ANUPAM GHOSH Vs. UNION OF INDIA

JUDGEMENT

(1.) This appeal is directed against the judgment dated 10.8,87 passed by Mr. Justice Umesh Chandra Banerjee in C.O. No. 11155 (W) of 1986. By the aforesaid judgment, the learned trial Judge dismissed the writ petition. Sri Anupam Ghosh was the Finance Director of Andrew Yule & Co. Ltd., which is admittedly a Government Company within the meaning of the Companies Act. In the letter of appointment of the writ petitioner-appellant, Sri Anupam Ghosh, it was inter alia, provided that the service of Sri Ghosh was liable to be terminated on either side on three months' notice or on payment of three month's salaries in lieu thereof. The service of Sri Ghosh was terminated by an order dated 22.8.86 and he was served with a letter of termination with immediate effect and a cheque of three months salary in lieu of notice was enclosed with the letter of termination. Such letter of termination was the subject matter of challenge in the writ petition concerning Civil Order No. 11155(W) of 1986 and it was contended that such order of termination was malafide and an utter abuse of the power vested in the concerned authority and the same was also bad on the ground of lack of fairness. In the writ proceeding, it was strongly contended on behalf of M/s. Andrew Yule & Co. Ltd. and also other respondents that the said Company not being a 'State' within the meaning of Article 12 of the Constitution, the writ petition for challenging the order of termination of contract of service was not maintainable. It was also contended that in any event, the said order of termination squarely belongs to the field of private law and not to the field of public law and no public duty being involved in regulating the contract of service between the writ petitioner and M/s. Andrew Yule & Co. Ltd. no writ would be issued in a challenge of the said order of termination of service. The learned trial Judge has held that the said Company was not a 'State' within the meaning of Article 12 of the Constitution, the writ petition therefore, was not maintainable for challenging the said order of termination. The learned trial Judge indicated the outline of the arguments advanced by the parties on the question of nature of duties, namely, whether public or private law was involved in dealing with the contractual service of the writ petitioner but the learned trial Judge refrained from making any finding on the said question in view of his finding that the Company not being an instrumentality of the Government, no writ would lie against the Company and therefore, the decision on the said question was not necessary for the disposal of the writ petition. It appears that large number of decisions were cited at the hearing of the said case and the learned trial Judge has taken pains in summarising the decisions cited by the respective parties on the question as to whether or not M/s. Andrew Yule & Co. Ltd. (hereinafter referred to as the 'Company') was an instrumentality of the Central Government and as such, a 'State' within the meaning of Article 12. The features and characteristic of an institution, corporation, company or society making it an instrumentality of the State as indicated in various judgment of the Supreme Court have been indicated by the learned trial Judge very succinctly and considering the facts and circumstances of the case and the incorporation and functioning of the Company and the nature of control exercised by the Central Government over the Company, the learned trial Judge has come to the finding that the said Company is not an instrumentality of the Central Government and as such, not a 'State' within the meaning of Article 12 of the Constitution. The various aspects relevant for the consideration as to whether or not an institution, company, society or a body corporate is an instrumentality of the 'State' within the meaning of Article 12 of the Constitution have been indicated by the learned trial Judge with reference to the decisions of, the Supreme Court and other High Courts in order to appreciate the contentions of the parties raised in the writ petition and also in the :instant appeal. It will be only desirable to refer to the slid aspect constituting an instrumentality 6f the State. The learned trial Judge has held that whether the functions are closely related to governmental function and whether department of a Government is transferred to a corporation or whether rule making or regulation making power has been given, which when made would regulate the dealing with the people at large are clear feature in support of treating the institution as an instrumentality or agency of the Government. But when the Government while embarked upon the commercial activity put funds and exercise direct or indirect control and receive the profits such facts by themselves will not be adequate to hold the institution an agency or instrumentality of the Government. Large number of decisions of the Supreme Court and other High Courts were cited at the hearing of the writ proceeding and the learned trial Judge having referred to the said decision have summarised the ratio of the decisions. The learned trial Judge has considered amongst other, the following decisions of the Supreme Court and other High Courts. (i) Praga Tools Corporation vs. Imannual (AIR 1969, SC 1306), (ii) Heavy Engineering Mazdoor Union vs. State of Bihar (AIR 1970, SC 1982), (iii) Sukhdeb Singh vs. Bhagat Ram (AIR 1979, SC 1331), (iv) Sabhajit Tewari vs. U?ion of India (AIR 1975, SC 1325), (v) Rammanna D. Shetty vs. International Airport.Authority (AIR 1979 SC 1628), (vi) Ajoy Hasia vs. Khalid Mujit (AIR 1981, SC 487), (vii) G. C. Gupta vs. Kashmir Bank (AIR 1986, J & K page-1), (viii) Tekraj vs. Union of India (AIR 1980, SC 469),. (ix) B. K. Patra vs....... (AIR 1981, Orissa 143) and (x) Central Inland Water Transport Corporation vs. B. N. Gangully (AIR 1986, SC 1571).

(2.) The learned trial Judge has held that the shares of the Company, which were privately owned were acquired from time to time and the majority of holding now belongs to the Central Government. Such shares are regularly quoted in the Stock Exchange Market. The Company did not receive any grant in aid or subsidy atleast in Seventh Plan period from the Central Government and the Company also functions as a holding Company of large number tea growing and manufacturing Companies. There are a number of competitors in the market and the Company does not enjoy any privilege of monopoly in its trading activity. The Company also does not get any preferential treatment in the matter of contract or orders from the Government. The Company generates its own funds from financial corporations, whatever money has come from the Central Government, has been credited to the Company's account as loan repayable with interest. In the matter of policy and management, the Company is wholly independent. The whole time Directors are appointed by the President of India, who holds 86.31% ordinary shares. Its account is liable to audit and scrutiny by the Comptroller and Auditor General of India as provided in the Companies Act, 1956. There is no other control by the Central Government. In regard to the functioning of the Company, it is neither of public importance nor closely related to Government functions. The entire share capital of the Company is not held by the Government. The Government's loan and: equity as a percentage of total expenditure comes to 5.57% and the Government loan as a percentage of total expenditures comes to 2.311% and that is also restricted upto the Sixth Plan period. The learned trial Judge has also held that the management of the Company rest with the Board of Directors and the decisions are also of the Board and not by the Government. No department of the Government has been transferred to the Company.. Accordingly, there is no deep any pervasive State Control as far as the function of the Company is concerned. The learned trial Judge has also held that the company is a trading company like similar other companies in the Geld and its functions cannot be termed to be the functions of public importance and of nature closely related to the governmental functions. The learned trial Judge has held that to be an instrumentality or agency of the Government, it is necessary to consider the cumulative effect of various tests indicated by the Supreme Court in the aforesaid decisions and satisfaction of one or two may not be sufficient to constitute an institution, company, society or corporation a 'state' within the meaning of Article 12 of the Constitution. Referring to the decision made in the case of Central Inland Water Transport Corporation, the learned trial Judge has indicated that the Supreme Court in the said case had taken note of the monopolistic status and trading in water transport by the said Corporation, and on consideration of such nature of trading together with the financial assistance and deep and pervasive State control and also on consideration of the fact that the said Corporation is discharging the function of public importance in regard to the river transport, the Supreme Court has held that such corporation is an instrumentality of the Government but the company does not satisfy of the said tests.

(3.) Mr. Malay Kumar Basu, the learned counsel appearing for the appellant has contended that the various tests, satisfaction of which makes an institution, company or society etc. an instrumentality of the Government have been indicated in the decisions referred to by the learned trial Judge. The trial Judge has summarised the decisions made in the cases referred to by him but he has failed to appreciate the facts relating to the company, which clearly establish that the finance of the company is more or less fully controlled by the Central Government and the share capital is principally owned by the President of India. In the matter of constitution of the Board of Directors, there is deep and pervasive control of the Central Government and the nominees of the Central Government are in the Board of Directors. The policy outline made by the Central Government from time to time is, strictly followed by the company in moulding its trading activities. Although under the Companies Act, 1956, the company, a Government company functions through the Board of Directors but there is deep and pervasive control of the Central Government in the functioning of the company by nominating a number of Directors in the Board. He has also submitted that the Board of Directors of the Company has virtually no decision making power starting from capital expenditure, payment of dividend, appointment of persons beyond a certain limit, settlement of charter of demands and fixation of pay scales of the employees. The Board of Directors are bound to give effect to orders, directives or instructions issued by the Central Government. Mr. Basu has submitted that the said features clearly point out that the company enjoins a deep and pervasive control of the Government and the factors which weighed with the Supreme Court in coming to the decision that the Central Inland Water Transport Corporation was an instrumentality of the Government are also satisfied in the instant case. Mr. Basu has referred to the guidelines of Bureau of Public Enterprises for contending that such guidelines relate to the functioning of the company and contrary to the guidelines, the company is not permitted to function. The Board of Directors of the Company cannot take any independent decision overriding the guidelines issued by the Bureau of Public Enterprises. It has been contended by Mr. Basu that when the company became public enterprise in 1979, it became part of the Government planning process and was asked to put up its proposal for the Sixth Plan period covering 1980-81 and 1984-85 to be indicated by the Government in Sixth Five Year plan. The Board of the company submitted its plan to the Government for Rs. 10 crores against which actual expenditure incurred during the period was 7.36 crores. The Central Government also provided finance to the extent of Rs. 2.62 crores, which was about 85% of the total requirement of the company. Mr. Basu has submitted that the company could not deny the said fact but at the time of hearing before the learned trial Judge, an attempt was made to distort the facts by adding the revenue expenditure with capital expenditure during the said period to indicate that financial assistance was only 5.57% and the learned trial Judge was misled and made an erroneous finding to that effect. Mr. Basu has contended that merely because the company is a trading concern and is engaged in trading activities with other companies in the field, the company cannot be held to be an instrumentality or agency of the State is not a correct proposition. The anxiety of the Government in the development of public sector enterprises thereby achieving the goal of planned development of the country cannot be under-estimated. The Central Government has set up a separate department, known as department of Public Enterprise under the Ministry of Industries in order to ensure proper functioning of the public enterprises. The effect of such deep and pervasive control have been indicated in various decisions of the Supreme Court including the decision in Ajoy Hasia and International Airport Authority's case. Mr. Basu has submitted that what constitutes deep and pervasive control cannot be formulated precisely and the question as to whether or not there are deep and pervasive control of the Central Government or State Government over a company, society, etc. are to be decided on consideration of the relevant facts relating to such company, society, etc. He has contended that if the articles of the company are referred to, it will be evident that the Board of Directors is functioning in accordance with the orders, instruments and directions of the Government. The control of the Government over the company is not nominal but real. Under the Articles of Association of the Company, the President of India has derived enormous power in controlling the affairs of the company. Such power together with the rights by virtue of being a majority share holder, the President and for that matter, the Central Government exercises control to a very great extent on the functioning of the company. The overall effect of the control being exercised by the Central Government on the company should be appreciated for deciding the true character of the company.