Central Inland Water Transport Cor. Case

THE CENTRAL INLAND
WATER TRANSPORT
CORPORATION LIMITED
VS.
BROJO NATH GANGULY
By Sunil Sahoo
Khordha Law College
4th Year

THE CENTRAL INLAND WATER TRANSPORT CORPORATION
LIMITED VS. BROJO NATH GANGULY.
( CIVIL APPEAL NO. 4412 AND 4413 OF 1985)
1986 AIR 1571 , 1986 SCR(2) 278
Court Supreme Court of India
Name of the case Central Inland Water Transport Corporation Ltd V.
Brojo Nath Ganguly
Civil appeal no. 4412 and 4413 of 1985
Appellant Central Inland Water Transport Corporation Ltd and Ors
Respondent Brojo Nath Ganguly and Ors
Citation 1986 AIR 1571 , 1986 SCR(2) 278
Bench/judges Justice D.P.Madan
Justice A.P.Sen

THE CENTRAL INLAND WATER TRANSPORT CORPORATION
LIMITED VS. BROJO NATH GANGULY.
( CIVIL APPEAL NO. 4412 AND 4413 OF 1985)
1986 AIR 1571 , 1986 SCR(2) 278
Involved Acts The Constitution of India, 1950;
The Indian Companies Act, 1956;
The Indian Contract Act, 1872;
Service, Discipline and Appeal Rules, 1979.
Important sections Article 12, 14, 38 and 39 from the Constitution of India, 1950;
Section 16, 19A and 23 of the Indian Contract Act, 1872;
Section 617 of the Indian Companies Act, 1956;
Rule 9(1) from the Central Inland Water Transport
Corporation Limited-
Appeal Rules 1979.
Decided on 06.04.1986

CASE SUMMARY
In the case of Central Inland Water Transport Corporation Ltd v. Brojo Nath Ganguly ,The
appellant was the Central Inland Water Transport Corporation Ltd and Ors and the respondent was
Brojo Nath Ganguly and Ors. The company mentioned by appellant was a company that was owned
by two governments namely the State Government of West Bengal and by the Government of India.
The appellants company in the case has been defined in the India Companies Act, 1956 under
Section 617.
The Central Inland Water Transport Corporation ltd was incorporated on February 22, 1967. It
was owned by the Government of India and the State Governments of West Bengal and Assam. It
was a Government company of Section 617 of the Companies Act, 1956 which is a subsidiary of a
Government company. There’s a company “Rivers Steam Navigation Company Limited” was
developing very much in the same business comprising the maintenance and flowing of river service
as the company it has been undertaking and it was ordered to be wind up by an order on May 5,
1967 delivered by the Calcutta High Court and it dissolved payment to all the investors .

By the High Court the arrangement scheme was approved and entered into the dissolved
corporation and the company liabilities and the assets of the said company were handed over by
the company.
Brojo Nath Ganguly was the first respondent in Civil Appeal was at the date when the said
scheme of arrangement became operative, working in the mentioned company and the
Corporation took over his services and he was selected on September 8, 1967 as a Deputy Chief
Accounts Officer. A confidential letter regarding accusations made against him for showing
negligence or careless attitude in maintaining the Provident Fund accounts was sent to him by the
General Manager (Finance Department) on February 16, 1983 to reply within 24 hours to the
accusation of negligence . Brojo Nath Ganguly had given a clear reply to the show cause notice.
Thereafter by a letter from the date of February 26, 1983 was signed by the Chairman cum Managing
Director of the Corporation, under clause (i) of rule 9 the notice or the Service Rules was given to
Ganguly terminating his services with the mentioned Corporation with instant effect .

GOING TO THE BRIEF STUDY OF FACTS IN THIS CASE;
The Central Inland Water Transport Corporation was incorporated by the Union
Government. The corporation was under complete dominance of the Central Government of
India and also it holds all of its shares.
Brojo Nath Ganguly the respondent of 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 particular terms and conditions.
Brojo Nath Ganguly joined as the Deputy Chief Accountant Officer in the corporation
and later he was appointed as the Deputy Financial Adviser and Chief Accounts Officer
through his hard work and determination.
A suit was filed by the respondent in High Court of Calcutta by that Rule 9(i) is arbitrary and
unprincipled because of which the decision was in respondent’s favour by the Hon’ble. This
leads the plaintiff to file a suit against that in the apex court of the country i.e. the special leave
grant by the Supreme Court of India.
.

Anyways here also the court’s decision was against the petitioner and the special leave grant
was cancelled by the Supreme Court. The court held under the Indian Contract Act, 1872
section 23 Rule 9 (i) to be void.
In the present case, plaintiffs had much less bargaining power as compared to that of
Corporation, as they did not have any meaningful choice while supposing to the terms and
conditions given of their permission the corporations. If they would have refused to accept the
said rule, it would have led to their authorized service and exposed them to the harassment
and the consequent anxiety and uncertainty of discovering alternative employment actions.
The judgment given in the case Central Inland Water Transport Corporation Ltd V Brojo
Nath Ganguly was rejecting the appeal and the Supreme Court held that the term “state” had
a stand basis so the state covers the government and parliament of India. The operations and
the functions of the company are crucially played a national importance. There were no raised
disputes as the company was a public sector entity of the government. Thus the Court relied
upon the judgment of Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, clarifies that the
State operates by its instrumentalities, being an abstract body.

Accordingly, “for Article 12, the Court must necessarily lift the corporate veil in order to establish
if the face of the instrumentality or agency is present behind that envelope. When there exists
an agency of the State which the garb of a Government Company has presumed. Thus it
ceases to be an agency. To determine the subject matter the judgment was marked as ” In this
instance, the company was found to fall under the defined notion . By the second issue the
court replied that the Court assessed that it is unable to compare employees with commodities
soled an offer or they are bought and sold, or it is a contract of employment equivalent to a
transaction involving those enterprises. Thus in accordance with Article 23 of Indian Contract
Act 1872 , Rule 9(1) the conditions were unfair , arbitrary and contrary to public policy.c

ISSUES RAISED :
Does Article 12 of the Indian Constitution holds its jurisdiction over the corporation that comes under
the definition of state
• Was the clause (i) of Rule 9 of The Central Inland Water Transport Corporation Limited- Appeal
Rules , service and discipline 1979 is arbitrary and unconscionable ?
• Can the power granted under rule 9(i) be declared void in violation of Article 14 of the
Constitution ?
• Is an unconscionable term can be held to be void/ voidable under Indian Contract Act (ICA) ?

CONTENTION :
The appellant’s contention was that any government company incorporated under the
Company Act . It has a different form than any statutory corporation incorporated through a
statute. The distinction of operations was between the both by illustrations. On the contrary, the
arguments of respondents was that a broad interpretation term of a state as it referred to Article 12
and also applies to governmental corporations v companies . A state has its authority to operate
any of its agencies, through any other Government Department , Government Company, State
Corporation or any other activity it including commercial layouts also .
In response to the contract employment it was argued that his contracts are distinctive
from the other contracts. The term unreasonable inserted by the other private employer as can not
be found in the eyes of law. Such as the term may In accordance with the Constitution, ruled
unconstitutional with Article 14.

RATIONALE :
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 of 1956 but completely taken over
by three governments at a time namely the Central Government, the Government of West Bengal
and Government of Assam .
A statutory corporation is generally established in order to create a monopoly in the State. I respect
a particular activity. However a Government company is not established for this purpose so the
Corporation does not have the monopoly of inland water transport but is only a trading company
and it was already shown by the objects clause in its Memorandum of Association; and The barging
had kept forward was based on unethical terms as it contradicted the justified reasons and it seems
to have taken place under unfair edge over others.

And the state under Section 39 should favour the policy of safeguarding its citizens and providing
equal pay for equal work for both sex i.e. both females and male are equally decreasing the
means of production to the common detrimental and concentration of wealth and the 9th rule of
clause 1 of the Central Inland Water Transport Corp Limited . Service and Discipline and Appeal
Rules, 1979 held 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
that was permissible.
The Rule 9(1) of clause in a contract of employment interferes with the unfavorable to the public
interest and the large sections of the public and it may lead to generating a lack of confidence in
the heads of those who encounter it and also it is against the welfare of the public.

DEFECTS OF LAW :
The Court relied upon the judgment of Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi and
clarified that the State operates by its instrumentalities. Accordingly, for Article 12, the Court must
necessarily lift the corporate veil in order to establish if the face of the agency or instrumentality is
present behind that veil. If there is any existence of an agency of the State which was about to be
presumed the garb of a Government Company, it thereby ceases to be an agency”.
This judgement was marked as a test to determine the subject matter. In this instance, the company
was found to fall under the defined notion. In answer to the second issue, the dispute between the
company and the employees was seen as distinct from the other contracts entered into throughout
the course of their commercial activity. The Court assessed that it is unable to compare employees
with commodities offered for sale or which are bought and sold, nor is a contract of employment
equivalent to a transaction involving enterprises.

INFERENCE :
Therefore, in accordance with Article 23 of the Indian Contract Act 1872, Rule 9 (i) of the
Rules of Service, Discipline and Appeal was deemed void and declared ultra-vires pursuant to Article
14 of the Constitution. The conditions were unfair, arbitrary and contrary to public policy.
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. The Expression “The State” was used in Part III or IV of The Indian
Constitution it doesn’t just incorporate the Union of India yet incorporates additionally– that work
under the profound and inescapable control of the government bodies.

As it was propounded by the word unjustifiable methods it was meant to be wrong or nonsensical.
On the off chance that an agreement is inappropriate at the time the agreement is made, the Court
may decline to uphold the agreement. There would be an unreasonable deal in this way, be one
which is conflicting to what exactly is justifiable or unjustifiable and correct or sensible and
Statement (i) of Rule 9 is against the public arrangement and it is void under segment 23 of the
Indian Contract Act as it presents outright and self-assertive force upon the enterprise. It doesn’t
state who in the interest of the Corporation is to utilize that power. There are no rules set down to
demonstrate in what conditions the force given by rule 9(i) is to be practiced by the Corporation.
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.

CONCLUSION :
The appeal was dismissed by Justice D.P. Madon the Supreme Court judge and the judgment was
given against the defendants stating that rule 9(i) is said to be invalid, arbitrary, and
unconscionable and opposes public policy under Section 23 of Indian Contract Act, 1872. This case
played a crucial role in the interpretation of the term ‘state’ under Article 12. The corporation was
also ordered to pay the expenses of appeal by the court. The decision provided was descriptive
but was in favour of the respondent. Also to accept the choice given was thankful and expressive
that helped in broadening the idea of Article 12.

REFERENCES :
• M.C. Mehta vs Kamal Nath case
• V. Sadasivan and 36 Others vs Binny Limited
• Indian Kanoon, (15th April 2010), Central Inland Water Transport Corporation Ltd. v.
Brojo Nath Ganguly
• Ranjit Samantaray, (5th June 2009),Central Inland Water Transport Corporation Ltd. & Ors V.
Brojo Nath Ganguly & Ors
• Nishka Singh, (12th Jul 2020), Central Inland Water Transport Corporation Ltd. & Ors V. Brojo Nath
Ganguly AIR 1986 SC 1571

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