 Good evening, friends. Before Christmas, if we could have a Santa Claus giving gifts, they cannot be a better thing. And on the same way, if your holidays are starting as a lawyer, you can't expect much better legal knowledge being shared from a person like PS Raja Kupal, a senior advocate. And being connected with Rikram, they say it's an icing on the cake. So these all, not formal contracts, but a contract to share legal knowledge is what it can be said. So Rikram means try. So it's a try understanding between me, Raja Kupal and Rikram to share some knowledge prior to the Christmas. So we say Merry Christmas prior to that. And the understanding of unconscionable contract of the employment in respect of a famous judgment, not only for the students of law and the employees, employer and the lawyers itself is a fascinating judgment of central inland water transport corporation versus broger not the nuances of section 23 couldn't have been better explained than this judgment. Before we ask Mr. Raja Kupal to share his knowledge, we'll ask the Rikram to share his few thoughts. They say sometimes the center comes prior in time. Otherwise normally three terms comes at the later part of the session. Over to you. I think he also has an issue. So you can take over. Because the Rikram and friends, frankly, I was not ready to arrive. I was doubtful whether I would be able to spend a time in webinar or investor time in webinar just before vacation. Luckily, it happened that our high court was closed today. For us, the vacation started yesterday. Whereas for rest of the country, including schools and colleges, it starts at the end of today. That is, we had a holiday today. Therefore, I when because said, can we do a session on this Friday? I said yes, because that way a good year ending for me also because ultimately, we should speak something that is close to my close to our hearts at the end of the year so that we can welcome you here in a happy. Central and water transportation transport case corporation case. According to me is a landmark both in the matter of contract law as also in the matter of constitution. The simple issue that was involved in the central inland water transport corporation was whether a government company can be regarded as an instrumentarity of state under article 12 of the constitution. Second question was the second and more most important question in central inland water transport case was whether naked hire and fire policy would fall out of constitutional values. If it is practiced in a contract of employment by a government company, yes, before Brezhonath Ganguly also, there were three judgments. One of Karnataka High Court, which has not been able to trace in spite of my best efforts, rendered in early 1980s by my Lord Justice Ramajoy's who in respect of a government company that is Warath Electronics Limited had held that a clause in the service contract which enables the employer to terminate the services of a permanent employee with three months notice or one month notice or whatever it is or notice period salary in New York notice is bad in law and it is unconstitutional. That was the only judgment regarding a government company and with the best of my efforts I have not been able to trace it because it is not a reported judgment. I hope to get the assistance of my good friend Mr. Trivikram to somehow trace it because it is a treasure because that would be the first judgment which would have applied the concept of Article 14 to a government company. That was one judgment which I have not been able to trace from Karnataka High Court. There were three other judgments rendered by two High Courts. One was the judgment of Lordship Justice P. B. Sawan as single judge of Bombay High Court where accepting challenge to Regulation 48 of the Submissive Discipline and Appeal Regulations of Year India Statutory Corporation which was a statutory body established under the Aircraft Act. That clause 48 which enables the employer to terminate the services of an employee has no longer required without assigning any reason Justice Sawan had held it to be bad. But at the same time there was another division range judgment of Bombay High Court where dealing with very same Regulation of very same Air India Statutory Corporation division range had held that such a clause is valid and then the judgment of division range of Calcutta High Court rendered by Lordship Justice M. M. Dutt as the then boss holding that such a clause in the Central Inland Water Transport Corporation service regulations the service rules is bad in that. They therefore effectively while the Air India was a statutory corporation in the aspect of government companies there were only two judgments that were available. One is the judgment of division range of Calcutta High Court from which the appeal arose in Central Inland Water Transport case and another unreported judgment of Karnataka High Court. The all earlier judgments including judgment of Supreme Court in West Bengal State Electricity Board that is Deshbandh Ghosh. Though the three judge bench of Supreme Court had held that such a clause in a statutory body service regulations is bad. There was no judgment of the Supreme Court in regard to the government company being a state and the naked iron fire policy as contained in the regulation in question was unconstitutional. Therefore I would regard Rajanath Ganguly authored by Justice D. P. Madan as a pathfinder. In jurisprudence we have precedents but not a great value for future and the second and higher class of contribution to law is pathfinding judges. Rajanath Ganguly is one pathfinder. The division bench of Calcutta High Court had held that the clause which enabled the corporation to generate the submissions of a permanent employee with three months notice or notice pay in lieu of notice is violative of article 14 and in one paragraph it had also held that it is a state because only if it is a state article 14 can be enforced but the beauty of Rajanath Ganguly is that the bench formulated two questions. One is even if it is not a statutory body whether a government company as defined under the company site whether it can be held to be an instrumentality of state. Once it is had to be instrumentality of state application of article 14 is a matter of fact because for every state act in any state action by then already the Ramana Dahera city was there which said even in contractual field the state has to act in accordance with article 14. The second and more important question that was framed by the bench was whether a contract of employment can be set aside or declared unenforceable if it is contrary to section 23 of the contract that is a contract which is opposite to public policy. The idea was as I decipher when I read the judgment in its entirety to ensure that the larger corporate bodies having huge economic power they do not exploit a helpless worker he may be a manager or a senior manager irrespective of the status irrespective the status the financial capability of an employee would be insignificant when you compare it with the financial resources to which the employer can lay hands. Therefore the first and foremost importance of Rajan of Ganguly is in applying contract act section 23 of contract act to a service contract and say that if it is opposite to public policy then the contract would be void of that clause of the contract would be void. Another difficulty that was faced by the bench in Rajan of Ganguly was there was a previous judgment of the Supreme Court in Praga tools where Supreme Court even after noticing that in Praga tools 56% of the share capital is held by the government it has declined to issue a written and it had declined to hold it to be an instrumentality of state. Statutory bodies they they they stand as a different footing like YGC, LIC or any other statutory bodies that were in Sukhdev Singh the position of statutory corporations established under a statute had been clear but in so far as government company is concerned there was a contradictory judgment in Praga tools that had to be overcome. Then these two difficulties that is whether a government company can become can be turned as an instrumentality under Article 12. Number two even if it is not so can an unconscionable term in a contract of employment what is unconscionable? Unconscionable unconscionable is something that is repulsive to the values of distinguishing between right and the wrong that is if something tells your conscience look this is a wrong thing or this is opposed to the right thing that is when your conscience is ripped of course it is another matter some some get just conscience will never get ripped even for that an answer is there in Brajana Ganga. There were these two questions independently answered in Brajana Ganga. On first question whether it is an instrumentality of state of law the argument advance was see it is not established under any statute it is only registered at the company side there is no judgment law to hold that it is an instrumentality of the state that was overcome or answered by the Supreme Court by saying that look the entire share capital is owned by the government all the directors are appointed by the government managing directors the company is appointed by the government the it functions as a alter ego of the government and discharges government function then there was another hurdle namely look if you take year India strategy the corporation it was the year the act under which the year India corporation was established it conferred monopoly on year India international company then ONGC it had conferred governmental government blessed monopoly on ONGC then life insurance corporation of India no other company other than the life insurance company of India life insurance corporation could undertake the business of life insurance this difference that is selling central inland water transport operation not enjoying monopoly in the area of its operations unlike LIC unlike ONGC that was also put up by the management saying that government has not conferred any monopoly on us therefore we are not an instrumentality of state all these were answer well as if this is Madan we're saying that corporation established by statutes have been held to be instrumentalities and agencies of government in a long caten of decisions of this court for the purpose of article one must necessarily see through the corporate way to ascertain whether the whether behind that wheel is the face of an instrumentality or agency of the government the corporation which is the opponent in these two appeals before us squarely falls within these observations and it also satisfies the various tests which have been laid down merely because it has so far not the monopoly of inland water transportation is not sufficient to devastate of its character of an instrumentality of state it is nothing but the government operating behind a corporate will carrying of governmental activity and a governmental function of vital public importance this functionality test was propounded and it also said that not enjoying monopoly in the chosen field is not decisive of whether or not whether a company or corporation is the instrumentality of state or not then when the Supreme Court tried to or came to examine the question of validity of rule 9 1 of the that is the rule that was under challenge it came up with face delivery strange and what the Supreme Court called as an argument which have which you see which accepted would result in putting the clock back by a few centuries that is clause 9 1 of the rule in force in the Central Land and Water Transport Corporation stated that the management can terminate the services of any employee by giving three months notes then there was a corresponding clause which gave the same right to the employee of an employee can resign from the services of the corporation by giving three months now if you take equality what is equality management has a right to terminate the services of a person by giving him three months profits at the same time the employees is also having a right to put an end to his employment by giving a three months notice both are equal this was the equality propounded by the management before the Supreme Court it said you cannot hold clause 9 1 of our service rules to be bad because equal right is given to both the management as also to the employee if management wants to send out it can send out three months notice if employee wants to walk out he can walk out three months notice therefore it is perfectly equal and the rights and obligations are mutual and identical to overcome that justice modern in fact gave a very very striking example of equality in a forest there will be lion and the lamb both are free to roam around wherever they want in the forest both of them are free to eat whatever they want to eat in the forest the only difficulty is only lion has the capacity to go devour the lamp and lamb does not have that that is where the concept of unequal bargaining power was brought into force now the main principle argument there were two employees that was who had been terminated like that both of them were in managerial care the argument was look with their eyes and ears wide open they have signed this contract as employment today it is not open to them to say that this clause in the contract of service is bad the answer was unequal bargaining power is a good ground to set aside an unequal and unfair contract this where the judgment in Projan of Ganguly stands out till then the firm belief was in service jurisprudence no new right can be created the courts can only protect the status quo if there is a term in contract of service that is final it cannot be interfered by invoking the provisions of public policy or constitutional ideals that are enshrined in directive principles of state policy and fundamental rights of course an article 14 some discussion had to be there but no contract in a statutory service regulation like West Bengal State Elections people it is a statutory service regulation or an area corporation is a statutory service regulation in a statutory body there can be a procure contract also like number of cases we have seen where the employer would not have framed any regulations though the employer is employed to frame regulations on the other hand the service conditions would be governed by non-strategic rules or non-strategic contracts even where it is a non-strategic contract the judgment if it is contrary to public policy then that clause which is contrary to public policy can be struck down then the question came what is public policy because whether it is dependent on the government policy or whether it is something more than government policy then Supreme Court going by fundamental rights and the directive principles of state policy and preamble to the constitution which has promised certain things to every Indian it held that the public policy is not mere policy of the government but public policy is something more and then it said that the public policy means common good of vast majority of the population and to drive home this point it said several statutory authorities have a clause similar to rule 91 in their contracts of employment as appears in the decided cases West Bengal State and the Air India International having several government companies apart from the corporation must be which is the first appointment before us must be having there are 970 government companies with paid a capital of 16,450 crores as stated in the written argument submitted on we have the union of India the government and its agencies and instrument is constitute the largest employer in the country a clause such as rule 91 in contract of employment affecting large sections of the public is harmful and injurious to the public interest smokers excuse me it is not harmful to the smoke health it is injurious to the public interest for it tends to create a sense of insecurity in the minds of those to whom it applies consequently it is again as public good there were anything again as public interest again anything again as public good was held to be opposite to public policy thereby bringing this clause as falling fall of section 23 of the contract act now what is the section 23 of the contract act section 23 of the contract act states what are the considerations and objects which are lawful and what are not the consideration of an agreement is lawful unless it is forbidden by law or is of such a nature that it permitted it to defeat the provisions of any law or is fraudulent or involves or implies ingenuity the person or property of other or the court regards it as immoral or opposite to public policy this entire clause 9 1 was upturned on the ground of the public policy then there are certain very interesting I would say lessons for the court also in the program of Ganguly's case one thing it said was that the validity of rule 9 1 would have to be tested on the principle of law of contracts this is very important because testing the validity of the clause on principles of contract act would mean that the law declared on such testing of the clause in contract of employment by applying contract act would be applicable to all employment irrespective of whether they are government owned government controlled or impure and simple private well there is a clause in the specific effect section which says non-inforcibility of contractors of life but folding a clause to be contrary to section 23 would result in commensurate increase in compensation that one may get even under private employment for wrongful termination of contractors that is the significance of that and then it also said one glorious thing it did was which is almost a guideline for the future is the naked higher-end file principle contained in termination clause which said that anybody without any reason can be terminated is that it amounts to Henry Yates clause and it said that no other phrase could be is more app than calling it a Henry Yates clause what is Henry Yates clause King is supreme King is above the legislature what the legislature has done King can undo that is power is delegated to the king to undo any provision of a legislature legislative edict an act is part of a possible the problem King can undo it that is called as a power delegated to a delegated to annul the parent act parliament makes an enactment and law says if there is any difficulty in implementing this act King can amend that we have seen removal of difficulties causes in almost every enactment because the parliament or legislature when it enacts a law it may not know exactly what are the most minute details that would have to be encountered while implementing this this enact therefore power to remove difficulties is incorporated that within a particular period during first one year or two years of operation of the enactment the government can remove those difficulties removing the difficulties different from removing the law itself Henry Yates clause is one which enables the delegated delegated to remove the lights they were the supreme court term this clause which enabled termination of an employment of a permanent employee with three months notice as nothing short of Henry Yates clause or to put it differently it is a lawless law laws are made but without any enforceability because of the clauses like these Henry Yates clauses the another forward-looking observation in the judgment in Prajonath Ganguly is well whether this striking down a contract or a clause in a contract whether it can apply to commercial contracts because normally in commercial contracts what happens is the parties to the contract would be more or less of equal strength when two traders enter into an agreement it cannot be said that they were of unequal bargain in strength as it happens between employer and employee government the employer can say yes if you don't sign this contract I don't want whereas employee cannot say that if we insist on for this clause I don't want employee because for him employment is a question of survival there is one employee not willing to do time does not make a difference but at the same time if every one-sided clause is liable to be struck down as opposed to public policy then it may affect the very trade and commerce in the country therefore Supreme Court said this principle of unequal bargaining power may not be applicable to commercial contracts at the same time it also provided for an exception what is that exception as a policy holder when you go to buy an insurance policy may be health policy or motor vehicle policy or life policy the insurance gives you a printed format that is a contract which is formulated by you with you having this required to the dotted line in what way it is different between a contract between an employer and employee of unequal bargain this principle was also initiated that is the when a person exploits the distressed situation inexperience lack of judgmental ability or grave will of weakness to obtain grant or promise of pecuniary advantages in such case the so-called printed contracts the obnoxious clause in such contracts can be declared to be opposed to policy or a unjust unfair contract ultimately it said any contract taking brutality of circumstances into account if it is unjust or unfair on one side it can be unfair this principle has been extended by the Supreme Court subsequently in respect of the insurance contracts also and this is what is that settlement clause that is normally when we submit a client under any insurance policy we have to sign a receipt even before we receive anybody they I state that I have received money in full and final settlement that is a card and satisfaction that that normally it is called as a card and satisfaction this card and satisfaction clause was in one of the judgments of Supreme Court held to be opposed to public policy applying the principles of progeny. Therefore, this judgment has shown the part as to two things one is even in a few and simple contractual matter unequal by bargaining power unconscionable term in the contract printed contract and exception to liability clauses which are predetermined by the powerful partner of the two those can be annulled if in the overall context the contract appears to be unfair and dangerous or would shock the concepts of the court. The second thing is it said because one argument that was advanced was there is no precedent where the government company has been government company particularly when it has it has not been conferred a where in conferred a government conferred monopoly there is no precedent where such a body has been declared to be an instrumental state on that the Supreme Court very categorically said that the absence or lack of a president should not render us helpless the court has to look forward and not be happy with the status quo the very interesting that paragraph 66 of the report the fallacy lies in the assumption which that submission makes that merely because a point has not fallen for addition by the court it should therefore be not decided anytime for this assumption true the law would have remained static and would have never advanced the whole process of judicial interpretation lies in extending or applying by analogy the ratio of dissidentity of an earlier case to a subsequent case which differs from it in certain essentials. Therefore it said the law has to move with times it cannot be the judicial function is not merely to apply the precedence but move forward having regard to the objectives of the constitution preamble of the constitution direct to principles of the constitution in the absence of a president the Supreme Court said in Prajanath Ganguly the three factors are the three supreme forces which would guide the duty share is preamble to the constitution fundamental rights guarantee and direct to principles of state and it said very very interestingly natural justice is not something that is given to us by article 14 but article 14 is only a guardian of natural justice that is natural justice was there has been there and will have to be there and will be there irrespective of article 14 what the article 14 does is it does not by itself give any citizen natural justice but it acts as a guardian of natural justice of course certain judgments have said that this is the procedure under as per natural justice but this will apply only for future cases as if natural justice arises from particular day in the life no Prajanath Ganguly says natural justice is there always article 14 has only provided a guardian of that one of the reasons for why this rule 91 was stuck down was that it is opposite to public policy of course number one it is contrary to natural justice three it is a product of unequal bio gaining power five it can four it can be discriminatory four it is opposite to good consents or it is unconscionable and it is untenable applying the principles of what is right and what is wrong and the constitutional force of course they are subsequently there have been any number of judgments which followed these principles but only sad parties that the principles laid down in Prajanath Ganguly though they are applicable both for public employment and private employment particularly because the position of the impugned clause there has been tested and the annual of contractor independent of its being instrumentality of state unfortunately the sub the courts have not extended the principle laid down about unconscionability of a contract in Prajanath Ganguly in subsequent judgments and it has merely whether it is a civil court or whether it is a constitutional court they have been satisfied telling that either it would not apply or you are you are entitled only for compensation for wrongful termination to contract without applying Prajanath Ganguly even in determination of the compensation amount I trust that this judgment is applied in more and more areas of protecting employment because this is judgment which is intended to protect the citizens against economic might of the employers thank you very much thank you sir the one day the one day preparation for a particular topic like you said that today only you have taken up the topic and prepared it so as usual we will take few questions for a youngsters to understand how should he understand the nuance of the entire gist of the judgment should he go hurriedly in the first round and thereafter understand second or should he try to understand from the head notes or should he go about it head notes it is better we reject it because it is editor's view or not judges view head note is written by the editor of the journal not with judge a glorious example is the Ramakrishna versus national textile corporation NTC in that Ramakrishna if you see the head note head note says insover the workmen are concerned here right which is not specifically denied is deemed to have been granted that sentence or that philosophy I don't find anywhere in the world but I successfully read the head note and got a decision also in my favor in one case but subsequently supreme god confirmed that decision a different reason than the reason for understanding anything in law forget about the judgment is only one way that is read read read and read and every time you read your mind gives the judgment a different dimension or you are able to see the judgment or perceive the judgment in a different dimension than the first reading of the earlier rate and we had a judge Thrivikram would know we read normally the conclusion of the judgment and if you go to a SCC online paragraph sir you get in the head notes or in the digest notes is the ultimate conclusions we read that conclusion paragraph we accept the conclusion from paragraph from website and go to court conclusion is always based on two things facts of the case and applicable rules these two you can ascertain and assimilate only when you read the judgment in its entire see for example today I was preparing just preparing papers in an arbitration line I have been handling I must have been handling that matter almost for last one year in CMB then in arbitration application for interim measure and all one clause that I find in the termination contract termination termination letter is government has granted approval for the proposal of APMC to cancel the contract somehow from day one I was firmly of the view that there was no proposal at all from the APMC to cancel the seeking comments of I am not on the question that the government approval was relevant or irrelevant a statement is made in the termination letter that the cabinet has approved the proposal to terminate the contract in its meeting held on so on so then I find after completion the pleadings there is no proposal at all but I had failed to read this one sentence in the termination that cabinet has approved the proposal today while filing the rejoin I noticed where is the approval where is the proposal approval is there for somebody to approve there must be a proposal the difference between approval and dictation is this if I propose and you approve it is approval of my proposal if you directly to terminate it is a dictation and not an approval you know in administrative law dictation and approval of main support one is participative decision making another is something that comes from a person who has no authority abdication of statutory discretion see that said that particular sentence and absence of proposal I must have it must have occurred to my mind in 20th or 25th reading of a simple contract then we are thinking now we are talking of understanding the judgment judgment has to be read in its entirety number one number two when you are reading the world judgments world means what is new today will become world after five years judgment would always reflect the current thinking which is in tune with the current state of the society current values of the society when you find a 1956 judgment speaking in a different tone that 2016 judgment try to rationalize why that difference in approach what are the societal changes that has occurred then only you will be in a position to understand the for example now there is one judgment of some Mukherjee where he said that asking questions to explain circumstances is not mandated see there was a case of this where Supreme God said in disciplinary proceedings rules there would be a clause where the employee has not examined himself as a witness in his defense then inquiry officer shall question him on the circumstances appearing against him in the evidence long long years ago supreme god taken a view that this is another section 313 of the CRPC therefore not asking questions is not meant can we repeat it today in the same forum as it was said 50 years ago because then 313 itself was in permissive words today 313 is in mandatory words and 313 courts have held repeatedly if prejudice caused by his establishment by failure to question the accused on the circumstances appearing against him then the conviction goes for a toss therefore you should read the judgment fully and keep keep in back of your mind what were the societal values then what are the societal values of these also one of the statements of law made in the judgment in Prajapati that interpretation of law should be a continuous process in tune with the times in which we are interpreting I can only say there is no shortcut no hand no read the judgment in full don't worry you may mark a wrong paragraph while reading for the first time do always marking always by pencil so that in a second reading if you find some other paragraph more relevant you can arrange the first one and mark the next pencil and reading these are the two things and when you are reading after all we are all practicing at the markets you would keep those books for eternity at least during our lifestyle when you read mark the appropriate paragraphs in the by a pencil so that in midnight on some other day when you want to quote it next day when you want to cite it you will know the paragraphs you will have to refer it is continuous education not continuing education continuing education as holidays but continuous education does not normally the college teachers have signed during summer vacation for continuing education rest of the time they will be educating the students whereas advocates have to be on continuous education yes sir yeah director any question from your side no questions at all sir sir has so elaboratively so indirectly he has presented that I have no questions and that's that's one of the reasons perhaps we don't have in the chat box as well as well so thank you sir for sharing your knowledge thank you thank you happy new year happy new year at once sir and many thanks this is the first day of vacation and you have given us time that itself is a big Santa's gift as Mr. Chaturth rightly said thank you sir thank you sir before we part tomorrow the session would be the admissibility of forensic evidence in India with the with the right against self-incrimination do stay connected with us tomorrow at 6