SUPREME COURT OF INDIA
Binny Limited
Vs
V. Sadasivan
Civil Appeal No.1976 of 1998 (With C.A.No.4839 of 2005)
(K.G.Balakrishnan and P.Venkatarama Reddi)
08/08/2005
K.G. BALAKRISHNAN, J.
1. Leave granted in SLP(C) No.6016/2002 and the appeal is heard along with
Civil Appeal No.1976/1998. In these two appeals, common questions of law arise
for consideration.
2. In Civil Appeal 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
machinery and management had no other alternative but to suspend the operations
of the mill. Order of termination was issued to the respondents invoking Clause
8 of the agreement dated 12.3.1991 entered into by the respondents with the
appellant company. As per clause 8 of the agreement, the Management had a right
to terminate the services without assigning any reason by just giving one
month's notice or salary in lieu thereof. Appellant contended that all these
respondents were drawing salary of more than Rs.1,600/- per month and they were
not 'workmen' under the Industrial Disputes Act, 1947
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.
3. 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 company
was a private employer and the appellant was working under a private contract
of employment. The Writ Petition filed by the appellant was referred to a
larger Bench in view of the important question of law raised by the parties and
the Full Bench of the Bombay High Court elaborately considered the question and
held that the appellant was not entitled to the remedy sought for and the Writ
Petition was not maintainable. The Full Bench held that by terminating the
services of the appellant, the Company was not discharging any public function
and, therefore, the action sought to be challenged by the appellant was not
amenable to the jurisdiction of judicial review.
4. We heard the learned Counsel on either side. Reference was made to various
decisions on the subject.
5. The contention of the appellant in Civil Appeal No.1976/1998 was that the
decisions of the High Court invoking the extraordinary jurisdiction under
Article 226 of the Constitution was incorrect and that the Court should not
have interfered with the decision of a private limited company and that the
powers under Article 226 cannot be invoked against a private authority who is
discharging its functions on the basis of the contract entered into between the
employer and the employees. It was contended that the remedy available to the
workers was only ordinary civil litigation. It was also contended that there
was no public law element in the action taken by the appellant against the
employees and, therefore, the public law remedy of judicial review had no
application.
6. Employees who are respondents in that appeal contended that their contract
with the appellant was per se illegal and void as it was opposed to Section 23
of the Indian Contracts Act. It was argued that under similar circumstances,
this court had given direction to redress the grievances of the employees.
Reference was made to Central Inland Water Transport Corporation Ltd. vs. Brajo
Nath Ganguly and it was contended by the respondent employees that the
decision to terminate their services was based on a specific clause in the
contract which by itself is void in view of Section 23 of the Indian Contracts
Act. Therefore, the High Court was justified in giving a declaratory relief in
their favour.
7. In Civil Appeal arising out of SLP (Civil) No.6016 of 2002, the appellant
contended that the action of the respondent 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.
8. We have carefully considered the various contentions urged by the parties on
either side. In order to decide the question, it is necessary to trace the
history of law relating to judicial review of public actions.
9. Superior Court's supervisory jurisdiction of judicial review is invoked by
an aggrieved party in myriad cases. High Courts in India are empowered under
Article 226 of the Constitution to exercise judicial review to correct
administrative decisions and under this jurisdiction High Court can issue to
any person or authority, any direction or order or writs for enforcement of any
of the rights conferred by Part III or for any other purpose. The jurisdiction
conferred on the High Court under Article 226 is very wide. However, it is an
accepted principle that this is a public law remedy and it is available against
a body or person performing public law function. Before considering the scope
and ambit of public law remedy in the light of certain English decisions, it is
worthwhile to remember the words of Subha Rao J. expressed in relation to the
powers conferred on the High Court under Article 226 of the Constitution in
Dwarkanath vs. Income Tax Officer at pages 540-41:
"This article is couched in comprehensive phraseology and it ex-facie
confers a wide power on the High Courts to reach injustice wherever it is
found. The Constitution designedly used a wide language in describing the
nature of the power, the purpose for which and the person or authority against
whom it can be exercised. It can issue writs in the nature of prerogative writs
as understood in England; but the scope of those writs also is widened by the
use of the expression "nature", for the said expression does not
equate the writs that can be issued in India with those in England, but only
draws an analogy from them. That apart, High Courts can also issue directions,
orders or writs other than the prerogative writs. It enables the High Court to
mould the reliefs to meet the peculiar and complicated requirements of this
country. Any attempt to equate the scope of the power of the High Court under
Article 226 of the Constitution of India with that of the English Courts to
issue prerogative writs is to introduce the unnecessary procedural restrictions
grown over the years in a comparatively small country like England with the
unitary form of Government into a vast country like India functioning under a
federal structure. Such a construction defeats the purpose of the article
itself..." *
10. The Writ of Mandamus 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
are statutory and duties arising merely from contract. Contractual duties are
enforceable as matters of private law by ordinary contractual remedies such as
damages, injunction, specific performance and declaration. In the
Administrative Law (Ninth Edition) by Sir William Wade and Christopher Forsyth,
(Oxford University Press) at page 621, the following opinion is expressed:
"A distinction which needs to be clarified Ist that between public
duties enforceable by mandamus, which are usually statutory, and duties arising
merely from contract. Contractual duties are enforceable as matters of private
law by the ordinary contractual remedies, such as damages, injunction, specific
performance and declaration. They are not enforceable by mandamus, which in the
first place is confined to public duties and secondly is not granted where
there are other adequate remedies. This difference is brought out by the relief
granted in cases of ultra vires. If for example a minister or a licensing
authority acts contrary to the principles of natural justice, certiorari and
mandamus are standard remedies. But if a trade union disciplinary committee
acts in the same way, these remedies are inapplicable: the rights of its
members depend upon their contract of membership, and are to be protected by declaration
and injunction, which accordingly are the remedies employed in such
cases." *
11. Judicial review is designed to prevent the cases of abuse of power and
neglect of duty by public authorities. However, under our Constitution, Article
226 is couched in such a way that a writ of mandamus could be issued even
against a private authority. However, such private authority must be
discharging a public function and that the decision sought to be corrected or
enforced must be in discharge of a public function. The role of the State
expanded enormously and attempts have been made to create various agencies to
perform the governmental functions. Several corporations and companies have
also been formed by the government to run industries and to carry on trading
activities. These have come to be known as Public Sector Undertakings. However,
in the interpretation given to Article 12 of the Constitution, this Court took
the view that many of these companies and corporations could come within the
sweep of Article 12 of the Constitution. At the same time, there are private
bodies also which may 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 care, education and personal social services, from
funds raised by taxation. A body may perform public functions in the form of
adjudicatory services (such as those of the criminal and civil courts and
tribunal system). They also do so if they regulate commercial and professional
activities to ensure compliance with proper standards. For all these purposes,
a range of legal and administrative techniques may be deployed, including:
rule-making, adjudication (and other forms of dispute resolution); inspection;
and licensing. *
Public functions need not be the exclusive domain of the state. Charities,
self-regulatory organizations and other nominally private institutions (such as
universities, the Stock Exchange, Lloyd's of London, churches) may in reality
also perform some types of public function. As Sir John Donaldson M.R. urged,
it is important for the courts to "recognise the realities of executive
power" and not allow "their vision to be clouded by the subtlety and
sometimes complexity of the way in which it can be exerted".
Non-government bodies such as these are just as capable of abusing their powers
as is government." *
12. In Regina vs. Panel on Take-overs and Merges, Ex parte Datafin Plc. And
another (1987)1 Queen's Bench Division 815, a question arose whether the Panel
of Take-overs and Mergers had acted in concert with other parties in breach of
the City Code on Take-overs and Mergers. The panel dismissed the complaint of
the applicants. Though the Panel on Take-over and Mergers was purely a private
body, the Court of Appeal held that the supervisory jurisdiction of the High
Court was adaptable and could be extended to any body which performed or
operated as an integral part of a system which performed public law duties,
which was supported by public law sanctions and which was under an obligation
to act judicially, but whose source of power was not simply the consent of
those over whom it exercised that power; that although the panel purported to
be part of a system of self-regulation and to derive its powers solely from the
consent of those whom its decisions affected, it was in fact operating as an
integral part of a governmental framework for the regulation of financial
activity in the City of London, was supported by a periphery of statutory
powers and penalties, and was under a duty in exercising what amounted to
public powers to act 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.
13. Lloyd L.J., agreeing with the opinion expressed by Sir John Nonaldson 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." *
14. In that decision, they approved the observations made by Lord Diplock in
Council of Civil Service Unions vs. Minister for the Civil Service 1984 Indlaw HL 42, 409 wherein it was held:
"....for a decision to be susceptible to judicial review the
decision-maker must be empowered by public law (and not merely, as in
arbitration, by agreement between private parties) to make decisions that, if
validly made, will lead to administrative action or abstention from action by
an authority endowed by law with executive powers which have one or other of
the consequences mentioned in the preceding paragraph. The ultimate source of
the decision-making power is nearly always nowadays a statute or subordinate
legislation made under the statute; but in the absence of any statute
regulating the subject matter of the decision the source of the decision-making
power may still be the common law itself, i.e., that part of the common law
that is given by lawyers the label of `the prerogative.' Where this is the
source of decision-making power, the power is confined to executive officers of
central as distinct from local government and in constitutional practice is
generally exercised by those holding ministerial rank" *
15. It is also pertinent to refer to Sir John Donaldson M.R. in that Take-Over
Panel case:
"In all the reports it is possible to find enumerations of factors
giving rise to the jurisdiction, essential or as being exclusive of other
factors. Possibly the only essential elements are what can be described as a
public element, which can take many different forms, and the exclusion from the
jurisdiction of bodies whose sole source of power is a consensual submission to
is jurisdiction." *
16. The above guidelines and principles applied by English courts cannot be
fully applied to Indian conditions when exercising jurisdiction under Article
226 or 32 of the Constitution. As already stated, the power of the High Courts
under Article 226 is very wide and these powers have to be exercised by
applying the constitutional provisions and judicial guidelines and violation,
if any, of the fundamental rights guaranteed in Part III of the Constitution.
In the matter of employment of workers by private bodies on the basis of
contracts entered into between them, the courts had been reluctant to exercise
the powers of judicial review and whenever the powers were exercised as against
private employers, it was solely done based on public law element involved
therein.
17. This view was expressly stated by this Court in various decisions and one
of the earliest decisions in The Praga Tools Corporation vs. Shri C.A. Imanual
and Others . In this case, the appellant 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 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 that 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
order of mandamus is, in form, a command directed to a person, corporation or
any inferior tribunal requiring him or them to do s particular thing therein
specified which appertains to his or their office and is in the nature of a
public duty. It is, however, not necessary that the person or the authority on
whom the statutory duty is imposed need be a public official or an official
body. A mandamus can issue, for instance, to an official of a society to compel
him to carry out the terms of the statute under or by which the society is
constituted or governed and also to companies or corporations to carry out
duties placed on them by the statutes authorizing their undertakings. A
mandamus would also lie against a company constituted by a statute for the
purpose of fulfilling public responsibilities [Cf. Halsbury's Laws of England
(3rd Ed.), Vol. II p. 52 and onwards]. The company being a non-statutory body
and one incorporated under the Companies Act there was neither a statutory nor
a public duty imposed on it by a statute in respect of which enforcement could
be sought by means of a mandamus, nor was there in its workmen any
corresponding legal right for enforcement of any such statutory or public duty.
The High Court, therefore, was right in holding that no writ petition for a
mandamus or an order in the nature of mandamus could lie against the
company." *
18. It was also observed that when the High Court had held that the writ
petition was not maintainable, no relief of a declaration as to invalidity of
an impugned agreement between the company and its employees could be granted
and that the High Court committed an error in granting such a declaration.
19. In VST Industries Limited vs. VST Industries Workers' Union & Anr.
5, the very same question came up for
consideration. The appellant-company was engaged in the manufacture and sale of
cigarettes. A petition was filed by the first respondent under Article 226 of
the Constitution seeking a writ of mandamus to treat the members of the respondent
Union, who were employees working in the canteen of the appellant's factory, as
employees of the appellant and for grant of monetary and other consequential
benefits. Speaking for the Bench, Rajendra Babu, J., (as he then was), held as
follows:
"7. In de Smith, Woolf and Jowell's Judicial Review of Administrative
Action 5th Edn., It 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 "public" or a "private"
body.
(2) The principles of judicial review prima facie govern the activities of
bodies performing public functions.
(3) However, not all decisions taken by bodies in the course of their public
functions are the subject matter of judicial review. In the following two
situations judicial review will not normally be appropriate even though the
body may be performing a public function
(a) Where some other branch of the law more appropriately governs the dispute
between the parties. In such a case, that branch of the law and its remedies
should and normally will be applied; and
(b) Where there is a contract between the litigants. In such a case the express
or implied terms of the agreement should normally govern the matter. This reflects
the normal approach of English law, namely, that the terms of a contract will
normally govern the transaction, or other relationship between the parties,
rather than the general law. Thus, where a special method of resolving disputes
(such as arbitration or resolution by private or domestic tribunals) has been
agreed upon by the parties (expressly or by necessary implication), that
regime, and not judicial review, will normally govern the dispute." *
20. Applying the above principles, this Court held that the High Court rightly
held that it had no jurisdiction.
21. Another decision on the same subject is General Manager, Kisan Sahkar Chini
Mills Limited. Sultanpur, UP vs. Satrughan Nishad and Ors. . The
appellant was a cooperative society and was engaged in the manufacture of
sugar. The respondents were the workers of the appellant and they filed various
writ petitions contending that they had to be treated as permanent workmen. The
appellant challenged the maintainability of those writ petitions and applying
the principles enunciated in VST Industries' case (supra), it was held by this
Court that the High Court had no jurisdiction to entertain an application under
Article 226 of the Constitution as the mill was engaged in the manufacture and
sale of sugar which would not involve any public function.
22. In Federal Bank Limited vs. Sagar Thomas & Ors. , the respondent
was working as a Branch Manager of the appellant Bank. He was suspended and
there was a disciplinary enquiry wherein he was found guilty and dismissed from
service. The respondent challenged his dismissal by filling 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 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.
23. The counsel for the respondent in Civil Appeal No.1976 of 1998 and for the
appellant in the civil arising out of SLP (Civil) No.6016 of 2002 strongly
contended that irrespective of the nature of the body, the writ petition under
Article 226 is maintainable provided such body is discharging a public function
or statutory function and that the decision itself has the flavour of public
law element and they relied on the decision of this Court in Andi Mukta Sadguru
Shree Muktajee Vandas Swami Survarna Jayanti Mahotsav Smarak Trust & Ors.
vs. V.R. Rudani & Ors. . In this case, the appellant was a Trust
running a science college affiliated to the Gujarat University under Gujarat
University Act, 1949. The teachers working in that college were paid in the pay
scales recommended by the University Grants Commission and the college was an
aided institution. There was some dispute between the University Teachers
Association and the University regarding the fixation of their pay scales.
Ultimately, the Chancellor passed an award and this award was accepted by the
State Govt. as well as the University and the University and the University
directed to pay the teachers as per the award. The appellants refused to
implement the award and the respondents filed a writ petition seeking a writ of
mandamus and in writ petition the appellants contended that the college managed
by the Trust was not an "authority" coming within the purview of Article
12 of the Constitution and therefore the writ petition was not maintainable.
This plea was rejected and this Court held that the writ of mandamus would lie
against a private individual and the words "any person or authority"
used in Article 226 are not to be confined only to statutory authorities
instrumentalities of the State and they may cover any other person or body
performing public duty. The form of the body concerned is not very much
relevant. What is relevant is the nature of the duty imposed on the body. The
duty must be judged in the light of positive obligation owed by the person or
authority to the affected party. No matter by what means the duty is imposed,
if a positive obligation exists, mandamus cannot be denied.
24. The above decision cannot be applied to the facts of this case. It is
important to note that the college was an aided institution and imparting
education to students. These facts are specifically stated in paragraph 15 of
the judgment. It was in this background that this Court held that there was a
public law element in the matter involved therein and that the college
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.
25. Two other decisions relied upon by the appellant to argue that the writ
petition was maintainable are the decisions reported in Central Inland
Water Transport Corporation Ltd. & Anr. vs. Brojo Nath Ganguly & Anr.
(supra) and in 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 an appeal
before this Court. The main thrust of the argument of the respondents was that
Rule 9(1) of Central Inland Water Transport Corporation Limited (Service,
Discipline and Appeal) Rules, 1979 was void and illegal and violative of
Article 14 of the Constitution and it was also void in view Section 23 of the
Contract Act. This Court held that Rule 9(1) was violative of Article 14 as it
was against the public policy as the employer had absolute power to terminate
the service of an employee giving three months notice. This Court held that this
was an absolute arbitrary power given to the corporation and termination of the
respondent employees by invoking Rule 9(1) was illegal.
26. It is important to understand the real dicta laid down in the background of
the facts involved therein. The appellant was a public sector undertaking and
in that view of the matter it was held that the contract of employment and the
service rules which gave absolute and arbitrary power to terminate the service
of the employees were illegal. It may be also noticed that the termination
clause was referred to in the context of the contract read as a whole and no
enquiry was contemplated under the rules even in the case of allegation of
misconduct and it was held to be violative of the principles of natural
justice. It was also held to be violative of Section 23 of the Contract Act as
it was opposed to public policy to terminate the services of the employee
without conducting an enquiry even on the ground of misconduct. The public
policy principles can be applied to the employment in public sector undertaking
in appropriate cases. But the same principles cannot be applied to private
bodies. There are various labour laws which curtail the power of the employer
from doing any anti-labour activity. Sufficient safeguards are made in the
labour law enactments to protect the interests of the employees of private
sector. The service rules and regulations which are applicable to govt.
employees or employees of public sector undertakings stand on a different
footing and they cannot be tested on the same touchstone or enforced in the
same manner. Therefore, the decision rendered by this Court in Central Inland
case is of no assistance to the respondents in Civil Appeal No.976 of 1988 or
to the appellants in the civil appeal arising out of SLP (Civil) No.6016 of
2002.
27. In the second case also, namely, the Delhi Transport Corporation vs. DTC
Mazdoor Congress & Ors. , 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.
28. In this context, it must be noted that the High Court purported to apply to
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 State of Binny Limited in their entirety. Clause (9)
contemplates an inquiry in a case of termination for misconduct. Thus there is
a provision for natural justice in case of termination involving misconduct and
stigma. In such a case, whether the ratio of the decisions of DTC and Central
Inland cases would apply or not, was not examined by the High Court. This is an
additional reason why the declaration by the High Court should not be allowed
to stand.
29. Thus, it can be seen that a writ of mandamus or the remedy under Article
226 is pre-eminently a public law remedy and is not generally available as a
remedy against private wrongs. It is used for enforcement of various rights of
the public or to compel the public / statutory authorities to discharge their
duties and to act within their bounds. It may be used to do justice when there
is wrongful exercise of power or a refusal to perform duties. This writ is
admirably equipped to serve as a judicial control over administrative actions.
This writ could also be issued against any private body or person, specially in
view of the words used in Article 226 of the Constitution. However, the scope
of mandamus is limited to enforcement of public duty. The scope of mandamus is
determined by the nature of the duty to be enforced, rather than the identity
of the authority against whom it is sought. If the private body is discharging
a public function and the denial of any right is in connection with the public
duty imposed on such body, the public law remedy can be enforced. # The
duty cast on the public body may be either statutory or otherwise and the
source of such power is immaterial, but, nevertheless, there must be the public
law element in such action. Sometimes, it is difficult to distinguish between
public law and private law remedies. According to Halsbury's Laws of England
3rd ed. Vol. 30, page-682, "a public authority is a body not necessarily a
county council, municipal corporation or other local authority which has public
statutory duties to perform and which perform the duties and carries out its
transactions for the benefit of the public and not for private profit."
There cannot be any general definition of public authority or public action.
The facts of each case decide the point.
30. A contract would not become statutory simply because it is for construction
of a public utility and it has been awarded by a statutory body. But
nevertheless it may be noticed that the Government or Government authorities at
all levels in 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 it 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.
31. 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., 3 and also in Kerala
State Electricity Board vs. Kurien E. Kalathil 2000 (6) SCC 295. In the
latter case, this Court reiterated that the interpretation and implementation
of a clause in a contract cannot be the subject matter of a writ petition.
Whether the contract envisages actual payment or not is a question of
construction of contract. If a term of a contract is violated, ordinarily, the
remedy is not a writ petition under Article 226.
32. Applying these principles, it can very well be said that a writ of
mandamus can be issued against a private body which is not a State within the
meaning of Article 12 of the Constitution and such body is amenable to the
jurisdiction under Article 226 of the Constitution and the High Court under
Article 226 of the Constitution can exercise judicial review of the action
challenged by a party. But there must be a public law element and it cannot be
exercised to enforce purely private contracts entered into between the parties.
#
33. We are unable to perceive any public element in the termination of the
employees by the appellant in Civil Appeal No. 1976 of 1998 and the remedy
available to the respondents is to seek redressal of their grievance in civil
law or under the labour law enactments especially in view of the disputed
questions involved as regards the status of employees and other matter. So
also, in the civil appeal arising out of SLP (Civil) No. 6016 of 2002, the writ
petition has been rightly dismissed by the High Court. We see no merit in the
contention advanced by the appellant therein. The High Court rightly held that
there is no public law element and the remedy open to the appellant is to seek
appropriate relief other than judicial review of the action taken by the
respondent company.
34. In the result, we set aside the declaration order by the High Court and
allow Civil Appeal No. 1976 of 1998 to the extent indicated above. Civil Appeal
arising out of SLP (Civil) No. 6016 of 2002 is dismissed leaving open the right
of the appellant to seek redressal of his grievance before other appropriate
forum.