TaxTMI 
TaxTMI 
TaxTMI 
1961 (8) TMI 36
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....a Bank Employees' Association which is a trade union organization of Bank Employees of several banks operating in India The Punjab National Bank Employees' Union, which is a trade union with similar objects has been committed to intervene in this appeal in support of the appellant union The three other Writ Petitions are by other Bank Employees' Unions whose description would be apparent from the cause title and all these cases have been heard together because in the writ petitions also the point raised is identical, viz., the validity of s.34A of the Banking Companies Act, which will be referred to hereafter as the impugned provision. Section 34A whose validity is the matter in dispute in these proceedings runs in the following terms "34A. (1)Notwithstanding anything contained in section 11 of the Industrial Disputes Act, 1947. or any other law for the time being in force, no banking company shall in any I proceeding under the said Act or in any appeal or other proceeding arising therefrom or connected therewith, be Compelled by any authority before which such proceeding is pending to produce, or give inspection of, any of its books of account or other document or fur....
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....estions arose from time to time as to how far the practice was consistent with the statutory provisions as to disclosure contained in the several Companies Acts enacted from time to time.; We shall, however, add that the desirability and; even the legality of this practice has not gone without challenge, though there has been a considerable body of opinion which has held this to be salutary and necessary for the preservation and progress of a credit institution like a bank. We are not now concerned with the desirability or ethics of the practice which is a matter for the consideration of the legislature but as to the steps by which accord was established between the practice and the law. The Indian Companies Act of 1866 drew no distinction between the contents of balance sheet,of banking companies as distinguished from those of other companies and both were required to disclose a list of debts owing to the concern which were considered bad or doubtful Pro-visions on the same lines, i. e., without any, distinction between Banking and other companies, were copied and continued by the Indian Companies Act of 1882. When, however, the Companies Act of 1913 was enacted, Form F' to th....
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.... rendered on February 28, 1927 (vide Shamdasani v. Pochkanwala (A.I.R. 1927 Bom. 414 : 29 Bom. L.R. 722.) and very soon thereafter the Government of India intervened by a notification dated March 29, 1927 under s. 151 of the companies Act 1913 amending form 'F' and as amended banks were excluded from the requirement of disclosing the reserve for bad and doubtful debts under the heading, `capital and Liabilities' in the left hand side of the balance-sheet, and in the right-hand column "book debts which were bad and doubtful for which provision had been made to the satisfaction of the auditors",, were not required to be shown as part of the property and assets of a Bank. The provisions of the Companies Act of 1913 underwent numerous changes by the amending Act of 1936 which included inter alia one whereby the change effected by the Notification, dated March 29, 1927, in Form `F' were omitted and Form `F'was made to retain the note which accompanied it under the Act of 1913 without the exception in favour of banks effected by the Notification. This was possibly unintended, because on the day after the amending Act came into operation, the Central Government publis....
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.... enable a company to avoid violent fluctuations in its published profits or its dividends." The Committee made number of recommendations several of which were adopted in' the U. K. Companies Act of 1948, and those relevant' to the point under discussion served to bring the law as to the contents of a balance-sheet of a Banking Company unto. line with the practice of sound and well managed banks. In India, special legislation in relation to Banking Companies embodying several of these recommendations was enacted in the shape of the Banking Companies Act 1949 (Act of 1949). Section 29 of the Act laid down the law in regard to requirements of the contents of the balance-sheets of banks. The balance-sheet and Profit & Loss account were to be in the form set out in the 3rd schedule to that and sub-s. (3) of that section exempted Banking Companies from the, requirements of conforming to the form of balance-sheet and Profit & Loss, account of companies registered under the Indian Companies Act; and the Central Government were empowered by sub-s. (4) to amend the, form set out in the schedule by Notifications published in the official., Gazette. In Form 'A' which provided ....
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....ything beyond what the Sastry Tribunal had granted. The Jeejeebhoy Tribunal set out their difficulties in assessing the plea of incapacity raised by the banks in the context of the provisions of the Banking Companies Act and the form of balance-sheet prescribed thereunder in the following terms : "At the very outset there is an initial difficulty in arriving at a correct estimate of the financial position of banks. There are two circumstances which militate against our securing a proper insight into the financial state of banks. We refer in particular to (a) the undisclosed or secret reserves and (b) to the manner in which it is permissible in law for a banking company to exhibit its balance sheet. It is not in dispute that bank do have undisclosed or secret reserves which they acquire in a number of ways, and such undisclosed reserves cannot be ascertained from the balance sheet.......................................... x x x The other difficulty with which we are confronted at the outset is the manner in which a bank is permitted to present its profit & lose account. On the income side the form originally prescribed by the Banking Companies Act required the banks to declare "....
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....he Industrial Disputes Act referred the dispute which related to several matters to the National Tribunal constituted by & Notification of Government of the same date, K. T. Desai, J. was the Tribunal so appointed. Most of the major banks in the country were made parties to the reference including the Reserve Bank and State Bank of India. After the Tribunal started functioning and after the parties formulated their respective contentions, applications were filed by the Bank Employees Association on June 9, 1960, for directing the respondent-banks to produce before the Tribunal for the purposes of adjudication several documents listed in the applications. Among the items in respect of which production was thus sought were (1) statements showing "the secret reserves in any form" of each bank from 1954 right upto December 31, 1959 ; and (2) statements showing the provision made "for bad and doubtful debts and other usual and necessary provisions" during the years 1954 to 1959 and the total amounts outstanding in such items in each bank in the said years. The banks filed their reply on July 16, 1960. The production of the documents and the information called for on several of the matte....
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....ken into account in the course of industrial adjudication. The question before us is, is this attempt at some approximation of the position of the workmen to that of shareholders etc. unconstitutional ? Mr. Chari, learned Counsel for the appellant in Civil Appeal No. 154 addressed to us the main arguments in the case and these were supplemented by learned Counsel appearing for the petitioners in the several writ petitions and also by learned Counsel on behalf of the Interveners both in the appeal as well as in the petitions. Though the arguments before us ranged over a very wide field, the attack on the validity of the legislation was rested on two main grounds : (1) that the impugned legislation contravened the fundamental right guaranteed to "trade unions" by the provision contained in sub-cl. (c) of el. (1) of Art. 19; and (2) that it violated the freedom of equality guaranteed by Art. 14 of the Constitution. We shall consider these two points in that order : First as to the impugned provision being obnoxious to, or in contravention of sub-cl.(c) of cl. (1)'of Art. 19'of the' Constitution. This Article runs, to quote only the relevant words "Article 19. (1) All cit....
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....ed. If this concomitant right were not conceded, the right guaranteed to form an union would be an idle right, an empty shadow lacking all substance. (3)The object for which labour unions axe brought into being and exist is to ensure collective bargaining by labour with the. employers. The necessity for this has arisen from an incapacity stemming from the handicap of poverty and consequent lack of bargaining power in workmen as compared with employers which is the reason d'etre for the existence of labour organizations. Collective bargaining in order to be effective must be enforceable labour withdrawing its co-operation from the employer and there is consequently a fundamental right to strike a right which is thus a natural deduction from the right to form unions guaranteed by sub-cl. (c) of cl.(1) of Art. 19. As strikes, however, produce economic dislocation of varying intensity or magnitude, a system has been devised by which compulsory industrial adjudication is substituted for the right to strike. This is the ratio underlying the provisions of the Industrial Disputes Act 1947 under which Government is empowered in the event of an industrial dispute which may ultimately le....
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....e soundness and tenability of the steps in the reasoning. It is not necessary to discuss in any detail the first step as sub-cl (c) of el. (1) of Art. 19 does guarantee to all citizens the right ',to from associations". It matters little whether or not learned Counsel is right in his submission that the expression "union' in the clause has reference particularly to Trade Unions or whether the term is used in a generic sense to designate any association formed for any legitimate purpose and merely as a variant of the expression "Association" for comprehending every body of persons so formed. It is not controverted that workmen have a right to form "associations or unions" and that any legal impediment in the way of the formation of such unions imposed directly or indirectly which does not satisfy the tests laid down in cl. (4) would be unconstitutional as contravening a right guaranteed by Part III of the Constitution It is the second step in the argument of the learned Counsel, viz., that the right guaranteed to form "an union" carries with it a concomitant right that the achievement of the object for which the union is formed shall not be restricted by legislation unless s....
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....er and carried on the same activity-say as a partnership, or as a company etc., he obtains larger rights of a different content and with different characteristics which include the right to have the validity of legislation restricting his activities tested by different standards, viz., those laid down in el. (4) of Art. 19. This would itself be sufficient to demonstrate that the construction which the learned Counsel for the appellant contends is incorrect, but this position is rendered clearer by the fact that Art. 19-as contrasted with certain other Articles like Arts. 26, 29 and 30-grants rights to the citizen as such, and associations can lay claim to the fundamental rights guaranteed by that Article solely on the basis of their being an aggregation of citizens, i.e., in right of the citizens composing the body. As the stream can rise no higher than the source, associations of citizens cannot lay claim to rights not open to citizens, or claim freedom from restrictions to which the citizens: composing it are subject. The resulting position way, be illustrated thus If an association were formed' for' the purpose of arrying on business, the right to form it would be Guara....
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....al Disputes Act the expressions `union signifies not merely a union of workers but includes also unions of employers. If the fulfilment of every object for which an union of workmen was formed were held to be a guaranteed right, it would logically follow that a similar content ought to be given to the same freedom when applied to an union of employers which would result in an absurdity. We are pointing this out not as any conclusive answer, but to indicate that the theory of learned Counsel that a right to, form unions guaranteed by sub-cl. (c) of ol.(1) of Art. 19 carries with it a fundamental right in the union so formed to achieve every object for which it was formed with the legal consequence that any legislation not falling within el. (4) of Art. 19 which might in any way hamper the fulfilment of those objects, should be declared unconstitutional and void under Art, 13 of the Constitution, is not a proposition which could be accepted as correct. Besides the qualification subject to which the right under sub-cl. (c) is guaranteed, viz., the contents of el. (4) of Art. 19 throw considerable light upon the scope of the freedom, for the significance and contents of the grants of ....
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....ght" to collective bargaining guaranteed to labour unions. first as regards the decisions of this Court on which learned Counsel relied Romesh Thappar v. The State of Madras(1)Was the earliest case referred to; and learned counsel placed reliance in particular on the following passage in the judgment of the learned Chief Justice : "Turning now to the' merits, there can be no doubt that freedom of speech and expression includes freedom of propagation of ideas, and that freedom is ensured by the freedom of circulation. 'Liberty of circulation is as essential to that freedom as the liberty of publication. Indeed, without circulation the publication would be of little value : Ex parte Jackson, 96 U.S. 727". Based on this, learned Counsel submitted that if the phrase "freedom of speech and expression' in sub-cl. (a) of el. (1) of Art. 19 were given this liberal construction so as to effectuate the object for which the freedom was conferred, a similar construction ought to be adopted of the content of the freedom guaranteed by sub-cl. (c) of el. (1) of Art. 19. We are, however, unable to discern any analogy between the two cases. It is obvious that "freedom of speech" means....
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....erms tantamount to the surrender of their constitutional right of administration of the educational institutions of their choice is in truth and in effect to deprive them of their rights under Art. 30 (1).19 We do not consider that these observations and this construction of el. (1) of Art. 30 assist learned Counsel in his submission as regards the theory of concomitant rights flowing from the freedom guaranteed by sub-cl. (c) of cl. (1) of Art. 19. The observations of the learned Chief Justice and the conclusions drawn are in relation to the construction of Art. 30 and cannot be divorced from' the context. They do not purport to lay down any general rule of construction for the freedoms guaranteed under the several sub-heads of cl. (1) of Art. 19, and, indeed, what we have pointed out earlier should suffice to indicate the impossibility of upholding any such construction of the freedoms guaranteed by the latter Article. Learned Counsel also referred us to certain passages in two judgments of the Supreme Court of the United States : National Association for the advancement of colored people v. Alabama,( 2 Law. Ed. Second 1488)and Bates v. Little Rock(4 Law. Ed. Second 480.)in....
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....ntal right as recognized or guaranteed by the Constitution, but in the sense of a right of the unions which enacted law. recognized or respected, and as other decisions of the United states' Supreme Court show, was subject to regulation by the legislature(3). We have, therefore, reached the conclusion that the right guaranteed. by sub-cl.(c) of cl.(1) of Art. 19 does not carry with it a concomitant right Vide Weaver Constitutional Law and its Administration (1946) p. 505, referring to Dorchy v., Kansas 272 U. S. 306 : 71 L. Ed. 2A8 "Neither he common law nor the 14th Amendment confers the absolute right to strike." that the unions formed for protecting the interests of labour shall achieve the purpose for which they were brought into existence, such that any interference, to such achievement bythe law of the land would be unconstitutional unless the same could be justified as in the interests of public order or morality. In our opinion, the right guaranteed under sub-cl. (c) of el. (1.) of Art. 19 extends to the formation of an association and insofar as the activities of the association are concerned or as regards the steps which the union might take to achieve the purpose of ....
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....as well as the apparent credit worthiness of banks operating in the country. It was really this principle which is vital to the economic life of the community that has been responsible for the changes that have been made from 1927 onwards as regards the form of balancesheet and of the Profit & Loss accounts of banking companies as distinguished from other trading and industrial organizations. There was urgent need to protect from disclosure certain of the items of appropriation by banks in order to preserve them as credit institutions. On the other hand, there was the need-an equally urgent need for enabling the workers in these institutions not to be denied a proper wage and other emoluments and proper conditions of service. the question was how far information which in the interests of national economy the banks were entitled to withhold from their shareholders and the general public, was to be made available for determining the capacity of the banks to pay their employees. It was in these Circumstances that the impugned legislation was enacted which while preserving industrial adjudication in respect of disputes between the banks and their employees, entrusted the duty of determ....
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....ointed out already, the impugned legislation merely carries out to its logical conclusion the effect of the changes in the form of the balance-sheet and Profit and Loss accounts of Banks which starting in 1927 culminated in the notification dated December 22, 1951 under s. 29 (4) of the Banking Companies Act amending the Forms appended to that Act. If the construction of the "right to form unions" under sub-cl. (c) of cl.(1) of Art. 19 put forward by learned Counsel for impugning the validity of the enactment is negatived, then subject to the point about Art. 14 which we shall examine presently, legislative competence being conceded there could be no legal objection to its validity. Objections based on colourable legislation have relevance only in situations when the power of the legislature is restricted to particular topics, and an attempt is made to escape legal fetters imposed on its powers by resorting to forms of legislation calculated to mask the real subject-matter. No such problem exists in the present case and it is common ground that once the legislation passes the test of the fundamental rights,guaranteed by Part III, legislative competence not being in dispute, its. va....
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....n fact, in the application which the employee associations made before the adjudicator to direct the production of information and documents from the banks this phrase was used and it is apparent that even the Bank Employees' Associations understood it as having a definite connotation. It was next submitted on behalf of some of the interveners that s. 34A(1) and (2) violated Art. 14 in that the classification contained in it was impermissible as not being based on rational grounds. It was said (1) that the protection against a disclosure applied only to adjudications under the industrial Disputes Act and not to other adjudications ; (2) that it applied only to certain banking companies and not to all banking companies; and (3) that by reason of s. 34A (2) the provisions of the impugned enactment were applied in a discriminatory manner to all banks other than the Reserve Bank. The first two points cover the same ground and arise out of the fact that the. impugned provision by its 3rd sub-section defines a "banking company" referred to in it and to which its provisions apply, as meaning a ""Banking Company" under the Industrial Disputes Act, 1947. The Industrial Disputes Act def....