2005 (4) TMI 292 - SC - Companies Law

Whether the Delhi Stock Exchange is State under Article 12 of the Constitution of India and is amenable to writ jurisdiction ? Whether the issue relating to the termination of service of the General Manager is purely in the realm of contract and, therefore, not amenable to writ jurisdiction ? Whether the termination of contract of employment of the General Manager of Delhi Stock Exchange by the Board of Directors after taking into account the material on record which leads to loss of confidence is not valid in law ? Whether in case where the Stock Exchange has lost confidence in its General Manager who was holding the post of trust should be reinstated on the Stock Exchange or is it not appropriate to grant him compensation in lieu of reinstatement? Whether the Writ Court committed an error of jurisdiction in not considering one of the fundamental contentions as was pressed that being a case of loss of confidence and the employee having the post of trust ? Held that - Appeal allowed with modifications. Taking into consideration all circumstances although the termination of the appellant s service was illegal and unjustified, the totality of the circumstances of the case rendered it improper and unjust to direct the relief of reinstatement with full back wages. The High Court, even while moulding the relief on agreement of the parties, directed a sum of Rs. 12 lakhs to be paid to the appellant as compensation from which the amounts already paid from time to time under orders of the High Court were to be adjusted which needs to be upheld with a slight modification on the issue of compensation as the compensation payable in lieu of reinstatement and back wages shall be increased to Rupees Fifteen lakhs.

Issues:
1. Termination of service challenged under Article 226.
2. Loss of confidence as a ground for termination.
3. Applicability of writ jurisdiction.
4. Validity of termination based on loss of confidence.
5. Reinstatement versus compensation.

Issue 1 - Termination of service challenged under Article 226:
The appellant challenged the termination of service before the Delhi High Court under Article 226. The Single Judge held the termination mala fide and illegal, quashing it and ordering the appellant's continuation with all benefits. The Division Bench remitted the matter back to the Single Judge for findings on loss of confidence as a ground for termination.

Issue 2 - Loss of confidence as a ground for termination:
The Division Bench considered if termination based on loss of confidence is valid in law. The Single Judge found the issue not argued properly and concluded that the questions did not arise for consideration. The Division Bench observed that loss of confidence was not a ground for termination and that serious charges were present against the appellant.

Issue 3 - Applicability of writ jurisdiction:
The Division Bench addressed the writ jurisdiction, holding that the Delhi Stock Exchange fell under Article 12, making it amenable to writ jurisdiction. The appellant, being a permanent employee, could not be terminated based on a clause held ultra vires.

Issue 4 - Validity of termination based on loss of confidence:
The Division Bench found the termination illegal and arbitrary, emphasizing that loss of confidence alone was not a valid ground for termination. Serious allegations were exchanged between the parties, leading to a recommendation against reinstatement.

Issue 5 - Reinstatement versus compensation:
The Division Bench partially allowed the appeal, directing compensation of Rs. 12 lakhs to be paid to the appellant. The court considered the circumstances and agreed that reinstatement with full back wages was not appropriate. The compensation was later increased to Rs. 15 lakhs, with terminal benefits and costs awarded to the appellant.

This detailed analysis covers the issues involved in the legal judgment comprehensively, addressing the termination challenge, loss of confidence, writ jurisdiction, validity of termination, and the choice between reinstatement and compensation.

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