Andhra HC (Pre-Telangana)
In W.A.No.1107 Of 2012: vs M/S. Air India Limited Formerly ... on 5 October, 2012
Bench: G. Rohini, C.Praveen Kumar
THE HON'BLE Ms. JUSTICE G. ROHINI AND THE HON'BLE SRI JUSTICE C.PRAVEEN KUMAR WRIT APPEAL No.1107 OF 2012 and Batch 05.10.2012 In W.A.No.1107 OF 2012: M/s. Air India Limited formerly National Aviation Company of India Limited) (a Central Government Corporation), rep. By its Chairman and Managing Director, Corporate Office at Air India Building, Nariman Point, Mumbai, and another. S.P.D. Sudhakar In W.A.No.1110 of 2012: 1.M/s. Air India Limited (formerly National Aviation Company of India Limited) (a Central Government Corporation), rep. By its Chairman and Managing Director, Corporate Office at Air India Building, Nariman Point, Mumbai, and another. And Y.V. Raju Counsel for the petitioners : Mrs. V.Uma Devi Counsel for respondent : Sri M.Surendar Rao (GIST: (HEAD NOTE: ? Cases cited: 1 (2006) 11 SCC 67 1 (1995) 4 SCC 734 WRIT APPEAL No.1107 OF 2012 AND WRIT APPEAL No.1110 OF 2012 COMMON JUDGMENT:
(Per G. Rohini, J) The Executive Director (SR) of M/s. Air India Limited, Chennai, by his proceedings dated 26.5.2010, informed the respondents in these two appeals that their services were terminated with immediate effect under Regulation 13 (a) of the Service Regulations of Indian Airlines (for short, 'Service Regulations'). The said communication was admittedly based on the order dated 26.5.2010 passed by the Chairman & Managing Director of the National Aviation Company of India Limited (NACIL) terminating the service of the respondents herein on the ground that the respondents, who are the office bearers of All India Aircraft Engineers Association (AIAEA), had destabilised the functioning of the company by instigating and leading the other employees to join the strike on a flimsy ground and that the company had lost confidence in them due to their actions and the potential to cause harm to the company in future as well. Aggrieved by the same, the respondents herein filed W.P.Nos.492 and 1623 of 2011. Both the said writ petitions were allowed by a learned Single Judge by common order dated 28.8.2011 and the impugned orders of termination were set aside. Hence these two writ appeals by M/s. Air India Limited.
We have heard Ms. V. Uma Devi, advocate, representing Sri K. Srinivasa Murthy, the learned counsel for the appellants and Sri M. Surender Rao, the learned counsel appearing for the respondent in W.A.No.1107 of 2012 and Sri Vedula Venkata Ramana, the learned Senior Counsel representing M/s. Bharadwaj Associates for the respondent in W.A.No.1110 of 2012. The respondents herein (hereinafter referred to as 'the writ petitioners') were appointed in the erstwhile Indian Airlines, a Corporation constituted under the Air Corporations Act, 1953. By reason of Section 11 of the Air Corporations (Transfer of Undertakings and Repeal) Act, 1994 (for short, 'the Repeal Act, 1994') the Air Corporations Act, 1953, stood repealed w.e.f. 29.1.1994. Thereafter, the Indian Airlines Corporation was renamed as the Indian Airlines Limited, having been registered as a company under the provisions of the Companies Act, 1956. Subsequently, in the year 2007 it amalgamated with National Aviation Company of India Limited (NACIL) as per the scheme approved by the Government of India, Ministry of Corporate Affairs. The petitioner in W.P.No.1623 of 2011 was working as a Chief Pharmacist (Special Grade) and the petitioner in W.P.No.492 of 2011 was working as a Chief Aircraft Engineer. It is not in dispute that by the date of the impugned orders of termination the petitioner in W.P.No.1623 of 2011 was the Regional Secretary of the Air Corporations Employees Union (ACEU), Hyderabad and the petitioner in W.P.No.492 of 2011 was the General Secretary of All India Aircraft Engineers Association (AIAEA).
The orders of termination dated 26.5.2010 were assailed in the writ petitions primarily on the ground that the Service Regulations which were framed in exercise of the power conferred by Section 42 (2) (b) of the Air Corporations Act, 1953 were no longer in existence and therefore the termination of services of the writ petitioners invoking Regulation 13 (a) of the said Regulations was illegal. Even assuming that the said Regulations were in force, it was contended that the Board of Directors alone was competent to exercise the power conferred under Regulation 13 (a) and therefore the impugned orders of termination which were passed by the Chairman & Managing Director were without jurisdiction.
Air India Limited filed counter-affidavits contending that notwithstanding the repeal of the Air Corporations Act, 1953, the Service Regulations are applicable to those who joined service prior to Repeal Act, 1994 as clarified by the Supreme Court in INDIAN AIRLINES LIMITED v. PRABHA D KANAN [(2006) 11 SCC 67]. It was explained that the appellant - M/s. Air India Limited is no longer a Statutory Corporation, but it is a Company registered under the Companies Act, 1956 and its management and other functions are governed by its Memorandum and Articles of Association read with Section 630 of the Companies Act, 1956 and that the Service Regulations were adopted as an interim arrangement by the Board of Directors of the National Aviation Company of India Limited (NACIL), the predecessor-in-interest of Air India Limited, in its meeting held on 28.2.2007 so as to apply the same to the employees of the erstwhile Indian Airlines Limited till such time their rules & regulations were framed. It was also pleaded that the Chairman and Managing Director was delegated the powers to take a decision on behalf of the Board of Directors of the NACIL in terms of the delegation of powers to meet any emergency when urgent action was called for subject to the decision and/or ratification by the Board of Directors of the company. Thus, it was contended that the allegation that the Chairman & Managing Director was not competent was untenable.
In the additional counter-affidavit filed on behalf of Air India Limited, it was further explained that in terms of the powers conferred under Article 132 (25) & (29) of the Articles of Association of NACIL the company in its 12th Board meeting held on 29.5.2008 approved the Instrument of Delegation of Administrative Powers and as per clauses 3.2 & 3.3 of the said Instrument of Delegation the Chairman & Managing Director can exercise the powers vested with the Board. It was also stated that the order of termination passed by the Chairman & Managing Director dated 26.5.2010 under Regulation 13 (a) of the Service Regulations was subject to the decision and/or ratification by the Board of Directors of the company and that the Board in its 32nd meeting held on 25.7.2010 had ratified the action taken by the Chairman & Managing Director having regard to the circumstances under which the action was taken by the Management.
In the light of the distinction drawn by the Supreme Court in INDIAN AIRLINES LIMITED v. PRABHA D KANAN [(2006) 11 SCC 67] between those employees who joined Air India's service prior to the Repeal Act of 1994 and after the said Repeal Act came into force, the learned Single Judge proceeded on the assumption that the Service Regulations are applicable to the writ petitioners since they were appointed long before the Repeal Act, 1994. However on merits it was held that under Regulation 13 (a) of the Service Regulations the power was conferred on the Board of Directors alone to terminate the services of an employee after forming an opinion as required therein and initiate action thereupon and that such statutory power could not be delegated or exercised by any subordinate authority. It was also held by the learned Single Judge that the mere fact that the Board of Directors had ratified the action of the Chairman & Managing Director of the company in its subsequent meeting held on 25.7.2010 would not have the effect of curing or validating the inherently illegal exercise of power by the Chairman & Managing Director of the company invoking Regulation 13 (a) of the Service Regulations. Thus the impugned orders of termination dated 26.5.2010 were set aside and the writ petitions were allowed. The order passed by the learned Single Judge is sought to be assailed by Ms. V. Uma Devi, the learned counsel for the appellant reiterating the contention that as per clause 3.3 of the Instrument of Delegation of Administrative Powers which was approved by NACIL on 29.5.2008, the Chairman & Managing Director is empowered to take a decision on behalf of the Board of Directors to meet any emergency subject to ex-post-facto approval of the Board. According to the learned counsel it is in exercise of the said power conferred under clause 3.3, the impugned orders of termination dated 26.5.2010 came to be passed by the Chairman & Managing Director. Since the action taken by the Chairman & Managing Director was subsequently ratified by the Board of Directors of the company in its meeting held on 25.7.2010, the learned counsel for the appellant contended that the impugned orders of termination cannot be held to be without jurisdiction.
We have also heard Sri M. Surender Rao and Sri Vedula Venkata Ramana, the learned counsel appearing for the respondents/writ petitioners. As already noticed, the Air Corporations Act, 1953 under which the erstwhile Indian Airlines Corporation was constituted, stood repealed w.e.f. 29.01.1994. During the subsistence of the Air Corporations Act, 1953, the Indian Airlines Corporation in exercise of the powers conferred by Section 45 (2) (b) of the said Act with the previous approval of the Central Government made the Regulations governing the terms and conditions of service of different categories of its employees.
Regulation 13 (a) of the Service Regulations under which the services of an employee may be terminated without any prior notice reads as under:
"13(a). The services of an employee may be terminated without assigning any reasons to him/her and without any prior notice but only on the following grounds not amounting to misconduct under the Standing Orders, namely:
(i) If he/she is, in the opinion of the Corporation (the Board of Directors of Indian Airlines) incompetent and unsuitable for continued employment with the Corporation and such incompetence and unsuitability is such as to make his/her continuance in employment detrimental to the interest of the Corporation; OR
(ii) if his/her continuance in employment constitutes, in the opinion of the Corporation (the Board of Directors of Indian Airlines), a grave security risk making his/her continuance in service detrimental to the interests of the Corporation;
OR
(iii) if in the opinion of the Corporation (the Board of Directors of Indian Airlines) there is such a justifiable lack of confidence which, having regard to the nature of duties performed, would make it necessary in the interest of the Corporation, to immediately terminate his/her services."
As could be seen, Regulation 13(a) can be invoked when the services are sought to be terminated by reason of some act on the part of the employee which does not amount to misconduct. The grounds upon which the power can be invoked are
(i) where an employee is rendered incompetent and unsuitable; (ii) where continuance in employment may also constitute a grave security risk (iii) where there is justifiable lack of confidence; (iv) where lack of confidence has a direct correlation to the nature of duties performed; (v) where the Corporation is of the opinion that it is necessary in the interest of the Corporation to immediately terminate the services of the employee.
It is no doubt true that the power conferred under Regulation 13 (a) which excludes the audi alteram partem rule and results in termination of services of an employee has serious consequences. However the provision itself provided for in-built safeguards and the power conferred thereunder can be exercised only on formation of an opinion as to the existence of the circumstances specified therein.
Having considered all the said aspects in detail, the Supreme Court in INDIAN AIRLINES LIMITED v. PRABHA D. KANAN1 upheld its Constitutional validity and declared that the said provision cannot be held to be arbitrary or discriminatory.
However the question that requires consideration in the present case is whether the Chairman & Managing Director of the appellant company can invoke the power so conferred expressly on the Board of Directors under Regulation 13(a). As noticed above, the case of the appellant is that by virtue of the powers delegated to the Chairman & Managing Director under clause 3.3 of the Instrument of Delegation, he is competent to exercise the power under Regulation 13 (a) subject to ex-post-facto approval by the Board of Directors. On the other hand, the contention on behalf of the respondents/writ petitioners is that the general delegation of the administrative powers of the Board of Directors upon the Chairman & Managing Director cannot be extended to the power specifically conferred on the Board of Directors by the statutory regulations. The same submission was canvassed in the writ petitions and the learned Single Judge having accepted the said contention held:
"Thus, as matters stand, Regulation 13(a) of the Service Regulations posits that the highest authority of the company viz. its Board of Directors alone should exercise the power conferred thereby, after forming a considered opinion that one of the conditions therein was made out warranting removal of an employee from service without following the due procedure. Trite to state, given the extensive and lethal amplitude of this power, it was entrusted to the highest administrative collective body, the Board of Directors of the company, to exercise the same wisely. This Regulation partook of statutory flavour, having been framed in exercise of powers conferred by Section 45 of the Act of 1953.
Once the statute required a particular thing to be done in a particular manner, then it should be done either in that manner or not at all [STATE OF MAHARASHTRA v. JALGAON MUNICIPAL COUNCIL (2003) 9 SCC 731)].
As the power under Regulation 13(a) of the Service Regulations was entrusted to the Board of Directors of the company in the capacity of being its highest authority, the Board alone was expected to form an opinion as required therein and initiate action thereupon. Such statutory power could not be delegated or exercised by any subordinate authority."
Having given our careful consideration to the submissions made by the learned counsel on either side, we find it difficult to sustain the order under appeal for the following reasons.
The Air Corporations Act, 1953, under which the Service Regulations were framed stood repealed with effect from 29.01.1994 by reason of Section 11 of the Air Corporations (Transfer of Undertakings and Repeal) Act, 1994 which came into force on 29.01.1994. The question whether the Regulations framed under the Air Corporations Act, 1953 continue to be effective after the repeal of the Air Corporations Act, 1953 fell for consideration in AIR INDIA v. UNION OF INDIA2. After considering the effect of Section 8 of the Repeal Act of 1994 which contained a saving clause, the Supreme Court held that the Service Regulations ceased to be effective on 29.01.1994.
The relevant paras from the said decision may be extracted:
"9. 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 is undoubtedly "to quieten doubts" of those Air 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, extend to the said Regulations.
10. Holding as we do that the said Regulations ceased to be effective on 29-1- 1994, the very foundation of Air India's case no longer exists. No consideration of other arguments is, therefore, necessary."
In a later decision in INDIAN AIRLINES LIMITED v. PRABHA D KANAN (1 supra) in which the Constitutional validity of Regulation 13 of the Service Regulations was upheld, it was reiterated that the judgment in AIR INDIA LIMITED v. UNION OF INDIA (2 supra) was binding.
Therefore, so far as the question as to whether the Service Regulations are saved notwithstanding the repeal of the Air Corporations Act, 1953 is concerned, there is no ambiguity and it is clear that the said Regulations no longer survived.
It is no doubt true that in INDIAN AIRLINES LIMITED v. PRABHA D KANAN (1 supra) a distinction was drawn between the employees who joined Air India's service before the Repeal Act of 1994 and thereafter and the Service Regulations were held to be applicable to the respondent therein. However as we could see the question whether the Service Regulations continue to have the statutory force or not was neither argued nor decided in the said case.
Therefore, the said question needs consideration in the light of the finding recorded in AIR INDIA LIMITED v. UNION OF INDIA (2 supra) that the Service Regulations are not saved by Section 8 of the Repeal Act of 1994 and that they ceased to be effective on 29.01.1994 i.e., the date on which the Air Corporations Act, 1953 stood repealed. Indisputably therefore, the Service Regulations do not have any statutory force with effect from 29.01.1994. So far as the appellant herein is concerned, after the repeal of the Air Corporations Act, 1953, the appellant company is no longer a statutory corporation. After the Repeal Act of 1994 came into force, the Indian Airlines Corporation was renamed as the Indian Airlines Limited having been registered as a company under the provisions of the Companies Act, 1956 and its management and other functions are governed by its Memorandum and Articles of Association. It is explained in the counter-affidavits filed on behalf of the appellant company that the Service Regulations were adopted as an interim arrangement by the Board of Directors of the National Aviation Company of India Limited (NACIL), the predecessor-in-interest of Air India Limited, in its meeting held on 28.2.2007 so as to apply the same to the employees of the erstwhile Indian Airlines Limited till such time their rules & regulations were framed. In this scenario, the learned counsel for the appellant submits that the Service Regulations are being applied to the services of the employees of the appellant company like any other terms & conditions governing their services and thus the power under Regulation 13 (a) was invoked by the Chairman & Managing Director for terminating the services of the petitioners in exercise of the powers delegated under clause 3.3 of the Instrument of Delegation. Reiterating that the Service Regulations lost their statutory flavour, the learned counsel for the appellant would submits that the action of the Chairman & Managing Director in invoking the power under Regulation 13 (a) as a delegatee of the Board of Directors cannot be held to be illegal or without jurisdiction. We find merit in the said submission.
Clause 3 of the Instrument of Delegation which was approved by the Board of Directors on 29.05.2008 and has come into force with effect from 7.7.2008, reads as under:
"3. GENERAL CONDITIONS OF DELEGATION:
3.1 Board of Directors of NACIL shall have full powers subject to the provisions of Companies Act, 1956, Memorandum of Association & Articles of Association and directives received from Govt. of India from time to time. 3.2 Chairman & Managing Director/Managing Director subject to provisions of Companies Act, 1956, Memorandum of Association & Articles of Association and directives received from Govt. of India from time to time and as per policies, rules, regulations and Budgets as approved by the Board of Directors and Principles of Financial Propriety and subject to general supervision and control by the Board of Directors is authorized to exercise all or any of the powers vested in the Board for the management and administration of the Company, except on the matters in respect of which prior approval of Board of Directors is necessary.
3.3 Chairman & Managing Director/Managing Director may within the ambit of operational necessity and efficiency or to meet any emergency and when urgent action is called, take decision on behalf of the Board provided, however, that a report be made to the Board for its ex-post-facto approval. (emphasis supplied)"
A plain reading of clause 3.3 shows that the Chairman & Managing Director is competent to take a decision on behalf of the Board of Directors to meet any emergency and when urgent action is called for, however such decision is subjected to the ex-post-facto approval by the Board of Directors.
As rightly submitted by the learned counsel for the appellant the Service Regulations are being applied to the services of the employees of the appellant company not in the form of statutory regulations. In fact, as held in AIR INDIA LIMITED v. UNION OF INDIA (2 supra), the said Regulations lost their statutory force w.e.f. 29.01.1994.
Once it is held that the Service Regulations lost the statutory force and they are merely adopted by the appellant company to govern the services of its employees for the time being, there is no justifiable reason to hold that the delegation of powers of the Board of Directors upon the Chairman & Managing Director under clause 3.3 of the Instrument of Delegation cannot be extended to the power conferred under Regulation 13 (a).
It may be true that the exercise of power under Regulation 13 (a) has serious consequences and it requires to be exercised on formation of an opinion by the Board of Directors which is the highest authority of the company. However clause 3.3 of the Instrument of Delegation itself imposed safeguards by requiring ex-post-facto approval by the delegator. Therefore, wherever the said power is invoked by the Chairman & Managing Director in exercise of the powers delegated under clause 3.3 of the Instrument, it is mandatory to submit a report to the Board of Directors for its ex-post-facto approval. Non-observance of the said condition will make the order of the Chairman and Managing Director void ab initio. We may also mention that the power conferred under Regulation 13(a) itself is not unguided or unbridled and it can be invoked only in certain circumstances and on the grounds specified therein.
Hence in our considered opinion the Chairman & Managing Director is competent to invoke the power under Regulation 13 (a) of the Service Regulations subject to ex-post-facto approval by the Board of Directors. Since the action of the Chairman & Managing Director was subsequently ratified by the Board of Directors on 25.7.2010, the impugned orders of termination cannot be held to be illegal on any ground whatsoever.
The decision relied upon by the learned counsel for the petitioners in V.C., BANARAS HINDU UNIVERSITY v. SHRIKANTH in which the action of the Vice-Chancellor in terminating the services of the employee was held to be a nullity on the ground that the Executive Council alone was competent to exercise the said power has no relevance to the case on hand in view of clause 3.3 of the Instrument of Delegation under which the powers of the Board of Directors of the appellant company have been expressly delegated to the Chairman & Managing Director.
It is brought to our notice that both the writ petitioners filed appeals against the orders of termination and the same are pending before the Board of Directors of the appellant company. Therefore, we decline to enter into the question whether the impugned terminations were justified in the facts and circumstances of the case and whether the requirements for invoking the power under Regulation 13 (a) were satisfied. Since the appellate authority seized with the said issue, we deem it appropriate to direct to dispose of the appeals preferred by the writ petitioners following due process of law as expeditiously as possible preferably within a period of eight weeks from the date of receipt of this order.
Accordingly, the common order passed by the learned Single Judge dated 28.08.2012 is hereby set aside and both the Writ Appeals are allowed with the above direction to dispose of the appeals preferred by the writ petitioners. No costs.
_________________ Justice G. Rohini _________________________ Justice C.Praveen Kumar Date: 05.10.2012