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PETITIONER: K.C. JOSHI

       Vs.

RESPONDENT: UNION OF INDIA AND ORS.

DATE OF JUDGMENT23/04/1985

BENCH: DESAI, D.A. BENCH: DESAI, D.A. MISRA RANGNATH

CITATION:  1985 AIR 1046            1985 SCR  (3) 869  1985 SCC  (3) 153        1985 SCALE  (1)707  CITATOR INFO :  F          1987 SC1831  (3)  F          1987 SC1833  (3)  F          1991 SC1490  (6)

ACT:      Constitution of India 1950 Articles 121416 310 and 311:      Oil   and    Natural    Gas    Commission-Whether    an instrumentality of  the  State  -Whether  amenable  to  writ jurisdiction-Employees of  corporation-Whether  entitled  to protection of equality in Matters of public employment      Labour Law:      Employee employed on regular basis until further orders -Services of  employee-Whether could  be terminated  by  one month’ s notice.      Income Tax  Act 1961  Section 89  and Income  Tax Rules 21A:      Employee-Termination order set aside Awarded back wages and compensation  In lieu  of reinstatement-Relief of income tax-Entitlement of.

HEADNOTE:      The  appellant   was   initially   appointed   in   the Respondent-Public Sector  Undertaking as  an Assistant Store Keeper and  later selected  as a  Store Keeper.  The  office order recited that the appellant had been appointed as Store Keeper till  further orders, that his appointment was purely temporary, that  he will  be on  probation for  period of  6 months, and  that the  appointment may  be terminated at any time by  a month’s  notice. On  successful completion of the probation period  of six  months, the appellant was informed that ’he  was continued  in service on a regular basis until further order.’  The appellant  was later  transfer- red and the Transfer  Order was  challenged by him in a suit, and an obtained an  interim order  restraining the undertaking from implementing the transfer order.      The Employees’ Union submitted a charter of demands and it was followed by a notice threatening direct action by the members of  the Union. The appellant was an active worker of the union. The employees went on strike, and 870 the Union  submitted a  list of  workmen to  the Corporation requesting the  Corporation  to  give  them  the  status  of

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protected  workmen  as  required  by  section  33(4  of  the industrial Disputes Act, 1947. The Appellant’s name appeared at S.No  2 in the Letter. By an Office Order the services of the appellant  were  terminated  with  immediate  effect  in accordance with the terms and conditions of the service, and a cheque  for one  month’s pay in lieu of notice accompanied the order.      The appellant  challenged the  legality and validity of the order  terminating his  service in a Writ Petition and a Division Bench  of the High Court dismissed the Petition. It held that  though on  successful completion of the probation period, the  appellant had been appointed on a regular basis as Store Keeper, he was non-the-less a temporary employee of the Corporation  till the  date on  which his  services were terminated.  The   Corporation   was   not   an   Industrial Establishment within  the meaning  of the  expression in the Industrial  Employment   (Standing  Orders)  Act,  1946  and therefore the  Model Standing  Orders enacted  under the Act were  not  applicable  to  the  Corporation.  The  Order  of termination of  service was  not violative  of the  Oil  and Natural Gas  Commission  (Conduct,  Discipline  and  Appeal) Regulations, 1964  as the  service of  the appellant was not dispensed with  on the  allegation of misconduct, but it was an order of termination of service simpliciter in accordance with Regulation  25. As  the service  of the  appellant were terminated not  because of any personal bias of the officers of the  Corporation, but because of his unsatisfactory work, the allegation of mala fides cannot be upheld.      Allowing the appeal to this Court, ^      HELD: 1  The judgment  or the High Court is quashed and set aside  and  the  rule  is  made  absolute  in  the  writ petition. The  Oil and Natural Gas Commission is directed to pay Rs.2  lakhs to  the appellant  in lieu  of backwages and compensation in  lieu of  reinstatement within  a- period of four weeks.  The  appellant  is  entitled  to  relief  under section 89, Income Tax Act, 1961 read with Rules 21 A of the Income Tax  Rule, because  the compensation  awarded include salary which  had been  in arrears  for 18 years as also the compensation in lieu of reinstatement [878H, 879A, E-G]      2. If the appellant was appointed on regular basis, his service cannot  be terminated  by one  month’s notice. If it was by  way of punishment, as the High Court has found it to be so, termination is violative of the principles of natural justice in that no opportunity was given to the appellant to clear himself  of the  alleged misconduct  which proved  the real bans for making of the order of termination of service. If it  is discharge  simpliciter, it  would be  violative of Article 16,  because a number of store-keepers junior to the appellant are shown to have been retained in the service and cannot be  picked arbitrarily.  He  had  the  protection  of Article 16  which confers  on him  the fundamental  right of equality  and  equal  treatment  in  the  matter  of  public employment.      3. The several communications which include a letter of appreciation and 871 a certificate  eulogizing the  services  of  the  appellant, clearly show  that the  charge of  unsuitability was  either cooked up  or conjured  up for a collateral purpose of doing away with  the service  of an  active trade-union worker who because of his activities became an eye-sore. The view taken by the High Court that the termination of service was legal, valid or justified is not therefore tenable.                                                 [877H, 878C]

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    4.  Ordinarily,  where  the  order  of  termination  of service is  shown   to be  bad and  illegal,  the  necessary declaration must follow that the employee continues to be in an uninterrupted  serviced and  he is  entitled to full back wages. [878D]      In the  instant case,  the appellant was out of service from December  29, 1967.A  period of  nearly 18  years  have rolled by  and he  would have  to go back to some chagarined master. On  enquiry, the appellant informed that substantial and adequate  compensation would  be more  acceptable to him than reinstatement with backwages.                                                       [878E]      Shri Sant  Raj &  Anr. v.  Sh. O.P.Singla  & Anr  Civil Appeal No. 650/82 dated April 9, 1985 referred to.       5. An unbiased Judge, and an opportunity to controvert the   allegation  and  to  clear  oneself  are  the  minimum principles  of natural justice which must inform the drastic power  of dismissal affecting the livelihood of an employee.                                                       [876F]      6.  The   Oil  and   Natural  Gas   Commission  is   an instrumentality of  the State  and is  comprehended  in  the expression ’other authority’ in Art. 12, and any termination of  service   of  the   employee  of   the  Corporation,  if successfully questioned  would permit  the court  to make  a declaration that  the employee  continues to  be in service. Even if  the employees  of  the  Corporation,  which  is  an instrumentality of  the State,  cannot be  said  to  be  the members of  a civil  service of  the Union  or an  All India Service, or  hold any  civil post  under the  Union, for the purpose of  Articles 310 and 311 and therefore, not entitled to the  protection of  Art. 311, they would none-the-less be entitled  to   the  protection  of  the  fundamental  rights enshrined in  Articles 14 and 16 of the Constitution that is they would  be entitled to the protection of equality in the matter of  employment in  public service  and they cannot be dealt with in an arbitrary manner.                                                 [874G; 875C]      Sukhdev  Singh   &  Ors.   v.  Bhagatram  Sardar  Singh Raghuvanshi &  Anr, [1975]  3 SCR  619 and  A. L.  Kalra  v. Project and  Equipment Corporation  of India  Ltd., [1984] 3 SCC 317 referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 3187 of 1982 From  the Judgment  and Order  dated 22.1.1974  of  the Allahabad High Court in C.M.P. No. 1395 of 1968. 872      A.R. Gupta for the Appellant.      B. Datta,  Rishi Kesh,  Badri Prasad,  Ajit  Pudissary, Girish Chandra and Ms. A. Subhashini for the Respondents.      The Judgment of the Court was delivered by      DESAI, J.  Another unequal fight between a giant public sector  undertaking:   Oil  and   Natural   Gas   Commission (Corporation’ for  short) and  a Store Keeper which has been brought to  this Court  by the ultra legalist stand taken by the  Corporation   which  lacks  equanimity  and  smacks  of victimisation.      The appellant  was appointed  as Assistant Store Keeper in April, 1962 and was posted at Dehradun. Later on when the Corporation decided  to recruit  Store Keeper, the appellant was selected  in  open  competition  and  was  appointed  on December 7,  1963 as  such. He  was posted at Cambay, Gujrat and later  on   December 24, 1963 sent back to Dehradun. The

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office order  dated  February  26,  1964  recites  that  the appellant has  been appointed  as Store  Keeper till further orders and the post is sanctioned for the period February 7, 1964 to February 29, 1964. In other words, a man selected in an open  competition was  offered the post which was to last for 22  days roughly.  He was also told that his appointment was purely  temporary and  that other  terms of service were those as  set out  in the letter dated December 7, 1963, one of which  was that  the appellant will be on probation for a period of  six months  from the  date of the appointment and the same may be extended at the discretion of the appointing authority and  that the appointment may be terminated at any time by  a months’  notice given  by either side. On January 13, 1965,  the appellant  was informed  in  writing  by  the Memorandum  No.   PF/K-44-/64-ENT  that   the  appellant  on successful completion of the probation period of six months, is continued  in service  on  regular  basis  until  further orders. By  office order  dated April 6, 1947, the appellant who was  described as  Store keeper,  Grade  I  Mech.  Engg. Branch  was  transferred  to  Cambay-Nawagam  project.  This transfer order  was challenged  by the  appellant on diverse grounds in a suit filed by him. He sought an interim in- 873 junction restraining  the respondents  from implementing the order of  transfer. Interim  injunction as  prayed  for  was granted.      The Oil  & Natural  Gas  Commission  Employees  Mazdoor Sabha (Union  for short),  Dehradun submitted  a charter  of demands on  May 15,  1967 and  it was  followed by  a notice threatening direct  action by  the members  of the Union. It appears that  the appellant  was an  active  worker  of  the Union. The  usual management  response emerged  be a  secret letter dated  September 1,  1967. Shri  R.P.  Sharma,  Chief Engineer under  whom the  appellant was at the relevant time working was  told that  the appellant  is the  main  trouble maker and  that he is being given free hand by his immediate superiors and  that the  Chief Engineer  did not keep strict vigilance  over   the  activities   of  the  appellant.  The employees of the Corporation went on strike on September 12, 1967. It  was called off on September 24, 1967. On September 28, 1967,  the Union  submitted a  list of  workmen  to  the Corporation requesting  the Corporation  to  give  them  the status of  protected workmen  as required  by Sec. 33 (4) of the Industrial  Disputes Act, 1947. Appellant’s name appears at S.  No. 2  in this letter. On December 27, 1967 the Union complained of  victimisation of  the  active  union  workers including the  appellant- On  December 29, 1967 Office Order No. M  (Engg) 1  (1)/67 was  issued by which the services of the appellant  were  terminated  with  immediate  effect  in accordance with  the terms  and conditions  of his service.A cheque in  the amount of Rs. 317 accompanied the order being one month’s  pay in lieu of notice. The appellant challenged in Writ Petition No. 1395/68 in the Allahabad High Court the legality and validity of the order terminating his services.      A Division  Bench of the Allahabad High Court held that despite the  order dated January 13, 1965 that on successful completion of  the probation  period, the appellant has been appointed on  a regular  basis as Store Keeper, he was none- the-less a  temporary employee  of the  Corporation till the date on  which his  services were terminated. The High Court further held  that the  Corporation  is  not  an  industrial establishment  within  the  meaning  of  the  expression  in Industrial  Employment   (Standing  Orders)  Act,  1946  and therefore the  Model Standing  Orders enacted  under the Act were not  applicable to  the undertaking of the Corporation.

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However, the  High Court  examined an alternative contention that 874 assuming  that   the  Industrial   Establishment   (Standing (Orders) Act,  1946 does  apply to  the undertaking  of  the Corporation, yet in view of the provisions contained in Sec. 13B of  the Act, no provisions of the Act would apply to the undertaking of  the Corporation. The High Court repelled the contention of the appellant that the order of termination of service is  violative of  Oil  and  Natural  Gas  Commission (Conduct,  Discipline   and   Appeal),   Regulations,   1964 observing that  as the  service of  the  appellant  was  not dispensed with  on the  allegation of  misconduct, but as it was an  order  of  termination  of  service  simpliciter  in accordance with  the Regulation  25, no  other regulation is shown to  have been  contravened by  the impugned order. The High  Court   rejected  the  submission  on  behalf  of  the appellant that  as the Corporation is a State or at any rate instrumentality of  the State’ as contemplated by Art. 12 of the Constitution and therefore, the appellant is entitled to the protection  of Art  14 and  16 observing that ’it is not the requirement of law that in order to dismiss one employee on the  ground  of  unsuitability,  the  Government  or  the Corporation is  required to dismiss all an observation which has left  us guessing  for  its  content  and  meaning.  The Division Bench  finally concluded that as the service of the appellant were  terminated not  because of any personal bias of the  officers of  the  Corporation  but  because  of  his unsatisfactory work,  the allegation of mala fides cannot be upheld. Accordingly, the writ petition was dismissed with no order as to costs. Hence this appeal by special leave.      Mr. B.  Datta, learned  counsel who  appeared  for  the respondents did  not press before us the contention that the Corporation is  not an instrumentality of the State. In view of the  numerous decisions  of this Court and especially one in  Sukhdev   Singh  &   Ors.  v.   Bhagatram  Sardar  Singh Raghuvanshi & Anr.(1), a Constitution Bench of this Court in terms held  that ’the  Oil and  Natural Gas Commission is an instrumentality of  the State  and is  comprehended  in  the expression  other  authority’  in  Art.  12,  and  that  any termination of  service of  the employee of the Corporation, if (1) [197513 S.C.R. 619. 875 successfully questioned  would permit  the court  to make  a declaration that the employee continues to be in service.’      Even if  the employees  of the Corporation, which is an instrumentality of  the State,  cannot the be said to be the members of  a civil  service of  the Union  or an  All-India service or  hold any  civil post  under the  Union, for  the purpose of  Art. 310  and 311 and therefore, not entitled to the protection  of Art.  311,  they  would  none-theless  be entitled  to   the  protection  of  the  fundamental  rights enshrined in  Art. 14  and 16  of the Constitution. In other words, they  would be entitled to the protection of equality in the  matter of  employment in  public  service  and  they cannot be dealt with in an arbitrary manner. (See A.L. Kalra v. Project and Equipment Corporation of India Ltd.)(1).      The  next  question  is  whether  the  service  of  the appellant  was   terminated  in   accordance  with   law  or regulation or  in a  thoroughly arbitrary  manner ?  Factual matrix set  out hereinbefore will affirmatively show that on successful completion of his probation period, the appellant was appointed  on the regular establishment as Store Keeper. Thus effective from 13, 1965, the appellant was appointed on

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regular basis  as Store  Keeper. There is nothing to show in the order that on completion of the probation period, he was appointed as  a temporary  Store Keeper. The words used are: ’He is continued in service on a regular basis until further orders.’ The  expression ’until  further orders’  suggest an indefinite  period.  It  is  difficult  to  construe  it  as clothing him  with the status of a temporary employee. It is even worst  than being a probationer because the apprehended further order  may follow  the very next day. Therefore, the expression until  further order’ being thoroughly irrelevant has  to  be  ignored.  It  is  even  inconsistent  with  the appointment on regular basis as stated in that very order.      If the  appellant was  appointed on  regular basis, his service cannot be terminated by one month’s notice. If it is by way  of punishment,  as the High Court has found it to be so, it  will be  violative  of  the  principles  of  natural justice in that no opportunity was given to the appellant to clear himself of the (1) 11984] 3 S.C.C. 317. 876 alleged misconduct which never found its expression on paper but which  remained in  the minds of those passing the order of termination  of service.  If it is discharge simpliciter, it would  be violative  of Art. 16 because a number of Store Keepers junior  to the  appellant are  shown  to  have  been retained in  service and  the  appellant  cannot  be  picked arbitrarily. He had the protection of  Art.  16 which  confers on  him the  fundamental  right  of equality  and  equal  treatment  in  the  matter  of  public employment.      Mr. Datta  however, contended  that the  earlier  order dated December 7, 1963 recites that the appointment could be terminated by either side by one month’s notice and that was the  power   invoked  in  terminating  the  service  of  the appellant. The  order dated December 7, 1963 was at the time when the appellant was appointed on probation. On successful completion of  probation, the  appellant became  a member of the regular  establishment. The contract of service, if any, has to  be in  tune with  Art. 14 and 16 and such unilateral power of termination of service without giving reasons is so abhorent that  it smacks  of discrimination  and  therefore, violative of  Art. 14.  The High  Court brushed  aside  this aspect by  merely observing  that in  order to  dismiss  one employee on  the ground  of unsuitability, the Government or the Corporation  is not  required to  dismiss all’. If it is suggested that you can dismiss anyone without a semblance of an enquiry  or without  whisper of the principles of natural justice,  then   such  an   approach  overlooks   the  well- established  principle   that  where  State  action  affects livelihood or  attaches stigma,  the punitive  action can be taken after  holding an  enquiry according to the principles of natural  justice. In  other words, an unbiased Judge, and an opportunity  to controvert  the allegation  and to  clear oneself are  the minimum principles of natural justice which must  inform  such  drastic  power  of  dismissal  affecting livelihood of  an employee.  If the  observation of the High Court was  with reference  to the  contention of  the  order being violative  of Art.  14 and  16, it  overlooks the fact that the  Corporation attempted to sustain its action on the ground that  the services  of the  appellant  were  no  more required which  will certainly  impel the  court to  enquire whether the post had been abolished or whether retaining the juniors, the  inconvenient person  was thrown  out under the garb of  being surplus.  Therefore, the approach of the High Court in this behalf is not appreciable.

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877      Accepting the  finding  of  the  High  Court  that  the appellant was  removed from  service on  the ground  of  his unsatisfactory work,  the same  could  not  have  been  done without an  enquiry in accordance with principles of natural justice. At  any rate  the action  appears to  be thoroughly arbitrary. If  the facts  are properly  viewed  this  public sector  corporation   has  disclosed   the  typical  private employer’s unconcealed  dislike and detestation of an active trade unionist. From the facts stated in the earlier portion of the  judgment, it  appears that appellant was a protected workman. Add  to this the fact that the secret letter of Mr. L J.  Johnson dated  September 6,  1967  reveals  the  inner working of the mind of the top brass of the Corporation when Mr. Johnson  states that  Mr. Joshi  (appellant) ;5 the main trouble maker in the corporation. Earlier on March 29  1967, the Assistant  Director wrote  to the  Director of Stores to transfer the  appellant from  Dehradun to  Assam, the  usual management response  namely, to  transfer the  active  trade union worker  to weaken  the trade  union movement.  Even  a charge of  victimisation  qua  the  appellant  was  made  in writing. The  then Petroleum  Minister Mr. Ashok Mehta wrote to Mr.  Natwarlal Shah.  ONG Employees Mazdoor Sabha wherein he assured  that the  Corporation would not be interested in victimising anyone  and yet  soon after within three months, the services of the appellant were terminated.      And now  reasons for  the termination of service of the appellant may  be  examined.  The  appellant  is  considered unsuitable for  the job  as found  by the High Court. How he became unsuitable is an aspect not even examined by the High Court.  On   the  contrary  one  has  to  refer  to  several communications eulogizing  the  services  of  the  appellant which have  been placed  on record. One Ganga Ram, Personnel Officer, ONGC,  Tel Bhavan, Dehradun has certified on August 26, 1964  that Shri  Joshi was  found to  be ’very  sincere, conscientious dependable and hard working official and he is very much  loyal to  his duties  as Store  Keeper and he has done exceedingly  well’ He  also states that Mr. Joshi knows his job  thoroughly well’.  On April 15,1965, the Controller of Stores  and  Purchase,  the  immediate  superior  of  the appellant writes  that ’Mr.  Joshi knows  his work very well and he is very conversant with the purchase work, accounting and maintenance  of stores. He is a very bright young man of blameless character  and would  do very well in any position of responsibility’.  This letter  of appreciation  was  sent when the 878 officer  was   relinquishing  his  charge  of  the  post  of Controller of  Stores and  Purchase. On January 16.1968, the Chief Engineer  Shri R P. Sharma has issued a certificate in which  it  is  stated  that  he  found  Mr.  Joshi  sincere, intelligent and  hard working  young man  fully trust-worthy and dependable  for any  confidence that  may be  reposed in him’.  This   will  clearly   show  that   the   charge   of unsuitability was  either cooked  up or  conjured up  for  a collateral purpose  of doing  away with  the service  of  an active trade-union  worker who  because  of  his  activities became an eye sore.      Accordingly we  are unable to agree with the view taken by the High Court that the termination of service was legal, valid or  justified. This  appeal will  accordingly succeed. The question then is: what relief we must grant ?      Ordinarily, where  the order  of termination of service is shown  to be  bad and  illegal, the necessary declaration must  follow  that  the  employee  continues  to  be  in  an

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uninterrupted service  and he is entitled to full backwages. We  would  have  been  perfectly  justified  in  giving  the declaration and making that order. However, the appellant is out of service from December 29, 1967 till today.A period of nearly 18  years have  rolled by and he will have to go back to some  chagarined master.  We therefore, enquired from the learned  counsel   appearing   for-the   appellant   whether substantial  and   adequate  compensation   would  be   more acceptable to  him  or  reinstatement  with  backwages.  The appellant opted  for the  latter and  Mr. B.  Datta  learned counsel for  the commission  conceded that  the  Corporation would willingly  pay Rs.  2 lakhs as and by way of backwages and compensation in lieu of reinstatement.      This matter was adjourned to enable learned counsel for the appellant  to work out the spread over of backwages. Mr. A.K. Gupta,  learned counsel for the appellant has submitted the calculations  of backwages.  The figures therein set out are not disputed. We accept the same and treat it as part of the judgment.A  copy of  it shall  always be  annexed to the copy of this judgment.      Accordingly this  appeal is allowed and the judgment of the High Court is quashed and set aside and the rule is made absolute in  the writ  petition. The  Oil  and  Natural  Gas Commission is directed 879 to pay  Rs. 2  lakhs to  the appellant  on the  basis of the calculations herein  submitted  in  lieu  of  backwages  and compensation in  lieu of  reinstatement within  a period  of four weeks from today.      In view of the computation made in respect of backwages and compensation  from  year  and  year,  we  must  make  it abundantly clear   whether  the Commission would be entitled to deduct  income-tax while  making  the  payment.  In  this connection we  would follow  the decision  of this  Court in Shri Sant Raj & Anr. v. O.P. Singla & Anr.(1)      In tune  with  that  decision  we  give  the  following decision.      Now that  the amount  is being paid in one lump sum, it is likely that the employer may take recourse to Sec. 192 of the Income Tax Act, 1961 which provides that when any person responsible for  paying any income chargeable under the head ’Salaries’ shall,  at the  time of payment deduct income tax on the  amount payable  at the  average rate  of  income-tax computed on  the  basis  of  the  rates  in  force  for  the financial  year  in  which  the  payment  is  made,  on  the estimated income  of the  assessee under  this head for that financial year. If therefore the employer proceeds to deduct the income-tax  as provided  by Sec.  192, we  would like to make it  abundantly  clear  that  each  appellant  would  be entitled to  the relief  under Sec. 89 of the Income Tax Act which provides  that where,  by reason  of  any  portion  of assessee’s salary  being paid in arrears or in advance or by reason of  his having  received in  any one  financial  year salary for  more than 12 months or a payment which under the provisions of  clause (3)  of Section 17 is a profit in lieu of salary, his income is assessed at a rate higher than that it would  otherwise  have  been  assessed,  the  Income  Tax Officer shall  on an  application made to him in this behalf grant such  relief as  may  be  prescribed.  The  prescribed relief is  set out  in Rule 21A of the Income-tax Rules. The appellant is  entitled  to  relief  under  Sec.  89  because compensation herein  awarded includes  salary which has been in arrear  for 18  years as also the compensation in lieu of reinstatement and the  relief should be given as provided by Sec. 89 of the Income-tax Act

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(1) [1985] 3 S.C.R: R 623 880 read with  Rule "  IA of the Income Tax Rules. The appellant indisputably is  entitled to the same. If any application is necessary to  be made,  the appellant may submit the same to the competent  authority and the Commission shall assist the appellant for obtaining the relief.      The appeal  is allowed  as herein  indicated,  with  no order as to costs. N.V.K.                                       Appeal allowed. 881