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Sunil Kumar Debnath and ors. Vs. Mining and Allied Machinery Corporation Ltd. - Court Judgment

LegalCrystal Citation
SubjectService;Constitution
CourtKolkata High Court
Decided On
Case NumberAppeal from Original Order No. 328 of 1966
Judge
Reported inAIR1968Cal322,72CWN144,(1968)ILLJ643Cal
ActsConstitution of India - Articles 226 and 311; ;Companies Act, 1956 - Section 617
AppellantSunil Kumar Debnath and ors.
RespondentMining and Allied Machinery Corporation Ltd.
Appellant AdvocateA.P. Chatterjee and ;A.P. Sarkar, Advs.
Respondent AdvocateSalil Kr. Dutt, Adv.
DispositionAppeal dismissed
Cases ReferredSuprasad Mukherjee v. State Bank of India.
Excerpt:
- .....judge considered in ex-tenso the question as to whether, in relation to a government company, a writ application lies. he considered a large number of cases, and divided them into separate groups. the first case to be noticed was a decision of the patna high court in subodh ranjan ghosh v. sindri fertilisers and chemicals ltd. : (1957)iillj686pat . in that case, the petitioner was employed by the respondent company which was aprivate limited company, completely owned y the government of india and the management of which was entrusted to a board of directors nominated by the president of india. ramaswami, c. j. (as he then was) held that in the eye of law, the company was a separate legal entity and had separate legal existence and was a different person altogether from the subscribers.....
Judgment:

Sinha, C.J.

1. This is an appeal against an order passed by Banerjee, J. on the 16th February, 1966 by which he rejected the application for a Rule summarily, on the ground that the respondent appeared to be a Government company which is neither the Government nor a statutory body, and so, not amenable to the writ jurisdiction. The learned Judge relied on his own judgment in Prafulla Kumar Sen v. Calcutta State Transport Corporation, : AIR1963Cal116 and refused to issue a Rule and dismissed the application. Before us, on the 19th of December. 1966 learned Advocate for all parties agreed that it would merely protract matters if we sent the case back to the court below for issuing a rule, but the more desirable course would be to allow the parties to file affidavits and then decide the matter on the merits. This was done, and we have heard the matter on the merits. The facts which have emerged are as follows: In the application, there were three petitioners, who are now the appellants before us. The respondent is the Mining and Allied Machinery Corporation Limited, Durgapur. In 1962 the Heavy Engineering Corporation Ltd. a Government company, in its coal Mining Machinery project started recruit-ing candidates with a view to meet the initial requirements of trained and experienced workers/operators in the plant when it went into production. Accordingly, 122 candidates were recruited. The way that the recruitment was done was as follows: An offer was made by the Administrative Officer on behalf of the Coal Mining Machinery Project of the Heavy Engineer-ins Corporation Ltd. of the nature set out in annexure 'A' to the petition, copy whereof is set out at pages 9 to 12 of the paper book. Candidates who accepted the offer, executed bonds of the nature as set out in annexure 'B' to the petition, copy whereof is set out at pages 21 to 22 of the paper book. The workers recruited were given different scales of pay depending on their qualification, experience and performance at the interview which took place at the time of selection The scales were as follows:

'1. Rs. 110-143 (Revised)

2. Rs. 140-175 ( ' )

3 Rs. 150-240 ( ' )'.

While most of the workers obtained practical training on the job in the project, some were also sent to Chittaranjan Locomotive Works for practical training, in such skills or trades for which facilities were not available at the said project at that time. Some of these Workers were also sent to U. S. S. R. for training. During the latter part of 1963, when production had initially started all assessment of these workers operators were made by committees formed by the Project, and they were absorbed in regular production in different scales of pay on the basis of qualification, experience and performance. 29 only were retained in their existing scales of pay as they did not fulfil the requisite specification of qualification and experience required for higher scales. They were, however, subsequently absorbed in the regular production establishment in due course, on their acquiring the required skill and experience. It is at this time that the list described as an 'absorption list' in the petition, was made out. Absorption was made in the way mentioned above.

2. The respondent company, namely the Mining and Allied Machinery Corporation Ltd. of Durgapur is a Government Company incorporated under the Companies Act, 1956 as a private limited company, shares of which are owned by the President of India and his nominees. In 1965 this company was incorporated and took over the Coal Mining Machinery Project of the said Heavy Engineering Corporation Ltd. It will, therefore, appear that the absorption was made in different scales of pay on the assessment of the qualification, experience and performance of the workers by a special committee. In fact, Clause (iii) of the offer of appointment accepted by the petitioners contains the following paragraph:

'After satisfactory completion of training depending upon the ability displayed during training, you will be offered and appointed on a suitable grade.'

In the bond that was executed, an undertaking was given that if the worker refused to serve the Corporation or any of its subsidiaries for a minimum period of five years, on successful completion of training in any capacity as directed by the Corporation, then he would have to pay a penalty namely, to refund to the Corporation on demand the moneys paid to him or expended on his training, travelling expenses etc upto an amount not exceeding Rs. 10,000/-with interest. On or about the 19th January 1966 a promotion list has been drawn up, in which 32 of the workmen were shown as being entitled to promotion to different posts, on higher scales. This was based on proper consideration of merit, qualification and performance of the worker concerned. In January, 1966 demand for justifice was served and on 16th February, 1966 an application was made under Article 226 of the Constitution. The nature of the petition was as follows: It was stated that the absorption list made prior to 1965 by the Coal Mining Machinery Project of the Heavy Engineering Corporation Ltd. was made arbitrarily, as well as the promotion list dated 19th January 1966, by the respondent. It is stated that these were done in violation of the rules of natural justice and were discriminatory and violative of Article 16 of the Constitution and the prayer is that the said absorption list and the promotion list should be quashed by a Writ of certiorari and a Writ of Mandamus should be issued directing the respondent to withdraw and cancel and/or forbear from giving effect to the same. In answer to the complaint affidavits have been filed on behalf of the respondent stating that the application was misconceived and that on the facts and circumstances of this case, no question arises, either of discrimination or of violation of Article 16 of the Constitution. In the court below, the application was dismissed on the ground that, as the respondent is neither the Government nor a statutory body, an application would not lie under Article 226 of the Constitution. We will certainly deal with this point, but having heard the matter on the merits we find that there are a number of insuperable barriers in the way of the success of this application. They may be enumerated as follows. (1) The quashing of the absorption list will affect nearly 500 persons, none of whom are before this court The setting aside of the promotion list would affect 32 persons who are in the list, none of whom were made parties in the application, and so none are before us. (2) The absorption list, was made at a time when the appellants were working under the Coal Mining Machinery Project of the Heavy Engineering Corporation Ltd. They were subsequently taken over bythe Mining and Allied Machinery Corporation Ltd. in 1965. Neither the Heavy Engineering Corporation Ltd. nor its Coal Mining Machinery Project which drew up the absorption list are before us, and the respondent is a separate entity in law. (3) The application is not only belated and made in the absence of the parties affected, but it bristles with disputed questions of fact which cannot be conveniently decided in this jurisdiction. The nature of the induction of the appellants, the facts about absorption, the terms of the contract and its alleged breach are all facts which are disputed. They cannot be decided without taking evidence. If it is a question of a breach of an agreement, the remedy would be by a legal action and not in the writ jurisdiction.

3. Any one of these grounds would be quite sufficient to cause dismissal of this application. In many such matters I have consistently held before that an application of this nature should not be allowed in the Writ jurisdiction. Any order made herein would affect a large number of persons during a long period of time, during which numerous promotions have been made, posting have been effected and any order made in the Writ jurisdiction would violently upset the entire administration of the company concerned. Hence such applications should not be entertained in the Writ jurisdiction. On the facts, we are of the opinion that there arises no question of discrimination, either under Article 14 (which has not been distinctly mentioned) or under Article 16 of the Constitution. The workers were recruited for being given training and they were absorbed in different posts bearing different scales of pay according to their efficiency and attainments. Nothing has been shown why it should be otherwise, and how there has either been a violation of the rules of natural justice or discrimination violative of Articles 14, 15 of the Constitution This again would be quite sufficient to dispose of this application but since a point has been raised and argued before us I will proceed to consider, whether in the circumstances of the case, an application under Article 226 should at all be entertained. In Sohan Lal v. Union of India, : [1957]1SCR738 Imam J. said as follows:

'Normally, a writ of mandamus does not issue to or an order in the nature of mandamus is not made against a private individual. Such an order is made against a person directing him to do some particular thing specified in the order, which appertains to his office and is in the nature of a public duty (Halsbury's Laws of England. Vol 11, Lord Simonds Edition, p 84).'

4. It was held, however, that where collusion was alleged or that the transaction was colourable, jurisdiction to issue awrit to or make an order in the nature of, mandamus against a party might be said to exist in a court. The position was explained by me in the case of, Dr. Sudhir Chandra Neogy v. Calcutta Tramways Co. Ltd. : AIR1960Cal396 where I pointed out another exception to the general rule, namely where the Court was dealing with a 'public utility company'. There I said as follows:

'Normally speaking, a Writ of Mandamus is not issued against a private individual. In the Supreme Court decision : [1957]1SCR738 , Imam, J. relied on the law as delineated in Halsbury's Laws of England. Volume 11, page 85, para 159. As I said, a writ of Mandamus does not normally or ordinarily issue against a private individual. Such an order is made against a person directing him to do some particular thing specified in the order which appertains to his office or is in the nature of a public duty. Thus, the most familiar instance of the issue of such a writ is against officials, public bodies or statutory Corporations, which are governed by the Statute of their incorporation. It does not follow However that such a Writ does not lie against a company in any event. There are instances in which such Writs have been issued in the case of a company, or even a private individual. But in these restricted cases, it would have to be shown that there does not exist an alternative legal remedy or that such remedy is not sufficient or adequate. It might be said in the case of a private individual, if there is violation of the ordinary law, then in that case recourse can be had to the remedies laid down in the ordinary law of the land, and that in such a case, recourse to a Court of equity would be unnecessary It is however not necessary for me to go further into this aspect of the question, because the present case, in my opinion, is a case of public utility concerned and in such cases a special principle applies. This is an aspect of the question which was discussed in a Bench decision of the Bombay High Court, in Corporation of the City of Nagpur v. Nag-pur Electric Light and Power Co. Ltd : AIR1958Bom498

5. In the present case, the respondent is a 'Government company, as defined in Section 617 of the Indian Companies Act.' 'A Government company' means any company in which not less than 50 per cent of the paid-up share capital is held by the Central Government or any State Government or partly by the Central Government and partly by one or more State Governments and includes a company which is a subsidiary of a Government company as thus defined. When a company which is a 'Government company', is formed, a number of restrictions is imposed upon it by law. For example, it cannot employ a Managing Agent (Section 618). The auditor is appointed by the Central Government onthe advice of the Comptroller and Auditor General of India (Section 619). The Central Government has a duty to make an annual report which should be placed before both Houses of the Parliament, together with a copy of the audit report and the comments made by the Comptroller and Auditor General of India (Section 619).

6. As stated above, the respondent company is a 'Government company', of which the shareholders are the President of India and his nominees. It is private limited company, and there are restrictions on the transfer of shares. Provided that these restrictions are observed, one of which is that shares may not be transferred without the consent of the President, the company can cease to be a 'Government company', and indeed there is nothing to prevent the entire share capital being transferred to private owners. From all points of view, such a company cannot but be considered as an 'individual', although the present ownership is with Government. No authority has yet said that such a company is a public body or the officials thereof are public officers. In a Supreme Court decision, Nagnur Electric Light and Power Co. Ltd. v. Shreepstirao : (1958)IILLJ9SC the point arose but was not finally decided. The subject matter of the decision related to the Standing Orders of Joint Stock Company. S. K. Das, J. said as follows:

'The Attorney General appearing for the appellants addressed us on the scope and abmit of Article 22B of the Constitution, and he contended that even if the respondent had been wrongfully dismissed by his private employer, the proper remedy was means of a suit and not by invoking the special writ jurisdiction of the High Court. These contentions raised important questions, but we do not think that we are called upon to decide them in this case.'

In M. Varghese v. Union of India, : (1963)IILLJ569Cal a single Judge of this High Court, considered the case of a Government company but he also did not. come to any final decision. In that decision, the learned Judge was considering the case of the Hindusthan Steel Limited, which is a private limited company. of which there are three shareholders, namely the President and his two nominees who are Secretaries of two Ministries. It is thus a 'Government company', as defined under Section 617 of the Indian Companies Act. The petitioners were drivers employed under the Durgapur Steel Project, a concern of the Hindusthan Steel Limited, whose services were terminated and they made an application under Article 226, on the footing that they were Government servants and were entitled to protection guaranteed by the Constitution, especially by Article 311. The learned Judge considered in ex-tenso the question as to whether, in relation to a Government company, a writ application lies. He considered a large number of cases, and divided them into separate groups. The first case to be noticed was a decision of the Patna High Court in Subodh Ranjan Ghosh v. Sindri Fertilisers and Chemicals Ltd. : (1957)IILLJ686Pat . In that case, the petitioner was employed by the respondent company which was aPrivate limited company, completely owned y the Government of India and the management of which was entrusted to a Board of Directors nominated by the President of India. Ramaswami, C. J. (as he then was) held that in the eye of law, the company was a separate legal entity and had separate legal existence and was a different person altogether from the subscribers to the Memorandum, namely, the President or the Secretary to the Government of India. The learned Chief Justice discussed the question of ownership, control and management of the, company and held that though they were completely vested in the President of India, yet the Court was not entitled to pierce the veil of corporate entity and to examine the reality beneath. The learned Chief Justice followed the well known English case, Tamlin v. Hannaford (1950) 1 K. B. 18 where it was held that an employee of the British Transport Commission was not a civil servant and its property was not Crown property. Mukherjee, J. pointed out that India was evolving there basic legal patterns of State enterprises, namely (1) Statutory Corporations formed by and under Special Statutes, both Parliamentary and State, (2) Government Departmental undertaking and (3) Government Companies under the Companies Act with special Articles and Memoranda. With regard to the first heading, the learned Judge has referred to the instance of the Calcutta State Transport Corporation which is a statutory body and as was held in : AIR1963Cal116 it was a body entirely different from the State Government and the employees thereof are not persons holding civil posts under the State. A similar case is, Andhra Pradesh State Road Transport Corporation v. Income-tax Officer, Hyderabad AIR 1962 Andh Pra 323 where, in spite of all the control anl management of the Corporation it was held not to be a State-owned corporation nor was corporation held to be carrying on business on behalf of the Government. It was therefore held to be liable to pay income-tax under the Income-tax Act. In contrast, the learned Judge pointed out that, in Mohan Singh v. Patiala and East Punjab States Union, AIR 1954 Pepsu 136 it was held that the manager of a bank owned by a State was holding a civil post within the meaning of Article 311 but again in Suprasad Mukherjee v. State Bank of India. : (1961)IILLJ736Cal it was held that an employee of the State Bank was not a civil servant under the State and could not avail himself ofArticle 311 of the Constitution. The learned Judge then proceeded to say as follows :

'The position, therefore, of companies registered and incorporated under the Companies Act and particularly of the Government Companies has been the subject of good deal of judicial thought and decisions. A learned single Judge in re V. S. Hariharan, : (1960)ILLJ164AP considered the question of the Hindusthan shipyard Ltd. This again is an example of a company registered under the companies Act. where the Government of India subscribed 80 per cent of the share capital and 10 out of 13 Directors were nominated by the Government of India and where large subsidies and advances were given by the Union Government from the shipping Development found and Government of India had the controlling and administrative authority over the company. Even then it was held that these features would not make any difference to the jural character of the company and that it still remained a limited liability company. No writ of certiori was allowed to run against such a company in that case.

On an analysis and review of these different types of State enterprises I do not think it is possible to come to any uniform general formula to hold that in no cases where there is a statutory corporation governed by a statute or in no case of Government Companies can there be a civil post or post under the State within the meaning of Article 311 of the Constitution '

7. The learned Judge, however, did not come to a final decision with regard to 'Government Companies. He proceeded to say as follows:--

'In this case I would not rest my decision on the point that the petitioners were not Goverment servants or holding civil posts under the State. In an appropriate case in future it may be necessary to re-examine and thoroughly consider how far the doctrine of incorporation making the company a legal entity, creates a veil that cannot be pierced and extends to prevent service under the State within the meaning of Article 311 of the Constitution, specially in such companies like the Hindustan Steel Ltd., where it is admittedly a completely Government owned company, within all the funds of the capital and all the shares owned by the Government, and where the Government is not merely the majority share-holder of 51 per cent but also the 100 per cent owner of the company.'

8. At the present moment however, regard being had to the state of the authorities, I am of the opinion that, as pointed out in 1950 1 KB 18 (supra), the court was not entitled to pierce the veil of corporate entity and to examine the reality underneath. That in my view would be a matter of legislation and not of judicial interpretation. As at present advised, I must hold that a joint stock company is like a private individual except in some restricted cases, namely when the company is a public utility company, and its employees are not civil servants and are not entitled to the protection offered by Article 311 of the Constitution. Therefore, in such cases a writ application under article 226 of the Constitution does not lie for the purposes of protecting service conditions. That being so, the learned Judge in the court below rightly rejected the application and the appeal is dismissed, but no order is made as to costs.

Arun K. Mukherjea, J.

9. I agree.


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