Balmer Lawrie & Co. Ltd. v. Partha Sarathi Sen Roy (SC) BS415370
SUPREME COURT OF INDIA

Before:- Dr. B.S. Chauhan and V. Gopala Gowda JJ.

Civil Appeal Nos. 419-426 of 2004 With Civil Appeal No. 926 of 2013. D/d. 20.2.2013.

Balmer Lawrie & Co. Ltd. and Ors. - Appellants

Versus

Partha Sarathi Sen Roy and Ors. - Respondents

For the Appellants :- Sudhir Chandra, Sr. Adv., Parijat Sinha, Ms. Reshmi Rea Sinha, Anil Kumar Mishra, S.C. Ghosh, Snehashish Mukherjee and Rameshwar Prasad Goyal, Advocates.

For the Respondents :- Sangram Patnaik, Umesh Yadav, Ms. Swayam Siddha, Naresh Kumar, Pijush K. Roy, Ms. Kakali Roy, C. Balakrishna, Bijan Kumar Ghosh, Mrs. Sarla Chandra and Abhisth Kumar, Advocates.

A. Constitution of India, Articles 12 and 226 - Authority - State - Writ maintainability - Appellant-Balmer Lawrie &Co. Ltd - Public Limited Company incorporated under India Companies Act - 59% shares held by Government and it is a Government Company and subsidiary of IBP which is also a Government company and managed under the guidance of the Ministry of Petroleum and Natural Gas - The appellant company cannot take any independent decisions with respect to the revision of pay-scales that are applicable to its employees and the same are always subject to the approval of the Administrative Ministry - The annual budget of the company is also passed only if the same is approved by the Administrative Ministry - Whole time Directors of the appellant company are appointed by the President of India and such communications are also routed through Administrative Ministry - The appellant company and IBP Company Ltd. had a common Chairman - Cumulative effect of all the aforesaid facts etc. in reference to the appellant would render it as an authority amenable to the writ jurisdiction of High Court.

[Paras 25 to 27]

B. Constitution of India, Articles 12 and 226 - State - Instrumentality of the State - Writ maintainability - Case law discussed.

[Paras 7 to 12]

C. Words and phrases - Word 'pervasive' - It mean that which pervades/tends to pervade in such a way, so as to be, or become, prevalent or dominant - Extensive or far reaching, spreading through every part of something.

[Para 6]

D. Constitution of India, Article 12 - Instrumentality of State - Pervasive control - The term 'control' is taken to mean check, restraint or influence - Control is intended to regulate, and to hold in check, or to restrain from action - The word 'regulate' would mean control or to adjust by rule, or to subject to governing principles.

[Para 13]

E. Constitution of India, Article 12 - Instrumentality of State - Writ maintainability - The factors to be considered by the Court whether an authority is amenable to writ jurisdiction enumerated.

[Para 17]

F. Constitution of India, Articles 12, 14 and 226 - Contract Act, 1872, Section 23 - Instrumentality of State - Termination - As per term of appointment which provides that Company shall have the right, at its sole discretion to terminate services of respondent by giving three months' notice in writing and without assigning any reason - Held that the Court cannot approve the 'hire and fire' policy adopted by the appellant company and the terms and conditions incorporated in the Manual of Officers in, 1976, cannot be held to be justifiable, and the same being arbitrary, cannot be enforced - Clause 11 of the appointment letter held to be unconscionable clause - The Service Condition Rules held to be violative of Article 14 of the Constitution to this extent - The contract of employment also held to void to such extent.

[Para 28]

G. Words and phrases - Word 'unconscionable' - It means showing no regard for conscience, irreconcilable with what is right or reasonable - An unconscionable bargain would therefore, be on which is irreconcilable with what is right or reasonable.

[Para 28]

Cases Referred :-

Agricultural Produce Market Committee v. Ashok Harikuni etc., 2000(4) S.C.T. 674 : AIR 2000 Supreme Court 3116.

Ajay Hasia etc. v. Khalid Mujib Sehravardi etc., AIR 1981 Supreme Court 487.

Assam Small Scale Ind. Dev Corporation Ltd. v. M/s. J.D. Pharmaceuticals, AIR 2006 Supreme Court 131.

Balco Employees' Union (Regd.) v. Union of India, 2002(2) S.C.T. 12 : 2002 (2) SCC 333.

Bangalore Water Supply & Sewerage Board v. A. Rajappa, AIR 1978 Supreme Court 548.

Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, AIR 1986 Supreme Court 1571.

Chief Conservator of Forests v. Jagannath Maruti Kondhare etc., 1996(2) S.C.T 164 : AIR 1996 Supreme Court 2898.

D.T.C. v. D.T.C. Mazdoor Congress, 1991(1) S.C.T 675 : AIR 1991 Supreme Court 101.

K. Ramanathan v. State of Tamil Nadu, AIR 1985 Supreme Court 660.

K.C. Sharma v. Delhi Stock Exchange, AIR 2005 Supreme Court 2884.

Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, AIR 1941 Federal Court 5.

LIC of India v. Consumer Education and Research Centre, 1995(4) S.C.T. 678 : AIR 1995 Supreme Court 1811.

Lt. Governor of Delhi v. V.K. Sodhi, 2007(4) S.C.T. 102 : 2007(5) Recent Apex Judgments (R.A.J.) 15 : AIR 2007 Supreme Court 2885.

M.D., H.S.I.D.C. v. M/s. Hari Om Enterprises, AIR 2009 Supreme Court 218.

M/s. Star Enterprises v. City and Industrial Development Corpn. of Maharashtra Ltd., (1990) 3 SCC 280.

M/s. Zee Telefilms Ltd. v. Union of India, AIR 2005 Supreme Court 2677.

Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers' Assn., AIR 2002 Supreme Court 609.

N. Nagendra Rao & Co. v. State of A.P., 1995(1) R.R.R 378 : AIR 1994 Supreme Court 2663.

Pasupuleti Venkateswarlu v. Motor & General Traders, 1975(*) RCR (Rent) 486 : AIR 1975 Supreme Court 1409.

Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, 2002(2) S.C.T. 1067 : (2002) 5 SCC 111.

Punjab National Bank by Chairman v. Astamija Dash, 2008(3) S.C.T. 60 : AIR 2008 Supreme Court 3182.

Rajasthan State Electricity Board Jaipur v. Mohan Lal, AIR 1967 Supreme Court 1857.

Rajesh D. Darbar v. Narasingrao Krishnaji Kulkarni, (2003) 7 SCC 219.

Ramana Dayaram Shetty v. International Airport Authority of India, AIR 1979 Supreme Court 1628.

State of Mysore v. Allum Karibasauppa, AIR 1974 Supreme Court 1863.

State of U.P. v. Jai Bir Singh, 2005(3) S.C.T. 143 : (2005) 5 SCC 1.

Steel Authority of India Ltd. v. National Union Water Front Workers etc., 2001(4) S.C.T. 1 : AIR 2001 Supreme Court 3527.

Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, AIR 1975 Supreme Court 1331.

U.P. Cooperative Cane Unions Federations v. West U.P. Sugar Mills Association, AIR 2004 Supreme Court 3697.

Union of India (UOI) v. Asian Food Industries, AIR 2007 Supreme Court 750.

V.P.R.V. Chockalingam Chetty v. Seethai Ache, AIR 1927 Privy Council 252.

Virendra Kumar Srivastava v. U.P. Rajya Karmachari Kalyan Nigam, 2005(1) S.C.T. 153 : AIR 2005 Supreme Court 411.

Vodafone International Holdings B.V. v. Union of India, (2012) 6 SCC 613.

West Bengal State Electricity Board v. Desh Bandhu Ghosh, (1985) 3 SCC 116.

Workmen v. Hindustan Steel Ltd., AIR 1985 Supreme Court 251.

JUDGMENT

Dr. B.S. Chauhan, J. - These appeals have been preferred against the impugned judgments and orders of the High Court of Calcutta dated 30.1.2002 and 24.12.2002 in FMA No. 301/2001, CO. 2038/1993, WP. Nos. 778/1992, 2613, 2798 & 3169/2000, 1109/1998 and 1739/1996, by which the Calcutta High Court by a majority decision held that the Balmer Lawrie & Co. Ltd. - appellant, is a State within the purview of Article 12 of the Constitution of India, 1950 (hereinafter referred to as, the 'Constitution'), and is thus, amenable to writ jurisdiction.

2. Facts and circumstances giving rise to these appeals are:

3. Shri Sudhir Chandra, learned senior counsel appearing for the State, has submitted that the appellant company cannot be held to be a State within the meaning of Article 12 of the Constitution, or any other authority for that matter, as there is no deep and pervasive control exercised by the Government over the company, though certain financial aid was given by it for specific purposes. The Government however, does not have control over the day-to-day functioning of the company. Merely because the appellant company is a subsidiary of a Government company, and is itself a Government company, the same would not make the appellant company fall within the purview of the word 'State' as intended by Article 12 of the Constitution. Moreover, it does not carry out any public function which could render it as, 'any other authority', for the purposes of Article 226 of the Constitution. It also does not have any kind of monopoly over its business, in fact, it carries on a variety of business activities and faces competition from all the other industries that operate in the same fields as it does. The terms of employment therefore, cannot be enforced through writ jurisdiction. Thus, the only remedy available to the respondent was to file a suit for damages. The appeals deserve to be allowed.

4. Per contra, Shri Sangaram Patnaik, Mr. Bijan Kumar Ghosh and Mr. P.K. Roy, the learned counsel appearing for the respondents have submitted that the appellant company is a Government company, and is a subsidiary of a Government company, which is controlled entirely by the Government and that the Government has absolute control over the company. The majority judgment of the Calcutta High Court, holding the appellant company to be a State within the meaning of Article 12 of the Constitution cannot be found fault with. Even otherwise, law does not permit an employer, particularly the State or its instrumentalities, to terminate the services of its employees by adopting a "hire and fire" approach, as it would be hit by the equal protection clause enshrined in Article 14 of the Constitution of India (hereinafter referred to as, the 'Constitution'). Additionally, the respondent died long ago, and no attempt was ever made by the appellant company to substitute him with his legal heirs. Thus, the appeal stands abated qua him. The facts and circumstances of the case do not warrant any interference by this court, and the appeals are therefore, liable to be dismissed.

5. We have considered the rival submissions made by learned counsel for the parties and perused the record.

There is sufficient material on record, and the Memorandum and Articles of Association of the appellant company make it abundantly clear, that the same is a Government company and is a subsidiary of IBP, which is also a Government company. The share holding of the appellant company has been referred to hereinabove, and more than 61.8% shares are held by IBP, a Government company. However, the question for consideration before us is, whether in light of the aforementioned facts and circumstances, the appellant company is, in fact, a State within the meaning of Article 12 of the Constitution.

6. The said issue has been considered by various larger benches, and it has been held that in order to meet the requirements of law with respect to being a State, the concerned company must be under the deep and pervasive control of the Government. The dictionary meaning of 'pervasive' has been provided hereunder:

7. In Virendra Kumar Srivastava v. U.P. Rajya Karmachari Kalyan Nigam, 2005(1) S.C.T. 153 : AIR 2005 Supreme Court 411, this court held, that in order to examine whether or not an authority is a State within the meaning of Article 12 of the Constitution, the court must carry out an in depth examination of who has administrative, financial and functional control of such a company/corporation, and then assess whether the State in such a case is only a regulatory authority, or if it has deep and pervasive control over such a company/corporation, whether such company is receiving full financial support from the Government, and whether administrative control over it has been retained by the State and its authorities, and further, whether it is supervised, controlled and watched over by various departmental authorities of the State, even with respect to its day-to-day functioning. If it is so, then such company/corporation can be held to be an instrumentality of the State under Article 12 of the Constitution and therefore, will be amenable to the writ jurisdiction of the High Court under Article 226 of the Constitution.

8. In Lt. Governor of Delhi & Ors. v. V.K. Sodhi & Ors., 2007(4) S.C.T. 102 : 2007(5) Recent Apex Judgments (R.A.J.) 15 : AIR 2007 Supreme Court 2885, a similar test was applied, and it was held that once finances are made available to the company, and the administration of such finances is left to that company, and there is no further Governmental control or interference with respect to the same, such company/corporation or society cannot be held to be a State, or a State instrumentality within the meaning of Article 12 of the Constitution. In this case, this court came to the conclusion that the very formation of an independent society under the Societies Registration Act, may be suggestive of the intention that such a society, could not be a mere appendage to the State.

9. A Seven-Judge Bench of this Court in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology & Ors., 2002(2) S.C.T. 1067 : (2002) 5 SCC 111 held, that while examining such an issue, the court must bear in mind whether in the light of the cumulative facts as established, the body is financially, functionally and administratively, dominated by, or is under the control of the Government. Such control must be particular to the body in question, and must be pervasive. If it is found to be so, then the body comes within the purview of State within the meaning of Article 12 of the Constitution. On the other hand, when the control exercised is merely regulatory, whether under a statute or otherwise, the same would not be adequate, to render the body a State. The court, while deciding the said issue placed reliance upon its earlier judgments in Rajasthan State Electricity Board Jaipur v. Mohan Lal & Ors., AIR 1967 Supreme Court 1857; and Sukhdev Singh & Ors. v. Bhagatram Sardar Singh Raghuvanshi & Anr., AIR 1975 Supreme Court 1331, wherein it was held that such a body must perform certain public or statutory duties, and that such duties must be carried out for the benefit of the public, and not for private profit. Furthermore, it was also laid down that such an authority is not precluded from making a profit for pubic benefit. The court came to the conclusion, that although the employees of the Corporation may not be servants of either the Union, or of the State, at the same time, such a company/corporation must not represent the "voice and hands" of the Government. Therefore, this court in Pradeep Kumar Biswas (supra), held that financial support of the State, coupled with an unusual degree of control over the management and policies of a body, may lead to an inference that it is a State. Additionally, other factors such as, whether the company/corporation performs important public functions, whether such public function (s) are closely related to Governmental function, and whether such function (s) are carried out for the benefit of the public, etc. are also considered. The court also considered the case of Ramana Dayaram Shetty v. International Airport Authority of India & Ors., AIR 1979 Supreme Court 1628, wherein it was held that a corporation can be said to be an instrumentality or agency of the Government therein under certain conditions, and the same are summarised below :

The Court also considered the cases of Ajay Hasia etc. v. Khalid Mujib Sehravardi & Ors. etc., AIR 1981 Supreme Court 487; and Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers' Assn. & Anr. AIR 2002 Supreme Court 609.

10. In M/s. Zee Telefilms Ltd. & Anr. v. Union of India & Ors., AIR 2005 Supreme Court 2677, this Court, after applying tests laid down in various cases, examined the facts of that case and came to the conclusion that the body was not a State within the meaning of Article 12 of the Constitution, or for that matter, 'any other authority' for the purposes of Article 226 of the Constitution, while observing as under :

This Court further observed:

(Emphasis added)

11. Often, there is confusion when the concept of sovereign functions is extended to include all welfare activities. However, the court must be very conscious whilst taking a decision as regards the said issue, and must take into consideration the nature of the body's powers and the manner in which they are exercised. What functions have been approved to be sovereign are, the defence of the country, the raising of armed forces, making peace or waging war, foreign affairs, the power to acquire and retain territory etc. and the same are not amenable to the jurisdiction of ordinary civil courts. (Vide: N. Nagendra Rao & Co. v. State of A.P., 1995(1) R.R.R 378 : AIR 1994 Supreme Court 2663; and Chief Conservator of Forests & Anr. v. Jagannath Maruti Kondhare etc., 1996(2) S.C.T 164 : AIR 1996 Supreme Court 2898).

In Bangalore Water Supply & Sewerage Board v. A. Rajappa & Ors., AIR 1978 Supreme Court 548, this Court dealt with the terms "Regal" and "Sovereign" functions, and held that such terms are used to define the term "Governmental" functions, despite the fact that there are difficulties that arise while giving such a meaning to the said terms, for the reason that the Government has now entered largely the field of industry. Therefore, only those services, which are governed by separate rules and constitutional provisions such as Articles 310 and 311, should strictly speaking, be excluded from the sphere of industry by necessary implication.

Every Governmental function need not be sovereign. State activities are multifarious. Therefore, a scheme or a project, sponsoring trading activities may well be among the State's essential functions, which contribute towards its welfare activities aimed at the benefit of its subjects, and such activities can also be undertaken by private persons, corporates and companies. Thus, considering the wide ramifications, sovereign functions should be restricted to those functions, which are primarily inalienable, and which can be performed by the State alone. Such functions may include legislative functions, the administration of law, eminent domain, maintenance of law and order, internal and external security, grant of pardon etc. Therefore, mere dealing in a subject by the State, or the monopoly of the State in a particular field, would not render an enterprise sovereign in nature. (Vide: Agricultural Produce Market Committee v. Ashok Harikuni & Anr. etc., 2000(4) S.C.T. 674 : AIR 2000 Supreme Court 3116; State of U.P. v. Jai Bir Singh, 2005(3) S.C.T. 143 : (2005) 5 SCC 1; Assam Small Scale Ind. Dev Corporation Ltd. & Ors. v. M/s. J.D. Pharmaceuticals & Anr., AIR 2006 Supreme Court 131; and M.D., H.S.I.D.C. & Ors. v. M/s. Hari Om Enterprises & Anr., AIR 2009 Supreme Court 218).

12. A public authority is a body which has public or statutory duties to perform, and which performs such duties and carries out its transactions for the benefit of the public, and not for private profit. Article 298 of the Constitution provides that the executive power of the Union and the State extends to the carrying on of any business or trade. A public authority is not restricted to the Government and the legislature alone, and it includes within its ambit, various other instrumentalities of State action. The law may bestow upon such organization, the power of eminent domain. The State in this context, may be granted tax exemption, or given monopolistic status for certain purposes. The State being an abstract entity, can only act through an instrumentality or an agency of natural or juridical persons. The concept of an instrumentality or agency of the Government is not limited to a corporation created by a statute, but is equally applicable to a company, or to a society. In a given case, the court must decide, whether such a company or society is an instrumentality or agency of the Government, so as to determine whether the same falls within the meaning of expression 'authority', as mentioned in Article 12 of the Constitution, upon consideration of all relevant factors.

In light of the aforementioned discussion, it is evident that it is rather difficult to provide an exhaustive definition of the term "authorities", which would fall within the ambit of Article 12 of the Constitution. This is precisely why, only an inclusive definition is possible. It is in order to keep pace with the broad approach adopted with respect to the doctrine of equality enshrined in Articles 14 and 16 of the Constitution, that whenever possible courts have tried to curb the arbitrary exercise of power against individuals by centres of power, and therefore, there has been a corresponding expansion of the judicial definition of the term State, as mentioned in Article 12 of the Constitution.

In light of the changing socio-economic policies of this country, and the variety of methods by which Government functions are usually performed, the court must examine, whether an inference can be drawn to the effect that such an authority is infact an instrumentality of the State under Article 12 of the Constitution. It may not be easy for the court, in such a case, to determine which duties form a part of private action, and which form a part of State action, for the reason that the conduct of the private authority, may have become so entwined with Governmental policies, or so impregnated with Governmental character, so as to become subject to the constitutional limitations that are placed upon State action. Therefore, the court must determine whether the aggregate of all relevant factors once considered, would compel a conclusion as regards the body being bestowed with State responsibilities.

13. When we discuss 'pervasive control', the term 'control' is taken to mean check, restraint or influence. Control is intended to regulate, and to hold in check, or to restrain from action. The word 'regulate', would mean to control or to adjust by rule, or to subject to governing principles. (Vide: State of Mysore v. Allum Karibasauppa & Ors., AIR 1974 Supreme Court 1863; U.P. Cooperative Cane Unions Federations v. West U.P. Sugar Mills Association & Ors. etc.etc., AIR 2004 Supreme Court 3697; M/s. Zee Telefilms Ltd., (supra); and Union of India (UOI) & Ors. v. Asian Food Industries, AIR 2007 Supreme Court 750).

14. In K. Ramanathan v. State of Tamil Nadu & Anr., AIR 1985 Supreme Court 660, this court held as under:

15. In Vodafone International Holdings B.V. v. Union of India & Anr., (2012) 6 SCC 613, this Court observed that:

16. The need to determine and reach a conclusion as regards such an issue is of paramount importance as this Court has stated in Steel Authority of India Ltd. & Ors. v. National Union Water Front Workers & Ors., 2001(4) S.C.T. 1 : AIR 2001 Supreme Court 3527, and held as under:

(See also: M/s. Star Enterprises & Ors. v. City and Industrial Development Corpn. of Maharashtra Ltd. & Ors. (1990) 3 SCC 280; LIC of India & Anr. v. Consumer Education and Research Centre & Ors., 1995(4) S.C.T. 678 : AIR 1995 Supreme Court 1811; and Mysore Paper Mills Ltd. (supra).

17. In order to determine whether an authority is amenable to writ jurisdiction except in the case of habeas corpus or quo warranto, it must be examined, whether the company/corporation is an instrumentality or an agency of the State, and if the same carries on business for the benefit of the pubic; whether the entire share capital of the company is held by the Government; whether its administration is in the hands of a Board of Directors appointed by the Government; and even if the Board of Directors has been appointed by the Government, whether it is completely free from Governmental control in the discharge of its functions; whether the company enjoys monopoly status; and whether there exists within the company, deep and pervasive State control. The other factors that may be considered are whether the functions carried out by the company/corporation are closely related to Governmental functions, or whether a department of Government has been transferred to the company/corporation, and the question in each case, would be whether in light of the cumulative facts as established, the company is financially, functionally and administratively under the control of the Government. In the event that the Government provides financial support to a company, but does not retain any control/watch over how it is spent, then the same would not fall within the ambit of exercising deep and pervasive control. Such control must be particular to the body in question, and not general in nature. It must also be deep and pervasive. The control should not therefore, be merely regulatory.

18. In West Bengal State Electricity Board & Ors. v. Desh Bandhu Ghosh & Ors. (1985) 3 SCC 116, this Court considered a case where the respondent-employee was terminated by giving him only three months' notice, and without holding any enquiry or informing him about any actions on his part that were unwarranted. The court, after placing reliance on the judgment in Workmen v. Hindustan Steel Ltd., AIR 1985 Supreme Court 251, held that where a regulation enables an employer to terminate the services of an employee, in an entirely arbitrary manner and in a manner that confers vicious discrimination, the same must be struck down as being violative of Article 14 of the Constitution. Therefore, even Standing Orders must be non-arbitrary, and must not confer uncanalised and drastic powers upon the employer, which enables him to dispense with an inquiry and further enables him to dismiss an employee, without assigning any reason for the same, by merely stating, that doing so would not be expedient, and that it would be against the interests of the industry, to allow continuation of employment with respect to the employee. This is primarily because, such a procedure is violative of the basic requirements of natural justice. Such power would tantamount to a blatant adoption of the "hire and fire" rule.

19. Where the actions of an employer bear public character and contain an element of public interest, as regards the offers made by him, including the terms and conditions mentioned in an appropriate table, which invite the public to enter into contract, such a matter does not relegate to a pure and simple private law dispute, without the insignia of any public element whatsoever. Where an unfair and untenable, or an irrational clause in a contract, is also unjust, the same is amenable to judicial review. The Constitution provides for achieving social and economic justice. Article 14 of the Constitution guarantees to all persons, equality before the law and equal protection of the law. Thus, it is necessary to strike down an unfair and unreasonable contract, or an unfair or unreasonable clause in a contract, that has been entered into by parties who do not enjoy equal bargaining power, and are hence hit by Section 23 of the Contract Act, and where such a condition or provision becomes unconscionable, unfair, unreasonable and further, is against public policy. Where inequality of bargaining power is the result of great disparity between the economic strengths of the contracting parties, the aforesaid principle would automatically apply for the reason that, freedom of contract must be founded on the basis of equality of bargaining power between such contracting parties, and even though ad idem is assumed, applicability of standard form of contract is the rule. Consent or consensus ad idem as regards the weaker party may therefore, be entirely absent. Thus, the existence of equal bargaining power between parties, becomes largely an illusion. The State itself, or a state instrumentality cannot impose unconstitutional conditions in statutory rules/regulations vis-a-vis its employees, in order to terminate the services of its permanent employees in accordance with such terms and conditions. (Vide: Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, AIR 1986 Supreme Court 1571; D.T.C. v. D.T.C. Mazdoor Congress, 1991(1) S.C.T 675 : AIR 1991 Supreme Court 101; LIC of India (supra); K.C. Sharma v. Delhi Stock Exchange & Ors., AIR 2005 Supreme Court 2884; and Punjab National Bank by Chairman & Anr. v. Astamija Dash, 2008(3) S.C.T. 60 : AIR 2008 Supreme Court 3182).

20. A question may also arise as regards whether the court must examine only those facts and circumstances that existed on the date on which the cause of action arose, or whether subsequent developments, are also to be taken into consideration. The aforesaid issue was dealt with by this Court in Rajesh D. Darbar & Ors. v. Narasingrao Krishnaji Kulkarni & Ors., (2003) 7 SCC 219, and therein it was held as under:

21. The above-mentioned appeals are required to be considered in light of the aforesaid settled legal propositions. However, at this stage it may also be pertinent to refer to the relevant Clauses of the Memorandum and Articles of Association, which read as under:

22. Admittedly, the appellant is a Government company which is managed under the guidance of the Ministry of Petroleum and Natural Gas. The Ministry of Petroleum and Natural Gas exercises administrative control over the appellant company. The appellant company started its business as a partnership firm in 1867 and subsequently, the same was converted into a private limited company in 1924, and then eventually, into a public limited company in 1936.

Its past shareholding position has been reproduced as under:

Category of shareholders

%age of equity holding

IBP Co. Ltd.

61.80%

Financial Institutions & Bank

21.69%

Public

14.29%

Employees

0.85%

Foreign National

0.44%

Corporate Bodies

0.86%

U.P. State Government

0.02%

Directors and their relatives

0.85%

The present shareholding as per the Annual Report for 2005-06 has been as under:

Category of shareholders

%age of equity holding

Balmer Lawrie Investment Ltd.

61.80%

Mutual Fund and UTI

5.08%

Financial Institution and Banks

12.85%

Foreign National

2.97%

UP State Government

0.05%

Private/Corporate Bodies

6.14%

Indian Public

11.10%

Directors and their relatives

0.01%

23. There is nothing on record to show that the Central Government provides any financial or budgetary support to the appellant company. The appellant company is a profitable company and meets its own working capital requirements, as well as its fixed capital requirements for all requisite purposes through internal funds generated by the re-deployment of its own profits, and also by borrowing short term funds from financial institutions. The grant given by the Government to the appellant company is in fact very limited, and the extent of such grant has been shown by the company as under:

Category of shareholders

%age of equity holding

Balmer Lawrie Investment Ltd.

61.80%

Mutual Fund and UTI

5.08%

Financial Institution and Banks

12.85%

Foreign National

2.97%

UP State Government

0.05%

Private/Corporate Bodies

6.14%

Indian Public

11.10%

Directors and their relatives

0.01%

24. The appellant company carries on its business in diverse fields through various Strategic Business Units (hereinafter referred to as 'SBUs'), and its work is being carried on by (i) an SBU for Industrial Packaging; (ii) an SBU for Greases & Lubricants; (iii) an SBU for Logistics Services; (iv) an SBU for Projects & Engineering Consultancy; (v) an SBU for Travel & Tour; (vi) an SBU for Leather Chemicals; (vii) an SBU for Tea Blending & Packaging; and (viii) an SBU for Container & Freight Station.

25. Undoubtedly, the business carried on by the appellant company does not confer upon it any monopolistic character, as there are several private companies that are carrying on the same business and some of these businesses are even generally carried on by individual persons.

Under the Conduct, Discipline and Review Rules applicable to the officers of the appellant company, a letter dated 31.3.1989 written by Managing Director of the company, shows that Government directives on the subject have been made applicable with certain modifications as required to the terms and conditions of employment that are applicable to various organizations of the company. The company is not only a Government of India enterprise, but is also under the Administrative control of the Ministry of Petroleum, Chemicals and Fertilizers, Government of India. Its directors are appointed mainly from Government service. Article 26AA of the Articles of Association lays down that the President of India shall be entitled to issue from time to time, such directives or instructions, as may be considered necessary in regard to the administration of the business and affairs of the company. Article 7A thereof, provides that the President of India shall, subject to other existing provisions, be entitled to appoint one or more directors in the company for such period, and upon such terms and conditions, as the President of India may from time to time decide are required. In view of the provisions of Section 617 of the Companies Act, 1956, a Government company has been defined by way of an inclusive definition, as that which is a subsidiary of a Government company. The appellant company has also been receiving grant-in-aid from the Oil Industry Development Board by way of a grant and not as a loan. Some products of the company are in fact monopoly products, whose procurement and distribution are within the direct control of the Ministry of Petroleum which is under the Central Government. All Matters of policy and also, the management issues of the appellant company, are governed by the Central Government. The Central Government has control over the appointment of Additional Directors, and Directors, and their remuneration etc. is also determined by Presidential directives, and the same is applicable to deciding the residential accommodation of the Managing Director, his conveyance, vigilance, issues regarding the welfare of weaker sections etc. The functioning of the appellant company is of great public importance. Majority of its shares are held by a Government company. Its day-to-day business and operations, do not depend on the actions and decisions taken by the Board of Directors, in fact the said decisions are taken under either Presidential directives, or in accordance with instructions issued by the Administrative Ministry or the Finance Ministry. Its basic function is related to the oil industry, which is generally handled by Government companies. The appellant company cannot take any independent decisions with respect to the revision of pay-scales that are applicable to its employees, and the same are always subject to the approval of the Administrative Ministry. The annual budget of the company is also passed only if the same is approved by the Administrative Ministry.

26. It is evident from the material on record that all the whole time Directors of the appellant company are appointed by the President of India, and such communications are also routed through the Administrative Ministry.

The appellant company is under an obligation to submit its monthly, as well as its half-yearly performance reports to the Ministry of Petroleum, Government of India. The company has also promoted the use of Hindi language in the course of official work, in consonance with the circulars/guidelines that have been issued by the Government of India. The appellant company and IBP Company Limited, had a common Chairman. The remuneration structure of the employees of the appellant company, is also in conformity with those which are applicable to the Indian Oil Corporation and IBP, as has been fixed by the Bureau of Public Enterprises, Government of India. The reservation policy as enshrined in the Directive Principles of the Constitution, has also been implemented as per the directions of the Central Government in the appellant company.

27. In order to determine whether the appellant company is an authority under Article 12 of the Constitution, we have considered factors like the formation of the appellant company, its objectives, functions, its management and control, the financial aid received by it, its functional control and administrative control, the extent of its domination by the Government, and also whether the control of the Government over it is merely regulatory, and have come to the conclusion that the cumulative effect of all the aforesaid facts in reference to a particular company i.e. the appellant, would render it as an authority amenable to the writ jurisdiction of the High Court.

28. Clause 11(a) of the letter of appointment reads as under:

Undoubtedly, the High Court has not dealt with the issue on merits with respect to the termination of the services of the respondents herein. However, considering the fact that such termination took place several decades ago, and litigation in respect of the same remained pending not only before the High Court, but also before this Court, it is desirable that the dispute come to quietus. Therefore, we have dealt with the case on merits. In keeping with this, we cannot approve the "hire and fire" policy adopted by the appellant company, and the terms and conditions incorporated in the Manual of Officers in 1976, cannot be held to be justifiable, and the same being arbitrary, cannot be enforced.

In such a fact-situation, clause 11 of the appointment letter is held to be an unconscionable clause, and thus the Service Condition Rules are held to be violative of Article 14 of the Constitution to this extent. The contract of employment is also held to be void to such extent. The dictionary meaning of the word 'unconscionable' is "showing no regard for conscience; irreconcilable with what is right or reasonable. An unconscionable bargain would therefore, be one which is irreconcilable with what is right or reasonable. Legislation has also interfered in many cases to prevent one party to a contract from taking undue or unfair advantage of the other. Instances of this type of legislation are usury laws, debt relief laws and laws regulating the hours of work and conditions of service of workmen and their unfair discharge from service, as also control orders directing a party to sell a particular essential commodity to another." Thus, we do not find any force in the said appeals. The same are dismissed accordingly.

29. As we have already mentioned, the present appeal stands abated qua respondent in C.A. No. 419/2004 owing to his death, and the non- substitution of his legal heirs. We would like to clarify that his legal heirs may enure the benefits of this judgment, to the extent that respondent was entitled to receive 60% of the arrears of wages due to him, from the date of his termination to the date of his superannuation. The benefit shall be calculated on the basis of periodical revision of salary and other terminal benefits which shall be paid to the LRs of the deceased employee within three months. If it is not given within three months then interest at the rate of 9% will accrue. Additionally, they shall also be entitled to all statutory benefits like gratuity, provident fund and pension, if any.

CIVIL APPEAL NO. 926 OF 2013

30. The abovesaid appeal stands disposed of in terms of judgment in Civil Appeal Nos. 419-426 of 2004.

Ordered accordingly.