J.P. Sharma vs Union Of India And Anr.
1986 Latest Caselaw 319 Del

JUDGMENT

Sunanda Bhandare, J.

(1) In this writ petition under Article 226 of the Constitution of India the petitioner has challenged the order of respondent No. 2 India Tourism. Development Corporation (for short I.T.D.C.) dated 11th December 1982 terminating the services of the petitioner in pursuance to a directive of the Government under Article 96 of the Articles of Association of India Tourisra Development Corporation Limited.

(2) The facts of the case lie in a very narrow compass. In 1947 the petitioner joined as a Receptionist in Government of India holders under the Directorate of Estates. Ministry of Works, Mines and Power and promoted as Assistant Manager, Hotel Janpth in 1959. In 904 Government of India created Janpath Hotels Limited and. His petitioner's services were loaned to Janpath. Hotel as Manager. In 1969 he was appointed Deputy Manager Ashoka Hotels Limited. In 1970 a decision was taken by the Government to merge Janpath Hotels Limited and Ashoka. Hotels Limited and thus the petitioner became a permanent employee of I.T.D.C. Thereafter, he continued to work with various hotels. During this period he had successfully passed through certain competitions and was sent abroad for training. In 1976 the petitioner was appointed General Manager, I.T.D.C. Due to certain differences on 5th September 1977 he tendered His resignation effective from 4th December 1977, however, on 7th September 1977 he withdraw his resignation. The question of his Office right to withdraw the resignation during the notice period was a subject matter of controversy for some time but Ultimately on 5th August 1980 the petitioner was reinstated as General Manager (Hotels) by treating the period between the date of his resignation till the date of his re-joining as leave due/leave extraordinary. On 19th August 1980 a new Chairman-cum-Managing Director of the I.T.D.C. was appointed. Certain .allegations, of ineffciency were made against the petitioner and. therefore, on 22nd August 1982 the Secretary, Ministry of Tourism verbally asked the ptitioner to proceed on leave, and on 21st September 1982 the petitioner was transferred to Madras with immediate effect and on 22nd September v 1982 he was relised of his duties at Headquarters, New Delhi The petitioner took, charge at Madras on 4th October 1982. and on 12th December 1982 the impugned order of termination was passed.

(3) Though in the writ petition the petitioner has challenged the order of termination on several grounds and even certain allegations of malafides are made, at the hearing, learned counsel for the petitioner, in view of the authoritative judgments of the Supreme Court, for the sake of brevity, limned his challenge and assailed the impugated order as being in breach and disregard of elementary rules of natural justice and, fair play. It was, contended by the learned counsel that the, petitioner's relationship with I.T.D.C. was one of status and not of contract and respondent No. 2 being a Slate within the meaning of Article 12 of the Constitution of India could not dispense with the services of the petitioner by giving a simple notice, it was farther submitted that the impugned order of termination could not have been passed because the Government, while exercising power under Article 96 of the Articles of Association of India Tourism Development Corporation Limited could not issue such a directive because under this Article the Government could issue directive only related to audit. However. assuming, if this Article did give such a power then the Article would be ultravires Articles 14, 16 and 19 of the Constituation of Indian learned counsel referred to Ajay Hasia & Anr. v. Khalid Mujib & Others. . (1) Som Prakash Rekhiv. Union of India & Another, , (2) Ramana Dayaram Shetty v. The International Airport Authority of India & Others, Sukhdev Singh & Others v. Bhagat Ram Sardar Singh Raghuvanshi & Another, and U.P. Warehousing Corporation & Others v. Vijay Narayan Vajpayee, in support of his contention that I.T.D.C. is a State within the meaning of Article 12 of the Constitution of India and West Bengal State Electricity Board & Others v. Desh Bandhu Ghosh & Others. . Workman Hindustan Steel Limited v. Hindustan Steel Limited & Others, and Central Inland Water Transport Corporation & Another v. Brojo Nath Ganguly & Another. 3986 (3) Sc 156 (8) in support of his contention that a provision which gives arbitrary and unguided power to terminate the services of a permanent employee in violative of Articles 14 & 16 of the Constitution of India. It was further submitted that in view of the background the impugned order of termination is in effect an order of dismissal/removal from service and this since it was, passed without affording an opportunity to the petitioner it is against the principles of natural justice. Learned counsel referred to the judgment of the Supreme Court in Anoop Jaiswal v. Government of India & Others, in support of this contention.

(4) Learned counsel for the respondent very seriously disputed that I.T.D.C. is a State within the meaning of Article 12 of the Constitution of India. It was submitted by the learned counsel that the I.T.D.C. is a Government company created under a. Statute Which performed only trading activities and not governmental functions and, therefore was not an instrumentlity of the State. It was submitted that since I T.D C is not a State the excise of the contractual power by the I.T.D.C. could not be challenged in a writ petition under Article 226 of the Constitution of India. It was further submitred that Article 96 of the Articles of Association of India Tourism Devlopment Corporation Limited did not deal only with audit and thus since the impugned order was passed in pursuance to a Government directive it was perfectly valid. Learned counsel submited that the various judgments of the Supreme Court referessed to by the learned counsel for the petitioner are distinguishable because none of these decisions dealt with a company created under a Statute performing only trading activities. It was submitted that development of Tourism is not a governmental function Alternatively, it was submitted that even if the order of termination is set aside on the ground that it violates the principles of natural justice no further relief as regards back wages could be granted to the petitioner while exercising jurisdiction under Article 226 of the Constitution of India. Learned counsel retired to the judgment of the Supreme Court in U.P. Warehousing Corporation & Others case (supra).

(5) I do not think that the question whether a Government company registered under the Companies Act carrying on trading activities is a State as contemplated under Article 12 of the Constitution of India or not in any longer res-integra. In Som Prakash Rekhis case (supra) the Supreme Court held that' Bharat Petroleum Corporation Limited, a company recognised by and closely with rights and duties by a Statute is a State within the meaning of Article 12 of the Constitution of India and observed as follows :---

If the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government."

"39.Let us cull out from Airport Authority. (supra) the Indicia of "other authorities under control of the Government of India" bringing a corporation within the definition of "the State". The following factors have beep emphasised in that ruling as telling, though not clinching. These characteristics convert a statutory corporation, a government company, a co-operative society and other registered society or body into a State and they are not confined to statutory corporations alone. We may decoct the tests for ready reference:

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 c of Government".

2.Existence of "deep and pervasive" State control may afford an indication that the Corporation is a State agency or instrumentality.

3."It may also be a relevant factor whether the corporation enjoys monopoly status which is State conferred or State protected".

4."If the functions of the corporation are of public importance and, closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government".

5."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".

The tinale is reached when the cumnulative effect of all the relevant factors above set out is assessed and once the body is found to be an instrument or agency of Government, the further conclusion emerges that it is. 'State' and is subject to the same constitutional limitations as Government.

"A study of Sukhdev's case, (a) Constitution Bench decision of this Court) yields the clear result that the preponderant considerations for pronouncing an entity as State agency or instrumentality arc (1) financial resources of the State being the chief funding source, (2) functional character being governmental in essence, (3) plenary control residing in Government, (4) prior history of the same activity having been carried on by Government and made over to the new body and (5) some element of authority or command. Whether the legal person is a corporation created by a State, as distinguished from under a Statute, is not an important criterion although it may be in indicium."

"The commonsense signification of the expression "other authorities under the control of the Government of India" is plain and there is no reason to make exclusion on sophisticated grounds such as that the legal person must be a statutory corporation, must have power to make laws, must be created by and not under a statute and so on. The jurisprudence of Third World countries cannot afford the luxury against which Salmond Cavilled. Salmond. .Jurisprucence, 10th End. p. 51".

(6) The Constitution Bench of the Supreme Court in Ajay Hasias's case (supra) has held as follow :

"We may point out that it-is immaterial lor this purpose whether the corporation is created by a institute or under a statute. Th3 test is whether it is an c 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, 1956 or it may be a society registered under tile Societies Registration Act, 1860 or any other similar stature What ever be its 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 fuctors. 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 instrumentaly or agency of the Govt. so as to come within the meaning of the expression 'authority' in Article This view has been reiterated again in Central Inland Water Transport Corporation case (supra) and the Supreme Court observed thus :-

"ARTICLE 298, as so substituted, therefore, expands the executive power of the Union of India and each of the States which collectively constitute the Union to carry on any trade or business. By extending the executive power of the Union and each of the States to the carrying on of any trade or business, Article 298, does not, however, convert either the Union of India or any of the States which collectively form the Union into a merchant buying and selling goods or carrying on either trading or business activity, for the executive power of the Union and of the States, whether in the field of trade or business or in any other field, is always subject to constitutional limitations and particularly the provisions relating to Fundamental Rights in Part Iii of the Constitution and is exercisable, in accordance with and for the furtherance of the Directive Principles of State Policy prescribed by Part V of the Constitution."

"40.The State is an abstract entity and it can, therefore, only act through its agencies or instrumentalities, whether such agency or instrumentality be human or justice. The trading and business activities of the State Constitute 'public enterprise'. The structural form in which the government operates in the field of public enterprise are many and varied. These may consist of government departments, statutory bodies, statutory corporations, government' companies, etc."

"If there is an instrumentality or agency of the State which has assumedthe garb of a government company as defined in Section 617 of the Companies Act, it does not follow that ft thereby ceases to be an instrumentality or agency of the State. For the purposes of Article 12 one must necessarily see through the corporals veil to ascertain whether behind that veil is the facs of an instrumentality or agency of the State."

(7) Thus the test is whether .1 he company is an instrumentality or the agency of the Government and not as to how it is created. It may be a company created, by a statute or under a statute and as long as it satisfies the six test", laid down in Som. Prakash Rekhi's. case (supra) as reiterated in Central Inland Water Transport Corporation case .(supra) it is immaterial whether it performs trading activity. That being the position, there can be no doubt that even if a Govt. company created under a statute performs trading activities when it deals with service conditions of its employees is subject to fundamental rights.

(8) Having cleared the legal position let me now refer to the facts of the present case. Clause Iii of the Memorandum and Articles of Association of I.T.D.C. sets out the objectives of establishing the company. As per this Article the company is mainly established for the purpose of developing tourism in the country. The entire share capital of the I.T.D.C. is held by the Government inasmuch as out of the total 5 shares 3 shares are held by the President of India and the remaining two are held by two directors who are ex-officio members representing the Ministry of Transport, Government of India. Under Article 60 of the Articles of Association of India Tourism Development Corporation it is the President who has to determine the number of Directors of the company. Though the I.T.D.C. does not hold a monopoly status, the activities carried on by the I.T.D.C. are of vital national importance and in fact the Seventh Five Year Plan has in paragraphs 8.220 and 8.2334 specifically dealt with I.T.D.C. The Conduct, Discipline & Appeal Rules 1978 applicable to all employees of the I.T.D.C. are printed in a green booklet. The cover of this booklet discloses I.T.D.C. as a Government of India Undertaking.

(9) Article 96 of the Articles of Association of India Tourism Development Corporation reads thus :-

"96.Notwithstanding anything contained in any of these Articles the President may, from time to time, issue such directives or instructions as may be considered necessary in regard to the finance, conduct of the business and affairs of title Company. The Company shall give effect to the directives or instructions so issued. In particular, the President will have the powers :-

(I)to give directions to the Corporation as to the exercise and performances of' its functions in matters involving national security of substantial public interest and to ensure that the Corporation gives effect to such directions;

(II)To call for such returns, accounts and other information with respect to the property and activities of the Corporation and its constituent units as may be required from time to time:

(III)To authorise the amount of capital to be raised and the terms and conditions on which it may be raised;

(IV)To approve the Corporation five year and annual plans of development on the Corporation's capital budget;

(V)To approve the Corporation's revenue budget in case there is an clement of deficit which is proposed to be met by obtaining funds from the Govemment; and

(VI)To approve agreements involving foreign collaboration proposed to be entered into by the Corporation."

c plain reading of this Article it is clear that the Government of India has a deep and prevasive control over the Company and its employees and in fact the impugned order itself indicates that this control is real. Moreover, the amalgamation of the Janpath Hotels Limited which was a Department of the Directorate of Estates, Ministry of Works & Housing. Government of India & Ashoka Hotels Limited to form I.T.D.C. also goes a long way to show that I.T.D.C. is nothing but an instrumentality or agency of the Govt.

(10) I find no substance in the contention of the learned counsel for the respondents that development of tourism is not a governmental function because if that was not so the Government of India would not have a separate Ministry of Tourism. Merely, because Along with governmental functions it also performs certain trading functions it is not divested of its true character of an instrumentality or agency of the State. All these factors indicate that behind the corporate veil the I.T.D.C. is an instrumentality or agency of the State.

(11) Now coming to the challenge to the impugned order as being against the principles of natural justice. It is not disputed that the petitioner was not given an opportunity to explain his conduct or that any hearing was given to him before the impugned order was passed. For deciding the present petition I do not think it is necessary for me to go into the question of validity and/or applicability of Article 96 of the Articles of Association of India Tourism Development Corporation Limited because, in my opinion, even if it is aslimed to be applicable the exercise of the power under this Article in the present case is against the principles of audi alterm partem and the impugned order cannot be sustained. Once the company is held to be an instrumentally of the State its action has to be equated to State action and to be valid, such an action must conform to the constitutional and other constraints arising out of a host of principles evolved in administrative law to prevent State action from arbitrary, unfair, unjust or unreasonable. The principles of administrative law were so construed in order to ensure rule of law. Thus if Article 96 of the Article of Association of India Tourism Development Corporation Limited has to stand the test of Articles 14 & 16 of the Constitution of India than this Article will have to be read subject to the implied duty to hear the officer on the principle of audi alterm pattem. Since that principle has admittedly not been followed it vitiates the order on that ground, alone.

(12) Now I come to the question of relief. Learned counsel "for the respondent very vehemently contended that the relief regarding back wages cannot be granted to the petitioner even if. the impugned order is set aside. In my view, the authority cited by the learned counsel for the respondent would not be applicable to the facts of the present case. That was a case where the removal or dismissal was held to be illegal, however certain factual matrix existed and an explanation was called for from the employee and in such a case it was felt not proper for the High Court in its equitable jurisdiction to grant consequential and monetary relief. The petitioner has already reached the age of superannuation and there is no question of his being reinstated in service. On the facts of the present case, there is nothing to show that at any time there was any explanation called for from the petitioner or that there are any special cirucmstances why once the order of termination is set aside being in breach of rules of natural justice the normal consequential directions should not be given. Since the impugned order is set aside the petitioner would be entitled to all such monetary consequential benefits as permissible under the law.

(13) In the result the petition is allowed. The rule is made absolute. The order dated 11th December, 1982 is set aside. The petitioner would also be entitled to back wages and other monetary consequential benefits. The petitioner is also entitled to costs quantified at Rs. 3000.00 .