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CASE NO.: Appeal (civil)  7055 of 2002

PETITIONER: K.C. Sharma

RESPONDENT: Delhi Stock Exchange & Ors.

DATE OF JUDGMENT: 01/04/2005

BENCH: K.G. BALAKRISHNAN & B.N. SRIKRISHNA

JUDGMENT: J U D G M E N T

Srikrishna, J.

       This appeal by special leave impugns the judgment of the Delhi High  Court in Letters Patent Appeal No.331/1999.         The appellant joined the service in Delhi Stock Exchange \026 the First  Respondent in this appeal - as General Manager with effect from 5.5.1992.  Initially, he was in-charge of the Market Division  and later on made in- charge  of Investor Grievances Cell.  He is highly qualified academically,  holding two first class Masters Degrees in Commerce and Arts, and three  core professional Degrees of Chartered Accountant, Company Secretary and  Cost Accountant.  In the initial stages, the appellant’s service was very much  appreciated by the First Respondent as a result of which he was granted  accelerated increments.  While he was in charge of the Investors Grievances  Cell, he took strict action against certain members of the Respondent Stock  Exchange.  This caused some dissatisfaction in the minds of some of the  brokers.  On 9th June 1995 there was a murderous assault on the appellant  and an FIR was lodged with the police. It is the case of the appellant  that till  about October 1995 the Executive Director, in-charge of the First  Respondent appreciated the appellant’s merits and was supportive.   Thereafter, there was a period of time when there was no Executive Director  between 25th October, 1995 and 13th December 1995.  During this Period the  First Respondent’s affairs were managed by elected member-directors.  The  appellant contends that, because of strict action taken by him against some  of the member-Directors, the member-Directors were waiting for an  opportunity to get rid of him. The appellant claims that during the period   26th October 1995 to 12th December 1995 he was subjected to continuous  humiliation and victimization.  In the meanwhile, the Delhi Police after  investigation gave out a press release on 7th March, 1996 naming one of the  brokers, Shiv Charandass Aggarwal, as having engineered the assault on the  appellant by paying money to some hooligans. The said Shiv Charandass  Aggarwal was arrested by the Delhi Police and during interrogation he  admitted that he was involved in the incident, as the appellant had been  harsh against him and imposed a penalty of Rs. 2 lakhs in a public grievance  appeal filed against him.  On 7.3.1996 the office of the Deputy  Commissioner of Police issued a press release stating these facts.  According  to the appellant, despite periodic notes put up by him indicating how some  of the brokers were acting contrary to the rules of the Exchange and of legal  provisions, no action was either proposed or taken against such erring  brokers by the First Respondent.  After the press release was published, the  member-Directors felt that the appellant was responsible for maligning one  of the members.  In the meanwhile, on 22.5.1996, the appellant, in  accordance with the guidelines of the Ministry of Finance, issued notices to  various brokers including the President, Vice-President and senior Directors  of the Stock Exchange. This, perhaps, was the last straw on the camel’s  back. On 23.5.1996 the First Respondent issued a notice to the appellant

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terminating his service with immediate effect on payment of three months  salary.  The termination was purportedly in exercise of the power vested in  the Board of Directors, vide Para 4 of the appointment letter of the appellant  dated 12.11.1993.   

The appellant challenged the termination of his service by a writ  petition under Article 226 of the Constitution before the Delhi High Court.   The learned single Judge allowed the writ petition on 7.7.1999 holding that  the First Respondent is ’State’ within the meaning of Article 12 of the  Constitution; and that the termination of the services of the appellant was  malafide and illegal. In this view of the matter, the learned single Judge  quashed and set aside the order of termination of the appellant’s service and  declared that the appellant shall be continued in the service of the First  Respondent with all consequential benefits. The First Respondent challenged  this order of the learned single judge by a Letters Patent Appeal.  It was  argued before the Division Bench in appeal that the termination of the  contract of employment of the appellant was on account of loss of  confidence and that the learned single Judge had failed to address himself to  this issue despite the material on record being pointed out. The Division  Bench remitted the matter to the learned single Judge to give his finding on  the following two issues: i)      Whether the termination of the contract of employment of the  General Manager of Delhi Stock Exchange by the Board of  Directors after taking into account the material on record which  leads to loss of confidence is not valid in law ?

ii)     Whether in a case where the Stock Exchange has lost  confidence in its General Manager who was holding the post of  trust should be reimposed on the Stock Exchange or is it not  appropriate to grant him compensation in lieu of reinstatement  as per the ratio of judgment of Supreme Court in the case of  O.P. Bhandari v. ITDC, AIR 1987 SC 111."

By judgment dated 1.3.01 the learned single Judge held that the two  issues had not been argued before him at all.  Referring in detail to what  transpired before him, he held : "When the point had not been taken in the counter- affidavit and when leave was sought to file an additional- affidavit and the point is mentioned only in the written  arguments, which are submitted after the judgment was  reserved, it is too much for the litigant to say, especially before  any court, that the point argued was not considered. It is in the  above backdrop that I am driven to the conclusion that the two  questions would not arise for consideration."

       The Division Bench finally heard the Letters Patent Appeal and raised  the following questions which arose for its consideration in the appeal: 1.      Whether the Delhi Stock Exchange is State under Article  12 of the Constitution of India and is amenable to writ  jurisdiction ? 2.      Whether the issue relating to the termination of service of  the General Manager is purely in the realm of contract  and, therefore, not amenable to writ jurisdiction ? 3.      Whether the termination of contract of employment of  the General Manager of Delhi Stock Exchange by the  Board of Directors after taking into account the material  on record which leads to loss of confidence is not valid in  law ? 4.      Whether in case where the Stock Exchange has lost  confidence in its General Manager who was holding the  post of trust should be reinstated on the Stock Exchange  or is it not appropriate to grant him compensation in lieu  of reinstatement as per the ratio of judgment of Supreme  Court  in the case of O.P. Bhandari v. ITDC, AIR 1987

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SC 111 ? 5.      Whether the Writ Court committed an error of  jurisdiction in not considering one of the fundamental  contentions as was pressed that being a case of loss of  confidence and the employee having the post of trust ?

Answering question no.1, the Division Bench held that the Delhi  Stock Exchange satisfied the conditions laid down by this Court in Ramana  Dayaram Shetty v. International Airport Authority of India (AIR 1979 SC  1628), and therefore, the First Respondent was ’State’ within the meaning  of Article 12 and amenable to the writ jurisdiction of the High Court. On the second question, the Division Bench came to the conclusion  that the appellant was a permanent employee. Having regard to the fact  that the provision corresponding to clause (4) of his letter of appointment  has been held ultra vires in a series of judgments of this Court, the Division  Bench was of the opinion that the appellant’s service could not have been  dispensed with by relying on or on the basis of the provisions contained in  paragraph 4 of the letter of appointment. Question Nos. 3 to 5 were considered together by the Division Bench,  which did not disagree with the findings of the learned single Judge that  the termination of the services of the appellant was illegal and arbitrary. In  fact, the Division Bench observed: "the fact, however, remains that loss of  confidence was not a ground for termination of service. The order  terminating the service, ex facie, was not stigmatic. From a statement made  in the counter-affidavit, as also the additional affidavit, it is evident that  there were serious charges against the writ petitioner". The Division Bench was of the view that, on the one hand the  appellant had made serious allegations on the member-Directors of the  Stock Exchange including its President, Vice-President and other senior  members, while on the other there were serious allegations made against  him of using his office for unauthorisedly making correspondence with the  authorities. The Division Bench concluded that such allegations and  counter allegations of serious nature were themselves a pointer to the fact  that there was bad blood between the parties and hence it would not be  advisable to direct reinstatement irrespective of the fact that loss of  confidence had not been pleaded or proved. The Division Bench placed  heavy reliance on the judgment of this Court in O.P. Bhandari v. ITDC  (supra). The Division Bench partly allowed the appeal of the First Respondent  \026 Delhi Stock Exchange and directed as under : "In that view of the matter, we are of the opinion that  payment of compensation for a sum of Rs.12 lakhs shall  meet the ends of justice.  Out of the aforementioned  amount of Rs.12 lakhs, the amount which has already  been paid to the respondent by the appellant shall be  adjusted. Such balance amount should be paid to the  appellant within a period of three months from date.

Mr. Shanti Bhushan admitted that the writ petitioner had  tried to obtain employment but did not succeed so far. It  is, therefore, not ruled out that he has a chance of getting  re-employment. As agreed to by the learned counsel for  the parties, the writ petitioner may be technically  reinstated in service for a period of three months.  However, as the writ petitioner would neither join in his  service, nor he shall be assigned with the duties and the  functions as agreed to by the learned counsel for the writ  petitioner. He would not claim any salary for the said  period but he would during the afore-mentioned period,  try to obtain an alternative job. The appellant, however,  shall issue a formal letter of reinstatement on the  aforementioned terms which Dr. Singhvi, learned counsel  for the appellant agreed."                               (italics ours)

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Mr. Shanti Bhushan, learned counsel for the appellant strenuously  urged  that the High Court’s judgment was self contradictory. He contended  that having come to the conclusion that paragraph (4) of the letter of  appointment gave no authority to the First Respondent to terminate the  service of the appellant, and further having found that the action of the First  Respondent was illegal and malafide  there was no justification whatsoever  for the High Court to have refused the normal relief of reinstatement with  full back wages and consequential benefits. He relied on the same authorities  that were cited before the Division Bench of the High Court and referred to  in the judgment under appeal.  Mr. Mukul Rohtagi, learned counsel appearing for the respondent,  reiterated the arguments which were made before the High Court and  supported the judgment of the High Court.  We are in agreement with the conclusions of the Division Bench  that  the respondent no.1 is amenable to the writ jurisdiction, that  the termination  of services  of  the appellant in purported exercise of powers vested under   paragraph (4) of letter of appointment  dated 12.11.1993 is illegal and that,  in the facts and circumstances of the case, the removal of the appellant from  the service was both malafide and unjustified.   This takes  us to the question of relief to be granted to the appellant.           From a reading of the judgment it appears to us that  the Division  Bench of the High Court decided that compensation in lieu of reinstatement  was the better option and moulded the relief according to what the parties  had agreed. It is not possible for us, therefore, to accept that the judgment of  the High Court is wholly erroneous, as urged by the learned counsel for the  appellant.         Taking into consideration all circumstances, we are of the view that,  although the termination of the appellant’s service was illegal and  unjustified,  the totality of the circumstances of the case render it improper  and unjust to direct the relief of reinstatement with full back wages.  The  High Court, even while moulding the relief  on agreement of the parties,  directed a sum of Rs. 12 lakhs to be paid to the appellant as compensation  from which the amounts already paid from time to time under orders of the  High Court were to be adjusted.  In our view, the impugned judgment needs to be upheld with a slight  modification on the issue of compensation.  The compensation payable in  lieu of reinstatement and back wages shall be increased to Rupees Fifteen  lakhs (Rs. 15,00,000/-).

We partly allow the appeal and modify the impugned judgment as  under:-

The compensation payable in lieu of reinstatement and back wages  shall be Rupees Fifteen lakhs. The amount, if any, already paid under the  directions of the High Court shall be liable to be set off therefrom.

The appellant shall be given terminal benefits, if any, admissible  under the terms of service.

The appellant shall be paid Rupees One lakh towards costs in the High  Court and in this Court.