HIGH COURT FOR THE STATE OF TELANGANA
THE HON'BLE THE CHIEF JUSTICE RAGHVENDRA SINGH CHAUHAN
AND
THE HON'BLE SRI JUSTICE B. VIJAYSEN REDDY
WRIT APPEAL No.143 of 2017
Date:04.01.2021
BETWEEN
The Managing Director,
Indian Immunologicals Limited,
Hyderabad and others.
... APPELLANTS
AND
Narendra Agarwal.
...RESPONDENTS
Counsel for the Appellants : Mr. C.R. Sridharan Senior Counsel for Mr. Salloori Ramesh
Counsel for the Respondent : Narendra Agarwal (Party-in-Person)
The Court made the following:
2
JUDGMENT: (Per Hon'ble Sri Justice B. Vijaysen Reddy)
Aggrieved by the order, dated 24.11.2016, passed by a learned
Single Judge in WP.No.4159 of 2015, whereby the learned Single
Judge has set aside the termination orders dated 24.01.2015 and
allowed the writ petition, the appellants have approached this Court.
2. The parties are hereinafter referred to as they were arrayed
before the learned Single Judge.
3. In brief, the case of the petitioner is as follows:
(a) The respondent No.2, the company, is wholly owned by the
Government of India and is a subsidiary of National Dairy Development
Board ('NDDB' for short), which is amenable to the jurisdiction of this
Court. The majority of the employees, except the Managing Director,
are appointed on contract basis. The petitioner was appointed as
Manager Grade-III, in the marketing department, by letter of
appointment dated 02.03.2007. In the appointment letter, it was
mentioned that the petitioner is entitled to Rs.35,000/- per month as
basic pay besides other allowances including performance incentive @
25% per annum based on performance. The appointment letter shows
that the petitioner was appointed for a period of three years with effect
from 28.02.2007. One of the conditions of appointment was that the
services of the petitioner could be terminated by giving one month
notice or by paying one month basic salary in lieu of the notice and
vice-versa.
(b) The petitioner left his previous company on receiving the
offer letter dated 09.02.2007. Considering his merit, sincerity and
honesty, the petitioner was given performance incentive by
proceedings dated 10.08.2007. Specific conditions were imposed in the
said letter that the petitioner shall retire on attaining the age of 3
58 years and that he has to enter confidentiality and secrecy
agreement besides giving an undertaking that he shall not join any
other competitor company for a period of one year after leaving the
services of the respondent No.2, the company. In token of
appreciation, the respondent No.1 issued letter dated 01.08.2008
revising the compensation (salary) from Rs.35,000/- to Rs.47,572/-
with effect from 01.08.2008. The said letter also included the condition
of termination of service with one month notice during the period of
three years.
(c) By letter dated 01.04.2009, the services of the petitioner
were renewed for a further period of three years; the basic pay was
enhanced to Rs.49,990/-. Thereafter, on 01.04.2020 another renewal
letter was issued, renewing the services of the petitioner for another
period of three years, with revision of compensation to Rs.67,379/-.
Subsequently, the petitioner was promoted as Manager Grade-II with
retrospective effect from 01.04.2013, while revising the compensation
to Rs.77,621/-. Thereafter, by circular dated 20.03.2014,
the respondent No.3 expanded the role of the petitioner by giving him
full charge of Marketing, HR & Training and Development of entire
marketing work force of all the market verticals of the company.
However, the sincerity, efficiency and reputation of the petitioner had
become an eyesore to some of the vested interests. Therefore, they
prevailed over the management to suffocate, strangulate and
humiliate the petitioner by creating an atmosphere so that he would
leave the organization on his own. As a result, the petitioner was
relieved from HR duties by office order dated 25.06.2014, he was
transferred to a lower role.
(d) Further, the petitioner reported to his new role before the
General Manager HBI pursuant to office order dated 25.06.2014.
Vide circulars dated 04.09.2013 and 08.09.2014, the respondents 4
revised the compensation packages to all the employees but denied
the same to the petitioner. Thus, the petitioner was humiliated and
subjected to deep rooted vindictiveness. Moreover, on 25.11.2014,
the petitioner was asked to vacate his cabin, and to share a cabin with
an employee much junior to him. In fact, the petitioner was given a
much smaller desk than his junior. Even his intercom line was
removed. When the petitioner applied for a casual line on 26.11.2014,
the same was rejected without giving any reason. On the same day,
the petitioner was asked to submit a daily work report for the entire
month starting 01.11.2014 which was not the normal practice in the
company. The petitioner addressed a representation dated 25.11.2014
to the Chairman; the same was received on 28.11.2014. As there was
no response, the petitioner made another request through email on
22.12.2014. As a counter-blast, the Company Secretary and Manager
Legal issued office order dated 02.01.2015 transferring the petitioner
to Distribution department at Ooty plant with immediate effect.
The said transfer was nearly 1000 KMs away from the work place
where the petitioner was working at the relevant time.
(e) Moreover, the petitioner was transferred to a role in which
he had no previous experiences. The petitioner suffered health
problems due to the humiliation, and ill treatment meted out to him.
He was admitted in KIMS Hospital; he was advised to undergo
investigations including Angiogram (CAG) and other investigations.
This fact was intimated to the respondent No.2, the company,
on 05.01.2015 by the petitioner's spouse. But surprisingly, a show
cause notice dated 06.01.2015 was issued by the respondent No.2,
the company, to the petitioner alleging unauthorized absence without
permission or intimation. After being discharged from the hospital,
on 11.01.2015, the petitioner sent a reply. He denied the allegations
as baseless, and clarified that he was hospitalized. The information of 5
hospitalization was given to the respondent No.2, the company,
in time. Thus, his absence cannot be termed as "unauthorized".
The petitioner was subjected to further humiliation by the respondent
No.2 whereby under letter dated 16.01.2015, he was asked to vacate
the quarters by 15.02.2015. The petitioner was admitted to KIMS
hospital on 23.01.2015 to rectify urological defect. While the petitioner
was actually undergoing treatment, the respondent No.2 issued the
impugned termination order dated 24.01.2015 by invoking clause 18
of the appointment letter dated 02.03.2007, with one month basic pay
in lieu of notice with immediate effect.
(f) According to the petitioner, though the impugned order is
termed as termination of contract, it is, in fact, a camouflage of the
orders of termination under the garb of a renewal of the services and
the amendment made to the condition therein. The petitioner has
rendered eight years of service with the respondent No.2. Though the
petitioner is termed as "a contract employee" he has been treated as
"a regular employee". This fact is evident from the letter dated
10.08.2007. The pay slips issued by the respondent No.2,
the company, specifically mentions that the petitioner was
"a permanent employee". The certificate issued by the General
Manager HR, dated 24.08.2010, also clearly indicates that the
petitioner is "a permanent employee" of the organization. Therefore,
according to the petitioner, the termination order is issued in
colourable exercise of power for extraneous and collateral reasons.
4. In the counter affidavit filed by the respondents, preliminary
objection regarding maintainability of the writ petition was raised.
Further the following brief averments were made:
(a) The writ petition is not maintainable against the respondents
since they are not amenable before the High Court under Article 226 of 6
the Constitution of India. The remedy for the petitioner, if any, lies
before a different forum. The respondent No.2, the company, is not an
establishment of the Government of India. It is a wholly owned
subsidiary company of NDDB. It is no where related to the
Government of India as alleged by the petitioner. There is no direct or
indirect involvement by the Government. In fact, the Government of
India has no control over the day to day affairs of the respondent
No.2. Moreover, no grant or funding is provided by the Government.
The management of the respondent No.2 is absolutely independent of
Government; it has its own independent board; no stake of the
Government is involved in the respondent No.2. Moreover, the
company is registered as a 'non-government company' by the
Registrar of Companies, Hyderabad. Therefore, the respondent No.2 is
not an instrumentality of the State. Hence, the writ petition is not
maintainable.
(b) As per the objectives of the respondent No.2-company its
duty is only towards its members and customers. It is neither a
statutory body, nor governed by a statute. Its functions are also not
akin to governmental functions. It cannot be characterized as a public
body. The contract between the respondent No.2 and the petitioner
cannot be treated as belonging to public law. It is a pure and simple
contract of service, regulating, circumscribing and governing the
relationship between the petitioner and the respondents. This issue
was also considered in a catena of decisions including RAJASTHAN
STATE ROAD TRANSPORT CORPORATON v. KRISHNAKANTH
[AIR 1995 SC 1715]; DEEPAK KUMAR BISWAS v. DIRECTOR OF
PUBLIC INSTRUCTIONS [(1987) 2 SCC 252]; CHANDER MOHAN
KHANNA v. N.C.E.R.T. [(1991) 4 SCC 578]; HEAVY ENGINEERING
UNION v. STATE OF BIHAR [(1969) 3 SCR 995] and TEKRAJ
VASANDI v. UNION OF INDIA [AIR 1988 SC 496].
7
(c) On merits, the respondents pleaded that initially the
petitioner was appointed on contract basis, under letter dated
02.03.2007, for a period of three years. The same was renewed from
time to time based on organizational needs and subject to meting the
performance standard. The petitioner had some or the other issues
with the co-employees. He used to disobey the instructions of the
superiors, and the functional heads. He was involved in unnecessary
arguments with colleagues, insubordination, sore relations with
co-employees etc. In spite of several warnings, the petitioner never
bothered to respect his colleagues. His disrespectful behavior
compelled the organization to move him from one department to
another in anticipation that would mend his ways. Vide transfer order
dated 02.01.2015, the petitioner was transferred to Ooty,
on administrative reasons. The petitioner pretended to be unwell on
receipt of the said letter. He was asked to show medical documents to
prove his claim of ill-health. But he failed to prove the same.
The petitioner did not report to duty on 05.01.2015.
Thus, termination order was issued to the petitioner vide letter dated
24.01.2015 as per the terms of the fixed tenure employment.
The termination letter along with a cheque equivalent to one month's
salary (in lieu of one month notice period) was served on the
petitioner on 24.01.2015 as provided for by the terms of his contract
of fixed tenure employment.
(d) In the counter, the respondents further denied the
allegations in the writ affidavit while adverting to each para in the
affidavit.
5. In rejoinder, the petitioner stated that the respondent No.2 is,
indeed, a wholly owned subsidiary company of NDDB, which in turn is
a Government company incorporated as an institution of national 8
importance under a special Act of the Parliament - the NDDB Act,
1987 (Act 37 of 1987). The respondent No.2 is very much related and
connected with the Government of India. The mere fact that the
respondent No.2 is registered as a separate company, and it also
managed to get itself registered under the sub-category of a
non-government company would not change the fact of it being a
wholly owned by Government of India institution. Moreover, there are
no private individuals holding shares in the respondent No.2. In fact,
the entire equity is owned by NDDB, which is an instrumentality of the
Government of India. This makes it amply clear that the respondent
No.2 is a Government owned company.
Mother Dairy, another subsidiary of NDDB, was held to be a
public authority on account of it being substantially financed by the
Central Government by the High Court of Delhi in MOTHER DAIRY
FRUIT & VEGETABLE PVT. LTD. v. HATIM ALI [WP.Nos.3110 and
5809 of 2011). The other points which would clarify the status of the
respondent No.2 as having connections with the Government are:
a. Chairman of the NDDB is appointed by the Appointment Committee of the Cabinet, Government of India. The said Chairman is also the Chairman of the respondent No.2. Furthermore, all the directors of the respondent No.2 are appointed by NDDB.
b. Letter issued by the General Manager-HR of the respondent No.2-company says it is a 'Public Sector' company. c. The respondents use Vehicles with "Govt. Vehicle" tag. d. CDA of the respondent No.2 says that the employees will not criticize the Government.
e. The respondent No.2 conducts special recruitment drive for SC/ST.
f. Ministry of Agriculture, Department of Animal Husbandry sought explanation from the respondent No.2 in the case of the petitioner; the respondent No.2 responded to the explanation so sought.
g. Appointment letter issued to the petitioner states that the services of the petitioner are transferable to NDDB.
9
h. Children of the employees of the respondent No.2 are given admission in Kendriya Vidyalayas.
The allegation that the petitioner is having serious behavioral
problem was denied.
6. In the counter-affidavit to the rejoinder of the petitioner,
the respondent No.2 stated that NDDB itself does not appoint the
Board of Director of the respondent No.2. The appointment of Board of
Directors would be decided in the Annual General Body Meeting of the
respondent No.2. Further, there are independent Directors also on the
board of the respondent No.2. They are appointed basing on their
qualification, experience etc. The Managing Director is appointed by
duly selected Board of Directors of the respondent No.2.
The conducting of recruitment for SC/ST or directing employees not to
criticize the Government would not indicate that the respondent No.2
is an agency or instrumentality of the State. The respondent No.2 was
a unit of NDDB initially. But later on, it was incorporated as a separate
company. It was deleted from the list of units of NDDB; it was added
in the list of subsidiaries of NDDB. The judgment of the Delhi High
Court in MOTHER DAIRY's case (supra) is out of context. For, it was
rendered with reference to the provisions of the RTI Act, but not with
reference to Article 12 of the Constitution of India. The respondent
No.2 does not receive any grant or any financial aid from the
Government of India; it generates its own income. The Board takes all
decisions for running the company. There is no public duty discharged
by the respondent No.2. For, its operations are purely commercial in
nature. The respondent No.2 does not satisfy the test laid by the
Hon'ble Supreme Court for treating it as an agency or instrumentality
of the State.
10
7. Heard Mr. C.R. Sridharan, the learned Senior Counsel for the
appellants, and Mr. Narendra Agarwal, the party-in-person, considered
the impugned order, and perused the record.
8. The learned senior counsel for the appellants has raised the
following contentions:
(a) The conclusion drawn by the learned Single Judge holding
the employment of the petitioner as permanent, and not contractual,
is without any material and legal basis. Under appointment letter
dated 02.03.2007, it was clearly mentioned that the petitioner is
appointed temporarily for a period of three years with effect from
28.02.2007. Clause 18 of the appointment letter gives absolute right
to the respondent No.2 to terminate the services of the petitioner by
giving one month notice, or by paying one moth salary in lieu of
notice. So also the petitioner is also entitled to resign from service by
giving one month notice, or by paying one month compensation in lieu
of notice. The petitioner is a work charged employee. Further,
the petitioner never pleaded that he be treated as a permanent
employee. The services of the petitioner were terminated in terms of
Clause 18 of the contract of employment. It is a simplicitor termination
and not stigmatic.
(b) There is no deep and pervasive control of the Government in
the Board, as required under Article 12 of the Constitution of India.
NDDB is neither an authority, nor an instrumentality of the State.
The findings of the learned Single Judge in paras 22 and 23 are
contradictory to the findings in BALWANT RAI SALUJA v. AIR
INDIA LIMITED1 case.
(c) Though NDDB was declared as an institute of national
importance, mere 100% control by the Government would not make a
1 (2014) 9 SCC 407 11
company a public authority. Similarly, NDDB also does not become a
public authority.
(d) The High Court of Delhi in MOTHER DAIRY's case held
parental concern public authority under Article 12 of the Constitution
of India. However, the said case did not deal with Article 12 of the
Constitution of India, but dealt with public authority under the RTI Act
with reference to Section 2(h) of the RTI Act. The authority does not
fall within the said definition. Moreover, the said decision was appealed
before a Division Bench and the decision of the learned Single Judge
was stayed. Thus, the learned Single Judge, in the instant case, was
not justified in relying on MOTHER DAIRY's case.
(e) Drawing comparison to operations of Air India under Section
9 of the Air Corporations Act, Air India is required to act as per the
directions of the Central Government. However, under Section 11 of
the NDDB Act, the board has to act on the basis of sound business
principles, and not according to the directions of the Central
Government. Thus, there is no supervisory control of the Government.
(f) The holding company herein i.e. NDDB is not a company
incorporated under the Companies Act. It is not a body corporate.
Thus, the Doctrine of Lifting of the Corporate Veil is inapplicable.
NDDB is a separate entity. The learned Single Judge having held that
the respondent No.2 does not perform public duty, yet holds that it
comes within the ambit of the Article 12 of the Constitution of India.
This conclusion is contrary to a catena of judgments of the Supreme
Court wherein ratio is laid down that no Mandamus can be issued
against an organization or entity, which does not discharge public
duty.
(g) There is no other pleading except that the respondent No.2
is wholly owned by the Government of India and subsidiary of NDDB.
Even Certificate of Incorporation clearly shows that the respondent 12
No.2 is registered as non-government company. Thus, the respondent
No.2 is not amenable to writ jurisdiction. The main object of the
respondent No.2 is to manufacture vaccines and animal health
products. Hence, it does not perform any public function. It carries out
commercial functions. The relationship between the petitioner and the
respondent No.2 is that of contractual service; it is part of private law
and not public law. Hence, writ petition was not even maintianable.
(h) The factors mentioned in K.K. SAKSENA v. INTERNATIONAL COMMISSION ON IRRIGATION AND
DRAINAGE2 case are inapplicable to the facts of the present case.
The respondent No.2 is not an authority under Article 12 of the
Constitution of India. Even if there is deep and pervasive control either
financial or administrative by NDDB over the respondent No.2,
even the respondent No.2 cannot be considered as an instrumentality
of the State.
9. Per contra, Mr. Narendra Agarwal, party-in-person, has raised
the following contentions:
(a) The Articles of Association of the respondent No.2-company
with specific reference to Articles 10, 14 and 16 were brought to the
notice of the Court.
(b) Pursuant to the grievance letters addressed to the Under
Secretary, Government of India, Ministry of Agriculture and Farmers
Welfare, information was sought from the respondent No.2.
Under letters dated 27.04.2016, 12.05.2016 and 24.07.2016,
the respondent No.2 intimated that the matter is subjudice.
(c) Gazette notification dated 09.09.2002 pertaining to NDDB
Amendment Regulations, 2020 indicate that the respondent No.2 is
added as a subsidiary company of NDDB.
2 (2015) 4 SCC 670 13
(d) The report of independent auditors of the respondent No.2
clearly shows that NDDB is one of the enterprises as Principal
Shareholder having significant influence in the affairs of the
respondent No.2.
(e) The Chairman of the respondent No.2 is also the Chairman
of NDDB. Under letter dated 24.08.2010 issued by the General
Manager (HR) of the respondent No.2, it was certified that the
petitioner is a permanent employee of the respondent No.2.
The respondent No.2 is under public sector.
(f) As per clause 7 of the terms and conditions of the
employment, the petitioner could have been appointed in any
department of the respondent No.2-company or posted to any
establishment of Indian Immunologicals Limited or NDDB.
(g) The respondent No.2 was created by NDDB with an object to
help NDDB in making India self-reliant in milk production under the
Government of India's (GOI) 'Operation Flood' Program. The mandate
of the respondent No.2 is to make available a high quality Foot and
Mouth Disease (FMD) vaccines to the farmers of the counter at a price
which they could afford a very important national mission.
(h) The respondent No.2 was corporatized in the year 1999 with
the prior permission of GOI. Later, the respondent No.2 ventured into
making of high quality yet affordable Anti Rabies Vaccine (ARV) for the
people of India and helped GOI get rid the counter of dangerous Nerve
Tissue Vaccine (NTV). Since inception the respondent No.2 remained
undisputed market leader in FMD production and supply to
Governments. It has got monopoly in that field.
(i) The respondent No.2, even today, continues to pursue the
mandate of NDDB, which is parent company. Since 1999 till 2016 the
Chairperson of NDDB was Chairperson of the respondent No.2. NDDB
owns 100% equity of the respondent No.2. The respondent No.2 14
cannot issue a single equity share to anyone without approval of
NDDB. The respondent No.2 cannot be placed for liquidation except by
an order of GOI, being wholly subsidiary of NDDB.
(j) The employees of the respondent No.2 are transferable to
NDDB and vice versa. NDDB gives interest free work capital and term
loan to the respondent No.2. The entire Board of the respondent No.2
is under complete control of NDDB (holding company).
The respondent No.2 is required to follow GOI's directives to give
reservation to SC/ST people in recruitment. It comes under Ministry of
Agriculture. The subsidiary of the respondent No.2 is also subsidiary of
NDDB. The respondent No.2 uses the vehicles with 'Government
Vehicle' tag. There is a deep and pervasive control of NDDB on the
respondent No.2.
(k) The parameters and observations of the Supreme Court in a
catena of decisions clearly apply to the appellant company to
substantiate that it is a wholly owned by State and financed by State
and indirectly by GOI being under complete control of the holding
company, NDDB and thus, is an agency and instrumentality of the
State.
(l) The activities of the respondent No.2 are of public
importance and for the benefit of the general public, more particularly,
the farming community. The numerous documents filed in support of
the writ petition and the nature of employment clearly indicates that
the petitioner is a permanent employee and could not have been
terminated under a simplicitor termination letter.
10. Based on the above rival contentions, the following issues arise
for consideration in this appeal:
1. Whether the respondent No.2-company is a Government company, and instrumentality of the State within the meaning of Article 12 of the Constitution of India or not?
15
2. Whether the respondent No.2 is discharging public functions so as to make it amenable to the writ jurisdiction under Article 226 of the Constitution of India?
3. Whether the petitioner is a permanent employee of the respondent No.2 or not?
4. Whether the termination order dated 20.01.2015 is legally sustainable or not?
ISSUE Nos.1 and 2:
11. The definition of State under Article 12 of the Constitution of
India is not exhaustive. It is an inclusive definition. The concept of
State, its entities and functionality has undergone sea change for the
past few decades. The predominant character of welfare state prior to
eighties and nineties has drastically changed. The State through its
agencies and instrumentalities even ventured into profit making
activities like housing, infrastructure, breweries, software
development, metro rail etc. in contrast to its predominant functions
like collection of revenue, maintenance of law and order etc. In pursuit
of such activities different entities/companies/organizations were
formed. The constitutional Courts had occasion from time to time to
deal with the nature of constitution, activities, funding etc. of such
entities so as to determine whether such entities are 'State' within
'Article 12' of Constitution of India. There cannot be a straightjacket
formula as to what parameters and indicia decide an entity to be a
State. It differs with the fact situation in each case. There are several
decisions of the Supreme Court and various High Courts on this
subject.
12. Learned senior counsel has drawn the attention of this Court to
the following decisions:
16
PRAGA TOOLS CORPORATON v. C.A. IMANUAL3; MYSORE PAPER MILLS LTD. v. MYSORE PAPER MILLS OFFICERS' ASSOCIATION4; VST INDUSTRIES LTD. v. VST INDUSTRIES WORKERS' UNION5; PRADEEP BISWAS v. INIDAN INSTITUTE OF CHEMICAL BIOLOGY6; ANDHRA PRADESH PAPER MILLS LIMITED v. CH. SEETHARAMAIAH7; GENERAL MANAGER, KISAN SAHKARI CHINI MILLS LTD. v. SATRUGHAN NISHAD8;
VALJIBHAI MULJIBHAI SONEJI v. STATE OF BOMBAY9; DR. S.L. AGARWAL v. THE GENERAL MANAGER, HINDUSTAN STEEL LTD.10; BALWANT RAI SALUJA's case (1 supra); CENTRAL INLAND WATER TRANSPORT CORPORATION LIMITED v. BROJO NATH GANGULY11 and BALMER LAWRIE & COMPANY LIMITED v. PARTH SARATHI SEN ROY12
13. From the above authoritative pronouncements the following
indicia are deducible to determine whether an entity/
company/organization is a State within the meaning of Article 12 of
the Constitution of India and is amenable to writ jurisdiction or not.
(a) Mandamus lies to secure the performance of a public or
statutory duty, and not performance of obligations which are of private
character (PRAGA TOOLS CORPORATON).
(b) The Government company in which majority of shares are
held by government; where there is deep and pervasive control of its
day-to-day administration is a State. (MYSORE PAPER MILLS LTD.)
(c) The majority of governing body of the organization
substantially comprises of private individuals and when it does not
discharge governmental or sovereign functions such organization is not
a State (PRADEEP BISWAS).
3 1969 (1) SCC 585 4 (2002) 2 SCC 167 5 (2001) 1 SCC 298 6 2002 (5) SCC 111 7 2003 (4) ALD 693 DB 8 (2003) 8 SCC 639 9 (1964) 3 SCR 686 = AIR 1963 SC 1890 10 1970 (1) SCC 177 11 (1986) 2 SCC 156 12 (2013) 8 SCC 345 17
(d) The company having limited share holding of Government;
Chairman and Board of Directors are not appointed by Government
and it is not entrusted with statutory/public duties is not a State and
not amenable to writ jurisdiction (ANDHRA PRADESH PAPER MILLS
LIMITED).
(e) The company wherein Government has 50% shares but
management committee is dominated by 2/3rd non-government
members is not a State (KISAN SAHKARI CHINI MILLS LTD).
(f) The company which has not given control of running to the
alleged parent company (AIR INDIA) and functions of appointment,
dismissal, disciplinary action etc. is retained by the company is not a
State (BALWANT RAI SALUJA). The employees of the company
cannot be placed at the same footing as Air India's regular employees.
(g) The corporation carrying out a governmental activity and
governmental functions of vital importance is a State and amenable to
writ jurisdiction (CENTRAL INLAND WATER TRANSPORT
CORPORATION LIMITED).
(h) The whole time Directors of the Company are appointed by
State (President of India); the company is under obligation to submit
monthly, half-yearly performance reports to the Government
(of India); company implementing reservation policy as per directions
of Government. The company and alleged parent company have a
common Chairman; the company is an 'authority' amenable to writ
jurisdiction (BALMER LAWRIE & COMPANY LIMITED).
14. Now coming to the case on hand it is relevant to check the
background as to how NDDB and the Indian Immunologicals Limited
were formed and what is the nature of their functions and activities:
The preamble of the NDDB Act, 1987 reads as follows:
18
"An Act to declare the institution known as the National Dairy Development Board in the State of Gujarat to be an institution of national importance and to provide for its incorporation and for the vesting in that body corporate of the undertakings of the Indian Dairy Corporation with a view to provide for the administration and the carrying on of the functions to be performed by the body corporate more effectively throughout the country and for matters connected therewith and incidental thereto.
WHEREAS the National Dairy Development Board, a society formed and registered under the Societies Registration Act, 1860 (21 of 1860) has been serving the country by the adoption of a co-operative strategy, being a strategy evolved at Anand (Gujarat), for the economic development of the rural masses and has been playing a vital role in improving the quality of life of the people through co-operative effort;
AND WHEREAS the objects of the National Dairy Development Board are such as to make it an institution of national importance and to constitute it as a body corporate;
AND WHEREAS the functions of the Indian Dairy Corporation, a company formed and registered under the Companies Act, 1956, (1 of 1956) and the functions of the National Dairy Development Board are complementary to each other and aimed at achieving common objectives ...
15. The salient features of the NDDB Act are culled out hereunder:
The NDDB is a institution of national importance (Section 2);
it is body corporate (Section 4), and it shall have perpetual succession
to acquire, hold and dispose of property and to contract; undertaking
of the Indian Dairy Corporation shall stand transferred to NDDB
(Section 5); the Chairman of NDDB and other Directors shall be
nominated by Central Government after consultation with the
Chairman (Section 8); the Central Government shall have power to
terminate service of the Chairman and Directors (Section 9); it shall be
the duty of NDDB to promote, plan and organize programmes for the
purposes of dairy and agricultural based and allied industries; to adopt 19
cooperative strategy in more effective manner on an intensive and
nation wide basis and take such steps as may be necessary for the
purposes aforesaid facilitating research, promotional activities in the
fields of dairying, immunology, animal husbandry, agriculture and
horticulture; imparting technological know-how to such organizations
in the cooperative or public sector as are engaged in the production,
procurement, preservation or marketing of milk and milk products;
recommending to Government as and when necessary the maximum
and minimum prices to be fixed for purchase or sales of milk;
functioning as a channelizing agency in respect of export and import of
milk and milk products and of milch animals or bulls; regulating dairy
and allied industries and functioning as regulatory authority, as may
be required by the Central Government; promoting and developing
production, grading and marking of milk and milk products in various
parts of the country; co-operating with international organizations and
foreign experts and for functioning as an agent of the Central
Government for the reception, utilization and disbursement of any gift
of milk and milk products and any other foodstuffs (Section 16);
the Central Government may delegate certain powers to NDDB to
undertake and perform any of the activities or functions of the Central
Government relatable to dairy, foodstuffs and connected industries
(Section 38); Mother Dairy, Delhi to be a subsidiary unit of NDDC
(Section 42); NDDB may for implementation of its objects, subject to
the previous approval of the Central Government form one or more
companies either by itself or in conjunction with any of its subsidiaries
or with any other undertaking (Section 43) and any schemes or
regulations made under the NDDB Act shall be made before the House
of Parliament (Section 50).
20
16. Regulation 2 of the National Dairy Development Board Officers
(Appointment, Pay and Allowance) (Amendment) Regulations, 2002 is
extracted below:
"....2. Amendments to the National Dairy Development Board Workmen (Appointment, Pay and Allowances) Regulations, 1988.
(1) In the definition of "Subsidiary Company" in clause (t) of Sub-regulation (1) of Regulation 3, the following "company" shall be deleted:
"Hindustan Packaging Company Limited"
and the following "companies" shall be added:-
1. Mother Dairy Fruit & Vegetable Company Limited
2. Indian Dairy Machinery Company Limited
3. Indian Immunologicals Limited
4. Dhara Vegetable Oil and Foods Company Limited
5. Bhavnagar Vegetable Products Limited
6. Bharat Asceptic Packaging Industries Limited.
(2) In the definition of "Subsidiary Unit" in clause (u) of Sub-regulation (1) of Regulation 3, the following Units shall be deleted:
1. Mother Dairy, Delhi
2. Indian Dairy Machinery Company
3. Indian Immunolgicals
17. Relevant Articles of Association of the respondent No.2 with
respect to Board of Directors are extracted hereunder:
9. The number of Directors of the Company which shall not be less than 4 and shall not be more than 12 including any director nominated by the financial institutions and Banks who may provide financial assistance to the Company.
10. (1)...
(2) Subject to Article 9, NDDB shall have a right to appoint directors on Board of the Company.
(3)...
(4)...
(5) The term of office for remaining Directors shall be three years and such Directors shall retire on the expiry of the said term or on their ceasing to be in the 21
employment of their organizations whether on resignation or otherwise; whichever is earlier. However, NDDB may re-appoint any Director or Directors for such period as it may decide. (6) Subject to the provisions of Section 284 of the Act, the NDDB may remove any director from office at any time before they complete the term.
18. It is not in dispute that the respondent No.2 is wholly owned
subsidiary of NDDB. NDDB is a body corporate owned by the
Government of India constituted under the NDDB Act, 1987 (37 of
1987). Under the NDDB Amendment Regulations, 2002, dated
09.09.2020, the respondent No.2 is shown as one of the subsidiary
companies of NDDB. Article 10(2) makes it clear that NDDB has right
to appoint the Directors on Board of the respondent No.2. Under
Article 10(5), NDDB has authority to reappoint any Director or
Directors for such period as it may decide. Under Article 10(6), NDDB
may remove any Director from office at any time before they complete
the term subject to Section 284 of the Companies Act.
19. Moreover, in the certificate issued by the respondent No.2,
dated 24.08.2008, expressing its no objection for issuance of passport
to the petitioner, it was specifically mentioned that the respondent
No.2 is under "public sector". Further, the financial audit report of the
respondent No.2, for the period between 2014 and 2015, shows that
one Sri T. Nanda Kumar was the Chairman of the respondent No.2 and
one of the key management personnel. During the same period,
Sri T. Nanda Kumar was also the Chairman of NDDB. The audit
statement also shows that NDDB is the principal shareholder of the
respondent No.2. Thus, it is clear that NDDB has got direct and
pervasive control over the affairs of the respondent No.2. 22
20. The incorporation of the respondent No.2, nature of its
activities, the manner in which the respondent No.2 is conducting its
affairs and the control of NDDB over the respondent No.2, are all the
factors which indicate that the NDDB has absolute control over the
management of the respondent No.2. Apart from the financial control,
whereby the NDDB is the principal shareholder of the respondent No.2,
NDDB also has management control over the respondent No.2.
For, the Board of the respondent No.2 is constituted by NDDB; NDDB
is having absolute right to reappoint and remove the Directors of the
respondent No.2. Though the respondent No.2 is registered as
subsidiary company of NDDB, but the power to appoint, reappoint or
remove a director, vested in NDDB clearly proves that the respondent
No.2 is under the direct and effective control of NDDB, which is a
public sector organization.
21. The Memorandum of Association of the respondent No.2
contains the main objects of the company, which are extracted below:
"A. MAIN OBJECTS OF THE COMPANY TO BE PURSUED IN ITS INCORPORATION:
1. To acquire and take over the ongoing business of Indian Immunologicals, manufacturers of vaccines and animal health products, a Managed unit of National Dairy Development Board with all or any of the assets and liabilities ... to enter into any agreement with M/s. National Dairy Development Board on one part and the proposed Company Indian Immunologicals limited ...
2. To carry on business as manufacturer, fabricator, assembler, processors, traders, importers, Exporters, consignors, principals, owners, agents, factors, buyers, sellers, constructors and hirers of and dealers in all types of pharmaceuticals, drugs, medicines, chemicals, herbals, diagnostics, antibiotics, antiseptics, disinfectants, opticals, biologicals ... and things capable of being used in connection with such products or required by the customers dealing with this company.
23
2A. To carry on business as producers, manufactures, imports, exporters, traders, dealers, distributors, stockist, ... containers for the semen and liquid nitrogen, all classes, kinds, types and descriptions of cattle, buffalo and their cross breads, ... set up management information systems, develop and provide technologies/software relating to feeding, artificial insemination, progeny testing, management and health care of animals."
22. Thus, as seen from the above, there cannot be any iota of doubt
that the respondent No.2 is incorporated in furtherance of achieving
goals and objects of NDDB. The activities of the respondent No.2 are
not independent of the NDDB. The comparison of the provisions of the
NDDB Act and Articles of Association, Memorandum of Association of
the respondent No.2 reveal that the activities of both the entities are
complimentary to each other, which is further strengthened by the
NDDB Regulations as amended in the year 2002. May be as a
subsidiary company, the respondent No.2-company has got
independent legal existence. However, the main purpose of creation of
the respondent No.2 is not only to fulfill and accomplish the objectives
of NDDB but also to further give more independence in manufacturing,
developing pharmaceuticals, medicines, herbals, antibiotics etc. and
also to carry on business in dairy buffalo breeds of all classes, kinds
etc; manufacture of artificial insemination equipment, containers of
semen etc. which are all ancillary activities meant to support the cattle
breed, which is the main backbone of the Indian farming community
and livestock. And to act as support system to the main activities of
NDDB. The object of the respondent No.2 is not just to do commercial
activities, but more so for protecting, developing and upgrading cattle
breed in India. Thus, the respondent No.2 is discharging a public duty
and functions of national importance, more particularly, for protecting
the interests of farming community and people dependant on livestock
and dairy farming.
24
23. The contention of the learned Senior Counsel that the activities
of the respondent No.2 are only dependant on the requirements of its
members and customers and not related to public duties is
unacceptable. In view of the clear admission of the respondent No.2
that it is a public sector undertaking vide letter dated 24.08.2008;
the fact that it is discharging the functions in consonance with the
Directive Principles of State Policy under Article 48 of the Constitution
of India, namely to organize animal husbandry on scientific line and to
improve the breeds of cattle, it is held that the respondent No.2 is not
only discharging public duty, but is also an instrumentality of the
State.
24. As borne out from the record, originally the Indian
Immunologicals Limited was a subsidiary unit of NDDB. The NDDB
(Amendment) Regulations, 2002 were framed in exercise of powers
conferred by Section 48 of the NDDB Act. It appears that three
subsidiary units i.e. (1) Mother Dairy, Delhi, (2) Indian Dairy
Machinery Company and (3) Indian Immunologicals were constituted.
As evident from the record, the Mother Dairy unit (Delhi) was created
for the purpose of manufacturing, marketing and selling of milk and
milk products, ice creams etc. (motherdairy.com). The Indian Diary
Machinery Company (Anand, Gujarat) was created for the purpose of
manufacturing dairy equipments, components, cattle feed equipment,
cattle feed plants, pharmaceutical equipment, refrigeration etc. and to
contribute to moderating their prices (idmc.com). Likewise, the Indian
Immunologicals (Hyderabad), which is another subsidiary, was created
for the purpose of developing, maintaining, upgrading etc. medicines,
vaccines and for carrying out ancillary activities like artificial
insemination, protecting and upgrading cattle breed etc. These three
units are created under Section 43 of the NDDB Act to achieve the 25
objects of NDDB. The purpose of constituting these three units was not
to make them independent and unconnected with NDDB, but it was
otherwise. Later, in order to expand the activities of the subsidiary
units and also to enable them to have certain functional autonomy;
to ensure equitable distribution of activities of NDDB, the subsidiary
units were upgraded as companies under the NDDB Officers
(Appointment, Pay and Allowance) (Amendment) Regulations, 2002,
which have been set up in various parts of the country. All these three
companies have been constituted as wholly owned subsidiaries of
NDDB.
25. Thus, the observations drawn above lead to irresistible
conclusion that the activities of the respondent No.2 have the flavour
of public duties. Hence, this Court holds that the respondent No.2 is a
State within the meaning of Article 12 of the Constitution of India and
is amenable to writ jurisdiction. The decisions relied upon by the
learned Senior Counsel do not help the case of the appellants.
For, the activities of the companies/entities therein strictly do not
amount to discharging public or statutory duties.
26. The submission of the learned Senior Counsel that the
respondent No.2 is registered as a private company, and that the
activities of the company are dependant on requirements of its
members and customers and it is not an instrumentality of the State,
is without any force. There is no relevant material pointed out by the
learned Senior Counsel to show that the respondent No.2 is a purely
private and commercial enterprise, and totally unconnected with the
affairs of NDDB.
27. The learned Senior Counsel submitted that the learned Single
Judge fell in error by wrongly applying the doctrine of lifting of 26
corporate veil in the instant case. The said doctrine has to be invoked
in exceptional circumstances, and only for discovering whether two
companies are really identical in case of fraud, entities being a mere
cover or façade to conceal the fraud. The Courts are entitled to lift the
veil of corporate entity and to pay regard to economic realities behind
illegal façade. Learned senior counsel further submitted that subsidiary
company is an independent entity. The impugned order passed by the
learned Single Judge is per incuriam since the provisions of the
Companies Act and the settled legal position on the doctrine of lifting
of corporate veil have been ignored. To buttress his contentions,
the learned senior counsel relied on the following decisions:
COMMISSIONER OF INCOME TAX, CALCUTTA v. MESSRS ASSOCIATED CLOTHIERS LTD.13; COMMISSIONER OF INCOME TAX v. SRI MEENAKSHI MILLS LTD.14; In HEAVY ENGINEERING MAZDOOR UNION v. STATE OF BIHAR15; SWARAN SINGH LAMBA v. UNION OF INDIA16; DIRECTOR OF SETTLEMENTS v. M.R. APPARAO17; A.R. ANTULAY v. R.S. NAYAK18; MAYURAM SUBRAMANIAM SRINIVASAN v. CBI19; UNION OF INDIA v. R.P. SINGH20;
28. The above contentions of the learned senior counsel are without
any merit. The doctrine of lifting/piercing of corporate veil is not a
concept which has limited application for particular type of cases.
No doubt, such doctrine is applied mostly in cases of tax frauds, and in
matters dealing with economic activities of companies. There cannot
be any straightjacket formula under which the doctrine of lifting of
corporate veil could be applied. Even in disputes relating to
workman/employee, the doctrine of lifting of corporate veil has been
13 1963 SCC Online Cal 6 : AIR 1963 Cal 529 14 (1967) 1 SCR 934 : AIR 1967 SC 819 15 1969 (1) SCC 765 16 (1995) 4 SCC 546 17 (2002) 4 SCC 638 18 (1988) 2 SCC 602 19 (2006) 5 SCC 752 20 (2014) 7 SCC 340 27
applied in MYSORE PAPER MILLS LTD.'s case (4 supra) and PRADEEP
BISWAS's case (6 supra); CENTRAL INLAND WATER TRANSPORT
CORPORATION LIMITED's case (11 supra). In any event,
the doctrine of lifting of corporate veil is not of much relevance in the
instant case. For, from the admitted documents forming part of record,
it is clear the respondent No.2 is a wholly owned subsidiary company
of NDDB and there is a clear admission by the respondent No.2 that it
is a public sector undertaking; it is also implementing reservation
policy for SC/ST category. Thus, the contention of the learned Senior
Court that the learned Single Judge wrongly applied the doctrine of
lifting of the corporate veil and that the impugned judgment is
per incuriam the settled legal propositions is without any merit.
ISSUE No.3:
29. The learned Senior Counsel submitted that the employment of
the petitioner is purely contractual. The petitioner is not discharging
any public duty. The petitioner was initially appointed for a period of
three years. From time to time his tenure was extended.
Mere reference to retirement age as 58 years does not alter the nature
of employment, which is temporary. There is no material to show that
the petitioner is a permanent employee of the respondent No.2.
In fact, the respondent No.2 does not have any employees, who hold
permanent employment. The appointment letter dated 02.03.2007 and
further renewal letters clearly show that the employment of the
petitioner is only temporary. And the petitioner is being paid
compensation and based on his performance, he was given annual
incentive from time to time.
28
30. The learned senior counsel relied upon GRIDCO. LTD. v.
SADANANDA DOLOI21 wherein the Supreme Court held as under:
8. ... In the meantime, the extended period of his employment also expired whereupon the Corporation granted to the respondent a further extension of one year upto 3rd November, 2001, on the same terms and conditions as stipulated in the letters dated 6th February, 1997, and 29th October, 1997. Two further representations dated 22nd November, 2000, and 13th February, 2001, to the appellant-Corporation for extension of the tenure of appointment till superannuation did not find favour with the appellant. Instead the appointment of the respondent was terminated in terms of an order dated 19th February, 2001 with three months' salary in lieu of notice paid to him.
16. This question has to be answered in two distinct parts. The first part relates to the aspect whether the order passed by the appellant-Corporation is amenable to judicial review and if so what is the scope of such review. The second part of the question is whether on the standards of judicial review applicable to it, the order of termination is seen to be suffering from any legal infirmity.
...
26. A conspectus of the pronouncements of this court and the development of law over the past few decades thus show that there has been a notable shift from the stated legal position settled in earlier decisions, that termination of a contractual employment in accordance with the terms of the contract was permissible and the employee could claim no protection against such termination even when one of the contracting parties happened to be the State. Remedy for a breach of a contractual condition was also by way of civil action for damages/compensation ...
27. Applying the above principles to the case at hand, we have no hesitation in saying that there is no material to show that there is any unreasonableness, unfairness, perversity or irrationality in the action taken by the Corporation. The Regulations governing the service conditions of the employees of the Corporation, make it clear that officers in the category above E-9 had to be appointed only on contractual basis.
21
AIR 2012 SC 729 29
31. On the other hand, Mr. Narendra Agarwal, the party-in-person,
has submitted that under letter dated 10.08.2007, the petitioner was
informed that based on his appraisal for the period 2006-2007,
his increment for the year fixed at 7% and the terms of employment
are modified. It also contains one condition that the petitioner shall
retire on attaining the age of 58 years in accordance with the rules and
regulations of the respondent No.2. The petitioner was promoted to
higher levels from time to time and was also given annual increments.
In the pay slips issued by the respondent No.2-company for the
months of January 2014, March 2014, April 2009, December 2013 etc.
it was indicated as 'Employee Group - Permanent'. There is no
material produced by the respondent No.2-company that the activities
of the company are temporary in nature and dependant on the
requirements of its members and customers. On the other hand, the
nature of employment, pay slips, the manner in which the petitioner
was receiving annual increments, transfer to different departments
and promoted to higher posts from time to time clearly prove that
petitioner was in permanent employment of the respondent No.2.
32. The documents relied upon by the parties herein, as discussed
supra, do not in any manner create a doubt that the petitioner is not a
permanent employee. The payment of increments, enhancement of
salary from time to time, admission by the respondent No.2 that the
petitioner will retire at the age of 58 years and bound by service rules,
further clinching evidence of acknowledgment of the respondent No.2
in the pay slips treating the petitioner as permanent employee belies
the contention of the learned Senior Counsel that the petitioner is in
contractual employment. The petitioner was not only given promotions
but also transferred from one unit to another unit of the respondent
No.2, company, which in normal employment relationship is not 30
indicative of temporary or contractual employment. The nature of
employment of the petitioner has all attributes of permanent
employment. Hence, the petitioner is held to be a permanent
employee of the respondent No.2, company. The judgment in
GRIDCO. LTD's case (21 supra) is not applicable to the instant case
since the services of the employee therein were for temporary period
and it was a case where the employee submitted representations for
extension of tenure of appointment till superannuation; in terms of
conditions of temporary employment, the employee therein was
terminated by giving three moths salary in lieu of notice period.
ISSUE No.4:
33. The respondent No.2 has service rules viz. Indian
Immunologicals Limited Conduct, Disciplinary and Appeal Rules
(for short 'the Rules'), which came into force from 18.10.1999.
Rule 3(a) of the Rules defines the term 'employee'. Rule 24 deals with
'penalties' - minor penalties and major penalties. Rule 25 provides for
'Disciplinary Authority' for imposing penalties under Rule 24. Rule 26
deals with 'Procedure for Imposing Major Penalties. Rule 27 deals with
'Action on the Inquiry Report'. Rule 33 deals with 'Appeals' against
order imposing penalties on employee. Rule 34 deals with the power of
'Review' wherein the reviewing authority may call for record of any
case within six months from the date of final order against any major
penalty.
34. The learned Senior Counsel has drawn the attention of this
Court to the similarity of facts of STATE OF U.P. v. KAUSHAL
KISHORE SHUKLA22 to the present case. Relying upon the said
decision, it is submitted that, even if preliminary enquiry is conducted
into the charges leveled against an employee appointed on temporary
22 (1991) 1 SCC 691 31
basis, and subsequently his services are terminated under simplicitor
proceedings, it cannot be understood that there is an element of
punity proceedings. For, it is always open to the employer to make an
order of discharge simplicitor in terms of the contract of service.
The same was done in the instant case. Learned Senior Counsel relied
on the following paras of the said judgment:
"If therefore the authority decides, for some reason, to drop the formal departmental enquiry even though it had been initiated against the temporary govt. servant, it is still open to the authority to make an order of discharge simpliciter in terms of the contract of service or the relevant statutory rule. In such cases the order of termination of services of the temporary govt. servant which in form and in substance is no more than his discharge affected under the terms of contract or the relevant rule cannot, in law, be regarded as his dismissal, because the appointing authority was actuated by the motive that the said servant did not deserve to be continued in service for some alleged inefficiency or misconduct." "In the instant case the respondent was a temporary Government servant and there was adverse report regarding his work which was reflected in the adverse remarks made for the year 1977-78. The competent authority held a preliminary inquiry in the allegations of improper conduct in carrying out unauthorised audit of Boys Fund of an educational institution, On result of the preliminary enquiry no charges were framed against the respondent, no officer was appointed for holding the departmental inquiry instead the competent authority chose to terminate the respondent's services in exercise of its power under the terms of contract as well as under the relevant rules applicable to a temporary Govt. servant. It never intended to dismiss the respondent from service. Holding of preliminary inquiry does not affect the nature of the termination order ..."
35. In the light of the observations made in issue No.3 holding that
the petitioner is a permanent employee, the above cited judgment will
be of no help to the respondent No.2 inasmuch as the company is
bound by its service rules for termination of its permanent employees
and cannot resort to termination simplicitor on the wrong assumption 32
of petitioner's employment being temporary in nature. The service
rules/regulations (by whatever name called) of the respondent No.2
have statutory force since it is a State within the meaning of Article 12
of the Constitution of India and discharging public duties.
The petitioner being selected under the recruitment policy of the
respondent No.2 and moreover governed by service rules,
as discussed in paras 31 to 33 above, cannot be removed dehors such
rules. Thus, the termination order dated 20.01.2015 is illegal and in
breach of service rules. The Supreme Court in SUKHDEV SINGH v.
BHAGAT RAM23 held as under:
"27. In Naraindas Barot's case this Court held that the termination of services by Corporation created by a statute without complying with the requirements of the regulations framed by the Corporation under the State Governing conditions of the employees of the Corporation was bad. The reason is that the termination contravened the provisions contained in the regulations.
28. In Tewari's case the termination of the employment of Tewari was challenged on the ground that the resolution of the District Board terminating the services was invalid. The High Court dismissed Tewari's application under Article 226 in limine. This Court held that the Courts are invested with the power to declare invalid the act of a statutory body, if by doing the act the body has acted in breach of the mandatory obligation imposed by statute.
The District Boards Act conferred power upon the State Government by Section 172 to make rules under the Act. The District Board relied on a notification headed "Regulation regarding dismissal, removal or reduction of officers and servants of District Board". It was treated as a rule inasmuch as Section 173(2) of the District Boards Act which conferred power to frame regulations did not confer any power to frame powers regulating the exercise of the power of dismissal of officers of servants of the Board. This Court held that under the rules dismissal, removal or reduction of an officer or servant might be effected only after affording him a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. In Tewari's case this Court
23 1975 (1) SCC 421 33
also said that the order of dismissal involving punishment must be exercised consistently with the rules or regulations framed under the Statute.
29. In the Life Insurance Corporation case, there were regulations framed under the Act. Clause 4(3) of the Regulations prescribed that in Judging a Field Officer's work, the Corporation shall observe the principles contained in the circular issued by the Managing Director on 2 December, 1957. Paragraph 4(h) of the circular which became an integral part of the regulations inter alia stated that where the Committee of its own decided that the poor performance of a Field Officer was not due to circumstances beyond his control or that he had made no efforts and not shown inclination or willingness to work, the services of such Field Officer would be terminated. There was also in existence a Field Officer's order which was issued in exercise of the powers conferred on the Central Government by Section 11(2) of the Act. Clause 10 of the order provided for penalties and termination of service. The contention of the employee was that the termination of service could be brought about only under clause 10 of the Order. This Court held that the regulations to be framed by the Corporation were not to be inconsistent either with the Act or with orders made under Section 11(2) of the Act. The circular which was a part of the regulations under clause 4(3) thereof and clause 10 of the order were reconciled by this Court by stating that paragraph 4(h) of the circular could be availed of to terminate the services of the officers but such termination was to be effected in the manner prescribed by clause 10. The termination was not in accordance with either clause 10(a) or (b) of the order. Therefore, the termination was invalid. The Life Insurance case (supra) recognised regulations framed under the Act to have the force of law.
30. In the Indian Airlines Corporation case this Court said that there being no obligation or restriction in the Act or the rules subject to which only the power to terminate the employment could be exercised the employee could not contend that he was entitled to a declaration that the termination of his employment was null and void. In the Indian Airlines Corporation case reliance was placed upon the decision of Kruse v. Johnson (1898) 2 Q.B. 91 for the view that not all by-laws have the force of law. This Court regarded regulation as the same thing as by-laws. In Kruse v. Johnson the Court was simply describing the effect that the county by-laws have on the public. The observations of the Court 34
in Kruse v. Johnson that the by-law "has the force of law within the sphere of its legitimate operation" are not qualified by the words that it is so "only when affecting the public or some section of the public... ordering something to be done or not to be done and accompanied by some sanction or penalty for its non- observance." In this view a regulation is not an agreement or contract but a law binding the corporation, its officers, servants and the members of the public who come within the sphere of its operations. The doctrine of ultra vires as applied to statutes, rules and orders should equally apply to the regulations and any other subordinate legislation. The regulations made under power conferred by the statute are subordinate legislation and have the force and effect, it validly made, as the Act passed by the competent legislature.
36. The decision relied upon by the learned Senior Counsel in
RAMAKRISHNA MISSION v. KAGO KUNYA24 is also not applicable
to the facts of the present case since the Hon'ble Supreme Court was
dealing with the activities of a hospital established by Mission and it
was held that the hospital was not discharging any public duty;
the relationship between the employer and the employee was purely
contractual and within the realm of private law.
37. Since in issue No.3 it is held that the petitioner is a permanent
employee, the rules are required to be followed for the purpose of
subjecting the petitioner to disciplinary proceedings. The judgments
cited by the learned Senior Counsel would not come to the rescue of
the respondent No.2 since the service of the petitioner is permanent in
nature.
38. In the light of the above, this Court does not find any merit in
the writ appeal; the same is liable to be dismissed. Accordingly, it is,
hereby, dismissed.
24
2019 SCC Online SC 501 35
As a sequel, the miscellaneous petitions, pending if any,
shall stand closed. There shall be no order as to costs.
____________________________ RAGHVENDRA SINGH CHAUHAN, CJ
__________________ B. VIJAYSEN REDDY, J January 4th, 2021 DSK
