by applying
the second proviso. Sympathy and commiseration cannot be allowed
to outweigh considerations of public policy, concern for public interest,
c regard for public good and the peremptory dictate of a constitutional
prohibition"

It was further observed:

" ... Those who formed the Constituent Assembly were not the
D advocates of a despotic or dictatorial form of government. They were
the persons who enacted into our Constitution the Chapter on
Fundamental Rights. The majority of them had fought for freedom ~nd
had suffered imprisonment in the cause of liberty and they, therefore,
were not likely to introduce into our Constitution any provision from
E the earlier Government of India Acts which had been intended purely
for the benefit of a foreign imperialistic power. After all, it is not as
if a government servant is without any remedy when the second
proviso has been applied to him. There are two remedies open to him,
namely, departmental appeal and judicial review. The scope and extent
of these remedies will be considered later in the course of this
F judgment...."

In Brojo Nath Ganguly (supra), Clause (i) of Rule was termed to be a
'the Henry VIII Clause'. It was held that it conferred arbitrary and unguided
power upon the Corporation. It was found to be violative of audi alteram
G partem rule of natural justice which was implicit in Article 14 of the Constitution
of India. It was held to enable the Corporation to discriminate between the
· employees and employees.

This Court rejected a contention raised on behalf of Appellant therein
that the same pertains to contract and held that even if that be so it was
H violative of Section 23 of the Indian Contract Act being containing an
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] 1037

unconscionable term. A
This Court took note of the fact that there were 970 government
companies and its agencies and instrumentalities and they constitute the
largest employer in the country and, thus, a clause like Rule 9(i) in a contract
of employment affecting large sections of the public is harmful and injurious
to the public interest. B
This Court held that no opportunity whatever of a hearing is at all to
be afforded to the permanent employee whose services are to be terminated
in exercise of power. It rejected the contention that the Board of Directors
would not exercise this power arbitrarily or capriciously as it consists of C
responsible and highly placed persons stating:

" ... This submission i5nores the fact that however highly placed a
person may be, he must necessarily possess human frailties .... "

It, however, appears that it specially referred to the case of Air India
Regulations which had a similar clause. D
It was observed:

" ... Undoubtedly, in certain circumstances the principles of natural
justice can be modified and, in exceptional cases, can even be excluded
as pointed out in Tulsiram Patel case. Rule 9(i), however, is not E
covered by any of the situations which would justify the total exclusion
of the audi alteram partem rule."

Air India and Indian Airlines who have similar regulations thereafter
amended Regulation 13.
F
A similar question came up for consideration before this Court in Delhi
Transport Corporation v. D.T.C. Mazdoor Congress and Ors., (1991] Supp I
SCC 600 wherein th is Court specifically referred to Regulation 9(b) of Delhi
Road Transport Authority (Conditions of Appointment and Service)
Regulations.
G
Sabyasachi Mukharji, CJ.who delivered the minority opinion noticed the
regulation framed by Indian Airlines in the following terms:

"13. The services of an employee are terminable at 30 days on either
side or basic pay in lieu:
H
1038 SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R.

A Provided, however, the Corporation will be at liberty to refuse to
accept the termination of his service by an employee where such
termination is sought in order to avoid disciplinary action contemplated
or taken by the management."

The learned Chief Justice noticed that the Board of Directors of Indian
B Airlines have approved the amendment carried out in Regulation.

In para I 09 of the judgment, the· learned Chief Justice opined:

"109. Efficiency of the administration of these undertakings is very
vital and relevant consideration: Production must continue, services
c must be maintained and run. Efficacy of the services can be ensured
only if manned by disciplined employees or workers. Discipline,
decency and order will have to be maintained. Employees should have
sense of participation and involvement and necessarily sense of
security in semi-permanent or quasi-permanent or permanent
employment. There must be scope for encouragement for good work.
D In what manner and in what measure, this should be planned and
ensured within the framework of the Constitution and, power mingled
with obligations, and duties enjoined with rights, are matters of
constitutional adjustment at any particular evolved stage of the
philosophy of our Constitution."
E
B.C. Ray, J. speaking for the majority, however, declared the said rule
to be ultra vires inter alia on the premise that it conferred unbriddled,
uncanalised and arbitrary power without conforming to audi alteram partem
rule of principle of natural justice which was violative of Section 23 of the
Indian Contract Act.
F
Sawant, J. opined:

"233. Both the society and the individual employees, therefore, have
an anxious interest in service conditions being well defined and explicit
to the extent possible. The arbitrary rules, such as the one under
G discussion, which are also sometimes described as Henry VIII Rules,
can have no place in any service conditions."

It has been observed:

"In fact, one of the public undertakings, viz., Indian Airlines has come
H
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] 1039
out with such regulation being amended Regulation 13 of its Employees' A
Service Regulations, and the same has been placed on record by them.
What is necessary to note in this connection is that the reading of
such circumstances in the existing regulation would require its extensive
recasting which is impermissible for the court to do. I know of no
authority which supports such wide reading down of any provision
of the statute or rule/regulation. For all these reasons the doctrine of B
reading down is according to me singularly inapplicable to the present
case and the arguments in support of the same have to be rejected."

Sawant, J. while considering the doctrine of reading down noticed:

" ... In fact, one of the public undertakings, viz., Indian Airlines has C
come out with such regulation being amended Regulation 13 of its
Employees' Service Regulations, and the same has been placed on
record by them. What is necessary to note in this connection is that
the reading of such circumstances in the existing regulation would
require its extensive recasting which is impermissible for the court to D
do. I know of no authority which supports such wide reading down
of any provision of the statute or rule/regulation. For all these reasons
the doctrine ofreading down is according to me singularly inapplicable
to the present case an·d the arguments in support of the same have
to be rejected."
E
Sawant, J. and Ramaswamy, J. adopted the reascnings of Ray, J.

The learned Judges, however, did not deal with the question as to
whether Regulation 13 could be said to be ultra vires.

Amended Regulation also came up for considerati.Jn before this Court F
in Hari Pada Khan v. Union of India and Ors., [1996] 1 SCC 536] wherein
while referring to Hindustan Steel Ltd. (supra) and Tulsiram Patel (supra),
this Court opined:

"S. The doctrine of principle of natural justice has no application
when the authority concerned is of the opinion that it would be G
inexpedient to hold an enquiry and that it would be against the
interest of security of the Corporation to continue in employment the
offender-workman when serious acts are likely to affect the foundation
of the institution. In Union of India v. Tulsiram Patel, a Constitution
Bench of this Court upheld the validity of the similar provisions under H
1040 SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R. ..:.

A Article 311 of the Constitution. Recently, in SLP (C) No. 11659of1992
the matter had come up before this Court on 13-11-1995, where the
validity of a pari materia provision was questioned. This Court upheld
the validity stating that the above clause will operate prospectively.

6. A contention has been raised by Mr Krishnamani that in Tulsiram
B Patel case this Court had upheld the validity of the rule subject to the
principle of natural justice. It is needless to mention that the principle
of natural justice requires to be modulated consistent with the scheme
of the rules. It is settled law that the principle of natural justice cannot
supplant but can supplement the law. In that view of the matter, the
rule having been made to meet specified contingency the principle of
c natural ju~tice by implication, stands excluded. We do not think that
the rule is ultra vires of Articles 14 and 21 as stated earlier."

In the amended Regulation 13, care had been taken to set out the
circumstances in which the services of an employee can be terminated by way
D of discharge without holding enquiry and it took stock of eventualities which
do nnt constitute misconduct and yet retention of an employee in the service
by the management for any one of the groui;ds mentioned in the said regulation
might be considered as detrimental for the management or against public
interest.

E The question again came up for consideration before this Court in
Basudeo Tiwary v. Sida Kanhu University and Ors., [1998] 8 SCC 194 wherein
Rajendra Babu, J. opined:

"9. The law is settled that non-arbitrariness is an essential facet of
Article 14 pervading the entire realm of State action governed by
F Article 14. It has come to be established, as a further corollary, that
the audi alteram partem facet of natural justice is also a requirement
of Article 14, for natural justice is the antithesis of arbitrariness. In the
sphere of public employment, it is well settled that any action taken
by the employer against an employee must be fair, just and reasonable
which are the components of fair treatment. The conferment of absolute
G power to terminate the services of an employee is an antithesis to fair,
just and reasonable treatment. This aspect was exhaustively considered
by a Constitution Bench of this Court in Delhi Transport Corpn. v.
D. T. C. Mazdoor Congress 1.

1 l. In the light of these principles of law, we have to examine the
H
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] 1041
scope of the provision of Section 35(3) which reads as follows: A
"35. (3) Any appointment or promotion made contrary to the provisions
of the Act, statutes, rules or regulations or in any irregular or
unauthorised manner shall be tenninated at any time without notice."

12. The said provision provides that an appointment could be B
terminated at any time without notice if the same had been made
contrary to the provisions of the Act, statutes, rules or regulations or
in any irregular or unauthorised manner. The condition precedent for
exercise of this power is that an appointment had been made contrary
to the Act, rules, statutes and regulations or otherwise. In order to
arrive at a conclusion that an appointment is contrary to the provisions C
of the Act, statutes, rules or regulations, etc., a fiuding has to be
recorded and unless such a finding is recorded, the termination cannot
be made, but to arrive at such a conclusion necessarily an enquiry will
have to be rr.ade as to whether such appointment was contrary to the
provisions of the Act etc. If in a given case such exercise is absent, D
the condition precedent stands unfulfilled. To arrive at such a finding
necessarily enquiry will have to be held and in holding such an
enquiry, the person whose appointment is under enquiry will have to
be issued a notice. If notice is not given to him, then it is like playing
Hamlet without the Prince of Denmark, that is, if the employee
concerned whose rights are affected is not given notice of such a E
proceeding and a conclusion is drawn in his absence, such a conclusion
would not be just, fair or reasonable as noticed by this Court in D.T.C.
Mazdoor Sabha case I. In such an event, we have to hold that in the
provision, there is an implied requirement of hearing fqr the purpose
·of arriving at a conclusion that an appointment had been made confrary F
to the Act, statute, rule or regulation etc. and it is only on such a
conclusion being drawn, the services of the person could be terminated
without further notice. That is how Section 35(3) in this case will have
to be read."

Yet again in Uptron India ltd. v. Shammi Bhan and Anr., [1998] 6 SCC G
538 Saghir Ahmad, J opined that the principles of natural justice must be
complied with and the employee concerned must be informed of the grounds
for which action was proposed to be taken against him for overstaying the
leave. [See also State of Punjab v. Jagir Singh, [2004] 8 SCC 129 & V.C.
Banaras Hindu University and Ors. v. Shrikant, (2006) 6 SCALE 66]
H
1042 SUPREME COURT REPORTS {2006) SUPP. 8 S.C.R.

A Keeping in view the aforementioned legal principles, we may notice the
factual matrix of the matter.

Prabha D. Kanan (Respondent) joined service of the Corporation as an
Air Hostess on 28th September, 1977. She was promoted as Deputy Manager .~
in Inflight Service Department. On 18th June, 2002. She was put on duty in
B Flight IC-617-961 operating on sector Mumbai -Hyderabad-Bangalore-Sharjah.
When the flight landed at Hyderabad, she along with other crew members
went for customs clearance from the Departure.Hall to board the connecting
flight being Flight No. 961 from Hyderabad to Sharjah via Bangalore.
Immediately after take off, it was called back at the request of the Customs
C Authorities. Respondent was asked to deplane by Custom Authorities. She
was ar,rested for carrying Indian currency amounting to Rs. 22,07,978/- along
with foreign currency, viz., 180 UAE Dirhams, 13% Kuwaiti Dirhams, 3 Bahraini
Dirhams and 20 Nepali Rupees. She is said to have made a confessional
statement before the Custom Authorities in terms of Section 108 of the
Customs Act that she had been carrying unauthorisedly the said amount. Her
D husband on the basis of her statement was also arrested. The arrest of
Respondent and her involvement in a racket of dealing in foreign exchange
in violation of Foreign Exchange and Regulation Act was extensively reported
in newspapers on 19th June, 2002. Respondent was released on bail on 3rd
July, 2002. Her services were tenninated invoking Regulation 13 of the
E Regulations by the Board of Directors of the Corporation by a letter dated
9th August, 2002 stating:

"This is to infonn you that the Boa1·d of Directors of Indian Airlines
Ltd. has decided to terminate your services with immediate effect
under Regulation 13 of Service Regulations applicable to you.
p Accordingly, yoar services stand tenninated with immediate effect
from 09.08.2002. Though you are not entitled to any notice or salary
in lieu thereof in terms of Regulation 13, however, a cheque No.
354551 dated 09.08.2002 for Rs. 21,734/- is enclosed."

A writ petition was filed by Respondent before the High Court of Delhi.
G In its judgment dated 30th August, 2005, while rendering Regulation 13 as
ultra vires, it was held:

"We have noted th_e relevant judgments. We have to note that the
incident leading to termination is not denied by the petitioner, she had
accepted the guilt at '~ast initially and the criminal trial is still pending.
H Considering that the serious allegations are found worthy of acceptance
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] ] 043

by the Board of Directors, we do not think that we should compel the A
Board of Directors to reinstate such an employee in whom they have
obviously lost confidence. She will, however, have to be compensated
monetarily. By now, the rates of interest have gone down considerably
and nearly to half of what is mentioned in O.P. Bhandari's case
(supra). This being so, if the petitioner is to be adequately B
compensated, we direct that she be paid six years' salary towards
both back wages as well as for loss of employment in future. This
will be on the basis of her last drawn basic pay and dearness allowance.
Respondents will pay the petitioner the amount refunded by her
towards the provident fund and gratuity also with interest at the rate
provided under the statutes governing them. This should be the C
appropriate compensation for the termination of her services· and loss
of employment considering that she has about I 0 years of service
hereafter..."

Mr. Arun Jaitley and Mr. Lalit Bhasin, learned senior counsel appearing
on behalf of the Corporation would submit: D
(i) that the High Court committed a manifest error in holding
Regulation 13 to be unconstitutional insofar as it failed to take
into consideration that the same does not confer any unguided
or arbitrary power.

(ii) Regulation 13, it was pointed out, does not speak of misconduct.
E
It speaks of justifiable lack of confidence having regard to (a)
incompetence, (b) unsuitability and (c) security. Regulation, thus,
provides for the specific contingencies specified therein.

(iii) An assessment' of such contingencies is required to be made by F
the highest available authority. What would be the material for
arriving at a conclusion is a reasonable apprehension that the act
on the part of the employee would be detrimental to the interest
of the country.

(iv) The High Court also failed to take into consideration the history G
of the precedents of this Court as also how the Regulation was
amended having regard to the directions issued by this Court in
Hindustan Steel Ltd. (supra). Strong reliance in this behalf has
been placed on Ajit Kumar Nag v. General Manager (PJ) Indian
Oil Corporation Ltd Haldia and Ors., (2005] 7 SCC 764.
H
A
1044 SUPREME COURT REPORTS [2006] SUPP. & S.C.R.

Mr. Uday Umesh Lalit, learned senior counsel appearing on behalf of
-
Respondent, per contra would submit:

(i) that Regulation of Air India was not saved by Section 8 of the
1994 Act.
(iO Reference of the amended Regulation in Delhi Transport
B Corporation (supra) itself would not be a ground for upholding
the validity thereof.
(iii) Regulation 13 is arbitrary as no reason is required to be assigned
as to which of the provisions had been applied.
C (iv) When an extraordinary power has been conferred keeping in
view the objective criteria laid down therein, it was obligatory on
the part of the Corporation to spell out as to how they were
invoking the said extraordinary rule which was not rule.
(v) It was in that sense contended that not only reasons were required
D to be assigned but opportunity was also required to be given for
making a representation.
(vi) Extraordinary power cannot be invoked except in a case of security
risk. It may not be permissible to invoke the said power only .on
the purported ground of 'justifiable lack of confidence".
E (vii) Only because power has been conferred upon a high authority,
the same by itself is not a ground to uphold the constitrltionality
of the provision. Had there been a provision for.complying with
the principles of natural justice, the same would have been a
solace to the employee. Our attention was drawn to a decision
F of this Court in Institute of Chartered Accountants of India v.
L.K. Ratna and Ors., [1986] 4 SCC 537 wherein the provisions of
Chartered Accountants Act, 1949 were upheld opining that
although no hearing was required to be given but such a hearing
had been provided for by the Appellate Authority.
(viii) The question as regards the applicability of the principles of
G
natural justice would depend upon the facts and circumstances
of each case. Strong reliance in this behalf has been placed on
Babubhai & Co. and Ors v. State of Gujarat and Ors., [1985] 2
sec 732].
(IX) In any event, even in relation to quantum of compensation, the
H
.... INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.) 1045
High Court should have taken into consideration that she had A
put in 20 years of service. While doing sg, the attending
circumstances were also required to be considered, viz., she had
checked in her baggage; she was already in the cabin; the suit
case was found in the baggage handling area; and she was said
to be the owner of the unclaimed suit case which was denied and B
disputed. She although had made confession but the same was
retracted. She was found to be not guilty not only in the
adjudicating proceedings but also in the criminal case.

In that view of the matter, she should be directed to be reinstated in
service with full backwages.
c
Respondent was holding a very high ranking post. She was incharge
of a flight. Admittedly, a suit case was found which was booked by her,
'which, however, remained unclaimed. The Custom Authorities found the
same. Only Respondent was singled out as the owner of the suit case. It
is not in dispute that the suit case contained a large sum of money including D
foreign currencies. Whoever be the owner thereof did not make any declaration
is regard thereto. Rs. 22 lakhs were recovered. She was arrested only on her
confession. Thereafter only, the impugned order was passed.

The Board of Directors consisting of five directors, viz., Shri Sunil
Arora, Chairman & Managing Director, JAL, Shri V. Subramanian, Jt. Secretary E
& Financial Advisor, Ministry of Civil Aviation, Shri J.N. Gogoi, Offg. Managing
Director, Air India, Shri S.K. Narula, Chairman, Airports Authority of India and
Shri P.P. Vora, Chairman, IDBI, passed the impugned order.

Evidently, there is no provision for appeal since the decision is taken
by the highest authority of the corporate entity, viz., Board of Directors which F
includes the Chairman also. Appellant is a body corporate. No appeal can
be made against the order passed by the Chairman and the Board of Directors.
The order being passed by a highest authority, the question of providing for
appeal would not arise. Even in Tulsiram Patel (supra), this Court held that
no appeal would be available from an order passed by the President of India. G
Regulation 13 is invoked when the termination of the services is effected by
reason of some act on the part of the employee which does not amount to
misconduct. It can be invoked:

(i) where an employee is rendered incompetent and unsuitable.
H
A
1046

(ii)
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

where continuance in employment may also constitute a grave
-
security risk.
(iii) where there is justifiable lack of confidence.

(iv) where lack of confidence must have a direct correlation to the
nature of duties performed.
B
(v) where the Board must consider it to be necessary in the interest
of the Corporation to immediately terminate the services of the
employee concerned.

The provisions, therefore, provide for inbuilt safeguards.
c
In Ajit Kumar Nag (supra), a Three-Judge Bench of this Court had the
occasion to construe Standing Order 20(vi) of the Certified Standing Orders
of Indian Oil Corporation which reads as under:

"Where a workman has been convicted for a criminal offence in a
D court of law or where the General Manager is satisfied for reasons to
be recorded in writing, that it is neither expedient nor in the interest
of security to continue the workman, the workman may be removed or
dismissed from service without following the procedure laid down
under Ill of this clause."

E The court noticed that standing Order No. 32 in Hindustan Steel Ltd
(supra) was more or less similar to Standing Order 20(vi) of the certified
standing of Respondent, therein. Strong reliance was placed by Appellant for
advancing the contention that the said clause was ultra vires in Hari Pada
Khan (supra). This Court, however, opined:
F "26. We are unable to accept the contention. It is true that in Hari
Pada Khan thiS Court upheld the order of dismissal by expressly
observing that it would be subject to result of trial but what Mr Rao
forgets is that in Hari Pada Khan the power was exercised by the
General Manager not under the second part of Standing Order 20(iv),
G but under the first part thereof, which covered cases of conviction of
a workman for a criminal offence. The second part dealt with satisfaction
of the General Manager about the expediency of not keeping a workman
in service. Since the power was exercised by the General Manager on
the first part and the basis was registration of a criminal case against
the workman, obviously, this Court was justified in observing that
H
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] I 047
when the action was taken on the basis of pendency of a criminal A
case, the action of dismissal of the workman must abide by the result
of the trial. The facts of the case before us are totally different. In this
case, the General Manager has exercised the power under the second
part of Standing Order 20(vi) which empowered him to take action on
satisfaction for reasons to be recorded in writing that it was not in the B
interest of security to continue the workman in service. The direction
in Hari Pada Khan therefore, does not apply to the factual matrix of
the present case for claiming relief by the appellant."

Referring to Tulsiram Patel (supra), this Court held that as security of
a State is not involved and a limited power is conferred upon the General C
Manager being the highest administrative head of the Corporation, it cannot
be contended that the power had been conferred upon a petty officer of the
Corporation. It was further opined:

"35. We are equally not impressed and hence unable to uphold the
contention that clause (vi) of Standing Order 20 confers a blanket or D
uncanalised power on the General Manager. In our judgment, sufficient
guidelines and safeguards have been provided in the Standing Orders
themselves, such as (i) the power is conferred on the highest
administrative head of the Corporation; (ii) eventualities have been .
specifically and expressly stated in clause (vi) of Standing Order 20;
(iii) satisfaction of the General Manager that such an eventuality has E
arisen; (iv) recording of reasons in writing; and (v) right of appeal
against the decision of the General Manager. Such a provision, in our
considered view, cannot be held arbitrary or unreasonable, violative
of Article 14 of the Constitution."

The Court further opined that even in absence of an appeal, the employee F
is not remediless as a power of judicial review would be applicable.

As has been held by this Court in Ajit Kumar Nag (supra), per se, the
provisions cannot be held to be arbitrary or discriminatory.

Although all persons comprising of the Board of Directors would have G
human frailties, as has been observed by this Court in Brojo Nath Ganguly
(supra) but a provision for appeal cannot be made from the highest authorities.

Regulation provides for simpliciter discharge. It does not debar any
employee from being reappointed. By such simpliciter discharge, the employee H
1048 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A concerned would not be debarred from obtaining appointment elsewhere.
Power can be exercised only in interest of the company. In a case of this
nature, requirements to comply with principles of natural justice as such may
not be practicable.

In Institute of Chartered Accountants of India (supra), it was stated:
B
"14. Our attention has been invited to the difference between the
terms in which Section 21(3) and Section 21(4) have been enacted and,
it is pointed out, that while in Section 21 (4) Parliament has indicated
that an opportunity of being heard should be accorded to the member,
nowhere in Section 21(3) do we find such requirement. There is no
c doubt that there is that difference between the two provisions. But,
to our mind, that does not affect the questions. The textual difference
is not decisive. It is the substance of the matter, the character of the
allegations, the far-reaching consequences of a finding against the
member, the vesting of responsibility in the governing body itself, all
these and kindred considerations enter into the decision of the
D
question whether the law implies a hearing to the memb~r at that
stage."

It was further observed:

"17. It is then urged by learned counsel for the appellant that the
E provision of an appeal under Section 22A of the Act is a complete
safeguard against any insufficiency in the original proceeding before
the Council, and it is not mandatory that the member should be heard
by the Council before it proceeds to record its finding. Section 22A
of the Act entitles a member to prefer an appeal to the High Court
F against an order of the Council imposing a penalty under Section
21(4) of the Act. It is pointed out that no limitation has been imposed
on the scope of the appeal, and that an appellant is entitled to urge
before the High Court every ground which was available to him before
the Council. Any insufficiency, it is said, can be cured by resort to
such appeal. Learned counsel apparently has in mind the view taken
G in some cases that an appeal provides an adequate remedy for a
defect in procedure during the original proceeding. Some of those
cases as mentioned in Sir William Wade's erudite and classic work on
Administrative Law 5"1 Edn. But as that learned author observes (at
p. 487), "in principle there ought to be an observance of natural
H justice equally at both stages", and
INDIAN AIRLINES LTD. v. PRABHAD. KANAN [S.B. SINHA,J.) 1049

"If natural justice is violated at the first stage, the right of appeal is A
not so much a true right of appeal as a corrected initial hearing:
instead of fair trial followed by appeal, the procedure is reduced to
unfair trial followed by fair trial."

And he makes reference to the observations of Megarry, J. in Leary
v. National Union of Vehicle Builders. Treating with another aspect B
of the point, that learned Judge said:

"If one accepts the contention that a defect of natural justice in the
trial body can be cured by the presence of natural justice in the
appellate body, this has the result of depriving the member of his right
of appeal from the expelling body. If the rules and the law combine C
to give the member the right to a fair trial and the right of appeal, why
should he be told that he ought to be satisfied with an unjust trial and
a fair appeal? Even if the appeal is treated as a hearing de novo, the
member is being stripped of his right to appeal to another body from
the effective decision to expel him. I cannot think that natural justice D
is satisfied by a process whereby an unfair trial, though not resulting
in a valid expulsion, will nevertheless have the effect of depriving the
member of his right of appeal when a valid decision to expel him is
subsequently made. Such a deprivation would be a powerful result to
be achieved by what in law is a mere nullity; and it is no mere triviality
that might be justified on the ground that natural justice does not E
mean perfect justice. As a general· rule, at all events, I hold that a
failure of natural justice in the trial body cannot be cured by a
sufficiency of natural justice in an appellate body."

The view taken by Megarry, J. was followed by the Ontario High
Court in Canada in Re Cardinal and Board of Commissioners of Police F
of City of Cornwall. The Supreme Court of New Zealand was similarly
inclined in Wislang v. Medical Practitioners Disciplinary Committee,
and so was the Court of Appeal of New Zealand in Reid v. Rowley."

In Babubhai & Co. (supra), this Court held:
G
"6. It cannot be disputed that the absence of a provision for a.
corrective machinery by way of appeal or revision to a superior
authority to rectify an adverse order passed by an authority or body
on whom the power is conferred may indicate that the power so
conferred is unreasonable or arbitrary but it is obvious that providing H
1050 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A such corrective machinery is only one of the several ways in which
the power could be checked or <;ontrolled and its absence will be one
of the factors to be considered along with several others before
coming to the conclusion that the power so conferred is unreasonable
or arbitrary; in other words mere absence of a corrective machinery
by way of appeal or revision by itself would not make the power
B
unreasonable or arbitrary, much less would render the provision invalid.
Regard will have to be had to several factors, such as, on whom the
power is conferred - whether on a high official or a petty officer, what
is the nature of the power - whether the exercise thereof depends
upon the subjective satisfaction of the authority or body on whom it
c is conferred or is it to be exercised objectively by reference to some
existing facts or tests, whether or not it is a quasi-judicial power
requiring that authority or body to observe principles of natural justice
and make a speaking order etc.; the last mentioned factor particularly
ensures application of mind on the part of the authority or body only
to pertinent or germane material on the record excluding the extraneous
D
and irrelevant and also subjects the order of the authority or body to
a judicial review under the writ jurisdiction of the Court on grounds
of perversity, extraneous influence, ma/a fides and other blatant
infirmities. Moreover all these factors will have to be considered in the
light of the scheme of the enactment and the purpose intended to be
E achieved by the concerned provision. If on an examination of the
scheme of the enactment as also the purpose of the concerned
provision it is found that the power to decide or do a particular thing
is conferred on a very minor or petty officer, that the exercise thereof
by him depends on his subjective satisfaction, that he is expected to
exercise the power administratively without any obligation to make a
F speaking order then, of course, the absence of a corrective machinery
will render the provision conferring such absolute and unfettered
power invalid. But it is the cumulative effect of all these factors that
will render the provision unreasonable or arbitrary and liable to be
struck down. In three of the decisions referred to by counsel where
G the concerned provision was struck down the cumulative effect of
several factors that were present in each was taken into consideration
by the Court, while in C.R.H. Readymoney case the provision was •
held to be valid."

But, in a case of this nature although there is no provi:;ion for appeal,
H
INDIAN AIRLINES LTD. v. PRABHAD. KANAN [S.B. SINHA, J.) 1051
but even in a judicial review, the court may require the employer to produce A
the records, on a perusal whereof the court may come to a finding as to
whether the order passed by the Board of Directors was bona fide or not.

A judicial review of such an order would be maintainable. In· a case
of judicial review, where no appeal is provided for, the High Court in exercise
of its jurisdiction under Article 226 of the Constitution of India would not B
confine its jurisdiction only to the known tests laid down therefor, viz.,
illegality, irrationality, procedural impropriety. It has to delve deeper into the
matter. It would require a deeper scrutiny.

We may notice that keeping in view the situational changes and,
particularly, outsourcing of the sovereign activities by the State, this Court C
has been expanding the scope of judicial review. It includes the misdirection
in law, posing a wrong question or irrelevant question and failure to consider
relevant question. On certain grounds judicial review on facts is also
maintainable. Doctrine of unreasonableness has now given a way to doctrine
of proportionality. D
In S.N. Chandrashekar v. State of Karnataka, [2006] 3 SCC 208, this
Court observed:

"33. It is now well known that the concept of error of law includes the
giving of reasons that are bad in law or (where there is a duty to give E
reason) inconsistent, unintelligible or substantially inadequate. (See
de Smith's Judicial Review of Administrative Action, 5th Edn., p. 286.)

34. The Authority, therefore, posed unto itself a wrong question.
What, therefore, was necessary to be considered by BDA was whether
the ingredients contained in Section -14-A of the Act were fulfilled and F
whether the requirements of the proviso appended thereto are satisfied.
If the same had not been satisfied, the requirements of the law must
be held to have not been satisfied. If there had been no proper
application of mind as regards the requirements of law, the State and
the Planning Authority must be held to have misdirected themselves
in law which would vitiate the impugned judgment. G
35. In Hindustan Petroleum Corpn. Ltd. v. Darius Shapur Chenaj;this
Court referring to Cho/an Roadways Ltd v. G. Thirugnanasambandam
held: (SCC p. 637, para 14)

"14. Even a judicial review on facts in certain situations may be H

-
1052 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A available. In Cho/an Roadways Ltd v. G. Thirugnanasambandam this
Court observed: (SCC p. 253, paras 34-35)

'34 .... .lt is now well settled that a quasi-judicial authority must pose
unto itself a correct question so as to arrive at a correct finding of
fact. A wrong question posed leads to a wrong answer. In this case,
B furthennore, the misdirection in law committed by the Industrial
Tribunal was apparent insofar as it did not apply the principle of res
ipsa loquitur which was relevant for the purpose of this case and,
thus, 'failed to take into consideration a relevant factor and forthennore
took into consideration an irrelevant fact not germane for detennining
the issue, namely, that the passengers of the bus were mandatorily
c required to be examined. The Industrial Tribunal further failed to apply
the correct standard of proof in relation to a domestic enquiry, which
is "preponderance of probability" and applied the standard of proof
required for a criminal trial. A case for judicial review was, thus, clearly
made out.
D 35. Errors of fact can also be a subject-matter of judicial review. (See
E. v. Secy. of State for the Home Deptt.) Reference in this connection
may also be made to an interesting article by Paul P. Craig, Q.C. titled
"Judicial Review, Appeal and Factual Error" published in 2004 Public
Law, p.788."
E
Yet again in State ofU.P. v. Sheo Shanker Lal Srivastava [2006] 3 SCC
276, this Court observed:

"24. While saying so, we are not oblivious of the fact that the doctrine
of unreasonableness is giving way to the doctrine of proportionality.
F 25. It is interesting to note that the Wednesbury principles may not
now be held to be applicable in view of the development in
constitutional law in this behalf. See, for example, Huang v. Secy. of
State for the Home Deptt. wherein referring to R. v. Secy. of State of
the Home Deptt., ex p Daly it was held that in certain cases, the
adjudicator may require to conduct a judicial exercise which is not
G merely more intrusive than Wednesbury, but involves a full-blown
merit judgment, which is yet more than ex p. Daly requires on a judicial
,,. review where the court has to decide a proportionality issue."

Although it is of not much relevance but the history in relation to such
regulation assumes importance in view of the fact that this Court in Hindustan
H
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] 1053

Steel Ltd (supra) directed framing of Regulation in the light of proviso (b) A
appended to Clause (2) of Article 311 of the Constitution of India. Regulation
13 has been amended accordingly.

So far as the justifiability of the impugned order is concerned, we are
of the opinion that the following facts are required to be taken into
consideration. B
Respondent was holding a post of trust and confidence. She had been
issued a 'Red Airport Entry Pass' which gave unrestricted access to all civil
airports in India and flying to other countries on the network of Indian
Airlines. Any doubt on the integrity of the person holding such a post of C
trust and confidence may shake the confidence of the employer. If such
activities are permitted, the same in a given case may provide for risk not only
to the aircraft but also to a large section of people. The subjective satisfaction
of the Board of Directors was based on the confession she made and the
evidences collected by the Directorate of Enforcement. The fact that
subsequently she had been exonerated or she had been discharged from the D
criminal case may not be of much significance as the validity of the order must
be judged having regard to the fact situation as was obtaining on the day
on which the same was passed. We have noticed in the final order dated 13th
December, 2005, the Custom Excise and Service Tax Appellate Tribunal, South
Zonal Branch at Bangalore exonerated Respondent.
E
However, having regard to the fact that there was no evidence as to
why she carried the suit case from Mumbai or she had been handed over the
suitcase at Hyderabad and keeping in view the nature of investigation carried
out by the Customs Authorities, the penalties imposed on her under Section
114 (i) of the Customs Act was held to be not sustainable stating:
F
"Summing up, we find:-

(i) The investigation into this episode is not very thorough;

(ii) The reason for abandoning the currency has not been brought
out; G
(ill) There is no evidence to establish that the Appellants made an
attempt to export the currency.

(iv) The statements do not appear to have been given voluntarily;

(v) The currency was neither seized from the possession of the H
1054 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A Appellants nor from the aircraft;
(vi) The test to prove an 'attempt' to illegally export as laid down
in the case of Mohd. Yakub has not been proved."

In the criminal case, no charge was framed. Respondent was discharged
B only on the ground that she had not been found liable in the civil proceedings.

Appellant in the said proceedings had no role to play. We, therefore,
are of the opinion that Regulation 13 is intra vires. We are bound by the
decision of this Court in Ajit Kumar Nag (supra). The Board of Directors,
in the aforementioned fact situation, must be held to have public interest in
C mind.

In Kanhaiyalal Agrawal and Ors. v. Factory Manager, ·Gwalior Sugar
Company Ltd, [200 I] 9 SCC 609, whereupon Mr. Lalit placed strong reliance,
this Court upheld the findings of the Industrial Court as also the High Court
that the principles for invoking lbss of confidence in the employee based on
D objective criteria, viz., (i) that the workman is holding a position of trust and
confidence; (ii) by abusing such position, he commits acts which results in
forfeiting the same; and (iii) to continue him in service would be embarrassing
and inconvenient to the employer or would be detrimental to the discipline
or security of the establishment; stood satisfied.

E True, loss of confidence cannot be subjective but there must be
objective facts which would lead to a definite inference of apprehension in
the mind of the employer regarding trustworthiness of the employee and
which must be alleged and proved. But, then all the criteria mentioned
therein are present in the instant case.
F The question which now arises is as to whether the Regulation 13 is
applicable to the case of Respondent. Section 45 of the 1953 Act provides
for regulation making power of the Corporation. It extends to the tenns and
conditions of service of officers and other employees of the Corporation
...
other than the Managing Director and officers of any other categories
G referred to in Section 44 of the 1953 Act. Regulations were framed pursuant
to or in furtherance of the said regulation making power. Regulation 13, as
it stood earlier, did not contain any power in the Board of Directors to
tenninate the services of an employee. Regulation 13 speaks of lack of
confidence. Regulation 13 came into force with effect from 1.3.1993.
H Respondent indisputably was appointed prior thereto.
INDIAN AIRLINES LTD. v. PRABHA D. KANAN [S.B. SINHA, J.] 1055
A question arose as to whether by reason of the repealing provisions A
contained in the 1994 Act, the Regulations framed under the 1953 Act survives
and consequently the exercise of powers under Regulation 13 shall be void
ab initio.

Our attention has been drawn to a decision of this Court in Air India
v. Union of India and Ors., JT (1995) 5 SC 578 wherein it was held: B
"Section 8 of the 1994 Act does not in express terms save the said
Regulations, nor does it mention them. Section 8 only protects the
remuneration, terms and conditions and rights and privileges of those
who were in Air India's employment when the 1994 Act came into
force. Such saving in undoubtedly "to quieten doubts" of those Air C
India employees who were then in service. What is enacted in Section
8 does not cover those employees who joined Air India's service after
the 1994 Act came into force. The limited saving enacted in Section
8 does not, in our opinion, extent to the said Regulations."

The said decision was rendered when a question was raised as to
D
whether standing orders framed under Industrial Employment (Standing Orders)
Act, 1946 survives the regulation making power. It was held that the regulations
have ceased to be effective on 29th January, 1994 and, thus, regulation
making power no longer survives.
E
Mr. Bhasin would submit that the provisions of the Regulations would
apply to Respondent as:

(i) She never disputed the application of the Regulations.

(it) A Special Leave Petition covering the same area being SLP (C)
No. 2230-31 of 2005 is pending before this Court. F
As at present advised, we do not intend to enter into the said
controversy. The judgment of this Court in Air India (supra) is binding on
us. We have, therefore, no other option but to hold that Regulation 13 would
not apply to the case of Respondent. However, despite the same, we are of
the opinion that the interest of justice would be subserved if the nature of G
relief to Respondent granted by the High Court is upheld.

We, therefore, hold that although Regulation 13 is not unconstitutional
but the same is not applicable in case of Respondent. However, we are

H
1056 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A furthermore of the opinion that in the peculiar facts and circumstances of this
case and keeping in view the fact that she had put in 20 years of service she
be. paid eight years' salary towards both back wages as well as for loss of
employment in future. This will be on the basis of her last drawn basic pay
and dearness allowance. The CorjJoration will pay Respondent the amount
B refunded by her towards the provident fund and gratuity at the rate of interest
provided under the Statutes governing them. The relief granted to Respondent
shall, in our opinion, subserve the interest of justice.

Both the appeals are allowed in part and to the extent mentioned
hereinbefore. No costs.
c KKT. Appeal Partly Allowed.