1988 (1) TMI 359 - HC - Indian Laws

Summary

Issues Involved:

1. Whether Modern Food Industries (India) Ltd., a Government Company, falls within the definition of 'the State' under Art. 12 of the Constitution of India.
2. Whether clause 2.18 of the Staff Regulations is illegal and void on the grounds of being unconscionable, opposed to public policy, and violative of Arts. 14 and 16 of the Constitution of India.
3. Whether the High Court had jurisdiction to entertain the petition brought by the respondent-employee who was posted at the Calcutta Unit but received the termination order at Ahmedabad while on leave.

Issue-wise Detailed Analysis:

1. Definition of 'the State' under Art. 12:

The first issue examined whether Modern Food Industries (India) Ltd., a Government Company, is considered 'the State' under Art. 12 of the Constitution. The Court analyzed the structure and control of the company, noting that it is a Government Company with 99% of its shares held by the Central Government, State Governments, and statutory Corporations controlled by the Government of India. The President of India exercises significant control over the company's financial and managerial decisions. The Court concluded that the company is an instrumentality or agency of the Government, thus falling within the definition of 'the State' under Art. 12. This conclusion was supported by various precedents, including the cases of Rajasthan State Electricity Board v. Mohan Lal and Sukhdev Singh v. Bhagatram, which established that entities with substantial government control and performing public functions are 'the State' under Art. 12.

2. Legality of Clause 2.18 of the Staff Regulations:

The second issue addressed the validity of Clause 2.18 of the Staff Regulations, which allowed the termination of a confirmed employee's services with 90 days' notice or pay in lieu thereof. The Court found this clause to be unconscionable and opposed to public policy under Section 23 of the Contract Act, as it lacked mutuality and conferred arbitrary power on the management. The clause was also found to violate Arts. 14 and 16 of the Constitution, as it was arbitrary and unreasonable. The Court relied on the precedent set by the Supreme Court in Central Inland Water Transport Corporation Ltd. v. Brojo Nath, which struck down a similar clause as being opposed to public policy and violative of Art. 14. The Court concluded that Clause 2.18 is void and unenforceable.

3. Jurisdiction of the High Court:

The third issue was whether the High Court had jurisdiction to entertain the petition, given that the respondent-employee was posted at the Calcutta Unit but received the termination order at Ahmedabad. The Court held that the communication of the termination order to the employee at Ahmedabad constituted a part of the cause of action, thus giving the High Court jurisdiction. The Court referred to the Supreme Court's decision in State of Punjab v. Amar Singh Harika, which established that an order of dismissal becomes effective only when communicated to the concerned employee. The Court also cited similar decisions from the Calcutta High Court and Kerala High Court, which supported the view that the place where the consequences of the order fell on the employee is relevant for determining jurisdiction.

Conclusion:

The Court upheld the findings of the learned single Judge, concluding that Modern Food Industries (India) Ltd. is 'the State' under Art. 12, Clause 2.18 of the Staff Regulations is void and unenforceable, and the High Court had jurisdiction to entertain the petition. The appeal was dismissed with costs.