Karnataka High Court
The Mysore Paper Mills Limited, ... vs The Mysore Paper Mills Officers' ... on 12 August, 1998
Equivalent citations: ILR1998KAR3620, 1998(6)KARLJ667, (1999)IILLJ552KANT
Bench: R.P. Sethi, M.B. Vishwanath, K.R. Prasada Rao
JUDGMENT
K.R. Prasada Rao
1. These appeals have been filed against the order passed by the learned Single Judge in Writ Petition Nos. 5517 and 5518 of 1998, dated 4-3-1998 confirming the ex parte stay order dated 24-2-1998 staying the operation of the order of transfer of respondent 2-Deputy Manager (TTC) from the Technical Training Centre to its Regional Office, Calcutta under Office Memorandum No. FPA TRF 97 384, dated 27-11-1997 issued by the appellant (Annexure-EE to the writ petitions) and rejecting the application filed by the appellant-Company for vacating the stay order dated 24-2-1998.
2. The impugned order passed by the learned Single Judge has been challenged by the management of the appellant-Company on two grounds which are (1) the writ petitions filed by the respondents in the writ appeals are not maintainable, as the appellant-Company is not a "State" or other authority within the sweep of the expression used in Article 12 of the Constitution of India and (2) the order of transfer passed by the appellant is in accordance with the terms and conditions of contract of service as well as Officers' Service Rules and it is purely on account of exigencies of work and in the interest of business of the appellant-Company and the said order of transfer passed is not vitiated by any mala fides and the same cannot be challenged by the respondents in the writ proceedings. But it is contended by the respondents in the writ petitions that Mysore Paper Mills which is a Company incorporated under the Companies Act, 1956 and which is a Government Company, as defined in Section 617 of the said Act falls within the meaning of the "State", as defined in Article 12 of the Constitution of India and the said Company being the "State" within the meaning of Article 12 of the Constitution of India is bound to act fairly and reasonably and, if it does not do so, its action can be struck down under Article 14, as being arbitrary. It is further argued by the respondents that in the present case the transfer order passed by the management of the appellant-Company is mala fide and illegal and it amounts to resorting to unfair labour practice and act of victimisation. We have heard the elaborate arguments of the learned Senior Counsel Sri Udayaholla appearing for the appellant and Sri K. Subba Rao, learned Counsel appearing for the respondents on both the above grounds urged in the present appeal. After the said arguments were heard, the question: whether the appellant-Company can be considered as "State" within the meaning of the expression used in Article 12 of the Constitution of India has been referred to Full Bench by an order of Division Bench dated 10-7-1998, since it is found that in the earlier unreported decisions of this Court rendered by some of the Division Benches vide decisions in Writ Petition Nos. 1995 of 1983, W.A. No. 1445 of 1984, W.A. Nos. 87 and 88 of 1992, W.P. No. 27375 of 1992, W.P. No. 6257 of 1987, W.P. No. 8746 of 1991, W.P. No. 16861 of 1989, W.P. No. 16504 of 1995, W.P. Nos. 16940 and 16941 of 1990, it was held that the appellant-Company was not a "State" and since it is felt that the said decisions need reconsideration and the question is to be decided afresh on the basis of the principles laid down by the Supreme Court in various decisions in Rohtas Industries Limited and Another b Rohtas Industries Staff Union and Others, Ajay Hasia v Khalid Mujib Sehravardi and Others and Sheela Barse v Secretary, Children Aid Society and Others, which are relied upon by the learned Counsel appearing for both the sides. After the Full Bench was constituted, further arguments of the learned Counsels appearing for both sides have been heard.
3. The points which arise for consideration of the Full Bench are:
(1) Whether the Mysore Paper Mills which is a Company incorporated under the Companies Act, 1956 and which is a Government Company, as defined in Section 617 of the Companies Act falls within the meaning of the word "State" as defined in Article 12 of the Constitution of India?
(2) Whether the action taken by the appellant-Company transferring the 2nd respondent to Calcutta under the memo bearing No. FPA TRF 97 384, dated 27-11-1997 (Annexure-EE) is vitiated by mala fides and whether it is arbitrary and illegal?
4. Before proceeding to consider the above points, we find it necessary to state briefly the relevant facts narrated by the respondents in their writ petitions:
The 2nd respondent in the writ appeals who is a post-graduate in Chemistry, joined the Mysore Paper Mills Limited (hereinafter referred to as the 'Mill') as a Management Trainee on 10-8-1981 and was posted to look after D.M. Plant and thereafter, he was confirmed as Assistant Superintendent (Laboratory) in the Research and Development Division of the Mill as per the Official Memorandum 26-9-1983. Thereafter, he was promoted to the post of Deputy Superintendent (D.M. Plant) with effect from 14-8-1986 as per the Official Memorandum dated 6-12-1986. Subsequently he was further promoted as Senior Superintendent (D.M. Plant) with effect from 14-8-1989 as per the Official Memorandum dated 7-9-1991 and the said post was later redesignated as Assistant Manager (D.M. Plant). He was transferred to the Regional Office, Calcutta by a memo bearing Ref. No. FPA/TRF/97/381, dated 27-11-1997. The 2nd respondent alleged that the said transfer order is mala fide and illegal and it was issued with a view to victimise him and to prevent him from functioning as an executive member of a MPM Officers' Association which was registered on 30-12-1986 under the provisions of the Indian Trade Unions Act about a decade back. He also alleged in the writ petition that himself and other officers of the Mill took active lead to form the said Association and he became the founder-Secretary of the Association. After the formation of the Association for the first time on behalf of officers of the Mill, the 1st respondent-Association submitted a general charter of demands which included inter alia revision of pay scales, revision of dearness allowance and revision of house rent allowance and several other allowances, parity, revision of service rules and deletion of certain service rules which were inconsistent with the democratic norms. After the charter of demands were submitted, the management of the Mill refused to concede the demands. Therefore, the matter was taken up in conciliation and since the Conciliation Officer did not take up the demands for conciliation, the 1st respondent-Association moved this Court by means of a writ petition under Article 226 of the Constitution of India which was allowed and in furtherance of the direction given the dispute was referred to the Additional Industrial Tribunal, Bangalore for adjudication in ID No. 66 of 1988. However, during the pendency of the proceedings before the Additional Industrial Tribunal, there was an out of Court settlement and an award was made on the basis of joint Memorandum of Settlement and that settlement was accepted and the Tribunal made an award. One of the clauses of the settlement was that the management was required to amend and revise the Officers' Service Rules after discussing the matter with the representatives of the Association on the basis of suggestions made by the Association. Though an award was passed by the Tribunal, the management of the Mill totally failed to carry out its obligation in terms of the award. Therefore the Association had to move the enforcement machinery constituted under the provisions of the Industrial Disputes Act. But the Labour Department of the Government of Karnataka did not take any action because the Mysore Paper Mills being a Karnataka State Public Sector Undertaking. Thereafter, the Association submitted a representation before the Joint Labour Commissioner on 29-1-1988, furnishing complete details of the violations of the award committed by the management. During the year 1990, Paper Mills Workers' Association and the Officers' Association formed a joint front, and there was a joint struggle by the workers and the officers because of certain pressing demands and problems. Immediately thereafter the services of the 2nd respondent were terminated without holding an enquiry by an order dated 6-4-1990. Subsequently, the order of termination was superseded by another order dated 2-7-1990 and the 2nd respondent was kept under suspension as per the Official Memorandum dated 2-7-1990. Subsequently, the order of suspension was revoked and the 2nd respondent was reinstated by the management of the Mill as per the Official Memorandum dated 22-12-1990. Thereafter, the 2nd respondent continued to work in D.M. Plant and he was not holding any post as an office bearer of the Association between 1991 and 1994. However, he was guiding the office bearers whenever his guidance was sought and he was advising the 1st respondent-Association in respect of fresh charter of demands and certain other matters in respect of which there were serious disputes between the Association and the management of the Mill. According to the respondents during that period one Sri V.K. Gore, was the Chairman and Managing Director of the Mill and he became very hostile towards the office bearers of the Association and also towards the active functionaries of the Association. During April 1994, a show-cause notice was issued to the 2nd respondent to which he submitted a detailed explanation dated 30-4-1994. Thereafter, since the Manager (Boilers) endorsed the correctness of the contents of the said explanation as per his endorsement dated 3-4-1994, the management dropped the matter. It is the further case of the respondents that in the meantime, the 2nd respondent was co-opted as executive committee member of the 1st respondent-Association of which he was founder-Secretary. Since this was not to the liking of the management, the management was very much after him and the office bearers of the Association who were all taking keen interest on the affairs of the Association. In the meanwhile certain proceedings were initiated by the 1st respondent to declare the office bearers and eight executive committee members including the 2nd respondent as 'protected workmen' under Section 33 of the Industrial Disputes Act, but the management did not agree to the said proposal of the Association. Thereafter an application was filed before the Labour Court, the competent authority competent to decide the issue under Section 33 of the Act. While these proceedings were going on, a press statement was issued by the office bearers about dealings regarding import of pulp and avoidable loss to the Mill. The Chairman and Managing Director became very hostile and he issued charge-sheets to Shri Gopinath, Manager (Electrical), who was the President of the Association and to Sri B.N. Srinivas, who was the Secretary of the Association and was working as Deputy Manager. On the same day the 2nd respondent was transferred from D.M. Plant of the Mill to the Task Force Department as per the Official Memorandum dated 8-10-1994 issued by the General Manager. Since the said transfer was totally illegal and was done with the mala fide intention of harassing him, the 1st respondent-Association submitted a representation addressed to the General Manager (HRD & A) requesting him to revoke the order of transfer of the 2nd respondent and post him back to bis earlier department. Despite submitting the said representation, no action was taken to reconsider the transfer order issued to the 2nd respondent, because the order of transfer was issued with a mala fide intention and to see that the 2nd respondent stopped to do any kind of trade union activity, as the place to which be was posted was totally isolated and the management also saw to it that the second petitioner did not come in contact with any one. The 2nd respondent challenged the said order of transfer before this Court in W.P. No. 31660 of 1994 and this Court ordered notice to the management. Respondents also alleged that at that time the 2nd respondent's wife and Sri Gopinath's wife were assaulted by the security guard and they were humiliated in the absence of the 2nd respondent and Sri Gopinath, the then President of the Association. The 2nd respondent alleged to have sent a letter dated 20-10-1994, addressed to the Senior Manager (Task Force) of the Mill and his immediate superior under whom he was posted certified to the correctness of the facts mentioned in the representation. Subsequently the 2nd respondent was transferred from the Task Force Department to the Technical Training Centre as Assistant Manager, as per the order dated 14-3-1995 and he was simultaneously issued a Memo of Charges on 14-3-1995, alleging that he has contravened several service rules framed by the management. Second respondent submitted a representation dated 29-3-1995 in answer to the said charges. Subsequently no enquiry was held against the 2nd respondent into the said charges and the matter was dropped as per the endorsement dated 7-8-1996 issued by the General Manager. Since the 2nd respondent was transferred to the Technical Training Centre as Assistant Manager, he withdrew the writ petition filed by him on 2-2-1996. According to the respondents, thereafter there was deterioration in the affairs of the Mills and there was lot of discontentment amongst the employees including the management of the Mill. In this background Sri Suryanarayana Rao a well-known person in the trade union, who is Honorary President of the 1st respondent-Association met the press and urged for a probe into the affairs of the Mill and its management. There was a specific reference regarding procurement of raw materials and other purchases which have added to the cost of production. This news was published in Deccan Herald newspaper dated 29-9-1997 and in almost all the other newspapers. He also urged the Chief Minister of Karnataka to hold a COD probe into the affairs of the Mill and its mismanagement before the Chairman and Managing Director Sri S.L. Gangadharappa about the affairs of the Mill. This news item was published in Deccan Herald newspaper dated 29-9-1997. Thereafter, when the Chairman and Managing Director learnt that 2nd respondent and Gopinath have been co-opted as executive members of the Association, he thought they have been responsible for the news which appeared in the newspaper and also for providing the material to Sri Suryanarayana Rao. Immediately after the Association addressed a letter to the General Manager (HRD & A) regarding co-opting of the 2nd respondent and Sri Gopinath, Sri S.L. Gangadharappa, Chairman and Managing Director directed the General Manager (HRD & A), who was incharge Officer to transfer the 2nd respondent to Calcutta and as a result the transfer order dated 27-11-1997 came to be issued transferring the 2nd respondent to Regional Office, Calcutta. According to the respondents in the entire background, the transfer of 2nd respondent is nothing but mala fide action resorted with a view to victimise him and to force him to disassociate himself with the activities of the 1st respondent-Association. It is also alleged that the Chairman and the Managing Director by a letter dated 27-1-1998, enclosing a copy of the resolution of the Board directed the officers to disassociate themselves from the Association. In the meantime, the leave applied by the 2nd respondent was sanctioned as per letter dated 16-1-1998 and he was asked to appear before the Medical Board by an intimation dated 21-1-1998. Thereafter the 2nd respondent also submitted a representation to the management requesting for sanction of leave as per letter dated 7-2-1998. Thereafter he received a memo informing him that the sick leave applied for by him has been sanctioned on loss of pay upto 5-2-1998 and further he was sanctioned privilege leave for a period of 30 days from 6-2-1998 till 7-3-1998 and he was asked to appear before the NIMHANS, Bangalore for further treatment. In the meantime, the 1st respondent-Association received a letter dated 5-6-1998 from the management informing that the fundamental rights are subject to reasonable restrictions imposed by the State and the advise of the management to disband the association was within the powers of the management and further threatened that the management would not entertain any further correspondence with the Association. The management also informed that the officers wanted to enjoy fundamental rights they are free to leave the organisation. The respondents, therefore contended that the action taken by the management in transferring the 2nd respondent to Calcutta is an act of victimisation and unfair labour practice. Therefore they approached this Court for quashing the said transfer order and sought for an interim order of stay pending disposal of the writ petitions.
5. The learned Single Judge granted an ex parte order of stay on 24-2-1998 and subsequently the application filed by the appellant-management to vacate the said stay order has been dismissed on 4-3-1998 and the earlier stay order issued has been confirmed.
Aggrieved by the impugned order passed by the learned Single Judge, the management filed the present appeals.
6. Point No. 1.--First we shall refer to the leading decisions of the Supreme Court cited by the learned Counsel appearing for both parties, wherein certain tests were indicated to determine whether the society, institution, company, corporation etc., can be said to fall under the definition of the word "other authorities and thus "State" referred in Article 12 of the Constitution of India.
The leading case on the subject is the decision rendered by the Supreme Court in Ajay Hasia's case, supra, wherein it was held:
"Where a corporation is an instrumentality or agency of the Government, it must be held to be an 'authority' within the meaning of Article 12 and hence subject to the same basic obligation to obey the fundamental rights as the Government.
It is immaterial for determining whether a corporation is an authority whether the corporation is created by a statute or under a statute. The test is whether it is an instrumentality or agency of the Government and not as to how it is created. The inquiry has to be not as to how the juristic person is born but why it has been brought into existence. The corporation may be a statutory corporation created by a statute or it may be a Government company or a company formed under the Companies Act or it may be a society registered under the Societies Registration Act or any other similar statute. Whatever be the genetical origin, it would be an "authority" within the meaning of Article 12 if it is an instrumentality or agency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a company or society and in a given case it would have to be decided on a consideration of the relevant factors. Whether the company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression "authority" in Article 12. A juristic entity which may be "State" for the purpose of Parts III and IV would not be so for the purpose of Part XIV or any other provision of the Constitution. (Case law discussed) (paras 11 and 12)".
In para 9 of the same decision it is held:
"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 . 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 too 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 tampered 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 corporation or an instrumentality or 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 be an 'authority' and, therefore "State" within the meaning of the expression in Article 12" ".
The next important case on the subject is the decision rendered in Som Prakash Rekhi v Union of India and Another, (Krishna Iyer, J.), it was held:
"If a statutory corporation, body or other authority is an instrumentality or agency of the Government, it would be an "authority" and therefore "State" within the meaning of that expression in Article 12, and is subject to the same constitutional limitations as Government. The preponderant considerations for pronouncing an entity as State agency or instrumentality are: (i) financial resources of the State being the chief funding source, (ii) functional character being governmental in essence, (iii) plenary control residing in Government, (iv) prior history of the same activity having been carried on by Government and made over to the new body and (v) some element of authority of command. Whether the legal person is a corporation created by a statute, as distinguished from under a statute, is not an important criterion although it may be an indicium".
In another decision rendered in Manmohan Singh Jaitla v Commissioner, Union Territory, Chandigarh and Others, it was held:
"(C) Punjab Aided Schools (Security of Service) Act (19 of 1969) as extended to Union Territory of Chandigarh, Section 3 -- Aided school receiving protection under the Act -- School subject to regulations made by Education Department -- It is other authority within Article 12 of Constitution and amenable to writ jurisdiction of High Court. Civil Writ No. 1086 of 1983, dated 24-2-1983 (Punjab and Haryana), reversed -- Constitution of India, Articles 226 and 12 -- Other authority -- Aided School)".
In a latest decision of the Supreme Court in Air India Statutory Corporation v United Labour Union and Others, it was held:
"(C) Contract Labour (Regulation and Abolition) Act (37 of 1970), Section 2(1)(a) -- Appropriate Government -- Corporation, instrumentality or agency -- If under control of an appropriate Government -- Principles for determination laid down.
(1) The constitution of the corporation or instrumentality or agency or corporation aggregate or corporation sole is not of sole material relevance to decide whether it is by or under the control of the appropriate Government under the Act.
(2) If it is a statutory corporation, it is an instrumentality or agency of the State. If it is a company owned wholly or partially by a share capital, floated from public exchequer, it gives indicia that it is controlled by or under the authority of the appropriate Government.
(3) If commercial activities carried on by a corporation established by or under the control of the appropriate Government having protection under Articles 14 and 19(2), it is an instrumentality or agency of the State.
(4) The State is a service corporation. It acts through its instrumentalities, agencies or persons natural or juridical.
(5) The governing power, wherever located, must be subject to the fundamental constitutional limitations and abide by the principles laid in the Directive principles.
(6) The framework of service regulations made in the appropriate rules or regulations should be consistent with and subject to the same public law principles and limitations.
(7) Though the instrumentality, agency or person conducts commercial activities according to business principles and are separately accountable under their appropriate bye-laws of Memorandum of Association, theybecome the arm of the Government.
(8) The existence of deep and pervasive State Control depends upon the facts and circumstances in a given situation and in the altered situation it is not the sole criterion to decide whether the agency or instrumentality or person is by or under the control of the appropriate Government.
(9) Functions of an instrumentality, agency or person are of public importance following public interest element.
(10) The instrumentality, agency or person must have an element of authority or ability to effect the relations with its employees or public by virtue of power vested in it by law, Memorandum of Association or bye-laws or Articles of Association.
(11) The instrumentality, agency or person renders an element of public service and is accountable to health and strength of the workers, men and women, adequate means of livelihood, the security for payment of living wages, reasonable conditions of work, decent standard of life and opportunity to enjoy full leisure and social and cultural activities to the workmen.
(12) Every action of the public authority, agency or instrumentality or the person acting in public interest or any act that gives rise to public element should be guided by public interest in exercise of public power or action hedged with public element and is open to challenge. It must meet the test of reasonableness, fairness and justness.
(13) If the exercise of the power is arbitrary, unjust and unfair, the public authority, instrumentality, agency or the person acting in public interest, though in the field of private law, is not free to prescribe any unconstitutional conditions or limitations in their actions.
It must be based on some rational and relevant principles. It must not be guided by irrational or irrelevant considerations and all their actions should satisfy the basic law requirement of Article.
14. The public law interpretation is the basic tools of interpretation in that behalf relegating common law principles to purely private law field".
The question whether a Government Company which carries on a trading activity can be considered as a "State" within the meaning of the expression used in Article 12 of the Constitution of India came up for consideration in a decision in Central Inland Water Transport Corporation Limited v Brojo Nath Ganguly and Another, at pages 1572 and 1573, wherein it is held:
"(A) Constitution of India, Article 12 -- Expression, 'the State' in Article 12 -- Interpretation of -- Definition of expression 'the State' in Article 12 being for purposes of Part III and Part IV expression is not confined to its ordinary and constitutional sense as extended by inclusive portion of Article 12 but used in the concept of the State in relation to Fundamental Rights guaranteed by Part III and Directive Principles of State Policy contained in Part IV which are declared by Article 37 to be fundamental to governance of the Country (Interpretation of Statutes -- Inclusive definition).
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".
Another important decision of the Supreme Court on this question is considered in Chander Mohan Khanna v National Council of Educational Research and Training and Others, wherein it was held that:
"Article 12 of the Constitution of India should not be stretched so as to bring in every autonomous body which has some nexus with the Government within the sweep of the expression "State". A wide enlargement of the meaning must be tempered by wise limitation. It must not be lost sight of that in the modern concept of welfare State, independent institution, corporation and agency are generally subject to State control. The State control, however vast and pervasive, is not determinative. The financial contribution by the State is also not conclusive. The combination of State aid coupled with an unusual degree of control over the management and policies of the body, and rendering of an important public service being the obligatory functions of the State may largely point out that the body is "State". If the Government operates behind a corporate veil, carrying out governmental activity and governmental functions of vital public importance, there may be little difficulty in identifying the body as "State" within the meaning of Article 12 of the Constitution".
The learned Counsel for the respondents has relied upon a decision of our High Court rendered in K.V. Panduranga Rao v Karnataka Dairy Development Corporation, Bangalore, wherein it is held that the Karnataka Dairy Development Corporation Limited is an agent and instrumentality of the State, applying the tests laid down in the above decisions of the Supreme Court.
7. On the basis of the above tests laid down by the Supreme Court in the above decisions, we must now proceed to examine whether the appellant-Company in the present case is an authority falling within the definition of "State" under Article 12 and whether it is an instrumentality or agency of the Government? The answer must obviously be in the affirmative, if we have regard to the Memorandum of Association and various notifications issued by the Government from time to time.
8. The xerox copy of the certificate Annexure-KKK issued by the Government dated 24-2-1983 produced by the respondents clearly discloses that Mysore Paper Mills Limited is a Government Company as per Section 617 of the Companies Act, 1956. It is seen from the Memorandum of Association of the appellant-Company Annexure-EEE produced by the respondents that the said company is established with the following objects:
1. To carry on the business of manufacturers, importers and exporters of and dealers in all kinds and classes of paper, Board and Pulp, including writing paper, printing paper, absorbent paper, newsprinting paper, wrapping paper, tissue paper, cover paper, blotting paper, filter paper, antique paper, ivory finish paper, coated paper, art paper, bank or bond paper, badami, brown or buff paper, bible paper, cartridge paper, clothlined paper, azurelaid and wove paper, creamlaid and wove paper, grease-proof paper, gummed paper, hand-made paper, parchment paper, drawing paper, craft paper, manila paper, envelope paper, tracing paper, vellum paper, chemically treated paper, litmus paper, photographic paper, glass paper, emery paper, etc., etc., paste board, card board, straw board, pulp board, leather board, mill board, corrugated board, box board, post cards etc., etc., soda pulp, mechanical pulp, sulphite pulp, etc., etc., and all kinds of articles in the manufacture of which in any form paper, board or pulp is used, and also to deal in or manufacture, import or export any other articles or things of a character similar or analogous to the foregoing or any of them or connected therewith.
(1-A) To carry on the business of manufacturers, refiners, producers, importers and exporters of and dealers in all kinds and classes of sugar, cane sugar, beet sugar, starch sugar, gur, khandasari sugar and jaggery, all kinds of sugar products, sugar candy, glucose, confectionery and canned fruits, sugar cane, bagasse, molasses, yeast and other fermentation syrups and alcohol, all alcoholic substance, acetone, spirits, starch and all products or by-products thereof and food products generally and all kinds of articles or products in the manufacture of which any form of sugar is used and also or deal in or manufacture, refine, produce, import to export any other articles or things of a character similar or analogous to the foregoing or any of them or connected therewith.
3. To purchase, sell, import, export or carry on the business of manufacturers of dye stuff, tanning and bleaching materials, organic and inorganic chemicals, inclusive of sulphuric acid, hydrochloric acid, drugs, glue, resin, cellulose, spirits, turpentine, soap, all salts and carbonates, oil, chlorate, lime, caustic soda, clay and other materials and substances used in the manufacture or treatment of paper, board and pulp and sugar.
4. To develop the resources of and turn to account any lands and any rights over or connected with the land belonging to or in which the Company is interested, in particular by clearing, draining, fencing, planting, cultivating, building, improving, farming, irrigating, grazing and by promoting immigration and emigration and the establishment of villages and settlements.
(4-A) To promote/establish joint ventures, ancillary units and provide technical know-how/collaboration and advice, whether in India or outside relating to manufacture, distribution of paper, sugar or any other articles, products or things of a character of similar or analogous to the foregoing or any of them or connected therewith.
(5) To carry on any other business, whether manufacturing or otherwise, which may seem to the Company capable of being conveniently carried on in connection with the above or calculated directly or indirectly to enhance the value of or to render profitable any of the Company's property of rights.
(5-A) To undertake, carry out, promote and sponsor rural development including any programme for promoting the social and economic welfare of, or the uplift of the people in any rural area and to incur any expenditure on any programme of rural development and to assist execution and promotion thereof either directly or through an independent agency or in any other manner. Without prejudice to the generality of the foregoing. 'Programme of rural development' shall also include any Programme for promoting the social and economic welfare of, or the uplift of the people in any rural area which the Directors consider it likely to promote and assist rural development, and that the words 'rural area' shall include such areas as may be regarded as rural areas under the Income-tax Act, 1961 or any other law relating to rural development in force from time to time and the Directors may at their discretion in order to implement any of the above mentioned objects or purposes transfer without consideration or at such fair or concessional value as the Directors may think fit and divest the ownership of any property of the Company to or in favour of any Public or local Body or Authority of Central or State Government or any Public Institution or Trust/Fund recognised or approved by the Central or State Government or any authority specified in that behalf by such Government or established under any law for the time being in force as the Directors may approve.
(5-B) To undertake, carry out, promote and sponsor or assist any activity for the promotion and growth of the national economy and for discharging what the Directors may consider to be social and moral responsibilities of the Company to the public or any section of the people and in such manner and by such means as the Directors think fit and the Directors may without prejudice to the generality of the foregoing, undertake, carry out, promote and sponsor any activity for publication of any books, literature, newspapers, etc., or for organising lectures or seminars likely to advance those objects or for giving merit awards, scholarships, loans or any other assistance to deserving students or other scholars or persons to enable them to prosecute their studies in academic pursuits or researches and for establishing, conducting or assisting any institutions, fund, etc., having any one of the aforesaid objects as one of its objects, by giving donations or otherwise in any other manner and the Directors may at their discretion in order to implement any of the above mentioned objects or purposes transfer without consideration or at such fair or concessional value as the Directors may think fit and divest the ownership of any property of the company to or in favour of any public institution or Trust recognised or approved by the Central or State Government or any authority specified in that behalf by such Government or established under any law for the time being in force as the Directors may approve.
9. Thus it is seen from the above objects that one of the objects of the said Government Company is to carry on business of manufacture of newsprinting papers which is the monopoly of the State, since no other company is allowed to produce newsprint in State of Karnataka. It is also seen from Object No. 5-A that the appellant-Company is entrusted with an important programme of Rural Development including Programme of promoting the social and economic welfare or the uplift of the people in any rural areas. Article 5-B indicates that the appellant-Company is entrusted with duty to undertake, carry out and sponsor or assist any activity for the promotion and growth of the national economy and it is entrusted with the social and moral responsibilities to the public in such manner and by such means, as the Director thinks fit etc. The above Articles 5-A and 5-B are newly introduced in the Memorandum of Association of the appellant. Thus it is found from the above objects that the appellant-Company is entrusted with an important function of public importance closely related to governmental functions and it enjoys monopoly status which is State conferred. The above functions entrusted to the appellant-Company clearly go to show that the Government operates behind a corporate veil carrying out Governmental function of vital importance and so we find no difficulty in identifying the appellant-Company as "State" within the meaning of Article 12 of the Constitution. It is also seen from Annexure-FFF produced by the respondents, the Public Enterprises Survey of 1995-96 which is the summarised balance sheet of the Mysore Paper Mills Limited for the years 1993-94, 1994-95 and 1995-96, is given as follows:
SUMMARISED BALANCE SHEET 1993-94 1994-95 1995-96 A. RESOURCES:
(Rupees in lakhs) Subscribed Share Capital 9853.01 9853.01 9853.01 Out of this:
From Government of Karnataka 5674.99 5674.99 5674.99 From Financial Institutions 3954.42 3954.42 3954.42 From other sources 223.60 223.60 223.60
10. Thus it is clear from the above balance sheet that more than 97% of the share capital has been contributed by the State of Karnataka and the Financial Institutions controlled and belonging to Government of India. It is also relevant to note that according to Article 114 of the Articles of Association the business of the Company shall be managed by the Board of Directors. Article 119 of the Articles of Association states that the Chairman of the Board of Directors shall be the Managing Director. According to Article 93, the number of Directors to whom the management of the Mill is entrusted shall not be more than 12 and should not be less than 9 inclusive of four Directors to be nominated by the Government of Karnataka including Directors nominated by the Financial Institutions under Article 94-A of the Articles of Association, which are referred as Industrial Development Bank of India, Industrial Finance Corporation of India, the Industrial Credit and Investment Corporation of India Limited, Life Insurance Corporation of India, Unit Trust of India and General Insurance Corporation or any other Finance Corporation or any Financing Corporation or Credit Corporation or any other Financing Company or body to whom MPM owes moneys. It is also made clear in Article 94-A that the Board of Directors of the Company shall have no power to remove from office the Nominee Directors and they shall hold the said office only so long as moneys remain owing by the Company to the corporations and aforesaid financial units or so long as the said units and corporations hold Debentures in the Company as a result of direct subscription or private placement, etc.
11. The appellant-Company is under the control of the Government of Karnataka which is sometimes done directly and sometimes through the mechanism of the Karnataka State Bureau of Public Enterprises. The tasks entrusted to KSBPE in relation to MPM are as mentioned in the Book published by the Department of Personnel and Administrative Reforms, Government of Karnataka. An extract from the said book is produced by the respondents and is marked as Annexure-FFF. It is also found from the Articles of Association that the Chairman and Managing Director is appointed by the Government of Karnataka. In addition to this, there are two nominees of Government of Karnataka on the Board of Directors. Further there are two directors, who are nominated by the Financial Institutions controlled by the Central Government. In addition to these five directors, there are elected directors, but they are persons nominated by the Government of Karnataka. Thus without the concurrence or nomination by the Government of Karnataka, one cannot become a Director of the Mills. Further, it is also seen from the Articles of Association that appointment of several officers of the Mill can only be done with the permission or approval of the Government of Karnataka. Article 128 provides that the Directors may from time to time appoint a General Manager on such terms and that such remuneration, as it may fix subject to the approval of the Government of Karnataka. Respondents produced a copy of the letter dated 28-11-1982 addressed to the Joint Director (Tech.), KSBPE, Bangalore, stating that the Mysore Paper Mills unit is one of the units which is under the control of Government of Karnataka. From this clause it is clear that the appellant-Company is under the control of the Government of Karnataka and so it has to be considered as an instrumentality of the State. It is also found from the Articles of Association that for any investment or expenditure above Rs. 25,00,000/- approval of the Government of Karnataka is required. In addition to this whenever revision of pay scales and allowances of the employees and officers of the appellant-Company have to be done the same have to be done only with the approval of KSBPE. It is further found that permission of Government of Karnataka is required for the recruitments of posts carrying on pay scales above Rs. 4,700/-. Further the reservation policy of Article 16(4) of the Constitution is applicable to recruitments in the appellant-Company. Employees working in the appellant-Company are permitted to go on deputation to other Government Departments and vice-versa. All foreign tours of officers are to be approved by Government of Karnataka. All loans taken by MPM are guaranteed by Government of Karnataka.
12. Thus from all these facts it is found that the appellant-Company is totally controlled by Government of Karnataka which is a clear indication that the appellant-Company is an instrumentality of the State. Respondents produced a true copy of the letter dated 1-8-1985 of the Secretary of Government of Karnataka addressed to the Chairman and Managing Director of the Company conveying approval for the continuance of Prof. Y.M.L. Sharma, Sri J.S. Matharu and Sri R.M. Mehta, as Directors on the Board of Directors of the Company. He also produced:
(i) Another letter dated 8-9-1992 marked as Annexure-JJJ from Under Secretary to Government, Commerce and Industries Department, Government of Karnataka, addressed to the Chairman and Managing Director of the Mill conveying approval of the Government to re-elect Shri N. Ravindranathan, Sri S.K. Warrier and Sri M.K. Ramachandra as Directors of the forthcoming Annual General Meeting of the Mill. The respondents also produced document.
(ii) Annexure-LLL -- A letter dated 27-8-1987 from Secretary, Commerce and Industries Department to the Chief Executives of Companies coming under the Administrative Control of Commerce and Industries Department, Government of Karnataka, including MPM, regarding meeting of Committee on Public Undertakings.
(iii) Annexure-MMM - Circular dated 27-6-1988 from Secretary, Commerce and Industries Department furnishing duties and responsibilities of Government Directors/Nominee Directors of all Companies coming under the control of Commerce and Industries Department.
(iv) Annexure-NNN - Letter dated 24-5-1989 from Secretary, Commerce and Industries Department, Government of Karnataka, to the Chief Executive coming under the administrative control of Commerce and Industries Department including MPM, regarding furnishing of action taken report on the recommendations of the Committee on papers.
(v) Annexure-PPP - Letter dated 10-5-1989 from CMD of MPM to Secretary, Commerce and Industries Department, requesting for approval of appointment of Executive Director and upgradation of Deputy General Manager (P & A).
(vi) Annexure-QQQ - Government Order dated 1-3-1991 permitting the foreign tour of Shri B.B. Manthurgi Mutt, Senior Forest Officer, MPM.
(vii) Annexure-RRR - Government Order dated 15-3-1993 permitting the foreign tour of Sri V.K.K, Gore, IAS, CMD of MPM.
(viii) Annexure-SSS - Government Order dated 18-5-1992 providing State Government guarantee in favour of MPM to accept new deposits/renewals.
(ix) Annexure-TTT - Government Order dated 15-3-1993 redesignating Sri B.K. Jagdish Chandra, IFS, Additional Chief Conservator of Forests, as Director (Forests) of MPM.
(x) Annexure-UUU - Notification dated 11-11-1993 issued by Commerce and Industries Department, deputing Shri D.S. Vishwanath, Deputy Director as General Manager (HRD & A) of MPM.
(xi) Annexure-VW - Letter dated 11-10-1993 from CMD of MPM to Government of Karnataka requesting for approval of expenditure for upgradation of Soda Recovery Boilers.
(xii) Annexure-WWW - Letter dated 11-10-1993 from CMD of MPM to Government of Karnataka requesting for approval of expenditure for conversion of Railway siding at MPM.
(xiii) Annexure-XXX - Letter dated 18-2-1994 conveying the approval of Government for the VRS Scheme of MPM.
(xiv) Annexure-YYY - Circular dated 7-9-1994 from Government of Karnataka regarding appointment of competent officers under Karnataka Public Premises Act.
(xv) Annexure-ZZZ - Letter dated 27-7-1995 from the Government directing MPM to strictly follow the Roaster system for recruitments.
(xvi) Annexure-AAAA - Letter dated 7-12-1994 from KSBPE to MPM stating that payment of DA should have the approval of Government of Karnataka.
The contents of the above documents clearly go to show that the entire company is run as part of the State Government and even the schemes of the company are to be approved by the Government. It is also found from the above correspondences that there is total financial control over the Company by the Government of Karnataka. The detailed instructions are given by the Government indicating how the Directors of the Government have to function. The Government of Karnataka has notified premises of the Company at Ehadravathi as "Public Premises" under the provisions of Karnataka Public Premises (Eviction of Unauthorised Occupants) Act, 1974 and appointed 5 officers of the Company as competent officers for the purpose of the Act and all the top officers of the Mills are appointed with the approval of the Government and whenever officers are deputed abroad, sanction of Government is required.
From the above facts it is clearly established that the appellant-Company is an authority and instrumentality or agency of the "State", as defined under Article 12 of the Constitution of India.
13. From the above material placed on record, the following facts are established:
(1) Out of the share capital of the appellant-Company, 97.6% is held by the Government of Karnataka and the Financial Institutions owned by the Central Government.
(2) The entire company is being run on the basis of the financial assistance rendered by the institutions which is guaranteed by the Government of Karnataka. The appellant-Company enjoys the monopoly status, since the newsprint is manufactured by the Government and governmental agencies.
(3) There is existence of definite all pervasive control on the appellant-Company, as the Chairman and Managing Director is nominated by the Government, in addition two nominees are of the Government of Karnataka on the Board of Directors and two Directors are nominees of the financial institutions controlled by the State Government. Whenever a Director nominated by the Government is transferred elsewhere, his successor automatically becomes director by virtue of the office held by him.
(4) The functions of the appellant-Company are all of public importance, manufacture of newsprint is of paramount public importance, as it is an item of import substitution. The fact that the Government of India exempted excise duty to newsprint also indicates that it is of public importance, as it is required for dissemination of information to the general public. Further rural development, promotion of social and economic welfare and promotion of national economy are some of the objectives entrusted to the appellant-Company and the appellant-mill has been declared as "protected area" under the Officials Secrets Act, 1957.
(5) The appellant-Company is entirely controlled by the Board of Directors, consisting of 13 Directors and out of them 5 arc the nominees of Government of Karnataka and the financial institutions totally owned and controlled by the Government of India and even the other elected Directors are nominated by Government of Karnataka. The Chairman and Managing Director of appellant-Company reports to the Principal Secretary, Commerce and Industries Department, Government of India on every year. Thus the appellant-Company has got the characteristics of a Department of Government of Karnataka and the Mill is protected, constituted, started and controlled by the Government of Karnataka. The Company Secretary of the appellant in his communication dated 28-1-1992 at Annexure-GGG has clearly stated that the appellant-Company is an undertaking under the control of the Government of Karnataka.
14. Thus all the important tests laid down by the Hon'ble Supreme Court in the above decisions to determine whether corporation, Government Company or any other institution is a "State" or other authority or instrumentality of the Government are satisfied in respect of appellant-Company. So we have no hesitation to hold that the appellant is "State" within the meaning of expression used in Article 12 of the Constitution of India.
On similar facts in a decision rendered in Association of Officers, Gujarat State Fertiliser Company v Gujarat State Fertiliser Company and Another, at page 239, it was held that:
"Gujarat State Fertilizer Company Limited, is a "State" within the meaning of Article 12 of the Constitution of India because more than 80% of the shareholding is owned and are controlled by the Government. More than 49% of the total shares are held by the Government of Gujarat while more than 31% of the total shares are held by Government Financial Institutions, Nationalised Banks and the Insurance Companies. Government of Gujarat is entitled to nominate and appoint 1/3rd of the Board of Directors of the Company who shall be permanent Directors and they need not hold any qualification shares and are not liable to retire by rotation or be removed by the Company. Under the articles, one of the Directors nominated by the Government of Gujarat has to be appointed as the Chairman of the Board of Directors of the Company and one of the Directors nominated by the Company can be appointed as Managing Director of the Company. Company discharges the governmental functions to implement the Directive Principles of State Policy enshrined in Part IV of the Constitution and more particularly the duty cast upon by the State Government to endeavour to organise agriculture on modern and scientific lines as provided in Article 48 of the Constitution. Hence the Gujarat State Fertilizer Company is amenable to the jurisdiction of the Court under Article 226 of the Constitution".
In the above decision, same objectives found in Articles 5-A and 5-B of the Memorandum of Association of Mysore Paper Mills, are introduced as Articles 13-A and 13-B of the Memorandum of Association of the Gujarat State Fertilizer Company Limited. It is found in the above discussion that the Mysore Paper Mills also discharges the Governmental functions to implement the directive principles of the State policy, as per the provisions of Articles 5-A and 5-B of the Memorandum of Association. Article 147 provides that the accounts of the Company shall be audited by an Auditor appointed by the Central Government on the advise of the Controller and Auditor General of India and his duties shall be regulated by provisions of Section 619 of the Companies Act.
15. It is pointed out by the learned Counsel for the respondents that presently there are 13 Directors on the Board of the Company out of whom 11 are nominees of the Government of Karnataka and two are nominees of the financial institutions controlled by Government of India. The names of the said Directors are given in the 62nd Annual Report of the Company for the year 1996-97 which is produced by the respondents. So, we hold that the Mysore Paper Mills is a "State" within the meaning of the Article 12 of the Constitution of India.
16. In another decision of this Court rendered in T.G. Srinivasa Murthy v Bharat Earth Movers Limited, it was held that:
(1) Bharat Earth Movers Limited, (2) Hindusthan Machine Tools Limited and (3) Karnataka Agro Industries Corporation Limited which are companies incorporated under the Companies Act, 1956 and are Government Companies defined in Section 617 of the Companies Act fall within the meaning of word "State", as defined in Article 12 of the Constitution of India.
In para 8 of the said decision it is observed that:
"8. (1) It is not disputed, that in the case of each of the respondent-Companies the whole or substantial part of the share capital is held by the Central Government and/or the State Government, as the case may be. It is also not disputed that each one of the respondent-Companies is a Government Company as defined in Section 617 of the Companies Act and they are all public sector undertakings established by the respective Governments and that the concerned Government exercises full and effective control over these companies".
Relying upon the above decisions of Supreme Court rendered in Sow Prakash Rekhi, supra, in the case of Ramana Dayaram Setty v International Airport Authority of India and in the case of Ajay Hasia, supra, it was held by this Court that all the three said companies fall within the definition of the "State".
In another decision of this Court rendered in K.V. Panduranga Rao, supra, it is held that:
"It is not necessary that all the tests should be satisfied, for reaching the conclusion either for or against holding an institution to be 'State'. In a given case some of the features may emerge so boldly and prominently that a second view may not be possible. There may yet be other cases where the matter would be on the border line and it would be difficult to take one view or the other outright".
Applying the tests laid down by the Supreme Court, in the above said decisions, Full Bench of this Court held in the above decision that the Karnataka Dairy Development Corporation is "State" within the meaning of Article 12.
In the present case as it is found that more than 97% of the share capital of the Mysore Paper Mills Company is that of the State Government and other financial Institutions which are under the control of Union of India, as the deep and pervasive control of the State over the functions and working of the company is evident from the provisions of the bye-laws and other Government Orders and notifications referred in the above discussion and as the objectives covered by Articles 5-A and 5-B of the Memorandum of Association governing the company fall under the Directive Principles of State Policy under Article 38 of the Constitution and for the various other reasons given in the above discussion, we have no hesitation to hold that the appellant-Company is a "State" within the meaning of Article 12 of the Constitution of India.
17. With the passage of time, now State of Karnataka and the financial institutions under the control of Government of India subscribed more than 97% share capital and State acquired deep and pervasive control of the Mysore Paper Mills Company. Consequent upon the amendments introduced under Articles 5-A and 5-B of Memorandum of Association in the year 1994, now the said Company is entrusted with an important public duty to undertake, promote and sponsor rural development and to promote social and economic welfare of the people in rural areas by undertaking programmes and to assist in activities for the promotion and growth of the national economy, for discharging what the Directors may consider to be social and moral responsibility of the Company to the public or any section of the people which is clearly related to Governmental function and the company enjoys monopoly status which is State conferred. In essence the Government operates behind a corporate veil carrying out Governmental activity and Govern-
mental functions of vital public importance. In the changed set up of the constitution of Board of Directors, investment, mode of functioning of the Mysore Paper Mills Company and the new objectives undertaken by it, we hold that the view taken by this Court in the earlier decisions rendered in the W.P. No. 27375 of 1992, W.P. No. 8746 of 1991, W.P. No. 16861 of 1989, W.P. No. 16504 of 1995, Writ Appeal Nos. 87 and 88 of 1992 and W.A. No. 1445 of 1984, that the Mysore Paper Mills was not "State" is no longer good law.
18. Further the learned Counsel for the respondents contended that even if the appellant-Company does not fall within the expression "State" as defined in Article 12, still the writ petitions filed by respondents are maintainable in view of the decision of Supreme Court in Shri Anadi Mukta Sadguru Muktajee Vandasjiswami Suvarna Jayanthi Mahotsava Smarak Trust and Others v V.R. Rudani and Others, wherein it was held that:
"This is a striking departure from the English law. Under Article 226, writs can be issued to "any person or authority". It can be issued "for the enforcement of any of the fundamental rights and for any other purpose". 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 enTorce-ment 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 owed 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 on the ground that the duty to be enforced is not imposed by the statute. 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".
This Court in S.S. Anand v Management of Mahatma Gandhi Vidya Peeta (Reg.), Bangalore , held that:
"The expression 'any person or authority' used in Article 226 of the Constitution are not confined only to statutory authorities and instrumentalities of the State, but cover any other person or body performing public duty and that what is important is the nature of the duty imposed on the body judged in the light of the positive obligation owed by the person or the authority to the person affected. If a positive obligation exists, a mandamus cannot be denied. Mandamus is a very wide remedy, which could be easily available to reach injustice wherever it is found".
But, as rightly pointed out by the learned Counsel for the appellant, if rights sought to be enforced are purely of a private character, no mandamus can be issued. The nature of duty imposed on the body must be judged in the light of positive obligations owed by the person or authority to the affected party and there must be an element of public duty before mandamus can be issued. Since it is found that the appellant-Company is a "State" within the meaning of Article 12 of the Constitution of India, it is unnecessary to go into the question whether the relief sought for by the respondents can be granted under Article 226 without reference to the provisions of Article 12.
19. Point No. 2: As it is found that the writ petitions are maintainable, we will now proceed to consider the merits of the contention raised by the respondents that the order of transfer Annexure-EE passed by the management is mala fide, unjust not in public interest and in violation of the provisions of Article 14 of the Constitution of India. In support of this contention the respondents have referred to the chronological events which took place prior to 27-11-1997 the date on which the transfer order has been passed and certain other events which took place subsequent to the date of passing the said transfer order. It is seen from the Employment Certificate Annexure-E produced by the respondents that the 2nd respondent joined the appellant-Company on 10-8-1981 and is presently working as Assistant Manager-D.M. Plant, Power Block Division, MPM, Bhadravathi. Annexure-A is the Official Memorandum dated 14-7-1981, issued to the 2nd respondent appointing him as the Management Trainee (Technical Services) subject to the terms and conditions mentioned therein. According to term No. 10 of the said appointment order, the 2nd respondent was clearly informed that his services are liable to be transferred to any other place in the country at the discretion of the management. Thus, it is found that the transfer is an incident of service of the 2nd respondent as the appellants alleged. The appellants have also produced the service regulations to show that all its employees are liable to be transferred to other Regional Offices of the appellant-Company. So, the respondents are not entitled to contend that the 2nd respondent has any legal right to work only at Bhadravathi either under the terms and conditions of his appointment order or under the service regulations governing the employees of the appellant-Company. It is alleged by the respondents that 2nd respondent has been a victim of several acts of victimisation on the part of the appellants and during the year 1990 he was terminated from the services of the company without any enquiry. It is further alleged that during 1994, he was transferred to the Task Force Department and was kept under solitary confinement for about 6 months. The security guards were preventing any one from meeting him. It is further alleged that on 29-10-1994, he filed Writ Petition No. 31660 of 1994 against the said transfer order and after this Court issued notice on 14-3-1995, he was transferred back to the Technical Training Centre and on the same day he was charge-sheeted for the alleged trade union activities. Since he was transferred back to the Technical Training Centre, the Writ Petition No. 31660 of 1994, filed by him was permitted to be withdrawn by keeping open all the contentions urged therein. It is also pointed out by the respondents that subsequently on 12-6-1996, respondent 2, was promoted as Deputy Manager (Technical Training Centre) with effect from 14-8-1994 and on 7-8-1996, the charge-sheet dated 14-3-1995 issued against him was dropped by the management of the Company.
20. According to the respondents, the appellant has taken all the above steps against the 2nd respondent, since he was responsible for forming the Officers' Association which was registered on 30-12-1996 under the provisions of the Indian Trade Unions Act, in which he became the founder-Secretary and was actively participating in the activities of the Association as an office bearer by submitting Charter of demands for revision of pay scales, revision of dearness allowance, revision of HRA and several other allowances and revision of service rules, etc. It is also their case that in spite of award of the Additional Industrial Tribunal in favour of the Officers, the same has not been enforced and a representation given by the 1st respondent-Association before the Joint Labour Commissioner on 29-9-1997 was found to be of no use. According to the respondents, during the year 1990 the Paper Mills Workers' Association and the Officers' Association formed a joint Trade Union and there was a joint strike by the workers and the officers and it was a cause for the termination of the 2nd respondent by the management without holding any enquiry. But we are unable to accept the contention of the respondents that on account of the said events which took place long prior to the date of the transfer of the 2nd respondent in the year 1997, the appellant-management has acted malafide in issuing the said transfer order, and that it is an act of victimisation and unfair labour practice. As admittedly the 2nd respondent ceased to be an office bearer during period from 1991 to 1994 in the first respondent-Association and as even thereafter he was not in the forefront in making any demands on behalf of the 1st respondent-Association till he was said to have been co-opted as an executive committee member on 22-11-1997, it cannot be said that the management could have any grievance or personal grudge against 2nd respondent to take any punitive or vindictive action against him. On the other hand, it is found from the above facts that the management has dropped the proceedings against the 2nd respondent on 7-8-1996 on receiving his reply to the charge-memo issued to him on the recommendation of his superior officer and they have even promoted him as Deputy Manager on 12-6-1996 with effect from 14-8-1994. Similarly, even earlier on 22-12-1990 he was reinstated with full back wages after his services were terminated on 6-4-1990 and he was also promoted as Senior Superintendent (DMS) with effect from 14-8-1939. Having regard to these admitted facts, it is no longer open to the respondents to still contend that 2nd respondent was victimised by the management on account or his active participation in the Trade/Umon activities. According to the respondents it is only the Honorary President of the Association Comrade S. Surayanarayana Rao, who gave press statement on 26-9-1997 demanding COD probe into various irregularities committed by the Managing Director and not the 2nd respondent. So for any such demands made on behalf of the Association by the Honorary President of the Association, the appellant could not have nurtured any personal grievance or prejudice against the 2nd respondent.
21. Thus, it is clear that all the above chronological events which took place prior to the date of transfer order Annexure-EE issued against the 2nd respondent have no direct bearing or connection with the said action taken by the management against the 2nd respondent. Further, the contention of 2nd respondent that after 1994, he was guiding the office bearers of the 1st respondent-Association whenever guidance was sought from him and he was advising them in respect of fresh charter of demands and certain other matters in respect of which serious dispute was there between the Association and the management of the Mills is not supported by any prima facie documentary evidence. Similarly, the allegation made by him in para 4 of his writ petition that during this period Sri V.K. Gore, who was the Chairman and Managing Director of the Mills became very hostile towards the office bearers of the Association and also towards the active functionaries of the Association and on account of it a show-cause notice was issued to him during April 1994 making frivolous charges against him is also not based on any material placed on record. Even otherwise, the very fact that subsequently the said proceedings were dropped against him after receiving his explanation dated 30-4-1994 and the report from the Manager (Boilers), as admitted by the 2nd respondent in para 5 of the writ petition, itself shows that the then Chairman and Managing Director of the Company had no prejudice against the 2nd respondent and on the contrary he acted in accordance with rules, deciding the matter objectively. Further it is the contention of the appellant that the 2nd respondent and Mr. Gopinath the founder-President of the Association were co-opted with predated resolution as executive committee members on coming to know the impending transfer in respect of which the management did not receive any information till 27-11-1997, to put up a defence that the transfer has been effected to prevent the 2nd respondent from functioning as office bearer and to disrupt the activities of the Association. This contention is taken by the appellant in the objections filed by them in the writ petitions in para 6.
22. It is further contended by the appellant that since an order of termination was issued to Sri Gopinath, Manager (Technical) as per order, dated 27-11-1997 - Annexure-FF he was also co-opted along with 2nd respondent at the same time. It is also pointed out by the appellant that Chairman and Managing Director of the Company issued the directions on 17-11-1997 to post an officer at Regional Office, Calcutta and in furtherance of the said directions issued. So, it is clear that at the time when the said direction was issued by the Managing Director and Chair-
man of the Company, 2nd respondent was not an office bearer of the Association. Appellants also produced the communication received by them from the 1st respondent-Association to the effect that 2nd respondent and Gopinath were co-opted as executive committee members, to show that it was received by them only on 28-11-1997.
23. In the light of these facts we are unable to accept the contention of the learned Counsel for the respondents that the transfer order issued transferring the 2nd respondent to the Regional Office, is vindictive, mala fide and arbitrary action taken by the appellant to victimise the 2nd respondent and to paralyse the functioning of the 1st respondent-Association.
24. So far as the subsequent events referred by the respondents which took place after the date of the transfer order, they cannot be taken into consideration to decide the question whether the action taken by the appellant in issuing the transfer order to the 2nd respondent is vitiated by mala fides and arbitrariness. Respondents referred to a letter dated 12-1-1998 addressed to the President of the Association asking them to disband the Association as per the decision taken by the Board of Directors in their meeting held which is marked as Annexure-SS. It is also the case of the respondents that thereafter the said communication was sent individually to all the Officers including the 2nd respondent. Respondents have also referred to a letter dated 24-4-1998 addressed to the President of the Association Annexure-R-23 informing that the Board of Directors of the Company in its meeting held on 6-1-1998, has desired to advise them to disband the MPM Officers' Association and therefore, they are advised to vacate the side rooms in the Guest House Complex presently used as office of the Association with furniture and fittings provided by the Company and to hand over possession of the same to the Deputy Manager (PR), Bhadravathi. But since these letters are addressed to the Association, 2nd respondent cannot make them as basis to contend that the order of transfer passed against him is a mala fide action taken by the management. In fact in our view the said demands made by the management have no direct bearing or connection with the transfer order issued to the 2nd respondent. Similarly the memo of charges issued on 21-4-1998, as per Annexure-R15 to the 2nd respondent for applying for extension of leave and avoiding to report for duty at the Regional Office, Calcutta, also cannot be taken into consideration to decide the point in issue when the said action was taken long after the date of issue of the transfer order when the 2nd respondent went on applying for leave without complying with the directions in the transfer order in spite of the fact that this Court has stayed the operation of the interim order passed by the learned Single Judge.
25. It is pointed out by the learned Counsel for the respondents that the 2nd respondent applied for leave on medical grounds from 13-4-1998 to 30-4-1998 as per Annexure-R11 by producing a medical certificate dated 5-4-1998 issued by the Orthopaedic Surgeon, since he was suffering from acute backache and in spite of it the said leave was rejected as per the endorsement dated 16-4-1998 marked as Annexure-R13 making several false and vague allegations for which he sent a reply by way of representation as per Annexure-R14 and sought for leave upto 25-5-1998 informing the management that the medical board appointed by the Company had certified that he was fit only for sedentary jobs and as such it would be hazardous for his health to undertake any arduous journey.
26. It is, therefore, vehemently contended by the learned Counsel for the respondents that the appellant was bent upon to victimise the 2nd respondent and to put him to untold hardship and misery without cancelling the transfer order, in spite of the said health condition of the 2nd respondent. But it is the contention of the appellant that the 2nd respondent, who never complained about any ill-health prior to the date of his transfer order, started applying for leave on medical grounds only with a view to avoid joining at the new place of his posting on the alleged medical grounds. It is unnecessary for us to go into the merits of the respective submissions made by the learned Counsels, since these are subsequent developments which have no direct bearing on the question. Whether the action taken by the management in transferring the 2nd respondent to Regional Office, Calcutta, is a mala fide action.
27. The respondents have also referred to one more subsequent incident which took place on the intervening night of 5/6-5-1998, setting fire to the household articles inside the quarters occupied by respondent 2 by breaking open the doors during his absence when he had gone to Mangalore. On receiving the said information, 2nd respondent lodged a complaint with the police copy of which is produced as Annexure-R19. In this complaint 2nd respondent has shown the appellant Sri S.L. Gangadharappa, Chairman and Managing Director of the Company, as the suspect, who must have been behind the entire incident and must have got it done with the help of some assistants with an intention to intimidate him and his family and to cause material damage to him out of personal hatred. On the basis of the said complaint, a case is registered in Paper Town Police Station, Bhadravathi in Crime No. 30 of 1998 copy of which is Annexure-R20, in which he alleged that he has done the said act to force him to resign and give up his job, because of the fear and intimidation created by the said dastardly act. According to 2nd respondent, the total loss suffered by him in the said incident comes to more than 3.60 lakhs.
28. It is also pointed out by the learned Counsel for the respondents that the management had instructed the Security, Watch and Ward of the Paper Mills not to take any action by immediately lodging any complaint with the police and with a view to forestall any action being taken, Sri S.L. Gangadharappa, Chairman and Managing Director of the Mills wrote a D.O. letter addressed to the Principal Secretary, Commerce and Industries Department on 6-5-1998 itself copy of which is produced and marked as Annexure-R21, falsely alleging that the incident must have been engineered by the 2nd respondent himself. On the basis of the said facts, it is vehemently contended by the learned Counsel for the respondents that the said conduct of the appellant, shows bias against the 2nd respondent who is victimised to see that all legitimate activities of the Association were put to an end. According to him, the appellant was keen on getting rid of the 2nd respondent somehow, on the false ground, that his services were required at Calcutta. But, we are unable to find any merit in the above contention of the learned Counsel for the respondents, for the simple reason that the conduct of the 2nd respondent himself in lodging a complaint against the Managing Director and Chairman of the Company showing him as a 'suspect' in the complaint and a person behind the above incident, must have provoked the appellant in turn to make allegations against the 2nd respondent that he himself must have stage-managed the whole incident. When the 2nd respondent himself has no basis to make such allegations against the Chairman and Managing Director of the Company, he is not entitled to comment on the conduct of the appellant in writing to the Principal Secretary, Commerce and Industries Department that he suspects that the incident must have been engineered by the 2nd respondent himself in order to malign him. In fact the above conduct of the 2nd respondent in lodging a complaint against the Chairman and Managing Director of the company in the above said manner itself amounts to misconduct, an act of indiscipline and vindictive attitude towards the appellant, who is the head of the organisation which cannot be expected to be tolerated by the management. Further on the basis of the said subsequent incident, no inference can be drawn that the earlier order of transfer issued against the 2nd respondent by the management on 27-11-1997, is vitiated by mala fides.
29. It is next contended by the learned Counsel for the respondents that each of the above referred instances cannot be considered in isolation and if the totality of the circumstances are taken into consideration, it would be apparent that issue of transfer order is a clear instance of mala fide and arbitrary action taken on extraneous considerations with the sole object of victimising the 2nd respondent and forcing the other office bearers of the Association to disband the Association. But we are unable to find any merit in the above contention, as it is found that the management has not taken any vindictive action against the 2nd respondent at any time prior to the date of passing the above said transfer order and even, they promoted him twice and dropped the proceedings initiated against him accepting the undertaking given by him that he will not associate himself in any such unfortunate events which were referred in the memorandum of imputations issued to him on 6-4-1990. A copy of the said letter given by the 2nd respondent is produced by the respondents along with the other additional documents on 23-6-1998 which is at page 30.
30. Thus it is found that at any time earlier to 22-11-1997 the date on which the transfer order was passed, the appellant did not take any vindictive action against respondent 2 putting him to any financial or to any disadvantage in service. Further it is not the case of the respondents that the above said order of transfer would affect the career prospects of respondent 2 or that he would be put to any financial loss. In a decision of the Supreme Court rendered in N.K. Singh v Union, of India , it was held that:
"B. Service Law -- Transfer -- Scope of judicial review --Interference justified only in cases of mala fides or infraction of any professed norm or principle -- Where career prospects remain unaffected and no detriment is caused, challenge to the transfer must be eschewed".
In the present case, since it is not shown by the respondents that the career prospects of respondent 2 will be affected in any manner by virtue of the above said transfer order and that any detriment will be caused to him, respondents are not entitled to challenge the said transfer order. In the above said decision, it is also held:
"E. Service Law -- Transfer -- Mala fides -- Whether the impugned transfer order is mala fide -- Procedure for determining -- Held, the Court will look into the records only and not enter into a roving inquiry".
As it is found from the above discussion that the entire material placed on record does not disclose any mala fides on the part of the appellant in passing the above transfer order. We are unable to hold that the above transfer order is vitiated by any mala fides.
31. It is next contended by learned Counsel for the respondents that the 2nd respondent has no experience in the marketing side, as he was working in the technical section as a Deputy Manager in Technical Training Centre of the Department with effect from 14-3-1995, and earlier, he was looking after demineralising plant of the Mill and is transferred to Calcutta to work on marketing side when he had no experience in the Marketing Division which circumstance clearly indicates that it is a mala fide action taken by the management against him with a view to victimise him. But this argument is repelled by the appellant by narrating in his objections that, since 2nd respondent is a technically qualified person having expertise knowledge of the manufacturing of the paper and paper products which are final products of the appellant-Company he is transferred to Calcutta Regional Office to attend to the complaints which are being received from the customers regarding defects in the quality of paper and to give day-to-day feedback from the consumers on quality and other aspects so that corrective steps could be taken at the earliest point of time and convince the consumers situated in the eastern region about the quality of their product and accordingly increase the sales. It is also submitted by the appellant that the 2nd respondent had the benefit of exposure to training in various aspects of management principles, quality, employee-employer relations, customers relations effective communication and co-ordination etc., and it is for this reason, it has decided to transfer the services of the 2nd respondent to Calcutta Regional Office and the transfer order dated 27-11-1997 was issued on the direction and control of the Chairman and Managing Director. The respondents also submitted in para 19 of their objections that on account of liberalization policy and dumping of newsprint by multinationals, the company is facing severe competition from the imported newsprint and the regular customers of the appellant company have shifted to the imported newsprint because of lesser price and supposed better quality. As a result the appellant is facing adverse market conditions and there is a huge stock of paper worth about Rs. 10-12 crores are lying unsold in the godowns. The Company has been taking all steps and efforts to improve the market for its products.
32. In addition to adverse market conditions, the Company is also receiving several complaints from the eastern region regarding the quality of paper like breaks/joints in the reels of the newsprint etc., and it is for this reason the services of the 2nd respondent have been transferred to the Regional Office of the Company, Calcutta.
Thus the management has taken into consideration all aspects of the matter and effected transfer of the 2nd respondent to the Regional Office of Calcutta in the interests of the Company and in exigencies of service.
33. In the circumstances, we are unable to accept the above contentions of the learned Counsel for the respondents that the said action taken by the management is vitiated by mala fides and it is taken to curb the demands made by the Association and to see that the Trade Union Activities come to a standstill. Though it is also pointed out by the learned Counsel for the respondents that the complaints received at the Regional Office, Calcutta regarding the quality of papers etc., are only few, as held by the Supreme Court, this Court cannot make any roving enquiry in this regard and the question of mala fides is to be decided only on the basis of the material placed on record.
34. It is next contended by the respondents that the order of transfer affects the 2nd respondent's family, since 2nd respondent's wife is working in the Women Entrepreneur and she will not be able to go and live with him at Calcutta and she will have to close down her business which will involve several hardships, inasmuch as she has taken financial assistance from the KSFC. But even this contention cannot be accepted, as it is one of the terms and conditions of the appointment order issued to the 2nd respondent that he is liable to be transferred to any place and as there is also a service regulation in this regard. Further the inconvenience that may be caused to the 2nd respondent by the said transfer is not a factor which can be taken into consideration under any of the service regulations, before passing the transfer order in respect of an employee. In a decision of the Supreme Court in Union of India v S.L. Abbas , it is held that:
"An order of transfer is an incidence of Government service. Under the fundamental Rules, Government servant is liable to transfer anywhere in India. The executive instructions regarding transfer issued by the Government are in the nature of guidelines.
They do not have statutory force. Who should be transferred, where, is a matter for the appropriate authority to decide. Unless the order of transfer is vitiated by mala fides or is made in violation of any statutory provision, the Court cannot interfere with it".
In view of the above law laid down by the Supreme Court, it is not open to the respondents to contend that the management could have transferred some other person who had experience in the Marketing Division to Calcutta Office instead of sending the 2nd respondent to that place by the above said transfer order, when it is not shown by the respondents that the said transfer order is vitiated by any mala fides or is made in violation of any statutory provision or on any extraneous considerations. In another decision of the Supreme Court in State of Uttar Pradesh v V.N. Prasad1, it was held that:
"A. Service Law -- Transfer -- Order of -- Presumption of bona fides -- In absence of prima facie material to establish mala fides of the transfer order, interlocutory order of the High Court staying operation thereof, held, unjustified -- Constitution of India, Article 226 -- Interim order.
B. Service Law -- Transfer -- Transfer order -- Nature of evidence to establish mala fides of, held, has to be strong and convincing -- Administrative Law -- Natural justice -- Mala fides".
35. In the present case, as it is found that, respondents failed to establish any mala fides of the transfer order, the transfer order must be presumed to be a bona fide order passed in the interests of the Company and in the exigencies of service. In another decision of the Bengal Bhatdee Coal Company Limited v Ram Probesh Singh, at page 292, it was held that:
"the fact that the relations between an employer and the union were not happy and the workmen concerned were office bearers or active workers of the union would by itself be no evidence to prove victimisation, for if that were so, it would mean that the office bearers and active workers of a union with which the employer is not on good terms would have a carte blanche to commit any misconduct and get away with it on the ground that relations between the employer and the union were not happy. Such finding of the industrial tribunal must be characterised as one based merely on conjectures and surmises".
36. In view of the above law laid down by the Supreme Court in the present case, the contention of the respondents that because the relations between the appellant and Trade Union were not happy and since the 2nd respondent is co-opted as an executive member of the Association, the action taken by the appellant in transferring the respondent 2 to Regional Office at Calcutta is to be considered as an act of victimisation, cannot be accepted. In another decision of the Supreme Court rendered in State of Punjab v Joginder Singh Dhatt, it is held that:
"Transfer -- Order passed purely on administrative grounds -- In ordinary course and to prevent transferee from interfering with enquiry -- Order not causing any injustice -- Not liable to be set aside in writ jurisdiction".
In another decision in State of Madhya Pradesh v S.S. Kourav, it was held that:
"The Courts or Tribunals are not appellant forums to decide on transfers of officers on administrative grounds. The wheels of administration should be allowed to run smoothly and the Courts or Tribunals are not expected to interdict the working of the administrative system by transferring the officers to proper places. It is for the administration to take appropriate decision and such decisions shall stand unless they are vitiated either by mala fides or by extraneous consideration without any factual background foundation. When as in this case the transfer order is issued on administrative grounds the Court cannot go into the expediency of posting an officer at a particular place".
In another decision of the Supreme Court in Chief General Manager (Telecom), N.E. Telecom Circle and Another v Rajendra Ch. Bhattacharee and Others, it was held that:
"Employee has no legal right to insist for being posted at any particular place -- Moreso, when his transfer was justifiable on administrative grounds".
37. Thus, in view of the above position of law laid down by the Supreme Court and in view of the fact that the respondents failed to prove that the transfer order passed is vitiated by mala fides or by any extraneous considerations, we find that the respondents have no legal right to challenge the said order which is made on administrative grounds and this Court cannot act as an Appellate forum to decide on transfer of 2nd respondent on administrative grounds. It is also significant to note that no other office bearer of the 1st respondent-Association has been transferred by the appellant along with the 2nd respondent. This circumstance also falsifies the contentions of the respondents that the transfer of 2nd respondent is done with the sole object of forcing the officers to disband their association and to wind up the same or to paralyse the functioning of the said association.
38. Even assuming that the above transfer order has been passed to enforce discipline in the interest of the Company and for smooth running of the administration, in our opinion, the said action taken cannot be characterised as a mala fide and vindictive action, particularly when it is found that the conduct of the 2nd respondent in giving a complaint against Managing Director to the police showing him as suspect and accused in the incident of setting fire to his house is found to be reprehensible and amounts to a clear act of misconduct. It may be a sheer coincidence that the transfer order of the 2nd respondent came to be issued a few days after he was co-opted as executive member to the 1st respondent-Association. But when it is found that the said communication was received by the appellant only on 28-11-1997 after issuing the transfer order, it cannot be presumed that the said transfer order has been passed with a view to prevent him from functioning as an active office bearer of the 1st respondent-Association. Even the contention urged by the respondents that, according to the medical certificate issued in respect of the 2nd respondent, he is not in a position to attend any strenuous work and to undertake any long journey cannot be accepted, as it is found that the 2nd respondent could travel from Bhadravathi to Bangalore for his medical examination and for attending to this case and as it is also not shown that the nature of work entrusted to him at the Regional Office, Calcutta is of more strenuous nature than the work which he was attending at Bhadravathi and the new assignment entrusted to him would cause any serious health problems. Such a contention cannot be raised at this stage and it is premature.
39. So for all the above reasons, we answer Point No. 2 in the negative.
40. In the result, in view of our finding on Point No. 2, these writ appeals are allowed and the impugned order passed by the learned Single Judge is hereby set aside. The writ petitions stand dismissed. In the circumstances, we direct the parties to bear their respective costs.