PETITIONER:
S. L. AGARWAL
Vs.
RESPONDENT:
GENERAL MANAGER, HINDUSTAN STEEL LTD.
DATE OF JUDGMENT:
19/12/1969
BENCH:
HIDAYATULLAH, M. (CJ)
BENCH:
HIDAYATULLAH, M. (CJ)
GROVER, A.N.
RAY, A.N.
REDDY, P. JAGANMOHAN
DUA, I.D.
CITATION:
1970 AIR 1150 1970 SCR (3) 363
1969 SCC (1) 177
CITATOR INFO :
RF 1972 SC1324 (12)
F 1975 SC1239 (5)
MV 1975 SC1331 (124,128)
D 1979 SC1628 (30)
RF 1981 SC 212 (38,44)
D 1981 SC 487 (12)
C 1984 SC 161 (27)
RF 1986 SC1571 (49,52,56)
ACT:
Constitution of India, Art. 311-Civil post under Union or
State’ Post held under Hindustan Steel Ltd. whether such a
post-Holder whether entitled to protection of Article.
HEADNOTE:
The services of the appellant as Assistant Surgeon in the
Hindustan Steel Ltd., Ranchi were terminated purportedly in
terms of his contract of employment. In a petition under
Art. 226 he claimed that the termination was wrongful
inasmuch as it was really by way of punishment and Art. 311
of the Constitution had not been complied with. The company
resisted the ground by saying that Art. 311 was not
applicable to the appellant since he was employed by a
corporation and neither belonged to the civil service of the
Union nor held a civil post under the union. The High Court
dismissed the’ appellant’s petition. In appeal before this
Court by certificate, the appellant contended that since
Hindustan Steel was entirely financed by the Government and
its management was directly the responsibility of the
President, the post was virtually under the Government of
India.
HELD : (i) The protection of Art. 311(2) is available to the
categories of persons mentioned in cls.-(a)(b) and (c) of
Art. 311(l). . The appellant did not fall in the categories
mentioned in cls, (a) and (b). He did hold a civil post as
opposed to a military post but cl. (c) further required that
it must be under the Union or a State.
In view of the existence of shareholders, of capital raised
by the issuance of shares, and the lack of connection
between the finances of the corporation and the Consolidated
Fund of the Union, it must be held that Hindustan Steel Ltd.
was not a department of the Government nor were the servants
of it holding posts under the State. It had its independent
existence and by the law relating to corporations it was
distinct even from its members. In these circumstances the
appellant, as an employee of Hindustan Steel Ltd., did not
answer the description of a holder of ‘a civil post under
the Union’ as stated in Art. 31 1. The High Court was
therefore right in not affording him the protection of that
Article. [367 D; 369 C-E]
State of Bihar v. Union of India, C.A. Nos. 512-513/69 dt.
19-9-1969 and Praga Tools’Corporation v. C. V. Imanual &
Ors. C.A. No. 612 1966 dt. 19-2-1969, applied.
Subodh Raman Ghosh v. Sindhri Fertilizers and Chemicals Ltd.
A.I.R. 1957 Pat. 10, approved.
M. Verghese v. Union of India & Ors. A.I.R. 1963 Cal. 421,
Lachmi and Ors. v. Military Secretar to the Government of
Bihar, A.I.R. 1956 Pat. 398 Ram Babu Rathaur v. Divisional
Manager, Life Insurance Corporation of India, A.I.R. 1961
All. 503, Damodar Valley Corporation V. Provat Roy, ILX
C.W.N. 1023 and Tamlin v. Hannaford, [1950] 1 K.B.D. 18,
referred to.
364
(ii)The contentions sought to be raised by the appellant
regarding the validity of the departmental enquiry -against
him were not touched upon in the High Court’s judgment nor
mentioned in the proposed grounds filed with the application
for certificate. The appellant could not be allowed to urge
them for the first time in this Court.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 524 of 1967.
Appeal from the judgment and order dated July 19, 1966 of
the Madhya Pradesh High Court in Misc. Petition No. 33 of
1965.
P. Ram Reddy and S. S. Khanduja, for the appellant.
I. N. Shroff, for the respondents.
Shyamala Pappu, C. L. Somesekhar and Vineet Kumar, for the
intervener.
The Judgment of the Court was delivered by
Hidayatullah C.J. The appellant, who appeals :by certificate
granted by the High Court of Madhya Pradesh, was appointed
as Assistant Surgeon on probation, for one year by the Board
of Directors, Hindustan Steel Ltd.,Ranchi with effect from
October 22, 1959. After completing his period of probation
he was employed on a contract for 5 years. Ex. P-3 is the
Contract of Service which he entered into with the Company.
Under the terms of the contract there. was a further period
of probation. During the period of probation the Company
could terminate his service without notice and without
assigning any reason. On the completion of the period of
probation, either side could terminate the contract by 3
months’ notice without assigning any reason. The Company
could also terminate the employment by ‘giving in lieu of
notice, three months’ salary. This term was .applicable
till three months immediately before the end of the period
of 5 years. If a notice terminating the service was not ven
three months before the close of the end of 5 years the
contract was automatically extended till the incumbent
became superannuated on reaching the age of 55 years.
The appellant -passed the probation period and he was en-
titled to three months’ notice if his services were to be
terminated. The Company maintains certain set, of Rules
governing the employment of its workmen, in addition to the
Standing. Orders of. the. Company. Ex. P-4 represents
the procedure for imp sing major penalties - and for
punishment and appeal. These are .extracts from the
Disciplinary and Appeal Rules.
On September 17, 1964 the appellant. was on duty in the
Medical Out-Patients Department. He examined one Mrs.
365
Holey I who complained of cold, headache and weakness. It
appears that Mrs. Holey complained of some misbehaviour on
the part of the appellant and her husband reported the
matter to the Chief Medical Officer of the Bhilai Steel
Plant where the appellant was then posted. The Chief
Medical Officer asked for the explanation of the appellant
on September 21, 1964, but the appellant denied the
allegation. Some enquiry was then held. The appellant in
his appeal submits that he was not given a copy of the
written complaint received from Mr. and Mrs. Holey. On
October 5, 1964 some witnesses were examined in the presence
of the appellant. Two days previously the statements of Mr.
and Mrs. Holey were also recorded. The enquiry was being
held by the Commercial Manager. The appellant then sent a
notice to Mr. and Mrs. Holey charging them with defamation
and actually filed a suit on November 17, 1964 demanding
damages. On December 15, 1964 the General Manager ter-
minated his services with effect from March 15, 1965, that
is to say, after the expiry of three months’ notice under
the contract. It was stated in the order that the services
were being terminated in terms of his employment.
The appellant thereupon filed a petition under Art. 226 of
the Constitution in the High Court of Madhya Pradesh
claiming inter-alia that his services were wrongly
terminated without giving him the protection granted by Art.
311 of the Constitution. He also complained of breach of
the principles of natural justice inasmuch as the enquiry
was not proper. His contention was that although the action
was ostensibly taken according to the terms of the contract
of employment, he was really punished and he was entitled,
therefore, to the protection of Art. 3 1 1 of the
Constitution. The Company resisted the ground by saying
that Art. 311 was not applicable to the appellant inasmuch
as he was employed by a Corporation and neither belonged to
the civil service of the Union nor held a civil post under
the Union. The High Court in its judgment ruled that the
protection of Art. 311 of the Constitution was not available
in the case because the appellant was not entitled to it.
It appears that this was the only point urged in the High
Court. In the appeal before us attempt was made to enlarge
the case by arguing other points, namely, that the enquiry
was not properly conducted, that the principles of natural
justice were violated and that the appellant had no
opportunity of defending himself. None of these points is-
touched upon in the High: Court’s judgment and it appears
that in the High Court only the constitutional question was
raised. Otherwise, one would expect the High. Court to
have said something about it, or the appellant to have said
so in the application for certificate or in
366
the proposed grounds filed with that, application. We
decline to allow these fresh grounds to be urged.
The question that arises in this case is : whether the em-
ployeesof a Corporation such as the Hindustan Steel Ltd.,
are entitledto the protection of Art. 31 1 ? This
question can only be answered in favour of the appellant if
we hold that the appellant held a civil post under the
Union. It was conceded before us that the appellant could
not be said to belong to the civil service of the Union or
the State. Art. 31 1, on which this contention is based,
reads as follows :
“31-1. Dismissal, removal or reduction in rank of persons
employed in civil capacities under the Union or a State.
(1) No person who is a member of a civil service of the
Union or an all-India service or a civil service or a State
or holds a civil post under the Union or a State shall be
dismissed or removed by an authority subordinate to that by
which he was appointed.
(2)No such person as aforesaid shall be dismissed or
-removed or reduced in rank until he has been given a
reasonable opportunity of showing cause against the action-
proposed to be taken in regard to him;
Provided that this clause shall not apply-
(a)where a person is dismissed or removed or reduced in rank
on the ground of conduct which has led to his conviction on
a criminal charge;
(b)where an authority empowered to dismiss or remove a
person or to reduce him in rank is satisfied that some
reasons, to be recorded by that authority in writing, it is
not reasonably practicable to give to that person an
opportunity of showing cause; or
(c) where the President or Governor, as the case may be, is
satisfied that in the interest of the security of the State
it is not expedient to give to that person such an
opportunity.
(3)If any question arises whether it is reasonably
practicable to give to any person an opportunity of showing
cause under clause (2), the decision thereon of the
Authority empowered to dismiss or remove such person or to
reduce him in rank, as the case may be, shall be final.”
367
Clause (2) of the article, which gives the protection opens
with the words “no such person as aforesaid” and these words
take one back to clause (1) which describes the person or
persons to whom the protection is intended to go. Clause
(1) speaks of (i) persons who are members of (a) a Civil
Service of the Union, or (b) an All-India Service or (c) a
Civil Service of a State, or (ii) hold a civil post
under–the Union or a State. (a), (b) and (c) refer to the
standing services which have been created in the Union and
the States and which are permanently maintained in strength.
In addition to the standing services there are certain posts
which are outside the permanent services. The last category
in Art. 311(l) therefore speaks-of such posts on the civil
side as opposed to the military side. Incumbents of such
posts also receive protection.
In the present case the appellant did not belong to any of
the permanent services. He held a post which was not borne
on any of the standing services. It was, however,, a civil
post as opposed to a military post. So far the appellant’s
case is clear but the clause speaks further that such posts
must be under the Union or a State. – The question thus is
whether the servant employed here can be said to have held
the post under the Union or a State ? The appellant contends
that since Hindustan Steel Limited is entirely financed by
-the Government and its management is directly the
responsibility of the President, the post is. virtually
under the Government of India.
This argument ignores some fundamental concepts in relation
to incorporated companies. In support of the contention
that the post must be regarded as one under the Union the
appeliant relies on some obiter observations of a single
Judge in M. Verghese v. Union of India and others( 1). In
that case the petitioners were drivers working for the
Durgapur Project under Hindustan Steel Limited. The learned
Judge considered the question by analysing the set up of
Hindustan Steel Limited. He found that it was a Government
company and a private limited company, although it did not
include in its name any notice Jr that it was a private
company. He referred in detail to the various provisions in
the Articles of Association as also in the Indian Companies
Act which rendered the ordinary company law in applicable in
certain respects and conferred unlimited powers. of
management on the President of India and his nominees. He
also found that Hindustan Steel Limited was entirely owned
by the Union of India. From this the learned Judge wished
to infer that Hindustan Steel Limited was really a
department of” the Government but he did not express this
opinion and decided
368
-the case on another point. The appellant contends that the
conclusion which the learned single Judge did not draw in
the Calcutta case is the conclusion to draw in this appeal.
We must, according to him, hold that there is no difference
between Hindustan Steel Limited-and a Department of the
Government and that the service under Hindustan Steel
Limited is a service under the Union.
On the other hand, in State of Bihar v. Union of India and
-Anr.(1) Hindustan Steel Limited was not held to be a
“State” for purposes of Art. 131. The question whether
Hindustan Steel Limited was subject to the jurisdiction of
the High Court under Arts. 226 and 227 was left open. In
dealing with the above -conclusion, reference was made to
the incorporation of Hindus-tan Steel Limited as an
independent company and thus a distinct entity. In Praga
Tools Corporation v. C. V. Imanual and Ors.(2) it was
pointed out that a company in which 88 % of -,the capital
was subscribed by the Union and the State Governments could
not be regarded as equivalent to Government because being
registered under the Companies Act it had a separate legal
existence and could not be said to be either a Government
Corporation or an industry run by or under the authority of
the Union Government. Similar views were also expressed in
the High Courts. In Lachmi and Others v. Military Secretary
to the Government of Bihar(‘), the expression ”civil post
under the Union or the-State” was held to mean that the
civil post must be in the control of the State and that it
must be open to the State to ‘abolish the post or regulate
the conditions of .service. Although the case concerned a
Mali employed in Rai Bhavan, it was held that it was not a
post under the State even -though the funds of the State
were made available for paying, his salary. In a later
case-Subodh Ranjan Ghosh v. Sindhri Fertilizers and
Chemicals Ltd.(‘)-the employees of the Sindhri Fertilizers
were held not entitled to the protection of Art. 31 1. Our
brother Ramaswami (then Chief Justice) noticed that the
corporation was completely owned by the Union Government;
that the Directors were to be appointed by the President of
India -who could also issue directions. He nevertheless
held that in the eye of law the company was a separate
entity and had a separate legal existence. In our judgment
the decision in the -Patna case is correct. . It has also
the support of a decision re-ported in Ram Babu Rathaur v.
Divisional Manager, Life Insurance Corporation of India(5)
and another in Damodar Valley ,’Corporation v. Provat
ROY(‘). Our brother Ramaswami relied
(1)Civil Appeals Nos. 512-513 etc. of 1969 decide on
19.9.1969.
(2) Civil Appeal No. 612 of 1966 decided on February 19,
1969.
(3) A.I.R. 1956 Pat. 398.
(4) A.I.R. 1957 Pat. 10.
(5) A.I.R. 1961 All. 503.
(6) LX C.W.N. 1023.
369
in particular upon an English case Tamlin v. Hannaford(1).
In that case it was held in relation to a business that
although the minister was really incharge, the corporation
was different from. the Crown and the services of the
corporation were not civil services. Justice P. B.
Mukherjee of the Calcutta High Court, to. whose judgment we
referred earlier distinguished the English, case by pointing
out certain differences between the Corporation in that case
and Hindustan Steel Limited. He pointed out that (a)-in the
English Corporation no shareholders were required to,
subscribe the capital or to have a. voice in the affair, (b)
the capital was raised by borrowing and not by issuance of
shares, (c) the loss fell upon the consolidated fund and (d)
the corpo-ration was non-profit making. In our judgment
these differences rather accentuate than diminish the
applicability of the principle laid down in the English case
to our case. The existence of shareholders, of capital
raised by the issuance of shares, the lack of connection
between the finances of the corporation and the consolidated
fund of the Union rather make out a greater independent
existence than that of the corporation in the English case.
We must, therefore, hold that the corporation which is
Hindustan Steel Limited in this case is not a department of
the Government nor are the servants of it holding posts
under the State. It has its independent existence and by
law relating to Corporations it is distinct even from its
members. In these circumstances, the appellant, who was an
employee of Hindustan Steel Limited, does not answer the
description of a holder of ” a civil post under the Union’
as stated in the article. The appellant was not entitled to
the protection of Art. 311. The High,, Court was therefore
right in not affording him the protection. The appeal fails
and is dismissed but in the circumstances of the,case we
make no order about costs.
G.C. Appeal
dismissed.-,
(1) [1950] 1 K.B.D. 18.
370