Karnataka High Court
President, Chitradurga District ... vs The Managing Director, Bhadra Sahakari ... on 25 February, 2003
Equivalent citations: ILR2004KAR536, 2003(5)KARLJ466
Author: K. Ramanna
Bench: K. Ramanna
ORDER S.R. Nayak, J.
1. This writ petition is preferred by Chitradurga District Mazdoor Sangh, trade union represented by its President calling in question the inaction of the Management of Bhadra Sahakari Sakkare Karkhane Niyamita represented by its Managing Director, first respondent in the writ petition, in implementing the settlement produced as Annexure-A, dated 14-5-1998 and for a consequent direction to the management to implement the aforementioned settlement.
2. The events leading to the filing of the writ petition be noted briefly as under:
The services of members of the petitioner-Sangha, while serving as daily wagers, seasonal and regular employees in the establishment of the first respondent-factory, were terminated by the management. The concerned workmen instituted industrial disputes before the Labour Court, Hubli assailing the above action of the management. When those disputes were pending before the Labour Court, the management in response to several representations made by the union and its members negotiated with the office-bearers of the union for an amicable settlement of the industrial dispute and that has ultimately resulted in a settlement dated 14-5-1998 which is sought to be implemented in the present writ proceedings. According to the union, in terms of the settlement, the management ought to have absorbed the services of 53 workmen named in the settlement.
3. Opposing the writ petition, the management has filed statement of objections.
4. At the threshold, on behalf of the management, it is contended that writ petition is not maintainable for the first respondent-sugar factory could not be regarded as a "State" within the meaning of Article 12 of the Constitution nor an "authority" for the purpose of issuance of writs or orders under Article 226 of the Constitution. It is further contended by the management that the union, in terms of the settlement dated 14-5-1998, ought to have withdrawn the industrial dispute with regard to all workmen numbering 124 whereas union has withdrawn dispute concerning only 53 workmen and since the union has failed to stand by its solemn promise, it is not entitled to seek mandamus at the hands of this Court to implement the terms of the settlement which are favourable to its members without performing reciprocal obligations.
5. Since the preliminary objection raised by management goes to the root of the matter, it is appropriate that the Court should deal with that question in the first instance. Article 12 reads thus:
"In this part, unless the context otherwise requires, "the State" includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India".
6. The question as to under what circumstances private bodies like a Company, or a Corporation or a Society could be considered to be 'other authorities' within the meaning of that term occurring in Article 12 of the Constitution of India arose for decision before the Apex Court in Ajay Hasia v. Khalid Mujib Sehravardi and Ors. A Constitution Bench of the Supreme Court, on an in-depth and comprehensive treatment of the question and on consideration of its earlier decision in Ramana Dayaram Shetty v. The International Airport Authority of India and Ors., evolved certain tests for determining as to when a Corporation or a Company or a Society can be said to be an 'instrumentality or an agency of the State'. Paragraph 9 of the said judgment reads-
"The tests for determining as to when a Corporation can be said to be an instrumentality or agency of Government may now be culled out from the judgment in the International Airport Authority's case, supra. These tests are not conclusive or clinching, but they are merely indicative indicia which have to be used with care and caution, because while stressing the necessity of a wide meaning to be placed on the expression "other authorities", it must be realised that it should not be stretched so far as to bring in every autonomous body which has some nexus with the Government with the sweep of the expression. A wide enlargement of the meaning must be tempered by a wise limitation. We may summarise the relevant tests gathered from the decision in the International Airport Authority's case as follows:
(1) "One thing is clear that if the entire share-capital of the Corporation is held by Government it would go a long way towards indicating that the Corporation is an instrumentality or agency of Government".
(2) "Where the financial assistance of the State is so much as to meet almost entire expenditure of the Corporation, it would afford some indication of the Corporation being impregnated with governmental character".
(3) "It may also be a relevant factor..... whether the Corporation enjoys monopoly status which is the State conferred or State protected".
(4) "Existence of deep and pervasive State control may afford an indication that the Corporation is a State agency or instrumentality.
(5) "If the functions of the Corporation of public importance and closely related to governmental functions, it would be a relevant factor in classifying the Corporation as an instrumentality or agency of Government".
(6) "Specifically, if a department of Government is transferred to a Corporation, it would be a strong factor supportive of this inference of the Corporation being an instrumentality or agency of Government".
If on a consideration of these relevant factors it is found that the Corporation is an instrumentality or agency of Government, it would, as pointed out in the International Airport Authority's case, supra, be an 'authority' and, therefore, 'State' within the meaning of the expression in Article 12".
7. The Constitution Bench, however, has made it very clear that those tests evolved by it are neither conclusive nor clinching nor exhaustive, but they are merely indicative indicia, which have to be used with care and caution.
8. Another Constitution Bench of Supreme Court in Sukhdev Singh and Ors. v. Bhagatram Sardar Singh Raghuvanshi and Anr., dealing with the meaning of word 'authorities' occurring in Article 12 of the Constitution held.-
"Institutions engaged in matters of high public interest or performing public functions are by virtue of the nature of the function performed Government agencies, (see the decisions in (1926)273 US 536 : 71 Law Ed. 750 and Nixon v. Condon, (1931)286 US 73 : 76 Law Ed. 948). Activities which are too fundamental to the society are by definition too important not to be considered Government function. This demands the delineation of a theory which requires Government to provide all persons with all fundamentals of life and the determinations of aspects which are fundamental. The State today has an affirmative duty of seeing that all essentials of life are made available to all persons. The task of the State today is to make possible the achievements of a good life both by removing obstacles in the path of such achievements and in assisting individual in realizing his ideal of self-perfection. Assuming that indispensable functions are Government functions, the problem remains of defining the line between fundamentals and non-fundamentals. The analogy of the doctrine of "busineses affected with a public interest" immediately comes to mind. The difficulty here is well-stated by Justice Holmes in Tyson and Brother v. Banton, (1926)273 US 418 : 71 Law. Ed. 718 dealing with the constitutionality of a New York statute which limited the fees charged by theatre ticket brokers:
"But if we are to yield to fashionable conventions, it seems to me that theatres are as much devoted to public use as anything well can be. To many people the superfluous is the necessary, and it seems to me that Government does not go beyond its sphere in attempting to make life livable for them".
The difficulty of separating vital Government functions from non-Government functions has created further difficulties. Is the distinction between governmental and non-governmental functions which plagued the Courts a rational one? The contrast is between governmental activities which are private and private activities which are governmental. Without ,the adoption of a radical laissez faire philosophy and the definition of state functions as they were current in the days of Herbert Spencer it is impossible to sort out proper from improper functions. Besides the so-called traditional functions, the modern State operates a multitude of public enterprises. Mr. Justice Homes said, the Constitution does not enact Herbert Spencer's social statics. This applies equally to the definition of State function for legal purposes".
9. A Division Bench of the Supreme Court in Central Inland Water Transport Limited and Anr. v. Brojo Nath Ganguly and Anr., dealing with the expression 'State', in the context of Parts III and IV of the Constitution, held-
"What then does the expression "the State" in the context of Parts III and IV of the Constitution mean?
Men's concept of the State as a polity or a political unit or entity and what the functions of the State are or should be have changed over the years and particularly in the course of this century. A man cannot obstinately cling to the same ideas and concepts all his life. As Emerson said in his essay on "Self-Reliance", "A foolish consistency is the hobgoblin of little minds". Man is by nature ever restless, ever discontent, ever seeking something new, ever dissatisfied with what he has. This inherent trait in the nature of man is reflected in the society in which he lives for a society is conglomerate of men who live in it. Just as man by nature is dissatisfied, so is society. Just as man seeks something new, ever hoping that a change will bring about something better, so does society. Old values, old ideologies and old systems are thus replaced by new ideologies, a new set of values and a new system; they in their turn to be replaced by different ideologies, different values and a different system. The ideas that seem revolutionary become outmoded with the passage of time and the heresies of today become the dogmas of tomorrow. What proves to be adequate and suited to the needs of a society at a given time and in particular circumstances turns out to be wholly unsuited and inadequate in different times and under different circumstances.
The story of mankind is punctuated by progress and retrogression. Empires have risen and crashed into the dust of history. Civilisations have flourished, reached their peak and passed away. In the year 1625, Carew, C.J., while delivering the opinion of the House of Lords In re the Earldom of Oxford, (1626)W Jo 96 : (1626)82 ER 50 in a dispute relating to the descent of that Earldom, said:
"and yet time hath his revolution, there must be a period and an end of all temporal things, finis rerum, an end of names and dignities, and whatsoever is terrene".
The cycle of change and experiment, rise and fall, growth and decay, and of progress and retrogression recurs endlessly in the history of man and the history of civilisation. T.S. Eliot in the First Chorus from "The Rock" said;
0 perpetual revolution of configured stars, 0 perpetual recurrence of determined seasons, 0 world of spring and autumn, birth and dying! The endless cycle of idea and action, Endless invention, endless experiment".
The law exists to serve the needs of the society which is governed by it. If the law is to play its allotted role of serving the needs of the society, it must reflect the ideas and ideologies of that society. It must keep time with the heartbeats of the society and with the needs and aspirations of the people. As the society changes, the law cannot remain immutable. The early nineteenth century essayist and wit, Sydney Smit, said: "When I hear any man talk of an unalterable law, I am convinced that he is an unalterable fool". The law must, therefore, in a changing society march in tune with the changed ideas and ideologies. Legislatures are, however, not best fitted for the role of adapting the law to the necessities of the time, for the legislative process is too slow and the Legislatures often divided by politics, slowed down by periodic elections and overburdened with myriad other legislative activities. A constitutional document is even less suited to this task, for the philosophy and the ideologies underlying it must of necessity be expressed in broad and general terms and the process of amending a Constitution is too cumbersome and consuming to meet the immediate needs. This task must, therefore, of necessity fall upon the Courts because the Courts can by the process of judicial interpretation adapt the law to suit the needs of the society".
10. In the same case, the Division Bench further, on review of the earlier decisions, held.-
"What is the position before us? Is it only one case decided on a concession and another based upon an assumption that a Government company is "the State" under Article 12? That is the position in fact but not in substance. As we have seen, authorities constituted under, and Corporations established by, statutes have been held to be instrumentalities and agencies of the Government in a long catena of decisions of this Court. The observations in several of these decisions, which have been emphasised by us in the passages extracted from the judgments in those cases, are general in their nature and take in their sweep all instrumentalities and agencies of the State, whatever be the form which such instrumentality or agency may have assumed. Particularly relevant in this connection are the observations of Mathew, J., in Sukhdev Singh's case, supra, of Bhagwati, J., in International Airport Authority's case, supra, and Ajay Hasia's case supra, and of Chin-nappa Reddy, J., in Managing Director, Uttar Pradesh Warehousing Corporation and Ors. v. Vijay Narayan Vajpayee. If there is an instrumentality or agency of the State which has assumed the garb of a Government company as defined in Section 617 of the Companies Act, it does not follow that it thereby ceases to be an instrumentality or agency of the State. For the purposes of Article 12 one must necessarily see through the corporate veil to ascertain whether behind that veil is the face of an instrumentality or agency of the State. The Corporation, which is the appellant 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 divest it of its character of an instrumentality or agency of the State. It is nothing but the Government operating behind a corporate veil, carrying out a governmental activity and governmental functions of vital public importance. There can thus be no doubt that the Corporation is "the State" within the meaning of Article 12 of the Constitution".
11. Thus, now it is well-settled that mandamus can be issued to enforce public duty against a person or a body though they are not public officers or statutory bodies. In Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust and Ors. v. V.R. Rudani and Ors., a Division Bench of the Supreme Court held.-
"In Praga Tools Corporation v. C.V. Imanual and Ors., this Court said that a mandamus can issue against a person or body to carry out the duties placed on them by the statutes even though they are not public officials or statutory body. It was observed:
"It is, however, not necessary that the person or the authority on whom the statutory duty is imposed need be a public official or an official body. A mandamus can issue, for instance, to an official of a society to compel him to carry out the terms of the statute under or by which the society is constituted or governed and also to companies or Corporations to carry out duties placed on them by the statutes authorising their undertakings. A mandamus would also lie against a company constituted by a statute for the purpose of fulfilling public responsibilities.
(See Halsbury's Laws of England (3rd Ed., Vol. II, p. 52 and onwards)".
21. Here again, we may point out that mandamus cannot be denied on the ground that duty to be enforced is not imposed by the statute. Commenting on the development of this law, Professor De Smith states: "To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract". (Judicial Review of Administrative Act, 4th Ed. p. 540). We share this view. The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into watertight compartment. It should remain flexible to meet the requirements of variable circumstances. Mandamus is a very wide remedy which must be easily available 'to reach injustice wherever it is found'. Technicalities should not come in the way of granting that relief under Article 226. We, therefore, reject the contention urged for the appellants on the maintainability of the writ petition".
12. In Uttar Pradesh State Co-operative Land Development Bank Limited v. Chandra Bhan Dubey and Ors., a Division Bench of the Supreme Court dealing with the question whether the Uttar Pradesh State Co-operative Land Development Bank Limited is amenable to writ jurisdiction under Article 226 of the Constitution held-
"In view of the fact that control of the State Government on the appellant is all-pervasive and the employees had statutory protection and therefore the appellant being an authority or even instrumentality of the State, would be amenable to writ jurisdiction of the High Court under Article 226 of the Constitution it may not be necessary to examine any further the question if Article 226 makes a divide between public law and private law. Prima facie from the language of Article 226, there does not appear to exist such a divide. To understand the explicit language of the article, it is not necessary for us to rely on the decision of the English Courts as rightly cautioned by the earlier Benches of this Court. It does appear to us that Article 226 while empowering the High Court for issue of orders or directions to any authority or person, does not make any such difference between public functions and private functions. It is not necessary for us in this case to go into this question as to what is the nature, scope and amplitude of the writs of habeas corpus, mandamus, prohibition, quo warranto and certiorari. They are certainly founded on the English system of jurisprudence. Article 226 of the Constitution also speaks of directions and orders which can be issued to any person or authority including, in appropriate cases, any Government. Under Clause (1) of Article 367, unless the context otherwise requires, the General Clauses Act, 1897, shall, subject to any adaptations and modifications that may be made therein under Article 372, apply for the interpretation of the Constitution as it applies for the interpretation of an Act of the Legislature of the Dominion of India. "Person" under Section 2(42) of the General Clauses Act shall include any company or association or body of individuals, whether incorporated or not. The Constitution is not a statute. It is a fountain-head of all the statutes. When the language of Article 226 is clear, we cannot put shackles on the High Courts to limit their jurisdiction by putting an interpretation on the words which would limit their jurisdiction. When any citizen or person is wronged, the High Court will step in to protect him, be that wrong be done by the State, an instrumentality of the State, a company or a co-operative society or association or body of individuals, whether incorporated or not, or even an individual. Right that is infringed may be under Part III of the Constitution or any other right which the law validly made might confer upon him. But then the power conferred upon the High Courts under Article 226 of the Constitution is so vast, this Court has laid down certain guidelines and self-imposed limitations have been put there subject to which the High Courts would exercise jurisdiction, but those guidelines cannot be mandatory in all circumstances. The High Court does not interfere when an equally efficacious alternative remedy is available or when there is an established procedure to remedy a wrong or enforce a right. A party may not be allowed to bypass the normal channel of civil and criminal litigation. The High Court does not act like a proverbial "bull in a china shop" in the exercise of its jurisdiction under Article 226".
13. A three Judge Bench of the Supreme Court in Air India Statutory Corporation v. United Labour Union and Ors., dealing with the scope of power under Article 226 of the Constitution to enforce public law duties and granting public law remedies held-
"The founding fathers placed no limitation or fetters on the power of the High Court under Article 226 of the Constitution except self-imposed limitations. The arm of the Court is long enough to reach injustice wherever it is found. The Court as sentinel on the qui vive is to mete out justice in given facts. On finding that either the workmen were engaged in violation of the provisions of the Act or were continued as contract labour, despite prohibition of the contract labour under Section 10(1), the High Court has, by judicial review as the basic structure, constitutional duty to enforce the law by appropriate directions. The right to judicial review is now a basic structure of the Constitution by catena of decisions of this Court starting from Smt. Indira Nehru Gandhi v. Raj Narain, and S.R. Bommai v. Union of India . It would, therefore, be necessary that instead of leaving the workmen in the lurch, the Court would properly mould the relief and grant the same in accordance with law.
The public law remedy given by Article 226 of the Constitution is to issue not only the prerogative writs provided therein but also any order or direction to enforce any of the fundamental rights and "for any other purpose". The distinction between public law and private law remedy by judicial adjudication gradually marginalised and became obliterated. In Life Insurance Corporation of India v. Escorts Limited, this Court in paragraph 102 had pointed out that the difficulty will lie in demarcating the frontier between the public law domain and the private law field. The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the question and the host of other relevant circumstances. Therein, the question was whether the management of LIC should record reasons for accepting the purchase of the shares? It was in that fact situation that this Court held that there was no need to state reasons when the management of the shareholders by resolution reached the decision. This Court equally pointed out in other cases that when the State's power as economic power and economic entrepreneur and allocator of economic benefits is subject to the limitations of fundamental rights, a private Corporation under the functional control of the State engaged in an activity hazardous to the health and safety of the community, is imbued with public interest which the State ultimately proposes to regulate exclusively on its industrial policy. It would also be subject to the same limitations as held in M.C. Mehta v. Union of India .
The legal right of an individual may be founded upon a contract or a statute or an instrument having the force of law. For a public law remedy enforceable under Article 226 of the Constitution, the actions of the authority need to fall in the realm of public law --be it a legislative act of the State, an executive act of the State or an instrumentality or a person or authority imbued with public law element. The question requires to be determined in each case. However, it may not be possible to generalise the nature of the action which would come either under public law remedy or private law field nor is it desirable to give exhaustive list of such actions. As held by this Court in Calcutta Gas Company Limited v. State of West Bengal., that if the legal right of a Manager of a company is denuded on the basis of recommendation by the Board of Management of the company, it would give him right to enforce his right by filing a writ petition under Article 226 of the Constitution. In Mulamchand v. State of Madhya Pradesh, this Court had held that even though the contract was void due to non-compliance of Article 229, still direction could be given for payment of the amount on the doctrine of restitution under Section 70 of the Act, since the State had derived benefit under the void contract. The same view was reiterated in State of West Bengal v. B.K. Mandal and Sons, and in New Marine Coal Company Limited v. Union of India . In Gujarat State Financial Corporation v. Lotus Hotels (Private) Limited, a direction was issued to release loan to the respondent to comply with the contractual obligation by applying the doctrine of promissory estoppel. In Mahabir Auto Stores v. Indian Oil Corporation, contractual obligations were enforced under public law remedy of Article 226 against the instrumentality of the State. In Kumari Shrilekha Vidyarthi v. State of Uttar Pradesh, contractual obligations were enforced when public law element was involved. Same judicial approach is adopted in other jurisdictions, namely, the House of Lords in Gillick v. West Norfolk and Wisbech Area Health Authority, 1986 AC 112 : (1985)3 All. ER 402 : (1985)3 WLR 830 (HL) wherein the House of Lords held that though the claim of the plaintiff was negatived but on the anvil of power of judicial review, it was held that the public law content of the claim was so great as to make her case an exception to the general rule. Similarly in Dr. Roy v. Kensinstone and Chelsea Family Practitioners Committee, (1992)1 AC 624 : (1992)1 All ER 705 : (1992)2 WLR 239 (HLR) the House of Lords reiterated that though a matter of private law is enforceable by ordinary actions, a Court also is free from the constraints of judicial review and that public law remedy is available when the remuneration of Dr. Roy was sought to be curtailed. In Life Insurance Corporation v. Consumer Education and Research Centre, this Court held that each case may be examined on its facts and circumstances to find out the nature and scope of the controversy. The distinction between public law and private law remedy has now become thin and practically obliterated".
14. In the same decision the Supreme Court held that though the right to work under the Constitution is not a Fundamental Right, but after appointment to a post or office, be it under the State, its instrumentality, juristic person or private entrepreneurs, an employer must be dealt with as per public element and in public interest assuring him equality under Article 14 of the Constitution and all concomitant rights emanating therefrom.
15. What the Constitution Bench of the Supreme Court observed in paragraphs 81 and 82 in J.P. Unnikrishnan and Ors. v. State of Andhra Pradesh and Ors., AIR 1993 SC 2178 is quite apposite to appreciate the threshold objection raised by the management of the respondent-sugar factory. It reads-
"81. As a sequel to this, an important question arises: What is the nature of functions discharged by these institutions? They discharge a public duty. If a student desires to acquire a degree, for example, in medicine, he will have to route through a medical college. These medical colleges are the instruments to attain the qualification. If, therefore, what is discharged by the educational institution, is a public duty that requires, to act fairly.
82. In such a case, it will be subject to Article 14, Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust, supra, is an interesting case where a writ of mandamus was issued to a private college. In paragraph 12 at page 697 (of SCC) (para 11, at pp. 1610-11 of AIR) it was held:
"The essence of the attack on the maintainability of the writ petition under Article 226 may now be examined. It is argued that the management of the college being a trust registered under the Bombay Public Trust Act is not amenable to the writ jurisdiction of the High Court. The contention in other words, is that the trust is a private institution against which no writ of mandamus can be issued. In support of the contention, the learned Counsel relied upon two deci-sions of this Court: (a) Executive Committee of Vaish Degree College, Shamli v. Lakshmi Narain AIR 1976 SC 888 : (1976)2 SCC 58 and (b) Dipak Kumar Biswas v. Director of Public Instructions . In the first of the two cases, the respondent-institution was a Degree College managed by a registered Co-operative Society. A suit was filed against the college by the dismissed principal for reinstatement. It was contended that the Executive Committee of the college which was registered under the Co-operative Societies Act and affiliated to the Agra University (and subsequently to Meerut University) was a statutory body. The importance of this contention lies in the fact that in such a case, reinstatement could be ordered if the dismissal is in violation of statutory obligation. But this Court refused to accept the contention. It was observed that the management of the college was not a statutory body since not created by or under a statute. It was emphasised that an institution which adopts certain statutory provisions will not become a statutory body and the dismissed employee cannot enforce a contract of personal service against a non- statutory body" ".
16. Sri Jayakumar S. Patil, learned Counsel for the petitioner while meeting the threshold objection raised by the management took us through the relevant bye-laws of the first respondent-Company and provisions of Karnataka Co-operative Societies Act, 1959 (for short 'the Act') and would maintain that the supervision and control exercised by State Government in the affairs of management of first respondent-sugar factory are all pervasive and deep. Sri Jayakumar S. Patil would also highlight that nearly 65% of shares are held by Government apart from the fact that crores of rupees have been lent by the State Government to the sugar factory. Sri Jayakumar S. Patil with reference to the records placed before the Court would point out that not only crores of rupees have been lent to the sugar factory by the State Government but also the State Government has waived the liability of the sugar factory to an extent of several crores of rupees. After referring to the powers and functions of the Managing Director of the sugar factory, Sri Jayakumar S. Patil would maintain that the power conferred on the Managing Director are all vital as well as important in nature. Sri Jayakumar S. Patil would conclude that having regard to the totality of facts and circumstances of the case and pervasive powers vested in the State Government, it can be said that the impugned inaction of the management of the first respondent-sugar factory is not amenable to writ jurisdiction of this Court under Article 226 of the Constitution.
17. On the other hand, Sri S.N. Murthy, learned Counsel for the sugar factory, at the threshold, would maintain that primary function carried on by the sugar factory is not a function akin to a governmental function and therefore, simply because, the Government of Karnataka holds 62 to 65% of shares, advanced loans to first respondent-factory and waived certain loans due from it, it cannot be said that the sugar factory is a "State" within the meaning of Article 12 of the Constitution or an "authority" for the purpose of issuance of writs or orders under Article 226 of the Constitution. The crux of the argument of Sri Murthy is that the dispute brought before the Court does not involve any public law element and therefore, the petitioner should not be permitted to invoke extraordinary jurisdiction of this Court under Article 226 of the Constitution.
18. In the context of these rival contentions, what the Court has to see is whether the materials placed before the Court would satisfy one or the other test laid down by Apex Court in Ajay Hasia's case and the cases to follow it. It is relevant to caution ourselves that Supreme Court not only in Ajay Hasia's case but in the decisions to follow that judgment cautioned that in order to decide whether a legal entity can be regarded as a "State" or an "authority", it is not that all the six tests laid in Ajay Hasia's case should co-exist. The Court has also cautioned that the list of six tests is not exhaustive thereby indicating that there may be other relevant tests which could be applied by the constitutional Courts to decide the question whether a legal entity can be regarded as a "State". With this preface, we will proceed to examine the facts of this case in order to answer the preliminary objection raised by the first respondent in regard to maintainability of the writ petition.
19. The first respondent is a Co-operative sugar factory registered under the provisions of the Act. The salient features of first respondent-society which are not in dispute be noted briefly as under:
That, out of total paid up share-capital of Rs. 458.57 lakhs, the Government of Karnataka holds share-capital of Rs. 297 lakhs, that is to say, 65% of the total share-capital of the first respondent. In addition, Government of Karnataka has lent a sum of Rs. 3,61,05,868/- as could be seen from Annexure-J placed before the Court. Further, Government of Karnataka has waived the loan advanced to the first respondent-sugar factory to the tune of Rs. 2,26,25,186.21 as reflected in Annexure-K. Therefore, it is quite apparent that Government of Karnataka has vital stake in the financial management of the first respondent-sugar factory. We also find quite pervasive and important administrative powers vested in Government of Karnataka and Registrar of Co-operative Societies who is a statutory authority under the Act. It needs to be noticed that since Government of Karnataka is holding 65% of share-capital and has advanced huge loan referred to above, it can exercise powers conferred under the provisions of Sections 29, 29-G, 53-A and 54 of the Act. It also needs to be noticed that the first respondent-sugar factory is an "assisted society" within the meaning of that term as defined under Section 2(a-1) of the Act.
20. Section 29 of the Act empowers the State Government to nominate not more than three persons as its representatives on the committee of any assisted society. Since the respondent-society is the assisted society, the power available to the Government under Section 29 of the Act can be exercised by the State Government. It is trite that the power reserved to the State Government under Section 29 of the Act is a very important and vital power in managing the affairs of the first respondent.
21. Section 29-G deals with appointment of Chief Executive. The proviso to Sub-section (1) of Section 29-G provides that in respect of the co-operative societies where the majority of shares are held by the Government, the Government or the Registrar shall have power to appoint and remove the Chief Executive. In case of first respondent-sugar factory, since the Government holds 65% paid up share-capital, it is stated, in exercise of the power conferred under the proviso to Sub-section (1) of Section 29 of the Act, Government of Karnataka has deputed an officer of the Co-operation Department holding the rank of Joint Registrar as the Chief Executive of the first respondent-sugar factory. In addition to it, another officer of Co-operation Department of the cadre of Deputy Registrar has been posted as Secretary of the first respondent-sugar factory. We have perused Bye-laws 31 and 32 produced as Annexure-H with the writ papers. As could be seen from these bye-laws, the Chief Executive Officer/Managing Director is vested with vital and important powers, such as, to supervise the day-to-day administration of the society, to maintain proper accounts and to have complete control and dominion over the funds and property of the society, to enter into an agreement or contract for purchase and sale or lease of land, building etc., to sanction expenditure of establishment's purchase of stores and to incur other contingent expenditures; to draw, accept, endorse and negotiate bills of exchange and endorse, sell, transfer or otherwise deal with shares and Government securities and to exercise all other incidental and subsidiary powers which go with the office held by him. Of course, the Managing Director is entitled to exercise all those powers conferred upon him under Bye-law 32 subject to supervision and control of the Board of Directors of the Society. Sri Murthy, drawing our attention to the above rider would highlight that Managing Director is not a free bird to exercise all those powers enumerated under Bye-law 32 freely in his discretion and that his power is limited in the sense that his power is subject to supervision and control of the Board of Directors. Be that as it may, subject to supervision and control of Board of Directors, vital powers have been vested in the Managing Director to supervise and administer day-to-day management of the affairs of the first respondent-society. It cannot be gainsaid that the post of Managing Director is linchpin between the Board of Directors and day-to-day administration of the first respondent-sugar factory. Therefore, the Managing Director plays important and key role in the administration of the factory. Similarly, even the Secretary of sugar factory being an officer of the Government on deputation is vested with powers to administer the factory as a deputee of the Managing Director subject to directions and instructions issued by the Board of Directors and the Managing Director from time to time. Thus, the Secretary also plays important role in the administration of sugar factory. At this stage itself, it needs to be noticed that Section 29-G has been amended by Amendment Act 24 of 2001 with effect from 5-9-2001 by virtue of which, the Managing Director is also made a member of Board of Directors. Therefore, the Managing Director functions not only as Chief Executive of the administration of sugar factory in day-to-day affairs of the factory but also acts as an important member of the Board of Directors of the Society. In that view of the matter, the importance of the position of Managing Director cannot be downplayed as suggested by Sri Murthy.
22. Since Government of Karnataka holds more than 50% of total share- capital, by virtue of provisions of Section 53-A of the Act, it is empowered to nominate 1/3rd of total number of members of the Managing Committee of first respondent-society as its representatives. It is very significant to notice that under Sub-section (2) of Section 53-A, a person nominated as a member of a Committee of the co-operative society shall hold office as such member during the pleasure of the State Government. In other words, unless the State Government consents for removal of such member, the Board of Directors themselves cannot remove any nominated member from the Committee. Section 54 also invests a very vital and crucial power in the State Government to take over the control of management of the Co-operative Societies in respect of which societies it has granted aid amounting to not less than Rs. 2 lakhs if such an action was imperative in the estimation of the Government to safeguard the interest of the State. Under Bye-law 21(1)(A), the nominee of the State Government shall have a right of appeal to the Government against the decision of the Board which is likely to be prejudicial to the interest of the Government and/or of Industrial Finance Corporation of India, Industrial Development Bank of India, Industrial Credit and Investment Corporation of India and Life Insurance Corporation of India and the decision of the Government shall be binding on the Board. This particular provision demonstrably shows us that the nominees of the Government on the Board play vital role as sentinels to safeguard and protect the interests of the State Government and other public financial institutions.
23. The extraordinary powers conferred on the State Government and the Registrar of Co-operative Societies under the provisions of Sections 29, 29-G, 53-A and 54 are in addition to general power vested in the Registrar of Co-operative Societies under various provisions of the Act. Therefore, having regard to the various administrative powers and powers to influence the decision-making at the level of the Board of Directors, as noticed above, it cannot be said that the administrative control and supervision of the Government of Karnataka and the Registrar of Co-operative Societies over the affairs of the respondent-sugar factory is not pervasive.
24. It is true that although the Apex Court in Ajay Hasia's, case, supra, seems to have laid down the law that if a legal entity could answer any of the 6 tests enumerated in para 9 could be regarded as a "State" within the meaning of Article 12 of the Constitution, majority of the 7 Judges Bench (5:2) of the Supreme Court in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology and Ors., speaking through Ruma Pal, J. after reviewing all earlier decisions including Ajay Hasia's case, supra, held in para 41 thus:
"The picture that ultimately emerges is that the tests formulated in Ajay Hasia's case are not a rigid set of principles so that if a body falls within any one of them it must, ex hypothesi, be considered to be a State within the meaning of Article 12. The question in each case would be--whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control must be particular to the body in question and must be pervasive. If this is found then the body is a State within Article 12. On the other hand, when the control is merely regulatory whether under statute or otherwise, it would not serve to make the body a State".
Therefore, though as a rigid principle it could not be said that if a body simply answers one or the other six tests specified in Ajay Hasia's case, supra, such body is a "State", such body, nevertheless, can be regarded as "State" if the Court were to find having regard to the cumulative facts established and placed before it that the body concerned is financially, functionally and administratively dominated by or under the control of the Government. Therefore, having regard to the facts stated supra and the powers of the Government and the Registrar, we hold that the first respondent-sugar factory is financially, functionally and administratively dominated by and under the control of Government of Karnataka and the Registrar of Co-operative Societies. Consequently, we, after necessary reflection and in-depth examination of various powers available to Government of Karnataka and Registrar of Co-operative Societies not only under the provisions of the Act but also under the bye-laws of the first respondent, hold that the first respondent is a "State" within the meaning of Article 12 of the Constitution and therefore, the legality of its action can be tested in a writ proceeding under Article 226 of the Constitution.
25. Alternatively also, there is no difficulty for us to hold that the first respondent-sugar factory is amenable to the writ jurisdiction of this Court under Article 226 of the Constitution.
26. Clause (1) of Article 226 of the Constitution reads as follows:
"Notwithstanding anything in Article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories, directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose".
The term "authority" used in Article 226, in the context, must receive a liberal meaning unlike the term under Article 12. Article 12 is relevant only for purposes of enforcement of fundamental rights under Article 32 of the Constitution. Article 226 confers power on High Courts to issue writs not only for enforcement of fundamental rights but also for enforcement of non-fundamental rights. The words "any person or authority" used in Article 226 are, therefore, not confined only to the instrumentalities of the State. These expressions may also cover any other person or body performing public duty. As quite often said and reiterated by the Constitutional Courts, the form of the body concerned is not very much relevant and what is relevant is the nature of duty imposed on the body concerned. The Supreme Court in Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Survarna Jayanti Mahotsav Smarak Trust's case, supra, was pleased to observe that the duty of the body must be judged in the light of positive obligation owned by the person or authority of the affected party and that no matter by what means the duty is imposed, if a positive obligation exists mandamus cannot be denied.
27. The Apex Court in Rohtas Industries Limited and Anr. v. Rohtas Industries Staff Union and Ors., had occasion to deal with the expansive and extraordinary power of the High Court in the following words:
"9. The expansive and extraordinary power of the High Courts under Article 226 is as wide as the amplitude of the language used indicates and so can affect any person -- even a private individual -- and be available for any (other) purpose--even one for which another remedy may exist. The amendment to Article 226 in 1963 inserting Article 226(1-A) reiterates the targets of the writ power as inclusive of any person by the expressive reference to "the residence of such person". But it is one thing to affirm the jurisdiction, another to authorise its free exercise like a bull in a china shop. This Court has spelt out wise and clear restraints on the use of this extraordinary remedy and High Courts will not go beyond those wholesome inhibitions except where the monstrosity of the situation or other exceptional circumstances cry for timely judicial interdict or mandate. The mentor of law is justice and a potent drug should be judiciously administered. Speaking in critical retrospect and portentious prospect, the writ power has, by and large, been the people's sentinel on the qui vive and to cut back on or liquidate that power may cast a peril to human rights. We hold that the award here is not beyond the legal reach of Article 226, although this power must be kept in severely judicious leash".
28. In Praga Tools Corporation's case, supra, the Apex Court held as under;
"It is, however, not necessary that the person or the authority on whom the statutory duty is imposed need be a public official or an official body. A mandamus can issue, for instance, to an official of a society to compel him to carry out the terms of the statute under or by which the society is constituted or governed and also to companies or corporations to carry out duties placed on them by the statutes authorizing their undertakings. A mandamus would also lie against a company constituted by a statute for the purposes of fulfilling public responsibilities.
The term 'authority' used in Article 226, in the context, must receive a liberal meaning unlike the term in Article 12. Article 12 is relevant only for the purpose of enforcement of fundamental rights under Article 32. Article 226 confers power on the High Courts to issue writs for enforcement of the fundamental rights as well as non-fundamental rights. The words 'any person or authority' used in Article 226 are, therefore, not to be confined only to statutory authorities and instrumentalities of the State. They may cover any other person or body performing public duty. The form of the body concerned is not very much relevant. What is relevant is the nature of the duty imposed on the body. The duty must be judged in the light of positive obligation owned by the person or authority to the affected party. No matter by what means the duty is imposed, if a positive obligation exists mandamus cannot be denied".
29. In the same decision the Supreme Court also quoted the following observation of Professor de Smith with approval:
"....To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract".
30. The Supreme Court in Uttar Pradesh State Co-operative Land Development Bank Limited's case, supra, after review of all important earlier decisions on the point has opined about the scope and power of the High Court under Article 226 of the Constitution as under:
"... To understand the explicit language of the Article, it is not necessary for us to rely on the decision of the English Courts as rightly cautioned by the earlier Benches of this Court. It does appear to us that Article 226 while empowering the High Court for issue of orders or directions to any authority or person, does not make any such difference between public functions and private functions. It is not necessary for us in this case to go into this question as to what is the nature, scope of amplitude of the writs of habeas corpus, mandamus, prohibition, quo warranto and certiorari. They are certainly founded on the English System of jurisprudence. Article 226 of the Constitution also speaks of directions and orders which can be issued to any person or authority including, in appropriate cases, any Government. Under Clause (1) of Article 367, unless the context otherwise requires, the General Clauses Act, 1897, shall, subject to any adaptations and modifications that may be made therein under Article 372, apply for the interpretation of the constitution as it applies for the interpretation of an Act of the Legislature of the Dominion of India. "Person" under Section 2(42) of the General Clauses Act shall include any company or association or body of individuals, whether incorporated or not. The Constitution is not a statute. It is the fountainhead of all the statutes. When the language of Article 226 is clear, we cannot put shackles on the High Courts to limit their jurisdiction by putting an interpretation on the words which would limit their jurisdiction. When any citizen or person is wronged, the High Court will step in to protect him, be that wrong be done by the State, an instrumentality of the State, a company or a co-operative society or association or body of individuals, whether incorporated or not, or even an individual. Right that is infringed may be under Part III of the Constitution or any other right which the law validly made might confer upon him. But then the power conferred upon the High Courts under Article 226 of the Constitution is so vast, this Court has laid down certain guidelines and self-imposed limitations have been put there subject to which the High Courts would exercise jurisdiction, but those guidelines cannot be mandatory in all circumstances".
31. In addition to these decisions the expansive stance pursuaded by the Apex Court and High Courts for the purpose of issuance of writs under Article 226 could be highlighted by citing large number of other binding authorities also, but we do not wish to burden this judgment with more case-law. Suffice it to state that the Apex Court and High Courts have adopted a liberal approach when it comes to remedy wrongs suffered by citizens. Therefore, we hold that the first respondent is an "authority" within the meaning of that term for the purpose of Article 226.
32. In the instant case, as noticed above, the first respondent-sugar factory has employed large number of personnel to carry out its industrial activities as well as managerial functions. It is trite, the first respondent being a "State" cannot be permitted to practise anything in breach of Article 14 postulates: fairness in action, reasonableness and non-arbitrariness. In this background, grievance brought before the Court by the petitioner-Trade Union espousing the cause of its workmen should be appreciated.
33. Although considerable volume of pleadings are laid before the Court, we do not find it necessary to dilate on it in detail. It is, because, as reflected in the statement of objections filed by first respondent, the management fairly admits the existence of Annexure-A settlement dated 14-5-1998. The management in para (6) of its statement of objections dated 28-7-1999 states thus-
"In the meantime, a joint meeting was held in the chambers of Sri Umesh B. Katti, the then Minister for Sugar. After several rounds of discussions there was an understanding that only 53 workmen could be taken back to duty with 40 per cent backwages provided they withdraw all the cases pending before the Labour Court, Hubli against the management. This is not a conciliation settlement under the provisions of Industrial Disputes Act and it is also not a bilateral settlement under the I.D. Act. However, the management was ready and was willing to implement the under-standing reached, provided, the union withdraw all the disputes and 53 workmen report for duty".
Thus, it is quite clear that the management has absolutely no objection to reinstate 53 workmen and pay 40% backwages in terms of the settlement dated 14-5-1998 provided the union withdraws all the disputes pending before the Labour Court. Therefore, the only question that arises for our decision on facts is whether the management is justified and acted legally in placing that kind of rider as a condition precedent to implement the terms of the settlement. In our considered opinion, the insistence of the management that in order to implement the settlement, the union should withdraw all the industrial disputes pending before the Labour Court, Hubli is not only totally illegal but also quite contrary to the explicit terms of the settlement. A copy of the settlement, Annexure-A, dated 14-5-1998 which is in vernacular is annexed to the writ papers at pages 7 to 9. This settlement refers to negotiations held between the representatives of the management and the representatives of petitioner-union on 13-8-1996, 6-9-1996, 26-9-1996, 16-10-1996, 14-11-1996, 27-11-1996, 15-1-1997 and 15-4-1997. The settlement having referred to the previous negotiations held on the dates mentioned supra and referring to the deliberation conducted on 14-5-1998 records thus.
No doubt in terms of the settlement, the workmen are required to withdraw industrial disputes instituted by them before the Labour Court, Hubli. The question is whether all the workmen concerned in the industrial disputes should withdraw industrial disputes or only 53 workmen concerned. This question need not detain the Court for long. The answer to the question is very much found in the above extracted portion of the settlement itself. The words "Melkanda Karmikaru" are quite significant to find answer to the question. In our considered opinion, the words "Melkanda Karmikaru" refer to 53 workmen whose details are set out in the paragraph preceding the extracted paragraph in the settlement. That is the only reasonable way of understanding and construing the settlement dated 14-5-1998. We should state, in all fairness, Sri Murthy would also agree with us that that is the only reasonable way of understanding the words "Melkanda Karmikaru". However, Sri Murthy would contend that in the context of the present case, such a literal meaning cannot be given to the words "Melkanda Karmikaru". According to Sri Murthy, the background facts would clearly establish that the management from very inception to the end resulting in the settlement had been insisting that in order to grant relief to 53 workmen, the Union should withdraw industrial disputes not only with regard to 53 workmen but also with regard to other workmen who have instituted industrial dispute before the Labour Court, Hubli. In that regard, Sri Murthy drew our attention to the proceeding of the negotiation between the parties held on 15-1-1997. It is true, as could be seen from the copy of the proceeding dated 15-1-1997, the management demanded that the union should withdraw all the disputes. Not only such a demand is noticed in the proceeding dated 15-1-1997 but also in the proceeding dated 14-5-1998. That fact itself in no way help the management to sustain the contention that the understanding between the parties was that the union should withdraw all the disputes. Sri Murthy would state, what is stated in the extracted portion of the proceeding dated 15-1-1997 is a mistake. It may be that in the meetings earlier held between the parties the management insisted that in order to grant relief to 53 workmen, the union should withdraw all the industrial disputes instituted by all workmen. However, the question is, after necessary negotiations and discussions, what was ultimately agreed between the parties. The agreement is that 53 workmen in respect of whom the management has agreed to grant relief should withdraw industrial disputes instituted in the Labour Court, Hubli.
34. Admittedly, in terms of the settlement, the dispute instituted with regard to 51 workmen was withdrawn and the two others, it is stated, in the meanwhile, died. When surviving 51 workmen made necessary applications pursuant to the settlement before the Labour Court, Hubli seeking withdrawal of the disputes, the management chose to oppose that move of the union by contending that in terms of the settlement, the union was required to withdraw the industrial dispute with regard to all 124 workmen. Despite this opposition of the management, set out in the statement of objections filed before the Labour Court, the Labour Court impliedly overruled that objection and permitted the union to withdraw industrial dispute with regard to 51 workmen only. The management did not assail the order of the Labour Court permitting the union to withdraw industrial disputes only with regard to 51 workmen and rejecting the claim of the management in any appropriate legal proceeding.
35. The factual plea highlighted by Sri Murthy that there was in fact perfect understanding between the parties that all disputes should be withdrawn is also not acceptable to us for more than one reason. Firstly, if, in fact, the parties had agreed before the Sugar Minister that all the disputes pending before the Labour Court, Hubli should be withdrawn as a condition precedent in order to enable the management to implement the terms of settlement, then, there was no difficulty for the management to move the Sugar Minister and get the settlement clarified or modified. Such a course which was legitimately open to the management was not pursuaded by the management for the reasons best known to it. Therefore, it should not lie in the month of the management to now contend that the settlement required the trade union to withdraw industrial disputes instituted by all workmen numbering 124.36. Perhaps realising the seriousness of the violation of the terms of settlement committed by the management, Sri Murthy would contend that the settlement Annexure-A is not a settlement entered into between the parties under any statute and therefore, such a settlement could not be enforced under Article 226 of the Constitution of India. This contention of Sri Murthy is required to be noticed only to be rejected. Article 14 postulates pervade entire State actions and inactions and wherever the Court finds that these postulates are breached, it would step in and correct the wrongs done.
37. This is a very pathetic case and we are of the opinion that the management ought not to have taken the technical plea that writ petition is not maintainable in order to defeat the legitimate rights of the workmen under the settlement. We say this, because, the workmen acting on the solemn promise of the management withdrew industrial disputes instituted by them before the Labour Court, Hubli and the resultant position is that they are neither here nor there and they are now placed in "Trishanku Swarga" and the management is solely responsible for this sad state of affairs.
38. In our considered opinion, this is a fit case where the Court should apply the doctrine of promissory estoppel. We find all ingredients to apply doctrine of promissory estoppel. Admittedly, under Annexure-A the management has made the promise to workmen. On the basis of this promise, the workmen acted and altered their position to their peril. Therefore, the management cannot be permitted to approbate and reprobate in order to thwart legitimate rights of workmen flowing from the solemn promise made by the management, which has been reduced into writing before the Minister of Sugar. There is no necessity for us to go into the question whether the settlement Annexure-A could be regarded as a settlement arrived between the parties in the process of conciliation envisaged under the Industrial Disputes Act, 1947 or any other statute in view of our finding that the first respondent is a "State". We, however, also find some force in the contention of Sri Jayakumar Patil that in the premise of important powers conferred on the Government by Sections 29, 29-G, 53-A and 54, the power to conciliate between the management of the sugar factory and its employees could not be denied to the Minister of Sugar. Be that as it may, even assuming that it is not a settlement in the course of conciliation under the Industrial Disputes Act but it is only a settlement arrived at between the parties in exercise of the executive power of the first respondent-sugar factory, nevertheless, its action is required to be tested on the touchstone of the postulates of Article 14 and if it is so tested, the inaction of the management of the sugar factory should be condemned as the one tainted with irrationality and is totally unfair. The management must be rigorously held to the promise made by it and it must scrupulously perform its promise on pain of invalidation of an action in violation of it. Every activity of a State has a public element in it and must, therefore, be informed with reason and fairness, if the management promises to do certain thing as a responsible person but fails or refuses to do so, its action is liable to be tested for its validity on the touchstone of reasonableness and fairness.
39. By virtue of an interim order passed by this Court on 27-9-1999, it is stated, that 51 workmen concerned have been reinstated into service, but 40% of backwages is not paid. During the pendency of the writ petition, there was also a dispute between the parties with regard to the meaning to be given to the term "current wage" and that has been explained by the learned Single Judge by his order dated 16-3-2001. We have perused the opinion of the learned Single Judge and we are in respectful agreement with his opinion.
40. In the result and for the foregoing reasons, we allow the writ petition with costs quantified at Rs. 3,000/- payable by the first respondent to the petitioner's Counsel within two weeks. A writ of mandamus shall issued to the management of the first respondent-sugar factory to implement the settlement Annexure-A, dated 14-5-1998 and continue 51 workmen already reinstated into service and pay 40% of backwages, if not already paid, within a period of one month from today.