Bombay High Court
The Bombay Telephone Canteen ... vs The Mahanagar Telephone Nigam Ltd. on 14 October, 1988
Equivalent citations: [1989(58)FLR161], (1995)IIILLJ15BOM
Author: Sujata Manohar
Bench: Sujata Manohar
ORDER Sawant, J.
1. The common question as to which is the 'appropriate Government' under the Industrial Disputes Act, 1948 (hereinafter referred to as the Central act) and the Maharashtra Recognition of Trade : Unions and Prevention of Unfair Labour Practices Act, 1971 (hereinafter referred to as 'the Maharashtra Act') arises in both these appeals and therefore they are being disposed of by this common judgment. In Appeal No. 958 of 1987, the relevant facts are as follows:
Prior to coming into existence of the 1st Respondent the Mahanagar Telephone Nigam Limited (hereinafter referred to as 'the Nigam') on April 1, 1986, all the functions of the 1st respondent were admittedly carried on by the Department of Telecommunications, Ministry of Communications, Government of India. At its establishment at Cooperage, Bombay, a canteen for the benefit of its staff was being run by a Cooperative Society called the Bombay Telephone Cooperative Canteen Society Limited which is the 5th Respondent to the appeal. In the canteen some employees were employed who are admittedly the employees of the Nigam. On or about September 18, 1979, the services of three of the employees were terminated and two of them are respondents 6 and 7 to the appeal. On September 19, 1979, the Hotel Mazdpor Sabha, a trade union raised an industrial dispute in respect of the said termination of the services, before the Conciliation Officer of the State of Maharashtra under the Central Act. The Conciliation having failed, the Stale Government made a reference of the dispute to the Labour Court, Bombay. In the dispute, a preliminary objection was raised on January 1, 1981 by the Society, contending that the State Government had. no authority to make the reference and the State Labour Court had no jurisdiction to entertain the dispute, since the appropriate Government under the Central Act in the present case was the Central Government. The Labour Court upheld the preliminary objection holding that the appropriate Government was the Central Government and not the State Government. In that view of the matter, the Labour Court rejected the reference. Thereafter, the same dispute was raised before the Central Government Conciliation Officer, and on December 16, 1986 the Central Government referred the dispute to the Central Government Industrial Tribunal and the said dispute has since been pending before the said Tribunal.
In the meanwhile the 1st respondent, Nigam had already come into existence from April 1, 1986.
2. In Appeal No. 775 of 1988, on March 1,1987, Respondent No. 16, the Bombay Telephone Canteen Employees Association, filed a complaint against the Nigam under Section 28 of the Maharashtra Act, being Complaint (ULP) No. 290 of 1987 before the State Industrial Court against the non-implementation of the recommendations of the 4th Pay Commission. In that complaint, the Industrial Court issued certain directions to the appellate Nigam. Since those directions were not implemented, an application, being Miscellaneous Application No. 25 of 1987 was filed before the Vth Labour Court in the main complaint. While both the application and the main complaint were pending a preliminary objection was raised in the main complaint contending that the Maharashtra Act had no application to the canteen run by the Society since the State Government was not the appropriate, Government in relation to it as required by the Maharashtra Act. The objection was overruled by the Industrial Court by its order of April 27, 1988 holding that the appropriate Government for the canteen was the State Government and hence the Maharashtra Act had application to the complaint before it.
3. Against the decision of April 27, 1988 of the Industrial Court, the Nigam preferred a writ petition to this Court under Article 226 of the Constitution of India challenging not only the order passed by the Industrial Court under the Maharashtra Act, but also the pendency of the reference before the Central Government Industrial Tribunal under the Central Act, and the learned single Judge by his impugned order of June 9, 1988 admitted the petition and granted interim relief whereby the State Industrial Court was prevented from proceeding with the complaint under the Maharashtra Act, and the Central Industrial Tribunal was allowed to proceed with the industrial dispute pending before it. It is aggrieved by this order that both the Bombay Telephone Canteen Employees Association as well as the Nigam have preferred the present two separate appeal Nos. 958 of 1988 and 775 of 1988 respectively.
4. It is a little curious aspect of this dispute that the employees are sharply divided against each other on the issue of the proper forum to redress their grievances. The employees involved in the dispute pending-before the Central Government Industrial Tribunal are naturally reluctant to support the contention of the employees whose complaint under the Maharashtra Act is pending before the State Industrial Court and want to support the proposition that it is the Central Government which is the appropriate Government under the Centra! Act. The Ni-gam is not interested in taking any side but is naturally keen on getting the issue with regard to the forum decided finally.
5. On behalf of the appellants in appeal No. 988 of 1988 viz. the Bombay Telephone Canteen Employees Association, Mr. Vardaiya the learned counsel places reliance on a decision of the single Judge of this Court in the case of About Rehman Abdul Gafur and Anr. v. E. Paul and Ors. and two decisions of the Supreme Court, namely, Heavy Engineering Mazdoor Union v. State of Bihar and Ors. and Hindustan Aeronautics Limited v. Their Workmen and Ors. reported in 1975 II L.LJ. at page 336. As against 3 this, Mr. Ganguli appearing for the respondent workmen in Appeal No. 775 of 1988 while placing heavy reliance also on the decision of the Supreme Court (supra), refers us to yet another decision of the Supreme Court , Regional Provident Fund Commissioner, Karnataka v. Workmen, General Secretary, Karnataka Provident Fund Employees ' Union and Anr. He also seeks to draw support for the decision of one of us (Mrs. Sujata Manohar J.) International Airports Authority of India v. B.K. Srivastava and Ors. Mr. Kapadia appearing for the Nigam relies upon the decisions pointed out on both sides and in addition relies on the decision of the Supreme Court reported in 1988(3) S.C.C. page 106. Bank of India v. P.A. Stalin and Ors.
6. In , the learned single Judge was called upon to decide whether in a dispute between the Mazagaon Dock Limited and its employees, it was , the State or the Central Government which was the appropriate Government under" the Central Act. The learned Judge held that the expression "under the authority of the Central Government" as contained in Section 2(a)(i) of the Industrial Disputes Act must mean and is intended to apply to industries carried on directly under the authority of the Central Government. Industries which are carried on for their own purposes by incorporated commercial corporation which are governed by their own constitutions, as authorised by the Companies Act, cannot be described as carried on "under the authority of the Central Government". Such corporations are independent legal entities and they run the industries for their own purposes. Even when the Central Government controls these corporations, the industries are worked by the corporation under the authority of their own constitutions or charters. Consequently where the Central Government own the entire share capital of a corporation which is incorporated under the Companies Act and which run different industries, and when a dispute arising between the workers of one of such industries and its management is referred to a conciliation officer appointed by the State Government, his jurisdiction cannot be challenged by contending that the appropriate Government in respect of such industry is the Central Government and only such officer as is appointed by the Central Government can consider the dispute.
In 1969 (2) LLJ 549 Heavy Engineering Mazdoor Union v. State of Bihar & Ors, which is relied 'upon by both sides, the court considered the meaning of the word 'authority' used in Section 2(a) of the Central Act and also the question as to when the Corporation acts as an agent of the State. While dealing with the meaning of the word 'authority', the court held that he word must be construed according to its ordinary meaning and therefore must mean the legal power given by one person to another to do an act. A person is said to be authorised or to, have an authority when he is in such a position that he canact in a certain-manner without incurring liability to which he would be exposed but for the authority, or so as to produce the same effect, as if the person granting the authority, had for himself done the act. According to the court in such a situation there clearly arises the relationship of a principal and agent. The court further considered the meaning of the expression "under the authority of " and observed that this expression means "pursuant to the authority" such as where an agent or servant acts under or pursuant to the authority of his principal or master.
While dealing with the question whether the Corporation in the present case before it was the agent of the State, the Court held that it would depend on the facts of each case. Where a statute setting up the Corporation so provides such a Corporation can easily be identified as the agent of the State. In the absence of a statutory provision, however, a commercial corporation acting on its behalf, even though it is controlled wholly or partly by the Government department will be ordinarily presumed not to be a servant or agent of the State. The fact that the Minister appoints the members or directors of the Corporation and he is entitled to call for information and to give directions which are binding on the Directors and to supervise over the conduct or business of the Corporation does not render the Corporation an Agent of the Government. The court also observed that an inference that the Corporation is the Agent of the Government may be drawn where it is performing in substance governmental and not commercial functions, While dealing with the nature of an incorporated company as a special entity, the Court stated that an incorporated company has a separate existence and the law recognises it as a juristic person, separate and distinct from its members. This new personality emerges from the moment of its incorporation and its rights and delegations are different from those of its shareholders. Action taken against it does not directly affect its shareholders. The company in holding its property and carrying on its business is not the agent of its shareholders. The liability of an individual member is not increased by the fact that he is the sole person beneficially interested in the property of the corporation and that the other members have become members merely for the purpose of enabling the corporation to become incorporated and possess only a nominal interest in its property, or hold it in trust for him. Having made these observations, the Court held that the mere fact that the share capital of the Heavy Engineering Corporation was contributed by the Central Government and the fact that all its shares are held by the President and certain Officers of the Central Government does not make any difference to the proposition that the Corporation was a separate entity and not an agent of the Central Government.
In 1975 II L.LJ. 336 Hindustan Aeronautics Limited v. Their Workman and Ors. the Supreme Court followed its earlier decision in Heavy Engineering Mazdoor Union (supra) and held that Hindustan Aeronautics Limited was an entity separated from the Government, and it was not the agency of the Government. It may be mentioned here that an argument was advanced before the Court to which our attention was pointedly drawn by Mr. Vardaiya "that the company there was not an industry as it was carrying on a function which the Government alone was entitled to carry on to the exclusion of the private operators unlike in the case of the Heavy Engineering Industries". The Court while dealing with this argument observed that the distinction so made was of no consequence and does not affect the ratio of the case in Heavy Engineering Industries Limited, and held that the appropriate Government in that case was not the Central Government but,the State Government.
In Regional Provident Fund Commissioner, Karnataka v. Workmen, General Secretary, Karnataka Provident Fund Employees' Union and Anr. the admitted position was that the business of the Provident Fund Organisation was a governmental function. There was therefore, no difficulty in holding that the appropriate Government was the Central Government.
In International Airports Authority of India v. P.K. Srivastava and Ors. it held that the authority was created to discharge the functions of the Government and it was working under the control and authority of the Central Government. Hence the appropriate Government was the Central Government.
In 1988 (3) S.C.C. 106 Bank of India v. P.A. Stalin and Ors. the same question was again agitated. The Supreme Court after dealing with the Heavy Engineering Mazdoor Union (supra) and Hindustan Aeronautics Limited (supra) and other cases also referred to another of its decision viz. Ajay Hasia v. Khalid Mujib Sehravardi:1981 (1) LLJ 103 and approvingly quoted the following observations made in paragraph 7 of that judgment which are as follows:
"It is undoubtedly true that the corporation is a distinct juristic entity with a corporate structure of its own and it carries on its functions on business principle's with a certain amount of autonomy which is necessary as well as useful from the point of view of effective business management, but behind the formal ownership which is cast in the corporate mould, the reality is very much the deeply pervasive presence of the Government. It is really the Government which acts through the instrumentality or agency of the corporation and the juristic veil of corporate personality worn for the purpose of convenience of management and administration cannot be allowed to obliterate the true nature of the reality behind which is the Government"
The court ultimately came to the conclusion in that case that the appropriate Government in the case of dispute between the Bank of India, a nationalised Bank and its employees was the Central Government. The Court held that the Bank of India as well as other nationalised Banks were established under the Central Government.
7. It is in the light of the aforesaid decisions that we have to decide whether in the present case it is the Central Government or the State Government which is the appropriate Government under the Central Act. According to us, two tests which emerge from the aforesaid decision and which are relevant for considering whether a Company or Corporation is an agent of the Government or not are (i) whether the Company or the Corporation is established to carry on a function which is exclusively the privilege of the Government to carry on, and (li) whether the Government exercise control or supervision over the working of such a Company or Corporation. Both the tests must be satisfied before it is held that the Company or Corporation is an agent of the Government.
In the present case in the first instance, admittedly prior to the coming into existence of the Nigam on 1st April 1986, all the functions which are now being performed by the Nigam were carried on exclusively by the Centra] Government through its Telecommunication Department working under the Ministry of Communications, under the provisions of Section 4 of the Indian Telegraphs Act, 1885. Section 4 of the Act reads as follows:
"4(1) Within India the Central Government shall have the exclusive privilege of establishing, maintaining and working telegraphs:
Provided that the Central Government may grant a licence on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain or work a telegraph within any part of India:
Provided further that the Central Government may, by rules made under this Act and published in the Official Gazette, permit, subject to such restrictions and conditions as it thinks fit, the establishment, maintenance and working-
(a) of wireless telegraphs on ships within Indian Territorial waters and an aircraft within or above India, or Indian territorial waters and
(b) of telegraphs other than wireless telegraphs within any part of India.
(2) The Central Government may, by notification in the Official Gazette, dele gate to the telegraph authority all or any of its powers under the first proviso to Sub-section (1).
The exercise by the telegraph authority of any power so delegated shall be subject to such restrictions and conditions the Central Government may, by the notification, think fit to impose".
8. The aforesaid provision shows that the privilege of establishing, maintaining and working telegraph which includes telephones is exclusively that of the Central Government. The Central Government or its delegate the Telegraph Authority under Sub-section (2), has, however, the power to grant a licence to any other person or authority to run the said function on such conditions as it may think fit. It is in exercise of this power that by a notification of March 27, 1986 the Telegraph authority granted licence to the Nigam to carry on the said functions. The terms of the licence produced before us, show that, among other things, the licence is granted to the Nigam for a period of 5 years with an option to renew the same. The licence reserves the power to the Telegraph Authority to revoke the same on breach of any of the terms and conditions of the licence. The list of services handed over to the Nigam are mentioned in Schedule 'A' to the licence whereas schedule 'B' mentions the general conditions for the establishment, maintenance and working of the services listed in Schedule 'A'. The list mentions, among other things, that the Nigam will introduce new services as may be approved by the Telegraph Authority from time to time. The general conditions state that the terms and conditions of the making over of the management, control and oneration of the services from the Telecommunication Board to the Nigam and the condition for consequent transfer of assets and sharing of revenues for services rendered jointly by the Department of Telecommunications and the Nigam and the conditions governing the staff are covered separately by the Memorandum dated March 27, 1986 of the Telecommunications Board and that Memorandum and the orders/notifications referred to therein shall constitute an integral part of the general conditions and the licence will be subject to full compliance with the same. The general conditions further state that the Nigam will have the non-exclusive right to establish, maintain and work the services mentioned in Schedule A and that the services shall be established, maintained and marked in accordance with the rules made from time to time by the Central Government under Section 7 of the Indian Telegraphs Act, (hereinafter referred to as 'the Act'). Any person employed by the Nigam for the purpose shall be considered as a telegraph officer in accordance with subsection 2 of Section 3 of the Act. For the purposes of exercising the authority under the rules made under Section 7 of the Act, the Executive Directors of the Nigam shall be treated as equivalent to the Heads of Circles/Districts and General Managers of Department of Telecommunications, and the Managing Director of the Corporation will be treated as the head of the Department, and he may also exercise special powers as may be delegated by the Telegraph Authority from time to time by notification published in the Gazette. As regards the other officers, the Nigam has to intimate the Telegraph Authority the designations adopted and this equivalence to the designation in the Department of Telecommunication and accordingly the Telegraph Authority is to authorise the officers to exercise appropriate powers under the said rules by suitable modifications.
The N igam can fix rates, charges, deposits and fees for the establishment, maintenance, working, repair, transfer or shifting of any telegraph only as prescribed by the Telegraph Authority and published in the Gazette and the Nigam cannot fix the said rates, deposits, fees etc. without the written consent of the Telegraph Authority.
Under the general conditions, further the power to enter into individual agreements as defined in sub Section 4(a) of Section 7 as well as powers to place and maintain the telegraph lines and posts and to enter property conferred on the Telegraph Authority under Sections 10 and 11 of the Act are delegated by the Telegraph Authority to the Nigam and it is also expressly provided that arbitration of any dispute between the Nigam and the subscriber shall be dealt with in accordance with Section 7(b) of the Act as the disputes between the Tele graph Authority and the subscriber.
The Nigam is further bound to give all facilities to the Central and State Government to exercise all powers during public emergency or in the interest of public safety and abide by the orders issued under the Act. So also the Nigam has to indemnify the Central Government against all actions, claims and demands which may be brought against it in respect of any injury from : any act licensed or permitted by the licence.
The Nigam may further issue administrative instructions for the conduct of telegraphs provided those instructions are not in conflict with the provisions under the Indian Telegraph Rules framed under Section 7 of the Act or the administrative instructions issued by the Department of Telecommunications under the Telephone Allotment Rules.
The Nigam has further to provide to the performance Monitoring Unit of the Department of Telecommunication the required data and the facility and access for the purposes of data collection and analysis.
The acceptance and testing of switching and transmission equipment of the Nigam is to be carried out by the Acceptance Testing Organisation of the Department of Telecommunication and the introduction of new services and new technology has also to be done by the Nigam in consultation and close co-ordination with the said Department. The Nigam further has no power to sub-licence the privileges granted to it under the licence.
9. In addition to the aforesaid conditions of the licence, the Memorandum of Association and Articles of Association of the Nigam show that the Nigam was established to take over management, control and operation of two telephone districts, namely. Delhi Telephone District and Bombay Telephone District of the Department of Telecommunications together with all their assets and liabilities and to plan, establish, develop, provide, operate and maintain all types of Telecommunication services under licence and/or delegated powers under the Act and to work in close liaison with the Telecommunications Board and Department of Telecommunications in the matters, among others of:-
(a) Over-all development of Telecommunication Services in India and in the field of Overseas Communications.
(b) Technical specifications, standards and norms of services in the local and long-distance communication.
(c) Inter connection of the local networks services, long distance transmission systems and Overseas Communication systems managed by the Telecommunications Board or any other Organisation/Company.
(d) Implementation of any order and/or directive issued under the Indian Telegraph Act or Rules framed thereunder by the Telegraph Authority or any officer duly authorised by the Telegraph Authority or the Act.
(e) Introduction of new services.
(f) Sharing of revenues collected by the Company for various services with the Department of Telecommunications or any other agency for the usage of the facilities provided by them and vice-versa.
(g) Utilisation of the infrastructure facilities of the Telecommunications Board like Quality Assurance and Inspection, Training, Telecommunications Research Centre, Stores and Factory Organisation etc. by the Company on mutually agreed terms till such time as required by the Company.
(h) In the ordering of equipments and : stores which are having limited availability and/or limited sources of supply and are required both by the Company and the Telecommunications Board.
The Nigam has further to obtain specific prior.
(v) To take decisions regarding entering into partnership and/or regarding arrangements for sharing profits.
The Nigam can invest its moneys only in securities approved by the President and cannot give percentage in profit to any person employed by it without his approval. The Nigam cannot even borrow, raise or secure money without the approval of the President. The approval of the President is also necessary for the declaration of the dividend.
The auditor or auditors of the Nigam are further to be appointed or reappointed by the Central Government on the advice of the Comptroller and Auditor General of India who has the power-
(a) to direct the manner in which the Company's accounts shall be audited by the auditor/auditors appointed in pursuance of Article III hereof and to give such auditor/auditors instructions in regard to any matter relating to the performance of his/their functions as such.
(b) to conduct a supplementary or test audit of the Company's accounts by such person or persons as he may authorise in this behalf, and for the purposes of such audit, to have access, at all reasonable times, to all accounts, account books, vouchers, documents and other papers of the Company and to require information or additional information to be furnished to any person or persons so authorised, on such matters, by such person or persons and in such forms as the Comptroller and Auditor-General may, by general or special order, direct.
The auditor/auditors so appointed have to submit a copy of his/their reports to the Comptroller and Auditor-General who shall have the right to comment upon and supplement the audit report in such manner as he may think fit. Such comment has to be placed along with the report before the annual general meeting.
10. Thus the provisions of the licence and of the Memorandum and Articles of Association show that the Nigam is not only carrying on the function which hitherto was exclusively carried on by the Central Government, but also that the said functions are being carried on under the all pervasive control of the Central Government. In all matters material even to the day to day management of the affairs of the Nigam, a substantial control vests virtually in the Government. The all-embracing supervision and control of the Government leave no manner of doubt that the Nigam is created as a separate entity only for administrative convenience. For all practical purposes it is an agent of the Government. The relationship between the two is that of the principal and the agent and its real management is by the Government. Its corporate structure is only a veil. The present case therefore satisfied both the tests of the agency and is governed by the exception carved out by the Supreme Court in the case of Heavy Engineering Mazdoor Union v. State of Bihar and Ors. 1969-II LLJ 549 (supra) where the Court has observed that in cases where the Company or the Corporation carries on function which is exclusively reserved for the Government and does so as an agent of the Government. The Company or the Corporation though constituted as a separate entity can be said to be nothing more than an agent of the Government. Since on facts in that case these tests were not satisfied the Court had held that the Heavy Engineering Industries was not an agent of the Central Government but was a separate entity apart from the Government. To the same effect are the observations of the Court in A/ay Hasia v. Khalid Mujib Sehravardi (supra) quoted extensively above. We are therefore more than satisfied that the Nigam is nothing but the Central Government not- : withstanding its incorporation as a separate company.
11. Hence for the purposes of Section 2(a) of the Industrial Disputes Act the appropriate Government for the Nigam is the Central Government and the dispute between the Nigam and its employees can be referred for adjudication only by the Central Government and not by the State Government. This being the case, the Maharashtra Act will also not apply to the disputes between the Nigam and its employees. Hence the order passed by the Industrial Court on April 27, 1988 is hereby set aside and the proceedings before the State Industrial Court both under the Central Act as well as under the Maharashtra Act are quashed. For the same reason, the references pending before the Central Government Industrial Tribunal will proceed.
12. In view of our above findings, by consent the writ petition stands disposed of and the rule is made absolute accordingly with no order as to costs.
Appeal No. 988 of 1988 filed by the Bombay Telephone Canteen Employees' Association is dismissed.
Mr. Vardaiya applies for leave to appeal to the Supreme Court. According to us, no question of law is involved in this appeal which requires to be considered and decided by the Supreme Court. Hence the application for leave is rejected.