In Central Inland Water Transport vs Brojo Nath Ganguly case, the appellant was the Central Inland Water Transport Corporation who was a Public Company that was incorporated on 22nd February in the year 1967. The appellant company was a company that was owned by both the State Government of West Bengal and by the Government of India. A company such as the appellant in the case has been defined in the India Companies Act, 1956 under Section 617.
Brojo Nath Ganguly the first respondent in Civil Appeal was at the date when the said scheme of arrangement became operative, working in the said company and his services were taken over by the Corporation and he was selected on September 8, 1967, as a Deputy Chief Accounts Officer.
There was another company during that time which was known as ‘River Steam Navigation Company Ltd.’, it was on growing extensively. It was functioning mainly in maintenance along with looking after the flow of the river water services, along with this, it was commanded to make full payments requisite to all its creditors as the undertaken association was instructed by the honorable High Court of Calcutta to wind up through an order which was dated in 1967 on the 5th of May.
The first respondent of this Civil Appeal who was Brojo Nath Ganguly was already working with the above-said company, when an arranged scheme approved by the honorable High Court of Calcutta came into effect, because of which all of his services were withdrawn by the Corporation. On the 8th of September 1967, Brojo Nath Ganguly (first respondent) was appointed as the Deputy Accounts Officer.
After years have passed by he received a letter regarding accusations made against him for showing negligence or careless attitude in maintaining the Provident Fund accounts. The letter he received was sent to him by the General Manager (Finance Department) and was required to be replied to within 24 hours. In his response, a detailed reply was provided by Brojo Nath Ganguly. However, the response sent by him didn’t create much of an impact, as later he received a notice on 26th of February 1983 which contained signatures of the Chairman cum Managing Director of the Corporation. This notice was sent to him regarding termination of his services with an immediate effect in accordance with Clause (I) of Rule 9 of the Service Rules.
- The incorporation of the Corporation was done by the Union Government. The corporation was under complete dominance of the Central Government of India as they hold all of its shares.
- The respondent in the case used to work for a company which later came to liquefy as per the orders of the court and thus was given an authority in the appellants corporation under the requisite terms and conditions.
- Mr. Brojo Nath Ganguly joined as the Deputy Chief Accounts Officer in the corporation and later on became the Deputy Financial Adviser and Chief Accounts Officer through his determination and hard work.
- A suit was initiated by the respondent in High Court of Calcutta stating that Rule 9(i) is arbitrary and unprincipled because of which the decision of the hon’ble was in respondent’s factor.
- This led the plaintiff to file a suit in the apex court of the country i.e. the Supreme Court of India, for the grants of special leave, however here also the decision of the court was against the petitioner and the grant for special leave was cancelled by the Supreme Court. The court held Rule 9 (i) to be void under the Indian Contract Act, 1872 section 23.
- Does Article 12 of the Indian Constitution holds its jurisdiction over the corporation that comes under the definition of state?
- Whether Rule 9(i) is immoral u/s 23 of Indian Contract Act, 1872?
- Can power inferred by Rule 9(i) be declared void in violation of Article 14 of the Constitution?
- The court held that Central Inland Water Transport Corporation Limited is not just a regular company as defined under Section 617 of the Companies Act, 1956 but fully owned by three governments at the same time namely the Central Government, Government of Assam, and the Government of West Bengal jointly.
- The bargain put forward was based on unethical terms as it contradicted the justified reasons and seems to have taken place under unfair edge over the others. And the state under Section 39 should favor the policy of safeguarding its citizens and providing equal pay for equal work for both sex i.e. males and females equally decreasing the concentration of wealth and means of production to the common detriment. Rule 9(i) of the Central Inland Water Transport Corp Ltd.
- Service, Discipline and Appeal Rules, 1979 granted upon the corporation the power to end the service of a permanent employee by giving him three months’ notice in writing or to pay him the same three months’ basic v pay and dear was allowance.
- A clause such as Rule 9(1) in a contract of employment interfere with the large sections of the public and is unfavorable to the public interest and might lead to generating a lack of confidence in the heads of those who encounter it and it is against the public welfare.
The terms“The State” which are used in the Constitution of Indian in Part III or IV does not merely conclude it as Union of India but also includes all organizations that are dominated and controlled by the government. There were three conditions which the court regarded as the key ingredients which showed that the Corporation was a body of the government itself under the public sector as defined in the Constitution of India under Article 12.
These three conditions were:
- the Corporation was completely funded by three governments jointly,
- managed by Chairman and Directors that were appointed by the Central Government and,
- was under control and authorization of the Central Government.
Since the term ‘immoral’ means ‘unconscionable’ or ‘unprincipled’, it is right to say that an immoral bargain is an unprincipled bargain that would be antithetical to what is just.
Therefore, if an agreement or a contract is immoral or unconscionable at the time of its formation or creation, then the court may diminish the enforcement of such a contract or agreement.
Rule 9 (i) brought in the notice before the court in this matter is in opposition or contrast to the government policies and claimed to be void according to section 23 of the Indian Contract Act, 1872 as it gives arbitrary powers upon the corporation. Besides that, it did not signify that who is to perform and use these powers on the behalf of the corporation as well as there are no specific rules and regulations which illustrates that in what sort of situations or circumstances the Corporation may exercise the powers referred to in Rule 9(i).