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TMI Blog2004 (7) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of mandamus commanding upon the respondents to continue the petitioner as the Managing Director of Poorvanchal Vidyut Vitaran Company, Varanasi: (a)to issue a writ, order or direction in the nature of certiorari calling for the appointment and quashing the appointment dated 18-10-2003 of Sri Mukul Singhal, Managing Director, Poorvanchal Vidyut Vitaran Nigam Limited, Varanasi; (b)to issue a writ, order or direction in the nature of mandamus commanding upon the respondent to reinstate the petitioner on the post of Managing Director, Pooravanchal Vidyut Vitaran Nigam Limited, Varanasi; (iii)to issue any other writ, order or direction which this Hon'ble Court deems fit and proper, which the petitioner may be found entitled to, in the circumstances of the case; (iv)to award costs of the petition to the petitioner." 2. Petitioner has prayed for issuing a writ of certiorari to quash impugned order of termination of his services as Managing Director of Poorvanchal Vidyut Vitaran Nigam Limited/respondent No. 5 (Annexure-6 to the writ petition) as well as order dated 18-10-2003 appointing in his place on Mukul Singhal/respondent No. 6 as interim measure and a writ of mandamus to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the writ petition: 4. Petitioner, in brief, pleads that U.P. Power Corporation Limited (U.P.P.C.L.) is a Government company, registered under Companies Act, 1956, engaged in transmission and distribution of power to consumers in the State of Uttar Pradesh. In order to have effective control and distribution four sub-companies, including the Poorvanchal Vidyut Vitaran Nigam Ltd., with Head Quarter at Varanasi were formed and registered under the Companies Act, 1956. Post of Managing Director of other companies including Poorvanchal Vidyut Vitaran Nigam Limited (P.V.V.N. Ltd.) were advertised; an interview letter dated 29-5-2003 (Annexure-1 to the writ petition) was issued calling the petitioner to attend the interview and the petitioner appeared for interview before Selection Committee (referred in Article 73, Articles of Association of the Company) which comprised of the following: (i)Chief Secretary, Government of U.P.; (Chairman) (ii)Principal Secretary, Energy Department U.P. Government; (Member) (iii)Chairman and Managing Director, U.P. Power Corporation Ltd.; (Member) (iv)Director of Indian Institute of Management, Lucknow; (Member) (v)Nominee of Director, Indian Instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a day's notice, a meeting of the Committee as convened as contemplated under Article 73 of the Articles of Association and impugned order of removal dated 20-9-2003, passed by the Governor (Annexure-6 to the writ petition), which is outcome of political consideration and in contravention of principles of natural justice and therefore arbitrary and illegal. 9. According to the petitioner, respondent Company is a Government Industrial Company. Admittedly, State Government holds 100 per cent share of the company/P.V.V.N. Ltd. and, therefore, it is an 'Authority's/instrumentality of the State under Article 12 of the Constitution of India. Case of the respondent Nos. 1, 2 and 4 in counter-affidavit: 10. In the counter-affidavit filed by the respondent No. 1 it is averred that rights of the petitioner as Managing Director were governed by the Articles of Association of the Company and petitioner is trying to enforce the contractual obligations enshrined under the Articles of Association of the Company. The writ petition for enforcement of contractual obligation is not maintainable. On merit it is contended that after petitioner had joined as Managing Director of the Company, report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18-10-2003. The termination of the petitioner has also been ratified by the Company vide its resolution dated 20-10-2003; a true copy of the minutes of the Board of Directors of company is Annexure-C.A. 8 to the counter- affidavit. Other respondents have also filed their counter-affidavit, stating same facts as alleged in counter-affidavit of respondent No. 1 Pleadings in rejoinder-affidavit in reply to the counter-affidavit of respondent No. 1: 14. In the rejoinder-affidavit dated 8-12-2003. While facts stated in the writ petition has been reiterated, it is again alleged by the petitioner that Company is Government Company and is a State within meaning of Article 12 of the Constitution of India and every action should be according to the principles enriched under Article 16 of the Constitution of India. Once action of the respondent is colourable exercise of power the writ petition is maintainable and preliminary objection is liable to be rejected. 15. Petition has been filed on the ground of mala fide and ground that State Government being a shareholder has no concern in the matter of termination of its Managing Director. The contract is between the Company and its Managing D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Committee referred to under Article 73 of the Articles of Association. For ready reference, relevant extract of Articles of Association (Annexure-9 to the writ petition) is given below: "Articles of Association of Poorvanchal Vidyut Vitran Nigam Ltd. Company Limited by Shares Interpretation 1. In the interpretation of the Memorandum of Association and these Articles the following expressions shall have the following meanings, unless repugnant to the subject or context: The 'Act' or the 'said Act' means the Companies Act, 1956.... 'Company' means the Poorvanchal Vidyut Vitran Nigam Ltd. 'Directors' means the Directors of the company, or as the case may be Directors assembled at Board. 'Government' means the Government of Uttar Pardesh. 'Government Corporation' means (i).... (ii) a Government Company as defined in the Act. 'Managing Director' means a director selected as such by the selection and entrusted with the substantial power of management which would not otherwise be exercised by him, and includes a director occupying the position of Managing Director, by whatever name called. The Managing Director of the Company shall exercise his powers subject to the superint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion given to members of the company, state the fact of their presentations having been made, and (b)send a copy of the representations to every member of company to whom notice of the meeting is send (which before or after receipt of the representations by the company). and a copy of the representations is not send as aforesaid because they were received too late or because of the company's default, the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting : Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Company Law Board is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter, and the Company Law Board may order the company's cost on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it. (5) & (6)****** (7) Nothing in this section shall be taken: (a)as depriving a person removed thereunder of any compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative Central Bank Ltd.(supra). Supreme Court noted: "....Bye-law of a Cooperative Society can at best have the status of an Article of Association of a Company governed by the Companies Act, 1956 and as held by this Court in Co-operative Central Bank Ltd. v. Additional Industrial Tribunal, Andhra Pradesh [1970] 1 SCR 205; AIR 1970 SC 245, the bye-laws of a Cooperative Society framed in pursuance of the provisions of the relevant Act cannot be held to be law or to have the force of law. They are neither statutory in character nor they have statutory flavour so as to be raised to the status of law." 27. Sri Sudhir Agarwal, during course of arguments, conceded that the Company in question, wherein U.P. Government has 100 per cent shares is a Government Company and thus it is an "Authority"/"Instrumentality" of State under Article 12, Constitution of India. 28. Learned counsel for the petitioner, Sri V.B. Upadhyaya, Sr. Advocate, did not dispute the 'ratio' laid down by the Apex Court in the aforementioned judgments but contended that : (i) a writ petition lies both against a private person and/or 'State' (or 'State Authority'/ 'Instrumentality of State' as contemplated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings." 30. It is argued by the petitioner that the two contingencies Nos. (ii) and (iii), enumerated by the Apex Court in the case of Harbanslal Sahnia (supra), exist in the present case. 31. At the outset we may mention that petitioner (as also confirmed by Sri V.B. Upadhyaya, learned senior counsel for the petitioner), has not pressed submissions made regarding non-compliance of section 284 of the Companies Act. The short question in the instant case to be decided is whether petitioner is entitled to claim the relief by filing writ petition under Article 226, Constitution of India, article 73(g) aforequoted contemplates that Managing Director can be removed on the recommendation of the Selection Committee constituted under Article 73. 32. This provision confers power upon the Company to remove the Director (including Managing Director). 33. We find that there is no complaint of violation of any statutory provision. Whether Governor has concern in the matter is not relevant as the impugned order is duly ratified by the Board of Directors of the Company or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce A.K. Yog regarding dismissal of writ petition. However, I want to express my opinion separately on grounds taken by petitioner in writ petition and objections raised by respondents. 42. Preliminary objection raised by the learned counsel for the respondents is that, writ petition is not maintainable on the ground that there is no breach of statutory provisions. Article 73(g) of Articles of Association under which services of petitioner has been terminated by appointing authority is not a statutory provision. 43. Regarding non-maintainability of the petition following cases have been ralied upon by the learned counsel for respondents. Life Insurance Corporation of India v. Escorts Ltd. AIR 1986 AC 1370: 44. While dealing with the contention of the maintainability of the petition, it has been held by the Hon'ble Apex Court in above mentioned case that, if the action of the State is political or sovereign in character, the court will keep away from it. The court will not debate academic matters or concern itself with the intricacies of trade and commerce. If the action of the State is related to contractual obligation or obligations arising out of the contract, the Court may no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worker under Industrial Law or by Labour or by Industrial Tribunals; (c)A statutory body when it has acted in breach of mandatory obligation imposed by the statute. 47. Dismissal though in violation of regulation framed under Agricultural Produces (Development of Warehousing) Corporation Act is not in breach of mandatory obligation under the Act, employee cannot claim reinstatement. Smt. J. Tiwari v. Smt. Jawala Devi Vidya Mandir AIR 1981 SC 122: 48. In above mentioned case, it has been held that, right and obligation of an employee of a private institution are covered by the terms of the contract entered into between the parties, even if the dismissal is wrongful, he would be entitled to decree for damages and not an order of reinstatement or declaration that, notwithstanding the termination of his service, he continues to be in service. Sukhdevo Singh v. Bhagat Ram Sardar Singh Raghuvanshi AIR 1975 SC 1331: 49. In the above mentioned case it has been held that, mere fact that Regulations are made in respect of the conditions of service of the employees of certain Institution or Organisation does not mean that, those conditions are statutory. No doubt, these are conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may not promote public interest. Viewed in this manner, in which we find no conceptual difficulty or anachronism, we find no reason why the requirement of article 14 should not extend even in the sphere of contractual matters for regulating the conduct of the State activity. Further it has been held that, it is now too well-settled that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract. This distinction between the State and a private individual in the field of contract has to be borne in the mind." 53. The meaning and true import of arbitrariness is more easily visualised than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 73 of the Articles of Association. 59. Attention of the Court was also drawn towards the termination order of the petitioner, Annexure-VI to the petition by His Excellency Governor under Article 73 of the Articles of Association. 60. Contention of the respondents is that, as the power of appointment includes the power of termination and as petitioner was appointed under Article 73 of the Articles of Association and his services were terminated under the same Article on the recommendation of the Selection Committee, it cannot be said that there was arbitrariness in terminating the services of the petitioner. 61. It has also been argued by the respondents that as Articles of Association has no force of law or Statute nor there is any provision for giving an opportunity and appointment and termination was made under Article 73 of the Articles of Association, which has no statutory force as held in the case of Radha Krishna Agarwal ( supra), the principles of natural justice cannot be invoked in the present case. 62. It has been argued by the respondent that decision in Kumari Shrilekha Vidyarthi (supra), is not applicable in the present case on the ground that mode prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and termination, which has been followed, it cannot be said that, wrong procedure has been applied for terminating the services of the petitioner. Moreover, it is in accordance with sub-section (7)(b) of section 284 of Companies Act. In such circumstances as there is no breach and mode prescribed in the Article 73 of Articles of Association was adopted and according to sub-section (7)(b) of section 284 of Companies Act, Managing Director may be removed besides the provision of section 284, the Court is of the view that petition is not maintainable. 69. It has been argued by learned counsel for the petitioner that out of seven members present in the meeting of the Selection Committee Sri Krishna Kumar was representative of I.I.M., Lucknow and Sri Sanjay Sachdeva was representative of C.I.I. as per Annexure-C.A. 3 of the counter-affidavit. It shows that out of seven members only three members were present and presence of Sri Krishna Kumar and Sri Sanjay Sachdeva representatives has no effect as they were not the members of the Selection Committee. As such quorum was not complete. 70. It has been argued by petitioner that, if there is no provision of quorum, majority of members o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministrative function. Selection of the candidates for admission to Medical Colleges does not involve performance of any judicial or quasi-judicial function. 74. In the present case also Committee was constituted by executive order for performing purely administrative function. In this connection attention of the Court was drawn towards Article 73 of Articles of Association, which reads as follows: "73(a) The Government of Uttar Pradesh shall constitute a Selection Committee consisting of Chief Secretary, G.O.U.P., Principal Secretary (Energy), G.O.U.P., U.P.P.C., Director of Indian Institute of Management, Lucknow, Director of Indian Institute of Technology Kanpur, Secretary General of C.I.I. and C.M.D. of the Rural Electrification Corporation to select and recommend to the company the person to be appointed as Directors, including Managing Director and whole time directors. In addition, the Managing Director so selected would also be a member of the Selection Committee for selecting the remaining directors." 75. Contention of petitioner is that stigma has been attached by terminating the services of the petitioner. 76. Argument of respondents that no stigma has been attached. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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