TMI Blog2005 (8) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... l No. 1976/1998, narration of brief facts is necessary to understand whether the reliefs as prayed for by respondents 2 to 36 could have been granted by the High Court. Each of the respondents was working as member of the management staff of the appellant company, which was engaged in the manufacture of cloth. The respondents were originally appointed in the appellant-company in various jobs such as Clerks, Machine Overlookers, Supervisors, etc. According to these respondents, from 1981 onwards, the appellant company started insisting on them to be designated as management staff with the object of avoiding payment of overtime wages. The respondents signed an agreement with the Management acceding to the request of the appellant company, but they continued to perform the same duties as before. The appellant company contended that there was incessant rain in the night of 12.6.1996 when the entire company premises was flooded with water and it caused serious damage to the plant and machinery and finished-stock and the appellant company stayed all the operations and informed the Commissioner of Labour that water had entered the mill premises causing serious damage to the plant and mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Contracts Act. Reliance was placed on Central Inland Water Transport Corporation Ltd. Vs. Brojo Nath Ganguly (1986) 3 SCC 156 and the High Court ultimately held that in the proceedings under Article 226, the respondents herein would not be entitled to get the relief of reinstatement and back wages and the court granted only a declaratory relief to the effect that the termination order was illegal and the respondents had to work out an appropriate remedy before the appropriate forum. In the appeal arising out of SLP (Civil) No. 6106/2000, the appellant was employed as a Corporate Legal Manager with the 1st respondent company, which is a private limited company engaged in the manufacture of chemicals. The services of the appellant were terminated with effect from 1.6.1998. The appellant sought for the issue of a Writ or other appropriate Order to quash or set aside the Termination Order dated 1.6.1998. He also sought for a Writ of Mandamus directing the respondents to allow the appellant to report for work in the same grade and pay-scale to which he was originally employed. The respondent company contended that the Writ Petition was not maintainable as the respondent comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was illegal and void and his services should not have been terminated by the employer. According to the appellant, even if the decision-making authority is a private body or not an 'authority' coming within the purview of Article 12 of the Constitution, on wider issues, the jurisdiction of the High Court under Article 226 can be invoked to set aside the illegal act and to protect the fundamental rights of the aggrieved party. The learned Counsel for the respondent representing the company submitted that the appellant had been rightly discharged from the services and the company being a private authority was not amenable to the writ jurisdiction of the High Court. It was submitted that under the powers of judicial review by the High Court, a public action alone could have been challenged and the decision to terminate the service of an employee on the ground that his services were unsatisfactory does not have any public law element and, therefore, the High Court has rightly rejected the contentions advanced by the appellant therein. We have carefully considered the various contentions urged by the parties on either side. In order to decide the question, it is necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mus lies to secure the performance of a public or a statutory duty. The prerogative remedy of mandamus has long provided the normal means of enforcing the performance of public duties by public authorities. Originally, the writ of mandamus was merely an administrative order from the sovereign to subordinates. In England, in early times, it was made generally available through the Court of King's Bench, when the Central Government had little administrative machinery of its own. Early decisions show that there was free use of the writ for the enforcement of public duties of all kinds, for instance against inferior tribunals which refused to exercise their jurisdiction or against municipal corporation which did not duly hold elections, meetings, and so forth. In modern times, the mandamus is used to enforce statutory duties of public authorities. The courts always retained the discretion to withhold the remedy where it would not be in the interest of justice to grant it. It is also to be noticed that the statutory duty imposed on the public authorities may not be of discretionary character. A distinction had always been drawn between the public duties enforceable by mandamus that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be discharging public functions. It is difficult to draw a line between the public functions and private functions when it is being discharged by a purely private authority. A body is performing a public function when it seeks to achieve some collective benefit for the public or a section of the public and is accepted by the public or that section of the public as having authority to do so. Bodies therefore exercise public functions when they intervene or participate in social or economic affairs in the public interest. In a book on Judicial Review of Administrative Action (Fifth Edn.) by de Smith, Woolf Jowell in Chapter 3 para 0.24, it is stated thus: A body is performing a public function when it seeks to achieve some collective benefit for the public or a section of the public and is accepted by the public or that section of the public as having authority to do so. Bodies therefore exercise public functions when they intervene or participate in social or economic affairs in the public interest. This may happen in a wide variety of ways. For instance, a body is performing a public function when it provides public goods or other collective services, such as health ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicially; that, therefore, the court had jurisdiction to review the panel's decision to dismiss the applicants' complaint; but that since, on the facts, there were no grounds for interfering with the panel's decision, the court would decline to intervene. Lloyd L.J., agreeing with the opinion expressed by Sir John Donaldson M.R. held : I do not agree that the source of the power is the sole test whether a body is subject to judicial review, nor do I so read Lord Diplock's speech. Of course the source of the power will often, perhaps usually, be decisive. If the source of power is a statute, or subordinate legislation under a statute, then clearly the body in question will be subject to judicial review. If at the end of the scale, the source of power is contractual, as in the case of private arbitration, then clearly the arbitrator is not subject to judicial review. In that decision, they approved the observations made by Lord Diplock in Council of Civil Service Unions vs. Minister for the Civil Service (1985) A.C. 374, 409 wherein it was held : .for a decision to be susceptible to judicial review the decision- maker must be empowered by public law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant company was a company incorporated under the Indian Companies Act and at the material time the Union Government and the Government of Andhra Pradesh held 56 per cent and 32 per cent of its shares respectively. Respondent workmen filed a writ petition under Article 226 in the High Court of Andhra Pradesh challenging the validity of an agreement entered into between the employees and the company, seeking a writ of mandamus or an order or direction restraining the appellant from implementing the said agreement. The appellant raised objection as to the maintainability of the writ petition. The learned Single Judge dismissed the petition. The Division Bench held that the petition was not maintainable against the company. However, it granted a declaration in favour of three workmen, the validity of which was challenged before this Court. This Court held at pages 589-590 as under: .that the applicant for a mandamus should have a legal and specific right to enforce the performance of those dues. Therefore, the condition precedent for the issue of mandamus is that there is in one claiming it a legal right to the performance of a legal duty by one against whom it is sought. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is noticed that not all the activities of the private bodies are subject to private law, e.g., the activities by private bodies may be governed by the standards of public when its decisions are subject to duties conferred by statute or when by virtue of the function it is performing or possible its dominant position in the market, it is under an implied duty to act in the public interest. By way of illustration, it is noticed that a private company selected to run a prison although motivated by commercial profit should be regarded, at least in relation to some of its activities, as subject to public law because of the nature of the function it is performing. This is because the prisoners, for whose custody and care it is responsible, are in the prison in consequence of an order of the court, and the purpose and nature of their detention is a matter of public concern and interest. After detailed discussion, the learned authors have summarized the position with the following propositions : (1) The test of a whether a body is performing a public function, and is hence amenable to judicial review, may not depend upon the source of its power or whether the body is ostensibly a pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al by filing a writ petition. The learned Single Judge held that the Federal Bank was performing a public duty and as such it fell within the definition of other authorities under Article 12 of the Constitution. The appellant bank preferred an appeal, but the same was dismissed and the decision of the Division Bench was challenged before this Court. This Court observed that a private company carrying on business as a scheduled bank cannot be termed as carrying on statutory or public duty and it was therefore held that any business or commercial activity, whether it may be banking, manufacturing units or related to any other kind of business generating resources, employment, production and resulting in circulation of money which do have an impact on the economy of the country in general, cannot be classified as one falling in the category of those discharging duties or functions of a public nature. It was held that that the jurisdiction of the High Court under Article 226 could not have been invoked in that case. The counsel for the respondent in Civil Appeal No. 1976 of 1998 and for the appellant in the civil appeal arising out of SLP(Civil) No. 6016 of 2002 strongly contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llege authorities were bound to pay salary and allowances to the teachers. The said case did not emanate from a contract of employment between the workers and the private body. For that reason, the Rudani's case cannot be applied to the facts of the present case. Two other decisions relied upon by the appellant to argue that the writ petition was maintainable are the decisions reported in (1986)3 SCC 156 Central Inland Water Transport Corporation Ltd. Anr. Vs. Brojo Nath Ganguly Anr. (supra) and in 1991 Supp(1) SCC 600 Delhi Transport Corporation vs. DTC Mazdoor Congress Ors. The Central Inland case was extensively relied on. In this case, the appellant corporation was a Govt. company incorporated under the Companies Act and the majority of the shares were held by the Union of India and remaining shares were held by the State of West Bengal. Each of the respondents in the two appeals was in the service of the said company. A notice under Rule 9(1) was served on them and their services were terminated with immediate effect by paying three months pay. They filed writ petitions before the High Court and the Division Bench allowed the same. The appellant corporation filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o , namely, the Delhi Transport Corporation Vs. DTC Mazdoor Congress Ors. 1991 Supp.(1) SCC 600, the appellant was a public sector undertaking and the main controversy was about the term other authorities under Article 12 of the Constitution. Both in Central Inland and DTC cases, the decision of the public sector undertaking was under challenge and the question raised was whether the principles of natural justice and fairness are to be applied. It was held that this Court has got jurisdiction to consider this question by invoking the principles of judicial review. But it would be noticed that in both the cases, it was a public sector undertaking coming within the purview of other authorities under Article 12 of the Constitution. In this context, it must be noted that the High Court purported to apply the ratio in the above two decisions on the assumption that all termination simplicitor clauses providing for termination on giving notice will be per se invalid. But the High Court has not examined clauses (8) (9) of the Agreement between Management and the Staff of Binny Limited in their entirety. Clause (9) contemplates an inquiry in a case of termination for misconduct. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increasingly employing contractual techniques to achieve its regulatory aims. It cannot be said that the exercise of those powers are free from the zone of judicial review and that there would be no limits to the exercise of such powers, but in normal circumstances, judicial review principles cannot be used to enforce the contractual obligations. When that contractual power is being used for public purpose, it is certainly amenable to judicial review. The power must be used for lawful purposes and not unreasonably. The decision of the employer in these two cases to terminate the services of their employees cannot be said to have any element of public policy. Their cases were purely governed by the contract of employment entered into between the employees and the employer. It is not appropriate to construe those contracts as opposed to the principles of public policy and thus void and illegal under Section 23 of the Contract Act. In contractual matters even in respect of public bodies, the principles of judicial review have got limited application. This was expressly stated by this Court in State of U.P. vs. Bridge Roof Co. (1996) 6 SCC 22 and also in Kerala State Electricity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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