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1998 (8) TMI 450

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..... (1) the writ petitions filed by the respondents in the writ Appeals are not maintainable, as the appellant-company is not a 'State' or other authority within the sweep of the expression used in Article 12 of the Constitution of India, and (2) the order of transfer passed by the appellant is in accordance with the terms and conditions of contract of service as well as Officers' Service Rules and it is purely on account of exigencies of work and in the interest of business of the appellant-company and the said order of transfer passed is not vitiated by any mala fides and the same cannot be challenged by the respondents in the writ proceedings. But it is contended by the respondents in the Writ Petitions that Mysore Paper Mills which is a company incorporated under the Companies Act, 1956 ('the Act') and which is a Government Company, as defined in section 617 of the Act falls within the meaning of the 'State', as defined in article 12 of the Constitution and the said company being the 'State' within the meaning of article 12 of the Constitution is bound to act fairly and reasonably and, if it does not do so, its action can be struck down under article 14, as being arbitrary. It is .....

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..... relevant facts narrated by the respondents in their writ petitions: The 2nd respondent in the Writ Appeals who is a post-graduate in Chemistry, joined the Mysore Paper Mills Ltd. ('the Mill') as a Management Trainee on 10-8-1991 and was posted to look after D.M. Plant and thereafter, he was confirmed as Assistant Superintendent (Laboratory) in the Research and Development Division of the Mill as per the Official Memorandum 26-9-1983. Thereafter, he was promoted to the post of Deputy Supdt. (DM Plant) with effect from 14-8-1986 as per the official memorandum dated 6-12-1986. Subsequently he was further promoted as Senior Suptd. (D.M. Plant) with effect from 14-8-1989 as per the official Memorandum dated 7-9-1991 and the said post was later redesignated as Assistant Manager (D.M. Plant). He was transferred to the Regional Office, Calcutta by a memo bearing Reference No. FPA/TRF/97/381 dated 27-11-1997. The 2nd respondent alleged that the said transfer order is mala fide and illegal and it was issued with a view to victimise him and to prevent him from functioning as an Executive Member of the M.P.M. Officer's Association which was registered on 30-12-1986 under the provisions of th .....

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..... s Association formed a joint front, and there was a joint struggle by the workers and the officers because of certain pressing demands and problems. Immediately thereafter the services of the 2nd respondents were termi- nated without holding an enquiry by an order dated 6-4-1990. Subse- quently, the order of termination was superseded by another order dated 2-7-1990 and the 1st respondent was kept under suspension as per the Official Memorandum dated 2-7-1990. Subsequently, the order of suspen- sion was revoked and the 2nd respondent was reinstated by the manage- ment of the Mill as per the Official Memorandum dated 22-12-1990. Thereafter, the 2nd respondent continued to work in DM Plant and he was not holding any post as an Office Bearer of the association between the 1991 and 1994. However, he was guiding the office bearers whenever his guidance was sought and he was advising the 1 st respondent-association in respect of fresh charter of demands and certain other matters in respect of which there were serious disputes between the association and the management of the Mill. According to the respondents during that period one Sri V.K. Gore, was the Chairman and Managing Director o .....

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..... r of transfer was issued with a mala fide intention and to see that the 2nd respondent stopped to do any kind of trade union activity, as the place to which he was posted was totally isolated and the Management also saw to it that the second petitioner did not come in contact with any one. The 2nd respondent challenged the said order of transfer before this Court in W.P. No. 31, 660 of 1994 and this Court ordered notice to the Management. Respondents also alleged that at that time the 2nd respondent's wife and Sri Gopinath's wife were assaulted by the security guard and they were humiliated in the absence of the 2nd respondent and Sri Gopinath, the then President of the Association. The 2nd respondent alleged to have sent a letter dated 20-12-1994, addressed to the Senior Manager (Task Force) of the Mill and his immediate superior under whom he was posted certified to the correctness of the facts mentioned in the representation. Subsequently the 2nd respondent was transferred from the Task Force Department to the Technical Training Centre as Assistant Manager, as per the order dated 14-3-1995 and he was simultaneously issued a Memo of Charges on 14-3-1995, alleging that he has cont .....

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..... sociation. It is also alleged that the Chairman and the Managing Director by a letter dated 27-1-1998, enclosing a copy of the resolution of the Board directed the officers to disassociate themselves from the association. In the meantime, the leave applied by the 2nd Respondent was sanctioned as per letter dated 16-1-1998 and he was asked to appear before the Medical Board by an intimation dated 21-1-1998. Thereafter the 2nd Respondent also submitted a representation to the Management requesting for sanction of leave as per letter dated 7-2-1998. Thereafter he received a memo informing him that the sick leave applied for by him has been sanctioned on loss of pay up to 5-2-1998 and further he was sanc- tioned privilege leave for a period of 30 days from 6-2-1998 till 7-3-1998 and he was asked to appear before the NIMHANS, Bangalore for further treatment. In the meantime, the 1st Respondent Association received a letter dated 5-2-1998 from the management informing that the fundamen- tal rights are subject to reasonable restrictions imposed by the State and the advise of the management to disband the association was within the powers of the management and further threatened that the m .....

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..... ency of the Government and that would have to be decided on a proper assessment of the facts in the light of the relevant factors. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a company or society and in a given case it would have to be decided, on a consideration of the relevant factors. Whether the company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression 'authority' in Article 12. A juristic entity which may be 'State' for the purpose of Parts III and IV would not be so for the purpose of Part XIV or any other provision of the Constitution. (Case law discussed)" (p. 487) In Para 9 of the same decision it is held: "The tests for determining as to when a corporation can be said to be an instrumentality or agency of Government may now be called out from the judgment in the International Airport Authority's case (AIR 1979 SC 1628). These tests are not conclusive or clinching, but they are merely indicative indicia which have to be used with care and caution, because while stressing the necessity of a wide meaning to be placed .....

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..... hief funding source, (ii) functional character being governmental in essence, (iii ) plenary control residing in Government, (iv) prior history of the same activity having been carried on by Government and made over to the new body, and (v) some element of authority or command. Whether the legal person is a corporation created by a statute, as distinguished from under a statute, is not an important criterion although it may be an indicium..." (p. 212) In another decision rendered in Manmohan Singh v. Commissioner, Union Territory AIR 1985 SC 364, it was held: "(C) Punjab Aided Schools (Security of Service) Act (19 of 1969) as extended to Union Territory of Chandigarh, S.3-Aided School receiving grant upto 95 per cent of its expenditure - Teachers receiving protection under the Act - School subject to regulations made by Education Department - It is other authority within Article 12 of Constitution and amenable to writ jurisdiction of High Court. Civil Writ No. 1086 of 1983, D/24-2-1983, (Punj. & Har.), Reversed. (Constitution of India, Arts. 226 and 12. Other authority - Aided School)." (p. 365) In a latest decision of the Supreme Court in Air India Statutory Corpn. v. United La .....

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..... 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 must be based on some rational and relevant principles. It must not be guided by irrational or irrelevant considerations and all their actions should satisfy the basic law requirement of Article 14. The public law interpretation is the .....

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..... service being the obligatory functions of the State may largely point out that the body is 'State'. If the Government operates behind a corporate veil, carrying out governmental activity and governmental functions of vital public importance, there may be little difficulty in identifying the body as 'State' within the meaning of Article, 12 of the Constitution." The learned Counsel for the Respondents has relied upon a decision of our High Court rendered in K.V. Panduranga Rao v. Karnataka Dairy Deve- lopment Corpn. 1994 (1) Kar. L.J. 149 wherein it is held that the Karnataka Dairy Development Corporation Ltd. is an agent and instrumentality of the State, applying the tests laid down in the above decisions of the Supreme Court. 7. On the basis of the above tests laid down by the Supreme Court in the above decisions, we must now proceed to examine whether the appellant- company in the present case is an authority falling within the definition of 'State' under article 12 and whether it is an instrumentality or agency of the Government? The answer must obviously be in the affirmative, if we have regard to the memorandum of association and various notifications issued by the Governme .....

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..... d therewith. 3. To purchase, sell, import, export or carry on the business of manufacturers of dyestuff, tanning and bleaching materials, organic and inorganic chemicals, inclusive of sulphuric acid, hydrochloric acid, drugs, glue, resin, cellulose, spirits, turpentine, soap, all salts and carbonates, oil, chlorate, lime, caustic soda, clay and other materials and substances used in the manufacture or treatment of paper, board and pulp and sugar. 4. To develop the resources of and turn to account any lands and any rights over or connected with the land belonging to or in which the Company is interested, in particular by clearing, draining, fencing, planting, cultivating, building, improving, farming, irrigating, grazing and by promoting immigration and emigration and the establishment of villages and settlements. 4A. To promote/establish joint ventures, ancillary units and provide technical know-how/collaboration and advice, whether in India or outside relating to manufacture, distribution of paper, sugar or any other articles, products or things of a character of similar or analogous to the foregoing or any of them or connected therewith. 5. To carry on any other business, whe .....

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..... e to deserving students or other scholars or persons to enable them to prosecute their studies in academic pursuits or researches and for establishing, conducting or assisting any institutions, fund, etc., having any one of the aforesaid objects as one of its objects, by giving donations or otherwise in any other manner and the Directors may at their discretion in order to implement any of the abovementioned objects or purposes transfer without consideration or at such fair or concessional value as the Directors may think fit and divest the ownership of any property of the Company to or in favour of any public institution or Trust recognised or approved by the Central or State Government or any authority specified in that behalf by such Government or established under any law for the time being in force as the Directors may approve." 9. Thus it is seen from the above objects that one of the objects of the said Government Company is to carry on business of manufacture of news printing papers which is the monopoly of the State, since no other company is allowed to produce news print in State of Karnataka. It is also seen from Object No. 5A that the appellant-company is entrusted wit .....

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..... rnataka including directors nominated by the financial institutions under Article 94A of the Articles of association, which are referred as Industrial Development Bank of India, Industrial Finance Corpn. of India. The Industrial Credit and Investment Corpn. of India Ltd., Life Insurance Corpn. of India, Unit Trust of India and General Insurance Corpn. or any other Finance Corpn. or any Financing Corpn. or Credit Corpn. or any other Financing Company or body to whom M.P.M. owes moneys. It is also made clear in article 94A that the board of directors of the company shall have no power to remove from office the Nominee Directors and they shall hold the said office only so long as moneys remain owing by the company to the Corpn. and aforesaid financial units or so long as the said units and Corpn. holds Debentures in the company as a result of direct subscription or private placement etc. 11. The appellant-company is under the control of the Government of Karnataka which is sometimes done directly and sometimes through the mechanism of the Karnataka State Bureau of Public Enterprises. The tasks entrusted to KSBPE in relation to MPM are as mentioned in the Book published by the Departm .....

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..... n by MPM are guaranteed by Government of Karnataka. 12. Thus from all these facts it is found that the appellant-company is totally controlled by the Government of Karnataka which is a clear indication that the appellant-company is an instrumentality of the State. Respondents produced a true copy of the letter dated 1-8-1985 of the Secretary of the Government of Karnataka addressed to the Chairman and Managing Director of the company conveying approval for the continuance of Prof. YML Sharma, Sri J.S. Matharu and Sri R.M. Mehta, as directors on the board of directors of the company. He also produced (i) another letter dated 8-9-1992 marked as Annexure - JJJ from Under Secretary to Government, Commerce & Industries Department, Govern- ment of Karnataka, addressed to the Chairman and Managing Director of the Mill conveying approval of the Government to re-elect Shri N. Ravindranathan, Sri S.K. Warrier and Sri M.K. Ramachandra as directors of the forthcoming Annual General Meeting of the Mill. The Respondents also produced document (ii) Annexures-LLL, a letter dated 27-8-1987 from Secretary C & I Department to the Chief Executives of companies coming under the Administrative Control .....

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..... ve the approval of Govern- ment of Karnataka." The contents of the above documents clearly go to show that the entire company is run as part of the State Government and even the schemes of the company are to be approved by the Government. It is also found from the above correspondences that there is total financial control over the company by the Government of Karnataka. The detailed instructions are given by the Government indicating how the directors of the Government have to function. The Government of Karnataka has notified premises of the company at Bhadravathi at 'Public Premises' under the provisions of Karnataka Public Premises (Eviction of Unauthorised Occupants) Act, 1974 and appointed 5 officers of the company as competent officers for the purpose of the Act and all the top officers of the Mills are appointed with the approval of the Government and whenever Officers are deputed abroad, sanction of Government is required. From the above facts it is clearly established that the appellant-company is an authority and instrumentality or agency of the 'State', as defined under article 12 of the Constitution. 13. From the above material placed on record, the following facts .....

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..... y stated that the appellant- company is an undertaking under the control of the Government of Karnataka." 14. Thus all the important tests laid down by the Hon'ble Supreme Court in the above decisions to determine whether Corpn. Government compa- ny or any other institution is a 'State' or other authority or instrumentality of the Government are satisfied in respect of appellant-company. So we have no hesitation to hold that the appellant is 'State' within the meaning of expression used in article 12 of the Constitution. On similar facts in a decision rendered in Association of Officers G.S.F.C. v. Gujarat State Fertilizers Co. 1985. LLJ 238 at Page 239, it was held that: "Gujarat State Fertilizer Company Ltd., is a 'State' within the meaning of Article 12 of the Constitution of India because more than 80 per cent of the shareholding is owned and are controlled by the Government. More than 49 per cent of the total shares are held by the Government of Gujarat while more than 31 per cent of the total shares are held by Government Financial Institutions, Nationalised Banks and the Insurance Companies. Government of Gujarat is entitled to nominate and appoint 1/3rd of the board of d .....

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..... orporation Limited which are companies incorporated under the Companies Act, 1956 and are Government Companies defined in section 617 of the Companies Act, fall within the meaning of word 'State', as defined in Article 12 of the Constitution of India." (p. 271) In para 8 of the said decision it is observed that: "(1) It is not disputed, that in the case of each of the respondent-com- panies the whole or substantial part of the share capital is held by the Central Government and/or the State Government, as the case may be. It is also not disputed that each one of the respondent-companies is a Government Company as defined in section 617 of the Companies Act and they are all public sector undertakings established by the respective Governments and that the concerned Government exercises full and effective control over these companies." (p. 278) Relying upon the above decisions of Supreme Court rendered in Som Prakash Rekhi's case (supra) in the case of Rammana Dayaram Setty v. International Airport Authority 1979 II LLJ 217 and in the case of Ajay Hasia (supra) , it was held by this Court that all the three said companies fall within the definition of the 'State'. In another decis .....

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..... pany enjoys monopoly status which is State conferred. In essence the Government operates behind a corporate veil carrying out Governmental activity and Governmental functions of vital public importance. In the changed set up of the constitution of board of directors, investment, mode of functioning of the Mysore Paper Mills Co. and the new objectives undertaken by it, we hold that the view taken by this Court in the earlier decisions rendered in the Writ Petitions W.P. 27375 of 1992, W.P. 8746 of 1991 W.P. 16861 of 1989, W.P. 16504 of 1995, Writ Appeal Nos. 87 & 88 of 1992 WA 1445 of 1984 that the Mysore Paper Mills was not 'State' is no longer good law. 19. Further the learned Counsel for the respondents contended that even if the appellant-company does not fall within the expression 'State' as defined in article 12, still the writ petitions filed by respondents are maintainable in view of the decision of Supreme Court in Shri Anandi Mukta Sadguru Shree Mukta jee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani AIR 1989 SC 1607, wherein it was held that: "... This is a striking departure from the English law. Under Article 226, writs can be issued to 'any perso .....

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..... haracter, no mandamus can be issued. The nature of duty imposed on the body must be judged in the light of positive obligations owed by the person or authority to the affected party and there must be an element of public duty before mandamus can be issued. Since it is found that the appellant-company is a 'State' within the meaning of article 12 of the Constitution, it is unnecessary to go into the question whether the relief sought for by the respondents can be granted under article 226 without reference to the provisions of article 12. 20. Point No. 2: As it is found that the Writ Petitions are maintainable, we will now proceed to consider the merits of the contention raised by the respondents that the order of transfer Annexure-EE passed by the management is mala fide, unjust, not in public interest and in violation of the provisions of article 14 of the Constitution. In support of this conten- tion the respondents have referred to the chronological events which took place prior to 27-11-1997 the date on which the transfer order has been passed and certain other events which took place subsequent to the date of passing the said transfer order. It is seen from the Employment Cer .....

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..... pany. 21. According to the Respondents, the appellant has taken all the above steps against the 2nd Respondent, since he was responsible for forming the Officers' Association which was registered on 30-12-1996 under the provisions of the Indian Trade Unions Act, in which he became the founder Secretary and was actively participating in the activities of the association as an office bearer by submitting Charter of demands for revision of pay-scales, revision of dearness allowance, revision of H.R.A. and several other allowances and revision of service rules etc. It is also their case that inspite of award of the Addl. Industrial Tribunal in favour of the Officers, the same has not been enforced and a representation given by the 1st Respondent Association before the Joint Labour Commissioner on 29-9-1997 was found to be of no use. According to the respondents, during the year 1990 the Paper Mills Workers Association and the Officers' Association formed a joint Trade Union and there was a joint strike by the workers and the Officers and it was a cause for the termination of the 2nd respondent by the management without holding any enquiry. But we are unable to accept the contention of .....

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..... ndent-association whenever guidance was sought from him and he was advising them in respect of fresh charter of demands and certain other matters in respect of which serious dispute was there between the association and the management of the Mills is not supported by any prima facie documentary evidence. Similarly, the allegation made by him in Para 4 of his Writ Petition that during this period Sri V.K. Gore, who was the Chairman and Managing Director of the Mills became very hostile towards the office bearers of the association and also towards the active functionaries of the association and on account of it a show-cause notice was issued to him during April 1994 making frivolous charges against him is also not based on any material placed on record. Even otherwise, the very fact that subsequently the sale proceedings were dropped against him after receiving his explanation dated 30-4-1994 and the report from the Manager (Boilers), as admitted by the 2nd respondent in para 5 of the Writ Petition, itself shows that the then Chairman and Managing Director of the company had no prejudice against the 2nd respondent and on the contrary he acted in accordance with rules, deciding the m .....

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..... eir meeting held which is marked as Annexure-SS. It is also the case of the respondents that thereafter the said communication was sent individually to all the Officers including the 2nd respondent. The respon- dents have also referred to a letter dated 24-4-1998 addressed to the President of the Association Annexure-R-23 informing that the board of directors of the company in its meeting held on 6-1-1998, has desired to advise them to disband the MPM Officers' Association and therefore, they are advised to vacate the side rooms in the Guest House Complex presently used as office of the association with furniture and fittings provided by the company and to hand over possession of the same to the Deputy Manager (PR), Bhadravathi. But since these letters are addressed to the Association, 2nd respondent cannot make them as basis to contend that the order of transfer passed against him is a mala fide action taken by the management. In fact in our view the said demand made by the management have no direct bearing or connection with the transfer order issued to the 2nd respondent. Similarly the memo of charge issued on 21 -4-1998, as per Annexure-R-15 to the 2nd respondent for applying .....

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..... ors during his absence when he had gone to Mangalore. On receiving the said information, 2nd respondent lodged a complaint with the police copy of which is produced as Annexure-R 19. In this complaint 2nd respondent has shown the appellant Sri. S.L. Gangadharappa, Chairman and Managing Director of the company, as the suspect, who must have been behind the entire incident and must have got it done with the help of some assistants with an intention to intimidate him and his family and to cause material damage to him out of personal hatred. On the basis of the said complaint, a case is registered in Paper Town Police Station, Bhadravathi. In Crime No. 30 of 1998 copy of which is Annexure-R20, in which he alleged that he has done the said act to force him to resign and give up his job, because of the fear and intimidation created by the said dastardly act. According to 2nd respondent, the total loss suffered by him in the said incident comes to more than Rs. 3.60 lakhs. 27. It is also pointed of by the learned Counsel for the respondents that the management had instructed the Security, Watch and Ward of the Paper Mills not to take any action by immediately lodging any complaint with t .....

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..... ity of the circumstances are taken into consideration, it would be apparent that issue of transfer order is a clear instance of mala fide and arbitrary action taken on extraneous considerations with the sole object of victimising the 2nd respondent and forcing the other Office Bearers of the association to disband the association. But we are unable to find any merit in the above contention, as it is found that the management has not taken any vindictive action against the 2nd respondent at any time prior to the date of passing the abovesaid transfer order and even, they promoted him twice and dropped the proceedings initiated against him accepting the undertaking given by him that he will not associate himself in any such unfortunate events which were referred in the memorandum of imputations issued to him on 6-4-1990. A copy of the said letter given by the 2nd respondent is produced by the respondents along with the other additional documents on 23-6-1998 which is at Page 30. 29. Thus it is found that at any time earlier to 22-11 -1997 the date on which the transfer order was passed, the appellant did not take any vindictive action against respondent No. 2 putting him to any fina .....

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..... ts in the quality of paper and to give day to day feed back from the consumers on quality and other aspects so that corrective steps could be taken at the earliest point of time and convince the consumers situated in the eastern region about the quality of their product and accordingly increase the sales. It is also submitted by the appellant that the 2nd respondent had the benefit of exposures to training in various aspects of management principles, quality, employee-employer relations, customers relations, effective communication and co-ordina- tion etc. and it is for this reason it has decided to transfer the services of the 2nd respondent to Calcutta Regional Office and the transfer order dated 27-11-1997 was issued on the direction and control of the Chairman and Managing Director. The respondents also submitted in para 19 of their objections that on account of liberalization policy and dumping of newsprint by multinationals, the company is facing severe competition from the imported newsprint and the regular customers of the appellant-company have shifted to the imported newsprint because of lesser price and supposed better quality. As a result, the appellant is facing advers .....

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..... rted in 1993-(II) LLJ 626 it is held that: "An order of transfer is an incidence of Government service. Under the fundamental Rules, Government servant is liable to transfer anywhere in India. The executive instructions regarding transfer issued by the Government are in the nature of guidelines. They do not have statutory force, who should be transferred, where, is a matter for the appropriate authority to decide. Unless the order of transfer is vitiated by mala fides or is made in violation of any statutory provision, the Court cannot interfere with it." (p. 626) In view of the above law laid down by the Supreme Court, it is not open to the respondents to contend that the management could have trans- ferred some other person who had experience in the Marketing Division to Calcutta Office instead of sending the 2nd respondent to that place by the abovesaid transfer order, when it is not shown by the respondents that the said transfer order is vitiated by any mala fides or is made in violation of any statutory provision or an any extraneous considerations. In another decision of the Supreme Court in State of U.P. v. V.N. Prasad 1995 Suppl. (2) SCC 151, it was held that: "A. Servi .....

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..... llant forums to decide on transfers of officers on administrative grounds. The wheels of administration should be allowed to run smoothly and the Courts or Tribunals are not expected to interdict the working of the administrative system by transferring the officers to proper places. It is for the administration to take appropriate decision and such decisions shall stand unless they are vitiated either by mala fides or by extraneous consideration without any factual background foundation. When as in this case, the transfer order is issued on administrative grounds the Court cannot go into the expediency of posting an officer at a particular place." (p. 1056) In another decision of the Supreme Court in Chief General Manager (Telecom) N.E. Telecom Circle v. Rajendra Ch. Bhattacharjee AIR 1995 SC 813, it was held that: "Employee has no legal right to insist for being posted at any particular place - More so, when his transfer was justifiable on administrative grounds." (p. . . . .) 36. Thus, in view of the above position of law laid down by the Supreme Court and in view of the facts that the respondents failed to prove that the transfer order passed is vitiated by mala fides or by a .....

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