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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

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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-

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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

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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

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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

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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