H.L. Anand, J.
(1) This is an unfortunate case in which the plaintiff, a Civil Engineer, who came to this Court in a grievance with regard to promotion, has in the process lost his job and now seeks relief either by way of specific enforcement of the contract of service or for damages on account of wrongful termination and raises some interesting facets of the problem of contractual service in a Government company, the effect of bilateral transfer of service from one employer to another, the law relating to specific enforcement of the contract of service and damages for wrongful termination
(2) Raj Krishan Chopra, plaintiff, joined the National Mineral 'Development Corporation Limited, a Government of India undertaking, for short, N.M.D.C., first defendant, as an Assistant Engineer (Civil) in November. 1960, pursuant to a contract of service. On completion of an year's period of probation satisfactorily, he was confirmed. In 1967. he was posted as officiating Executive Engineer (Civil) on a purely temporary basis and he was posted to the Rakhs Copper Project. In 1968. on the bifurcation of the N.M.D.C., Hindustan Copper Limited, another Government undertaking, for short, H.C.L., 2nd defendant, was incorporated and to it were transferred 'the assets and liabilities' of certain projects and works of the N.M.D.C. including the Khetri Copper Project. The staff, who were working in connection with the projects, including Khetri Copper Project, in which the plaintiff was working, was also transferred to H.C.L. The transfer of staff was not the result of any tripartite arrangement nor was the plaintiff given any option by N.M.D.C. to join H.C.L. The plainiff, however, continued to work in the Project which was transferred to H.C.L. and had since been dealing with HC.L. in all matters relating to his service including promotion, leave, provident fund, etc. The plaintiff laid claim to the next higher post of Executive Engineer (Civil) on the basis of promotion in terms of the National Mineral Development Corporation Limited (Recruitment and Promotion) Rules, 1967, for short, the Rules of 1967, Exh. D, but his claim was repelled by the H.C.L. and a direct recruit, namely, the fourth defendant was appointed to the said post, even though the plaintiff was also called for interview and was considered, but -was not found to be suitable. On June 20, 1968, the plaintiff sought his transfer back to the N.M.D.C. but was informed by H.C.L. that N.M.D.C. had informed H.C.L. that at present there was no vacancy against which plaintiff's 'case for transfer could be considered'. Pursuant to the appointment of the fourth defendant, the plaintiff was eventually reverted as Assistant Engineer (Civil) in March 1971. This was considered by the plaintiff to be a change in his status and tantamount to 'reduction in rank'. The plaintiff sought departmental remedies, but was unsuccessful and filed the present suit in March 1972 for a declaration that the post of Executive Engineer (Civil) could not be filled by direct recruitment, but could be filled up only by promotion and that the appointment of the fourth defendant to it was null and void and the plaintiff continued to officiate as Executive Engineer (Civil). Damages were also claimed for illegal reversion to the post of Assistant Engineer (Civil). Third and fourth defendants were Chairman and Executive Engineer (Civil), respectively, of H.C.L. Fifth defendant was the Executive Engineer, P.C.I., H.C.L. The suit was resisted by H.C.L. and the other defendant hut the N.M.D.C. chose to stay away from the proceedings initially. On the pleadings of the parties, the Court framed following seven issues on August 25, 1972
'1. Whether the services of the plaintiff were not lawfully transferred by defendant No. 1 to defendant No. 2 and if so, whether, the plaintiff has continued to be in Service of defendant No. 1 and what is its effect 2. Whether there was a negative covenant between the plaintiff and defendant No.1 which was binding on defendant No. 2 that all the posts of Executive Engineer (Civil) will be filled up only by promotion except when a suitable departmental candidates was not available 3. Whether the plaintiff was qualified under the rules of defendant No. 2 to be promoted as an Executive Engineer after completion of six years of service as Assistant Engineer If so, whether the defendants have wrongfully prevented the promotion of the; plaintiff and whether the appointment of defendant No. 4 and promotion of defendant No. 5 were invalid 4. Whether the inpugned orders dated 5th March, 1971 and 16th March, 1972 are invalid and ineffective 5. Whether the plaintiff is entitled to maintain a suit for declaration and injunction 6. Whether the plaintiff is entitled to the reliefs claimed in clauses (a), (b), (c) and (cl) and to what amount of damages if any. 7. Relief.'
In the course of trial of the suit, N.M.D.C sought permission and were adlowed o participate in the proceedings. At the instance of N.M.D.C. an additional issue, being issue No. 8, was framed on November 17, 1972. In the course of arguments, doubt was cast if, having regard to the language and tenor of para 9 of the plaint and the relief clause, it could be said that the plaintiff had specifically raised the question as to the subsisting privity of contract between him and N.M.D.C. or had made a. valid basis for any relief being granted to him against the N.M.D.C. Plaintiff, thereforee, sought and was grants by an order of September 13, 1973 leave to amend para 9 and certain other portions of the plaint. During the pendency of the suit, H.C.L. terminated the services of the plaintiff on March 19, 1974. apparently as a sequel to his raising the dispute with regard to promotion and dragging the parties to this Court. Plaintiff was accordingly granted leave to amend the plaint further by an order made on December 19, 1974, so as to assail the order of termination as also to clarify that the damages were claimed from both the N.M.D.C. and the H.C.L. The amended plaint seeks a declaration that the plaintiff continues to be in the employment of N.M.D.C. and, in the alternative, damages amounting to rupees one lakh jointly and severally from N.M.D.C. and H.C.L., on account of wrongful termination of services of the plaintiff. On the basis of the amended pleadings, following additional issues were framed on May 29, 1975 :
'1. Whether the purported termination of the services of the plaintiff by defendant No. 2 is wrong. illegal or improper 2. If so, to what relief is the plaintiff entitled 3. Whether this Court has jurisdiction to entertain and deal with the plea with regard to the purported termination of the services of the plaintiff ?'
The following additional issues was also framed on November 23. 1976 :
'Whether the plaintiff gave his implied consent to be an employee of defendant No. 2 and for that reason is estopped from claiming to the contrary ?'
(3) In support of the rival contentions parties produced a number of documents. The pontiff did not examine any oral evidence and failed to enter the witness box himself. Oral evidence was, however, produced on behalf of N.M.D.C. and H.C.L.
(4) In view of the events subsequent to the filing of the suit and with the amended pleadings, relief is confined to the declaration with regard to the continued employment of the plaintiff and in the alternative claim of damages for wrongful termination of service. The issue Nos. 2, 3, 4, 5, 6, as Originally framed, and which cover the various controversies between the parties with regard to the validity or otherwise of reversion and failure to promote the plaintiff, do not. thereforee, survive. The issues that survive are as follows :
1. Whether the services of the plaintiff were not lawfully transferred by defendant No. I to defendant No. 2 and if so, whether the plaintiff has continued to be in service 'of defendant No. I and what is its effect 2. Whether the plaint does not disclose cause of action against defendant No. 1 3. Whether the purported termination of the services of the plaintiff by defendant No. 2 ;s wrong, illegal or improper 4. If so. to what relief is the plaintiff entitled 5. Whether this Court has jurisdiction to entertain and deal with the plea with regard to the purported termination of the services of the plaintiff 6. Whether the plaintiff gave his implied consent to be an employee of defendant No, 2 and for that reason is estopped from claiming to the contrary. 7. Relief.
(5) A. Jurisdiction of this Court : The territorial jurisdiction of this Court was not challenged in relation to the relief sought from N.M.D.C. It was, however, urged on behalf of H.C.L. that this Court had no territorial jurisdition in relation to the suit against it. It was not disputed that the registered office of the H.C.L. was beyond the territorial jurisdiction of this Court and so was the place where the plaintiff was discharging his duties and received the order of termination. It was also not disputed that during the material period, the chairman of H.C.L. had his temporary headquarters within the territorial jurisdiction of this Court, had a regular cabin in an office maintained by H.C.L. within jurisdiction as also staff to assist him in the discharge of his duties and that even though the order was issued by the head office and communicated to the plaintiff outside the jurisdiction, the decision was arrived at by the Chairman within the jurisdiction. The cause of action for the suit with regard to termination is not confined to the communication of the termination order but would include the decision which led to the order and it was not disputed that the decisions are taken on the file and the communicaion of the order is merely intended to carry out the decision. The basic cause of action is the decision and that having been taken within jurisdiction, I see no reason why the suit is not within the jurisdiction of this Court, and I hold accordingly.
(6) B. Maintainability of a suit for declaration with regard to employment: While the language and the tenor of the plaint and some of the contentions raised on behalf of the plaintiff in the course of the trial of the suit gave the impression as if the plaintiff was seeking declaration with regard to status in the matter of employment as if his employment involved status as in Government service or in the service of a statutory authority, as distinct from a contractual relationship, which did not involve the concept of status, learned counsel for the plaintiff was eventually reconciled to the position that the service of the plaintiff under the N.M.D.C. or H.C.L., as the case may be, did not involve a question of status as both were joint stock companies registered under the Companies Act, even though the entire capital in both was held by the President of India or his nominees and that in view of the obvious legal implications of the corporate shell around the joint stock companies, it could not be said that the plaintiff was at any stage in the employment of the State and was, thereforee, 'not entitled to a declaration with regard to his employment when such relationship was purportedly terminated, even though wrongfully.
(7) The declaration with regard to employment was nevertheless sought to be justified on behalf of the plaintiff on three grounds. In the first instance, it was urged that in view of a- serious controversy between the parties as to whether the transfer of the services of the plaintiff by N.M.D.C. to H.C.L., without the express consent of the plaintiff, was tantamount to the severance of the relationship between the plaintiff and N.M.D.C. and the establishment of a fresh relationship of employment between the plaintiff and the H.C.L,, a declaration was necessary as to whether the plaintiff continued, notwithstanding the transfer and his subsequent conduct, to be in the employment of N.M.D.C. and that this would have an impact on the question as to which of the two were entitled to put an end to the contract of employment and that such a declaration would, thereforee, be necessary independently of the determination of status, for the purpose of giving relief, including the relief with regard to damages. It was further urged that if the Court came to the conclusion that the plaintiff continued to be in the employment of N.M.D.C., in spite of all that had happened, the purported action of H.C.L. in terminating the services of the plaintiff would obviously leave the relationship, as indeed the rights and obligations flowing from it. unaffected. Secondly, it was urged that where the order of termination was ultra virus in that it was either made by an authority including a corporate body like a joint stock company, without any authority or in excess of the terms of its authority or otherwise than in a manner in which it was empowered to act in relation to employment or was otherwise mala fide, the Court would be entitled to declare such action to be utra virus and, thereforee, null and void. A distinction was, thereforee, sought to be drawn between a declaration that an action was ultra virus and, thereforee, not valid and a direction requiring an employer to specifically discharge contractual obligation under a contract of employment. Thirdly, it was urged that even if the service of the plaintiff in either of the two companies did not involve any concept of status, plaintiff was nevertheless entitled to specifically enforce the contract of employment against such of them with which it subsisted because the bar of Section 14 of the Specific Relief act against specific enforcement of contracts of personal service would not hit the case of the plaintiff as the service of the plaintiff was outside the reach of the provision of Section 14 of the Act and could, thereforee, be specifically enforced and the only limitation would be if the Court, in its discretion, came to the conclusion tha,t there were grounds which would not justify relief by way of specific enforcement of the contract, consistent with the principles of English Law, which are, by and large, followed- in India.
(8) After hearing learned counsel for the parties. I have no doubt in my mind that the suit is maintainable. There is a serious controversy between the parties based on the unfortunate manner in which the staff of N.M.D.C. was dealt with on the transfer of projects to the H.C.L. as to whether the transfer of projects, assets and the staff had the effect of snapping the contractual relationship between the N.M.D.C. and the staff and forging a new relationship between the staff and the H.C.L. A suit, thereforee, to determine as to in whose employment the plaintiff was would, thereforee, be maintainable as a preclude to the further questions as to the relief to which the plaintiff would be entitled and from who. Such a suit would also be maintainable because the concept of ultra virus could be invoked to have the action of an employer declared void on the ground that the employer, whether a State authority, a statutory body or a corporate body created by any instrument had acted beyond its powers, the mandate that it had from those who constituted it or in a manner other than the manner laid down for its conduct. It is beyond doubt that the mala fide action has no legal existence and is, thereforee, ultra vires. This principle of administrative law would apply with equal force even to non-statutory bodies which must act within their charter, whether the articles of association or otherwise, and conform to certain norms. The concept of mala fide is based on the assumption that no corporate or statutory authority is empowered to act otherwise than in a bona fide manner and that the power to act never extends to act in a mala fide manner or in a manner which is neither just nor fair. It is for this reason that mala fide act is considered to be ultra virus such an authority. When the Court is, thereforee, called upon to declare the act of any corporate body ultra virus because it was mala fide, it does not tantamount to the enforcement of any contract but is a determination if the body has acted in accordance with law. Such a declaration would, thereforee, not be hit by either the Specific Relief Act or the principle of common law that contracts of service are not ordinarily specifically enforced. In any event, a suit which seeks specific performance of a contract of service is not barred by any law and is, thereforee, maintainable even if by Virtue of any provision of the Specific Relief Act or of the principle of common law, the Court may either be unable to give any relief or may refuse such a relief in exercise of any discretion that it may have in that behalf. Disentitlement to any relief or discretion to withhold relief is not synonymous with the non-maintainability of a suit. Even the basic concept that contracts of service could not be specifically enforced or in any event should not ordinarily be so enforced are fast undergoing change both in England and in this country under mounting pressure from socio-economic compulsions. The need to ensure personal freedom and to prevent slavery in the matter of employment, which was perhaps the motive force behind these principles, appears to be giving way to the claims of job security. Courts have, thereforee, over the years found more and more exceptions to the general rule. The law has not been static but is in a state of constant change. In the absence of a statutory bar to such a suit, thereforee, it would be unfair to hold that such a suit would not be maintainable, even though in the existing state of the law, a relief by way of specific performance of the contract of service may perhaps be rare and only in exceptional circumstances.
(9) C. Whether the relationship subsisted in spite of transfer: The crucial question is whether when the N.M.D.C. transferred all the copper projects, including the project in which the plaintiff was working, along with their assets and staff to H.C.L., it had the effect of severing the contractual relationship between 'N.M.D.C. and the plaintiff. It is well settled that an employee is not a chattel and could not be transferred from one employer to another so as to effect a severance of relationship between the employee and the existing employer and the establishment of a new relationship between the employee and the new employer except by a tripartite arrangement to which the employee may be a party. Such a severance may also be effected by an express option to the employee and on the exercise by him of the option, the necessary severance and establishment of new relationship results. It is a common case of the parties that the transfer of plaintiff with the project was not the result of a tripartite arrangement and the plaintiff was clearly not a party to the transfer. It is nobody's case that the services of the plaintiff were terminated by the N.M.D.C. or that a fresh letter of appointment was issued by H.C.L. The circumstances in which the two companies agreed on the transfer of the staff and the reason why the staff working in projects as distinct from the staff attached to the head office were not given any option and why the course of transfer was not given a precise legal form remains shrouded in mystery. But certain compulsions appear to be obvious behind the move for the transfer. In the first instance, there must have been the anxiety that the transfer of staff should not involve any break service. Secondly, there must have been the anxiety not to render surplus staff which was working in projects and thirdly, not to leave H.C.L. high and dry with projects but not the work force to continue the work. This would perhaps partly explain why no options were given to the staff which was working the projects, which were transferred. If that be so, there can be little doubt that the transfer did not tantamount to a severance of the relationship with the existing .employer.
(10) The question that, however, still remains is whether by conduct subsequent to the transfer, the plaintiff acquiesced in the arrangement and there was, thereforee, implied severance of the relationship with the existing employer and a corresponding establishment of fresh relationship with the new one. It is a common case of the parties that since the transfer, the plaintiff worked in the project to which he was assigned under the supervision of H.C.L., drew his salary from H.C.L. and dealt with H.C.L. in relation to all problems of employment including leave, provident fund, promotion, etc. and never dealt with N.M.D.C. in relation to any of the normal incidents of employment. In the totality of these circumstances, this Court held in the case of K. C. Nayar v. National Mineral Development Corporation(l), decided by B. C. Misra, J. on 14-11-1975, which also arose out of transfer of projects by N.M.D.C. to H.C.L., that there was an implied severance and establishment of a contractual relationship with the new employer. This case was, however, sought to be distinguished on the ground that certain material was placed in the present proceedings which would show that in spite of the transfer, the question with regard to option had been under consideration of the companies and at one stage the plaintiff specifically sought transfer back to the existing employer but is stated to have been told that there was no vacancy against-which. his transfer could be considered. It is true that soon after the establishment of H.C.L.,representations were made on behalf of some of the members of the staff, which had been transferred along with the Copper projects to the H.C.L., raising the question as to their right to exercise options and it appears from Exhibits D/4, D/5, D/6 and D/7 that the Administrative Officer of H.C.L. had written, to the N.M.D.C. in that behalf. It is equally true that in June, 1968, the plaintiff sought .his transfer to N.M.D..C.and by his letter of July 17, 1968, D.1.W. 1/1, the-Senior Administrative Officer of H.C.L. informed the plaintiff with reference to his letter of June 20, 1968 that 'the N.M.D.C. Limited has intimated that at present there is no vacancy against which his case for transfer can be considered' and that his further letter of June 27, 1968, addressed to N.M.D.C., was being forwarded to them for necessary action. Unfortunately, neither of the parties were able to produce either the original or the copy of the plaintiff's letter of June 20, 1968, so as to determine what precisely was the demand of the plaintiff. There was also considerable controversy whether the request of the plaintiff . for - transfer was ever -conveyed to N.M.D.C. and whether they ever informed the H.C.L. that there was no vacancy against which the transfer could be considered. However, neither the correspondence, between the HC.L. and the N.M.D.C. with regard to the need for option nor the alleged request of the plaintiff for transfer back to N.M.D.C. in any manner deflect from the conduct of the plaintiff in dealing with H.C.L. in all matters of employment ..because in the first instance, the plaintiff did not carry the demand for transfer to its logical conclusion by asserting aright on the basis of any subsisting contract of employment with N.M.D.C. What is worse, when the plaintiff came to this Court in 1972, he had reconciled himself to the idea that on the transfer he became the employee of H.C.L. 'on the same terms and conditions on which he' was employed' with N.M.D.C. 'as if he had joined the said defendant company from the very beginning' and this Is how he described the relationship with H.C.L. In para 9 of the original plaint. All that the plaintiff was anxious at that time to ensure was 'a continuation of the employment with defendant no. 1 company as if the two concerns were one entity and no alteration took place in his appointment, continuation in service or terms and conditions of service including promotion or otherwise as a result of the incorporation of defendant no. 2 company'. In para 10 of the plaint, the plaintiff further alleged that 'under the rules and practice prevailing at the time of the appointment of the plaintiff, which are deemed to be part of the contract of service of the plaintiff, originally with defendant no. 1 company and subsequently with defendant no. 2 company the plaintiff was entitled to promotion to the next post. . .' This being the state of the original pleadings, Dr. Anand Prakash, who appeared for H.C.L. was justified in his contention that no amount of material would be sufficient to support the contention of the plaintiff with regard to the continued subsistence of the reltionship batween N.M.D.C. and the plaintiff without the necessary foundation for it in the pleadings. Having regard, thereforee, to the consistent course of conduct of the plaintiff, his failure to enforce his contract with N.M.D.C. and the averments made in the plaint, it is not possible to hold that the relationship of employer and employee subsisted between the N.M.D.C. and the plaintiff and it must, thereforee, be held that there was an implied contract between H.C.L. and the plaintiff on the same terms and conditions on which the plaintiff was employed with the N.M.D.C., until varied by mutual consent. In this view of the matter the question of any estoppel does not survive and need not be considered.
(11) D. Whether there has been a breach of the contract of service: Whether the termination of the service of the plaintiff by H.C.L. could be said to be in breach of contract is the question that must, thereforee, be considered. The order of termination, Ann.'AA', does not assign any reason for the action and the plaintiff was admittedly paid three months salary in lieu of notice. Admittedly, there was no new contract of service pursuant to the transfer and it was a common case of the parties that the contract of service entered into between the plaintiff and the N.M.D.C. would ensure for the purpose of the relationship between the parties. It was also a common case of the parties that the Rules of 1967 do not contain My provision with regard to the termination of the services of the plaintiff and if the services of the plaintiff could otherwise be terminated because of the contractual nature of the arrangement, there was no provision in the Rules as to the period of notice to which the plaintiff may be entitled. The letter of appoint- ment of November 2, 1960, Ex. A issued to the plaintiff by N.M.D.C., no doubt, stipulates in clause (6) thereof that the management reserved the right in its sole discretion of terminating the appointment after giving one month's notice or payment in lieu of notice, but it was nobody's case that this condition was intended to regulate the service after the petitioner had successfully convicted the period of probation. A faint attempt was made on behalf of the plaintiff to void the termination on the ground that the Rules of 1967 visualise that on completing the period of probation, the plaintiff would be in the permanent employ- ment of N.M.D.C. and it was thereforee, urged that, consistent with the law relating to service under the State, the services of such an employee could be terminated only in the manner in which the services of a permanent Government servant could be dispensed with. It is, no doubt, true that the N.M.D.C. and the H.C.L. are both Government companies and the language and tenor of the Rules of 1967 appear to give the impression as if they were statutory rules intended to regulate service involving the concept of status and ensure, as it were, security of tenure. But it was not disputed that the concepts of permanent service, statutory rules and security of tenure were concepts which were wholly foreign to contractual service, except to the extent they form part of the contract of service. If that be so, H.C.L. was entitled to terminate the services of. the plaintiff but, in the absence of aprovision with regard to notice, only .by. a reasonable notice. In the case of Nayar (supra), this Court has already held that, having regard to the surrounding circumstances, six months notice would be reasonable in the circumstances. The plaintiff was admittedly given only three months salary in lieu of notice and the order of termination, thereforee, could not be said to be valid inasmuch as the services were terminated otherwise than by a reasonable notice. The termination of the services of the plaintiff was also invalid for a variety of other reasons. In the first instance, the order of termination gave no indication of the reason on which it was based and, what is worse, neither the witnesses produced by the N.M.D.C. and H.C.L. nor counsel for the Company were able to assign any possible reason for the 'termination. It was nobody's case that the ' plaititiff had lost the confidence of the employer or had been rendered surplus or was found to be unsuitable or had been guilty of any misconduct or that the termination was in any manner consistent with the exigencies of service. In this context, it is difficult to ignore that the plaintiff had by the time of termination put in a total of nearly 14 years of service under the N.M.D.C. and H.C.L. Thirdly, the services of the plaintiff were terminated during the pendency of the suit in which the plaintiff had brought to this Court a dispute with regard to his entitlement to promotion and in the absence of any other Explanationn, it is difficult to resist the conclusion that the services of the plaintiff were terminated because by bringing the matter to this Court the plaintiff had incurred the displeasure of. those in authority in H.C.L. because they did not relish his action in securing legal redress of his grievance with regard to promotion and since H.C.L. was aparty.to the proceedings, the termination perilously bordered on .contempt of this Court, even .if no contempt may perhaps have been.either intended, or .committed. The termination of the services of the plaintiff was, thereforee, no difference than-what-may be descrihed in industrial jurisprudence as a gross act of victimisation for seeking legal redress of a grievance. There is unfortunately no other possible Explanationn for the termination. Lastly, the termination being for a whole extraneous reasons, which were unconnected with the exigencies of service, was mala fide and. thereforee, ultra virus the powers of the corporate body.
(12) While there was little controversy with regard to invalidity of the termination in that reasonable notice was not given in view of the decision of this Court in the case of Nayar, there was considerable controversy between the parties on the question whether the various other reasons to void the order would be available to the plaintiff in view of the nature of the plaintiff's employment and the legal status of the Company. There was also some controversy as to whether in a purely contractual service, the employer was answerable to the employee or even to the Court, seized or the question of the validity of termination, as to the reason for the termination and as to the relevance of the question of mala fides or ultra virus in relation to a corporate body, which was neither statutory in origin nor an authority much less an organ of the State.
(13) It is a well settled principle of Administrative Law that all State action, including the decisions on which the action may be based, must be in bona fide exercise of executive aurthority, whether having its foundation in the Constitution of India, in any statute or otherwise, based on considerations which are relevant and germane to the question involved in the decision or the action, and that all such action and decisions must be just and fair not only in the manner in which they are arrived at or taken but also in their content. It is equally well settled that all State action must conform to the Constitutional, statutory or policy constraints and if they transgress any limits laid down by any of these, they are ultra virus and, thereforee, void. An action or a decision, which is not bona fide, has no legal existence and in that sense the concept of bona fide is considered a fact of the larger concept of ultra virus on the assumption that no Constitutional or statutory authority could have been empowered to act in a manner other than a bona fide manner and, thereforee, had no authority to act in mala fide exercise of its power. What is true of State action is equally true of actions and decisions of all statutory authorities or authorities derivated their power from any statute or statutory rules. While it may not be possible in the present state of the law to attribute to a corporate body the characteristics and obligations, which are relevant to state action or the actions of statutory or other authorities, the corporate bodies constituted by the State would appear to stand on a different footing. No doubt these are incorporated bodies and, consistent with the law relating to companies. have a personality and status which is distinct from those who constitute it. The Company law, however, to an extent Justifies the tearing of the corporate veil in the case of what are known as Government companies because the Company law itself recognises these companies as belonging to a class apart. If that be so, it is legitimate to ask whether State action would partake of a different character and the State be relieved of the various obligations merely because it steps down from the high sovereign pedestal to the field of trade, commerce or industry and takes the corporate veil or cloak. Pursuant to its welfare obligations under the Constitution, State in India, as indeed elsewhere in the world, is increasingly projecting its activities to non-sovereign fileds of action and for a variety of administrative reasons, reasons of expediency and otherwise, prefer to carry on these activities net 6s a sovereign authority or departmentally as part of a Government or even in the form of a statutory body, hut puts on the corporate garb primarily with a view to avoid rigid functioning and for facility of operations. The form that the State, thereforee, assumed in the conduct of such functions would be insufficient to insulate the State either from the various obligations or render it immune from judicial control. Whatever may be the position of other people who deal with such Government companies, there can be little doubt that the State is not relieved of its obligations to act in a bona fide, just and fair manner in relation to those in its employment not only because it is the State functioning under a different garb but also because the State being, the .largest employer in the country .is supposed to conduct itself as an ideal and enlightened employer so as to set 'high standards for the private sector to follow in the larger public interest. It follows, thereforee, that public sector bodies must act in a bona fide, just and fair manner with the same constraints which would inhibit State action in other areas. Mala fide action of these bodies would, on the same basis,..be ultra -vires because no public sector body or functionary could claim to have been authorised either by the State or by the nominees of the State, who constituted it, to act in any manner which is other than bona fide just and fair. In that sense, thereforee, the action and decision of public sector bodies in all matters of employment would be subject to judicial review and would be liable to be ignored if they are not bona fide or are otherwise' not just and fair. It is, thereforee, high time that those in authority in public sector undertakings run indirectly by the State get rid of the 'hire and fire' psychosis and are kept within the bounds and.the obligations which are implicit in all State action. If, thereforee, it is possible to describe an unwarranted termination of the service of an employee with 14 years long service, for no reason other than the crime that the employee approached a Court for the legitimate purpose of legal redress of an alleged wrong done to him in the matter of his promotion. during the pendency of the proceedings in a Court, as a wanton act of victimisation, the effect of. such conduct by a State run or managed body could not be held to be different. Even if one may. not go as far as to declare it a nullity or to describe it as ultra vires, it cannot escape being coademned as improper, unreasonable and, thereforee, illegal so as to entitle the employee to such relief as he- may deserve, in law.
(14) It the plaintiff is entitled to specific performance of the contract: If the termination was wrongful, and I have. held it to be so, to what relief is the plaintiff entitled in the. totality of the circumstances. The plaintiff would obviously prefer a specific performance of the contract and, thereforee, to be put back in service with all consequential benefits, as if nothing had happened. Such a course is, however, not free from doubt in the present state of the law. Ordinarily, when ^ a party to the contract commits a breach of it, the other party is not bound to accept the repudiation of the contract and may insist on a specific performance of the contract by the party in default. The breach of contract of service is said to be one of the exceptions to the general rule. In ' common law, wrongful dismissal of a servant employed on a contractual basis provides an exception to the rule that a party may elect to keep a repudiated contract alive. (2) Some of the recent decisions have. however, doubted whether this is correct. (3) Cheshire and Fifoot in the Ninth Edition of Law of Contract have observed on the basis of an article by Williams in 38 M.L.R. 292, that the rule that a servant cannot obtain specific performance is deduced from the undoubtedly sensible rule- that the master cannot get specific performance and has added that this may have made an excellent sense in the eighteenth century but in a modern industrial context it no longer appears inevitable and warned that historically 'the law would appear to be moving slowly but perceptibly toward a remedy by way of reinstatement'. (4) Recent decisions in England have shown a tendency, thereforee, to recognise that specific performance of a contract of service may be allowed in extraordinary circumstances. In the case of Hill v. C. A. Persons and Co. Ltd., the relief was granted because services of Hill were terminated under the compulsion of a trade union and at a time when he was on the verge of retirement. It may be pointed out in this context that the earlier thinking with regard to specific performance of a contract of service was based on the theory tl)ai any such concept would be perpetuating serfdom in that it would not only compel an unwilling employer to keep an employee, but also condemn an employee to remain in the service of a person against his will. Recent thinking, however, seems to indicate that the fear of serfdom is giving place to the need for job security.
(15) The claim of job security is much more impelling in a developing society like India. With the spectre of widespread unemployment and underemployment, the employed persons do not think in terms of serfdom but look for security. This is particularly so among the white-collared employed force. The legal position of specific performance of a contract of service in India presents some interesting problems. Section 14 of the Specific Relief Act, 1963, and its predecessor, inter alia, provides that a contract which runs into such minute and numerous detail or which is so dependent on the personal qualification or volition of the parties or otherwise from its nature is such that the Court cannot enforce specific performance of its material terms 'cannot be specifically enforced'. At first plush, it would seem that the principle of common law was incorporated in the statute in India in a modified and more rigid form leaving, as it were, no discretion for the Court to grant relief since such contracts could not be specifically enforced by virtue of a statutory bar. A review of the land mark decisions on the question beginning with the case of Western India Automobile Association(6) to some of the more recent decisions of the Supreme Court of India pose some interesting questions, which would perhaps call for fresh legal thinking so as to bring about a reorientation of the law in the face of the compelling needs of the changing times. In the Western India Automobile case (supra), the questions whether the Industrial Tribunal constituted under the Industrial Disputes Act had the jurisdiction to entertain a claim of reinstatement of a dismissed employee and the necessary power to order reinstatement were answered in the affirmative primarily because of the ambit and scope of the expression 'industrial dispute', but partly because adjudication of industrial disputes did not mean 'adjudication according to strict law of master and servant' and the award of the Tribunal may contain provisions for settlement of a dispute 'which no Court could order if it was bound by ordinary law but the Tribunal is not fettered in any way by these limitations'. Dealing with the opinion of Lord Goddard, C.J., in R. V. National Arbitration Tribunal (7) which had been relied upon for the contrary view, the Federal Court observed that 'the discussion about the powers of a civil court to enforce a contract under the Specific Relief Act is not directly relevant because it is clear that if an employment is determined according to the terms of the contract, there will be no subsisting contract thereafter of which specific performance could be claimed'. Elsewhere in the judgment, it was observed that 'the relief is not of such an unusual character that it may be wholly ruled out as one of the legal reliefs which the courts can grant. This relief of reinstatement is on the same footing as a relief of restitution. Restitution can be granted in integrum in certain cases. All that is required is that the ex-employee should be restored to his previous position so far as the capacity, status and emoluments are concerned and there is nothing extraordinary in such restoration being ordered when considered necessary in the interests of peaceful settlement of industrial disputes'. While the Federal Court, thereforee, found in the peculiar compulsions of the need for industrial peace, an island of exception for reinstatement in industrial adjudication, it did not close the door to specific enforcement being sought of a contract of service if the contract had not been lawfully terminated and did not read into the Specific Relief Act a total bar to the relief of reinstatement in all cases arising out of contract of employment. On the contrary, the Federal Court treated the relief of reinstatement at par with the relief of restitution generally. It would be useful to remember in this context that there was nothing in the language of Section 21 of the Specific Relief Act, 1977, or its successor i.e. Section 14 of the Specific Relief Act, 1963, which may expressly justify any exception. In the case of Dr. S. Dutt. Section 21 was specifically called in aid to negative any claim of specific enforcement of the contract of service. The exception to the general rule found by the Federal Court in Western India Automobile (Supra) was invoked, but was repelled on the ground that the Industrial Disputes Act was 'concerned with considerations which arc peculiar to it'. In the case of Tewari (9), the Supreme Court proceeded on the basis of common law and observed that under common law, the Court will not 'ordinarily force an employer to retain the services of an employee', but that the rule was subject to certain well recognised exceptions.' The provisions of the specific Relief Act were neither invoked * nor ruled upon. In the case of U.P. State Warehousing Corporation(10), the principle of common law was reiterated and it was observed that no declaration 'to enforce a contract of personal service would be normally granted'. Here again, the provision of the Specific Relief Act did not fall for consideration and the decision proceeded on the application of the common law of master and servant. In the case of Indian Airlines Corporation(11), the Supreme Court observed that 'when there is a purported termination of a contract of service, a declaration that the contract of service still subsisted would not be made in the absence of special circumstances because of the principle that courts do not ordinarily grant specific performance of service'. Here again, the decision did not rest on the provisions of the Specific Relief Act, but turned on the common law principle regulating the relationship of master and servant. In the case of Bank of Baroda (12), it was reiterated that 'no declaration to enforce a contract of personal service will be normally granted'. However, in the case of Sirsi Municipality (13). it was noticed that a declaration with regard to unlawful termination and restoration to service in the case of contract of employment 'would be indirectly an instance of specific performance of contract for personal service' and such a declaration was 'not permissible under the law of specific Relief Act'. On a consideration of some of these authorities, the Supreme Court hold in the case of Vaish Degree College(14) that 'a contract of personal service cannot ordinarily be specifically enforced and Court normally would not give a declaration that the contract subsists and the employee even after having been removed from service can be deemed to be in service against the will and consent of the .employer'. The Court then proceeded to deal with the recognised exceptions to the rule. Nevertheless the Court considered the question if the discretionary relief of specific performance should or .should not be granted in the peculiar circumstances of the case and ruled that in view of the special and peculiar circumstances 'it will not be proper exercise of discretion to grant a decree for declaration and injunction' in that case. It is interesting to notice in this context that the common law principle with regard to specific enforcement of a contract .of service, which had by and large provided the basis for the reasoning in most of the cases referred to above, has not been static in the country of its origin and had undergone drastic change. The fear expressed by Fry, L. J. in De Francosco (15) that the contract of service may not degenerate into 'contract of slavery' has since been more than misplaced by an urge to ensure job security. What was said by Lord Goddard, C.J. in 1948 has since been considerably watered down by recent thinking in England that specific enforcement of a contract of service may be granted in special circumstances and the case of Hill (supra) is not a solitary instance in which such relief was granted. It is in the backdrop of these changes that one must consider the weighty observations of Bhagwati, J. in his concurring opinion in the case of Vaish Degree College (Supra) and in which to an extent, the learned Judge struck a dissenting note with regard to the law of specific performance of a contract of service and indicated with considerably clarify a possible future line of legal thinking. The learned judge was apparently provoked by the orthodox thinking represented by the observations of Fry, L. J., referred to above and observed :
'This rationale obviously can have application only where the contract of employment is a contract of personal service involving personal relations. It can have little relevance to conditions of employment in modern large-scale industry and enterprise or statutory bodies or public authorities, where there is professional management of impersonal nature. It is difficult to regard the contract of employment in such cases as a contract of personal service save in exceptional cases. There is no reason why specific performance should be refused in case of this kind where the contract of employment does not involve relationship of personal character. It must be noted that all these describes of contract of service as personal, non-assignable unenforceable, and so on, grew up on an age when the contract of service , still frequently relation between the owner of a small workshop or trade or business and his servant. The conditions have now vastly changed and these doctrines have to be adjusted and reformulated in order to suit needs of a changing society. We cannot doggedly hold fast to these doctrines which correspond to the social realities of an earlier generation far removed from ours. We must rid the law of these anachronistic doctrines and bring it in accord 'with the felt necessities of the time'. It is interesting to note that in Fry's classic work on Specific Performance, contracts of service appear in a small group under the sub-heading 'where enforced performance would be worse than non-performance'. We may ask ourselves the question : for whom it would be worse and for whom it would be better. Where in a country like ours, large numbers of people are unemployed and it is extremely difficult to find employment, an employee who is discharged from service may have to remain without means of subsistence for a long period of time. Damages equivalent to one or two months' wages would be poor consolation to him. They would be wholly insufficient to 'sustain him during the period of unemployment following upon his discharge. The provisions for damages for wrongful termination of service was adequate at a time when an employee could without difficulty find other employment within the period of reasonable notice for which damages were given to him. But in conditions prevailing in the country, damages are a poor substitute for reinstatement : they fall far short of the redress which the situation requires. To deny reinstatement to an employee by refusing specific performance in such a case would be to throw him to the mercy of the employer : it would enshrine the power of wealth by recognising the right of the employer can afford to throw away but which would be no recompense to the employee. It is, thereforee, necessary and I venture to suggest, quite possible, within the limits of the doctrine that a contract of personal service cannot be specifically enforced, to take the view that in case of employment under a statutory body or public authority, where there is ordinarily no element of personal relationship, the employee may refuse to accept the repudiation of the contract of the employment by the statutory body or public authority and seek reinstatement on the basis that the repudiation is ineffective and the contract is continuing.'
The observations of the learned Judge were confined to employment under public body or a public authority but on the parity of reasoning the position of employment under a Government company could perhaps be no different on principle. It is, thereforee, a possible view to take of the law relating to specific performance of a contract of service that the provisions of Section 14 of the Specific Relief Act and its predecessor are not as wide in its sweep as was thought at one time and that .these provisions must be confined to. contracts of personal service as distinct from service of a purely impersonal nature in large business and industry.
(16) However, I would be reluctant to base relief of specific performance of the contract of service on this new legal thinking because in view of some of the decisions referred to above the matter is not Tree from doubt and any such relief may perhaps involve the plaintiff in further legal controversies which I would like to avoid for, I believe that, as it is, the plaintiff has suffered enough and would not. be able to indulge in the luxury of any further litigation I would. however, express the, hope that consistent with the felt necessities of the changing times, there would be an appropriate reorientation of the employment relations policy at , least in the public sector, if not elsewhere, so as to bring it in line with the service under the State and the concept of master and servant, a concept which is as anachronistic in the jargon in which it is described as is the principle that it embodies and represent the decaying remant of a decadant socio-economic order would give place' to an enlightened and progressive policy. In the fast changing employment scene today in the developing societies, particularly in the public sector, it may be difficult to distinguish in the days to come as to who would be the master and who the servant and with the increasing talk of labour participation in management and the concept of capital and labour as partners in progress, it may not be too long before the roles are reversed.
(17) F. Quantification of damages : It would not be safe, thereforee, to grant relief to the plaintiff on the basis of controversial legal concepts and the plaintiff must remain content with damages, what should be the measure of it in the totality of the circumstances of the present case. The plaintiff was given three months notice and would clearly be entitled to another three, months salary. It was not disputed that the plaintiff would be entitled to damages in addition to three months notice for having lost a job in which he served for 14 long years and to the satisfaction of the two employers. The award of damages it, however, opposed on the ground that the plaintiff's entitlement to damages must conform to the actual loss of salary and plaintiff would not be entitled to any relief because he chose to keep mum. and has not produced any material on the record that he remained unemployed or under-employed, or otherwise suffered monetary loss on account of being thrown out of employment. This is true that the plaintiff has not told this Court as to how he fared after he was fired. There is no Explanationn as to why he kept quite. It may be that he had suffered enough by coming to this Court in that while agitating the question of promotion, he lost his job and perhaps too scared to open his mouth, lest he met a worse fate if he opened his mouth a little too wide. Even so, the plaintiff would certainly be entitled to nominal damages to the extent the Court was entitled to take judicial note of what may happen where an employee is thrown out of employment after 14 years of long service. There can be little doubt that a person who was thrown out of his job after 14 years of service would never be able to get employment within the limited notice period of three to six months. There can also be no doubt that even if he got a job, it would never give him the emoluments which he was earning in the previous job by virtue of benefit of increments and promotions over a long period of time. There can also be no controversy that the army of educated unemployed in this country has over the years been mounting and the ranks of educated unemployed or under-employed include the engineers, the class to which the plaintiff belongs. The plaintiff would, thereforee, in any event, be entitled to nominal damages for the wrongful termination in addition to the three months salary in lieu of the insufficient notice. Having regard to all the circumstances, I would award to the plaintiff a decree of Rs. 10,000 inclusive of all benefits against H.C.L. The plaintiff would also have his costs including the entire court fees paid on the plaint and the Counsel's fee. The cost would be paid by N.M.D.C. in the peculiar circumstances of this case in that the N.M.D.C. failed to take appropriate measures to protect the interests of the plaintiff when his services were transferred to H.C.L., without his prior concurrence, and failed to provide him relief when he sought transfer. In view of all that I have said above, there may be a possibility that N.M.D.C. and H.C.L. may perhaps relent and agree to take the plaintiff back in the service of one or the other, on mutually acceptable terms. They would be entitled to exercise this option within three months and in that event, the plaintiff would not have the money decree, other than the costs. The suit against N.M.D.C. and the other defendants is dismissed. N.M.D.C. and the other defendants would bear their respective costs.