2004 (7) TMI 688 - HC - Indian Laws

Summary

Issues Involved:
1. Maintainability of the writ petition under Article 226 for enforcement of a contract of personal service.
2. Allegations of arbitrariness, illegality, and violation of principles of natural justice in the termination of the petitioner.
3. Applicability of Section 284 of the Companies Act and Articles of Association in the removal process.
4. Allegations of mala fide and political considerations in the termination.
5. The role of the State Government as a shareholder in the termination process.
6. Validity of the Selection Committee's constitution and quorum.

Detailed Analysis:

1. Maintainability of the Writ Petition:
The respondents raised a preliminary objection regarding the maintainability of the writ petition under Article 226 for enforcing a contract of personal service. They argued that the petition seeks enforcement of non-statutory provisions of the Articles of Association, which do not have the force of law. The Court referred to several precedents, including the Cooperative Central Bank Ltd. v. Additional Industrial Tribunal and Hanuman Prasad Gupta v. Hira Lal, which held that Articles of Association constitute a contract between a company and its members and do not have statutory force. Therefore, the writ petition for enforcement of such contractual obligations is not maintainable.

2. Allegations of Arbitrariness and Violation of Natural Justice:
The petitioner claimed that the termination was arbitrary, illegal, and in contravention of the principles of natural justice. The Court noted that there was no complaint of violation of any statutory provision. The termination was carried out by the Selection Committee as per Article 73(g) of the Articles of Association, which does not require compliance with Section 284 of the Companies Act. The Court found no evidence of stigma in the termination order and concluded that the termination was a simpliciter action without any stigmatizing remarks.

3. Applicability of Section 284 and Articles of Association:
The petitioner initially argued for the applicability of Section 284 of the Companies Act, which requires a memo of charges and an opportunity to respond before removal. However, this argument was not pressed during the hearing. The Court emphasized that the Articles of Association, under which the petitioner was appointed and terminated, are not statutory provisions. The power to remove the Managing Director under Article 73(g) remains unaffected by Section 284.

4. Allegations of Mala Fide and Political Considerations:
The petitioner alleged that the termination was based on political considerations and that he was made a scapegoat. He claimed that he was pressured to resign by the Chief Secretary under the directive of the Chief Minister. The Court found these allegations to be unsubstantiated and contradictory to the newspaper report submitted by the petitioner. Thus, the claim of mala fide was dismissed as false.

5. Role of the State Government as a Shareholder:
The petitioner contended that the State Government, being a shareholder, had no concern in the termination process, which should be between the company and its Managing Director. The Court rejected this argument, noting that the appointment and termination were both made by the Governor, and the termination was ratified by the Board of Directors of the company. Hence, the State Government's involvement was deemed appropriate.

6. Validity of the Selection Committee's Constitution and Quorum:
The petitioner questioned the validity of the Selection Committee's constitution and the quorum during the meeting that decided his termination. The Court observed that the plea of quorum was not raised in the writ petition or rejoinder-affidavit. Furthermore, the Selection Committee was constituted by an executive order and not under any statutory provision. The Court concluded that the presence of nominees in the Selection Committee was consistent with the procedure followed during the petitioner's appointment, and thus, there was no irregularity.

Conclusion:
The Court dismissed the writ petition, concluding that it was not maintainable under Article 226 for enforcing a contract of personal service. The termination of the petitioner was found to be in accordance with the Articles of Association and did not violate any statutory provisions or principles of natural justice. The allegations of mala fide and political considerations were deemed unsubstantiated. Consequently, the petitioner was advised to seek remedy through a claim for damages for wrongful dismissal or breach of contract.