Andhra Pradesh High Court - Amravati
Dredging Corporation Of India Limited vs Marrapu Sankara Rao on 28 January, 2022
Author: Prashant Kumar Mishra
Bench: Prashant Kumar Mishra
IN THE HIGH COURT OF ANDHRA PRADESH : AMARAVATI
HON'BLE MR. JUSTICE PRASHANT KUMAR MISHRA, CHIEF JUSTICE
AND
HON'BLE MR. JUSTICE M. SATYANARAYANA MURTHY
W.A.Nos.221 and 281 of 2020
(Proceedings through physical mode)
W.A.No.221 of 2020
Dredging Corporation of India Limited,
2nd Floor, Dredge House, Port Area,
Visakhapatnam - 530001,
Represented by its Managing Director,
through its Joint Manager (Legal),
Smt.V.Usha Rani
.. Appellant/respondent No.2
Versus
Marrapu Sankara Rao,
S/o M.Suryanarayana,
Aged 55 years, R/o.49-36-14,
Garlapati Residency,
NGGOs Colony, Akkayyapalem,
Visakhapatnam and 5 others.
.. Respondents
W.A.No.281 of 2020
Marrapu Sankara Rao,
S/o M.Suryanarayana,
Aged 55 years, R/o.49-36-14,
Garlapati Residency,
NGGOs Colony, Akkayyapalem,
Visakhapatnam.
.. Appellant/Petitioner
Versus
Government of India, Ministry of Shipping,
Parivahan Bhavan, 1 Sansad Marg,
New Delhi - 110 001
Represented by its Secretary and 5 others.
.. Respondents
Counsel for the Appellant :
(W.A.No.221 of 2020) Mr. Vadapalli Remesh
(W.A.No.281 of 2020) Mr. Prakash Buddarapu
Counsel for respondents :
(W.A.No.221 of 2020) Mr. Prakash Buddarapu
(W.A.No.281 of 2020) Mr. Vadapalli Ramesh
CJ and MSM,J
was_221 and 281_2020
2
COMMON JUDGMENT
Dt.28.01.2022 (Per M.Satyanarayana Murthy, J) Aggrieved by the order dated 28.04.2020 passed by the learned single Judge in W.P.No.7350 of 2019 the petitioner and respondent No.2 therein filed these two appeals under Clause 15 of Letters Patent as the learned single Judge allowed the writ petition in part. The writ petitioner preferred Writ Appeal No.281 of 2020 against the disallowed claim, respondent No.2 in the writ petition preferred Writ Appeal No.221 of 2020 against the relief granted in favour of the writ petitioner.
The parties to the appeals will hereinafter be referred as arrayed before the learned single Judge for the sake of convenience and to avoid confusion.
Marrapu Sankara Rao filed writ petition for issue of Writ of Mandamus declaring the proceedings issued by respondent No.2 through its Company Secretary in Letter No.DCIL/MD/2019/638, dated 11.03.2019 and Office Order No.24/2019 in Ref.DCl/HR/41S00890/2019-59-B dated 23.04.2019 intimating to the petitioner that his services ceased to be continued as Director Operations and Technical with effect from 08.03.2019 (AN) as illegal, arbitrary and violative of the Fundamental Rights guaranteed under the Constitution of India, particularly violative of Articles 19 (1)(g) 21 and 14 of the Constitution of India apart from the conditions stipulated under Share Purchase Agreement dated 08.03.2019 between the respondents, consequently set aside the proceedings in Letter No.DCIL/MD/2019/638, dated 11.03.2019 and the consequential Office Order No.24/2019 in CJ and MSM,J was_221 and 281_2020 3 Ref.DCl/HR/4/S00890/2019/59-B, dated 23.04.2019 issued by respondent No.2 by directing the respondents particularly respondent Nos.2 to 6 to continue the petitioner as Director (Operations and Technical) with effect from the date of Share Purchase Agreement i.e. 08.03.2019 and to declare the action of respondent No.2 in not allowing the petitioner to exercise the option of Lien in the post of General manager in respondent No.2 Corporation and not allowing the petitioner as Director Operations and Technical as illegal arbitrary and unjust, consequently direct respondent No.2 to allow the petitioner to exercise his option of Lien in the post of General Manager.
The factual matrix of the case is that the petitioner was appointed as Director (Operations and Technical) in respondent No.2
- Corporation in pursuance of the notification issued by respondent No.1 in the year 2014 vide Office Order No.2/2015 in Ref.SS- 28012/03/2014-DCI, dated 08.05.2015 and the petitioner reported to duty in respondent No.2 - Corporation on 01.06.2015. Taking note of the above, the Board of Directors of the respondent No.2 Corporation appointed the petitioner as Additional Director, and thereafter the appointment was finalised by the Annual General Meeting as per the provisions of the Companies Act with effect from the date of joining i.e. 01.06.2015.
As per the notification, the post of Director (Operations and Technical) is tenure based position having 5 years tenure from the date of joining in the said post or date of superannuation or till passing further orders, whichever is earlier. When the officer being selected to such post, he will be allowed to complete his tenure as notified and on such completion of the tenure of 5 years period, if he CJ and MSM,J was_221 and 281_2020 4 has service in his parent organisation i.e. respondent No.2 and in case he was not given further extension to the post of Director, then he will join in his parent organisation to serve the rest of the service in his substantive post. Accordingly, the petitioner is entitled to claim deemed lien with the respondent No.2 Corporation while continuing as Management Nominee of respondent No.1 in the post of Director (Operations and Technical). Thus, the petitioner is entitled to continue in service till attaining superannuation i.e., May, 2024 as per the rules and regulations of respondent No.1 and simultaneously, he is eligible to occupy the post of Director for a period of 5 years.
While the matter stood thus, respondent No.1 intended to put respondent No.2 - Corporation to 'strategic sale' by 100% disinvestment of the shares of Government of India during the year 2017. There was a huge resistance from various circles to oppose the same, respondent No.1 decided to operate the 'strategic sale‟ by transferring its shares in favour of respondent Nos.3 to 6, which formed as a consortium for the purpose. Accordingly, a share purchase agreement was entered between the President of India represented by respondent No.1 and the respondents 3 to 6 herein namely, Visakhapatnam Port Trust, Paradip Port Trust, Jawaharlal Nehru Port Trust and Deendayal Port Trust. In terms of the said share purchase agreement, the total shares of the respondent No.1 to the extent of 73.47% were transferred to respondent Nos.3 to 6. Consequent to such transfer, respondent No.1 completely discharged its investment in favour of the respondent Nos.3 to 6 and henceforth respondent Nos.3 to 6 herein which are autonomous bodies under the Government of India have become the owners of the respondent No.2 Corporation. In other words, instead of directly controlling respondent CJ and MSM,J was_221 and 281_2020 5 No.2 Corporation by respondent No.1, on entering into the Share Purchase Agreement, indirectly respondent No.1 is controlling through respondent Nos.3 to 6 herein and thereby the control of the Government of India continued to operate.
In view of Share Purchase Agreement, the nature of ownership alone was changed, but the services of all the work force including the officers and the employees, continued to be the same including lien existing, if any, deemed to be continued and no disturbance whatsoever been stipulated under the Share Purchase Agreement. The Share Purchase Agreement stipulates the continuation or otherwise of the Directors, Employee Retention, Protection of Employees, Employees Benefits etc. Clause 11.2 of the Share Purchase Agreement specifically stipulates that the Purchasers shall ensure that all the employees of the Company as on the Execution Date shall continue to be in the employment of the Company and the Purchasers shall, directly or indirectly, not retrench any employees of the Company for a period of one year from the Closing Date other than any dismissal or termination of employees of the Company from their employment in accordance with the applicable staff regulations, standing orders of the Company and Applicable law. Similarly, the Purchasers shall not take any action disadvantage to their service conditions taking away any existing benefits which are available prior to the Closing Date. Thus, a conjoint reading of Clauses 11.2 and 11.3 makes it clear that it also protects any employee who is holding lien also be saved and such employees are entitled to employment on completion of service as Director. In the instant case, though the petitioner was an employee of respondent No.2 Corporation, is continuing in the very same Corporation as Director by respondent CJ and MSM,J was_221 and 281_2020 6 No.1 as its Nominee for a period of 5 years and on successful completion he is entitled to re-join in his original position which he was holding at the time in his parent organization.
It is further contended that as per Clause 11.1, the Purchasers shall continue the appointment of the existing Whole Time Directors, Independent Directors and Nominee Directors until the expiry of their present term. However, post-closing Date, the Purchasers shall be entitled to appoint Whole Time Directors and other directors in accordance with Clause 7 and the Applicable Law in this regard.
In view of the said clause, the petitioner is entitled to continue as Director, but he was asked to resign even before completion of 5 years tenure since his tenure was up to May, 2020. After resignation, the petitioner intend to join in the parent company as Manager (Operations/projects), he was not permitted to join though he is having lien for five (5) years.
Clause 7.2A of the Share Purchase Agreement is only a transitional provision, whereunder on change of the management, the existing Directors of the Company will technically be converted as Directors under new management and for that purpose they technically submit their resignation but same is subject to Clause 11.1 so far as the Director is concerned and Clause 11.2 so far as Employment is concerned. In any way, the petitioner is entitled to continue as Director or in the alternative entitled to repatriate to his substantive post in respondent No.2 - company. He is neither allowed to rejoin in his substantive post i.e. Manager (Operations/projects) nor allowed to continue as Director (Operations and Technical) in violation of clause 11.1 of Share Purchase Agreement and it amounts to violation of right of the petitioner guaranteed under Article 19 (1) CJ and MSM,J was_221 and 281_2020 7
(g), 21 and 14 of the Constitution of India, requested to issue a direction as claimed in the writ petition.
Respondent No.2 filed counter admitting initial appointment of the petitioner, later appointment as director in respondent No.2 corporation and resignation of the petitioner in terms of Clause 7.2 of Share Purchase Agreement while supporting the action of the respondents in all respects.
The specific contention of the respondents is that pursuant to clause 7.2A of the Share Purchase Agreement, the petitioner along with all other directors tendered resignation on 08.03.2019 to the post of Director (Operations and Technical) of respondent No.2 with effect from 08.03.2019. As requested in his resignation letter, the same was put up to the Board of Directors in the Board Meeting of respondent No.2 held on 08.03.2019 in order to consider for whole- time directorship. Purchasers sought the vigilance profile of the whole-time directors of the Seller, who had resigned on 08.03.2019 from the Vigilance Department and in the case of the petitioner, Ministry of Shipping in consonance with the recommendations of the Central Bureau of Investigation (CBI) served major penalty charge sheet on him and the proceedings are under progress. As such, petitioner was not considered for re-appointment by the purchasers and the Nomination and Remuneration Committee of the New Board approved for settlement of dues of the petitioner as per the Share Purchase Agreement. As such petitioner herein ceased to be a Director of the company on and from 08.03.2019. In this regard, Letter No.DCIL/MD/2019 dated 11.03.2019 was issued to the petitioner and his name was deleted from the rolls of the Corporation CJ and MSM,J was_221 and 281_2020 8 vide Office Order No.24/2019 in Ref. DCI/HR/4/S00890/2019/59-B dated 23.04.2019.
To settle the terminal benefits of the petitioner, vigilance clearance was sought from the Ministry of Shipping through Vigilance Department. Ministry of Shipping vide letter No.C-31016/9/2019-Vig. dated 05.04.2019 informed that on the basis of CBI investigation report in RC 17(A)2015 case and as decided by the Disciplinary Authority, charge sheet for major penalty against the petitioner has been issued on 18.01.2019 and disciplinary proceedings are pending against him. Therefore, the payment of terminal benefits was not completed and the respondents agreed to release the same after completion of enquiry.
The petitioner while taking the charge as Director (Operations and Technical), he did not exercise his option for Lien to the post of General Manager (Project Engineering) which he had held prior to taking over charge as Director (Operations and Technical). As per DPE OMs No.23(9)/93-GM dated 31.01.1994 No.23/19/98/GL-014/0PE (GM) dated 13.01.1989 and F.No.16(10)12010-GM dated 27.11.2018, below Board level employees of CPSEs be permitted to retain lien on their below board level post for a period of 6 years when they are selected and appointed to Board level posts in the same or other CPSEs. The Government of India, Department of Public Enterprises issued OM dated 31.01.1994 directing that the Public Enterprises should permit retention of lien for a period of not exceeding 3 years for employees holding posts below Board level when they are appointed to the post of Board level within the same PSU or any other Central PSU, Government of India, subsequently vide OM dated 13.01.1999, extended the maximum period of 3 years for retention of CJ and MSM,J was_221 and 281_2020 9 lien to 5 years. By further OM dated 27.11.2018 the maximum period for retention has been extended to 6 years. Thus as per OM dated 31.01.1994, read with OM dated 31.01.1999 and 27.11.2018, below Board level employee is entitled for retention of lien for a period up to 6 years when they are appointed to any post at the Board level. The use of the words 'should permit' indicates that an application needs to be made by the concerned employee for retention of lien and that permission to retain lien can be granted by the CPSE. This is because in certain cases employees may not be interested in retaining lien. Therefore retention of lien is not deemed or automatic but subject to making an application and granting of such application by the CPSE. In the present case, the petitioner has failed to make an application for retention of lien in the Corporation after his appointment as Director (Operations and Technical). Therefore, in the absence of exercise of option, the petitioner is not entitled to claim any lien to the post of General Manager (Project Engineering) in the parent Corporation. Thus, the petitioner never interested to retain his lien for the post of General Manager (Project Engineering). In fact, petitioner, who was also holding the additional charge of Head of the Department (Human Resources) apart from General Manager (Project Engineering) had, himself, initiated the recruitment process for filling up the post of General Manager (Project Engineering) through open advertisement. Accordingly, the said post of General Manager (Project Engineering) which the petitioner held prior to his selection as Director, was filled up through direct recruitment. The question of petitioner being repatriated as General Manager (Project Engineering) does not arise since the said post is already filled up by the petitioner himself being the in-charge of Head of the Department (Human CJ and MSM,J was_221 and 281_2020 10 Resources). Thus, the petitioner is disentitled to claim lien over the post of General Manager (Project Engineering).
The respondents specifically contended that the final retiral benefits were not settled to the petitioner due to pendency of Vigilance proceedings etc. and made several other allegations about the retention of public property, which are not relevant for the purpose of deciding the present controversy. Finally, the respondents requested to dismiss the writ petition.
Learned single Judge, upon hearing argument of both the counsel, allowed the writ petition in part granting the following relief:
"For all the reasons mentioned above, the writ petition is partly allowed. It is held that the petitioner is entitled to continue in the post of General Manager (Operations) in the 2nd respondent DCI till his superannuation and as per the rules /regulations. As a result of this order, the petitioner is entitled to all the benefits that would naturally/consequentially flow and arise."
Aggrieved by the order of learned single Judge, the petitioner and respondent No.2 filed these two appeals. The writ petitioner filed Writ Appeal No.281 of 2020 aggrieved by the denial of relief to the petitioner to continue him as Director in the Corporation after his resignation to the post of Director (Operations and Technical). The writ petitioner raised specific ground that the learned single Judge did not consider the clauses 7.2A, 7.4 and 11 of Share Purchase Agreement (SPA) dated 08.03.2019 whereunder the appellant/petitioner is entitled to continue as Director of respondent No.2 - Corporation, but simply relying on clauses 7.2A and 11.1 passed the impugned order denying part of the relief erroneously. If the clauses 7.2A, 7.4 and 11 are considered conjointly, learned single Judge ought to have allowed the prayer for continuation of the CJ and MSM,J was_221 and 281_2020 11 petitioner as Director in respondent No.2 Corporation after purchase of the Corporation.
Learned single Judge also did not consider the balance tenure of writ petitioner for a period 15 months and mainly concentrated on interpretation of various clauses in Share Purchase Agreement committed grave error, requested to grant relief as claimed while ordering to continue the petitioner as Director (Operations and Technical).
Respondent No.2 filed Writ Appeal No.221 of 2020 aggrieved by the relief granted to the petitioner on various grounds. The main grounds urged before this Court are that when the petitioner tendered resignation to the post of Director (Operations and Technical) in pursuance of terms and conditions of „share purchase agreement‟ and accepted by the Corporation, he cannot claim lien over the post which he was holding prior to his appointment as Director. Apart from that the petitioner did not exercise option to retain his lien over the post which he was holding prior to his appointment as Director, so also another person was appointed for the post of General Manager (Project Engineering) by the petitioner himself being the in-charge of the Head of Department (Human Resources). Practically there is no vacant post in the cadre of General Manager (Project Engineering), therefore, the question of repatriating the petitioner as General Manager (Project Engineering) does not arise as the petitioner waived his right of lien over the post of General Manager (Project Engineering), requested to set aside the relief granted by the learned single Judge and dismiss the writ petition.
During hearing, Sri A.Satya Prasad, learned senior counsel for the writ petitioner, contended that the learned single Judge on CJ and MSM,J was_221 and 281_2020 12 misconstruing or on wrong interpretation of various clauses in the Share Purchase Agreement, denied the relief of continuation of petitioner in the company as Director (Operations and Technical), requested to re-appreciate various clauses in the Share Price Agreement and pass an order directing respondent No.2 to continue the petitioner as Director (Operations and Technical) in respondent No.2 Corporation for the remaining period of 15 months out of 5 years tenure as Director.
Sri M.Surender Rao, learned senior counsel, for respondent No.2 would contend that when the petitioner himself resigned to the post of Director (Operations and Technical) in terms of Share Purchase Agreement, he is disentitled to claim lien over the post of General Manager (Project Engineering) and that he did not opt for continuation of lien over the said post. When the petitioner did not exercise his option to continue lien over the post of General Manager (Project Engineering), he cannot claim lien over the said post and repatriation to the original post in the corporation.
He further contended that the post of General Manager (Project Engineering) was already filled, and the petitioner is one of the members in the selection committee being in-charge of Head of the Department (Human Resources). Thus, no vacant post in the cadre of General Manager (Project Engineering) as on date, in such case the question of taking the petitioner to the post of General Manager (Project Engineering) does not arise, requested to dismiss the writ petition in toto allowing the appeal filed by respondent No.2.
Sri M.Surender Rao, learned senior counsel, for respondent No.2, also brought to our notice about the pendency of vigilance CJ and MSM,J was_221 and 281_2020 13 enquiry against the petitioner on serious allegations and contended that he cannot be repatriated to the original post of General Manager.
Considering rival contentions, perusing the material available on record, the points need be answered by this Court are as follows:
(1) Whether the writ petitioner is required to exercise any option in terms of Standard Terms and Conditions for 2017 Pay Scales, Government of India? If not, whether the lien on the post is absolute right, consequently the petitioner is entitled to claim lien over the post of General Manager (Project Engineering) in respondent No.2 Corporation?
(2) Whether the petitioner is entitled to claim retention as Director (Operations and Technical) in respondent No.2
- Corporation in terms of Share Purchase Agreement?
(3) If point Nos.1 and 2 are decided in affirmative, whether the order of learned single Judge be sustained?
P O I N T No.1:
The major contention of the petitioner is that he is entitled to claim lien over the post of General Manager (Project Engineering) as per the terms and conditions of Share Purchase Agreement and Standard terms and conditions for 2017 pay scales, Government of India. Whereas, respondent No.2 vehemently contended that since the petitioner failed to exercise option to continue lien over the post of General Manager (Project Engineering), he is disentitled to claim lien over the said post. At the same time, when the General Manager (Project Engineering) was appointed by the petitioner himself, question of repatriation to the post of General Manager (Project Engineering) does not arise. On this ground also, the claim of the petitioner has to be thrown out in toto.
CJ and MSM,J was_221 and 281_2020 14 In view of the little controversy, it is appropriate to examine the issue with reference to Standard terms and conditions for 2017 pay scales, Government of India to find out whether the petitioner is required to exercise option, if not, disentitled to claim any lien over the post of General Manager (Project Engineering). Before going to Standard terms and conditions for 2017 pay scales, Government of India, we shall now examine what the word 'lien' means. The word 'lien' originally means "binding"; it derived from the Latin word „ligamen‟. Its lexical meaning is "right to retain". The word 'lien' is now variously described and used under different context such as 'contractual lien', 'equitable lien', 'specific lien', 'general lien', 'partners lien', etc. etc. in Halsbury's Laws of England, Fourth Edition, Volume 28 at page 221, para 502 it is stated :
In its primary or legal sense "lien" means a right at common law in one man to retain that which is rightfully and continuously in his possession belonging to another until the present and accrued claims are satisfied.
In Stroud's Judicial Dictionary, 5th Edition, Volume 3 at page 1465 the following passage is found:
LIEN. (1) A lien-(without effecting a transference of the property in a thing)- is the right to retain possession of a thing until a claim be satisfied; and it is either particular or general. So, as regards Scotland, "lien" is defined as including "the right of retention" (Sale of Goods Act 1893 (c. 71), Section 62), or it "shall mean and include right of retention" (Factors (Scotland) Act 1890 (c.
40), Section 1) see here on Great Eastern Railway v. Lords Trustees (1909) A.C.
109.
In words and Phrases, Permanent Edition Vol. 25 the definition of word 'lien' when used to explain the equitable lien, is given thus:
A 'lien' from a legal standpoint, embodies the idea of a deed or bond, and necessarily implies that there is something in existence to which it attaches.
At page 393 of the same Volume it is stated:
CJ and MSM,J was_221 and 281_2020 15 The word 'lien' has a well-known signification. In law it signifies an obligation, tie, or claim annexed to or attaching upon any property, without satisfying which such property cannot be demanded by its owner, vide Storm v. Waddell, N.Y.,2 Sandf. Ch. 494, 507, 508.
Again at page 399 of the same Volume it is stated: Lien" is a term of very large and comprehensive signification, but which never imports more than security, vide Mobile Building & Loan Ass'n v. Robretson, 65 Ala. 382, 383.
In Black's Law Dictionary, 6th Edition, at page 922 the following passage is found:
The word 'lien' is a generic term and, standing alone, includes liens acquired by contract or by operation of law.
Lien represents the right/title of a Government employee to hold a regular post, whether permanent or temporary, either immediately or on the termination of the period of absence. The benefits of having a lien in a post/service/cadre is enjoyed by all, officers who are confirmed in the post/service/cadre of entry or who have been promoted to a higher post declared as having completed the probation where it is prescribed, or those who have been promoted on regular basis to a higher post where no probation is prescribed under the rules, as the case may be.
The above right/title will, however, be subject to the condition that the junior-most person in the cadre will be liable to be reverted to the lower post/service/cadre if at any time the number of persons so entitled is more than the posts available in that cadre/service. For example, if a person who is confirmed or whose probation in a higher post has been declared as having been completed or one who is holding a higher post for which there is no probation on a regular basis, reverts from deputation or foreign service and if there is no vacancy in that post/service/cadre to accommodate him, the junior-
CJ and MSM,J was_221 and 281_2020 16 most person will be reverted. If, however, this officer himself is the junior-most, he will be reverted to the next lower post/service/cadre from which he was earlier promoted. (Vide: Office Memorandum No.18011/1/86-Estt.(D) dated 28.03.1988).
A Government servant who has acquired a lien on a post retains a lien on that post-
(a) while performing the duties of that post:
(b) while on foreign service, or holding a temporary post or officiating in another post;
(c) during joining time on transfer to another post;
unless he is transferred substantively to a post on lower pay, in which case his lien is transferred to the new post from the date on which he is relieved of his duties in the old post;
(d) while on leave; and
(e) while under suspension.
A Government servant on acquiring a lien on a post will cease to hold any lien previously acquired on any other post.
If a permanent employee is selected on the basis of his application for posts in other Central Government Department/ Offices/State Government, his lien may be retained in the parent department for a period specified in the Office Memorandum, but . If the employee concerned is not permanently absorbed within a period specified from the date of his appointment in the new post, he should immediately on expiry of the period, either resign from the service or revert to his parent cadre.
CJ and MSM,J was_221 and 281_2020 17 In view of the specific contention, it is now necessary to advert to the Standard terms and conditions for 2017 pay scales, Government of India. Clause 1.18 is relevant clause, which deals with lien, which we extracted hereunder for better appreciation.
"1.18 Lien: In case, he/she was holding a below board level post before his/her appointment to the board level post in CPSE, he/she will retain lien on their below board level post, if applicable, as per the extant guidelines of DPE/CPSE concerned.
In respect of any other item, concerning him/her which is not covered in preceding paras, he/she will be governed by the relevant rules/instructions of the CPSE concerned/Government."
Respondent No.2 contended that Government of India, Department of Public Enterprises (DPE) vide Office Memorandum No.23 (9)/93-GM dated 31.01.1994 directed that below board level employee shall be entitled to retain lien initially for a period of not exceeding 3 years, which is as follows:
It has now been decided that a uniform policy should be followed by all the PSEs in regard to retention of lien of their employees when selected and appointed to board level posts in the same PSE or in any other Central PSE. Accordingly, the public sector enterprises should permit retention of lien for a period not exceeding three* years to their employees holding posts below board level when they are appointed to posts at the board level within the same PSE or in any other Central PSE. The lien will automatically stand terminated at the conclusion of the three* year period. This decision will have prospective effect only.
Subsequently, the period of retention of lien has been extended to five years vide DPE OM No.23/19/98/GL-014/DPE (GM) dated 13.01.199 and to six years vide OM F.No.16(10)/2010-GM dated 27.11.2018.
Taking advantage of the words „should permit‟ used in the said office memorandum, respondent No.2 contended that the words CJ and MSM,J was_221 and 281_2020 18 „should permit‟ mean that only respondent No.2 has to permit the employee for retention of lien.
However, learned single Judge did not agree with this contention on harmonious construction of language employed in Office Memorandum No.23 (9)/93-GM dated 31.01.1994, DPE OM No.23/19/98/GL-014/DPE (GM) dated 13.01.199 and OM F.No.16(10)/2010-GM dated 27.11.2018. Even after perusal of Office Memorandum No.23 (9)/93-GM dated 31.01.1994, DPE OM No.23/19/98/GL-014/DPE (GM) dated 13.01.199 and OM F.No.16(10)/2010-GM dated 27.11.2018, we find no such clause giving option to the employee to exercise lien when he/she deputed to foreign service or any other service. In the absence of such clause, the contention of respondent No.2 that the petitioner failed to exercise lien, thereby not entitled to claim lien is without any merit.
When the petitioner was working as General Manager (Project Engineering), which is below board level post, he was appointed as Director (Operations and Technical) and his services were regularised as Director (Operations and Technical) in the board of directors. Thus, it is a regular post though it is a period of five (5) years or till termination, whichever is earlier. A similar or identical question came up before the Apex Court in "Dr.L.P. Agarwal v. Union of India (UOI)1", where Dr.L.P.Agarwal was appointed as a Professor of Ophthalmology and the Director of the Institute. It was a composite appointment. Thereafter, when he was compulsorily retired as a Professor, the question arose: whether his tenure post as a Director has also automatically come to a terminus? In that behalf, the Court 1 AIR1992SC1872 CJ and MSM,J was_221 and 281_2020 19 had considered the question and had held that even an outsider (not an existing employee of AIIMS) can be selected and appointed to the post of Director. Can such person be retired pre-maturely to the post of director? The Apex Court held that the appointment to the post of Director is governed by the Fundamental Rules and he is independent of the tenure which he holds in any other post either on permanent or temporary basis. Accordingly, on his ceasing to be a Director, he does not have the right to fall back upon the previous permanent post held by him as Professor and Head of the ENT Department. The observation of the Apex Court is extracted hereunder for better appreciation:
We have given our thoughtful consideration to the reasoning and the conclusions reached by the High Court. We are not inclined to agree with the same. Under the Recruitment Rules the post of Director of the AIIMS is a tenure post. The said rules further provide the method of direct recruitment for filling the post. These service-conditions make the post of Director a tenure post and as such the question of superannuating or prematurely retiring the incumbent of the said post does not arise. The age of 62 years provided under Proviso to Regulation 30(2) of the Regulations only shows that no employee of the AIIMS can be given extension beyond that age. This has obviously been done for maintaining efficiency in the Institute-Services. We do not agree that simply because the appointment order of the appellant mentions that "he is appointed for a period of five years or till he attains the age of 62 years", the appointment ceases to be to a tenure-post. Even an outsider (not an existing employee of the AIIMS) can be selected and appointed to the post of Director. Can such person be retired prematurely curtailing his tenure of five years? Obviously not. The appointment of the appellant was on a Five Years Tenure but it could be curtailed in the event of his attaining the age of 62 years before completing the said tenure. The High Court failed to appreciate the simple alphabet of the service jurisprudence. The High Court's reasoning is against the clear and unambiguous language of the Recruitment Rules. The said rules provide "Tenure for five years inclusive of one year probation" and the post is to be filled "by direct recruitment". Tenure means a term during which an office is held. It is a condition of holding the office. Once a person is appointed to a tenure post, his appointment to the said office begins when he joins and it comes to an end on the completion of the tenure unless curtailed on justifiable grounds. Such a person does not superannuate, he only goes out of the office on completion of his tenure. The question of prematurely retiring him does not arise. The CJ and MSM,J was_221 and 281_2020 20 appointment order gave a clear tenure to the appellant. The High Court fell into error in reading "the concept of superannuation" in the said order. Concept of superannuation which is well understood in the service jurisprudence is alien to tenure appointments which have a fixed life span. The appellant could not therefore have been prematurely retired and that too without being put on any notice whatsoever. Under what circumstances can an appointment for a tenure be cut short is not a matter which requires our immediate consideration in this case because the order impugned before the High Court concerned itself only with premature retirement and the High Court also dealt with that aspect of the matter only. This court's judgment in Dr. Bool Chand v. The Chancellor Kurukshetra University (1968)IILLJ135SC relied upon by the High Court is not on the point involved in this case. In that case the tenure of Dr. Bool Chand was curtailed as he was found unfit to continue as Vice-Chancellor having regard to his antecedents which were not disclosed by him at the time of his appointment as Vice-Chancellor. Similarly the judgment in Dr. D.C. Saxena v. State of Haryana (1987)IILLJ360SC has no relevance to the facts of this case.
The Apex Court in "S.K. Kacker v. All India Institute of Medical Sciences2" considered the same principle. Few facts of the said case are necessary for better appreciation of the law and its application to the present facts of the case.
One Dr.S.K.Kacker was appointed as professor and Head of ENT Department. Later, he was selected and appointed as director of AIIMS. It is also an admitted position that any Professor in India is entitled to apply for and seek selection to the post of Director. It is a selection post to be filled by competition in the open market. Therefore, once a Director is selected and appointed with the concurrence of the Central Government, it becomes an independent permanent appointment. But the contention of the petitioner therein was that the post of director is on temporary basis as it is for tenure and after completion of tenure, he is entitled to claim original post of Professor and Head of ENT department in AIIMS. This contention was rejected by the Apex Court and held that the Director of AIIMS is a 2 (1996)10SCC734 CJ and MSM,J was_221 and 281_2020 21 permanent post; as the petitioner is a permanent Government servant governed by the Fundamental Rules, he cannot hold two substantive posts at the same time, namely the post of Professor and Head of the Department and also the post of Director. Further, when the petitioner was appointed as director and his services were regularised in the post of Director, he cannot claim lien over the original post of Professor, Head of the ENT department. Thus, the Apex Court is of the opinion that the High Court was right in holding that the Dr.S.K.Kacker cannot revert as Professor and Head of the ENT Department, on his ceasing to be the Director of AIIMS.
Finally, the Apex Court rejected the contention of Dr.S.K.Kacker while upholding the order of the High Court holding that both the posts are substantive posts and the Dr.S.K.Kacker cannot fall back on the original appointment of Professor, Head of the ENT Department.
The same principle is applicable even to the present facts of the case for the reason that the petitioner was appointed as General Manager (Project Engineering) based on the notification issued by respondent No.2 and he was selected in the process of selection. Therefore, he was holding substantive post of General Manager (Project Engineering). Later, he was appointed as Director (Operations and Technical) in pursuance of the notification No.7/3/2014-PESB dated 23.05.2014. As per the said notification, any person can be appointed to the post of Director, not the employee working in respondent No.2 Corporation alone. Therefore, on appointment as Director (Operations and Technical) and regularisation of services as Director, the petitioner is ceased to hold original substantive post of General Manager (Project Engineering) as he cannot hold two CJ and MSM,J was_221 and 281_2020 22 substantive posts at a time i.e. General Manager (Project Engineering) and Director (Operations and Technical). When he tendered technical resignation in terms of Share Purchase Agreement, he is not ceased to be the Director for all practical purposes since the resignation is purely technical in nature for the purpose of compliance of terms and conditions of Share Purchase Agreement. Though he ceased to be a director either on completion of 5 years tenure or before completion of 5 years, he is not entitled to claim lien over the below board level post i.e. General Manager (Project Engineering) in view of the law laid down by the Apex Court in "Dr.L.P. Agarwal v. Union of India (UOI)" and "S.K. Kacker v. All India Institute of Medical Sciences" (referred supra).
As per the notification No.7/3/2014 -PESB dated 23.05.2014, respondent No.2 invited applications for the post of Director (Operations and Technical) and also specified the minimum age, qualifications, pay-scale and duration of appointment etc. In response to the said notification, several persons appeared for interview, out of 10 persons interviewed, first four persons from respondent No.2 Corporation and other six members i.e. Davinder Wadehra, Additional GM, SJVNL, Gaddam David, Additional GM, PFC, S.R.Varma, GM, HSL, M.V.Rao, GM, BEML, P.K.Saxena, Joint GM, HMT (MT) and CMDE A.N.Sonsale, MOD from different enterprises. Thus, any person including an outsider is entitled to apply for the post of Director (Operations and Technical) and the petitioner was selected ultimately. Therefore, the principle laid down in "S.K. Kacker v. All India Institute of Medical Sciences"
(referred supra) is directly applicable to the present facts of the case.
CJ and MSM,J was_221 and 281_2020 23 Learned single Judge decided that the petitioner is entitled to claim lien over the below board level post i.e. General Manager (Project Engineering) without considering his regularisation in the post of Director (Operations and Technical), which is a substantive post. Hence, the petitioner is not entitled to hold two substantive posts at a time and when his services are regularised in substantive post, he loses his right to claim lien over the below board level post i.e. General Manager (Project Engineering).
Learned single Judge did not consider automatic termination of lien over the original post consequent upon the regularisation of services of petitioner as Director (Operations and Technical).
Therefore, the conclusion arrived by the learned single Judge that the petitioner is entitled to claim lien over the below board level post i.e. General Manager (Project Engineering) and the direction issued to continue the petitioner in the said post is an illegality. In view of the law laid down by the Apex Court in "S.K. Kacker v. All India Institute of Medical Sciences" (referred supra), the petitioner is not entitled to claim lien over the post of General Manager (Project Engineering) consequent upon regularisation of his services as Director (Operations and Technical), but the learned single Judge erroneously arrived at such conclusion, thereby the order of the learned single Judge is liable to be set aside.
In view of our foregoing discussion, we hold that the petitioner ceased to be a General Manager (Project Engineering), which is below board level post, consequent upon his regularisation in a substantive post of Director (Operations and Technical) as the petitioner cannot continue in two substantive posts, thereby disentitled to claim lien CJ and MSM,J was_221 and 281_2020 24 over the post of General Manager (Project Engineering). Accordingly, the point is answered in favour of the respondents and against the petitioner.
P O I N T No.2:
The writ petitioner preferred a separate appeal aggrieved by the part of the order passed by the learned single Judge declining to grant 2nd part of relief i.e. continuing as Director for the remaining period of 15 months out of 5 years tenure.
Learned single Judge interpreted the terms of Share Purchase Agreement more particularly Clause 7.2A and 11.1 applying the principle laid down by the Apex Court in "DLF Universal Ltd. V. Director, Town and Country Planning, Haryana 3", and concluded that the petitioner is disentitled to claim continuation of service as Director (Operations and Technical) in respondent No.2 - Corporation.
Aggrieved by the finding recorded by the learned single Judge, the writ petitioner preferred an appeal on various grounds more particularly contending that various clauses in Share Purchase Agreement were not appreciated properly.
Undoubtedly, the consortium of respondent Nos.3 to 6 entered into Share Purchase Agreement with respondent No.2 and purchased entire shares in respondent No.2 Corporation and the consortium became the owner of respondent No.2 though it is being run by respondent No.2 itself. Clause 7.2A and 11.1 are the relevant clauses, which deals with the issue relating to „Director‟. Hence, it is apposite 3 AIR 2011 SC 1463 CJ and MSM,J was_221 and 281_2020 25 to extract those two clauses for better appreciation. Accordingly, they are extracted hereunder.
Clause 7.2A is as follows:
7.2A. On the closing date, the Directors of the Company nominated by the Seller shall tender their resignation and the Whole Time Directors shall be eligible for re-appointment. The Purchasers shall appoint its nominees on the Board to replace the directors who have resigned."
Clause 11.1 is as follows:
11.1 Directors: The Purchasers shall continue the appointment of the existing Whole Time Directors, Independent Directors and Nominee Directors until the expiry of their present term. However, post-Closing Date, the Purchasers shall be entitled to appoint Whole Time Directors and other directors in accordance with Clause 7 and the Applicable Law in that regard.
Clause 7.2A consists of two limbs. The first limb deals with resignation of directors nominated by respondent No.2 and also specifies that the whole time directors are eligible for re-appointment. Second limb permits the purchasers i.e. respondent Nos.3 to 6 to appoint its nominees on the Board to replace the directors who have resigned. Thus, absolute right is conferred on respondent Nos.3 to 6 to appoint its nominees on the Board to replace the directors who have resigned, though the resigned directors are eligible for re- appointment.
In view of the language employed in Clause 7.2A, more particularly the word „shall‟ in two limbs of Clause 7.2A, Board of Directors on the closing date mandatorily resign to their post and the purchasers respondent Nos.3 to 6 shall appoint their own directors in the place of resigned directors. Whereas, clause 11.1 mandates continuation of existing Whole Time Directors, Independent Directors CJ and MSM,J was_221 and 281_2020 26 and Nominee Directors until the expiry of their present term. However, as on closing date, the purchasers i.e. respondent Nos.3 to 6 are entitled to appoint Whole Time Directors and other directors in accordance with Clause 7 and the applicable law in that regard.
Thus, clause 7.2A and 11.1 of Share Purchase Agreement are totally inconsistent and irreconcilable with one another. Even two limbs in Clause 7.2A are irreconcilable.
Learned single Judge based on the law declared in "DLF Universal Ltd. V. Director, Town and Country Planning, Haryana" (referred supra), regarding interpretation of contract, concluded that the contract should be read in its entirety. The principle referred in "DLF Universal Ltd. V. Director, Town and Country Planning, Haryana" (referred supra), is extracted hereunder.
11. It is settled principle in law that a contract is interpreted according to its purpose. The purpose of a contract is the interests, objectives, values, policy that the contract is designed to actualize. It comprises joint intent of the parties. Every such contract expresses the autonomy of the contractual parties' private will. It creates reasonable, legally protected expectations between the parties and reliance on its results. Consistent with the character of purposive interpretation, the court is required to determine the ultimate purpose of a contract primarily by the joint intent of the parties at the time the contract so formed. It is not the intent of a single party; it is the joint intent of both parties and the joint intent of the parties is to be discovered from the entirety of the contract and the circumstances surrounding its formation.
CJ and MSM,J was_221 and 281_2020 27 Learned single Judge also adverted to the law laid down in "Radha Sundar Dutta v. Mohd. Jahadur Rahim4" and "India Trade Promotion Organisation v. International Amusement Limited5" . In "Radha Sundar Dutta v. Mohd. Jahadur Rahim"
the Apex Court held that if, in fact, there is a conflict between the earlier clause and the later clauses and it is not possible to give effect to all of them, then the rule of construction is well established that it is the earlier clause that must override the later clauses and not vice versa.
In "Forbes v. Git6", Lord Wrenbury stated the rule in the following terms :
"If in a deed an earlier clause is followed by a later clause which destroys altogether the obligation created by the earlier clause, the later clause is to be rejected as repugnant and the earlier clause prevails. In this case the two clauses cannot be reconciled and the earlier provision in the deed prevails over the later."
If the principle laid down in "Forbes v. Git" (referred supra) is applied to the present facts of the case, clause 7.2A will prevail over clause 11.1 of Share Purchase Agreement. In such case, harmonious construction of whole contract is to be adopted to trace the purpose of agreement.
Copy of Share Purchase Agreement is placed on record. But the intention of the parties to the agreement can be gathered from the contents of agreement, but we could find nothing except disinvestment in terms of Cabinet decision. In any view of the matter, legal position referred above is not in controversy. Hence, clause 7.2A 4 AIR 1959 SC 24 5 Manu/DE/8215 2007 6 [1922] 1 A.C. 256 CJ and MSM,J was_221 and 281_2020 28 will prevail over clause 11.1 of Share Purchase Agreement. Therefore, it is difficult to reconcile two limbs of Clause 7.2A of Share Purchase Agreement. But this Court has no option except to follow the law laid down by the Apex Court in the judgments (referred supra). By applying the same principle to the facts of the present case, we hold that clause 7.2A will override clause 11.1 of the Share Purchase Agreement.
One of the major contentions of the writ petition is that the learned single Judge did not consider clauses 7.2A, 7.4 and 11 together and committed an error in interpreting the clauses. According to clause 7.2A on the closing date, the Directors of the Company nominated by the seller tender their resignation, whereas clause 7.4 permits the purchaser to re-appoint the Whole Time Directors who have resigned, failing which such Whole Time Directors shall be entitled to compensation from the company in accordance with the terms of their employment contract, which shall be in addition to any terminal benefits, leave encashment, gratuity, benefits under VRS, which they are entitled to under their contract for employment.
Even if the clauses 7.2A and 7.4 are read together, option is given to the purchaser to re-appoint the Whole Time Directors who have tendered resignation in terms of clause 7.2A, but made it clear that the Whole Time Directors, who were not re-appointed, are entitled to compensation from the company in accordance with the terms of their employment contract, which shall be in addition to any terminal benefits, leave encashment, gratuity, benefits under VRS, which they are entitled to under their contract for employment.
CJ and MSM,J was_221 and 281_2020 29 Clause 7.4 did not obligate the purchaser to re-appoint Whole Time Directors, it is only an option given to the purchaser. Even if, these two clauses are read together, it may not improve the case of the petitioner, but the petitioner is entitled to claim compensation in addition to the terminal benefits.
Coming to the controversy regarding entitlement of the petitioner to continue as Director (Operations and Technical), undoubtedly, it is a tenure post for 5 years. At the same time, it is also not in dispute that contract of employment is governed by the conditions of appointment.
Admittedly, the petitioner was appointed as Director (Operations and Technical) for a period of 5 years from the date of his assumption of charge of the post on or after 01.06.2015, or till the date of the superannuation, or until further orders, whichever is the earlier. When an employee was appointed on tenure basis, he cannot be removed by any order except on the terms and conditions of the employment as held in "Dr.L.P. Agarwal v. Union of India (UOI)"
and "S.K. Kacker v. All India Institute of Medical Sciences"
(referred supra).
The Apex Court in "P.Venugopal v. Union of India7" relying on "Dr.L.P. Agarwal v. Union of India (UOI)" (referred supra) held that the principle of law stipulated by this Court that curtailment of the term of five years can only be made for justifiable reasons and compliance with principles of natural justice for premature termination of the term of a Director. Thus there was never any permissibility for any artificial and impermissible classification 7 (2008) 5 SCC 1 CJ and MSM,J was_221 and 281_2020 30 between the writ petitioner on the one hand and any future Director of the institution on the other when it relates to the premature termination of the term of office of the Director. The decision of the Board of Directors clearly falls foul of Article 14 of the Constitution being an apparent case of "naked discrimination".
Hence, it is clear from the law laid down by the Apex Court that when once employee was appointed on tenure basis except for justifiable reasons he cannot be removed before completion of tenure and no order need be passed after completion of tenure since it is an automatic termination from service. Therefore, the petitioner is entitled to continue in service till his services are terminated on justifiable grounds in compliance of principles of natural justice. But no such termination had taken place in the present facts of the case. More curiously, the petitioner himself tendered resignation in terms of clause 7.2A of Share Purchase Agreement. The contention of the petitioner is that the resignation is only a "technical resignation" and not intended to resign from service as Director (Operations and Technical).
Technical resignation is not defined anywhere. As per the Ministry of Finance OM No.3379-E.III (B)/65 dated the 17.06.1965, the resignation is treated as a technical formality where a Government servant has applied through proper channel for a post in the same or some other Department, and is on selection, required to resign the previous post for administrative reasons. The resignation will be treated as technical resignation if these conditions are met, even if the Government servant has not mentioned the word "Technical" while submitting his resignation. The benefit of past CJ and MSM,J was_221 and 281_2020 31 service, if otherwise admissible under rules, may be given in such cases. Resignation in other cases including where competent authority has not allowed the Government servant to forward the application through proper channel will not be treated as a technical resignation and benefit of past service will not be admissible. Also, no question of benefit of a resignation being treated as a technical resignation arises in case of it being from a post held on ad hoc basis.
In view of the meaning of word „technical resignation‟, the resignation of the petitioner would not fall within the definition of the technical resignation. Even if, it is treated as technical resignation, he is entitled to claim benefits of service, but not entitled to continue in the post as clarified in OM No.3379-E.III (B)/65 dated the 17.06.1965. If the petitioner is a Whole Time Director and not re-appointed on resignation in terms of Clause 7.2A of Share Purchase Agreement, at best, he is entitled to claim benefits under Clause 7.4 i.e. compensation from the company in accordance with the terms of his employment contract, which shall be in addition to any terminal benefits, leave encashment, gratuity, benefits under VRS, which he is entitled to under the contract for employment.
Hence, the petitioner is entitled to claim only benefits of service as per Office Memorandum and not entitled to continue in the post as Director (Operations and Technical) till completion of his term of 5 years. Learned single Judge rightly declined to grant such relief. However, we made it clear that the petitioner is entitled to service benefits while agreeing with the view taken by the learned single Judge. Accordingly, the point is answered.
CJ and MSM,J was_221 and 281_2020 32 In the result Writ Appeal No.221 of 2020 is allowed setting aside the order dated 28.04.2020 passed by the learned single Judge in W.P.No.7350 of 2019. Writ Appeal No.281 of 2020 is dismissed. No costs.
The miscellaneous petitions pending, if any, shall also stand closed.
PRASHANT KUMAR MISHRA, CJ M. SATYANARAYANA MURTHY,J Ksp