Full Judgment Text
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PETITIONER:
BOMBAY TELEPHONE CANTEEN EMPLOYEES’ ASSOCIATION, PRABHADEVI
Vs.
RESPONDENT:
UNION OF INDIA & ANR.
DATE OF JUDGMENT: 09/07/1997
BENCH:
K. RAMASWAMY, D. P. WADHWA
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
K. RAMASWAMYY. J.
This special leave petition has come up directly, from
the award of the Central Government Industrial Tribunal
No.2, Bombay, made on August 9, 1996 in Reference No.CGIT-
2/26/91.
Delay condoned.
The admitted position is that the petitioner
Association, representing five dismissed employees, had
sought reference under Section 10(1) of the Industrial
Disputes Act, 1947 (for short, the ‘Act’) to the Tribunal.
The dispute arose on account of termination by the
respondent-Management of the services of the said employe
on April 28, 1989; It was alleged that the termination was
without any notice and payment of retrenchment compensation
under Section 25-f. The reference came to be made on April
19, 1991. The Tribunal has held, that the telephone Nigam
Limited, Bombay is not an ’industry’. It, therefore, has no
jurisdiction to adjudicate the dispute. Prabhadevi Exchange
had a total strength of 3000 employees of the Tele-
communication Department, working in three shifts. As per
the Administrative Instructions issued by the Government,
for the first shift there should be a ’3A’ type canteen, for
the second shift ’A’ type canteen and for the third shift
there should be ‘C’ type canteen. It was averred that for
Type ‘3A’ canteen, there should be 57 employees, but only 24
employees were working on April 27.4.1989. The claim of the
petitioner is that the dismissed employees had joined the
service in 1987. They are claiming wages as per the
directions of this Court, i.e., as per the Fourth Pay
Commission’s recommendations. Since they were insisting upon
payment of the wages, it is alleged, the services of five
employees were terminated without giving any notice or
giving any retrenchment compensation as enjoined by Section
25-F of the Act. Therefore, they sought reinstatement into
service with full back wages and with continuity of service.
The respondents, on the other hand. contended that the
employees working in the canteen are not ’workmen’ within
the definition of Section 2(s) of the Act nor is the
respondent an ‘industry’ under Section 2(j). They are
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"treated as holding civil posts in the Central Government".
They were paid monthly salaries devised by the Canteen
Committee depending upon the increases in the cost of living
etc. The provisions of Chapter VI-B of the Act are
inapplicable to them. The Tribunal noted the findings as
under:
Prabhadevi Telephone Exchange employed about 4000
employees which is required under the provisions of
Administrative Instructions to have one departmental
canteen. In ‘A’ type canteen, 19 employees are required per
shift. It works from 5 a.m. to 12 midnight. In three shifts,
there at the relevant time are 24 employees including the
concerned five workmen. In view of a judgment of this Court,
non-statutory canteen employees are entitled to the benefits
of the recommendations of Third and Fourth Pay Commissions.
The Director of Canteen accordingly directed the Department
concerned to pay the canteen employees wages as per the
recommendations of the Pay Commission. Departmental
Canteen, it is contended by the management, is not an
‘industry’ as per the Memorandum dated January 12, 1982 of
the Director (Welfare), Indian Posts and Telegraphs
Department.
Relying upon the judgment of this Court in Sub-
Divisional Inspector of Posts Vaikkam & Ors. vs. Theyyam
Joseph [(1996) 2 SCC 293], the Tribunal has held that
departmental canteen is not an ‘industry’. However, on
merits, it has held that termination of the services of the
five employees is bad in law. Calling the decision in
question, the above special leave petition has been directly
filed under Article 136, contending that the ratio in
Theyyam Joseph’s case contrary to the judgment of this Court
in Bangalore water-supply & Sewerage Board, etc. vs. R.
Rajappa & Ors. [(1978) 3 SCR 207]. The judgment, therefore,
in Joseph’s case is not correct in law. When its correctness
was questioned in another case, notice was issued. It is,
therefore, contended that the ratio of the Constitution
Bench judgment of seven Judges in Bangalore Water Supply
Case applies to the facts herein. The judgement in Josph’s
case, was rendered without reference to the former and
hence the matter needs fresh examination. The question is
whether the view taken is correct in law? This Court is
aware of the decision in Bangalore Water Supply case in
which this Court had held the test to determine whether an
establishment is an ‘industry’ within the meaning of the
Act. Therein, the employees of the appellant Board were
fined for misconduct and the fine was recovered from them.
They filed an application under Section 33 C(2) of the Act?
The question was whether the Tribunal has jurisdiction under
Section 33-C(2) of the Act? The High Court had held it to be
an industry and, therefore, the application was
maintainable. On appeal, this Court laid down the tests as
under:
"The term "analogous to the trade
of business" could not cut down the
scope of the term "industry". The
said words can reasonably mean only
activity which results in goods
made and manufactured or service
rendered which are capable of being
converted into saleable ones. They
must be capable of entering the
word of "res commercium", although
they may be kept out of the market
for some reason. It is not the
motive of an activity in making
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goods or running a service but the
possibility of making them
marketable if one who makes goods
or renders service so desires, that
should determine whether the
activity lies within the domain or
circle of industry. But even this
may not be always a satisfactory
test. By this test the type of
services which are rendered purely
for the satisfaction of spiritual
or psychological urges of persons
rendering those services would be
excluded. Whenever an industrial
dispute would arise between either
employers and their workmen or
between workmen and workmen, it
should be considered an area within
the sphere of "industry’ but not
otherwise. In other words, the
nature of the activity will be
determined by the conditions which
give rise to the livelihood of the
occurrence of such disputes and
their actual occurrence in the
sphere.
The term "sovereign should be
reserved technically and more
correctly for the sphere of
ultimate decisions. Sovereignty
operates on a sovereign place of
its own. 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 a
necessary implication.
The special excludes the
applicability of the general.
Certain public utility services
which are carried out by
governmental agencies or
Corporations are treated by the Act
itself as within the sphere of
industry. If express rules under
other enactments govern the
relationship between the State as
an employer and its servants as
employees, it may be contended on
the strength of such provisions
that a particular set of employees
are outside the scope of the
Industrial Disputes Act.
The State today increasingly
undertakes commercial functions and
economic activities and services as
part of its duties in a welfare
state. Hence to artificially
exclude state-run industry from the
sphere of the Act, unless the
statutory provisions expressly or
by necessary implication have that
effect, would not be correct.
Section 2(j) of the Industrial
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Disputes Act (1947) which defines
"industry" contains words of wide
import, as wide as the Legislature
could have possibly made them. The
problem of what limitations could
and should be reasonably read in
interpreting the wide words used in
Section 2(j) is far too policy
oriented to be satisfactorily
settled by judicial decisions. The
Parliament must step in the
legislate in a manner which will
leave no doubt as to its intention.
That alone can afford a
satisfactory solution to the
question which has agitated and
perplexed the judiciary at all
levels.
Hospital Mazdoor Sabha was
correctly decided in so far as it
held that the JJ Group of hospitals
was an industry but the same cannot
be said in regard to the view of
the Court that certain activities
ought to be treated as falling
outside the definition clause.
There is no justification for
excepting the categories of public
utility activities undertaken by
the Government in the exercise of
its inalienable functions under the
constitution, call it regal or
sovereign or by any other name,
from the definition of "industry".
If it be true hat one must have
regard to the nature of the
activity and not to who engages in
it, it is beside the point to
enquire whether the activity is
undertaken by the State, and
further, if so, whether it is
undertaken in fulfilment of the
State’s constitutional obligations
or in discharge of its
constitutional functions. In fact,
to concede the benefit of an
exception to the State’s activities
which are in the nature of
sovereign functions is really to
have regard not s much to the
nature of the activity as to the
consideration who engages in that
activity: for, sovereign function
can only be discharged by the State
and not by a private person. If the
State’s inalienable functions are
excepted from the sweep of the
definition contained in section
2(j), one shall, have unwittingly
rejected the fundamental test that
it is the nature of the activity
which ought to determine whether
the activity is an industry.
Indeed, in this respect, it should
make no difference whether on the
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one hand, an activity is undertaken
by a corporate body in the
discharge of its statutory
functions or, on the other. by the
State itself in the exercise of its
inalienable functions. If the water
supply and sewerage schemes of fire
fighting . establishments run by a
Municipality can be industries, so
ought to be the manufacture of
coins and currency, arms and
ammunition and the winning of oil
and uranium. The fact that these
latter kinds of activities are, or
Can only be, undertaken by the
State does not furnish any answer
to the question whether these
activities are industries. When
undertaken by a private individual
they are industries, therefore,
when undertaken by the State, they
are industries. The nature of the
activity is the determining factor
and that does not change according
to who undertakes it. Items 8, 11,
12, 17 and 18 of the First Schedule
read with Section, 2(n)(vi) of the
Industrial Disputes Act render
support to this view. These
provisions which were described in
Hospital Mazdoor Sabha as ’very
significant, at lease show that,
conceivably, a Defence
Establishment, Mint or a Security
Press can be an industry even
though these activities are, ought
to be and can only be undertaken by
the State in the discharge of its
constitutional obligations or
functions. The State does not trade
when it prints a currency note or
strikes a coin. And yet,
considering the nature of the
activity, it is engaged in an
industry when it does so.
A systematic activity which is
organised or arranged in a manner
in which the trade or business is
generally organised or arranged
would be an industry despite the
fact that it proceeds from
charitable motives. It is in the
nature of the activity that one has
o consider and it is upon the
application of that test that the
State’s inalienable functions fall
within the definition of industry.
The very same principles must yield
the result that just as the
consideration as to who conducts
the activity, is irrelevant for
determining whether the activity is
an industry so is the fact that the
activity is charitable in nature or
is undertaken with a charitable
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motive. The status or capacity
corporate or constitutional, of the
employer would have, if at all,
closer nexus, than his motive on
the question whether the activity
is an industry. The motive which
propels the activity is yet another
step removed and ex hypothesis can
have no relevant on the question as
to what is the nature of the
activity. It is never true to say
that the nature of the activities
is charitable. The subjective
motive force of an activity can be
charity but for the purpose of
deciding whether an activity is an
industry one has to look at the
process involved in the activity,
objectively. The jural foundation
of any attempt to except charitable
enterprises from the scope of the
definition can only be that such
enterprises are not undertaken for
profit. out then, that clearly, is
to introduce the profit concept by
a side wind, a concept which has
been rejected consistently over the
years. If any principle can be said
to be settled law in this vexed
field it is this ; the twin
consideration of profit motive and
capital investment it irrelevant
for determining whether an
activity is an industry. Therefore
activities which are dominated by
charitable motives either in the
sense that the profit, which they
yield are diverted to charitable
purposes are not beyond the ; pale
of the definition of section 2(j).
It is much beside the point to
inquire who is the employer as it
to inquire, why is the activity
undertaken and what the employer
does with the profits, if any,
By this test a Solicitor’s
establishment would be an industry.
A Solicitor is undoubtedly does not
carry on a trade or business when
he acts for his client or advises
him or pleads for him, If and when
pleading is permissible to him. He
pursues a profession which is
variously and justifiably described
as learned, liberal or noble. But
it is difficult to infer from the
language of the definition in
section 2(j) that the Legislature
could not have intended to bring
in a liberal profession like that
of an Attorney within the ambit of
the definition of ’industry ’.
In Hospital Mazdoor Sabha the Court
while evolving a working principle
stated that an industrial activity.
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generally involved, inter alia, the
cooperation of the employer and the
employees, That the production of
goods or the rendering of material
services to the community must be
the direct and + proximate result
of such cooperation is a further
extension of that principle and it
is broadly, by the application
thereof that a Solicitors
establishment is held not to
attract the definition clause.
These refinements are, with
respect not warranted by the words
of the definition, apart from the
consideration that in practice they
make the application of the
definition to Concrete Case;
dependent upon a factual assessment
so highly subjective as to, lead to
confusion and uncertainty in the
understanding of the true legal
position. Granting that the
language of the definition is so
wide that some limitation ought to
be read into it, one must stop at a
point beyond which the definition
will skid into a domain too
rarefied to be realistic. Whether
the cooperation between the
employer and the employee is the
proximate cause of the ultimate
product and bears direct with it is
a test which is almost impossible
of application with any degree of
assurance or certitude. It will be
as much true to say that the
solicitor’s Assistant, Managing
Clerk, Librarian and the Typist do
not directly contribute to the
intellectual and product which is a
creation of his personal
professional skill, as that,
without their active assistance and
cooperation it will be impossible
for him to function effectively.
The unhappy state of affairs in
which the law is marooned will
continue to baffle the skilled
professional and his employees
alike as also the Judge who has to
perform the unenviable task of
sitting in judgment over the
directness of the cooperation
between the employer and the
employee, until such time as the
legislature decides to manifest its
intention by the use of clear and
indubious language. Beside the fact
that this Court has so held in
National Union of Commercial
Employees the legislature will find
a plausible case for exempting the
learned and liberal professions of
Lawyers, Solicitors, Doctors,
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Engineers, Chartered Accountants
and the like from the operation of
industrial laws. But until that
happens, in the present state of
the law it difficult by judicial
interpretation to create exemptions
in favour of any particular class.
The case of the clubs on the
present definition is weaker
still. The definition squarely
covers them and there is no
justification for amending the law
so as to exclude them from the
operation of the industrial laws.
The fact that the running of clubs
is not a calling of the club or its
managing committee, that the club
has no existence apart from its
members that it exists for its
members though occasionally
strangers take the benefit of its
services and that even after the
admission of guests, the club
remains a members’ self-serving
institution does not touch the core
of the problem.
(1) ‘Industry’ as defined in Sec.
2(j) and explained in Banerji’s
case has a wide import.
1.(a) Where (i) systematic
activity, (ii) organised by
cooperation between employer and
employee (the direct and
substantial element is chimerical);
(iii) for the production and/or
distribution of goods and services
calculated to satisfy human wants
and wishes (not spiritual or
religious, but inclusive of
material things or services geared
to celestial bliss e.g. making on a
large scale prasad or food), prima
facie there is an ‘industry’ in
that enterprise.
(b) Absence of profit motive or
gainful objective is irrelevant, be
the venture in the public, joint,
private or other sector.
(c) The true focus is functional
and the decisive test is the nature
of the activity with special
emphasis on the employer-employee
relations.
(d) If the organisation is a trade
or business it does not cease to be
one because of philanthropy
animating the undertaking.
II. Although section 2(j) uses
words of the widest amplitude in
its two limbs, their meaning cannot
be magnified to overreach itself.
(a) ‘Undertaking’ must suffer a
contextual and associational
shrinkage as explained in Banerji
and in this judgment; so also ,
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service, calling and the like. This
yields the interference that all
organised activity possessing the
triple elements in I (supra),
although not trade or business, may
still be ’industry’ provided the
nature’ of the activity, viz, the
employer- employee basis bears
resemblance to what we find in
trade or business. This take into
the fold of ’industry’
undertakings, calling and services,
adventures’ analogous to the
carrying on of trade or business’.
All features, other than the
methodology of carrying on the
activity viz. in organizing the
cooperation between employer and ;
employee, may be dissimilar. It
does not, matter, if on the
employment terms there is analogy.
III. Application of these
guidelines should not stop short of
their logical reach by invocation
of creeds, cults or inner sense of
incongruity or outer sense of
motivation for or resultant of the
economic operations. The ideology
of the Act being industrial peace,
regulation and resolution of
industrial disputes. between
employer and workmen, the range of
this statutory ideology must inform
the reach of the statutory
definition. Nothing less, nothing
more.
(a) The consequences are (i)
professions, (ii) clubs (iii)
educational institutions (iv)
cooperatives, (v) research
institutes (vi) charitable projects
and (vii) other kindred adventures,
if they fulfil the triple tests
listed in (supra), cannot be
exempted from the scope of section
2(j)
(b) A restricted category of
professions, clubs, cooperatives
and even gurukulas an little
research labs. may qualify for
exemption if, in simple ventures,
substantially and going by the
dominant nature criterion,
substantively no employees are
entertained but in minimal matters,
marginal employees are hired
without destroying the non employee
character of the unit.
(c) If, in a pious or altruistic
mission, many employ themselves,
free or for small honoraria or like
return, mainly drawn by sharing in
the purpose or cause, such as
lawyers volunteering to run a free
legal services clinic or doctors
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serving in their spare hours in a
free medical centre on asramites
working at the bidding of the
holiness, divinity or like central
personality, and the services are
supplied free or at nominal cost
and those who serve are not engaged
for remuneration or on the basis of
master and servant relationship,
then the institution is not an
industry even if stray servants,
manual or technical, are hired.
Such eleemosynary or like
undertakings alone are exempt-not
other generosity, compassion,
developmental passion or project.
IV. The dominant nature test:
(a) Where a complex of activities,
some of which qualify for
exemption, others not, involves
employees on the total undertaking,
some of whom are not ‘workmen’ as
in the University of Delhi case or
some departments are not productive
of goods and services if isolated,
even then, the predominant nature
of the services and the integrated
nature of the departments as
explained in the Corporation of
Nagpur, will be the true test. The
whole undertaking will be
’industry’ although ; those who are
not ’workmen’ by definition may not
benefit by the status.
(b) Notwithstanding the previous
clauses sovereign functions,
strictly understood, (alone),
qualify for exemption, not the
welfare activities of economic
adventures undertaken by Government
or statutory bodies.
(c) Even in departments discharging
sovereign functions if there are
units which are industries and they
are substantially severable, then
they can be considered to come
within sec. 2(j).
(d) Constitutionally and
competently enacted legislative
provisions may well remove from the
scope of the Act categories which
otherwise may be covered thereby."
It is not necessary to refer to the dissenting
judgments Beg, C.J in his concurring judgment, at page 221,
placitum E to G, has held thus:
"I would also like to make a few
observations about the so called
"sovereign" functions which have
been placed outside the field of
industry. I do not feel happy about
the use of the term "sovereign"
here. I think that the term
‘sovereign’ should be reserved,
technically and more correctly, for
the sphere of ultimate decisions.
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Sovereignty operates on a sovereign
plane of its own as I suggested in
Keshavananda Bharati’s case
supported by a quotation from
Ernest Barker’s "Social and
Political Theory". Again the term a
"Regal", from which the term
"sovereign" functions appears to
be derived, seems to be a misfit
in a Republic where the citizen
shares the political sovereignty in
which he has even a legal share,
however small in as much as he
exercises the right to vote. What
is meant by the use of the term
"sovereign", in relation to the
activities of the State, is more
accurately brought out by using the
term "governmental" functions
although there are difficulties
here also in as much as the
Government has entered largely now
fields of industry. Therefore, only
those services which are governed
by separate rules and
constitutional provisions, such as
Article 310 and 311 should,
strictly speaking, be excluded from
the sphere of industry by necessary
implication."
In State of Bombay & ors, vs. The Hospital Mazdoor
sabha & ors. [(1960) 2 SCR 866], this Court had given wider
interpretation to the word "industry", with a view to
achieve the scope and object of the Act, so as to make the
remedy available to the workmen. Similarly, in The
Corporation of the city of Nagpur vs. Its Employees [(1960)
2 SCR 942] this Court had pointed out that the definition of
the word ‘industry’ is very comprehensive. It is in two
parts. It is not necessary that an activity of the
Corporation must share the common characteristics of an
industry before it can come within the statutory
definition. The words of Section 2(14) of the City of Nagpur
Corporation Act which is equivalent to Section 2(j) of the
Act, are clear and unambiguous. The wide definition,
however, cannot include the regal, primary and inalienable
functions of the State, though statutorily delegated to a
Corporation and the ambit of such functions cannot be
extended so as to include the welfare activities of a modern
State, and must be confined to legislative power,
administration of law and judicial power. "The real test as
to whether a service undertaken by a Corporation is an
industry must be whether that service, if performed by an
individual or a private person, would be an industry.
Monetary consideration cannot be an essential characteristic
of an industry in a modern State. It was, therefore,
incorrect to say that only such activities as were analogous
to trade or business could come within Section 2(14) of the
Act". "When a service rendered by a Corporation as an
industry, the employees of the departments connected with
the service, whether financial, administrative or executive,
would be entitled to the benefits of the Act".
In 1960’s and 1970’s, there was parallel stream of
thinking being developed by this Court to engulf the service
conditions of the employees of a Corporation either
registered under the Companies Act or under the Societies
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Act or under a statute, vis-a-vis the Government employees.
In Heavy Engineering Mazdoor Union vs. The State of Bihar &
Ors. [(1969) 3 SCR 995], this Court held that the Government
Company is distinct from Government. In Praga vs. Tools
Corporation vs. C.V. Imanual [(1969) 3 SCR 773], the
employees were held not entitled to availed the remedy under
Article 226 of the Constitution. In Sukhdev Singh & Ors. vs.
Bhagatram Sardar Singh Raghuvanshi & Anr. [(1975) 3 SCR
619], a break-through was effected by a Constitution Bench
in considering whether the Oil and Natural Commission, the
Industrial Financial Corporation or the Life Insurance
Corporation is an ‘authority’ within the meaning of Article
12 of the Constitution and whether the employees working in
the Corporation are entitled to the protection of judicial
review under Article 14. It was answered it favour of the
employees. In separate but concurrent judgment, Mathew, J.
laid the foundation demolishing the autonomous status and
non-amenability to judicial review of the actions of
corporate sector and held that when a Corporation was
created by a statute, its rules or instructions partake the
statutory character like a subordinate legislation.
Therefore, they are to act consistently with the Rules or
Regulations made under the Act or by the statutory
authority.
The power of statutory authority is controlled and
restricted by the statute which created r them and the rules
and regulations framed thereunder. Any action of such bodies
in excess of their power or in violation of restrictions
placed on that power is ultra vires. Thus, the corporate
veil given in Praga Tools case was torn apart and their
actions were made amenable to judicial review. In Ajay Hasia
etc. vs. Khalid Mujib Sehravardi & Ors. etc. [(1981) 2 SCR
79], another Constitution Bench had held that having regard
to the Memorandum of Association and the Rules of the
Society, the respondent-College was a State within the
meaning of Article 12. The composition of the Society is
dominated by the representatives appointed by the Central
Government and the Governments of Jammu and Kashmir, Punjab,
Rajasthan and Uttar Pradesh with the approval of the Central
Government. Accordingly, it was held to be an
instrumentality of the State. In R.D. Shetty vs. The
International Airport Authority of India & Ors. [(1979) 1
SCR 1042] and U.P. Warehousing Corporation & Anr. vs. Narain
Vajpayee [(1980) 3 SCC 459] this Court laid the test to
determine as to when a Corporation can be said to be
instrumentality or agency of the Government. The test of
deep and permissive control was laid down thereunder. It was
held that the statutory authorities are amenable to writ
jurisdiction being an instrumentality or an authority under
the State within the meaning or Article 12 of the
Constitution. It was further held that the Corporation may
be an authority and, therefore, a State within the meaning
of Article 12. Yet, it may not be elevated to the position
of State for the purpose of Articles 309, 310 and 311 which
find place in Part XIV. For the purpose of Part III it has
separate jurisdictional entity, though it would not be so
for the purpose of Part XIV or another provisions of the
Constitution. In U.P. Warehousing corporation case, the
respondent, on the basis of the complaints after preliminary
enquiry, was charged with certain allegations and his
explanation was sought and to indicate his evidence, if any.
He had expressed his intention to cross-examine certain
witnesses as also to examine some others in defence. Without
taking any action on the respondent’s request, the appellant
passed an order dismissing him from service w.e.f. the date
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of his suspension. In the writ petition filed by him the
High Court quashed the order and directed his reinstatement
with full back-wages. This Court, on these facts, had held
that "in cases where there is an element of public
employment and service or support by statute or something in
the nature of an office or a status, which is capable of
protection, then irrespective of the terminology used, and
even though in some inter parties aspects the relationship
may be called that of master and servant, there may be
essential procedural requirement to be observed on grounds
of natural justice". The Warehousing Corporation was held to
be an authority and the dismissal, without conducting an
enquiry and without an opportunity to lead evidences for the
proposed punishment given to the respondent, was bad in law.
Therefore, the appeal was dismissed and the judgment of the
High Court was upheld. Chinappa Reddy, J. in his concurring
judgment had held that there is hardly any distinction, on
the principle, between a person directly under the
employment of the Government and a person under the.
employment of an agency or instrumentality of the Government
or a Corporation set up under a statute or incorporated but
wholly owned by the Government. Therefore, there is no good
reason, why, if Government is bound to observe the equality
clauses of the Constitution in the matter of employment and
in its dealings with the employees, the Corporations should
not be equally bound. Some elements of public employment is
all that is necessary. to take the employee beyond the reach
of the rule which denies him access to a court to enforce a
contract of employment and denies him the protection of
Articles 14 and 16 of the Constitution. Rajasthan State
Electricity Jaipur vs. Mohan Lal & Ors. [(1967) 3 SCR 377]
is also a case of the Rajasthan State Electricity Board
questioning whether it is an authority under Article 12 of
the Constitution. It was held by a Constitution Bench that
it is an authority under Article 12 or instrumentality of
the State. In D.T.C. vs. D.T.C. Mazdoor Congress & Ors.
[1991 Supp.(l) 600], the question arose whether D.T.C. is an
instrumentality under the State and whether it is entitled
to dismiss the employee by issuing one month notice or pay
in lieu thereof in terms of Regulation 9 of the Regulations.
A Constitution Bench, per majority had held that it is a
State within the meaning of article 12 of the Constitution.
It has no power to dismiss an employee with one month’s
notice or salary in lieu thereof, In Moti Ram Deka vs.
General Manager, NEF [(1964) 5 SCC 683], another
Constitution Bench had held that the service of an employee
of the Railway establishment cannot be dispensed with except
in accordance with the procedures established and unless
the essential steps of procedural fairness are adhered
to. Central Inland Water Transport Corporation Ltd, & Anr.
vs. Brojonath Ganguli & Anr. [(1986) 3 SCR 156], a Bench of
two Judges of this Court reiterated the same view giving
extended interpretation and making available the
constitutional remedy under Article 226 of the Constitution.
In Air India Statutory Corporation etc. vs. United Labour
Union & Ors. etc.[1996 (9) SCALE 70], the Air India
statutory Corporation, on abolition of the contract labour,
had not absorbed employees working on contract labour basis
after contract labour system was abolished. They filed the
writ petition in the High Court. The High Court gave the
directions to absorb them on regular basis. On appeal, this
Court considered the entire case law and laid down the
following principles in para 26 thus:
"(1) The constitution of the
Corporation or instrumentality or
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agency or Corporation aggregate or
Corporation sole is not of sole
material relevance to decide
whether it is by or under the
control of the appropriate
Government under the Act.
(2) If it is a statutory
Corporation, it is an
instrumentality or agency of the
State. If it is a company owned
wholly or partially by a share
capital. floated from public
exchequer, it gives indicia that it
is controlled by or under the
authority of the appropriate
Government.
(3) In commercial activities
carried on by a Corporation
established by or under the control
of the appropriate Government
having protection under Articles 14
and 19(2), it is an instrumentality
or agency of the State.
(4) The State is a service
Corporation. It acts through its
instrumentalities, agencies or
persons - natural or judicial.
(5) The governing power, wherever
located, must be subject to the
fundamental constitutional
limitations and abide by the
principles laid in the Directive
Principles.
(6) The framework of service
regulations made in the
appropriate rules of regulations
should be consistent with and
subject to the same public law
principles and limitations.
(7) Though the instrumentality,
agency or person conducts
commercial activities according to
business principles and are
separately accountable under their
appropriate bye-laws or Memorandum
of Association, they become the arm
of the Government.
(8) The existence of deep and
pervasive State control depends
upon the facts and circumstances in
a given situation and circumstances
in a given situation and in the
altered situation it is not the
sole criterion to decide whether
the agency or instrumentality or
persons is, by or under the control
of the appropriate Government.
(9) Functions of an
instrumentality, agency or persons
are of public importance following
public interest element.
(10) The instrumentality, agency or
person must have an element of
authority or ability to effect the
relations with its employees or
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public by virtue of power vested in
it by law, memorandum of
association or bye-laws or articles
of association.
(11) The instrumentality, agency or
person renders an element of public
service and is accountable to
health and strength of the workers,
men and women, adequate means of
livelihood, the security for
payment of living wages, reasonable
conditions of work, decent standard
of life and opportunity to enjoy
full leisure and social and
cultural activities to the workmen.
(12) Every action of the public
authority, agency or
instrumentality or the person
acting in public interest or any
act that gives rise to public
element should be guided by public
interest in exercise of public
power or action hedged with public
element and is open to challenge.
It must meet the test of
reasonableness, fairness and
justness.
(13) If the exercise of the power
is arbitrary, unjust and unfair,
the public authority,
instrumentality, agency or the
person acting in public interest,
though in the field of private law,
is not free to prescribe any
unconstitutional conditions or
limitations in their actions.
It was directed that since the workman were employed by
the contractor, on abolition of the contract labour system,
the appellant-Corporation being an instrumentality even in
the private field of contract, was bound by the essential
principles justice, equity and fair procedure and equality.
In Bangalore Water Supply Board case, the Board was held to
be an ‘industry and the action was amenable to adjudication
under the Contract Labour (Regulation & Abolition) Act.
It is, therefore clear that there have been two streams
of thinking simultaneously in the process of development to
give protection to the employees of the Corporation. Its
actions are controlled as an instrumentality of the State
and the rules are made amenable to judicial review. Where
there exists no statutory or analogous rules/instructions,
the provisions of the Act get attracted. The employees are
entitle to avail constitutional remedy under Article 226 or
32 or 136, as the case may be. The remedy of judicial review
to every citizen or every person has expressly been provided
in the Constitution. It is a fundamental right of every
citizen. In the absence of statutory/administrative
instruction in operation, the remedy of reference under
Section 10 of the Act is available. Therefore, two streams,
namely, remedy under the Act by way of reference and remedy
of judicial redressal by way of proceedings under Article
226 or a petition filed before the Administrative Tribunal
to the aggrieved persons are co-existing. If the doctrine
laid in Bangalore Water Supply Board case is strictly
applied, the consequence is catastrophic and would give a
carte blanche power with laissez fair legitimacy which was
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burried fathom deep under the lethal blow of Article 14 of
the Constitution which assures to every person just, fair
and reasonable procedure before terminating the service of
an employee. Instead, it gives the management/employer the
power to dismiss the employee/workman with one month’s
notice or pay in lieu thereof, and/or payment of
retrenchment compensation under the Act. The security of
tenure would be in great jeopardy. The employee would be at
the beck and call of the employer always keeping his order
of employment in a grave uncertainty and in a fluid state
like demorcus’s sword hangs over the neck. On the other hand
if the interpretation of providing efficacious remedy under
Article 226 gives protection to the workmen/employee the
speedy remedy under Article 226/Section 19 of the
Administrative Tribunal Act. They would protect the
employee/workman from arbitrary action of the employer
subserving the constitutional scheme and philosophy.
The Court would, therefore, strike a balance between the
competing rights of the individual and the state/agency or
instrumentality and decide the validity of action taken by
the Management. Necessarily, if the service conditions stand
attracted, all the conditions laid therein would become
applicable to the employees with a fixity of tenure and
guarantee of service, subject to disciplinary action. His
removal should be in accordance with the just and fair
procedure envisaged under the Rules or application of the
principles of natural justice, as the case may be, in which
event the security of the tenure of the employee is assured
and the whim and fancy and vagory of the employer would be
detered and if unfair and unjust action is found established
it would be declared as an arbitrary, unjust or unfair
procedure. On the other hand, if the finding is that there
exist no statutory rules or certified standing orders exist
or they are not either made or are inapplicable, the remedy
of reference under section 10 of the Act would always be
available and availed of as it is an industry and indicia
laid in Bangalore Water Supply Board case gets attracted.
From this perspective, this Court had approached the
problem in T. Joseph’s case. T Joseph’s case was a case
relating to the departmental employee whose services was
dispensed with. Considering the rules in operation in that
behalf, it was held that the telephone department is not an
industry. The appointment orders were given under the rules.
In that behalf, it was held that India is a Sovereign,
Socialist, Secular Democratic Republic. It has to establish
an egalitarian social order under the rule of law. The
welfare measures partake the character of sovereign
functions and the traditional duty to maintain law and order
is no longer the concept of the State, Directive Principles
of the State Policy enjoin the State to undertake diverse
duties envisaged under Part IV of the Constitution. One of
the duties of the State is to provide tale-communication
services to the general public an amenity; so, it is an
essential part of the sovereign functions of the State as a
welfare States In Physical Research Laboratory vs. K.G.
Sharma [CA No. 2663/97] decided on April 8, 1997, the
question was whether the appellant who conducted research in
a scientific laboratory was a ’workman’ and the institution
an ‘industry’, Since the service conditions regulate
conditions of employment, the Tribunal was devoid of
jurisdiction to entertain the application under the Act for
deciding the dispute. following the judgment in T. Joseph’s
case and distinguishing a judgment of three Judge bench, it
was held that research institute was a State within the
meaning of Article 12. It is not an industry attracting the
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provisions of the Act. So, in Chief Conservator of Forests &
Anr. vs. Jagannath Maruti Kandhara [(1996) 2 SCC 293], this
Court referred with approval the Bangalore Water Supply
Board case. In K.G. Sharma’s case, the industrial Tribunal
had observed that the Physical Research Laboratory is an
industry but this Court reversed lt. The Telecommunication
Department is not an industry and the Rules governing the
conditions of service of the employees stand attracted and
there by the remedy under Article 226 would be available. To
that area, the Act does not stand attracted. The respondents
admit that the dismissed workmen who were holding civil
post, by necessary implication, were excluded as workmen
under Section 2(s). Even though the activities of the
Corporation partake the character of a private enterprise,
since the workmen engage themselves in rendering services,
It is not an industry. If there exists no statutory rules
binding standing orders, necessarily, the reference under
Section 10(1) would be valid and the Tribunal has
jurisdiction to go into or the employee may avail of
judicial review or common law review.
On an overall view, we hold that the employees working
in the statutory canteen, in view of the admission made in
the counter-affidavit that they are holding civil posts and
are being paid monthly salary and are employees, the
necessary conclusion would be that the Tribunal has no
jurisdiction to adjudicate the dispute on a reference under
Section 10(1) of the Act. On the other hand, the remedy to
approach the constitutional court under Article 226 is
available. Equally, the remedy under Section 19 of the
Administrative Tribunal Act is available. But, generally,
the practice which has grown is to direct the citizen to
avail, in the first instance, the remedy under Article 226
or under Section 19 of the Administrative Tribunal Act and
then avail the right under Article 136 of the Constitution
by special leave to this court etc. Thus, in view of the
admission made by the respondents in their counter-affidavit
that the workmen of the appellant-Association are holding
civil posts and are being paid monthly wages and benefits
and are considered to be employees, the jurisdiction of the
Industrial Tribunal stands excluded. It is open to the
aggrieved party to approach appropriate authority in
accordance with law. In that view, the finding of the
Tribunal in the impugned judgment is legal and warrants no
interference. It is open to the respondents to avail of such
remedy as is available to a regular employee including the
right to approach the Central Administrative Tribunal or the
High Court or this Court thereafter for redressal of legal
injury.
The Special Leave Petition is accordingly dismissed.