A.K. Yog, J.
1. Earlier a Writ Petition (No. 45950 of 2003) was filed by the petitioner on more or less identical facts and grounds, as the present petition. It had several defects and, therefore, not entertained on merits and dismissed on the request of the learned counsel for the petitioner himself without prejudice to the right of the petitioner to the fresh writ petition so as to enable the petitioner to overcome the defects, which had crept inadvertently.
Petitioner, in the present writ petition, has claimed following reliefs :
'(i) to issue a writ, order or direction in the nature of certiorari quashing the impugned order of termination dated 20th September, 2003, passed by respondents (Annexure-6 to the writ petition) ;
(ii) to issue a writ, order or direction in the nature of mandamus commanding upon the respondents to continue the petitioner as the Managing Director of Purvanchal Vidyut Vitaran Company, Varanasi :
(a) to issue a writ. order or direction in the nature of certiorari calling for the appointment and quashing the appointment dated 18.10.2003 of Sri Mukul Singhal. Managing Director, Poorvanchal Vidyut Vitaran Nigam Limited, Varanasi;
(b) to issue a writ order or direction in the nature of mandamus commanding upon the respondent to reinstate the petitioner on the post of Managing Director, Poorvanchal Vidyut Vitaran Nigam Limited, Varanasi ;
(iii) to issue any other writ, order or direction which this Hon'ble Court deems fit and proper, which the petitioner may be found entitled to, in the circumstances of the case :
(iv) to award costs of the petition to the petitioner.'
2. Petitioner has prayed for issuing a writ of certiorari to quash impugned order of termination of his services as Managing Director of Purvanchal Vidyut Vitaran Nigam Limited/respondent No. 5 (Annexure-6 to the writ petition) as well as order dated 18.10.2003 appointing in his place on Mukul Singhal/respondent No. 6 as interim measure and a writ of mandamus to continue the petitioner as Managing Director of the said company on the following grounds :
'(A) Because the impugned action and order of the respondents is wholly arbitrary, illegal and in contravention of the principles of natural justice and, therefore, bad in law.
(B) Because the impugned action of the Government is clearly based on political consideration whereas a professional person like the petitioner has no role to play so far as the political considerations are concerned but in spite of this fact he has been made a scape goat.
(C) Because for removal of a director. Section 284 of the Companies Act itself contemplates that before removing a director he will be served with memo of charges and after considering his reply, the Government will take any action on the basis of the charges levelled and after considering the reply filed by the director.
(D) Because before passing the impugned order, the respondents neither provided any opportunity to the petitioner to explain his position nor he was informed of any ground on which action has been taken against him.
(E) Because the impugned action of the respondents entails serious civil consequences and. therefore, principles of natural justice had to be complied with.
(F) Because by change of Government all kind of actions are being taken against the officers appointed by the previous Government on the assumptions that they were close to the previous Government.
(G) Because there is absolutely no material before the State Government to infer on charges of misconduct against the petitioner.
(H) Because the petitioner was neither given to understand reasons for his removal nor he was given any show cause notice or copy of the resolution which was placed before the Committee as pointed out under Article 73, therefore the petitioner was in complete dark with regard to reasons for his removal.
(I) Because the C.M.D. deliberately withheld appraisal report from the committee and the committee did not have chance to consider performance of the petitioner on account of aforesaid incident.
(J) Because the C.M.D., U.P. Power Corporation Ltd. at the behest and direction of Chief Secretary for removal of petitioner, deliberately withheld appraisal report from the Committee.'
3. Ground Nos. B, F, G, I and J have not been pressed on behalf of the petitioner during course of arguments in Court.
Case of the petitioner in the writ petition :
4. Petitioner, in brief, pleads that U. P. Power Corporation Limited (for short called 'U.P.P.C.L.') is a Government company, registered under Companies Act, 1956, engaged in transmission and distribution of power to consumers in the State of Uttar Pradesh, in order to have effective control and distribution four sub-companies, including the Purvanchal Vidyut Vitaran Nigam Ltd., with Head Quarter at Varanasi were formed and registered under the Companies Act, 1956, ; post of Managing Director of other companies including Purvanchal Vidyut Vitaran Nigam Limited (hereinafter referred to as 'P.V.V.N. Ltd.') were advertised ; an interview letter dated May 29. 2003 (Annexure-1 to the writ petition) was issued calling the petitioner to attend the interview and the petitioner appeared for interview before Selection Committee (referred in Article 73, Articles of Association of the Company) which comprised of the following :
(i) Chief Secretary, Government of U. P.; (Chairman)
(ii) Principal Secretary, Energy Department U. P. Government; (Member)
iii) Chairman and Managing Director, U. P. Power Corporation Ltd.; (Member)
(iv) Director of Indian Institute of Management, Lucknow ; (Member)
(v) Nominee of Director, Indian Institute of Technology. Kanpur; (Member)
(vi) Nominee of Secretary general C.I.I. who was senior Advisory, Energy, C.I.I.; (Member)
(vii) Chairman and Managing Director, Rural Electrification Corporation. (Member)
5. Annexure-2 to the writ petition is the Bio-data/Executive Summary of the petitioner.
6. Governor of U.P., accepting the recommendations of the Selection Committee Issued appointment letter dated 2.7.2003 (Annexure-3 to the writ petition). Consequently petitioner was appointed Managing Director of P.V.V.N. Ltd. and he joined as such on 5.7.2003. The company, P.V.V.N. Ltd. vide its resolution dated 28.7.2003 ratified the appointment of the petitioner (Annexure-C-A. 5 to the counter-affidavit).
7. It is further pleaded vide paras 14 and 15 of the writ petition that on 18.9.2003 a phone call was received by the petitioner from the Chairman and Managing Director, U.P.P.C.L. (Called C.M.D.) and he was directed to reach Lucknow. He reached Lucknow at 5.30 p.m. The C.M.D. told him that Chief Minister was insisting for his immediate removal as he had annoyed him. Petitioner denied and said that he had never received any instructions from the level of the Chief Minister. Petitioner was taken to the Chief Secretary around 7.00 p.m. by C.M.D. The Chief Secretary asked the petitioner to tender his resignation and in that process, C.M.D. dictated a letter of resignation in the office, which was given to the petitioner for signature, but petitioner politely refused. On this Chief Secretary became furious and also threatened that if petitioner does 'not sign the resignation letter, he will be sent to jail. But petitioner did not sign that letter. The Chief Secretary directed the Chairman and Managing Director to get the termination of petitioner typed and hand it over to him forthwith. He also directed a press release be issued forthwith. Thereafter the Chairman and Managing Director along with the petitioner went to Sri Vijay Sharma, Principal Secretary, Energy, who also tried to pressurise and persuade the petitioner for signing the resignation letter. Next day in the morning, news paper reported the fact that petitioner was pressurised to resign from the post of Managing Director, copy of the news report, which was printed in 'Amar Ujala' Varanasi Edition is Annexure-V to the petition.
8. In the aforementioned backdrop, it is contended by the petitioner that on a day's notice, a meeting of the Committee as convened as contemplated under Article 73 of the Articles of Association and impugned order of removal dated 20.9.2003, passed by the Governor (Annexure-6 to the writ petition), which is outcome of political consideration and in contravention of principles of natural justice and therefore, arbitrary and illegal.
9. According to the petitioner, respondent Company is a Government Industrial Company, Admittedly. State Government holds 100% share of the Company/P. V.V.N. Ltd. and, therefore, it is an 'Authority',/instrumentality of the State under Article 12 of the Constitution of India.
Case of the respondent Nos. 1, 2 and 4 in counter-affidavit ;
10. In the counter-affidavit filed by the respondent No. 1 it is averred that rights of the petitioner as Managing Director were governed by the Articles of Association of the Company and petitioner is trying to enforce the contractual obligations enshrined under the Articles of Association of the Company. The writ petition for enforcement of contractual obligation is not maintainable. On merit it is contended that after petitioner had joined as Managing Director of the Company, report of unrest and vandalism were received ; there was unrest amongst the employees and officers of the company resulting in disruption of power supply hampering public interest ; he was also found responsible for low collection of revenue and that the petitioner was responsible for deliberate delay in disbursement of salary to the employees of the company even after he had received the funds from the U. P. Power Corporation Ltd. which resulted in wide scale resentment and unrest amongst employees.
11. Disbursement of salary to the employees of four companies including P.V.V.N. Ltd. were released simultaneously. All other three subsidiary companies distributed the salary to its employee while the petitioner issued orders of 30% advance in place of salary, which sparked of resentment resulting in disruption in functioning of the company. The petitioner's ineffectiveness is also highlighted by the fact that several complaints were received with regard to frequent failure of transformers, non-disbursement of salary, non-remittance of the collected revenue to the parent companies, poor electric supply, lack of attention to the public complaints.
12. Chairman Selection Committee/opposite party No. 2 (Chief Secretary) vide its order dated 18.9.2003, convened a meeting of the Committee (contemplated under Article 73 of Articles of Association) on 20.9.2003. In the meeting, out of six members, only four members, besides the Chairman, attended the meeting of the Committee and while reviewing the performance of all the four companies including P.V.V.N. Ltd. the Committee noted that function and performance of petitioner was not satisfactory and recommended termination of the petitioner from the post of Managing Director, P.V.V.N. Ltd. It also recommended for holding a fresh selection as well as recommended two names one of whom may be appointed as Managing Director till regular selection is made ; true copy of the minutes of the Committee dated 20.9.2003 is Annexure-C.A. 7 to the counter-affidavit of respondent No. 1.
13. Accepting above recommendation of the Committee, Governor, U.P., issued termination order on 20.9.2003 terminating services of the petitioner (See paras 12 and 16 of the counter-affidavit of respondent No. 1). As an interim measure, one Mukul Singhal was appointed and posted as Managing Director of P.V.V.N. Ltd.. who took charge of the said post on 18.10.2003. The termination of the petitioner has also been ratified by the Company vide its resolution dated 20.10.2003 ; a true copy of the minutes of the Board of Directors of company is Annexure-C.A. 8 to the counter-affidavit. Other respondents have also filed their counter-affidavit, stating same facts as alleged in counter-affidavit of respondent No. 1 :
Pleadings in rejoinder-affidavit in reply to the counter-affidavit of respondent No. 1 :
14. In the rejoinder-affidavit dated 8.12.2003, while facts stated in the writ petition has been reiterated, it is again alleged by the petitioner that Company is Government Company and is a State within meaning of Article 12 of the Constitution of India and every action should be according to the principles enriched under Article 16 of the Constitution of India. Once action of the respondent is colourable exercise of power the writ petition is maintainable and preliminary objection is liable to be rejected.
15. Petition has been filed on the ground of mala fide and ground that State Government being a share holder has no concern in the matter of termination of its Managing Director. The contract is between the Company and its Managing Director. However. It is Government, which has no concern, has terminated the services of the petitioner.
16. It has also been alleged that Regional/C.I.I. Lucknow, is a very junior officer, hence he could not be member. Thus, the Constitution of the Committee was illegal. It has also been alleged that convening of the Selection Committee meeting. Government approval followed by Board's resolution ratifying the Government approval was completed in a span of one and half days. No reasons has been assigned as to why undue haste has been shown. Performance of the petitioner has been very good as mentioned in (paras 12 and 18 of the rejoinder-affidavit).
17. In the rejoinder-affidavit (filed by the petitioner in response to the counter-affidavit of respondent No. 1) petitioner has filed several documents comprising of the statement of revenue realisation of four companies including that of the petitioner for a different periods ; Correspondence of the Vidyut Karamchari Sanyukta Sangharsh Samiti, Varanasi, complaining delay in payment of salary in the last few months. Letter of C.M.D., U.P.P.C.L. shows performance of Dakshananchal Vidyut Vltaran Nigam is poor amongst four companies; several other correspondences of the concerned authority show failure of transformers'. Report of the investigating team regarding failure of transformer, etc. Regarding his performance petitioner has submitted that he was dependent on U.P.P.C.L. obligation to provide manpower funds etc. and dealt with in detail regarding commercial performance, comparative performance of all the four companies, salary and discontentment amongst staff, administrative performance etc. (paras 10 to 20 of the rejoinder-affidavit).
18. We are in these proceedings not required to adjudicate upon correctness of the divergent contentions made by the petitioner on one hand and contesting respondents on the other hand or the correctness of the charges contained in the minutes of the meeting. (Annexure-C.A. 7 to the counter-affidavit).
19. We have also gone through the counter-affidavit filed by respondent Nos. 3 and 4 separately and the rejoinder-affidavit filed by the petitioner, in reply thereto.
20. Relevant extract of Articles of Association and Section 284 of the Companies Act, for ready reference reproduced below.
21. In the present case, services of the petitioner have been terminated by the Selection Committee referred to under Article 73 of the Articles of Association. For ready reference, relevant extract of Articles of Association (Annexure-9 to the writ petition) is given below :
'Articles of Association of Purvanchal Vidyut Vitran Nigam Ltd. Company Limited by Shares interpretation
1. In the interpretation of the Memorandum of Association and these Articles the following expressions shall have the following meanings, unless repugnant to the subject or context:
The 'Act' or the 'said Act' means the Companies Act, 1956.........
'Company' means the Purvanchal Vidyut Vitran Nigam Ltd.
'Directors' means the Directors of the Company, or as the case may be Directors assembled at Board.
'Government' means the Government of Uttar Pradesh.
'Government Corporation' means
(i) ..................................
(i) a Government Company as defined in the Act.
'Managing Director' means a director selected as such by the Selection and entrusted with the substantial power of management which would not otherwise be exercised by him and includes a director occupying the position of Managing Director, by whatever name called.
The Managing Director of the Company shall exercise his powers subject to the superintendence, control and directions of the Board of Directors.
Board of Directors
71. The number of Directors of the Company shall be not less than 3 (three) and not more than 7 (seven). The Directors may be either wholetime functional Directors or part time or nonfunctional or non-executive Directors. The Directors shall not be required to hold any qualification shares.
73. (a) The Government of Uttar Pradesh shall constitute a Selection Committee consisting of Chief Secretary, G.O.U.P., Principal Secretary (Energy), G.O.U.P., U.P.P.C.'. Director of Indian Institute of Management, Lucknow, Director of Indian Institute of Technology Kanpur, Secretary General of C.I.I. and C.M.D. of the Rural Electrification Corporation to select and recommend to the company the person to be appointed as Directors, including Managing Director and whole time directors. In addition, the Managing Director so selected would also be a member of the selection committee for selecting the remaining directors.
(b)................................
(g) The Managing Director and whole time Director shall be subject to removal only on the recommendation of the Selection Committee as constituted in Article 73 herein above.
(i) The tenure of any Director appointed pursuant to Article 73 will be for a minimum period of 3 years.'
'284. Removal of directors.- (1) A company may by ordinary resolution, remove a director (not being a director appointed by the Central Government in pursuance of Section 408) before expiry of his period of office.
Provided...........................
Provided...........................
(2) Special notice shall be required of any resolution to remove a director under this section, or to appoint somebody instead of a director so removed at the meeting at which he is removed.
(3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting.
(4) Where notice is given of a resolution to remove a director under this section and the director concerned makes with regret thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so :
(a) in any notice of the resolution given to members of the company, state the fact of their presentations having been made. and
(b) send a copy of the representations to every member of the company to whom notice of the meeting is sent (which before or after receipt of the representations by the company).
and a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting :
Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Company Law Board is satisfied that the rights conferred by this subsection are being abused to secure needless publicity for defamatory matter, and the Company Law Board may order the company's cost on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.
(5) ...........................
(6) ...........................
(7) Nothing in this section shall be taken :
(a) as depriving a person removed thereunder of any compensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as director.
(b) as derogating from any power to remove a director which may exist apart from this section.'
22. Heard learned counsel for the parties and perused the record.
23. On behalf of the respondents, a preliminary objection, has been raised, i.e., present writ petition, under Article 226, Constitution of India, which is for enforcing contract of 'Personal Service' is not maintainable.
24. Sri Sudhir Agarwal, Additional Advocate General, appearing on behalf of the contesting respondents argued that the petitioner seeks enforcement of contract of personal service on the ground of alleged breach of non-statutory provisions of Articles of Association and, therefore, the present writ petition is not maintainable and deserves to be dismissed as not maintainable.
25. In support of the above contention, he relies upon the following cases :
(i) Cooperative Central Bank Ltd. and others etc. v. Additional Industrial Tribunal, Andhra Pradesh, Hyderabad and Ors. etc., AIR 1970 SC 245 (para 10) :
The Court observed :
'We are unable to accept the submission that the bye-laws of a Cooperative Society framed in pursuance of the provisions of the Act can be held to be law or to have the force of law.,............they may be binding between the persons effected by them, but they do not have the force of a statute..............In fact, after such bye-laws laying down the conditions of service are made and any person enters in the employment of a society those conditions of service will have to be treated as conditions accepted by the employee when entering the service and will thus bind him like conditions of service specifically forming part of the contract of service. The bye-laws that can be framed by a society under the Act are similar in nature to the Articles of Association of a Company incorporated under the Companies Act and such Articles of Association have never been held to have the force of law..................'
(ii) Hanuman Prasad Gupta v. Hira Lal, AIR 1971 SC 206 (Para 7) :
The Apex Court held :
'..........................It is well established that the Articles of Association constitute a contract between a company and its members in respect of their ordinary rights as members.'
(iii) Babaji Kondaji Garad and Ors. v. Nasik Merchants Co-operative Bank Ltd., Nasik, AIR 1984 SC 192 (Para 45).
26. Referring to the case of Co-operative Central Bank Ltd. (supra), Supreme Court noted :
'.................. Bye-law of a Cooperative Society can at best have the status of an Article of Association of a Company governed by the Companies Act, 1956 and as held by this Court in Co-operative Central Bank Ltd. v. Additional Industrial Tribunal, Andhra Pradesh, (1970) 1 SCR 205; AIR 1970 SC 245, the bye-laws of a Cooperative Society framed in pursuance of the provisions of the relevant Act cannot be held to be law or to have the force of law. They are neither statutory in character nor they have statutory flavour so as to be raised to the status of law.'
27. Sri Sudhir Agarwal, during course of arguments, conceded that the Company in question, wherein U. P. Government has 100% shares is a Government Company and thus it is an 'Authority'/'Instrumentally' of State under Article 12, Constitution of India.
28. Learned counsel for the petitioner, Sri V. B. Upadhyaya, Sr. Advocate, did not dispute the 'ratio' laid down by the Apex Court in the aforementioned judgments but contended that : (i) a writ petition lies both against a private person and/or State' (or State Authority'/ 'Instrumentality of State' as contemplated under Article 12 of the Constitution of India, if a person/legal entity including 'State' or its authority is guilty of arbitrary action. According to Sri. V. B. Upadhyaya, the present writ petition, under Article 226, Constitution of India, is maintainable ; and cannot be thrown and dismissed summarily on the alleged 'Preliminary Objection' for the following reasons that:
(i) a writ shall lie against the Company, which is a Government Company (with 100% share of the Government and the Government having complete control over it and, therefore, a 'State Authority'/'State instrumentality' under Article 12 of the Constitution and particularly when the Company Indulges into activities relating to 'public interest' or in 'public nature' which are similar to public duties ;
(ii) the Court shall not refuse to exercise its extraordinary jurisdiction under Article 226, Constitution of India, when the action in question is per se arbitrary, initiated in utmost haste ignoring the principles of natural justice.
29. Learned counsel for the petitioner, in support of his contention, has relied upon the case in Harbanslal Sahnia and another v. Indian Oil Corporation Ltd. and Ors., (2003) 2 SCC 107 (Paras 5 to 8). For convenience, para 7 of the aforesaid judgment is reproduced:
'7. So far as the view taken by the High Court that the remedy by way of recourse to arbitration clause was available to the appellants and therefore the writ petition filed by the appellants was liable to be dismissed is concerned, suffice it to observe that the rule of exclusion of writ Jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, inspite of availability of the alternative remedy, the High Court may still exercise its writ Jurisdiction in at least three contingencies : (i) where the writ petition seeks enforcement of any of the fundamental rights ; (ii) where there is failure of principles of natural Justice ; or (iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged. (See Whirlpool Corporation v. Registrar of Trade Marks). The present case attracts applicability of the first two contingencies. Moreover, as noted, the petitioners' dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings.'
30. It is argued by the petitioner that the two contingencies Nos. (ii) and (iii), enumerated by the Apex Court in the case of Harbanslal (supra), exist in the present case.
31. At the out set we may mention that petitioner (as also confirmed by Sri V. B. Upadhyaya, learned senior counsel for the petitioner), has not pressed submissions made regarding non-compliance of Section 284 of the Company Act. The short question in the instant case to be decided is whether petitioner is entitled to claim the relief by filing writ petition under Article 226, Constitution of India. Article 73(g) aforequoted contemplates that Managing Director can be removed on the recommendation of the Selection Committee constituted under Article 73.
32. This provision confers power upon the Company to remove the Director (including Managing Director).
33. We find that there is no complaint of violation of any statutory provision. Whether Governor has concern in the matter is not relevant as the Impugned order is duly ratified by the Board of Directors of the Company or not. Averments contained in the relevant minutes of the company (filed as Annexures-C.A. 7 and C.A. 8 to the counter-affidavit of respondent No. 1) are only motive to take action. There is nothing in termination order to stigmatise the petitioner. Other averments in the said counter-affidavit regarding working of the petitioner are not relevant to show that they cast stigma.
34. There is no doubt that the petitioner was appointed Managing Director in accordance with the provisions contained under Articles of Association of the Company. Power of removal under Article 73(g) contain no rider.
35. Petitioner was appointed as Managing Director under Article 73 of Articles of Association which are not statutory and his services have been terminated by the Company in exercise of its powers under the provisions of Articles of Association. The powers of Board of Directors to remove Director or Managing Director remains unaffected.
36. The view taken by us finds support from the Judgment in the case of A. K. Home Chaudhary v. National Textile Corporation. U.P. Ltd. and Ors., 1984 (48) FLR 96 (K. N. Singh and Gopinath, JJ.) wherein this Court held :
'It is not necessary to go deeper into the matter to decide the question as to whether the National Textile Corporation is an authority as in our opinion even assuming it to be so, the provisions of Article 311 of the Constitution are not applicable. Even if the National Textile Corporation is authority and a juristic unit within the meaning of Article 12 of the Constitution, the petitioner would be entitled to the protection of his fundamental rights and Parts III and IV of the Constitution would only be applicable. Since the petitioner's services have been terminated in accordance with the terms of contract, no question of violation of petitioner's fundamental rights arises.'
37. Similar view has been taken in the case of Smt. Farrel Futado v. State of Goa and Ors., 1994 (80) Comp Cas 659.
38. Consequently we find that petitioner is not entitled to any relief through this writ petition under Article 226, Constitution of India for enforcement of contract of service. Moreover, we find that under Section 284, Companies Act, petitioner is entitled to file suit for damages. No other point has been raised.
39. Petition falls and is accordingly, dismissed.
40. We make no order as to costs.
V. N. Singh, J.-I agree with opinion of Hon'ble Mr. Justice A. K. Yog regarding dismissal of writ petition. However. I want to express my opinion separately on grounds taken by petitioner in writ petition and objections raised by respondents.
42. Preliminary objection raised by the learned counsel for the respondents is that, writ petition is not maintainable on the ground that there is no breach of statutory provisions. Article 73(g) of Articles of Association under which services of petitioner has been terminated by appointing authority is not a statutory provision.
43. Regarding non-maintainability of the petition following cases have been relied upon by the learned counsel for respondents.
Life Insurance Corporation of India v. Escorts Ltd., AIR 1986 SC 1370 :
44. While dealing with the contention of the maintainability of the petition, it has been held by the Hon'ble Apex Court in above mentioned case that, if the action of the State is political or sovereign in character, the Court wilt keep away from it. The Court will not debate academic matters or concern itself with the intricacies of trade and commerce. If the action of the State is related to contractual obligation or obligations arising out of the contract. the Court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the Court will examine actions of the State, if they pertain to the public law domain and refrain from examining them, if they pertain to the private law field. The question must be decided in each case with reference to the particular action, the activity in which, the State or the Instrumentality of the State is engaged, when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and does the roles of a shareholder, with all the rights available to such a shareholder.
M/s. Radha Krishna Agarwal and Ors., v. State of Bihar and Ors., AIR 1977 SC 1496 :
45. In the above mentioned case, it has been held that. when the State or its officers purport to operate within the contractual field and the only grievance of the citizen could be that the contract between the parties is broken by the action complained of, the appropriate remedy is by way of a petition under Article 226 of the Constitution and not an ordinary suit.
Executive Committee of U. P. State Warehousing Corporation v. C. K. Tyagi, AIR 1970 SC 1244 :
46. In the above mentioned case it has been held that, normally a contract of personal service will not be enforced by an order for specific performance and it will be not open for a servant to refuse/accept repudiation of a contract of service by his master and say that, the contract has never been terminated. Remedy to the employee is a claim for damages for wrongful dismissal or breach of contract. But when a right of statutory statute is given to an employee and there has been a violation of provision of statute, while terminating the service of such an employee, latter will be entitled to get the relief of declaration that order is null and void and that he continues to be in service as it will not then be a mere case of master terminating service of a servant. The exceptions to the normal rule that no declaration to enforce contract of personal service will be granted are given below :
(a) Public servant, who has been dismissed from service in contravention of Article 311 of Constitution ;
(b) Reinstatement of the dismissed worker under industrial Law or by Labour or by industrial Tribunals ;
(c) A statutory body when it has acted in breach of mandatory obligation imposed by the statute.
47. Dismissal though in violation of regulation framed under Agricultural Produces (Development of Warehousing) Corporation Act is not in breach of mandatory obligation under the Act, employee cannot claim reinstatement.
Smt. J. Tiwari v. Smt. Jawala Devi Vidya Mandir, AIR 1981 SC 122 :
48. In above mentioned case. it has been held that, right and obligation of an employee of a private institution are covered by the terms of the contract entered into between the parties, even if the dismissal is wrongful, he would be entitled to decree for damages and not an order of reinstatement or declaration that, notwithstanding the termination of his service, he continues to be in service.
Sukhdeo Singh v. Bhagat Singh Sardar, AIR 1975 SC 1331 :
49. In the above mentioned case it has been held that, mere fact that Regulations are made in respect of the conditions of service of the employees of certain institution or Organisation does not mean that, those conditions are statutory. No doubt, these are conditions of services applying to their employees. But if there is breach of those conditions, it cannot be said that there is a breach of any statutory provision.
Cooperative Central Bank Ltd. and Ors. etc. v. Additional industrial Tribunal, Andhra Pradesh, Hyderabad and Ors., AIR 1970 SC 245:
'In above mentioned case it has been held, that bye-laws of the Co-operative Society are of the nature of the Articles of Association of the Company incorporated under the Companies Act. They may be binding between the persons affected by them, but they do not have the force of a statute.'
Smt. Ferrel Futado v. State of Goa and Ors., 1994 Comp Cas 659 :
50. In this case the writ petition was filed challenging the order of removal on two grounds :
' (i) that power to remove the petitioner as Director and Chairperson vested in the Board of Director of the Corporation and not in the Government and the procedure of Section 284 of the Companies Act was applicable ;
(ii) that the order of removal was arbitrary and in violation of principles of natural justice.
In this connection, it was held by Bombay High Court that the entire matter fell ion the realm of contract and order of removal could not be challenged by a writ petition and, there was no public element attached to it. Moreover, reasons stated in the show cause notice did not constitute ground for removal under Section 284 of the Companies Act.'
51. Petitioner in effect sought enforcement of Articles of Association, which could not be ground in exercise of the Jurisdiction under Article 226 of the Constitution.
52. It has been argued by petitioner that, petition is maintainable and petitioner has relied on decision of following cases :
Kumari Shrilekha Vidyarthi etc. v. State of U. P. and Ors., AIR 1991 SC 537 :
'In abovementioned case. It has been held that, it is really the nature of its personality as State which is significant and must characterize all its action, in whatever Held, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters. There is a basic difference between the acts of the State which must invariably be in public interest and those of a private individual, engaged in similar activities, being primarily for personal gain. which may or may not promote public interest. Viewed in this manner, in which we find no conceptual difficulty or anachronism, we had no reason why the requirement of Article 14 should not extend even in the sphere of contractual matters for regulating the conduct of the State activity.
Further it has been held that, it is now too well-settled that every State action. In order to survive must not be susceptible to the vice of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract. This distinction between the State and a private individual in the field of contract has to be borne in the mind.'
53. The meaning and true import of arbitrariness is more easily visualised than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplate governance by laws and not by humor, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that 'be your ever so high, the laws are above you'. This is what men in power must remember, always.
54. It has been argued by respondents that unless it is shown that termination order is arbitrary or principles of natural justice have not been complied with the decision of Kumari Shrilekha Vidyarthi is not applicable.
55. It has also been argued by the State that where principles of natural Justice is applicable has been mentioned in the case of M/s. Radha Krishna Agarwal (supra) in which it has been held that, a question of the distinction between an administrative and quasi-Judicial decision can only arise in the exercise of powers under statutory provisions. Rules of natural justice are attached to the performance of certain functions regulated by statutes or rules made thereunder involving decisions affecting rights of parties. When a contract is sought to be terminated by the officers of the State, purporting to act under the terms of an agreement between parties, such action is not taken in purported exercise of a statutory power at all.
56. The limitations imposed by rules of natural justice cannot operate upon powers which are governed by the terms of an agreement exclusively. The only question which normally arises in such cases is whether the action complained of is or is not in consonance with the terms of the agreement.
57. It has been argued by the respondents that according to Article 73 of the Article of Association on the recommendations of the Selection Committee, Managing Director shall be appointed.
58. In this connection attention of the Court has been drawn towards Annexure-III of the writ petition, according to which petitioner was appointed by His Excellency Governor under Article 73 of the Articles of Association.
59. Attention of the Court was also drawn towards the termination order of the petitioner, Annexure-VI to the petition, by His Excellency Governor under Article 73 of the Articles of Association.
60. Contention of the respondents is that, as the power of appointment includes the power of termination and as petitioner was appointed under Article 73 of the Articles of Association and his services were terminated under the same Article on the recommendation of the Selection Committee, it cannot be said that there was arbitrariness in terminating the services of the petitioner.
61. It has also been argued by the respondents that as Articles of Association has no force of law or Statue nor there is any provision for giving an opportunity and appointment and termination was made under Article 73 of the Articles of Association, which has no statutory force as held in the case of M/s. Radha Krishna Agarwal (supra), the principles of natural justice cannot, be invoked in the present case.
62. It has been argued by the respondent that decision in Kumari Shrilekha Vidyarthi (supra), is not applicable in the present case on the ground that mode prescribed for termination under Article 73 of Articles of Association has been adopted.
Harbansh Lal Sahnia and Anr. v. Indian Oil Corporation Ltd. and Ors., 2003 (2) SCC 107 :
63. In above mentioned case it has been held that, 'The rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In an appropriate case, in spite of availability of the alternative remedy, the High Court may still exercise its writ jurisdiction in at least three contingencies : (i) where the writ petition seeks enforcement of any of the fundamental rights ; (ii) where there is failure of principles of natural justice ; or (iii) where the orders of proceedings are wholly without jurisdiction or the vires of an Act is challenged.'
It has also been argued by respondents that so far as decision of Harbansh, Lal Sahnia (supra), is concerned that decision is not applicable because the writ petition does not seek enforcement of any fundamental right, nor there is any violation of principles of natural justice nor the order is wholly without jurisdiction.
64. It has also been argued by the respondents that, even if it is found by the Court that dismissal is wrongful as there has been a breach of contract, remedy is for claim of damages.
65. In this connection, attention of the Court has been drawn towards the decision in Executive Committee (supra) in which, it has been held that remedy to the employees is claim for damage for wrongful dismissal or breach of contract. Attention of Court has also been drawn towards the decision in the Case of Smt. J. Tiwari (supra).
66. Attention of the Court has also been drawn towards Sub-section (7) (a) of Section 284 of the Companies Act, which reads as follows :
'284 (7) Nothing in this section shall be taken :
(a) as depriving a person removed thereunder of any compensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as Director.'
67. In this connection, attention of the Court has been drawn towards Sub-section (7) (b) If Section 284 of the Companies Act, which reads as follows :
'284 (7) (b) Nothing in this section shall be taken as derogating from any power to remove a director, which may exist apart from this section.'
68. It has been argued by respondent that, as procedure under Article 73 of Articles of Association has been given for appointment and termination, which has been followed, it cannot be said that, wrong procedure has been applied for terminating the services of the petitioner. Moreover, It is in accordance with Sub-section (7) (b) of Section 284 of Companies Act. In such circumstances as there is no breach and mode prescribed in the Article 73 of Articles of Association was adopted and according to Sub-section (7) (b) of Section 284 of Companies Act, Managing Director may be removed besides the provision of Section 284, the Court is of the view that petition is not maintainable.
69. It has been argued by learned counsel for the petitioner that out of seven members present in the meeting of the Selection Committee Sri Krishna Kumar was representative of I.I.M., Lucknow and Sri Sanjay Sachdeva was representative of C.I.I. as per Annexure-C.A. 3 of the counter-affidavit. It shows that out of seven members only three members were present and presence of Sri Krishna Kumar and Sri Sanjay Sachdeva representatives has no effect as they were not the members of the Selection Committee. As such quorum was not complete.
70. It has been argued by petitioner that. If there is no provision of quorum, majority of members of Selection Committee should be present and in this, connection attention of the Court has been drawn towards decision in Ishwar Chand v. Satya Narain Singh and Ors. 1972 (3) SCC 383, in which, it has been held that if there is no rule or regulation or provision for fixing quorum, presence of majority of the members would constitute it as valid meeting.
71. Argument of learned counsel for the respondent is that, plea of quorum has not been taken by the petitioner in the writ petition or rejoinder-affidavit. Moreover Selection Committee for appointment and termination of the Managing Director has been constituted by the executive order of the Governor and not under any statutory statute or law.
72. Besides it, it has been argued by the respondents that, even at the time of selection of the petitioner, Selection Committee consisted of nominee of the Director I.I.T., Kanpur and nominee of the Secretary General of C.I.I. As such if at the time of termination. Selection Committee consisted of the nominee, then the petitioner cannot have any grievance.
73. In this connection, respondents have relied upon the following decisions :
Bharat Singh and Ors. v. State of Haryana and Ors., AIR 1988 SC 2181:
In above mentioned case it has been held, 'that when a point which is ostensibly a point of law is required to be substantiated by facts, the party raising the point, if he is the writ petitioner, must plead and prove such facts by evidence which must appear from the writ petition and if he is the respondent, from the counter-affidavit. If the facts are not pleaded or the evidence in support of such facts is not annexed to the writ petition or to the counter-affidavit, as the case may be, the Court will not entertain the point. There is a distinction between a pleading under the Civil P.C. and a writ petition of a counter-affidavit. While in a pleading, that is a plaint or a written statement, the facts and not evidence are required to be pleaded, In a writ petition or in the counter-affidavit not only the facts but also the evidence in proof of such facts have to be pleaded and annexed to it.
Asif Hameed and Ors. v. State of Jammu and Kashmir, AIR 1989 SC 1899:
In above mentioned case it has been held by the Apex Court that ratio of the decision in the United Commercial Bank Ltd. v. Their Workmen, AIR 1951 SC 230, is inapplicable to the Committee constituted by executive order for performing purely administrative function. Selection of the candidates for admission to Medical Colleges does not involve performance of any judicial or quasi-judicial function.
74. In the present case also Committee was constituted by Executive order for performing purely administrative function. In this connection attention of the Court was drawn towards Article 73 of Articles of Association, which reads as follows :
'73 (a) The Government of Uttar Pradesh shall constitute a Selection Committee consisting of Chief Secretary, G.O.U.P., Principal Secretary (Energy), G.O.U.P., U.P.P.C.', Director of Indian Institute of Management. Lucknow, Director of Indian Institute of Technology Kanpur. Secretary General of C.I.I. and C.M.D. of the Rural Electrification Corporation to select and recommend to the company the person to be appointed as Directors, Including Managing Director and whole time directors. In addition, the Managing Director so selected would also be a member of the Selection Committee for selecting the remaining directors.'
75. Contention of the petitioner is that stigma has been attached by terminating the services of the petitioner.
76. Argument of respondents is that no stigma has been attached.
77. In this connection, attention of the Court, has been drawn by respondents towards the decision in Union of India and Ors. v. A. P. Bajpai and Ors., 2003 (2) AWC 882 (SC) : JT 2003 (1) SC 454. in which it has been held that authorities having reached a conclusion that the respondent was not suitable to continue in service, the order of termination of service was simpliciter without attaching any stigma to his conduct and therefore, the Tribunal erred in setting aside the termination order on the ground that it was stigmatic.
78. From perusal of the termination order it is clear that termination is simpliciter.
79. So far as the allegation of mala fide by the petitioner is concerned, it has been alleged by the petitioner that, he received a phone call from Chairman on 18.9.2003 and he was directed to reach Lucknow. Petitioner was taken to the Chief Secretary around 7.00 p.m. by C.M.D. Chief Secretary asked the petitioner to tender his resignation and in that process C.M.D. dictated a letter of resignation in the office of the Chief Secretary, which was given to the petitioner for signature, which the petitioner politely refused. While according to Annexure-V to the petition, filed by the petitioner, which is a report of newspaper that Chief Minister Sri Mulayam Singh Yadav demanded the resignation of the Managing Director of P.V.V.N. Ltd. and told the Managing Director to tender resignation immediately otherwise you will be dismissed. This information was given by Managing Director B. M. Varma to Amar Ujala by phone. Sri Varrna told the news paper that according to the fixed programme, all Managing Directors of Company went to Lucknow to meet Chief Minister. He was lonely summoned by the Chief Minister and there it was told by Chief Minister that he should resign otherwise, he will be dismissed. After hearing the talk of the Chief Minister, Managing Director returned back.
80. It shows that allegation of mala fide is totally false and allegation in writ petition and news given in newspaper are contradictory to each other.
81. It has been argued by the respondents that contention of the petitioner in the rejoinder-affidavit that, State Government being a share holder has no business in the affairs of the Company regarding termination of the Managing Director, as contract is between the Company and its Managing Director. The argument of the respondents is that. as the appointment of the petitioner was made by His Excellency Governor and appointment includes termination and termination was also made by the same authority, argument of the petitioner has no force.
82. Moreover, the termination order was ratified by the Board as per Annexure-C.A. 8 to the counter-affidavit of respondent No. 1.
83. The argument of the respondent's counsel is that, contention of the petitioner that there is no merit in termination of the petitioner's services is not correct, in view of Annexure-C.A, 7 to the counter-affidavit, in which, it has been mentioned that proper step has not been taken by the Managing Director, Varanasi (petitioner) and there is dissatisfaction in the employees and officers and due to strike of the employees, distribution of the electric supply is disturbed. There is adverse effect in realisation of revenue and salary of the employee as not been disbursed.
84. The writ petition is dismissed.