Punjab-Haryana High Court
Bhagirth Sharma vs Punjab Spinning & Weaving Mills Ltd. And ... on 9 January, 2001
Author: Bakhshish Kaur
Bench: Bakhshish Kaur
JUDGMENT Bakhshish Kaur, J.
1. The petitioner by invoking the extraordinary writ jurisdiction of this Court under Articles 226 and 227 of the Constitution of Indiaprays for quashing termination order Annexure P-3 vide which his services were terminated without affording an opportunity of being heard.
2. Sh. Bhagirath Sharma, the petitioner, was appointed as Manager (Personnel), Punjab Spinning & Weaving Mills Ltd., Chandigarh (hereinafter referred as the Company) on August 17, 1989 as per appointment letter, Annexure P-1. One of the conditions of service was that his services will be treated as confirmed from the very beginning, which were terminable after giving one month notice from either side, or, pay in lieu thereof. He had been working as such. His work and conduct was appreciated by me employer and he was also assigned the duties of Factory Manager vide resolution dated November 3, 1989, passed by the Board of Directors of the Company.
3. It is averred that while the petitioner was posted as Manager (Personnel) at Works Bathinda he proceeded on medical leave from 25.12.1989 to 16.1.1990 duly sanctioned by respondent No. 2. On 17th January, 1990 the petitioner reported back on duty with fitness certificate and submitted the joining report Annexure P-2, but he was not allowed to attend his duties. He was stopped at the gate by the security personnel as per verbal instructions of General Manager (Works). On 18th January, 1990 again he was not allowed to join the duty because on 23rd December, 1989 he had filed a complaint against the General Manager before the respondent No. 2. The petitioner approached the Chairman and Director of the Company for redressal of his grievances and on the direction of the Chairman he was allowed to join the duty at Headquarter, Chandi-
garh, with effect from 19.1.1990 and was assured the payment of salary for the period of 17th and 18th January, 1990.
4. The petitioner continued to work as Manager (Personnel) at Headquarter, Chandigarh. Respondent No. 2 pressurised him to resign from the post because of mala fide intention and extraneous consideration as he wanted to appoint Mr. K.P. Singh as Manager (Personnel) who was already working with the Company on deputation prior to joining of the petitioner at Headquarter, Chandigarh. On his joining at Headquarter, Chandigarh, Mr. K.P. Singh was transferred as Manager (Personnel & Administration) at Bathinda. Mr. K.P. Singh is a permanent employee of Punjab State Industrial Development Corporation where he was serving as Office Assistant prior to his appointment as Manager (Personnel) on deputation. The respondent No. 3 with mala fide intention and to adjust and confirm the services of Mr. K.P. Singh wanted to terminate the services of the petitioner. Ultimately petitioner's service were terminated vide order Annexure P-3, with effect from 31st March, 1990, without affording him an opportunity of being heard and without holding any regular enquiry. In as much as salary in lieu of three months notice as required under the rules and regulations governing the services of the petitioner and one month salary in lieu of the notice in accordance with the terms and conditions of the appointment was not paid simultaneously at the time of termination of his services. Soon after terminating the services of the petitioner, the respondent No. 2 had appointed and posted Mr. K.P. Singh as Manager (Personnel) in his place.
5. The services of the petitioner are governed by the Punjab Spinning & Weaving Mills Limited Service Rules, 1978 (in short the Rules). Aggrieved by the order Annexure P-3, he had preferred appeal Annexure P-4 to the Board of Directors and it was dismissed. The order was communicated to him vide memo dated 7th/8th August, 1990. No separate order passed by the Board of Directors in the appeal has been delivered to the petitioner in spite of written request made by him. He was however told that no separate order dismissing the appeal was passed by the Board of Directors. The relevant order is Annexure P-5. The impugned order is, therefore, illegal, unreasonable, against the principles of natural justice, unconstitutional and Clause 1(i) of Rule 3.2 which is the only rule which does not state in what circumstances a permanent employee can be terminated from service is against public policy and ultra vires of Article 14 of the Constitution.
6. The respondents No. 1 and 2, while resisting the petition, have raised preliminary objections that the respondent No. 1 is not an instrumentality of the State. It is a Company registered under the Companies Act. The State of Punjab has no control over the management and functioning of the Company. The Company not being State within the meaning of Article 12 of the Constitution of India and not amenable to writ jurisdiction of this Court, the writ petition is liable to be dis-
missed. It is pleaded, inter alia, that the respondent Company became a sick industrial company within the meaning of Section 3(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. A reference on behalf of the Company was made on 21st March, 1994 before the Board for Industrial Financial Reconstruction, who took proceedings and vide its order dated 24th April, 1996 sanctioned a scheme for rehabilitation of Company. Copy of the order annexed is Annexure R-2. Since scheme for rehabilitation of the respondent Company has been sanctioned and is under implementation, therefore, writ petition cannot proceed further. It is further added that a contract of employment cannot be specifically enforced by or against an employer. The remedy available to the petitioner is suit for damages. On merits the appointment of the petitioner and passing of the impugned order terminating his services are however admitted, but it is totally denied that the respondent No. 2 was interested to appoint Mr. K.P. Singh as Manager (Personnel), as alleged. The services of the petitioner were terminated in terms of his appointment letter.
7. I have heard the petitioner in person and Mr. Sumeet Mahajan, Advocate, learned counsel for the respondents.
8. The primary objection raised by learned counsel on behalf of the respondents is that writ petition is not maintainable as the respondent No. 1 is not a State within the meaning of Article 12 of the Constitution. Mr. Sumeet Mahajan, to support his contention, has relied upon Ramata Dutta (Ms.) v. The Union of India and others, 1998(5) SLR 683 (Calcutta), wherein it is held that company carrying on business could not be an instrumentality of the State. It was a case of workman of Tourism Department Corporation dismissed from service. It was, therefore, held that recourse to the provisions of Industrial Disputes Act should be taken and not by filing a writ petition. Mr. Mahajan has also relied upon Loss Prevention Association of India v. Doraiswami Venugopal and others, 1998(5) SLR 691 (Calcutta). The facts of both these cases are totally different. Therefore, the respondents cannot derive benefit from these authorities, particularly in view of the law laid down by the Hon'ble Supreme Court in authorities referred by the petitioner, which are discussed as under :-
9. To meet this argument, the petitioner has placed reliance on Central Inland Water Transport Corporation Ltd. and another v. Brojo Nath Ganguly and another and Central Inland Water Transport Corporation Ltd. and another v. Tarun Kantl Sengupta and another, AIR 1986 SC 1571. It was a landmark judgment relating to service contracts and on interpretation of the relevant Services Rule the Hon'ble Apex Court held that the rule empowering the Government Corporation to terminate services of its permanent employees by giving notice or pay in lieu of notice period is opposed to public policy and violative of Article 14 and directive principles contained in Articles 39(a) and 41. Herein it was also held that if there is an instrumen-
tality 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. It is held as under :-
"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 fact of an instrumentality or agency of the State. The Central Inland Water Transport Corporation, squarely falls within these observations and it also satisfies the various tests which have been laid down. Merely because it has so far not the monopoly of inland water transportation is not sufficient to divest it of its character of an instrumentality or agency of the State. It is nothing but the Government operating behind corporate veil, carrying out a governmental activity and governmental functions of vital public importance. There can thus be no doubt that the Corporation is "the Slate" within the meaning of Article 12 of the Constitution,"
Some of the observations made in paragraph 15 of the judgment in Central Inland Water Transport Corporation's case (supra), which have bearing on the point under consideration, read as under :-
"As the Corporation is "the State" within the meaning of Article 12, it was amenable to the writ jurisdiction of the High Court under Article 226. It is now well established that an instrumentality or agency of the State being "the State" under Article 12 of the Constitution is subject to the Constitutional limitations, and its actions are State actions and must be judged in the light of the Fundamental Rights guaranteed by Part III of the Constitution (see, for instance, Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, AIR 1975 SC 1331. The International Airport Authority's case, AIR 1979 SC 1628 and Ajay Hasia's case, AIR 1981 SC 487). The actions of an instrumentality or agency of the State must, therefore, be in conformity with Article 14 of the Constitution. The progression of the judicial concept of Article 14 from a prohibition against discriminatory class legislation to an invalidating factor for any discriminatory or arbitrary State action has been treated in Tulsiram Patel's case, 1985(3) SCC 398 at pages 473-476: AIR 1985 SC 1416 at pp 1460. The principles of natural justice have now come to be recognized as being a part of the Constitutional guarantee contained in Article 14."
10. Thus from the facts and circumstances of the case as reproduced above, it is apparently clear that the writ petition is maintainable and the respondent Company is a State within the meaning of Article 12 of the Constitution. In Arjed Ali Gazi v. State of Bengal, 1991(1) SLR 681 : 1991(1) SCT 399 (Calcutta)(DB), it has been observed that ordinarily a writ does not lie against a private body but the position will be entirely different if such private body is vested with statutory duties and functions. It was also a case where conditions of service of the petitioner were controlled by the terms of contract between the parties and the same have been left to be controlled by the statutory rules. Therefore, writ petition was held to be maintainable. In Civil Appeals Nos. 2704-06 of 1979 decided on 21st April, 1989, reported in AIR 1989 SC 1607, it has been held that if the rights are purely of a private character no mandamus can be issued. If the management of the college is purely a private body with no public duty mandamus will not lie. These are two exceptions to mandamus. But once these are absent and when the party has no other equally convenient remedy, mandamus cannot be denied. It is further observed, that, "Article 226 confers wide powers on the High Courts to issue writs in the nature of prerogative writs. 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 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 enforcemental purposes under Article 32. It is further observed that 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."
11. Now coming to the other aspect of the case regarding the validity of the impugned order. The appointment order Annexure P-1 clearly indicates that his services will be treated as confirmed from the very beginning, which can be terminated by giving one month notice from either side or pay in lieu thereof meaning thereby that his services could be terminated by payment of one month salary or by giving notice. Such a term of appointment has been declared as void under Section 23 of the Contract Act as being opposed to public policy and ultra vires Article 14 of the Constitution of India and also violative of directive principles contained in Articles 39(a) and 41 in Central Inland Water Transport Corporation Ltd.'s case (supra). It was also a case where under rule 9 clause (i) of the Central Inland Water Transport Corporation Ltd. Service Discipline and Appeal Rules, the services of a permanent employee could be terminated by giving him three months' notice in writing, or, in lieu thereof to pay equivalent of three months basic pay and dear-ness allowance. It was, therefore, observed that the power conferred by this rule is not arbitrary but also discriminatory and it enables the Corporation to discriminate between employee and employee. It can pick up one employee and apply to him clause (i) of Rule 9. It was, therefore, held that a clause such as Rule 9(i) in a contract of employment affecting large sections of the public is harmful and injurious to the pub-
lic interest for it tends to create a sense of insecurity in the minds of those to whom it applies and consequently it is against public good. Such a clause, therefore, is opposed to public policy and being opposed to public policy it is void under Section 23 of the Indian Contract Act. Similar proposition is contained in West Bengal Electricity Board's Regulations and Regulation 34 enables the Board to terminate the services of permanent employee by giving three months' notice or salary in lieu thereof. The Regulation was held to be totally arbitrary and confers on Board a power which is capable of vicious discrimination, in Civil Appeal No. 562 of 1985, decided on 26th February, 1985, West Bengal Slate Electricity Board and others v. Desh Randhu Ghosh and others, AIR 19S5SC 722.
12-13. The petitioner, as per terms and conditions of his appointment letter, was confirmed from the very beginning. Thus services of permanent employee could not be terminated arbitrarily as it has been done in the case in hand by passing the order Annexure P-3, which reads as under :-
"This is to inform you that you services would no longer be required with effect from 31st March, 1990 (A.N.) Your salary for the month of March, 1990, after necessary adjustments is being paid to you vide cheque No. 4167523 dated 27.3.90 for Rs. 2623.00 (Rs. Two thousand and six hundred twenty three only) on Canara Bank, The Mall, Bathinda, in full and final payment.
As per the terms and conditions of your appointment, you will be paid one month's salary in lieu of notice after you have handed over the charge to the General Manager (W) of the Company."
A careful reading of this order would further show that a rider has been imposed that the petitioner will be paid one month's salary in lieu of notice after he hands over the charge to the General Manager (W) of the Company. The order, thus, terminating the services of the petitioner arbitrarily, is not sustainable because conferment of "permanent" status on an employee guarantees security of tenure, as held by the Hon'ble Supreme Court in Uptron India Ltd. v. Shammi Bhan and another, 1998(6) SCC 538 : 1998(2) SCT 169 (SC). The relevant paras 15, 16, 17 and 18 of the judgment are re-produced as under :-
"15. conferment of "permanent" status on an employee guarantees security of tenure. It is now well settled that the services of a permanent employee, whether employed by the Government, or government company or government instrumentality or statutory corporations or any other "authority" within the meaning of Article 12, cannot be terminated abruptly and arbitrarily, either by giving him a month's or three months' notice or pay in lie thereof or even without notice, notwithstanding that there may be stipulation to that effect either in the contract of service or in the Certified Standing Orders.
16. This Court in W.B. SEB v. Deh Bandhu Ghosh held that any provision in the regulation enabling the management to terminate the services of a permanent employee by giving three months notice or pay in lieu thereof, would be bad as violative of Article 14 of the Constitution. Such a regulation was held to be capable of vicious discrimination and was also held to be naked "hire and fire" rule. This view was reiterated in Central Inland Transport Corpn. Ltd. v. Brojo Nath Ganguly.
17. Again in O.P. Bhandari v. Indian Tourism Development Corpn. Ltd. this court held that Rule 31(v) of the Indian Tourism Development Corporation (Conduct, Discipline & Appeal) Rules, 1978, which provided that the services of a permanent employee could be terminated by giving him 90 days notice or pay in lieu thereof, would be violative of Articles 14 and 16 of the Constitution.
18. The whole case-law was reviewed by the Constitution Bench in Delhi Transport Corpn. v. D.T.C. Mazdoor Congress and except the then Chief Justice Sabyasachi Mukherji, who dissented, the other 4 Judges reiterated the earlier view that the services of a confirmed employee could not be legally terminated by a simple notice."
The termination of the services of the petitioner, who is a permanent employee, is held to be arbitrary and violative of Article 14 of the Constitution.
14. For the aforesaid reasons, writ petition is allowed. The impugned order Annexure P-3 is held illegal and unconstitutional. The respondents are, therefore, directed to reinstate the petitioner with all consequential benefits, within four months from the date of receipt of copy of order.
15. Petition allowed.