K.I. SHEPHARD & ORS. ETC. ETC. versus UNION OF INDIA & ORS.

Citation: [1988] 1 S.C.R. 188 · Decided: 18-09-1987 · Supreme Court of India · Bench: RANGANATH MISRA · Disposal: Case Allowed

Cited by 5 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

A 
K.I. SHEPHARD & ORS. ETC. ETC. 
v. 
UNION OF INDIA & ORS. 
SEPTEMBER 18, 1987 
B 
[RANGANATH MISRA AND MURARI MOHAN DUTT, JJ.) 
Banking Regulation Act, 1949: 
Section 45-Amalgamation of banks-Employees excluded from 
employment by transferee banks-Draft scheme excluding names of 
employees-Doctrine of natural justice-Whether applicable-Post-
C decisional hearing--Whether sufficient-Examination of dispute 
regarding requirement of Procedure-Whether precluded-Scheme-
making process-Whether legislative. 
D 
Administrative Law: 
Amalgamation of banks-Exclusion of employees from employ-
ment by transferee banks in accordance with amalgamation scheme-
Doctrine of natural justice-Applicability of. 
Th"'Hindustan Commercial Bank, the Bank of Cochin Ltd. and 
E 
Lakshmi Commercial Bank were amalgamated with Punjab National 
Bank, Canara Bank, State Bank of India respectively in terms of sepa-
rate schemes drawn under the Banking Regulation Act, 1949, and 
pursuant thereto 125 employees of these banks were excluded from 
employment, and their services were not taken over by the respective 
transferee banks. Some of these excluded employees filed writ petitions 
F 
before the High Court which granted partial refief, but on appeal by the 
transferee Bank the Writ Petitions were dismissed by the Division 
Bench. 
Against this, appeals by Special Leave were filed before this 
Court. Some of the excluded employees filed writ petitions before this 
G 
Court directly. 
-~
It was contended on behalf of the excluded employees that the 
draft schemes did not include any name of employees intended to be 
.,,i,
excluded; that no opportunity of being heard as afforded to them before 
exclusion was ordered, and the authorities concerned had not acted 
H fairly; that none of them was responsible for ficticious, improper or 
188 
K.J. SHEPHARD v. U.O.J. 
189 
-f-
non-business like advances of loan to parties thereby bringing condi-
A 
lions nearabout bankruptcy for the appropriate banking companies, 
that many other employees against whom there were dermite charges 
already pending enquiry or even orders of dismissal bad been proposed 
bad been taken over and retained in service of the transferee banks 
while these excluded employees, without justification, had been called 
upon to face this unfortunate situation. 
B 
y 
The transferee banks, the Reserve Bank of India and the Union of 
India filed affidavits in opposition. It was contended on behalf of the 
Union of India that the scheme in respect of each of the amalgamated 
• 
banks bad been approved by it as required under the Act and since 
finality was attached to such schemes, the schemes could not be cbal- c 
1 
lenged, particularly in view of the provisions contained in Article 31-A 
of the Constitution. It was contended on behalf of the Reserve Bank of 
v 
India that law did not require that the draft scheme should contain the 
names of the employees to be excluded, that the incorporation of the 
names finalised on the basis of scrutiny of the records before the 
schemes were. placed before the RBI was sufficient compliance of the D 
requirements of the law; that the provisions of the Act did not confer 
any right on the employees of being beard; that the scheme-making 
process was legislative in character and, therefore, did not come within 
the ambit of natural justice, and the action, not being judicial or quasi-
judicial and, at the most, being administrative or executive was also not 
-1 
open to challenge on allegations of violation of rules of natural justice; E 
that moratorium under the statutory provisions could not be beyond six 
• 
months and in view of the fact that the entire operation· bad to be 
finalised within a brief time frame, the requirement of an enquiry by 
notice to all the officers to be excluded could not have been intended to 
be implanted into the provisions of section 45 and that provision of 
compensation had been made for those who were excluded from the F 
\ 
respective schemes. 
Allowing the writ petitions and appeals, this Court, 
HELD: 1. Rules of natural justice apply to administrative action 
and the decision to exclude a section of the employees without comply-
G 
ing with requirements of natural justice was bad. [206H) 
·-4..._ 
2.1 Fair play is part of public policy and a guarantee for justice to. 
citizens. In our system of Rule of Law, every social agency conferred 
with power is required to act fairly so that social action would be just,

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