Supreme Court of India
BALMER LAWRIE & CO. LTD. & ORS.versusPARTHA SARATHI SEN ROY & ORS.
- Citation
- 2013 INSC 112
- Decided
- 20 February 2013
- Disposal
- Disposed off
- Bench
- B S CHAUHAN
Holding
Balmer Lawrie & Co. Ltd. is a State instrumentality under Article 12 and the termination clause is unconstitutional and void to the extent it permits arbitrary dismissal.
Summary
Balmer Lawrie & Co. Ltd., a government‑owned company, terminated the services of employee Partha Sarathi Sen Roy under a clause that allowed dismissal at the company's sole discretion without reason. The employee challenged the termination by filing writ petitions, contending that the clause was unconstitutional and that the company was a State authority under Article 12, making it amenable to judicial review. The Supreme Court examined whether the company qualified as an "authority" within Article 12 by applying the deep and pervasive control test, considering shareholding, administrative control, and functional dependence on the Government. It held that the company is indeed a State instrumentality and therefore subject to writ jurisdiction. The Court also found the termination clause to be unconscionable, violative of Article 14 and Section 23 of the Contract Act, rendering that part of the employment contract void. Consequently, the appeals were dismissed and the termination deemed invalid. The Court directed that the deceased employee’s legal heirs be entitled to arrears of wages, gratuity, and other statutory benefits.
Issues considered
- The applicability of Article 12 of the Constitution to Balmer Lawrie & Co. Ltd. – whether it is a State authority amenable to writ jurisdiction.
- Whether the termination clause in the employment letter, allowing dismissal at sole discretion without reason, violates Article 14 of the Constitution.
- Whether the clause is void under Section 23 of the Indian Contract Act as an unconscionable and unfair term.
Legislation cited
- Companies Act, 1956s. Sec.255, s. Sec.284, s. Sec.617
- Constitution of Indias. Art.12, s. Art.14
- Indian Contract Act, 1872s. Sec.23
Subjects
Article 12State instrumentalityWrit jurisdictionEmployment terminationUnconscionable contractSection 23 Contract ActEquality before lawPublic authorityGovernment companyPervasive control
Judgment
[2013] 4 S.C.R. 1018
A BALMER LAWRIE & CO. LTD. & ORS.
v.
PARTHA SARATHI SEN ROY & ORS.
(Civil Appeal Nos. 419-426 of 2004 etc.)
FEBRUARY 20, 2013
B
[DR. B.S. CHAUHAN AND V. GOPALA GOWDA, JJ.]
Constitution of India, 1950 -Art. 12 - Instrumentality and
agency of Government - Determination - Criteria - Discussed
C and held: The Company in question is an authority u/Art. 12.
Contract - Contract of employment - Amenability to
judicial review - Held: Unfair, untenable, irrational or unjust
clause in a contract hit by s.23 of Contract Act and against
0 public policy, is amenable to judicial review - In the present
case employment contract providing termination of service of
employee at the sole discretion of the employer is not
justifiable - Hence the contract held void to that extent -
Contract Act - s. 23 - Judicial Review.
E Service Law - Termination of Service - By the State or
State instrumentality - As per clause in appointment letter
providing sole discretion to the employer to terminate the
services of employees - Held: State itself or a State
instrumentality cannot impose unconstitutional conditions in
F 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 - The alleged
clause of the appointment letter is unconscionable and thus
Service Condition Rules held violative of Art. 14 of the
G Constitution to this extent.
Words and Phrases:
'Control' and 'Pervasive control' - Meaning of.
H 1018
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1019
SARATHI SEN ROY & ORS.
The appellant-Company was a Government company A
and subsidiary of a Government Company. Responden~
employees joined the services of the Company at
different times. Services of the respondent-employees
were terminated in view of a clause in the letter of
appointment which provided that the company would
B
have a right which would be exercised at its so.le
discretion to terminate the services of such employees
without assigning any reason.
In a writ petition challenging the same the appellant-
Company contested the writs contending that it was not C
an authority within the meaning of Article 12 of the
Constitution and therefore was not amenable to writ
jurisdiction. The Single Judge of the High Court held that
the Company was not a State within meaning of Art. 12,
however, in another case the learned Single Judge held 0
that the Company was a State within meaning of Article
12. In writ appeals, held that the Company was a 'State'
within meaning of Article 12 of the Constitution. Hence
the present appeals.
Disposing of the appeals, the Court E
HELD: 1.1. It is 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 F
to keep pace with the broad approach adopted with
respect to the doctrine of equality enshrined in Articles
14 and 16 of the Constitution. 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 the G
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 intact an instrumentality of the State under
Article 12 of the Constitution. It may not be easy for the H
1020 SUPREME COURT REPORTS [2013) 4 S.C.R.
A 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,
8 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
C responsibilities. [Para 12] [1038-C-G]
1.2. 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
D 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 ,,f
E 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
F 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,
G 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
H how it is spent, then the same would not fall within the
. BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1021
SARATHI SEN ROY & ORS.
ambit of exercising deep and pervasive control. Such A
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.
[Para 17] [1040-H; 1041-A-E]
B
1.3. When 'pervasive control' is discussed, 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 C
principles. [Para 13] [1038-H; 1039-A]
State of Mysore vs. Allum Karibasauppa and Ors., AIR
1974 SC 1863: 1975 (1) SCR 601; UP. Cooperative Cane
Unions Federations vs. West UP. Sugar Mills Association
and Ors. etc.etc., AIR 2004 SC 3697: 2004 (2) Suppl. SCR D
238; Union of India (UOI) and Ors. vs. Asian Food Industries
AIR 2007 SC 750: 2006 (8) Suppl. SCR 485; K. Ramanathan
vs. State of Tamil Nadu and Anr. AIR 1985 SC 660: 1985 (2)
SCR 1028; Vodafone International Holdings B. VS. vs. Union
of India and Anr. (2012) 6 SCC 613: 2012 (1) SCR 573; E
Steel Authority of India Ltd. and Ors. etc. vs. National Union
Water Front Workers and Ors. etc.etc. AIR 2001 SC 3527:
2001 (2) Suppl. SCR 343; Mis. Star Enterprises and Ors. vs.
City and Industrial Development Corpn. of Maharashtra Ltd.
and Ors. (1990) 3 sec 280: 1990 (2) SCR 826; uc of India F
and Anr. vs. Consumer Education and Research Centre and
Ors. AIR 1995 SC 1811: 1995 (1) Suppl. SCR 349; Mysore
Paper Mills Ltd. vs. Mysore Paper Mills Officers' Assn. and
Anr. 2002 (1) SCR 37 - relied on.
1.4. A public authority is a body which has public or G
.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 H
1022 SUPREME COURT REPORTS 12013] 4 S.C.R.
A 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
B 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
c 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
0
mentioned in Article 12 of the Constitution, upon
consideration of all relevant factors. [Para 12] [1037-E-H;
1038-A-B]
1.5. In view of factors like the formation of the
E 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
F regulatory, and 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. [Para 27] [1050-D-E]
Virendra Kumar Srivastava vs. U.P. Rajya Karmachari
G Kalyan Nigam and Anr. AIR 2005 SC 411: 2004 (6) Suppl.
SCR 304; Lt. Governor of Delhi and Ors. vs. V.K. Sodhi and
Ors. AIR 2007 SC 2885: 2007 (8) SCR 1027; Pradeep
Kumar Biswas vs. Indian Institute of Chemical Biology and
Ors. (2002) 5 SCC 111: 2002 (3) SCR 100; Ramana
H Dayaram Sheffy vs. International Airport Authority of India and
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1023
SARATHI SEN ROY & ORS.
Ors. AIR 1979 SC 1628: 1979 (3) SCR 1014 - relied on. A
Rajasthan State Electricity Board Jaipur vs. Mohan Lal
and Ors. AIR 1967 SC 1857: 1967 SCR 377; Sukhdev Singh
and Ors. vs. Bhagatram Sardar Singh Raghuvanshi and Anr.
AIR 1975 SC 1331: 1975 (3) SCR 619; Ajay Hasia etc. vs.
B
Khalid Mujib Sehravardi and Ors. etc. AIR 1981 SC 487:
1981 (2) SCR 79; Mysore Paper Mills Ltd. vs. Mysore Paper
Mills Officers' Assn. and Anr. AIR 2002 SC 609: 2002 (1) SCR
37; Mis. Zee Telefilms Ltd. and Anr. vs. Union of India and
Ors. AIR 2005 SC 2677: 2005 (1) SCR 913; N. Nagendra
Rao and Co. vs. State of A.P. AIR 1994 SC 2663: 1994 (3) C
Suppl. SCR 144; Chief Conservator of Forests and Anr. vs.
Jagannath Maruti Kondhare etc.etc., AIR 1996 SC 2898:
1995 (6) Suppl. SCR 259; Bangalore Water Supply and
Sewerage Board vs. A. Rajappa and Ors., AIR 1978 SC 548:
1978 (3) SCR 207; Agricultural Produce Market Committee D
vs. Ashok Harikuni and Anr. etc. AIR 2000 SC 3116: 2000
(3) Suppl. SCR 379; State of U.P. vs. Jai Bir Singh (2005) 5
SCC 1: 2005 (1) Suppl. SCR 20; Assam Small Scale Ind.
Dev Corporation Ltd. and Ors. vs. Mis. J.D. Pharmaceuticals
and Anr. AIR 2006 SC 131: 2005 (4) Suppl. SCR 232; M.D., E
H.S.l.D.C. and Ors. vs. Mis. Hari Om Enterprises and Anr. AIR
2009 SC 218: 2008 (9) SCR 821 - referred to.
2.1. Where the actions of an employer bear public
character and contain an element of public interest, as
F
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, G
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 .
H
1024 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 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
8 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
C 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
D 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
E employees, in order to terminate the services of its
permanent employees in accordance with such terms and
conditions. [Para 19] [1042-C-H; 1043-A-B]
West Bengal State Electricity Board and Ors. vs. Desh
F Bandhu Ghosh and Ors. (1985) 3 SCC 116: 1985 (2) SCR
1014; Worl<men vs. Hindustan Steel Ltd. AIR 1985 SC 251:
1985 SCR 428; Central Inland Water Transport Corporation
Ltd. vs. Brojo Nath Ganguly AIR 1986 SC 1571: 1986 (2)
SCR 278; D. T.C. vs. D. T.C. MazdoorCongress, AIR 1991 SC
G 101: 1990 (1) Suppl. SCR 142; K.C. Sharma vs. Delhi Stock
Exchange and Ors., AIR 2005 SC 2884: 2005 (4) SCC 4;
Punjab National Bank by Chairman and Anr. vs. Astamija
Dash, AIR 2008 SC 3182: 2008 (7) SCR 365 • relied on.
2.2. The "hire and fire" policy adopted by the
H
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1025
SARATHI SEN ROY & ORS.
appellant- company cannot be approved, and the terms A
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 B
Rules are held to be violative of Article 14 of the
Constitution to this extent. [Para 28] [1051-B-D]
Rajesh D. Darbar and Ors. vs. Narasingrao Krishnaji
Kulkarni and Ors. (2003) 7 SCC 219: 2003 (2) Suppl. SCR
273 - referred to.
c
Case Law Reference:
2004 (6) Suppl. SCR 304 relied on Para 7
2007 (8) SCR 1027 relied on Para 8 D
2002 (3) SCR 100 relied on Para 9
1967 SCR 377 referred to Para 9
1975 (3) SCR 619 referred to Para 9 E
1979 (3) SCR 1014 relied on Para 9
1981 (2) SCR 79 referred to Para 9
2002 (1) SCR 37 referred to Para 9,16
F
2005 (1) SCR 913 referred to Para 10
1994 (3) Suppl. SCR 144 referred to Para 11
1995 (6) Suppl. SCR 259 referred to Para 11
1978 (3) SCR 207 referred to Para 11 G
2000 (3) Suppl. SCR 379 referred to Para 11
2005 (1) Suppl. SCR 20 referred to Para 11
2005 (4) Suppl. SCR 232 referred to Para 11 H
1026 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 2008 (9) SCR 821 referred to Para 11
1975 (1) SCR 601 relied on Para 13
2004 (2) Suppl. SCR 238 relied on Para 13
2006 (8) Suppl. SCR 485 relied on Para 13
B
1985 (2) SCR 1028 relied on Para 14
2012 (1) SCR 573 relied on Para 15
2001 (2) Suppl. SCR 343 relied on Para 16
c
1990 (2) SCR 826 relied on Para 16
1995 (1) Suppl. SCR 349 relied on Para 16
1985 (2) SCR 1014 relied on Para 18
D 1985 SCR 428 relied on Para 18
1986 (2) SCR 278 relied on Para 19
1990 (1) Suppl. SCR 142 relied on Para 19
E 2005 (4) sec 4 relied on Para 19
2008 (7) SCR 365 relied on Para 19
2003 (2) Suppl. SCR 273 referred to Para 20
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 419-
F
426 of 2004.
From the Judgment & Order dated 30.01.2002 &
24.12.2001 of the High Court at Calcutta in FMA No. 301 of
2001, C.O. No. 2038(W) of 1993, W.P. Nos. 778 of 1992,
G 2613, 2798, 3169 of 2000, W.P. No. 1109of1998 & 1739 of
1996.
WITH
C.A. Nos. 926 of 2013.
H Sudhir Chandra, Parijat Sinha, Reshmi Rea Sinha, Anil
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1027
SARATHI SEN ROY & ORS.
Kumar Mishra, S.C. Ghosh, Snehashish Mukherjee, A
Rameshwar Prasad Goyal for the Appellants.
Sangram Patnaik, Umesh Yadav, Swayam Siddha,
Naresh Kumar, Pijush K. Roy, Kakali Roy, C. Balakrishna, Bijan
Kumar Ghosh, Sarla Chandra, Abhisth Kumar for the B
Respondents.
The Judgment of the Court was delivered by
DR. B.S. CHAUHAN, J. 1. These appeals have been
preferred against the impugned judgments and orders of the C
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 D
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 E
are:
A. The appellant is a public limited company incorporated
under the Indian Companies Act, 1956. The shares of the
appellant company were originally held by lndo-Burma
Petroleum Co. Ltd., Life Insurance Corporation, Unit Trust of F
India, General Insurance Corporation and its subsidiaries,
Nationalised Banks and also by the public. Subsequently, in
2001 its majority equity shares, i.e. 61.8% of its shareholding,
which was held by IBP Co. Ltd., was transferred to Balmer
Lawrie Investments Ltd. {BLIL), a Govt. company in which 59% G
shares are held by the government.
B. The appellant company carries on business in diverse
fields through various Strategic Business Units {SBUs). None
of these SB Us have monopoly in any business. The said SBUs
H
1028 SUPREME COURT REPORTS [2013] 4 S.C.R.
A are involved in the manufacturing of packing materials, i.e. steel
drums and LPG cylinders, grease and lubricants. They also
provide air freight services, ocean freight services, and project
cargo management. They operate under a broader segment
classified as 'Logistic Services', providing space and scope
B for segregation, storage and aggregation of containerized
cargo, i.e. an infrastructural service carried on outside the port
premises for handling, loading/unloading and storage of
containerized import, as well as export cargo. The appellant
company also deals with leather chemicals and tea blending
c and packaging.
C. The respondents-employees joined the services of the
company at different times. However, for the purpose of
deciding this case it would be convenient to take up the facts
presented by respondent, Partha Sarathi Sen Roy.
D
The said respondent joined the appellant - company in May
1975 as a Management Trainee, and was later on confirmed
vide order dated 1.6.1976 as an officer in Grade-Ill, subject to
the terms and conditions mentioned in the letter of confirmation
E w.e.f. 20.5.1976. He had previously worked in different
branches of the company in Dubai, the United Arab Emirates
etc. as an Accountant-cum-Administrative Officer. His services
were terminated vide order dated 27.2.1981, in view of Clause
11 (a) of the letter of appointment which provided that the
F company would have a right, which would be exercised at its
sole discretion, to terminate the services of such employees
by giving them three calendar months' notice in writing, w;thout
assigning any reason for such decision. The respondent
challenged the said termination order by filing writ petition (C.R.
G No. 1562 (W) of 1981) in the High Court of Calcutta, praying
for the issuance of a writ of mandamus, directing that the said
termination order be quashed.
D. The appellant company contested the said writ petition
contending that it was not an authority within the meaning of
H
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1029
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
Article 12 of the Constitution, and therefore was not amenable A
to writ jurisdiction. The terms and conditions of contractual
rights and obligations could therefore, not be enforced through
writ jurisdiction. The matter was decided by the learned Single
Judge vide judgment and order dated 19.12.2000, holding that
the appellant was neither a State, no.r any other authority within B
the meaning of Article 12 of the Constitution, and thus the writ
petition itself was not maintainable.
E. Aggrieved, the respondent filed an appeal (FMA. No.
301/2001), against the said judgment and order of the learned C
Single Judge. However, in the meantime, another writ petition
No. 778/1992 was decided by another learned Single Judge
of the same High Court, holding that the appellant was intact a
State within the meaning of Article 12 of the Constitution. Thus,
the appellant preferred an appeal against the said judgment and D
order dated 27.3.2001, and the matters were heard together
by a Division Bench. Both the Judges delivered their judgment
on 30.1.2002 taking different views on the aforesaid issue. The
matter was referred to a third Hon'ble Judge, who vide judgment
and order dated 24.12.2002, held the appellant to be a State
within the meaning of Article 12 of the Constitution, and directed E
that the matter be placed before an appropriate bench for
decision of the writ petitions on merits.
Hence, these appeals.
F
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 ii G
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 H
1030 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 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
B 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
c 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
D 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
E 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
F '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
G 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
H Memorandum and Articles of Association of the appellant
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1031
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
company make it abundantly clear, that the same is a 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 B
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 C
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:
D
"It means 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."
E
7. In Virendra Kumar Srivastava v. U.P. Rajya
Karmachari Ka/yan Nigam and Anr. AIR 2005 SC 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 F
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 G
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 H
1032 SUPREME COURT REPORTS [2013) 4 S.C.R.
A 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. AIR
8
2007 SC 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/
C 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
D 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)
5 sec 111 held, that while examining such an issue, the court
E 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
F 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
G reliance upon its earlier judgments in Rajasthan State
·Electricity Board Jaipur v. Mohan Lal & Ors. AIR 1967 SC
1857; and Sukhdev Singh & Ors. v. Bhagatram Sardar Singh
Raghuvanshi & Anr. AIR 1975 SC 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
H
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1033
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
public, and not for private profit. Furthermore, it was also laid A
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" B
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/ c
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 D
Authority of India & Ors. AIR 1979 SC 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:
"(1) One thing is clear that if the entire share capital of E
the corporation is held by Government, it would go a long
way towards indicating that the corporation is an
instrumentality or agency of Government.
(2) Where the financial assistance of the State is so much F
as to meet almost entire expenditure of the corporation,
it would afford some indication of the corporation being
impregnated with governmental character.
(3) It may also be a relevant factor ... whether the
corporation enjoys monopoly status which is State- G
confen-ed or State-protected.
(4) Existence of deep and pervasive State control may
afford an indication that the corporation is a State agency
or instrumentality. H
1034 SUPREME COURT REPORTS [2013] 4 S.C.R.
A (5) If the functions of the corporation are of public
importance and closely related to governmental
functions, it would be a relevant factor in classifying the
corporation as an instrumentality or agency of
Government.
B
(6) 'Specifically, if a department of Government is
transferred to a corporation, it would be a strong factor
supportive of this inference' of the corporation being an
instrumentality or agency of Government."
c The Court also considered the cases of Ajay Hasia etc.
v. Khalid Mujib Sehravardi & Ors. etc. AIR 1981 SC 487; and
Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers' Assn.
& Anr. AIR 2002 SC 609.
0 10. In Mis. Zee Telefilms Ltd. & Anr. v. Union of India &
Ors., AIR 2005 SC 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
E other authority' for the purposes of Article 226 of the
Constitution, while observing as under:
"23. The facts established in this case show the following:
1. The Board is not created by a statute.
F
2. No part of the share capital of the Board is held by the
Government.
3. Practically no financial assistance is given by the
Government to meet the whole or entire expenditure of
G the Board.
4. The Board does enjoy a monopoly status in the field
of cricket but such status is not State-conferred or State-
protected.
H
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1035
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
5. There is no existence of a deep and pervasive State A
control. The control if any is only regulatory in nature as
applicable to other similar bodies. This control is not
specifically exercised under any special statute
applicable to the Board. All functions of the Board are not
public functions nor are they closely related to B
governmental functions.
6. The Board is not Cffjated by transfer of a government-
owned corporation. It is an autonomous body. "
This Court further observed: c
"35. In conclusion, it should be noted that there can
be no two views about the fact that the Constitution of this
country is a living organism and it is the duty of Courts
to interpret the same to fwfil the needs and aspirations D
of the people depending on the needs of the time. It is
noticed earlier in this judgment that in Article 12 the term
•other authorities" was introduced at the time of framing
of the Constitution with a limited objective of granting
judicial review of actions of such authorities which are E
created under the Statute and which discharge State
functions. However, because of the need of the day this
Court in Rajasthan State Electricity Board (supra) and
Sukhdev Singh (supra) noticing the socio- economic
policy of the country thought it fit to expand the definition
of the term •other authorities" to include bodies other than F
statutory bodies. This development of law by judicial
interpretation culminated in the judgment of the 7-Judge
Bench in the case of Pradeep Kumar Biswas (supra). It
is to be noted that in the meantime the socio-economic
policy of the Government of India has changed [See G
Ba/co Employees' Union (Regd.) v. Union of India and
Ors. (2002 2 SCC 333)] and the State is today distancing
itself from commercial activities and concentrating on
governance rather than on business. Therefore, the
situation prevailing at the time of Sukhdev Singh (supra) H
1036 SUPREME COURT REPORTS [2013] 4 S.C.R.
A is not in existence at least for the time being, hence, there
seems to be no need to further expand the scope of
"other authorities" in Article 12 by judicial interpretation
at least for the time being. It should also be borne in mind
that as noticed above, in a democracy there is a dividing
B line between a State enterprise and a non- State
enterprise, which is distinct and the judiciary should not
be an instrument to erase the said dividing line unless,
of course, the circumstances of the day require it to do
so."
c (Emphasis added)
11. Often, there is confusion when the cor>cept of sovereign
functions is extended to include all welfare activities. However,
the court must be very conscious whilst taking a decision as
D 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
E 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., AIR 1994 SC 2663; and Chief
Conservator of Forests & Anr. v. Jagannath Maruti Kondhare
etc.etc., AIR 1996 SC 2898).
F In Bangalore Water Supply & Sewerage Board v. A.
Rajappa & Ors., AIR 1978 SC 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
G 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
H industry by necessary implication.
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1037
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
Every governmental function need not be sovereign. State A
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 B
companies. Thus, considering the wide ramifications,
sovereign functions should be restricted to those !unctions,
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, c
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. AIR D
2000 SC 3116; State of U.P. v. Jai Bir Singh, (2005) 5 SCC
1; Assam Small Scale Ind. Dev Corporation Ltd. & Ors. v. Ml
s. J.D. Pharmaceuticals & Anr., AIR 2006 SC 131; and M.D.,
H.S.l.D.C. & Ors. v. Mis. Hari Om Enterprises & Anr., AIR 2009
SC 218).
E
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 F
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 G
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, H
1038 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 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
B 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
C 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
0
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
E 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
F 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
G 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'
H is taken to mean check, restraint or influence. Control is
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1039
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
intended to regulate, and to hold in check, or to restrain from A
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 SC 1863;
U.P. Cooperative Cane Unions Federations v. West U.P.
Sugar Mills Association & Ors. etc.etc., AIR 2004 SC 3697; B
Mis. Zee Telefilms Ltd., (supra); and Union of India (UOJ) &
Ors. v. Asian Food Industries, AIR 2007 SC 750).
14. In K. Ramanathan v. State of Tamil Nadu & Anr., AIR
1985 SC 660, this court held as under:
c
"The power to regulate carries with it full power over the
thing subject to regulation and in absence of restrictive
words, the power must be regarded as plenary over the
entire subject. It implies the power to rule, direct and
control, and involves the adoption of a rule or guiding D
principle to be followed or the making of a rule with
respect to the subject to be regulated. It has different
shades of meaning and must take its colour from the
context in which it is used having regard to the purpose
and object of the legislation." E
15. In Vodafone International Holdings B. V. v. Union of
India & Anr., (2012) 6 SCC 613, this Court observed that:
"'Control' is a mixed question of Jaw and fact. The control
of a company resides in the voting power of its F
shareholders and shares represent an interest of a
shareholder which is made up of various rights contained
in the contract embedded in the Articles of Association.
The question is, what is the nature of the "control" G
that a parent company has over its subsidiary? It is not
suggested that a parent company never has control over
the subsidiary. For example, in a proper case of "lifting
of corporate veil': it would be proper to say that the parent
company and the subsidiary form one entity. But barring . H
1040 SUPREME COURT REPORTS (2013] 4 S.C.R.
'
A such case, the legal position of any company
incorporated abroad is that ifs powers, functions and
responsibilities are governed by the law of its
incorporation.
B
Control, in our view, is an interest arising from
holding a particular number of shares and the same
cannot be separately acquired or transferred. Each share
represents a vote in the management of the company
and such a vote can be utilized to control the company."
c 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. etc. v.
National Union Water Front Workers & Ors. etc.etc: AIR 2001
SC 3527, and held as under:
D
"The principle is that if the Government acting through
its officers was subject to certain constitutional /imitations,
a fortiori the Government acting through the
instrumentality or agency of a corporation must equally
be subject to the same limitations. It is pointed out that
E
otherwise it would lead to considerable erosion of the
efficiency of the Fundamental Rights, for in that event the
Government would be enabled to override the
Fundamental Rights by adopting the stratagem of
carrying out its function through the instrumentality or
F agency of a corporation while retaining control over it. "
(See also: Mis. 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
G Research Centre & Ors. AIR 1995 SC 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
H warranto, it must be examined, whether the company/
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1041
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
corporation is an instrumentality or an agency of the State, and A
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, B
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 c
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 D
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
E
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 F
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 G
SC 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- H
1042 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 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
B 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.
c 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
D 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
E 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
F 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
G 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
H may therefore, be entirely absent. Thus, the existence of equal
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1043
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.)
bargaining power between parties, becomes largely an illusion. A
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 B
Ltd. v. Brojo Nath Ganguly, AIR 1986 SC 1571; D.T.C. v.
D.T.C. Mazdoor Congress, AIR 1991 SC 101; LIC of India
(supra); KC. Sharma v. Delhi Stock Exchange & Ors., AIR
2005 SC 2884; and Punjab National Bank by Chairman &
Anr. v. Astamija Dash, AIR 2008 SC 3182). c
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 D
in Rajesh D. Darbar & Ors. v. Narasingrao Krishnaji Kulkarni
& Ors. (2003) 7 sec 219, and therein it was held as under:
'The impact of subsequent happenings may now be spelt
out. First, its bearing on the right of action, second, on E
the nature of the relief and third, on its importance to
create or destroy substantive rights. Where the nature of
the relief, as originally sought, has become obsolete or
unserviceable or a new form of relief will be more
efficacious on account of developments subsequent to F
the suit or even during the appellate stage, it is but fair
that the relief is moulded, varied or reshaped in the light
of updated facts. Subsequent events in the course of the
case cannot be constitutive of substantive rights
enforceable in that very litigation except in a narrow G
category (later spelt out) but may influence the equitable
jurisdiction to mould reliefs. Conversely, where rights
have already vested in a party, they cannot be nullified
or negated by subsequent events save where there is a
change in the law and it is made applicable at any stage.
Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, H
1044 SUPREME COURT REPORTS [2013] 4 S.C.R.
A AIR 1941 FC 5 falls in this category. Courts of justice
may, when the compelling equities of a case oblige them,
shape reliefs - cannot deny rights - to make them justly
relevant in the updated circumstances. Where the relief
is discretionary, courts may exercise this jurisdiction to
B avoid injustice. Ukewise, where the right to the remedy
depends, under the statute itself, on the presence or
absence of certain basic facts at the time the relief is to
be ultimately granted, the court, even in appeal, can take
note of such supervening facts with fundamental impact.
c This Court's judgment in Pasupuleti Venkateswarlu v.
Motor & General Traders AIR 1975 SC 1409 read in its
statutory setting, falls in this category. Where a cause of
action is deficient but later events have made up the
deficiency, the court may, in order to avoid multiplicity of
litigation, permit amendment and continue the
D
proceeding, provided no prejudice is caused to the other
side. All these are done only in exceptional situations
and just cannot be done if the statute, on which the legal
proceeding is based, inhibits, by its scheme or otherwise, .•
such change in the cause of action or relief. The primary
.E
concern of the court is to implement the justice of the
legislation. Rights vested by virtue of a statute cannot be
divested by this equitable doctrine (see V.P.R. V.
Chockalingam Chetty v. Seethai Ache AIR 1927 PC
252)."
F
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
G Association, which read as under:
'7A Notwithstanding anything contained in these Articles
and so long as the Company remains a Government
Company, the President of India shall subject to the
provisions of Article 6 thereof and Section 255 of the Act,
H
BALMER LAWRIE & CO. LTD. & ORS. v.. PARTHA 1045
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
be entitled to appoint one or more Directors (including A
whole time Director (s) by whatever name called) of the
Company to hold office for such period and upon such
terms and condition as the President of India may from
time to time decide.
B
xx xx xx
17. The Company may, subject to the provisions of
Section 284 of the Act, by ordinary resolution for which
special notice has been given, remove any Director
before the expiration of his period of office and may be C
ordinary resolution of which special notice has been
given, appoint another person in his stead, if the Director
so removed was appointed by the Company in General
Meeting or by the Board under Article 10. The person so
appointed shall hold office until the date upto which his D
predecessor would have held office if he had not been
so removed. If the vacancy created by the removal of a
Director under the provisions of this Article is not so filled
by the meeting at which he is removed the Board may
at any time thereafter fill such vacancy under the E
provisions of Article 10.
xx xx xx
26AA. Notwithstanding anything to the contrary
contained in these Articles, so long as the company F
remains a Government company within the meaning of
Section 617 of the Act, the President of India shall be
entitled to issue from to time such directives or
instructions as may be considered necessary to the
conduct of business and affairs of the Company. G
Provided that all instructions from the President of India
shall be in writing addressed to the Chairman or
Managing Director of the Company.
xx xx xx H
1046 SUPREME COURT REPORTS (2013] 4 S.C.R. ·
A 146. No dividend shall be payable except out of the
profits of the Company or of moneys provided by the
Central or a State Government for the payment of the
dividend in pursuance of any guarantee given by such
Government and no dividend shall carry interest against
B the Company. "
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
C Natural Ges 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.
D Its past shareholding position has been reproduced as
under:
Category of shareholders %age of equity holding
IBP Co. Ltd. 61.80%
E
Financial Institutions & Banks 21.69%
Public 14.29%
Employees 0.85%
F
Foreign National 0.44%
Corporate Bodies 0.86%
U.P. State Government 0.02%
G
Directors & their relatives 0.85%
The present shareholding as per the Annual Report for
2005-06 has been as under:
H
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1047
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
Category of shareholders %age of equity holding A
Balmer Lawrie Investment Ltd. 61.80%
Mutual Fund & UTI 5.08%
Financial Institutions & Banks 12.85% B
Foreign National 2.97%
UP State Government 0.05%
Private/Corporate Bodies 6.14% c
Indian Public 11.10%
Directors & their relatives 0.01%
23. There is nothing on record to show that the Central D
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 E
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:
F
Year Amount of grant %age of the grant-vs-avg.
given in lakhs yearly fund requirement o•
the appellant-co.(353.55
crores)
1999 91.29 0.26 G
2001 237 0.67
2002 20 0.06
2003 176 0.50 H
1048 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 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)
B 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
C 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.
D 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
E 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
F 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,
G 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
H
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1049
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
company has been defined by way of an inclusive definition, A
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 B
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 c
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 D
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 E
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 F
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 G
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 H
1050 SUPREME COURT REPORTS (2013] 4 S.C.R.
A 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
B 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
c 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,
D 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
E 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
F under:
"The Company shall have the right, at its sole discretion,
to terminate your services by giving you three calendar
months notice in writing and without assigning any reason.
The Company also reserves the right to pay you in lieu
G qf notice, a sum by way of compensation equal to three
months emoluments consisting of basic salary, dearness
allowance, house rent assistance and bonus
entitlements, if any, after declaration of bonus".
H Undoubtedly, the High Court has not dealt with the issue
BALMER LAWRIE & CO. LTD. & ORS. v. PARTHA 1051
SARATHI SEN ROY & ORS. [DR. B.S. CHAUHAN, J.]
on merits with respect to the termination of the services of the A
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 B
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. c
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 car.tract of employment is also
held to be void to such extent. The dictionary meaning of the D
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 E
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 F
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 G
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 H
1052 SUPREME COURT REPORTS [2013] 4 S.C.R.
A 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
B 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.
c
K.K.T. Appeals disposed of.
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