The Life Insurance Corporation Of India, Bombay () v. Thakur Mohan Singh And Anr. (S).

NAIK J. - This is a first appeal by the Life Insurance Corporation of India.

2. The suit giving rise to this appeal was filed in forma pauperis by Thakur Mohansingh, Inspector of Agencies, Bombay Mutual Life Assurance Society, Ltd., (hereinafter referred to as 'the Assurance Company'), against the Union of India (defendant 1-respondent 2) and the Life Insurance Corporation of India (hereinafter referred to as 'the Corporation') (defendant 2-appellant) inter alia, for a declaration that the order dated 18-4-1956 terminating his services passed by the Custodian was wrong and illegal and that he yet continued in service of the defendant-appellant in the rank and grade held by him as also for arrears of salary, provident fund and gratuity, etc. amounting to Rs 17,322.50 (Rs. 13,747.50 salary from 1-6-1956 to 31-5-1959; Rs. 1,175.00 bonus; Rs. 1,500.00 provident fund and gratuity; and Rs. 1,100.00 interest on unpaid salary at 6% per annum), which would be due to him but for such illegal termination of his services. The suit was dismissed as against the Union of India but decreed with costs as against the defendant-appellant both as regards the declaration claimed as also for salaries, etc. claimed, though in the sum of Rs. 15, 465.00 only.

3. The suit of the plaintiff-respondent 1 was based, inter alia, on the following allegations: that on 1-6-1952 he was appointed Inspector of Agencies, Jabalpur Division, by the Bombay Mutual Life Assurance Society Ltd. on a basic salary of Rs. 300.00 per month ; that on 31-7-1953 he was issued a fresh appointment order appointing him Inspector of Agencies with effect from 1-7-1953 on probation for one year but without any break in his service; that he was confirmed in his appointment on 1-4-1954 ; that on 18-4-1956 the Custodian, who had taken over the management of the business of the Assurance Company under the Life Insurance (Emergency Provisions) Ordinance I of 1956, terminated his services giving him 18 days plus a month's salary in lieu of notice; that his representation to the Government of India against the aforesaid order of the Custodian was rejected on 21-4-1956, as also his further appeal to the Ministry of Finance, Government of India on or about 15-11-1956; that the order dated 18-4-1956 terminating his services was passed by the Custodian for and on behalf of the Union of India ; that the said order was illegal and ultra vires the Constitution of India, and, in any case, mala fide and in violation of the principles of natural justice, so that he was, inter alia, entitled to a declaration that inspite of purported termination of his services by the Custodian on 18-4-1956, he continued in service and was in consequence entitled to all the arrears of salary, bonus, etc. which he would have earned if he had continued in service. Amplifying the allegation that the order of the Custodian dated 18-4-1956 was illegal, ultra vires, etc., the plaintiff in effect said : that after the coming into force of the Ordinance I of 1956 he (the plaintiff) became a servant of the Union of India and, in so far as his services were terminated in violation of article 311 of the Constitution, the order terminating his services was unconstitutional and void; that if it be held that he was not a servant of the Union but an employee of the Assurance Company, then also the termination of his services was illegal for the following amongst other reasons :

(a) the Custodian could not terminate his services, as he had not been appointed by the Custodian but by the Assurance Company;

(b) even if the Custodian had the power, his exercise of the power was in violation of the principles of natural justice in so far as the order was passed without giving him a notice to show cause;

(c) it was also mala fide as it was the result of intrigue and underhand devices adopted by the Management against him ; and

(d) the reason for the termination of his services as stated in the order was that the total net premium income secured by him had shown a fall of Rs. 14,000 in the premium income guaranteed by him, while, not only was there no condition in his contract of service of any yearly quota of business to be secured by him but also the premium income as shown in the order of termination was wrong and imaginary.

4. The defendant 1, Union of India, denied that the plaintiff was a servant in the employ of the Union and alleged that there was no cause of action against it.

5. The defendant 2 appellant admitted that the plaintiff was a confirmed Inspector of Agencies whose services had been terminated by the Custodian by his order dated 18-4-1956 but denied that the said termination of his services was wrong and illegal or ultra vires of the Constitution, or that it violated the principles of natural justice, or was mala fide or on erroneous data as to business secured by him for the Assurance Company. It was further averred that the relief of declaration that the plaintiff, notwithstanding the termination of his services by order 18-4-1956, yet continued in service was not claimable by him under the circumstances of the case as the grant of such a relief would amount to a decree for specific performance of a contract of personal service terminated over three years ago, and that for the same reason the claim for salary for the period 1-6-1956 to 31-5-1959 together with bonus, etc., which was consequent to the relief of declaration, was not maintainable. It was also alleged that the claim was barred by limitation as it was made more than three years after the termination of services of the plaintiff on 18-4-1956. The other defences taken were that the suit was bad for misjoinder of the defendants and the causes of action, and that the plaint had not disclosed any cause of action against the defendant-appellant Corporation.

6. The learned Additional District Judge dismissed the suit as against the Union of India but decreed it as against the defendant 2- appellant Corporation holding, inter alia,

(1) That the plaintiff, on the date of the termination his services, was an employee of the Assurance Company.

(2) That he had not on that date acquired the status of servant of the Union of India with all the attendant rights and privileges under the Constitution of India.

(3) That, being an employee of the Assurance Company, his services could not be terminated by the Custodian nor by the Union of India.

(4) That the plaintiff was, on principles of natural justice, entitled to a notice to show cause against the termination of his services, and sufficient opportunity to show cause had not been given to him.

(5) That it had not been established that the Assurance Company or the Custodian was entitled to terminate the services of the plaintiff by giving him a month's notice.

(6) That the suit of the plaintiff for a declaration that he continued in service inspite of the order dated 18-4-1956 terminating his services was maintainable as it was not a suit for specifically enforcing a contract of personal service.

(7) That the suit was not bad for misjoinder of parties or causes of action.

(8) That in so far as the plaintiff should be deemed to have continued in service when the Life Insurance Corporation Act, 1956 came into force, the defendant-appellant Corporation was liable to pay his arrears of salary with interest as claimed, though he was not entitled to bonus or provident fund and gratuity claimed by him.

(9) That the termination of the services of the plaintiff was mala fide and unjustified.

(10) That the claim was not barred by limitation.

7. We may first dispose of the contention that the plaintiff-respondent was a servant of the Union of India, and, in so far as the order terminating his services was not in confirmity with article 31.1 of the Constitution, it was null and void and entitled the plaintiff to the reliefs claimed by him. The contention has been reiterated by the learned counsel for the plaintiff-respondent, even though it was answered against him by the learned Additional District Judge.

8. The contention is that though initially he was a servant of the Assurance Company, he became the servant of the Union on the coming into force of the Life Insurance (Emergency Provisions) Ordinance, 1956. In our opinion, the contention has no merit and was rightly rejected by the trial Court.

9. The aforesaid Ordinance was promulgated to protect the interest of the policy-holders pending nationalisation of Life Insurance business. Under section 3 thereof, the management of all the life insurance business of an Assurance Company is directed to vest in the Central Government on and from the date the Ordinance came into force and, pending the appointment of a Custodian, the persons in charge of the business immediately before such date shall be in charge of the management on behalf of the Central Government, Section 4 then provides for the appointment of a Custodian to take over the management of such business. The Ordinance thus provided for the taking over of the management only of the life insurance business, while the assets and liabilities of the life insurance business even thereafter continued to belong to the companies themselves which owned the life insurance business. By such transfer of the management of business the employees would continue to be the employees of the companies owning the life insurance business. They (the employees) would not become the employees of the Central Government in whom the management vested nor of the Custodian who was appointed by the Central Government to manage the business. We do not, therefore, see any reason to hold that on the vesting of the management of the Assurance Company in the Central Government, on and after the promulgation of the Ordinance, the employees of the Assurance Company, of which the plaintiff respondent was one, would become the employees of the Central Government.

10. The next question is whether in the case of the plaintiff-respondent, who was not a servant of the Central Government but only of the Assurance Company, a declaration that he continued in service of the Assurance Company, notwithstanding the order dated 18-4-1956 terminating his contract of service, could be given.

11. The circumstances under which such a declaration could be given to an employee came up for consideration before the Supreme Court in U. P. State Warehousing Corporation v. C. K. Tyagi, A I R 1970 S. C. 1244. The case related to the dismissal of a warehouseman employed by the U. P. State Warehousing Corporation who had been dismissed from service in contravention of regulation 16 (3) of the U. P. State warehousing Corporation Regulations and in whose case a declaration had been given by the lower Appellate Court that the order dismissing him was null and void and that he was entitled to be re-instated with full pay and other emoluments. The Supreme Court allowed the appeal of the State Warehousing Corporation holding, inter alia, that the respondent was not entitled to the reliefs claimed and decreed. Giving its reasons, it first examined the case of Vine v. National Dock Labour Board, (1956) 3 All ER 939, Barbar v. Manchester Hospital Board, (1958) 1 All E. R. 322 and Francis v. Municipal Councillors, (1962) 3 All E. R. 653 and said

"From a review of the English decisions, referred to above, the position emerges as follows: The law relating to master and servant is clear. A contract for personal service will not be enforced by an order for specific performance nor will it be open for a servant to refuse to accept the repudiation of a contract of service by his master and say that the contract has never been terminated. The remedy of the employee is a claim for damages for wrongful dismissal or for breach of contract. This is the normal rule and that was applied in Barber's case (supra) and Fraud's case (supra). But when a statutory status is given to an employee and there i has been violation of the provisions of the statute while terminating the services of such an employee, the latter will be eligible to get. the relief of a declaration that the order is null and Void and that he continues to be in service, as it will not then be a mere ease of a master terminating the services of a servant. This was the position in Fine's case (supra.)."

It then examined the two cases decided by it and reported in Dr. S. B. Dutta v. University of Delhi, A I R 1958 S. C. 1050 and S. R. Tiwari v. District Board, Agra, A I R 1964 S. C. 1680 and said -

"From the two decisions of this Court, referred to above, the position in law is that no declaration to enforce a contract of personal service will be normally granted. But there are certain well-recognised exceptions to this rule and they are: to grant such a declaration ffo appropriate cases regarding (1) a public servant, who has been dismissed from service in contravention of Article 311. (2) Beinstatement of a dismissed worker under Industrial law by Labour or Industrial Tribunals. (3) A statutory body when it has acted in breach of a mandatory obligation, imposed by statute."

It then considered the case reported in Life Insurance Corporation of India v. Sunil Kumar Mukherjee, A I R 1964 S. C. 847 and said -

"By not complying with the provisions of clause 10 of the order of the Central Government which is really related to section 11 of the Insurance Act, the Life Insurance Corporation must be considered to have acted in gross violation of the mandatory provisions of the statute."

Lastly, it considered the facts of the case before it in the light of the principles enunciated in the aforesaid decisions and said-

"In the instant case, a breach has been committed by the appellant of regulation 16(3) when passing the said order of dismissal, inasmuch as the procedure indicated therein has not been followed. The Act does not guarantee any statutory status to the respondent nor does it impose any obligation on the appellant in such matters. As to whether the rules framed under, section 52 deal with any such matters, does not arise for consideration in this case as the respondent has not, placed any reliance on the rules and he has rested his case only on regulation 16 (3). It is not in dispute that, in this case, the authority who can pass an order of dismissal has passed the same. Under those circumstances, a violation of regulation 16 (3), as alleged and established in this case, can only result in the order of dismissal being held to be wrongful and, in consequence, making the appellant liable for damages. But the said order cannot be held to be one which has not terminated the service, albeit wrongfully or which entitles the respondent to ignore it and ask for being treated as still in service."

12. If we examine the facts of our case in the light of the decision of the Supreme Court in the Warehousing Corporation's case (supra), we have held that the plaintiff was not a public servant to whom article 311 of the constitution applied. He was also not admittedly a worker under the Industrial law. The question, therefore, is whether the plaintiff-respondent could claim that while terminating his services by his order dated 18-4-1956 the Custodian had acted in violation of the provisions of any statute which had conferred on him some special status. In our opinion, the plaintiff respondent cannot claim to come into this category also.

13. The plaintiff-respondent was an employee of the Assurance Company, being its confirmed Inspector of Agencies, Jabalpur Division. The terms and conditions of his service were governed by a contract as between a master and a servant. No law had conferred on him any statutory status nor was the termination of his services in violation of any statutory provisions governing the contract of his service. No doubt, after the coming into force of the Ordinance I of 1956, the management of the business of the Assurance Company had vested in the Central Government which was managing it through a Custodian appointed by it; but this by itself gave the employees no statutory status. The plaintiff remained an employee of the Assurance Company and continued to be governed by the contract between himself and the Assurance Company, except that after the Custodian took over the management, he came under the overall control of the Custodian. As already held, this vesting of the management of the Assurance Company in the Central Government did not make him a servant of the Central Government nor was his status as an employee of the Assurance Company in any way changed by this arrangement.

14. Being in charge of the management of the Assurance Company, the Custodian as the statutory agent of the Assurance Company could validly exercise all the powers conferred and the duties imposed on the Assurance Company and as such had the power to terminate the services of the plaintiff-respondent. In our opinion, the power to manage the affairs of the Assurance Company carried with it the power to terminate the services of the employees if the Custodian thought it necessary to do so because such a power naturally inheres in the concept of management of the business of the Assurance Company.

15. The Ordinance I of 1956 nowhere provides a change in the Status of the employees of the 'controlled business' as defined in the Act which included the Assurance Company. It also does not, either expressly or even by implication, prohibit the Custodian from terminating the services of the employees of the Assurance Company. Reliance is, however, placed on clause (3) of section 4 and it is contended that the Custodian could exercise only such powers and perform such duties as had been expressly delegated to him. But, in our opinion, there is no basis for such a contention in the language of that clause which reads as follows :

"Nothing contained in sub-sections (3), (5) and (6) of section 3 shall apply to any insurer the management of whose controlled business has been taken over by the Custodian, but the Central Government may issue such directions to the Custodian as to his powers and duties as it deems desirable in the circumstances of the ease, and the Custodian may apply to the Central Government at any time for instructions as to the manner in which he shall conduct the management of the controlled business of the insurer or in relation to any matter arising in the ; course of such management."

No doubt, if the Central Government had issued any directions to the Custodian in this behalf, his power of management would have been to that extent controlled or modified by such directions; but, in the absence of such directions, the power conferred on him (the Custodian) under clause (1), which was very general in nature, authorised him to do all the acts necessary for the management of the business of the Assurance Company.

16. It may also be mentioned here that the plaintiff-respondent had not in his plaint claimed any special statutory status for himself, except in so far as he had claimed to be a 'servant of the State', nor had he alleged that the termination of his services was in violation of any statutory provisions governing his case.

17. The Supreme Court has once again in V. R. Misra v. Managing Committee, Jai Narayan College, (1972) 1 S. C. C. 623, reiterated the principles it had laid down in U. P. State Warehousing Corporation's case (supra) observing:

“It is well settled that, when there is purported termination of a contract of service, a declaration that the contract of service still subsisted would not be made in the absence of special circumstances, because of the principle that courts do not ordinarily enforce specific performance of contracts of service (See Executive Committee of V. P. State Warehousing Corporation Ltd. v. Chandra Kiran Tyagi (supra) and Indian Airlines Corporation v. Sukhdeo Rai, A I R 1971 S. C. 1828. If the master rightfully ends the contract, there can be no complaint. If the master wrongfully ends the contract, then the servant can pursue a claim for damages. Bo even if the master wrongfully dismisses the servant in breach of the contract, the employment is effectively terminated."

xxx xxx xxx

Mr. Setalvad contended that since the college in question is affiliated to a statutory body namely, the University of Luchnow, and is governed by the relevant statutes and ordinances framed tinder the provisions of Lucknow University Act, 1920, any violation of the statute or the ordinance in the matter of terminating the services of a teacher would attract the jurisdiction of the High Court under Article 226 of the Constitution as a statutes and ordinances have the force of law. In support of this, counsel relied upon the decision of this Court in Prabhakar Ramkrishna Jodh v. A. L. Pande and another, 1970 M P L J 983 (SC)=(1965) 2 S. C. R. 713.

xxx xxx xxx

On a plain reading of Statute 151, it is clear that, it only provides that the terms and conditions mentioned therein must be incorporated in the contract to be entered into between the college and the teacher concerned. It does not say that terms and conditions have any legal force, until and unless they are embodied in an agreement. To put it in other words, the terms and conditions of service mentioned in Statute 151 have proprio Vigore no force of law. They become terms and conditions of service only by virtue of their being incorporated in the contract. Without the contract they have no vitality and can confer no legal rights.

Whereas in the case of Prabhakar Ramkriskna Jodh v. A. L. Pande and another (supra) the terms and conditions of service embodied in Clause 8 (VI) (a) of the 'College Code' had the force of law apart from the contract and conferred rights on the appellant there, here the terms and conditions mentioned in Statute 151 have no efficacy, unless they are incorporated in a contract. Therefore, appellant cannot found a cause of action on any breach of the law but only on the breach of the contract. As already indicated, Statute 151 does not lay down any procedure for removal of a teacher to be incorporated in the contract. So, Clause 5 of the contract can, in no event, have even a statutory flavour and for its breach, the appellant's remedy lay elsewhere.

Besides, in order that the third exception to the general rule......... might apply, it is necessary that the order must be the order of a statutory body acting in breach of a mandatory obligation imposed by a statute."

18. Now, in the instant case, no statute had conferred on the plaintiff any special status. The Custodian in terminating his services by his order dated 18-4-1956 had also not acted in violation of the provisions of any statute. Consequently, applying the principle laid down in the aforesaid cases to the facts of this case, we are of opinion that the plaintiff could not claim a declaration that the order terminating his services was a nullity and that he continued to be in service in spite of the said termination of his services. Such a declaration could not be given as it would, in effect, seek to enforce a contract of personal service and thus offend section 21 (b) of the Specific Relief Act. A decree for arrears of salary could also not be given as such a decree was only consequential to the relief of declaration, which was not maintainable.

19. We may also add that the claim for the reliefs claimed was barred by limitation because the suit was filed more than three years after the order terminating the services of the plaintiff-respondent had been passed. The learned counsel for the plaintiff-respondent contends that the suit was within limitation because the plaintiff was under section 15 (2) of the Limitation Act entitled to the exclusion of the period of notice served on the defendant 2-respondent 2 under section 80 of the Code of Civil Procedure from the period of limitation prescribed. In our opinion, the plaintiff-respondent was not entitled to the exclusion of the period of notice, under the circumstances of the case, because, in our opinion, the joinder of the Union of India as a party defendant to the suit was quite unjustified. In Laldi Prasad v. Nizam-ud-din Khan, A I R 1919 Oudh. 26=54 I. C. 535, it was held that -

"No enactment required the plaintiff to give notice to the Secretary of State or the Municipality in this particular matter, for he had no cause of action against them. The learned Counsel is really arguing for the proposition that where a plaintiff under a mistake of law or fact conceives that he has a cause of action against the Secretary of State or a public body in addition to his cause of action against a private person and joins without reason the Secretary of State or the public body, he shall be entitled to extend the period of limitation ordinarily allowed by law against the private person by two months. The proposition cannot be accepted. The section has only application in cases in which the plaintiff has a good cause of action against such a body. The law forbids him to institute a case against such a body until he has given them notice. So the law says very reasonably, as you are not allowed to bring a case until two months have elapsed from the date of the notice, that period of two months shall not count against you in the way of limitation. But the law nowhere says to a plaintiff that when he is under no disability but erroneously imagines himself to be under a disability, he will obtain any relaxation of the ordinary law of limitation."

We agree with the aforesaid observations.

20. Under section 15 (2) of the Limitation Act, 'in computing the period of limitation for any suit of which notice has been given ....... in accordance with the requirements of any law for the time being in force, the period of such notice ....... shall be excluded. The interpretation of the section presents no difficulty when there is only one defendant in the suit. But where there are several defendants the rule was enunciated by a Division Bench of the Nagpur High Court as follows:

“All that the section requires is that a notice should have been given under law, and if this condition exists, it says without any reservation or qualification that the period of notice shall be excluded.

In Muhammad Sharif v. Nasir Ali, A I R 1930 All. 742, it has been held that if it is necessary or even permissible for a plaintiff to bring a suit claiming relief against all the defendants jointly, the period of notice should be excluded for the whole suit and not merely so far as the defendant to whom notice was given is concerned. The same view has been expressed in E. L. Rly. Co., Calcutta, v. Rahim Ullah-Elahi Baksh, A I R 1928 Lah. 349, B. and N. W. Railway Co. v. Ramswarup Lal, A I R 1922 Pat. 549 and Udharam v. Grahams Trading Co. Ltd., A I R 1937 Sind 281.

In Laldi Prasad v. Nizam-ud-din (supra) the period of notice given to the Secretary of State was not excluded under section 13 (2) of the Limitation Act in computing the period of limitation applicable to the suit as it was found that the Secretary of State was wrongly impleaded as a defendant in that suit.

In the present case, the Dominion of India was impleaded as defendant No. 1 for the tortious act of its employee defendant No 2 who was the Assistant Station Master at Yeotmal at the relevant time. It was necessary to serve a notice under section 80 of the Civil Procedure Code to defendant No. 1.

It cannot be said that the Dominion of India was unnecessarily impleaded as a defendant in this suit."

See Laxmichand v. Dominion of India, 1955 N L J 617=AIR 1955 Nag. 265.

21. In B. and N. W. Railway Co. v. Ramswarup Lal (supra), on which reliance was placed in the above Nagpur case, the observations of the Division Bench were:

"In a single suit which is properly brought against several defendants if the plaintiff is entitled to deduct a certain period from the period of limitation in respect of one defendant he is also entitled to the same period of limitation in the case of the other defendants"

22. In The State v. Jamna Das, AIR 1955 Punj. 117, where the plaintiff had no cause of action against the Union of India, in computing the period of limitation for the suit the period of notice given to the Union of India was not excluded.

23. In the instant case also, we are of opinion that in so far as there was no cause of action against the Union of India, the period of notice given to it could not be excluded in computing the period of limitation for the suit.

24. We may also observe that the claim of the plaintiff-respondent could at best be as between master and servant governed by the contract between the parties; and as the plaintiff servant had no statutory status nor had the master, while terminating his services, violated any statutory provisions, the termination of the services of the plaintiff-respondent by the Custodian for and on behalf of the master, the Assurance Company, could never be a nullity warranting the grant of the declaration prayed. The termination of his services might be in breach of contract and so unlawful giving rise to a claim for damages ; but as the suit is not framed for such a relief, we need not examine this aspect of the case which has neither been pleaded nor proved. It thus becomes unnecessary for us to examine whether the termination of the services of the plaintiff was in breach of contract or mala fide.

25. In the result, the appeal is allowed and the suit of the plaintiff-respondent dismissed with costs throughout.

Appeal allowed.