MANAGING DIRECTOR, UTTAR PRADESH WAREHOUSING CORPORATION & ANR. v. VINAY NARAYAN VAJPAYEE

Citation: [1980] 2 S.C.R. 773

Court: Supreme Court of India

Bench: R.S. SARKARIA, O. CHINNAPPA REDDY

Case summary

Furthermore, whether a wor~m_an or employee of a statutorY authority should be reinstated in public employment with or without full back wages, is a question of fact depending on evidence to be produced before the ! (i) appropriate cases of public s~rvants who have been...

Judgment text

l-1ANAGING DIRECTOR, UTTAR PRADESH WAREHOUSING ( CORPORATION & ANR. l'. • VINAY NARAYAN VAJPAYEE • January 16, 1980 [R. S. SARKARIA AND 0. CHINNAPPA REDDY, JJ. ] ·LJ1hour dispute-Employer-A Statutory Corporation-Disnzissed an e1npToyee 'lV-ithout giving an c-pporJunity of being_ heard-Validity of. ·Statutory bodies-Rights of employees under. Constitu1ion of India-Article 226-Scope of-High Court issued Writ of -Certiorari qutJshing order of di. unissal and ordered reinstatement of en1ployee with full back l'l-'oges--Il con1petent to order reinstaten1ent. The respondent was an employee of o statutory body. On allegations of ·theft, misappropriation of stocks and certain other irregularities a preliminary Cnquiry was conducted by the I\fanaging Director (the appellant) and charge~ were framed against the employee.

In the explanation submitted by him he expressly demanded that he wished to cross-examine certain witnesses whose names were given by him, and wanted to examine certain other persons a! witnesses. A few months thereafter, the appellant passed the impugned order I of dismissal and required him to pay Rs. 549j- on account of certain com· -I modities allegedly misappropriated by him. The employee's petition under Article 226 for tQa issue of a writ of certiorari ·was rejected by a single Judge. The Division Bench allowed the writ on the ground that the Corporation which was required to act in a quasi-judicial ·manner failed to give an opportunity of being heard to the dismissed employee and that therefore the order of dismissal was bad.

On appeal, the appellant contended that Regulation 16 providing for an enquiry and giving an opportunity to an employee against whom an enquiry ·"'tls to be held for misconduct had not come into force when the respondent was dismissed and, therefore, he had no statutory status and no locus-standi to maintain the writ which in substance was for specific performance of a .. contract of service. D~smissing the appeal, HEID : (Per Sarkaria, J. ) 1. The impugned· order of dismissal was bad in law and had been rightly· l! et aside by the High Court [781 F] (a) Regulations defining duties, conduct and conditions of its employees framed by statutory bodies have the force of law. The form and content of II contract with a particular employee being preScriptive and statutory, the statutory bodies have no free hand in framing the terms and conditions of tervice to their employees, but are bound to apply them as laid down in the regulations.

The regulations give the employees a statutory stntus oind impose obligations on the statutory authorities, and that they cannot deviate frorn \ the conditions of service laid down therein. There is no personal element in public employment and service. Whenever employees rights are affected by a decision taken under statutory powers the court would presume the • existence of a duty to observe the rules of natural justice and compliance by • the statutory body with rules and regulations in1posed by the statute. [779 E·G} Sukhdev Singh v. Bhagat Rani [1975] 3 SCR 619 referred to In the instant C•Jse the appellant v,.

ns a statutory body and, therefore, even if at the time of dismissal the statutory regulations had not been framed or had not come into force, employment being public employment, the employer could not terminate the employee's services without due enquiry in accordance with the regulations in force or in the absence of any regulations, in accordance with the rules of natural justice. Such on enquiry into the conduct of a public employee is of a quasi-judicial character. The respondent was employed by the Corporation in exercise of the powers conferred on it by the statute and, th~refore, the Corporation's pO\Ver to dismiss the respondent from service was derived from this statute. The court would presume the existence of a duty on the part of the dismissing authority to observe rules of natural justice and to act in accordance with the spirit of the regulation which was: then on the anvil and came into force shortly' after the dismissal.

Secondly, in the instant case no regular departmental enquiry \Vas hekl. The order of dismissal was passed summarily after perusing the employee's explanation. The rules of natural justice require that the dismissed e1nployee s·houlJ be given a reasonable opportunity to deny his guilt, to defend himself and to est"'blish his innocence which means an opportunity to cross-examine the witnesses relied upon by the Corporation and an opportunity to lead evidence in defence of the charge as also the show-cause notice for the proposed punishment. Such an opportunity w:\s der. itd to the respondent. [780 G-H; 781 A-D] Executive Con1n1itee of U. P. State Warehousing Corporation Ltd. v. Chandra Kiran Tyagi [1970] 2 S. C. R. 250; Ra111ana Dayara111 Shetty v. The International Airport Authority of India & Ors. A. I. R. 1979 S. C. 1628 referred to. 2. The High Court \Vas in error in directing payment of full back wages to the dismissed 'employee.

[783 EJ 3(a) In exercise of its certiorari jurisdiction under Article 226 of the Constitution, the High Court acts only in. a supervisory capacity and not as an. appellate tribunal. It does not review the evidence upon which the inferior Tribunal proposed to base its conclusion; it simply demolishes the order which it considers to be without jurisdiction or n1anifestly erroneou , the existence of a duty to observe the rules of natural justice and com- pliance with rules and regulations imposed by statute... The Court then referred to U. P. Warehousing Corporation and Indian Airlines Corporation cases and held that these decisions were rn direct conflict with an earlie. r decision of this Court in Naraindas Barot v. Divisional Controller, S. T. C. ,(') and were wrongly decided. The Court followed the decision in Sirsi Municipality (ibid). Mathew J. in his separate but concurring judgm~nt, pointed out how the concept of the State has undergone draetic changes in recent years.

A State is an abstract entity and can act oniy through the -instrumentality or agency of natural or juridical persons. With the advent of a welfare State the framework of civil service administration becarne increasingly insufficient for handling the new tasks which were often of a specialised and highly technical character For this reason, a policy of public administration through separate Corporations which would operate largely according to business principles and be separately accountable, was evolved. Such public corporations constituted under enactments, became a third arm of the Government. The employees of public corporation are not civil servants. In so far as public corporations fulfil public tasks on behalf of the Government, they are public authorities and, as such, subiect to control by Government. The public corporation being a creation of the State is subject to the ' . constitutional limitation as the State itself.

The Court thus with a majority of 4-1 held tilat the statutory bouies then under consideration were 'authonties' within tr' meaning of Article 12 of the Constitution and though their empl"yees were not sen ants of the Union or of a State, yet they had a statutory status. - The appellant is a Corporation constituted under the Uttar Pradesh State Warehousing Corporation (Act 28) of 1956, which was subsequently replaced by the Central Act 58 of 1962. It is a statutory body wholly controlled and managed by the Government. Its status 1s analogous to that of the Corporalions which were under consideration in Sukhdev Singh's case (ibid). The ratio of Sukhdev Singh's case, therefore, squarely applies to the present case.

Even if at the time of the dismissal, the statutory regulations had not been framed or had not come into force, then also the employment of the respondent was public employment and the statutory body, the employer, could not terminate the services of its employee without due enquiry in accordance with the statutory Regulations, if any in force, or in tl1c absence of such Regulations, ir. ence of the res- ~ndent. There was controversy on this point. But it was clear to the High Court from the report of enquiry by the Opposite Party No. 1 that he relied upon the reports of some persons and the statements of some other persons who were not examined by him. A regular departmental enquiry takes place only after the charge-sheet is drawn np and served upon the delinquent and the latter's explanation is obtained. In the present case, no such enquiry was held and the order of dismissal was passed summarily after perusing the respondent's explanation.

The rules of natural justice in this case, were honoured in total breach. The impugned order of dismissal was thus bad in law and had been rightly set aside by the High Court. Before passing on to the next question we may in fairness mention, that Mr. Asok Sen had cited two more decisions, also. The first was a recent judgment of the House of Lords in Melloch. v. Aberdeen Corporation('), wherein Lord Wilberforce in his speech (at pages 1595- 1596 of the Report) observed that in cases in which there is an element of public employment or service, or support by statute or something in the nature of an office or a status, which is capable of protection, then irrespective of the terminology used, and even though in some inter parties aspects the relationship may be called that of master and servant, there may be essential procedural requirement to be observed on grounds of natural justice. The second decision is Ramana (l) [1971] I W. L. R. 1578. Dayaram Shetty v.

The International Airport Authority of India & Ors. (') In Ramana Dayaram Shelly's case (ibid) Bhagwati, J. after making an exhaustive survey of t,he decisions of this Court and of American Courts, summarised some of the factors which are considered to determine whether a Corporation is an agency or instrumentality of Government. We do not think it necessary to burden this judgment by a detailed discussion of these cases because in the instant case, -all the material factors exist which show beyond doubt that the Uttar Pradesh State Warehousing Corporation constituted under the Central Act 28 of 1956, is an agency or instrumentality of the Government, and the relationship between the Corporation and its employees is not purely that of m-aster and servant, founded only on contract. Indeed, it was not seriously disputed that the respondent was in public employment, and the Corporation is an authority within the meaning of Article 12 of the Constitution.

Further contention of the learned counsel for the appellants is that even if the dismissal of the respondent was wrongful, the High Court could only quash the same, bnt it could not in the exercise of its certiorari jurisdiction under Article 226 of the Constitution give the further direction that the employee should be reinstated in service with full back wages. It is maintained that in giving this further direction, the High Court had overleaped the bounds of its jurisdiction. There appears to be force in this contention. It must be remembered that in the exercise of its certiorari jurisdiction under Article 226 of the Constitution, the High Court acts only in a supervisorY capacity and not as an appellate tribunal.

It does not review the evidence upon which the inferior tribunal proposed to base its conclusion; it simply demolishes the order which it considers to be without jurisdiction or manifestly erroneous, but does not, as a rule, substitute its own view for those of the inferior tribunal. In other words, the offending order or the impugned illegal proceeding is quashed and put out of the way as one which should not be used to the detriment of the writ petitioner. Thus in matters of employment, while exercising its supervisory jurisdiction under Article 226 of the Constitution, over the order and quasi-judicial proceeding of an administrative authority-not being a proceeding under the industrial law/labour law before an industrial/labour tribunal--<:ulminating in dismissal of the employee, the High Court should ordinarilv. in 11) A. I. R. 1979 S. C. 1628. U. P. WAREHOUSING CORPN. V. V. N. VAJPAYEE 783 (Chinnappa Reddy,!.

) the event of the dismissal being found illegal, simply qnash the same and should not further give a positive direction for payment to the employee full back wages (although as a consequence of the annulment of the dismissal, the position as it obtained immediately before the dismissal is restored), such peculiar powers can pr6£erly be exercised in a case where the impugned adjudication or award has been given by an Industrial Tribunal or Labour Court. The instant case is not one under Industrial/Labour Law. The respondentemployee never raised any industrial dispute, nor invoked the jurisdictiop. of the Labour Court or the Industrial Tribunal.

He directly moved the High Court for the exercise of its special jtJlisdiction under Article 226 of the Constitution for challenging the order of dismissal primarily on the ground that it was violative of the principles of natural justice which required that his public employment should not be terminated without giving him a due opportunity to defend himself and to rebut the charges against him. Furthermore, whether a wor~m_an or employee of a statutorY authority should be reinstated in public employment with or without full back wages, is a question of fact depending on evidence to be produced before the ! ribunal. If after the termination of his employment the workman/ employee was gainfully employed elsewhere, thl)J is one of the important factors to be considered in determining whether or not the reinstatement should be with full back wages and with conti~uity of employment.

For these two fold reasons, we are of opinion that the High Court was in error in directing payment to the employee full back WG)? fS. For the foregoing reasons wh\le upholding the judgment of the High Court with regard to the quashing of the order of dismiss~! of the respondent on the ground of its being invalid, we delete the direction for payment to the respondent full back wages. Excepting this modification, the appeal is dismissed. However. in the circumstan- Ce! ', the appellant-Corporation shall pay the costs of the responden4 in this Court. CHINNAPPA REDDY, J. -The respondent-employee was dismissed from service. The employer dismissed him, without observing the principles of natural justice. This has been found by the High Court who quashed the order of dismissal in a proceeding under Art. 226 of the Constitution. The employer has appealed. The employer claims that a declaration to enforce a contract of personal service cannot be granted by the Court.

The only remedy of the employee, he pleads, is to file a suit for damages for wrongful dis'missal. The answer of the employee is that the employer is a statutory Corpora- [1980] 2 S. C. R. tion whose employees have statutory status, and that the employer is bound by the regulations made under the statute as also to observe the principles of natural justice. Breach of the regulations or failure to observe the principles of natural justice entitles the employee to invoke the jurisdiction of the High Court under Article 226 of the Constitution. The question whether breach of statutory regulations or failures to observe the principles of natural justice by a statutory Corporation w:ll entitle an employee of such Corporation to claim a declaration of continuance in service and the question whether the employee is entitled to the protection of Arts. 14 and 16 against the Corporation were considered at great length in Sukhdev Singh & Ors. v. Bhagatram Sardar Singh Raghuvanslzi & Anr.

(1) The question as to who may be considered to be agencies or instrumentalities of the Government was also considered, again at some length, by this Court in Ramana Dayaram Shelly v. The International Airport Authority of India & Ors. (') I find it very hard indeed to discover any distinction, on principle, between a person directly under the employment of the Goverrnnent • and a person under the employment of an agency or instrumentality of the Government or a Corporation, set up under a statqte or in- ... corporated but wholly owned by the Government. It is self evident and trite to say that the function of the State has long since ceased to be confined to 'the preservation of the public peace. the exaction of taxes and the defence of its frontiers. It is now the function of the State to secure 'social, economic and political justice·. to preserve _,/''" 'liberty of thought, expression, belief, faith and worship', and to ensure 'equality of status and of opportunity'.

That is the proclamation of the people in the preamble to the Constitution. The desire to attain these objectives has necessarily resulted in intense Governmental activity in manifold ways. Legislative and executive activity have reached very far and have touched very many ' aspects of a Gitizen's life. The Government, directly or through the Corporations, set up by it or owned by it, now owns or manages, a large number of industries and institutions. It is the biggest builder in the country. Mammoth and minor irrigation projects, heavy and light engineering projects, projects of various kinds are undertaken by the Government. The Government is also the biggest trader in the country. The State and the multitudinous agencies and Corporations set up by it are the principal purchasers of the produce and (! ) [1975] 3 S. C. R. 619. (2) A. I. R. 1979 S. C. 1628. U. P. WAREHOUSING CORPN. V. V. N. VAJPAYEE 785 (Channappa Reddy, !.

) A the products of our country and they control a vast and complex machinery of distril;JUtion. The Government, its agencies and instrumentalities, Corporations set up by the Government under statutes and Corporations incorporated under the Companies Act but owned by the Government have thus become the biggest employers in the country. There is no good reason why, if Government is bound to B observe the equality clauses of the c0nstitution in the matter of employment and in its dealings with the employees, the Corparations set up or owned by the Government should not be equally bound and why, instead, such Corporations could become citadels of patronage and arbitrary action.

In a country like ours which teems with population, where the State, its agencies, its instrumentalities and its Corporations are the biggest employers and where millions seek employment and security, to confirm the applicability of the equality clauses of the constitution, in relation to matters of employment, strictly to direct employment under the Government is perhaps to mock at the Constitution and th~ people. Some element of public, employment is all that is necess·ary to take the employee beyond the D reach of the rule which denies him access to a Court so enforce a contract of employment and denies him the protection o1' Arts. 14 and 16 of the Constitution. After all employment in the public; sector has grown to vast dimensions and employees in the public sector often discharge as onerous duties as civil servants and partici- E pate in activities vital to our country's economy.

In growing realization of the importance of employment in the public sector, Parliament and the Legislatures of the States have declared persons in the service of local authoritie8, Government companies and statutory corporations as public servants and, extended to them by express enactment the protection usually extended to civil servants from suits and prosecution. It is, therefore, but right that the independence and integrity of those employed in the public sector should be secured as much as the independence and integrity of civil servants. , I agree with what has been said by my brother Sarkaria . r. I ' have added a few lines to emphasise some aspects of the problem. PB. R. Appeal dismissed.