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Wednesday, February 20, 2013

non-appointment to the post of a Civil Judge in Andhra Pradesh as her husband Sri Srinivasa Chowdary, who is practicing as an Advocate in the Courts at Markapur is having close links with CPI (Maoist) Party which is a prohibited organization. - on selection, the Civil Judges remain on probation for a period of two years, and the District Judges and the High Court have ample opportunity to watch their performance. Their probation can be extended if necessary, and if found unsuitable or in engaging in activities not behoving the office, the candidates can be discharged. - Prima facie, on the basis of the material on record, it is difficult to infer that the appellant had links/associations with a banned organization. The finding of the Division Bench in that behalf rendered in para 19 of the impugned judgment can not therefore be sustained. - we are clearly of the view that the High Court has erred firstly on the administrative side in discharging its responsibility under Article 234 of the Constitution, and then on the Judicial side in dismissing the writ petition filed by the appellant, by drawing an erroneous conclusion from the judgment in the case of Kali Dass Batish (supra). Having stated so, the 33Page 34 Court can not grant the mandamus sought by the appellant to issue an appointment order in her favour. As held by this Court in para 17 of Harpal Singh Chauhan Vs. State of U.P. reported in 1993 (3) SCC 552, the court can examine whether there was any infirmity in the decision making process. The final decision with respect to the selection is however to be left with the appropriate authority. In the present matter the Division Bench ought to have directed the State Govt. to place all the police papers before the High Court on the administrative side, to enable it to take appropriate decision, after due consideration thereof. 30. Accordingly, the impugned judgment and order dated 19.3.2009 rendered by the Division Bench of the Andhra Pradesh High Court is hereby set-aside. The first respondent State Government is directed to place the police report (produced before the Division Bench) for the consideration of the High Court on the administrative side. The first respondent should do so within two weeks from the receipt of a copy of this judgment. The selection committee of the High Court shall, within four weeks thereafter consider all 34Page 35 relevant material including this police report, and the explanation given by the appellant, and take the appropriate decision with respect to the appointment of the appellant, and forward the same to the respondent no 1. The first respondent shall issue the consequent order within two weeks from the receipt of the communication from the High Court. This appeal and the Writ Petition No. 26147 of 2008 filed by the appellant in the High Court will stand disposed off with this order. In the facts of this case, we refrain from passing any order as to the cost.


Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1389 OF 2013
(@ out of SPECIAL LEAVE PETITION (CIVIL) NO. 23312/2009)
Smt. K. Vijaya Lakshmi …  
Appellant
             Versus
Govt. of Andhra Pradesh
Represented by its Secretary
Home (Courts C1) Department
and another              …  
Respondents
J U D G  E M E N T
H.L. Gokhale J.
Leave Granted.
2. This appeal seeks to challenge the judgment and
order  dated  19.3.2009  rendered  by  a  Division  Bench  of
Andhra Pradesh High Court in Writ Petition No. 26147 of 2008.
By that order the said writ petition of the appellant disputing
Page 2
her non-appointment to the post of a Civil Judge in Andhra
Pradesh, has come to be dismissed.
Facts leading to this appeal
3. The appellant herein is an advocate practicing in
the  courts  at  Markapur,  District  Prakasam  in  the  State  of
Andhra Pradesh.
The Andhra Pradesh High Court (Respondent
No.2 herein) had invited applications for the appointments to
105 posts of (Junior) Civil Judges (including 84 posts by direct
recruitment)  by  its  Notification  No.1/2007-RC  dated
14.5.2007.  
A written examination was conducted for that
purpose on 28.10.2007, and those who qualified therein, were
called  for  an  interview.  
After  the  interviews,  some  81
candidates  from  amongst  the  direct  recruits  (and  17  by
transfer) were selected by a committee of Hon’ble Judges of
the High Court, and this selection was approved by the Full
Court on the administrative side.
The appellant was one of
those who were selected, and her name figured at S.No.26 in
the list of selected candidates from the general category.
4. However, it so transpired that whereas the other
selected  candidates  were  issued  appointment  letters,  the
2Page 3
appellant  was  not.   She,  therefore,  applied  on  3.11.2008
under the provisions of The Right to Information Act, 2005, to
find out the reason of her non-appointment.  She received a
letter dated 11.11.2008 from the respondent No.1 which gave
the following reason therefor:
“I  am  directed  to  invite  your  attention  to  the
reference  2nd cited,  and  to  inform  you  that,
adverse remarks were reported in the verification
report, that your husband Sri Srinivasa Chowdary,
who is practicing as an Advocate in the Courts at
Markapur is having close links with CPI (Maoist)
Party which is a prohibited organization.”
5. The  appellant  was  shocked  to  learn  the  above
reason for her non-appointment.  Although nothing was stated
against her in that letter, according to her what was stated
against her husband was also false. She, therefore, filed a Writ
Petition  bearing  No.  26147  of  2008  in  the  High  Court  of
Judicature  of  Andhra  Pradesh,  and  prayed  that  a  writ  of
mandamus be issued to declare that the non-inclusion of her
name in the list of Junior Civil Judges issued on 23.10.2008
was  illegal,  arbitrary  and  in  violation  of  Article  14  of  the
Constitution of India (Constitution for short), and consequently
3Page 4
a direction be issued to the respondents to forthwith issue an
order of appointment to her.
6. The respondents contested the matter by filing their
affidavits in reply. This time the Respondent No 1 alleged that
the appellant too had close links with the CPI (Maoist) party.
Paragraphs 4 and 5 of the affidavit of respondent No. 1 stated
as follows:-
“It is further submitted that the Superintendent of
Police, has reported that in re-verification of character
and  antecedents  of  Karanam  Vijaya  Lakshmi  D/o  K.
Balaguravaiah, Mangali Manyam, Markapur, Prakasam
District who is selected as Junior Civil Judge shows that
the confidential intrinsic intelligence collected recently
with regard to the movements of CPI (Maoist), it came
to light that Smt. K. Vijaya Lakshmi (Sl. No.26 in the
selected list) D/o K. Balaguravaiah r/o Mangali Manyam,
Markapur who is selected for the post of Junior Civil
Judge  and  her  husband  Srinivasa  Chowdary  s/o
Sambasiva Rao who is practicing as an advocate in the
Courts  at  Markapur  are  having  close  links  with  CPI
(Maoist) Party, which is a prohibited organization and
also in touch with UG cadre of the CPI (Maoist) Party.
Further  it  is  submitted  that  the  CPI  (Maoist)  is  a
prohibited Organization by the Government and as the
candidate  Smt.  K.  Vijaya  Lakshmi  Sl.  No.26  in  the
selected list D/o K. Balaguravaiah r/o Mangali Manyam,
Markapur  and  her  husband  Srinivasa  Chowdary  S/o
Sambasiva Rao who is practicing as an Advocate in the
Courts  at  Markapur  are  having  close  links  with  CPI
(Maoist) Party, which is a prohibited organization and
also in touch with UG cadre of the CPI (Maoist) Party
the Government feel that she should not be offered the
appointment to the post of Junior Civil Judge.”
4Page 5
7. The appellant filed a rejoinder on 8.2.2009, and
denied all the allegations as being false and incorrect.
8. A  counter  affidavit  was  filed  on  behalf  of  the
Respondent No. 2, by the Registrar General of the High Court.
In Para 4 of this affidavit it was stated that the appellant was
provisionally selected by the High Court for the appointment
to the post of a Civil Judge, along with other candidates.  A
provisional list of 98 selected candidates was sent to the first
respondent Government of Andhra Pradesh to issue orders
approving the select list, after duly following the formalities
like verification of antecedents.  The first respondent, vide its
G.O.Ms.  164  Home  (Cts.  C1)  Dept.  dated  23.10.2008,  did
thereafter  issue  the  order  approving  the  Selection  of  94
candidates. However, as far as the appellant is concerned, the
affidavit stated that the first respondent vide its memo dated
8.5.2008,  had  requested  the  Superintendent  of  Police,
Prakasam  District,  to  get  verified  the  character  and
antecedents  of  the  appellant  and  other  candidates.
Thereafter, the affidavit stated:-
5Page 6
“…The  1
st
 Respondent  through  the  letter
dated 25.10.2008 informed the High Court that
the  candidature  of  the  petitioner  could  not  be
considered as it was reported in her antecedents
verification  report  that  she  had  links  with
prohibited organization.
It  is  respectfully  submitted  that  this
Respondent has no role to play in the matter since
the 1
st
 Respondent is the appointing authority in
respect of Civil Judge (Junior Division).  Hence no
relief can be claimed against this respondent.”
Thus,  as  can  be  seen,  the  High  Court  Administration  was
informed through a letter that the appellant had links with a
prohibited organisation, but the affidavit does not state that
the  High  Court  was  informed  as  to  which  was  that
organization, or as to how the appellant had links with that
organization.  The High Court has also not stated whether it
made any inquiry with the Respondent No. 1 as to which was
that  organization,  and  in  what  manner  the  appellant  was
connected with it.  Besides, as can be seen from the affidavit,
the Government at its own level had taken the decision in this
matter that the candidature of the appellant could not be
considered due to the adverse report, and conveyed it to the
High Court. This decision was accepted by the High Court, as
6Page 7
it is, by merely stating that it had no role to play since the
Respondent No 1 was the appointing authority.
9. When the Writ Petition came up before a Division
Bench of the High Court, the Division Bench by its order dated
18.9.2008  called  upon  the  respondents  to  produce  the
material in support of the report which had been submitted by
the Superintendent of Police, Prakasam District. The report
and the supporting material  was tendered to the Division
Bench, and after going through the same the Bench held in
para 19 of its judgment that ‘the allegations appearing from
the antecedent verification report show links/associations with
the  banned  organization’.  The  Division  Bench  relied  upon
judgment of this court in  K.  Ashok  Reddy  Vs.  Govt.  of
India  reported in 1994  (2)  SCC  303 to state that judicial
review  is  not  available  in  matters  where  the  State  was
exercising the prerogative power, and applied it in the present
case since the appointment of the candidate concerned was
to be made to a sensitive post of a judge. The Division Bench
also referred to and relied upon the judgment of this Court in
Union of India Vs. Kali Dass Batish  reported in 2006 (1)
7Page 8
SCC 779 to the effect that when the appointing authority has
not found it fit to appoint the concerned candidate to a judicial
post, the court is not expected to interfere in that decision.
The Division Bench therefore dismissed the writ petition by its
impugned judgment and order.
10. Being aggrieved by this decision, the appellant has
filed the present appeal. When the matter reached before this
Court,  the  respondents  were  called  upon  to  produce  the
report which was relied upon before the High Court.  After a
number of adjournments, the report was ultimately produced
alongwith an affidavit of one M.V. Sudha Syamala, Special
Officer (I/C).  A document titled ‘Report over the activities
of CPI (Maoist) activists and their sympathizers’ dated
15.9.2008  by  Inspector  of  Police,  District  Special  Branch,
Ongole was annexed with that affidavit.  Para 5 of this report
made certain adverse remarks against the appellant.  This
para 5 reads as follows:-
“5.  Kasukurthi  Vijayalakshmi,  Advocate,
Markapur  CPI  (Maoist)  frontal  organization
member and sympathizer of CPI (Maoist):- She is
wife of Srinivasarao @ Srinivasa Chowdary.  She is
a  sympathizer  of  CPI  (Maoist)  party.   She  is  a
8Page 9
member of Chaitanya Mahila Samakhya (CMS), a
frontal  organization  of  CPI  (Maoist).   She  along
with  other  members  Nagireddy  Bhulakshmi  @
Rana  and  Cherukuri  Vasanthi,  Ongole  town  is
trying  to  intensify  the  activities  of  CMS  in
Prakasam district, especially in Markapuram area.”
One more affidavit was filed on behalf of the first respondent,
viz,  that of one Shri Kolli Raghuram  Reddy who  produced
along  therewith  some  of  the  documents  of  the  police
department, known as ‘A.P. Police Vachakam’. He, however,
accepted in para 5 of this affidavit that:-
“There  is  no  particular  documentary  proof
that the Chaitanya Mahila Samakhya is a frontal
organization to the CPI (Maoist) except the above
publication in A.P. Police Vachakam part III.” 
11. The appellant filed a reply affidavit and denied the
allegations. She stated that she was not a member of CPI
(Maoist), nor did she have any connection with the banned
organization or with any of its leaders. She disputed that any
such organization, by name CMS existed, and in any case, she
was not a member of any such organization. She submitted
that  her  husband  must  have  appeared  in  some  bail
applications of persons associated with this party, but she has
never appeared in any such case. She further stated that her
9Page 10
husband was a member of a panel of advocates who had
defended political prisoners, against whom the district police
had  foisted  false  cases,  and  those  cases  had  ended  in
acquittals.  She  disputed  the  bona-fides  of  the  police
department in making the adverse report, and relied upon the
resolutions passed by various bar associations expressing that
her husband was being made to suffer for opposing the police
in matters of political arrests.  We may note at this stage that
the Respondent No. 2 has not filed any counter in this appeal.
Submissions of the rival parties
12. Mr.  Ranjit  Kumar,  learned  senior  counsel  for  the
appellant submitted that the respondents have changed their
stand from time to time.  Initially, all that was stated was that
the husband of the appellant was having close links with CPI
(Maoist)  party,  which  is  a  prohibited  organization.
Subsequently,  it  was  alleged  that  the  appellant  was  also
having connection with the same party, and lastly it was said
that she was a member of CMS, which was named to be a
Maoist Frontal Organization.  The learned Counsel called upon
the respondents to produce any document to show that CMS
10Page 11
was in any way a Frontal Organization of CPI (Maoist), but no
such material has been produced before us.
13. Reliance was placed by Mr. Ranjit Kumar, on the
judgment of this Court in  State  of  Madhya  Pradesh  Vs.
Ramashanker Raghuvanshi reported in AIR 1983 SC 374.
That  was  a  case  concerning  the  respondent  who  was  a
teacher.  He was absorbed in a Govt. school on 28.2.1972 but
his service was terminated on 5.11.1974, on the basis of an
adverse report of Deputy Superintendent of Police. The High
court of Madhya Pradesh quashed that termination order, for
being in violation of Article 311 of the Constitution.  This Court
(per O. Chinappa Reddy, J.) while upholding the judgment of
the High Court, elaborated the concepts of freedom of speech,
expression and association enshrined in the constitution.  It
referred to some of the leading American judgments on this
very issue.  The Court noted that the political party ‘Jansangh’
or  RSS,  with  which  the  respondent  was  supposed  to  be
associated, was not a banned organization, nor was there any
report  that  the  respondent  was  involved  in  any  violent
activity.   The  Court  observed  that  it  is  a  different  matter
11Page 12
altogether if a police report is sought on the question of the
involvement of the candidate in any criminal or subversive
activity,  in  order  to  find  out  his  suitability  for  public
employment. But otherwise, it observed in para 3:-
“……Politics is no crime’. Does it mean
that only True Believers in the political faith of the
party in power for the time being are entitled to
public employment?...... Most students and most
young men are exhorted by national leaders to
take part in political activities and if they do get
involved in some form of agitation or the other, is
it to be to their ever-lasting discredit?  Some times
they get involved because they feel strongly and
badly about injustice, because they are possessed
of  integrity  and  because  they  are  fired  by
idealism.   They  get  involved  because  they  are
pushed into the forefront by elderly leaders who
lead and occasionally mislead them.   Should all
these  young  men  be  debarred  from  public
employment?  Is  Government  service  such  a
heaven that only angels should seek entry into it?”
This Court therefore in terms held that any such view to deny
employment to an individual because of his political affinities
would be offending Fundamental Rights under Articles 14 and
16 of the Constitution.
14. In paragraph 7 of its judgment the Court referred to
the observations of Douglas, J. in Lerner Vs. Casey which are
to the following effect:-
12Page 13
“7. In  Lerner v.  Casey,  (1958)  357  US  468
Douglas, J.  said:
“We deal here only with a matter of belief. We
have no evidence in either case that the employee
in question ever committed a crime, ever moved
in treasonable opposition against this country. The
only mark against them — if it can be called such
—  is  a  refusal  to  answer  questions  concerning
Communist Party membership. This is said to give
rise to doubts concerning the competence of the
teacher in the Beilan case and doubts as to the
trustworthiness  and  reliability  of  the  subway
conductor in the Lerner case....
There  are  areas  where  government  may  not
probe  .  .  .  But  government  has  no  business
penalizing  a  citizen  merely  for  his  beliefs  or
associations. It is government action that we have
here. It is government action that the Fourteenth
and First Amendments protect against . . . Many
join associations, societies,  and fraternities with
less than full endorsement of all their aims.”
Thereafter, in para 9 this Court once again quoted Douglas, J’s
statement in  Speiser  Vs.  Randall  (1958)  357  US  513 to
the following effect:-
“9……..Advocacy  which  is  in  no  way
brigaded with action should always be protected
by the First Amendment. That protection should
extend even to the ideas we despise…….”
Ultimately this Court dismissed that petition. What it observed
in paragraph 10 thereof, is equally relevant for our purpose.
This para reads as follows:-
13Page 14
“10. We are not for a moment suggesting,
that even after entry into Government service, a
person may engage himself in political activities.
All that we say is that he cannot be turned back at
the  very  threshold  on  the  ground  of  his  past
political  activities.   Once  he  becomes  a
Government servant, he becomes subject to the
various  rules  regulating  his  conduct  and  his
activities  must  naturally  be  subject  to  all  rules
made in conformity with the Constitution.”
15. Mr. Venkataramni, learned senior counsel appearing
for the respondents, on the other hand, drew our attention to
the  judgment  of a bench  of  three  judges  of this Court in
Union  of  India  Vs.  Kali  Dass  Batish  (supra), which was
relied upon by the Division Bench. That was a case where the
first respondent was a candidate for the post of a judicial
member in the Central Administrative Tribunal.  The selection
committee, under the chairmanship of a judge of this Court,
had selected him for consideration.  When his antecedents
were verified by the Intelligence Bureau, a noting was made
by the Director (AT), Ministry of Personnel, on 25.10.2001, to
the following effect:-
“……..(i) In legal circles, he is considered to
be an advocate of average caliber. (ii) It is learnt
that though he was allotted to the Court of Justice
R.L. Khurana, the learned Judge was not happy
with  his  presentation  of  cases  and  asked  the
14Page 15
Advocate General to shift him to some other court,
which was done. (iii) He was a contender for the
Shimla AC seat on BJP ticket in 1982 and 1985.
When he did not get the ticket, he worked against
the  party  and  was  expelled  from  the  party  in
1985.  He  was  subsequently  re-inducted  by  the
party in 1989…..”
The Director, however, gave him the benefit of doubt, since
his name had been recommended by a selection committee
headed by a Judge of Supreme Court.  The Joint Secretary,
Ministry of Personnel also made a similar note.  The Secretary,
Ministry of Personnel, however, made a note that he need not
be appointed, since his performance was poor.  The Minister
of State made a note that the departmental recommendations
be sent to the Chief Justice of India (C.J.I.).  When the proposal
was  subsequently  submitted  with  the  confidential
memorandum  to  the  C.J.I.,  he  concurred  with  the
memorandum  submitted  by  the  Secretary,  Ministry  of
Personnel, and the name of the first respondent was dropped.
16. It is on this background that first respondent  Kali
Dass Batish (supra) approached the Himachal Pradesh High
Court, which directed that his case be reconsidered afresh.
When that judgment was challenged, this Court noted the
15Page 16
above  referred  facts,  and  held  that  when  the  appropriate
decision-making procedure had been followed, and the C.J.I.
had  accepted  the  opinion  of  the  Ministry  to  drop  the
candidature of the first respondent, there was no reason for
the High Court to interfere with that decision.  Provisions of
the Administrative Tribunals Act, 1985 required a consultation
with the C.J.I. under Section 6(3) thereof.  That, having been
done, and the first respondent having not been found suitable,
there was no case for reconsideration.  Mr. Venkataramni tried
to emphasize that the involvement in political activities was
the factor which went against the respondent no.1 in that
case, and so it is for the appellant herein.  However, as we
can see from that judgment, the political connection was not
the  relevant  factor  which  went  against  Kali  Dass  Batish.
Principally, it is the fact that the he was reported to be a
mediocre  advocate  which  led  to  the  rejection  of  his
candidature.
17. It was also submitted on behalf of the respondents
that the name of a candidate may appear in the merit list but
he has no indefeasible right to an appointment.  Reliance was
16Page 17
placed on the judgment of a Constitution Bench of this Court
in Shankarsan Dash Vs. Union of India  reported in 1991
(3) SCC 47.  We must however, note that while laying down
the above proposition, this Court has also stated that this
proposition does not mean that the State has the license for
acting in an arbitrary manner.  The relevant paragraph 7 of
this judgment reads as follows:-
“7.  It  is  not  correct  to  say  that  if  a  number  of
vacancies are notified for appointment and adequate
number  of  candidates  are  found  fit,  the  successful
candidates  acquire  an  indefeasible  right  to  be
appointed  which  cannot  be  legitimately  denied.
Ordinarily  the  notification  merely  amounts  to  an
invitation  to  qualified  candidates  to  apply  for
recruitment and on their selection they do not acquire
any right to the post. Unless the relevant recruitment
rules so indicate, the State is under no legal duty to fill
up all or any of the vacancies. However, it does not
mean that the State has the license of acting in an
arbitrary  manner.  The  decision  not  to  fill  up  the
vacancies has to be taken bona fide for appropriate
reasons. And if the vacancies or any of them are filled
up,  the State is bound to  respect the comparative
merit  of  the  candidates,  as  reflected  at  the
recruitment  test,  and  no  discrimination  can  be
permitted……….”
Consideration of the rival submissions:
17Page 18
Duties of an advocate in the context of Article 22(1) of
the Constitution, and  the  provisions  of  the  Advocates
Act, 1961:
18. We have noted the submissions of the rival parties
on the issue of denial of appointment on the basis of a police
report.   The appellant has denied any association with CPI
(Maoist) party or CMS.  She has, however, stated that maybe
her husband had appeared as an advocate for some persons
associated  with  the  CPI  (Maoist)  Party  in  their  bail
applications. Initially, as stated in the first respondent’s letter
dated  11.11.2008,  the  basis  of  the  adverse  police  report
against the appellant was that her husband is having close
links  with  the  CPI  (Maoist)  party,  which  is  a  prohibited
organization. Mr. Ranjit Kumar submitted that the appellant
can’t be made to suffer because of her husband appearing for
some litigant, and secondly he asked: ‘in any case can her
husband be criticized for appearing to seek any bail order for
a  person  on  the  ground  that,  the  person  belongs  to  CPI
(Maoist) party?’ As an advocate, he was only discharging his
duties for the litigants who had sought his assistance.
18Page 19
19.   We quite see the merit of this submission. Those
who are participating in politics, and are opposed to those in
power, have often to suffer the wrath of the rulers. It may
occasionally result in unjustifiable arrests or detentions. The
merit of a democracy lies in recognizing the right of every
arrested  or  detained  person  to  be  defended  by  a  legal
practicenor  of  his  choice.  Article  22(1)  of  our  Constitution
specifically lays down the following as a Fundamental Right:-
“22. Protection against arrest and detention
in  certain  cases- (1) No person who is arrested
shall be detained in custody without being informed,
as soon as may be, of the grounds for such arrest
nor shall he be denied the right to consult, and
to  be  defended  by,  a  legal  practitioner  of  his
choice.”
(emphasis supplied)
All such accused do have the right to be defended lawfully
until  they  are  proved  guilty,  and  the  advocates  have  the
corresponding duty to  represent  them,  in  accordance with
law.  Taking any contrary view in the facts of the present case
will result into making the appellant suffer for the role of her
husband  who  is  discharging  his  duty  as  an  advocate  in
furtherance of this Fundamental Right of the arrested persons.
19Page 20
We cannot ignore that during the freedom struggle, and even
after  independence,  many  leading  lawyers  have  put  in
significant  legal  service  for  the  political  and  civil  right
activists, arrested or detained.  In the post independence era
we may refer, in this behalf, to the valuable contribution of
Late Sarvashri M.K. Nambiar, (Justice) V.M. Tarkunde, and K.G.
Kannabiran (from Andhra Pradesh itself) to name only a few of
the  eminent  lawyers,  who  discharged  this  duty  by
representing such arrested or detained persons even when
they belonged to banned organizations.
20. We may, at this stage, note that the Bar Council of
India, which is a regulating body of the advocates, has framed
rules under Section 49 of the Advocates Act, 1961.  Chapter-II
of Part-VI thereof, lays down the Standards of Professional
Conduct and Etiquette.  Section-I, consisting of rules 1 to 10
thereof, lays down the duties of the advocates to the court,
whereas Section-II lays down the duties to the client.  Rules
11 and 15 of this Section are relevant for us.  These two rules
read as follows:-
20Page 21
“11. An  advocate  is  bound  to  accept  any
brief in the Courts or Tribunals or before any other
authorities  in  or  before  which  he  proposes  to
practice at a fee consistent with his standing at
the  Bar  and  the  nature  of  the  case.   Special
circumstances may justify his refusal to accept a
particular brief.
       …….
15. It  shall  be  the  duty  of  an  advocate
fearlessly to uphold the interests of his clients by
all fair and honourable means without regard to
any unpleasant consequences to himself or any
other.   He shall defend a person  accused of a
crime regardless of his personal opinion as to the
guilt  of  the  accused,  bearing  in  mind  that  his
loyalty is to the law which requires that no man
should be convicted without adequate evidence.”
In A.S. Mohammed Rafi Vs. State of Tamil Nadu reported
in  2011  (1)  SCC  688, this Court was concerned with the
resolution passed by a Bar Association not to defend accused
policemen in criminal cases.  This Court in terms held that
such  resolutions  violate  the  right  of  an  accused  to  be
defended, which right is specifically recognised under Article
22(1) of the Constitution as a Fundamental Right, and such
resolutions are null and void.
Requirements for the appointment of a judicial officer,
under  Article  234  of  Constitution  and  Judicial  Service
Rules:
21Page 22
21. In this appeal, we are concerned with the question
as  to  whether  the  first  respondent  (the  Govt.  of  Andhra
Pradesh) and the second respondent (the High Court) have
proceeded  correctly  in  the  matter  of  appointment  of  the
appellant.  In this behalf we must refer to Article 234 of the
Constitution, which is the governing article when it comes to
the recruitment of persons other than District Judges to the
judicial service.  This article reads as follows:-
“234.   Recruitment  of  persons  other
than  district judges to the judicial  service –
Appointment of persons other than district judges
to the judicial service of a State shall be made by
the Governor of the State in accordance with rules
made by him in that behalf after consultation with
the State Public Service Commission and with the
High  Court  exercising  jurisdiction  in  relation  to
such State.”
22. In the instant case, appointments to the posts of
Civil Judges are governed by the Andhra Pradesh State Judicial
Service Rules, 2007 framed under Articles 233, 234, 235, 237
proviso to Article 309 and proviso to Article 320(3) of the
Constitution.   Rule  4  (1)  of  these  rules  declares  that  the
Governor of the State shall be the Appointing Authority for the
categories of District Judges and Civil Judges.  Rule 4 (2) (d)
22Page 23
lays  down  that  the  appointments  to  the  category  of  civil
Judges shall be by direct recruitment from among the eligible
advocates  on  the  basis  of  written  and  viva-voce  test,  as
prescribed by the High Court.  Accordingly, in the present
case an advertisement was issued, and written and oral tests
were conducted.  The appellant appeared for the same and
was declared successful in both the tests.  Thereafter her
name figured in the select list.  It was at this stage that the
investigation  was  carried  out  by  the  Intelligence  Bureau,
which gave an adverse report about her.  We do not find from
the affidavit of the Registrar General, filed during the hearing
of the Writ Petition,  that all relevant papers of the police
investigation  were  submitted  to  the  High  Court  on  the
administrative  side.    Now,  the  question  arises  viz.  as  to
whether it was proper for the respondent No. 1 to decide on
its own that the candidature of the appellant could not be
considered on the bias of that report?  The police report dated
15.9.2008 was produced before the Division Bench only when
the respondent No. 1 was called upon to produce the material
relied  upon  against  the  appellant.   And  if  the  report  was
23Page 24
adverse,  was  it  not  expected  of  the  respondent  no.1  to
forward  all  those  relevant  papers  to  the  High  Court  on
administrative side for its consideration?  This is what was
done in the case of  Kali  Dass  Batish  (supra) wherein an
adverse report was received after the inclusion of the name of
the respondent no.1 in the select list, and the report was
forwarded to the C.J.I.  In the present case it has not been
placed on record that all such papers were forwarded to the
High Court on the administrative side to facilitate its decision.
On  the  other  hand  the  Government  itself  had  taken  the
decision that appellant’s candidature could not be considered
in view of the adverse reports. It can not therefore be said
that there has been a meaningful consultation with the High
Court  before  arriving  at  the  decision  not  to  appoint  the
appellant.   Article  234  specifically  requires  that  these
appointments are to be made after consultation with the State
Public  Service  Commission  and  the  High  Court  exercising
jurisdiction  in  the  concerned  state.   The  High  Court  may
accept the adverse report or it may not.  Ultimately, inasmuch
as the selection is for the appointment to a judicial post, the
24Page 25
Governor will have to be guided by the opinion of the High
Court.  In the present case as is seen from the affidavit of the
Registrar-General in reply to the Writ Petition, in view of the
letter from the Home Department, the High Court has thrown
up its hands, and has not sought any more information from
the first respondent.  It is the duty of the Government under
Article 234 to forward such reports to the High court, and then
it is for the High Court to form its opinion which will lead to
the consequential decision either to appoint or not to appoint
the candidate concerned.  Such procedure is necessary to
have a meaningful consultation as contemplated under this
Article.  Any other approach will mean that whatever is stated
by the police will be final, without the same being considered
by the High Court on the administrative side.
23. In Shamsher Singh Vs. State of Punjab reported
in AIR 1974 SC 2192, a Constitution bench of this Court was
concerned with a matter where the Punjab and Haryana High
Court had handed over the work of conducting an enquiry
against a judicial officer to the Vigilance Department of the
25Page 26
Punjab Government.  This Court called it as an act of ‘selfabnegation’.  Para 78 of this judgment reads as follows:-
“78. The High Court for reasons which are not stated
requested the Government to depute the Director of
Vigilance to hold an enquiry. It is indeed strange that
the High Court which had control over the subordinate
judiciary  asked  the  Government  to  hold  an  enquiry
through the Vigilance Department. The members of the
subordinate judiciary are not only under the control of
the High Court but are also under the care and custody
of the High Court. The High Court failed to discharge
the duty of preserving its control. The request by the
High Court to have the enquiry through the Director of
Vigilance was an act of self abnegation. The contention
of  the  State  that  the  High  Court  wanted  the
Government to be satisfied makes matters worse The
Governor will act on the recommendation of the High
Court. That is the broad basis of Article 235. The High
Court should have conducted the enquiry preferably
through  District  Judges.  The  members  of  the
subordinate judiciary look up to the High Court not only
for discipline but also for dignity. The High Court acted
in  total  disregard  of  Articles 235 by  asking  the
Government  to  enquire  through  the  Director  of
Vigilance.”
24. In State of Bihar Vs. Bal Mukund Sah reported
in AIR 2000 SC 1296, a Constitution bench of this Court was
concerned with the issue as to whether it was permissible to
lay  down  the  recruitment  procedure  for  the  district  and
subordinate  judiciary  by  framing  rules  under  Article  309
without having a consultation with the High Court, in the teeth
26Page 27
of Articles 233 to 235.  This Court examined the scheme of
the relevant articles of the Constitution and the rules framed
by Government of Bihar, in this behalf.   Paragraph 20 of this
judgment is relevant for our purpose, and it reads as follows:-
“20.  Part VI of the Constitution  dealing with the
States, separately deals with the executive in Chapter II,
the State Legislature under Chapter III and thereafter
Chapter IV dealing with the Legislative Powers of the
Governor and then follows Chapter V dealing with the
High Courts in the States and Chapter VI dealing with the
Subordinate Courts. It is in Chapter VI dealing with the
Subordinate Courts that we find the provision made for
appointment  of  District  Judges  under  Article 233,
recruitment of persons other than the District Judges to
the Judicial Services under Article 234 and also Control
of the High Court over the Subordinate Courts as laid
down by Article  235. Article 236 deals with the topic of
'Interpretation'  and  amongst  others,  defines  by  subarticle (b) the expression "judicial service" to mean "a
service consisting exclusively of persons intended to fill
the post of District Judge and other civil judicial posts
inferior  to  the  post  of  District  Judge."  It  becomes,
therefore, obvious that, the framers of the Constitution
separately dealt with 'Judicial Services' of the State and
made exclusive provisions regarding recruitment to the
posts  of  District  Judges  and  other  civil  judicial  posts
inferior to the posts of the District Judge. Thus these
provisions  found  entirely  in  a  different  part  of  the
Constitution stand on their own and quite independent of
Part  XIV  dealing  with  Services  in  general  under  the
'State'.  Therefore,  Article 309,  which,  on  its  express
terms,  is  made  subject  to  other  provisions  of  the
Constitution,  does get  circumscribed to  the extent  to
which from its general field of operation is carved out a
separate  and  exclusive  field  for  operation  by  the
relevant provisions of Articles dealing with Subordinate
27Page 28
Judiciary  as  found  in  Chapter  VI  of  Part  VI  of  the
Constitution to which we will make further reference at
an appropriate stage in the later part of this judgment.”
25. These  judgments  clearly  lay  down  the  principles
which guide the interpretation and role of Articles 233 to 235
of  the  Constitution  to  safeguard  the  independence  of  the
subordinate  judiciary.   Article  234  requires  a  meaningful
consultation with the High Court in the matter of recruitment
to judicial service.  In view of the mandate of Article 234, High
Court has to take a decision on the suitability of a candidate
on the administrative side, and it cannot simply go by the
police reports, though such reports will, of course, form a
relevant part of its consideration. As held in paragraph 3 of
Ramashankar  Raghuvanshi  (supra)  to  deny  a  public
employment to a candidate solely on the basis of the police
report regarding the political affinity of the candidate would
be offending the Fundamental Rights under Article 14 and 16
of the Constitution, unless such affinities are considered likely
to effect the integrity and efficiency of the candidate, or (we
may  add)  unless  there  is  clear  material  indicating   the
involvement  of  the  candidate  in  the  subversive  or  violent
28Page 29
activities of a banned organization. In the present case there
is  no  material  on  record  to  show  that  the  appellant  has
engaged in any subversive or violent activities. The appellant
has denied her alleged association with CPI (Maoist) party or
CMS.   Respondent  No.  1  has  accepted  that  there  is  no
documentary proof that CMS is a frontal organization of CPI
(Maoist).   And  as  far  as  her  connection  CPI  (Maoist)  is
concerned, there is no material except the report of police,
the  bonafides  of  which  are  very  much  disputed  by  the
appellant.  Besides, since the report was neither submitted to
nor  sought  by  the  High  Court,  there  has  not  been  any
consideration thereof by the High Court Administration. Thus,
there has not been any meaningful consultation with the High
Court on the material that was available with the Government.
The High Court administration has thus failed in discharging
its responsibility under Article 234 of the Constitution.
26. The Division Bench has relied upon the observations
of  this  Court  in  K.  Ashok  Reddy (supra)  to  bring  in  the
principle of prerogative power to rule out judicial review. In
that  matter  the  petitioner  had  sought  a  declaration
29Page 30
concerning the judges of the High Courts that they are not
liable to be transferred. One of his submissions was that there
is absence of judicial review in the matter of such transfers,
and  the  same  is  bad  in  law.   As  noted  in  the  impugned
judgment, in K. Ashok Reddy (supra), this Court did refer to
the observations of Lord Roskill in Council of Civil Service
Union v. Minister for the Civil Service  reported in  1984
(3)  All  ER  935 that  many  situations  of  exercise  of
prerogative  power  are  not  susceptible  to  judicial  review,
because of the very nature of the subject matter such as
making  of  treaties,  defence  of  realm,  and  dissolution  of
Parliament to mention a few.  Having stated that, as far as the
transfer of judges is concerned, this court in terms held that
there was no complete exclusion of judicial review, instead
only the area of justiciability was reduced by the judgment in
Supreme  Court  A.O.R  Association  Vs.  Union  of  India
reported  in  (1993)  4  SCC  441. The  reliance  on  the
observations from  K.  Ashok  Reddy  (supra) was therefore
totally misplaced.  Besides, the appointment to the post of a
Civil Judge is covered under Article 234 and the State Judicial
30Page 31
Service  Rules,  and  if  there  is  any  breach  or  departure
therefrom, a judicial review of such a decision can certainly
lie. The High Court, therefore, clearly erred in holding that
judicial review of the decision concerning the appointment of
a  Civil  Judge  was  not  permissible  since  that  post  was  a
sensitive one.
Hence, the conclusion:
27. Here  we  are  concerned  with  a  question  as  to
whether  the  appellant  could  be  turned  back  at  the  very
threshold,  on  the ground of her alleged political activities.
She has denied that she is in any way connected with CPI
(Maoist) or CMS.  There is no material on record to show that
this CMS is a banned organization or that the appellant is its
member.
It is also not placed on record in which manner she
had participated in any of their activities, and through which
programme  she  tried  to  intensify  the  activities  of  CMS  in
Markapuram area, as claimed in paragraph 5 of the report
quoted above.
 While accepting that her husband may have
appeared for some of the activists of CPI (Maoist) to seek bail,
the appellant has alleged that the police are trying to frame
31Page 32
her due to her husband appearing to oppose the police in
criminal matters.
Prima facie, on the basis of the material on
record,  it  is  difficult  to  infer  that  the  appellant  had
links/associations with a banned organization. 
The finding of
the Division Bench in that behalf rendered in para 19 of the
impugned judgment can not therefore be sustained. 
28. We may as well note at this stage, that
on selection,
the Civil Judges remain on probation for a period of two years,
and  the  District  Judges  and  the  High  Court  have  ample
opportunity to watch their performance.  Their probation can
be  extended  if  necessary,  and  if  found  unsuitable  or  in
engaging in activities not behoving the office, the candidates
can be discharged.  
The relevant rules of the Andhra Pradesh
State Judicial Service being Rule Nos. 9, 10 and 11 read as
follows:-
“9. Probation and officiation:
a) Every  person  who  is  appointed  to  the
category  of  District  Judges  by  direct
recruitment from the date on which he joins
duty shall be on probation for a period of two
years.
b) Every  person  who  is  appointed  to  the
category of    District Judges otherwise than
on direct recruitment shall be on officiation
for a period of two years.
32Page 33
c) Every  person  who  is  appointed  to  the
category of Civil Judges shall be on probation
for a period of two years.
d) The period of probation or officiation, may be
extended by the High Court by such period,
not  exceeding  the  period  of  probation  or
officiation, as the case may be, as specified
in clauses (a) to (c) herein above.
10. Confirmation/Regularisation:  A person who
has  been  declared  to  have  satisfactorily
completed his period of probation or officiation
as the case may be shall be confirmed as a full
member of the service in the category of post
to which he had been appointed or promoted,
as against the substantive vacancy which may
exist or arise.
11. Discharge of unsuitable probationers: If at
the  end  of  the  period  of  probation  or  the
period of extended probation, the Appointing
authority on the recommendation of the High
Court,  considers  that  the  probationer  is  not
suitable  to  the  post  to  which  he  has  been
appointed, may by order discharge him from
service after giving him one month’s notice or
one month’s pay in lieu thereof.”
29. In view of this constitutional and legal framework,
we are clearly of the view that the High Court has erred firstly
on  the  administrative  side  in  discharging  its  responsibility
under Article 234 of the Constitution, and then on the Judicial
side in dismissing the writ petition filed by the appellant, by
drawing an erroneous conclusion from the judgment in the
case of  Kali  Dass  Batish  (supra).   Having stated so, the
33Page 34
Court can not grant the mandamus sought by the appellant to
issue an appointment order in her favour.  As held by this
Court in para 17 of  Harpal  Singh  Chauhan  Vs.  State  of
U.P. reported in 1993 (3) SCC 552, the court can examine
whether  there  was  any  infirmity  in  the  decision  making
process. The final decision with respect to the selection is
however  to  be  left  with  the  appropriate  authority.  In  the
present matter the Division Bench ought to have directed the
State Govt. to place all the police papers before the High
Court  on  the  administrative  side,  to  enable  it  to  take
appropriate decision, after due consideration thereof.  
30. Accordingly,  the  impugned  judgment  and  order
dated  19.3.2009  rendered  by  the  Division  Bench  of  the
Andhra  Pradesh  High  Court  is  hereby  set-aside.  The  first
respondent State Government is directed to place the police
report  (produced  before  the  Division  Bench)  for  the
consideration of the High Court on the administrative side.
The first respondent should do so within two weeks from the
receipt of a copy of this judgment. The selection committee of
the High Court shall, within four weeks thereafter consider all
34Page 35
relevant  material  including  this  police  report,  and  the
explanation given by the appellant, and take the appropriate
decision with respect to the appointment of the appellant, and
forward the same to the respondent no 1. The first respondent
shall issue the consequent order within two weeks from the
receipt of the communication from the High Court. This appeal
and the Writ Petition No. 26147 of 2008 filed by the appellant
in the High Court will stand disposed off with this order. In the
facts of this case, we refrain from passing any order as to the
cost.     
                         …………………………………
..J.
[ A.K. Patnaik ]
………………………………….
.J.
[ H.L. Gokhale  ]
New Delhi
Dated : February 18
th
, 2013
35

“hire and fire”- “The Company shall have the right, at its sole discretion, to terminate your services by giving you three calendar months notice in writing and without assigning any reason. The Company also reserves the right to pay you in lieu of notice, a sum by way of compensation equal to three months emoluments consisting of basic salary, dearness allowance, house rent assistance and bonus entitlements, if any, after declaration of bonus”. - “hire and fire” policy adopted by the appellant company, and the terms and conditions incorporated in the Manual of Officers in 1976, cannot be held to be justifiable, and the same being arbitrary, cannot be enforced. In such a fact-situation, clause 11 of the appointment letter is held to be an unconscionable clause, and thus the Service Condition Rules are held to be violative of Article 14 of the Constitution to this extent. The contract of employment is also held to be void to such extent. - The dictionary meaning of the word ‘unconscionable’ is “showing no regard for conscience; irreconcilable with what is right or reasonable. An unconscionable bargain would therefore, be one which is irreconcilable with what is right or reasonable. Legislation has also interfered in many cases to prevent one party to a contract from taking undue or unfair advantage of the other. Instances of this type of legislation are usury laws, debt relief laws and laws regulating the hours of work and conditions of service of workmen and their unfair discharge from service, as also control orders directing a party to sell a particular essential commodity to another.” - appeal stands abated qua respondent in C.A. No. 419/2004 owing to his death, and the non substitution of his legal heirs. We would like to clarify that his legal heirs may enure the benefits of this judgment, to the extent that respondent was entitled to receive 60% of the arrears of wages due to him, from the date of his termination to the date of his superannuation. The benefit shall be calculated on the basis of periodical revision of salary and other terminal benefits which shall be paid to the LRs of the deceased employee within three months. If it is not given within three months then interest at the rate of 9% will accrue. Additionally, they shall also be entitled to all statutory benefits like gratuity, provident fund and pension, if any.


Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.  419-426  OF 2004
Balmer Lawrie & Co. Ltd. & Ors.                   …Appellants
Versus
Partha Sarathi Sen Roy & Ors.                       …Respondents
WITH
CIVIL APPEAL NO.  926 OF 2013
J U D G M E N T
Dr. B. S. CHAUHAN, J.
1. These  appeals  have  been  preferred  against  the  impugned
judgments and orders of the High Court of Calcutta dated 30.1.2002
and 24.12.2002 in FMA No. 301/2001, CO. 2038/1993, WP. Nos.
778/1992, 2613, 2798 & 3169/2000, 1109/1998 and 1739/1996, by
which the Calcutta High Court by a majority decision held that thePage 2
Balmer Lawrie & Co. Ltd. – appellant, is a State within the purview of
Article 12 of the Constitution of India, 1950 (hereinafter referred to
as,  the ‘Constitution’), and is thus, amenable to writ jurisdiction.
2. Facts and circumstances giving rise to these appeals are:
A. The appellant is a public limited company incorporated under
the Indian Companies Act, 1956. The shares of the appellant company
were  originally  held  by  Indo-Burma  Petroleum  Co.  Ltd.,  Life
Insurance  Corporation,  Unit  Trust  of  India,  General  Insurance
Corporation and its subsidiaries, Nationalised Banks and also by the
public. Subsequently, in 2001 its majority equity shares, i.e. 61.8% of
its shareholding, which was held by IBP Co. Ltd., was transferred to
Balmer Lawrie Investments Ltd. (BLIL), a Govt. company in which
59% shares are held by the government. 
B. The appellant company carries on business in diverse fields
through various Strategic Business Units (SBUs). None of these SBUs
have monopoly in any business. The said SBUs are involved in the
manufacturing  of  packing  materials,  i.e.  steel  drums  and  LPG
cylinders, grease and lubricants. They also provide air freight services,
2Page 3
ocean freight services, and project cargo management. They operate
under a broader segment classified as ‘Logistic Services’,  providing
space  and  scope  for  segregation,  storage  and  aggregation  of
containerized cargo, i.e. an infrastructural service carried on outside
the  port  premises  for  handling,  loading/unloading  and  storage  of
containerized import, as well as export cargo. The appellant company
also deals with leather chemicals and tea blending and packaging.
C. The respondents-employees joined the services of the company
at different times. However, for the purpose of deciding this case it
would be convenient to take up the facts presented by respondent,
Partha Sarathi Sen Roy.
The said respondent joined the appellant – company in May
1975 as a Management Trainee, and was later on confirmed vide order
dated 1.6.1976 as an officer in Grade-III, subject to the terms and
conditions mentioned in the letter of confirmation w.e.f. 20.5.1976.
He had previously worked in different branches of the company in
Dubai,  the  United  Arab  Emirates  etc.  as  an  Accountant-cum Administrative Officer. His services were terminated vide order dated
27.2.1981, in view of Clause 11(a) of the letter of appointment  which
provided  that  the  company  would  have  a  right,  which  would  be
3Page 4
exercised  at  its  sole  discretion,  to  terminate  the  services  of  such
employees by giving them three calendar months’ notice in writing,
without  assigning  any  reason  for  such  decision.   The  respondent
challenged the said termination order by filing writ petition (C.R. No.
1562 (W) of 1981) in the High Court of Calcutta, praying for the
issuance of a writ of mandamus, directing that the said termination
order be quashed.
D. The  appellant  company  contested  the  said  writ  petition
contending that it was not an authority within the meaning of Article
12  of  the  Constitution,  and  therefore  was  not  amenable  to  writ
jurisdiction.  The  terms  and  conditions  of  contractual  rights  and
obligations could therefore, not be enforced through writ jurisdiction.
The matter was decided by the learned Single Judge vide judgment
and order dated 19.12.2000, holding that the appellant was neither a
State, nor any other authority within the meaning of Article 12 of the
Constitution, and thus the writ petition itself was not maintainable.
E. Aggrieved,  the  respondent  filed  an  appeal  (FMA.  No.
301/2001), against the said judgment and order of the learned Single
Judge. However, in the meantime, another writ petition No. 778/1992
was decided by another learned Single Judge of the same High Court,
4Page 5
holding that the appellant was infact a State within the meaning of
Article 12 of the Constitution. Thus, the appellant preferred an appeal
against the said judgment and order dated 27.3.2001, and the matters
were heard together by a Division Bench. Both the Judges delivered
their judgment on 30.1.2002 taking different views on the aforesaid
issue. The matter was referred to a third Hon’ble Judge, who vide
judgment and order dated 24.12.2002, held the appellant to be a State
within the meaning of Article 12 of the Constitution, and directed that
the matter be placed before an appropriate bench for decision of the
writ petitions on merits.
Hence, these appeals.
3. Shri Sudhir Chandra, learned senior counsel appearing for the
State, has submitted that the appellant company cannot be held to be a
State within the meaning of Article 12 of the Constitution, or any
other authority for that matter, as there is no deep and pervasive
control exercised by the government over the company, though certain
financial aid was given by it for specific purposes. The government
however, does not have control over the day-to-day functioning of the
company.  Merely because the appellant company is a subsidiary of a
5Page 6
government company, and is itself a government company, the same
would not make the appellant company fall within the purview of the
word ‘State’ as intended by Article 12 of the Constitution. Moreover,
it does not carry out any public function which could render it as, ‘any
other authority’, for the purposes of Article 226 of the Constitution. It
also does not have any kind of monopoly over its business, in fact, it
carries on a variety of business activities and faces competition from
all the other industries that operate in the same fields as it does. The
terms of  employment  therefore,  cannot be  enforced  through writ
jurisdiction. Thus, the only remedy available to the respondent was to
file a suit for damages. The appeals deserve to be allowed.
4. Per contra, Shri Sangaram Patnaik, Mr. Bijan Kumar Ghosh
and Mr. P.K. Roy, the learned counsel appearing for the respondents
have submitted that the appellant company is a government company,
and is a subsidiary of a government company, which is controlled
entirely  by  the  government  and  that  the  government  has absolute
control over the company.  The majority judgment of the Calcutta
High Court, holding the appellant company to be a State within the
meaning of Article 12 of the Constitution cannot be found fault with.
6Page 7
Even otherwise, law does not permit an employer, particularly the
State or its instrumentalities, to terminate the services of its employees
by adopting a “hire and fire” approach, as it would be hit by the equal
protection clause enshrined in Article 14 of the Constitution of India
(hereinafter  referred  to  as,  the  ‘Constitution’).  Additionally,  the
respondent  died  long  ago,  and  no  attempt  was  ever  made  by  the
appellant company to substitute him with his legal heirs. Thus, the
appeal stands abated qua him. The facts and circumstances of the case
do not warrant any interference by this court, and the appeals are
therefore, liable to be dismissed.
5. We  have  considered  the  rival  submissions  made  by learned
counsel for the parties and perused the record.
There is sufficient material on record, and the Memorandum
and  Articles  of  Association  of  the  appellant  company  make  it
abundantly clear, that the same is a government company and is a
subsidiary of IBP, which is also a government company. The share
holding of the appellant company has been referred to hereinabove,
and more than 61.8% shares are held by IBP, a government company.
However, the question for consideration before us is, whether in light
7Page 8
of the aforementioned facts and circumstances, the appellant company
is, in fact, a State within the meaning of Article 12 of the Constitution.
6. The said issue has been considered by various larger benches,
and it has been held that in order to meet the requirements of law with
respect to being a State, the concerned company must be under the
deep  and  pervasive  control  of  the  government.  The  dictionary
meaning of ‘pervasive’ has been provided hereunder:
“It means that which pervades/tends to pervade in such a
way, so as to be, or become, prevalent or dominant.”
“Extensive or far reaching, spreading through every part
of something.”
7. In  Virendra Kumar Srivastava v. U.P. Rajya Karmachari
Kalyan Nigam and Anr. AIR 2005 SC 411, this court held, that in
order to examine whether or not an authority is a State within the
meaning of Article 12 of the Constitution, the court must carry out an
in  depth  examination  of  who  has  administrative,  financial  and
functional control of such a company/corporation, and then assess
whether the State in such a case is only a regulatory authority, or if it
8Page 9
has  deep  and  pervasive  control  over  such  a  company/corporation,
whether such company is receiving full financial support from the
government,  and  whether  administrative  control  over  it  has  been
retained by the State and its authorities, and further, whether it is
supervised, controlled and watched over by various departmental
authorities  of  the  State,  even  with  respect  to  its  day-to-day
functioning. If it is so, then such company/corporation can be held to
be an instrumentality of the State under Article 12 of the Constitution
and therefore, will be amenable to the writ jurisdiction of the High
Court under Article 226 of the Constitution.
8. In Lt. Governor of Delhi & Ors. v. V.K. Sodhi & Ors. AIR
2007 SC 2885, a similar test was applied, and it was held that once
finances are made available to the company, and the administration
of such finances is left to that company, and there is no further
governmental control or interference with respect to the same,
such company/corporation or society cannot be held to be a State, or a
State  instrumentality  within  the  meaning  of  Article  12  of  the
Constitution. In this case, this court came to the conclusion that the
very  formation  of  an  independent  society  under  the  Societies
9Page 10
Registration  Act,  may  be  suggestive  of  the  intention  that  such  a
society, could not be a mere appendage to the State.
9. A Seven-Judge Bench of this Court in Pradeep Kumar Biswas
v. Indian Institute of Chemical Biology & Ors. (2002) 5 SCC 111
held, that while examining such an issue, the court must bear in mind
whether in the light of the cumulative facts as established, the body is
financially, functionally and administratively, dominated by, or is
under the control of the Government. Such control must be particular
to the body in question, and must be pervasive.  If it is found to be so,
then the body comes within the purview of State within the meaning
of Article 12 of the Constitution.  On the other hand, when the control
exercised is merely regulatory, whether under a statute or otherwise,
the same would not be adequate, to render the body a State.  The
court, while deciding the said issue placed reliance upon its earlier
judgments in  Rajasthan State Electricity Board Jaipur v. Mohan
Lal & Ors. AIR 1967 SC 1857; and  Sukhdev Singh & Ors. v.
Bhagatram Sardar Singh Raghuvanshi & Anr. AIR 1975 SC 1331,
wherein it was held that such a body must perform certain public or
statutory  duties,  and  that  such  duties  must  be  carried  out  for  the
1Page 11
benefit of the public, and not for private profit. Furthermore, it was
also laid down that such an authority is not precluded from making a
profit  for  pubic  benefit.  The  court  came  to  the  conclusion,  that
although the employees of the Corporation may not be servants of
either  the  Union,  or  of  the  State,  at  the  same  time,  such  a
company/corporation must not represent the “voice and hands” of the
government.   Therefore,  this  court  in  Pradeep  Kumar  Biswas
(supra),  held  that  financial  support  of  the  State,  coupled  with  an
unusual degree of control over the management and policies of a
body, may lead to an inference that it is a State. Additionally, other
factors such as, whether the company/corporation performs important
public functions, whether such public function (s) are closely related
to governmental function, and whether such function (s) are carried
out for the benefit of the public, etc. are also considered. The court
also  considered  the  case  of  Ramana  Dayaram  Shetty  v.
International Airport Authority of India & Ors. AIR 1979 SC
1628, wherein it was held that a corporation can be said to be an
instrumentality or agency of the government therein under certain
conditions, and the same are summarised below :
1Page 12
“(1) One thing is clear that if the entire share
capital  of  the  corporation  is  held  by
Government, it would go a long way towards
indicating  that  the  corporation  is  an
instrumentality or agency of Government.
(2) Where the financial assistance of the State
is  so  much  as  to  meet  almost  entire
expenditure  of  the  corporation,  it  would
afford  some  indication  of  the  corporation
being  impregnated  with  governmental
character.
(3)  It  may  also  be  a  relevant  factor  …
whether  the  corporation  enjoys  monopoly
status  which  is  State-conferred  or  Stateprotected.
(4)  Existence  of  deep  and  pervasive  State
control  may  afford  an  indication  that  the
corporation  is  a  State  agency  or
instrumentality.
(5) If the functions of the corporation are of
public  importance  and  closely  related  to
governmental  functions,  it  would  be  a
relevant factor in classifying the corporation
as  an  instrumentality  or  agency  of
Government.
(6)  ‘Specifically,  if  a  department  of
Government is transferred to a corporation, it
would be a strong factor supportive of this
inference’  of  the  corporation  being  an
instrumentality or agency of Government.”
1Page 13
The Court  also  considered  the  cases  of  Ajay Hasia  etc.  v.
Khalid  Mujib  Sehravardi &  Ors.  etc. AIR  1981  SC  487;  and
Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers’ Assn. &
Anr. AIR 2002 SC 609.
10. In M/s. Zee Telefilms Ltd. & Anr. v. Union of India & Ors.,
AIR 2005  SC  2677, this Court, after  applying  tests  laid  down  in
various  cases,  examined  the  facts  of  that  case  and  came  to  the
conclusion that the body was not a State within the meaning of Article
12 of the Constitution, or for that matter, ‘any other authority’ for the
purposes of Article 226 of the Constitution, while observing as under :
“23. The facts established in this case show
the following:
1. The Board is not created by a statute.
2. No part of the share capital of the Board is
held by the Government.
3. Practically no financial assistance is given
by  the  Government  to  meet  the  whole  or
entire expenditure of the Board.
4. The Board does enjoy a monopoly status in
the field of cricket but such status is not Stateconferred or State-protected.
1Page 14
5.  There  is  no  existence  of  a  deep  and
pervasive State control. The control if any is
only  regulatory  in  nature  as  applicable  to
other  similar  bodies.  This  control  is  not
specifically  exercised  under  any  special
statute applicable to the Board. All functions
of the Board are not public functions nor are
they  closely  related  to  governmental
functions.
6. The Board is not created by transfer of a
government-owned  corporation.  It  is  an
autonomous body.”
This Court further observed:
“35. In conclusion, it should be noted that
there can be no two views about the fact that
the  Constitution  of  this  country  is  a  living
organism  and  it  is  the  duty  of  Courts  to
interpret  the  same  to  fulfil  the  needs  and
aspirations  of the  people depending on the
needs of the time. It is noticed earlier in this
judgment that in Article 12 the term "other
authorities"  was  introduced  at  the  time  of
framing  of  the  Constitution  with  a  limited
objective  of  granting  judicial  review  of
actions  of such authorities which are created
under the Statute and which discharge State
functions. However, because of the need of
the  day  this  Court  in  Rajasthan  State
Electricity Board (supra) and Sukhdev Singh
(supra)  noticing the socio- economic policy
of the country thought it fit to expand the
definition of the term "other authorities" to
include bodies other than statutory bodies.
This  development  of  law  by  judicial
interpretation culminated in the judgment of
the  7-Judge  Bench  in  the  case  of  Pradeep
1Page 15
Kumar Biswas (supra). It is to be noted that
in the meantime the socio-economic policy of
the  Government  of  India  has changed  [See
Balco Employees' Union (Regd.) v. Union of
India and Ors. (2002 2 SCC 333)] and the
State  is  today  distancing  itself  from
commercial  activities  and  concentrating  on
governance  rather  than  on  business.
Therefore,  the  situation  prevailing  at  the
time  of  Sukhdev  Singh (supra)  is  not  in
existence at least for the time being, hence,
there seems to be no need to further expand
the scope of "other authorities" in Article 12
by judicial interpretation at least for the time
being. It should also be borne in mind that as
noticed  above,  in  a  democracy  there  is  a
dividing line between a State enterprise and
a non- State enterprise, which is distinct and
the judiciary should not be an instrument to
erase the said dividing line unless, of course,
the circumstances of the day require it to do
so.”
                                             (Emphasis added)
11. Often,  there  is  confusion  when  the  concept  of  sovereign
functions is extended to include all welfare activities. However, the
court must be very conscious whilst taking a decision as regards  the
said issue, and must take into consideration the nature of the body’s
powers and the manner in which they are exercised. What functions
have been approved to be sovereign are, the defence of the country,
the raising of armed forces, making peace or waging war, foreign
1Page 16
affairs, the power to acquire and retain territory etc. and the same are
not amenable to the jurisdiction of ordinary civil courts.  (Vide:  N.
Nagendra Rao & Co. v. State of A.P., AIR 1994 SC 2663; and
Chief  Conservator  of  Forests  &  Anr.  v.  Jagannath  Maruti
Kondhare etc.etc., AIR 1996 SC 2898).
In  Bangalore  Water  Supply  &  Sewerage  Board  v.  A.
Rajappa & Ors., AIR 1978 SC 548, this Court dealt with the terms
“Regal” and “Sovereign” functions, and held that such terms are used
to define the term “governmental” functions, despite the fact that there
are difficulties that arise while giving such a meaning to the said
terms, for the reason that the government has now entered largely the
field of industry.  Therefore, only those services, which are governed
by separate rules and constitutional provisions such as Articles 310
and 311, should strictly speaking, be excluded from the sphere of
industry by necessary implication.
Every  governmental  function  need  not  be  sovereign.  State
activities  are  multifarious.  Therefore,  a  scheme  or  a  project,
sponsoring trading activities may well be among the State’s essential
functions, which contribute  towards its welfare activities aimed at
the benefit of its subjects, and such activities can also be undertaken
1Page 17
by private persons, corporates and companies.  Thus, considering  the
wide ramifications, sovereign functions should be restricted to those
functions,  which  are  primarily  inalienable,  and  which  can  be
performed by the State alone. Such functions may include legislative
functions, the administration of law, eminent domain, maintenance of
law and order, internal and external security, grant of pardon etc.
Therefore, mere dealing in a subject by the State, or the monopoly of
the State in a particular field, would not render an enterprise sovereign
in  nature.  (Vide:  Agricultural  Produce  Market  Committee  v.
Ashok Harikuni & Anr. etc. AIR 2000 SC 3116; State of U.P. v. Jai
Bir  Singh,  (2005)  5  SCC  1;  Assam  Small  Scale  Ind.  Dev
Corporation Ltd. & Ors. v. M/s. J.D. Pharmaceuticals & Anr.,
AIR 2006 SC 131; and  M.D., H.S.I.D.C. & Ors. v. M/s. Hari Om
Enterprises & Anr., AIR 2009 SC 218).
12. A public authority is a body which has public or statutory duties
to  perform,  and  which  performs  such  duties  and  carries  out  its
transactions for the benefit of the public, and not for private profit.
Article 298 of the Constitution provides that the executive power of
the Union and the State extends to the carrying on of any business or
1Page 18
trade. A public authority is not restricted to the government and the
legislature  alone,  and  it  includes  within  its  ambit,  various  other
instrumentalities  of  State  action.  The  law  may  bestow  upon  such
organization, the power of eminent domain. The State in  this context,
may  be  granted  tax  exemption,  or  given  monopolistic  status  for
certain  purposes.  The  State  being  an  abstract  entity,  can  only  act
through  an  instrumentality  or  an  agency  of  natural  or  juridical
persons.  The  concept  of  an  instrumentality  or  agency  of  the
government is not limited to a corporation created by a statute, but is
equally applicable to a company, or to a society. In a given case, the
court  must  decide,  whether  such  a  company  or  society  is  an
instrumentality  or  agency  of  the  government,  so  as  to  determine
whether the same falls within the meaning of expression ‘authority’,
as mentioned in Article 12 of the Constitution, upon consideration of
all relevant factors.
In light of the aforementioned discussion, it is evident that  it is
rather  difficult  to  provide  an  exhaustive  definition  of  the  term
“authorities”, which would fall within the ambit of Article 12 of the
Constitution. This is precisely why, only an inclusive definition is
possible.  It is in order to keep pace with the broad approach adopted
1Page 19
with respect to the doctrine of equality enshrined in Articles 14 and 16
of the Constitution, that whenever possible courts have tried to curb
the  arbitrary  exercise  of  power  against  individuals  by  centres  of
power, and therefore, there has been a corresponding expansion of the
judicial definition of the term State, as mentioned  in Article 12 of the
Constitution.
In light of the changing socio-economic policies of this country,
and the variety of methods by which government functions are usually
performed,  the  court  must  examine,  whether  an  inference  can  be
drawn to the effect that such an authority is infact an instrumentality
of the State under Article 12 of the Constitution. It may not be easy
for the court, in such a case, to determine which duties form a part of
private action, and which form a part of State action, for the reason
that  the  conduct  of  the  private  authority,  may  have  become  so
entwined  with  governmental  policies,  or  so  impregnated  with
governmental character, so as to become subject to the constitutional
limitations that are placed upon State action.  Therefore, the court
must determine whether the aggregate of all relevant factors once
considered, would  compel a conclusion as regards the body being
bestowed with State responsibilities.
1Page 20
13. When  we discuss ‘pervasive  control’, the term ‘control’  is
taken to mean check, restraint or influence. Control is intended to
regulate, and to hold in check, or to restrain from action. The word
‘regulate’, would mean to control or to adjust by rule, or to subject to
governing  principles.  (Vide:  State  of  Mysore  v.  Allum
Karibasauppa & Ors., AIR 1974 SC 1863; U.P. Cooperative Cane
Unions Federations v. West U.P. Sugar Mills Association & Ors.
etc.etc., AIR 2004 SC 3697;  M/s. Zee Telefilms Ltd., (supra); and
Union of India (UOI) & Ors. v. Asian Food Industries, AIR 2007
SC 750).
14. In K. Ramanathan v. State of Tamil Nadu & Anr., AIR 1985
SC 660, this court held as under:
  “The power to regulate carries with it full
power  over  the  thing  subject  to  regulation
and in absence of restrictive words, the power
must be regarded as plenary over the entire
subject. It implies the power to rule, direct
and control, and involves the adoption of a
rule or guiding principle to be followed or the
making of a rule with respect to the subject to
be  regulated.  It  has  different  shades  of
meaning and must take its colour from the
2Page 21
context in which it is used having regard to
the purpose and object of the legislation.”
15. In Vodafone International Holdings B.V. v. Union of India
& Anr., (2012) 6 SCC 613, this Court observed that:
  “‘Control’ is a mixed question of law and
fact. The control of a company resides in the
voting power of its shareholders and shares
represent an interest of a shareholder which
is made up of various rights contained in the
contract  embedded  in  the  Articles  of
Association.
The question is, what is the nature of the
“control” that a parent company has over its
subsidiary? It is not suggested that a parent
company  never  has  control  over  the
subsidiary. For example, in a proper case of
“lifting of corporate veil”, it would be proper
to  say  that  the  parent  company  and  the
subsidiary form one entity. But barring such
case,  the  legal  position  of  any  company
incorporated  abroad  is  that  its  powers,
functions and responsibilities are governed by
the law of its incorporation.
Control, in our view, is an interest arising
from holding a particular number of shares
and the same cannot be separately acquired
or transferred. Each share represents a vote
in the management of the company and such
a  vote  can  be  utilized  to  control  the
company.”
2Page 22
16. The need to determine and reach a conclusion as regards such
an issue is of paramount importance as this Court has stated in Steel
Authority of India Ltd. & Ors. etc. v. National Union Water Front
Workers & Ors. etc.etc. AIR 2001 SC 3527, and held as under:
“The  principle  is  that  if  the  Government
acting  through  its  officers  was  subject  to
certain  constitutional  limitations,  a  fortiori
the  Government  acting  through  the
instrumentality  or  agency  of  a  corporation
must  equally  be  subject  to  the  same
limitations. It is pointed out that otherwise it
would  lead  to  considerable  erosion  of  the
efficiency of the Fundamental Rights, for in
that event the Government would be enabled
to  override  the  Fundamental  Rights  by
adopting  the  stratagem  of  carrying  out  its
function  through  the  instrumentality  or
agency  of  a  corporation  while  retaining
control over it.”
(See also:  M/s. Star Enterprises & Ors. v. City and Industrial
Development Corpn. of Maharashtra Ltd. & Ors. (1990) 3 SCC
280;  LIC of India & Anr. v. Consumer Education and Research
Centre & Ors. AIR 1995 SC 1811; and  Mysore Paper Mills Ltd.
(supra).
2Page 23
17. In order to determine whether an authority is amenable to writ
jurisdiction except in the case of habeas corpus or  quo warranto, it
must  be  examined,  whether  the  company/corporation  is  an
instrumentality or an agency of the State, and if the same carries on
business for the benefit of the pubic; whether the entire share capital
of the company is held by the government; whether its administration
is in the hands of a Board of Directors appointed by the government;
and  even  if  the  Board  of  Directors  has  been  appointed  by  the
government, whether it is completely free from governmental control
in  the  discharge  of  its  functions;  whether  the  company  enjoys
monopoly status; and whether there exists within the company, deep
and pervasive State control. The other factors that may be considered
are whether the functions carried out by the company/corporation are
closely related to governmental functions, or whether a department of
government has been transferred to the company/corporation, and the
question in each case, would be whether in light of the cumulative
facts  as  established,  the  company  is  financially,  functionally  and
administratively under the control of the government. In the event that
the Government provides financial support to a company, but does not
retain any control/watch over how it is spent, then the same would not
2Page 24
fall within the ambit of exercising deep and pervasive control.  Such
control must be particular to the body in question, and not general in
nature.  It must also be deep and pervasive. The control should not
therefore, be merely regulatory.
18. In  West  Bengal  State  Electricity  Board  &  Ors.  v.  Desh
Bandhu Ghosh & Ors. (1985) 3 SCC 116, this Court considered a
case where the respondent-employee was terminated by giving him
only  three  months’  notice,  and  without  holding  any  enquiry  or
informing  him about any actions on his part that were unwarranted.
The court, after placing reliance on the judgment in  Workmen v.
Hindustan Steel Ltd. AIR 1985 SC 251, held that where a regulation
enables an employer to terminate the services of an employee,  in an
entirely  arbitrary  manner  and  in  a  manner  that  confers  vicious
discrimination, the same must be struck down as being violative of
Article 14 of the Constitution.  Therefore, even Standing Orders must
be non-arbitrary, and must not confer uncanalised and drastic powers
upon the employer, which enables him to dispense with an inquiry and
further enables him to dismiss an employee, without assigning any
reason for the same, by merely stating, that doing so would not be
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expedient, and that it would be against the interests of the industry, to
allow continuation of employment with respect to the employee. This
is  primarily  because,  such  a  procedure  is  violative  of  the  basic
requirements of natural justice. Such power would tantamount to a
blatant adoption of the “hire and fire” rule.
19. Where the actions of an employer bear public character and
contain an element of public interest, as regards the offers made by
him, including the terms and conditions mentioned in an appropriate
table, which invite the public to enter into contract, such a matter does
not relegate to a pure and simple private law dispute, without the
insignia  of  any  public  element  whatsoever.  Where  an  unfair  and
untenable, or an irrational clause in a contract, is also unjust, the same
is  amenable  to  judicial  review.  The  Constitution  provides  for
achieving social and economic justice. Article 14 of the Constitution
guarantees to all persons, equality before the law and equal protection
of  the  law.  Thus,  it  is  necessary  to  strike  down  an  unfair  and
unreasonable  contract,  or  an  unfair  or  unreasonable  clause  in  a
contract, that has been entered into by parties who do not enjoy equal
bargaining power, and are hence hit by Section 23 of the Contract Act,
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and where such a condition or provision becomes unconscionable,
unfair, unreasonable  and  further, is against  public  policy.  Where
inequality of bargaining power is the result of great disparity between
the  economic  strengths  of  the  contracting  parties,  the  aforesaid
principle would automatically apply for the reason that, freedom of
contract must be founded on the basis of equality of bargaining power
between  such  contracting  parties,  and  even  though  ad  idem  is
assumed,  applicability  of  standard  form  of  contract  is  the  rule.
Consent  or  consensus  ad  idem  as  regards  the  weaker  party  may
therefore, be entirely absent. Thus, the existence of equal bargaining
power between parties, becomes largely an illusion. The State itself,
or a state instrumentality cannot impose unconstitutional conditions in
statutory  rules/regulations  vis-à-vis  its  employees,  in  order  to
terminate the services of its permanent employees in accordance with
such terms and conditions. (Vide: Central Inland Water Transport
Corporation  Ltd.  v.  Brojo  Nath  Ganguly,  AIR  1986  SC  1571;
D.T.C. v. D.T.C. Mazdoor Congress, AIR 1991 SC 101;  LIC of
India (supra); K.C. Sharma v. Delhi Stock Exchange & Ors., AIR
2005 SC 2884; and Punjab National Bank by Chairman & Anr. v.
Astamija Dash, AIR 2008 SC 3182).  
2Page 27
20. A  question may also arise as regards whether the court must
examine only those facts and circumstances that existed on the date on
which the cause of action arose, or whether subsequent developments,
are also to be taken into consideration. The aforesaid issue was dealt
with by this Court in  Rajesh D. Darbar & Ors. v. Narasingrao
Krishnaji Kulkarni & Ors. (2003) 7 SCC 219, and therein it was
held as under:
“The impact of subsequent happenings may
now  be  spelt  out. First,  its bearing  on  the
right of action, second, on the nature of the
relief and third, on its importance to create or
destroy substantive rights. Where the nature
of the relief, as originally sought, has become
obsolete or unserviceable or a new form of
relief will be more efficacious on account of
developments subsequent to the suit or even
during the appellate stage, it is but fair that
the relief is moulded, varied or reshaped in
the light of updated facts.  Subsequent events
in  the  course  of  the  case  cannot  be
constitutive of substantive rights enforceable
in  that  very  litigation  except  in  a  narrow
category (later spelt out) but may influence
the  equitable  jurisdiction  to  mould  reliefs.
Conversely, where rights have already vested
in a party, they cannot be nullified or negated
by subsequent events save where there is a
change in the law and it is made applicable at
any stage.  Lachmeshwar Prasad Shukul v.
Keshwar  Lal  Chaudhuri,  AIR  1941  FC  5
falls in this category. Courts of justice may,
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when the compelling equities of a case oblige
them, shape reliefs — cannot deny rights — to
make  them  justly  relevant  in  the  updated
circumstances.  Where  the  relief  is
discretionary,  courts  may  exercise  this
jurisdiction  to  avoid  injustice.  Likewise,
where the right to the remedy depends, under
the statute itself, on the presence or absence
of certain basic facts at the time the relief is
to be ultimately granted, the court, even in
appeal,  can  take  note  of  such  supervening
facts with fundamental impact. This Court's
judgment  in  Pasupuleti  Venkateswarlu  v.
Motor & General Traders AIR 1975 SC 1409
read  in  its  statutory  setting,  falls  in  this
category. Where a cause of action is deficient
but later events have made up the deficiency,
the court may, in order to avoid multiplicity
of litigation, permit amendment and continue
the  proceeding,  provided  no  prejudice  is
caused to the other side. All these are done
only in exceptional situations and just cannot
be  done  if  the  statute,  on  which  the  legal
proceeding is based, inhibits, by its scheme or
otherwise, such change in the cause of action
or relief. The primary concern of the court is
to  implement  the justice  of  the  legislation.
Rights vested by virtue of a statute cannot be
divested  by  this  equitable  doctrine  (see
V.P.R.V.  Chockalingam  Chetty  v.  Seethai
Ache AIR 1927 PC 252).”
21. The above-mentioned appeals are required to be considered in
light of the aforesaid settled legal propositions. However, at  this stage
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it  may  also  be  pertinent  to  refer  to  the  relevant  Clauses  of  the
Memorandum and Articles of Association, which read as under:
“7A. Notwithstanding anything contained in
these Articles and so long as the Company
remains  a  Government  Company,  the
President  of  India  shall  subject  to  the
provisions  of  Article  6  thereof  and  Section
255 of the Act, be entitled to appoint one or
more  Directors  (including  whole  time
Director (s) by whatever name called) of the
Company to hold office for such period and
upon  such  terms  and  condition  as  the
President  of  India  may  from  time  to  time
decide.
xx xx xx
17. The  Company  may,  subject  to  the
provisions  of  Section  284  of  the  Act,  by
ordinary resolution for which special notice
has been given, remove any Director before
the expiration of his period of office and may
be ordinary resolution of which special notice
has been given, appoint another person in his
stead,  if  the  Director  so  removed  was
appointed  by  the  Company  in  General
Meeting or by the Board under Article 10.
The  person  so  appointed  shall  hold  office
until  the  date  upto  which  his  predecessor
would have held office if he had not been so
removed.  If  the  vacancy  created  by  the
removal of a Director under the provisions of
this Article is not so filled by the meeting at
which he is removed the Board may at any
time  thereafter  fill  such  vacancy  under  the
provisions of Article 10.
xx xx xx
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26AA. Notwithstanding  anything  to  the
contrary contained in these Articles, so long
as  the  company  remains  a  Government
company within the meaning of Section 617 of
the  Act,  the  President  of  India  shall  be
entitled to issue from to time such directives
or  instructions  as  may  be  considered
necessary  to  the  conduct  of  business  and
affairs  of  the  Company.  Provided  that  all
instructions from the President of India shall
be in writing addressed to the Chairman or
Managing Director of the Company.
xx xx xx
146. No dividend shall be payable except
out  of  the  profits  of  the  Company  or  of
moneys provided by the Central or a State
Government for the payment of the dividend
in pursuance of any guarantee given by such
Government  and  no  dividend  shall  carry
interest against the Company.”
22. Admittedly, the appellant is a government company which is
managed under the guidance of the Ministry of Petroleum and Natural
Gas.  The  Ministry  of  Petroleum  and  Natural  Gas  exercises
administrative  control  over  the  appellant  company.  The  appellant
company  started  its  business  as  a  partnership  firm  in  1867  and
subsequently, the same was converted into a private limited company
in 1924, and then eventually, into a public limited company in 1936.
            Its past shareholding position has been reproduced as under:
Category of shareholders        %age of equity holding
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IBP Co. Ltd.                          61.80%
Financial Institutions & Banks                        21.69%
Public                           14.29%
Employees                           0.85%
Foreign National                           0.44%
Corporate Bodies                            0.86%
U.P. State Government                           0.02%
Directors & their relatives                          0.85%
The present shareholding as per the Annual Report for 2005-06
has been as under:
Category of shareholders        %age of equity holding
Balmer Lawrie Investment Ltd.                         61.80%
Mutual Fund & UTI                          5.08%
Financial Institutions & Banks                        12.85%
Foreign National                           2.97%
UP State Government                          0.05%
Private/Corporate Bodies                           6.14%
Indian Public                           11.10%
Directors & their relatives                           0.01%
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23. There is nothing on record to show that the Central Government
provides any financial or budgetary support to the appellant company.
The appellant company is a profitable company and meets its own
working capital requirements, as well as its fixed capital requirements
for all requisite purposes through internal funds generated by the redeployment of its own profits, and also by borrowing short term funds
from financial institutions. The grant given by the government to the
appellant company is in fact very limited, and the extent of such grant
has been shown by the company as under:
Year  Amount  of  grant  given  in
lakhs
%age of the grant-vsavg.  yearly  fund
requirement  of  the
appellant-co.(353.55
crores)
1999 91.29 0.26
2001   237 0.67
2002     20 0.06
2003   176 0.50
24. The appellant company carries on its business in diverse fields
through various Strategic Business Units (hereinafter referred to as
‘SBUs’), and its work is being carried on by (i) an SBU for Industrial
3Page 33
Packaging; (ii) an SBU for Greases & Lubricants; (iii) an SBU for
Logistics  Services;  (iv)  an  SBU  for  Projects  &  Engineering
Consultancy; (v) an SBU for Travel & Tour; (vi) an SBU for Leather
Chemicals; (vii) an SBU for Tea Blending & Packaging; and (viii) an
SBU for Container & Freight Station.
25. Undoubtedly, the business carried on by the appellant company
does  not  confer  upon  it  any  monopolistic  character,  as  there  are
several private companies that are carrying on the same business and
some of these businesses are even generally carried on by individual
persons.
Under the Conduct, Discipline and Review Rules applicable to
the officers of the appellant company, a letter dated 31.3.1989 written
by  Managing  Director  of  the  company,  shows  that  government
directives  on  the  subject  have  been  made  applicable  with  certain
modifications as required to the terms and conditions of employment
that  are  applicable  to  various  organizations  of  the  company.  The
company is not only a Government of India enterprise, but is also
under  the  Administrative  control  of  the  Ministry  of  Petroleum,
Chemicals and Fertilizers, Government of India.   Its directors are
3Page 34
appointed  mainly  from  government  service.  Article  26AA  of  the
Articles of Association lays down that the President of India shall be
entitled to issue from time to time, such directives or instructions, as
may be considered necessary in regard to the administration of the
business and affairs of the company. Article 7A thereof, provides that
the President of India shall, subject to other existing provisions, be
entitled to appoint one or more directors in the company for such
period, and upon such terms and conditions, as the President of India
may from time to time decide are required. In view of the provisions
of Section 617 of the Companies Act, 1956, a government company
has been defined by way of an inclusive definition, as that which is a
subsidiary of a government company. The appellant company has also
been receiving grant-in-aid from the Oil Industry Development Board
by way of a grant and not as a loan.  Some products of the company
are in fact monopoly products, whose procurement and distribution
are within the direct control of the Ministry of Petroleum which is
under the Central Government. All Matters of policy and also, the
management issues of the appellant company, are governed by the
Central Government. The Central Government has control over the
appointment  of  Additional  Directors,  and  Directors,  and  their
3Page 35
remuneration etc. is also determined by Presidential directives, and
the same is applicable to deciding the residential accommodation of
the Managing Director, his conveyance, vigilance, issues regarding
the welfare of weaker sections etc. The functioning of the appellant
company is of great public importance. Majority of its shares are held
by a government company. Its day-to-day business and operations, do
not  depend  on  the  actions  and  decisions  taken  by  the  Board  of
Directors, in fact the said decisions are taken under either Presidential
directives,  or  in  accordance  with  instructions  issued  by  the
Administrative Ministry or the Finance Ministry.  Its basic function is
related to the oil industry, which is generally handled by government
companies.   The  appellant  company  cannot  take  any  independent
decisions with respect to the revision of pay-scales that are applicable
to its employees, and the same are always subject to the approval of
the Administrative Ministry. The annual budget of the company is
also  passed  only  if  the  same  is  approved  by  the  Administrative
Ministry.
26. It is evident from the material on record that all the whole time
Directors of the appellant company are appointed by the President of
3Page 36
India,  and  such  communications  are  also  routed  through  the
Administrative Ministry.
The appellant company is under an obligation to submit its
monthly, as well as its half-yearly performance reports to the Ministry
of Petroleum, Government of India. The company has also promoted
the  use  of  Hindi  language  in  the  course  of  official  work,  in
consonance with the circulars/guidelines that have been issued by the
Government  of  India.  The  appellant  company  and  IBP  Company
Limited, had a common Chairman. The remuneration structure of the
employees of the appellant company, is also in conformity with those
which are applicable to the Indian Oil Corporation and IBP, as has
been fixed by the Bureau of Public Enterprises, Government of India.
The reservation policy as enshrined in the Directive Principles of the
Constitution, has also been implemented as per the directions of the
Central Government in the appellant company.
27. In  order  to  determine  whether  the  appellant  company  is  an
authority under Article 12 of the Constitution, we have considered
factors like the formation of the appellant company, its objectives,
functions, its management and control, the financial aid received by it,
3Page 37
its  functional  control  and  administrative  control,  the  extent  of  its
domination by the government, and also whether the control of the
government  over  it  is  merely  regulatory,  and  have  come  to  the
conclusion  that  the  cumulative  effect  of  all  the  aforesaid  facts in
reference to a particular company i.e. the appellant, would render it as
an authority amenable to the writ jurisdiction of the High Court.
28. Clause 11(a) of the letter of appointment reads as under:
“The Company shall have the right, at its sole discretion,
to terminate your services by giving you three calendar
months  notice  in  writing  and  without  assigning  any
reason. The Company also reserves the right to pay you
in lieu of notice, a sum by way of compensation equal to
three  months  emoluments  consisting  of  basic  salary,
dearness  allowance,  house  rent  assistance  and  bonus
entitlements, if any, after declaration of bonus”.
Undoubtedly, the High Court has not dealt with the issue on
merits  with  respect  to  the  termination  of  the  services  of  the
respondents  herein.  However,  considering  the  fact  that  such
termination took place several decades ago, and litigation in respect of
the same remained pending not only before the High Court, but also
before this Court, it is desirable that the dispute come to quietus.
Therefore, we have dealt with the case on merits. In keeping with this,
3Page 38
we cannot approve the “hire and fire” policy adopted by the appellant
company, and the terms and conditions incorporated in the Manual of
Officers in 1976, cannot be held to be justifiable, and the same being
arbitrary, cannot be enforced.  
In such a fact-situation, clause 11 of the appointment letter is
held to be an unconscionable clause, and thus the Service Condition
Rules are held to be violative of Article 14 of the Constitution to this
extent. The contract of employment is also held to be void to such
extent.  
The  dictionary  meaning  of  the  word  ‘unconscionable’  is
“showing no regard for conscience; irreconcilable with what is right
or reasonable. An unconscionable bargain would therefore, be one
which is irreconcilable with what is right or reasonable. Legislation
has also interfered in many cases to prevent one party to a contract
from taking undue or unfair advantage of the other. Instances of this
type of legislation are usury laws, debt relief laws and laws regulating
the hours of work and conditions of service of workmen and their
unfair discharge from service, as also control orders directing  a party
to sell a particular essential commodity to another.”  Thus, we do not
find  any  force  in  the  said  appeals.  The  same  are  dismissed
accordingly.  
3Page 39
29. As we have already mentioned, the present appeal stands abated
qua respondent in C.A. No. 419/2004 owing to his death, and the non substitution of his legal heirs. 
We would like to clarify that his legal
heirs  may  enure  the  benefits  of  this  judgment,  to  the  extent  that
respondent was entitled to receive 60% of the arrears of wages due to
him, from the date of his termination to the date of his superannuation.
The benefit shall be calculated on the basis of periodical revision of
salary and other terminal benefits which shall be paid to the LRs of
the deceased employee within three months.  If it is not given within
three months then interest at the rate of 9% will accrue. Additionally,
they  shall  also  be  entitled  to  all  statutory  benefits  like  gratuity,
provident fund and pension, if any.
CIVIL APPEAL NO.  926 OF 2013
30. The abovesaid appeal stands disposed of in terms of judgment
in  Civil Appeal Nos.419-426  of 2004.
..………………………….J.
(Dr. B.S. CHAUHAN)
   .…………………………..J.
(V. GOPALA GOWDA)
New Delhi;                                                                                
February 20, 2013
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4