2005 (5) TMI 345 - HC - Companies Law

Issues Involved:
1. Whether the respondent-company is a "State" within the meaning of Article 12 of the Constitution of India.
2. Validity of the termination of the petitioner's services.
3. Applicability of Section 318(4) of the Companies Act, 1956, for compensation.
4. Allegations of mala fide intentions and procedural irregularities in terminating the petitioner's services.
5. Maintainability of the writ petition.

Detailed Analysis:

1. Whether the respondent-company is a "State" within the meaning of Article 12 of the Constitution of India:
The court held that the respondent-company, Punjab Communications Ltd. (PUNCOM), is a "State" within the meaning of Article 12 of the Constitution of India. This conclusion was based on the fact that PUNCOM is a subsidiary of Punjab State Industrial Electronics Development and Production Corporation Ltd. (PSEDPCL), which holds 70% of its shares. According to Section 617 of the Companies Act, 1956, a Government company is defined as one where not less than 51% of the paid-up share capital is held by the Central Government, State Government, or both. The court also noted that PUNCOM's letterheads and documents described it as a "Government undertaking." Additionally, a previous judgment in Lt. Col. Guriqbal Singh v. Punjab Communications Ltd. confirmed that the company was under full control of the State and thus a State within the meaning of Article 12.

2. Validity of the termination of the petitioner's services:
The court found that the petitioner's appointment as Managing Director was purely contractual and included a termination clause that allowed for termination by giving three months' notice. This was evidenced by the resolutions and appointment letters (Annexures R2/1 and R2/2) which the petitioner had withheld. The court held that the termination was in accordance with the contract terms and was not punitive. Therefore, the termination was valid, and the petitioner's writ petition was essentially an attempt to enforce a contract of personal service, which is not maintainable under writ jurisdiction.

3. Applicability of Section 318(4) of the Companies Act, 1956, for compensation:
The court rejected the petitioner's claim for 36 months' remuneration under Section 318(4) of the Companies Act, 1956. The court noted that Section 318 uses the word "may," indicating that compensation is not mandatory. Furthermore, Sub-section (3) of Section 318 lists specific conditions under which compensation is not payable, including cases of gross negligence or misconduct. The court suggested that the petitioner's actions during his tenure could potentially fall under these exceptions, but this would require factual determinations beyond the scope of writ jurisdiction. Therefore, the petitioner was advised to seek remedy in an appropriate forum.

4. Allegations of mala fide intentions and procedural irregularities in terminating the petitioner's services:
The court found no merit in the petitioner's allegations of mala fide intentions and procedural irregularities. The petitioner claimed that the termination was orchestrated by influential persons with vested interests. However, the court noted that the petitioner failed to provide specific details or name the individuals involved. The court also dismissed the claim that the resolutions were not circulated to all directors, noting that the majority had approved the resolutions. The court found that the petitioner's allegations were vague and unsupported by evidence, and thus could not be considered.

5. Maintainability of the writ petition:
The court held that the writ petition was not maintainable because it sought to enforce a contract of personal service. The court emphasized that the petitioner's appointment was contractual and included a termination clause, making it a matter of contract law rather than public law. The court also criticized the petitioner for withholding crucial documents that demonstrated the contractual nature of his appointment. Consequently, the court dismissed the writ petition.

Conclusion:
The court dismissed the writ petition, holding that the respondent-company is a "State" within the meaning of Article 12, but the termination of the petitioner's services was valid and in accordance with the contractual terms. The petitioner's claims for compensation under Section 318(4) of the Companies Act, 1956, and allegations of procedural irregularities and mala fide intentions were rejected. The court concluded that the writ petition was not maintainable as it sought to enforce a contract of personal service.

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