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Prasun Kumar Bhattacharjee and ors. Vs. India Machinery Co. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKolkata High Court
Decided On
Case NumberC.R. No. 13746 of 1982
Judge
Reported in[1986]59CompCas411(Cal),87CWN995,(1987)ILLJ168Cal
ActsIndustries (Development and Regulation) Act, 1951 - Sections 16, 18A, 18B and 18E; ;Constitution of India - Articles 12 and 14
AppellantPrasun Kumar Bhattacharjee and ors.
RespondentIndia Machinery Co. Ltd. and ors.
Appellant AdvocateSusanta Chatterjee and ;Prabir Bhattacharya, Advs.
Respondent AdvocateR.N. Mitra, ;Samar Banerjee and ;A.N. Chunder, Advs.
Cases ReferredSom Prakash Rekhi v. Union of India
Excerpt:
- .....and control all property, effects and actionable claims of the industrial undertaking whose control or management is taken over under section 18a of the act. they would also exercise the powers of the directors of the undertaking (vide clause (a) to (c) of sub-section (1) of section 18b of the said act). the person or body of persons who have been authorised under section 18a of the act to take over management would be required to take necessary steps for efficiently managing the business subject to the provisions of the act and the control of the central government. subject to the provisions contained in subsection (1) of section 18e and also subject to the exceptions as the central government may specify in its notification, the indian companies act shall continue to apply to an.....
Judgment:

C. Mookerjee, J.

1. Petitioner No. 1 was a Junior Sales-cum-Service Engineer of India Machinery Company Ltd. Petitioner No. 2 was a Sales Supervisor of the said company. The said India Machinery Co. Ltd. was incorporated under the provisions of the Indian Companies Act, 1913, and it had been carrying on business of manufacture and sale of weighing machines, looms, machine tools, etc. The Central Government by an order dated November 25, 1972, under Section 18A of the Industries (Development and Regulation) Act, 1951, had authorised the chairman and the two members nominated by it to take over the management and control of the said undertaking, namely, India Machinery Co. Ltd. for a period of five years subject to the conditions set out in the said order. The Government of India by another notification dated August 24, 1977, had authorised the Industrial Reconstruction Corporation of India Ltd. to take over the management of the said company. The effect of the said notification has been extended from time to time and the last of such extension was due to expire on May 24, 1983.

2. On March 14, 1981, the chief executive of the India Machinery Co. Ltd. had issued notice to the petitioners and three other officers to show cause why disciplinary action should not be taken against them. The petitioners had instituted Title Suit No. 93 of 1981 in the second Court of the Munsif at Howrah, inter alia, for a declaration that the said show-cause notices were illegal and also for a permanent injunction restraining the respondents from taking any action against them. Both the trial court and lower appellate court had refused the prayer of the petitioners for granting temporary injunction. The petitioners filed a revision application in this court which was heard by Janah J. The learned judge, by his order dated February 17, 1981, allowed the said application, set aside the orders passed by the court below and granted a temporary injunction in favour of the petitioners.

3. Thereafter, on April 13, 1982, the chief executive of the said company had withdrawn the show-cause notices dated March 14, 1981. On November 22, 1982, the chief executive of the said company by letters addressed to the petitioners terminated their services with the company with immediate effect because their 'activities and conduct are found not conducive to the job entrusted' to them. The chief executive enclosed with each termination letter account payee cheques being one month's salary in lieu of one month's notice and also offered to pay them their other dues subject to adjustment of advances taken by them. On November 26, 1982, the petitioners moved this court under Article 226 and obtained the present rule.

4. Mr. Susanta Chatterjee, advocate, who appeared on behalf of the petitioners, has submitted that respondent No. 1 company, whose management and control has been assumed by the Central Government under Section 18A of the Industries (Development and Regulation) Act, 1951, is an instrumentality of the State and, as such, is an authority within the meaning of Article 12 of the Constitution. Mr. Chatterjee has further submitted that the respondents have acted arbitrarily and unreasonably by terminating the services of the two petitioners by way of punishment without observing the rules of natural justice. The respondents have thereby infringed Article 14 of the Constitution and, therefore, the impugned termination of the services of the two petitioners is liable to be quashed and set aside. Mr. Mitra, who appeared on behalf of the respondents, has contested the above contentions made on behalf of the petitioners and, according to Mr. Mitra, respondent No. 1 company still continues to be an incorporated company whose management temporarily has been assumed under Section 18A of the Industries (Development and Regulation) Act, 1951, and the same has been made over to the Industrial Reconstruction Corporation to exercise such functions and controls as have been specified in the notification under Section 18A of the said Act. Mr. Mitra has accordingly submitted that respondent No. 1 is not included within the expression 'other authorities' within the meaning of Article 12 of the Constitution and the petitioners cannot claim that the respondents have violated Article 14 of the Constitution by terminating their services without observing the principles of audi alteram partem.

5. I may now proceed to consider whether respondent No. 1 can be held to be an agency or instrumentality of the State and, therefore, an authority within the meaning of Article 12 of the Constitution. If this point is answered in favour of the petitioners, then undisputedly respondent No. 1 would be bound by the basic obligation to obey the constitutional mandate of Article 12 of the Constitution in the matter of termination of the services of the two petitioners. It is now settled law that for determining whether a juridicial person is an authority under Article 12 of the Constitution it is immaterial whether the same was created by statute or under statute, vide the case of Ajay Hasia v. Khalid Mujib Sheravardi : (1981)ILLJ103SC . Therefore, it is not very pertinent that respondent No. 1 was incorporated as a limited company under the Indian Companies Act, 1913. In order to decide whether respondent No. 1, whose management and control has been assumed under Section 18A of the Industries (Development and Regulation) Act, 1951, is an instrumentality, a proper assessment and consideration of all the relevant factors ought to be made.

6. The Supreme Court in the case of Som Prakash Rekhi v. Union of India and in the case of Ajay Hasia v. Khalid Mujib Sheravardi : (1981)ILLJ103SC , had laid down substantially the tests for determining whether a person or a body is an agency or instrumentality of the State. The Supreme Court, however, has observed that these tests were neither conclusive nor exhaustive but they were merely indicia to be used and in Ajay Hasia's case : (1981)ILLJ103SC , Bhagwati J. in paragraph 9 at page 496 had also cautioned against stretching the meaning of the word ' instrumentality ' so as to bring in every autonomous body which has some nexus with the Government. A wide enlargement of the meaning ought to be tempered by wise limitation. Respondent No. 1 does not admittedly satisfy test No. 1 laid down in Som Prakash Rekhi v. Union of India . The entire share capital of respondent No. 1 is held by private persons and not by the Government. The third test is also not fulfilled in the instant case because it is nobody's case that respondent No. 1 enjoys monopoly status either conferred or protected by State. The fourth and fifth test indicated in the aforesaid reported cases are also absent in the present case. The petitioners have not even alleged that the functions of respondent No. 1 are of public importance and closely related to governmental functions. Respondent No. 1, as already stated, was incorporated as a limited company and there was no question of any department of the Government being transferred to respondent No. 1. Thus, four out of five tests indicated in the aforesaid two cases decided by the Supreme Court are absent in the instant case. Therefore, it remains only to consider whether the State control under Section 18A of the Industries (Development and Regulation) Act, 1951, is sufficiently 'deep and pervasive' to support an inference that respondent No. 1 is an agency or instrumentality of the Government.

7. On November 25, 1972, in exercise of the powers conferred by subsection (1) of Section 18A of the Industries (Development and Regulation) Act, 1951, the Government of India had authorised persons mentioned in its order to take over the management of the whole of the undertaking of India Machinery Co, Ltd., because the Central Government was of the opinion that the said undertaking was being managed in a manner highly detrimental to public interest. Thus, the Central Government under Section 18A has assumed management and control of the said industrial undertaking without acquiring its ownership. Such management and control would be for a limited duration not exceeding the period specified under Section 18A(2) of the Act. The Central Government under Section 18F of the Act has power to cancel a notified order if it appears to it that the purpose of the order under Section 18A has been fulfilled or that it is necessary to do so for any other reasons. The effect of a notified order under Section 18A has been set out in Section 18B of the said Act. The provisions also indicate that the Central Government and the person or body of persons authorised by the Central Government would take over only the management of an industrial undertaking. Persons who were in charge of management prior to taking over would vacate their offices and contracts of management between the undertaking and managing agent and directors would be terminated. The managing agent, if any, appointed by the Central Government shall be deemed to have been duly appointed and in pursuance of the Indian Companies Act, 1913. Person or body of persons authorised under Section 18A would be authorised to take into their custody and control all property, effects and actionable claims of the industrial undertaking whose control or management is taken over under Section 18A of the Act. They would also exercise the powers of the directors of the undertaking (vide Clause (a) to (c) of Sub-section (1) of Section 18B of the said Act). The person or body of persons who have been authorised under Section 18A of the Act to take over management would be required to take necessary steps for efficiently managing the business subject to the provisions of the Act and the control of the Central Government. Subject to the provisions contained in subsection (1) of Section 18E and also subject to the exceptions as the Central Government may specify in its notification, the Indian Companies Act shall continue to apply to an undertaking whose control and management have been taken over under Section 18A of the said Act.

8. The provisions of Chapter 3A of the Industries (Development and Regulation) Act, 1951, which have been mentioned in the preceding paragraph, in my view, do not indicate sufficiently 'deep and pervasive State control' as to constitute an undertaking whose control and management has been taken over under Section 18A, of the Act, an instrumentality of the State. The State does not acquire the ownership of such an undertaking, but for a limited duration assumes management and control of an industrial undertaking which has either failed to comply with the directions issued under Section 16 of the Act or when an industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest. The provisions in Chapter 3A do not provide that the State would be bound to give financial assistance to every undertaking whose management or control may be assumed under Section 18A. The broad effect of taking over management under Section 18A would be to remove persons who had been in management of the said undertaking and to assume functions of control and management of the undertaking for a limited period. After a notification under Section 18A expires or is revoked, such management and control would revert back.

9. I conclude that in the instant case none of the indicia for constituting such an undertaking an agency or instrumentality of the State is present and merely because its control and management has been temporarily taken over under Section 18A of the Act, respondent No. 1 is not an authority within the meaning of Article 12 of the Constitution. Therefore, the petitioners cannot apply under Article 226 of the Constitution complaining that respondent No. 1 by terminating their services had infringed Article 14 of the Constitution. I do not, therefore, decide the further questionwhether or not termination of the petitioners' services was wrongful and whether or not they are entitled to any relief or reliefs in civil court. Therefore, the order on this writ application would be without prejudice to the rights and contentions of the parties in any other legal proceeding between them except on the point that respondent No. 1 was an authority under Article 12 of the Constitution.

10. The writ application being not maintainable, the rule is discharged without any order as to costs.


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