R.C. MANKAD

(1) This petition by the Association of Officers and its members petitioners Nos. 2 to 6 who are officers employed by Gujarat State Fertilizers Company Limited respondent No. 1 herein (hereinafter referred to as the Company) have filed this petition mainly challenging the legality and validity of the orders dated 6/05/1984. passed by the Company terminating the services of petitioners Nos. 2 to 6 (hereinafter referred to as the petitioners).

(2) Petitioner No. 1 association of officers of the Company (hereinafter referred to as the association) is alleged to be the representative trade union of the officers employed by the Company. It may be mentioned there that the Company which shad accorded recognition to the association has withdrawn its recognition on 11/05/1984 and this action of the Company is challenged in a civil suit filed in the Civil Court at Baroda. However this fact has no bearing on the controversy involved in this petition. Petitioners are office bearers and active member of the association. They had occasion to deal with the management of he Company in the matters relating to pay revision promotion bonus etc.

(3) lit is the case of the petitioners that the management of the Company was not pleased with the activities of the association and petitioners It is the petitioners allegation that the management of the Company has illegally discharged petitioners Nos. 2 and 3 from service in June/July 1978 but when they sought legal protection against them the impugned orders discharging them from service were withdrawn and they were reinstated in service. It is the petitioners case than the Company has again resorted to victimization of the office bearers of the association and illegally discharged the petitioners from service by orders date 6/05/1984 which are at Annuxures A1 to A5 to the petition. Petitioners allege that they are victims of anti trade union and anti-association attitude of the management of the Company. Discharge of the petitioners from service according to the petitioners is a move to disintegrate the association petitioners contend that the Company is a public limited Company controlled by the Government of Gujarat. According to the petitioners it is State within the meaning of Article 12 of the Constitution of India and is an authority and instrumentality of the Union of India and State of Gujarat in carrying out directive principles of the State policies laid down in the Constitution. Petitioners therefore contend that the Company is applicable to writ jurisdiction of this Court under Article 226 of the Constitution.

(4) By orders-Annuxures A1 to A5 dated 6/05/1984 petitioners are discharged from service with immediate effect under the 44 of the Companys Service Rules of 1989. The orders are in identical terms and they read as follows :-

1 You are hereby discharged from the services of the Company with immediate effect under Rule 44 of the Companys Service Rules by payment of 3 months basic pay and DA in lieu of 3 months notice. 2 If there are any dues payable by you to the Company your 3 months basic pay and DA will be adjusted against such dues. You are hereby requested to clear the dues payable by you to the Company. 3 You are further requested to submit the enclosed clearance for final settlement of your account. Rule 44 of the Companys service Rules under which the Company has discharged the services of the petitioners reads as under:- DISCHARGED OR DETERMINATION OF SERVICE AFTER CONFORMATION

After confirmation an employee in Grade I or II may be discharged from the service of the Company for sufficient reasons by the competent appointing authority or he may issue or discontinue from the service of the Company after giving three months notice in writing in that behalf or by payment of three months basic pay and deadness; allowance as in fore from time to time in lieu of such notice; an employee in any other Grade may he discharged from the service of the Company for sufficient reasons by the Competent appointing authority or he may leave or discontinue from the service of the Company after giving one months notice in writing in that behalf be by payment of one months basis pay and dearness allowance as in force from time to lime in fact of such notice Provided that the Board or the Personnel Cormorant may move such notice or payment in lieu thereof in case of an employee in grade 4 and the Managing Director may waive such notice or payment in lieu thereof in case of an employee in Grade II III or IV.

(5) Petitioners contend that the Company has no absolute power to terminate the services of its employee under rule 44. It is submitted that even in the Company is held to have power to discharge in employee from service under rule 44. it can do so only for sufficient reasons. No reasons were furnished to the petitioners either in the impugned orders or thereafter. Rule 44 these nor empower the Company to discharge its employee in Grade I or II by payment of three months basic pay and D.A. in lieu of three months notice. Petitioners therefore contend that the impugned discharge orders are illegal having in violation of the Service Rules. Petitioners further contend that discharge from service is one of the penalties enumerated in rule 120(1) of the Service Rules he Company Clause (ii) of rule 120 lays down that no penalty shall be imposed on any employee unless the appointing authority or such other authority empowered in this behalf is satisfied that a fair and proper enquiry was made and the charges Indian to the penalties were proved. It is submitted that discharge from service being a penalty. iL was incumbent upon the Company or the authority empowered in this behalf to held a fair and proper enquiry and to be satisfied that the charges leading to the penalty were proved before imposing such penalty on the petitioners. Therefore according to the petitioners they could have been discharged from service for sufficient reasons only after holding enquiry. Petitioners further submit that the impugned orders are violative of fundamental rights guaranteed under Article 21 of the Constitution inasmuch as a result of the impugned orders petitioners are deprived of the employment and are thrown into economic starvation. Mandate of Article 21 is that no one shall he deprived of his life and Liberty except in accordance with the procedure laid down by law. Petitioners submit that the prima facie has a wide meaning and the petitioners cannot be deprived of their livelihood under Article 21. The Company was therefore required to hear the petitioners and observe principles of natural justice before passing the impugned orders. Since the impugned orders have been passed in breach of the principles of natural justice. they are bad in law.

(6) In the alternative petitioners contend that if it is held that rule 44 confers absolute power on the Company to discharge its employees from service such rule would violate Articles 14 and 16 on the Constitution It is submitted that the rule which confers unguarded and unchannelised and absolute power on the Company of discharging its employees from service clearly violates Articles 14 and 16 of the Constitution. It is further submitted that if rule 44 is interpreted in the manner sought to be interpreted by the Company it is obvious that it is discriminatory violative of Articles 14 and 16 of the Constitution inasmuch a. officer employees are given different treatment than rest of the employees of the Company. Under rule 122 of the Companys Service Rules an employee has a tight of appeal against the order passed by his immediate superior or other superior authority which injuriously affects his interest. Petitioners therefore have a right to prefer appeal against the orders discharging them from service but they cannot effectively exercise this right in absence of reasons in support of their discharge from service supplied to them and therefore the impugned orders of discharge virtually amount to negation of the petitioners right to appeal.

(7) The Company denying the allegations made by the petitioners. has contended that it is not State or authority or instrumentality of State within the meaning of Article 12 of the Constitution and therefore it is not amenable to jurisdiction of this Court under Article 386 of the Consideration. It is submitted than the Company is not the agency of the State not is it a Government Company. It is a public limited Company incorporated under the Companies Act and remedy if any available to the petitioners is to file a civil suit before a competent Civil Court. It is further contended that services of the petitioners were terminated under the Service Rules of the Company as the appeals preferred by the petitioners against the impinged orders have been dismissed. The Company has denied that it has victimized the petitioners and that attempt has been made to discharged the association. Allegation that the Company is practicing unfair labour practice and that it was carried on anti-trade union activities is denied. According to the Company decision to discharge the petitioners from service was taken in the best interest of the Company under the power conferred under rule 44 of the Service Rules It is submitted that the Managing Director of the Company respondent No. 2 herein had recorded reasons on the file for discharge of the petitioners and that there were sufficient reasons to discharge the petitioners from service It is submitted that the orders of discharge were been fide and that there was no act of victimization in discharging them from service. The Company has placed in record the reason recorded for discharging a the petitioners from service and they are at Exh. C to the affidavit in reply. Company denies the petitioners allegation that impugned orders were i violation of Articles 14 16 and 21 of the Constitution of India.

(8) I will first deal with the question whether the Company is State or authority within the meaning of Article 12 of the Constitution. Article 12 define State as under (which appears in Part III of the Constitution).

"In this Part unless the context otherwise requires the State includes the Government and Parliament of India and the Government land the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India".

In a series of decisions the Supreme Court has considered the scope in the expression State occurring in Article 12. The recent trend recognised by the Supreme Court has broadened the concept of authorities..... under the control of Government of India. Where a corporation or a company is instrumentality or agency of the Government it must be held to be an authority within the meaning of Article 12 and hence subject to the same basic obligation to obey the fundamental rights as government. The question as to when a corporation can be regarded as authority within the meaning of Article 12 arise for consideration before the Supreme Court in R. D. Shetty v. The International Airport Authority of India A.I.R. 1979 S.C. 1628. The Supreme Court observed:

"So far as India is concerned the genesis of the emergence of corporations as instrumentalities or agencies of Government is to be found in the Government of India Resolution on Industrial Policy dated 16/04/1948 where it was stated inter alia that management of State enterprise will as a rule be through the medium of public corporation under the statutory control of the Central Government who will assume such powers has may be necessary to ensure this. It was in pursuance of the policy envisaged in this and subsequent resolutions on Industrial policy that corporations were created by Government for setting up V and management of public Enterprises and carrying out other public functions. Ordinarily these functions could have been carried out by Government departmentally through in service personnel but the instrumentslity or agency of in corporation was resorted to in these cases having regard to the nature of the task to be performed. The corporation acting as instrumentality or agency of Government would obviously be subject to the same limitations in the field of constitutional and administrative law as Government itself though in the eye of the law they would be distinct land independent legal entities. If Government acting through its officers is subject to certain constitutional and public law limitations. it must follow a fortiori that Government acting through the instrumentality or agency of corporations should equally be subject to the same limitations".

The Supreme Court then addressed itself to the question as to how to determine whether a corporation is acting as an instrumentality or agency of the Government dealing with that question observed;

"A corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such as the Companies Act 1956 or the Societies Registration Act 1860. Where a Corporation is wholly controlled by Government not only in its policy Banking but also in carrying out the functions entrusted to it by the law establishing it or by the Charter of its incorporation there can the no doubt that it; would be an instrumentality or agency of Government. But ordinarily where a corporation is established by statute it is accordance in its working subject only to a provision often times made that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a corporation incorporated under law is maenad by a board of directors or committee of management in accordance with the provisions of the statute under which it is incorporated ten does such a corporation become an instrumentality or agency of Government Is the holding of the entire share capital of the Corporation by Government enough or is it necessary that in addition. there should be a certain amount of direct central exercised by Government and if so what should be the nature of such control Should the functions which the corporation is charged to carry out posts any particular characteristic or feature or is the nature of the functions immaterial Now some thing is clear that is the entire share capital of the corporation is held by Government it would go a long way towards indicating that the corporation is an instrumentality of agency of Government. But as is quite often the case a corporation established by statute may have no shares or shareholders in which case it would be a relevant factor to; consider whether the administration is in the hands of a board of directors appointed by Government though this consideration also may not be determinative because even where the directors are appointed by Government they may be completely free from governmental control in the discharge of their functions. What then are the tests to determine whether is corporation established by statute or incorporated under law is an instrumentality or agency of Government It is not possible to formulate an inclusive or exhaustive test which would adequately answer this question. There is no cut and dried formula which would provide the correct division of corporations into those which are instrumentality or agencies of Government and those which are not".

The Supreme Court then proceeded to indicate the different tests apart from ownership of the entire share capital:

"......if extensive and unusual financial assistance is given and the purpose of the Government in giving such assistance coincides with the purpose for which the corporation is accepted to use the a assistance and such purpose is of public character it may be relevant circumstance supporting an inference that the corporation is an instrumentally or agency of Government. It may therefore he possible to say that where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation it would Board is so much as in of the corporation being impugned with Government character..............But a finding of State financial support plus an unusual degree of control over the management and policies might lead one to characterise an operation as State action Vide Sukhdev v. Bharatram (1975) 3 SCR 619 [LQ/SC/1975/80 ;] ">(1975) 3 SCR 619 [LQ/SC/1975/80 ;] [LQ/SC/1975/80 ;] at 658 : (AIR 1975 SC 1331 [LQ/SC/1975/80 ;] ">AIR 1975 SC 1331 [LQ/SC/1975/80 ;] [LQ/SC/1975/80 ;] So also the existence of deep and pervasive State Control may afford an indication that the Corporation is a State agency or instrumentality. it may also be a relevant racket or State protect. There can be little enjoys monopoly status which is State conferred or State the corporations ties to the State conferred or State protected monopoly status would be highly relevant in assessing the aggregate weight of the corporations ties to the State".

There in also another factor which may be regarded as having a bearing on the issue and it is whether the operation of the Corporation is an important public sanction. It has been held in the United States in a number of eases that the concept of private action must yield to a conception of State action where public functions are being performed Vide Arthur S. Miller: The Constitutional Law of the Security State (10 Stanford Law-Review 620 at 664). It may be noted that besides so called traditional followers the modern State operate a multitude of public enterprises and discharges a host of other public functions. If the sanctions of the corporation are of public importance and clearly related to government functions it would be a relevant factor in classifying the corporation as an instrumentality for agency of Government. This is precisely what was points out by Mathew J in Sukhdev v. Bhagtram (supra) where the the learned Judge said that institutions engaged in matters of high public interest of performing public functions are by virtue of the nature of the functions performed by government agencies. Activities which are too fundamental to the society are by definition too important not to be considered government functions". The Supreme Court however proceeded to point out with reference to the last functional test:

"....the decisions show that even this test of public or governmental character of the function it not say be application and does not invariably lead to the correct inference because the bank of government activity is broad and varied and merely because an activity may be such as may legitimately bly be carried on by Government it does not mean that a corporation which is otherwise a private entity would be an instrumentality or eagerest of Government by reason of carrying on such activity. In fact it is difficult to distinguish between governmental functions and non-government functions. Perhaps the distinction between governmental and non-governmental functions is not valid and or in a social welfare State where the laised faire is an outmoded concept and Herbert Spencers special statics has no place. The contrast is rather between governmental activities which are private and private activities which are governmental. (Mathew J. in Sukhdev v. Bhagatram (supra) at p. 652 But the public mature of the function in impregnated with governmental character or flied or entwined with Government one fortified by some other additional factory may render the Corporation an instrumentality or agency of Government. Specifically if a department of government is transferred to a corporation it would be a strong factory supportive of the inference".

The test for determining as to when a corporation can be said to be an instrumentality or agency of Government were called out from the judgment in the International Airport Authoritys case (supra) Ajay Hasia v. Khalid Mujib A.I.R. 1981 S.C. 487. The relevant tests were summarised as follows:-

"(1) One thing is clear that if the entire share capital of the corporation is held by Government it would to a long way towards indicating that the corporation is an instrumentality or agency of Government. (2) Where the financial assists of the State is so much as to meat almost entire expenditure of that corporations 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 the State conferred or State protected. (4) Existence of deep and pervasive State control may afford an indication that the Corporation is a State agency or instrumentality. (5) In the functions of the corporation of public importance and closely related to governmental functions it would be a relevant factor in classifying the corporation as an instrumentality be agency of Government. (7) Specifically if a department of Govt. is transferred to a corporation it would be a strong factory supportive of the inference of the corporation being an instrumentality or agency of the Government.

If on a consideration of these relevant factors it is found that the corporation is an instrumentality or agency of government it would as pointed not in the International Airport Authoritys case (supra) be an authority and therefore State within the meaning of the expression in Article 12 of the Constitution.

(9) The decision in International Airport Authoritys case was approved by Supreme Court in Som Prakah v. Union of India A.I.R. 1981 S.C. 212. It was observed by the Supreme Court in that case that the true test is functional. Not how the local person is born but why it is created. It was observed that apart from discharging functions or doing business as the proxy of the State. wearing the corporate mask there must be an element of ability to affect legal sometimes by virtue of power vested in it by law.

(10) Whether the Company in the instant case is State within the meaning of Article 12 of the Constitution will have to be decided in the light of the aforesaid principles laid down by the Supreme Court. In order to determine this question it is necessary to refer to the relevant facts and averments made in the petition and affidavit in reply. It appears that immediately after the formation of the State of Gujarat in 1960 the Government of Gujarat decided to set up a fertilizers project on priority basis. In the year 1960 a committee under the Chairmanship of the then Chief Secretary to the Gujarat V. Iswaran I.A.S. was constituted and Dr. C.B. Patel the then Director of Industries was made exofficio Secretary of the said committee. This committee recommended establishment of the fertilizers project near Baroda. Government of Gujarat formed a Board of Directors and promoted the Company. It is the allegation of the petitioners that all the expenditure for the formation of the Company including the expenditure for preparation of Memorandum and Articles of Association was paid by the Government of Gujarat. Even the registered office of the Company was located in Sachivalaya building at Ahmedabad and one B. D. Shah Officer on Special Duty Fertilizers of Industries Department was looking after the liaison work of the Company. The land for the Company was acquired by Govertment under Part II of the Land Acquisition Act and not under Part VII. Acquisition power Part II was made for public purpose. These allegations made by the petitioners are not denied by the respondents. According to the petitioners it is sufficient to note that name of the Company is Gujarat State Fertilizers Company Limited and that also indicates that it is a State Government industry Now so far as shareholding of the Company is concerned the break up is as follows :-

Government Financial Institutions 26.77% Government or Gujarat 49.03% Banking Companies 3.75% Insurance Companies 1.37% Indian Companies 1.78% Companies 0.75% Co-operative Societies 2.01% Individual Share holders. 14.54% ___________ Total 100.00% ___________

It would thus appear that major part (more than 80%) of the shareholding is owned and or controlled by the Government. More than 49% of the total shares are held by Government of Gujarat while more than 31% of the total shares are held by Government Financial Institutions Nationalised Banks and Insurance Companies.

(11) Articles 138 140 and 142 of the Articles of Association of the Company provide for appointment of Directors on the Board of Directors of the Company and they read as follows

"138 Number of Directors Unless otherwise determined in a General meeting and subject to the provisions of sec. 252 of the the number of Directors of the Company shall not be less than 4 nor more than 12 excluding the Government Director if any Special Director if any Debenture Director. If any and Corporation Directors if any two thirds of whom shall be liable to retire by rotation". Subject to the provisions of the and Articles 141 147 and 143 the Government of Gujarat shall be entitled to nominate and appoint one-third or the Directors (who are herein referred to as Government Directors) on the Board of Directors of the Company who shall be the permanent directors. Each such Director shall not be bound to hold any qualification shares and shall not be liable to retire by rotation or be removed by the Company. One of such Directors shall be the Chairman of the Board of Directors of the Company. Each such Director shall hold office. until he is either removed from the officer or another is nominated in his place by the Government of Gujarat or until he vacates the office by resignation or otherwise. The remaining two-thirds of the Directors shall be appointed on the Board of the Company by holders of equity shares in general meeting and the said shareholders shall be subject to retirement by rotation and the provisions as to holding of qualification shares etc. shall apply to each such Director".

142 Corporation: Director. So long as any moneys be owing by the Company to any Finance Corporation or Credit Corporation or to any Financing. Company or Body (which Corporation or Body is hereinafter in this Article referred to as the corporation) who may have advanced any loan to the Company or so long as any guarantee given by and Corporation at the request of and for the purposes of the Company remains outstanding or so long as such Corporation holds any shares of the Company as a result of its having underwritten the issue of shares by the Company the Directors may authorise such Corporation to appoint from time to time any person as a Director of the Company (which Director is hereinafter referred to as Corporation Director) and may agree that the Corporation Director shall not be liable to retire by rotation and need not possess any qualification shares in quo him for the office of such Director".

The Corporation may at any time and form time to time remove any such Corporation Director appointed by it and may at the time of much removed and also in the case of death or resignation of the person so appointed at any time appoint any other person as a Corporation Director in his place. Such appointment or removal shall be made in writing signed by the Chairman of the Corporation be any person or Director thereof and shall be delivered to the Company at its registered office.

It is clarified that every corporation entitled to appoint a Director under this Article may appoint such number of persons and Directors as may be authorised by the Directors of the Company".

Article 145(1) of the Articles of Association of the Company deals with appointment of Managing Directors and it reads as follows:-

"145 Power to appoint Managing Directors: Subject to the provisions of the the Directors may appoint from time to time one or more of them out of the permanent Directors nominated and appointed by the Government on the Board of Directors of the Company as specified in the Article 140 only to be the Managing Director or Managing Directors of the Company either for a fixed terra not exceeding five years at a time or such other term as may be approved by the Central Government in that behalf".

Article 147 deals with filing up of casual vacancies and Article 148 with Additional Director. These Articles do not have bearing on the question in controversy and therefore it is not necessary to set them out. Article 121 of the Articles of Association provides for totes of Members and it reads as under : -

"121 Votes of Members. Subject in the provisions of Articles 119 and 120 every member of the Company holding any equity share capital and otherwise entitled to the shall on a show of hands when present in person for being a bully corporate present by a represcribed duly authorised) have one rule and on a poll when present in person (including a body corporate by a duly authorised representative) for by an agent duly and raised under a power of Attorney or by proxy his voting right shall be in proportion to his share of the paid up equity share capital of the Company".

(12) The above Articles and the percentage of share holding of the Government of Gujarat reveal that 2/3rds of Directors on the Board of Directors are appointed by the Government of Gujarat. Under Article 140 of the Articles of Association Government of Gujarat is entitled to nominate. and appoint 1/3rd other Directors on the Board of Directors of the Company who shall be permanent Directors. Such Director is not bound to hold any qualification shares nor is he liable to retire be rotation or be removed by the. Company. Remaining 2 of the Directors are to be appointed by the holders of equity sharks in general meeting. Under Article 121 of the Articles of Association voting nights are in proportion to the share of the paid up equity share capital of the Compay. Since the Government of Gujarat holds 49.03% of the equity share capital one half of the 2/3rds of the Directors who are to be appointed by the holders of equity shares would be appointed by Government of Gujarat. If would thus appear that having regard of type nominated Directors on appointed Directors on the basis of voting right the Government of Gujarat can nominate or appoint 2/3rds of the total Directors. It is significant to note that under Article 140 of the Articles of Association one of the Directors nominated by the Government of Gujarat has to be appointed as Chairman of the Board of Directors of the company. It is also significant to note that under Article 145(1) one of more of them not of the permanent Directors nominated and appointed to the Government of Gujarat on the Board of Directors as specified in Article 14 only can be appointed as Managing Director (Managing Directors of the Company either for a fixed term not exceeding five years at a time or such other term has may be approved by the Central Government in that behalf. It is therefore. clear that the Managing Director or Managing Directors in wholly the executive powers vest and also the Chairman; who presides over the meetings of the Board of Directors are appointed by the State Government. Besides the State Government who has power to nominate and appoint 2/3rds of the Directors on the Board of Directors the Financial Corporations which are Government Corporations are entitled to nominate Corporate Directors The equally shareholders other than Government of Gujarat and Government owned Corporations are so small in number that they hardly have any scope of acting elected as Directors of their own at the Annual General Meeting. Practically appointment of Directors is continued by Government of Gujarat and/or Government lowered Institutions or Corporations. It indeed cannot be disputed tilat it is the Directors who manage the affairs of the Company. It was pointed out by the petitioners that at the to when they filed this petition out of cloth Directors six actors were directly connected and two Directors were indirectly connectwith the Government.

(13) Company discharges the Governmental functions to implement the directive principles of State policy enshrined in Part IV of the Institution and more particularly the duty cast upon the State Government to endeavour to organize agriculture on modern and scientific lines as provided in Article 48 of the Constitution. Clauses 13A and 13B incorporated under objects in the Memorandum of Association of the Company show that the Company is incooperated to implement the directive principles of the State policy. The said Objects are as under :-

"13 In undertake carry out promote and sponsor rural development including any programme for promoting the social and economic welfare of or the uplift of the public in any rural areas and to incur any expenditure on any programme of rural development and to assist execution and promotion thereof either directly or through an independent agency or in any other manner; without prejudice to the generality of the foregoing programme of rural development shall also include any programme for promoting the social and economic welfare of or the uplift Of the public in any rural development and that the words rural area shall include such areas under sec 35 of the Income-tax Act 1961 or any other law relating to made development not the time being in force and in older to implement any of the above mentioned objects or purposes transfer without consideration or at a fair or concession view and divest the ownership of any property for the Company to or in favour of any Public or Local Body or Authority or Central or State Government or any Public Institutions or Trusts engaged in the programme of rural development".

13 To undertaken carry out. promote and sponsor nr assist any activity for the promotion and ground of national economy and for discharge Social award moral responsibilities of the Company to the public of tally section of the public as also any activity likely to promote national welfare or social economic or moral uplift of the public or any section of the public and undertake carry put promote and sponsor any activity for publication of any books literature newspapers. or for organizing lectures or seminars likely to advocate these objects or for giving merit awards for giving scholarships loans or any other assistance to deserving students or other scholars to enable them to prosecute their studies or academic pursuits or researches and for establishing conducting or assisting any institution trust having any one of the aforesaid objects as one of its objects by giving donations or otherwise in any other manner and in order to implement any of the above mentioned objects or purposes transfer without consideration or at a fair or concessional value as the Directors may think fit and divest the ownership of any property of the Company to or in favour of any Public for Local Based or Authority or Central or State Government or any Public institutions or trustees established or operating under by virtue of or pursuant to any law for the time being in force"

(14) It is not decelerated that the above objects were inserted at the instance of the Government of Gujarat. It was urged that the aforesaid objects wore inserted only to get some benefit under the Income-tax Act. I am not prepared to believe that the Company would insert the objects in the Memorandum of Association without any intention to carry out those objects and only with a view to betting some benefits under the Income-tax Act. If there was no intention to carry out the objects and the object was only to get the benefit of Income-tax Act it is obvious that insertion of the above objects was of honest to say the least. However I am not inclined to accept the respondents contention on that the Company was not serious about carrying out the abovesaid objects and that they were inserted only for the purpose of attaining certain benefits under the Income-tax Act.

(15) The Articles of Association of the Company also provide for audit of the Companys as aunts by the Comptroller and Auditor General of India or its nominee. Relevant provisions in this regard are contained in Article 230 and they read as under:-

"230 State Government to direct audit by the Comptroller and Auditor General of India or its nominee. 1 If and so long as the Government of Gujarat holds either in the mane of the Governor of Gujarat or in the name be its nominee or nominees) at least 25 per cent of the paid up capital of the Company for the time being it shall be lawful for the State Government to direct the Company to have its accounts for the year or years specified in such direction audited by the Comptroller and Auditor General of India and it shall be the duty of the Company to abide by and comply with such directions. 2 On the State Government giving directions in pursuance of clause (1) hereof the Comptroller and Auditor General shall have powers:- (a) to direct the manner in which the Companys account shall be audited by the auditor appointed appointed in purchase of Article hereof and to give such auditor/auditors instructions in regard to any matter relating to the performance of his/their functions as each. ...................... . . ... (b) to conduct a supplementary or test audit of the Companys accounts by such person or persons as he may authorise in this behalf and for the purposes of such audit to have access at all reasonable times to call Accounts Account Books Vouchers Documents and other paper of the Company and to require information or additional information to be furnished to any person or; persons so authorised on such matters by such person or persons and in such firm as the Comptroller and Auditor General may by general or special under direct;

3 The Auditor aforesaid said shall submit a copy of his/their audit report to the Comptroller and Auditor-General of India who shall have the right to comment upon or supplement the audit report inasmuch manner audit held shall think fit. Any such comments upon supplement to the audit report shall be placed before the Meetings of the Company at the same time and in the came matter as this auditors report. In the context of the above Article 130 it is also important to refer to the correspondent exchanged between the Government of Gujarat and the Company collect to marked Exhibit D to the affidavit in reply dated 6/09/1985 filed of behalf of the Company in the letter dated October 4 1571 the Additional Chief Secretary to Government of Gujarat Industries. Mines and Power Department wrote to the Chairman of the Company inquiring whether there would be any objection if a convention was established to place the annual report do accounts of the Company before the State Legislature every year to enable a discussion of necessary. In reply the Company by its letter dated 8/10/1971 worth to the Additional Chief Secretary to say that while the Company was agreeable to the suggestions made in his letter it would suggest that a further convention also be accepted that it would be for the Minister Concerned in furnish whether information might be sought in the State Legislature. The Company assured that whether information Minister right require would he very willingly furnished by the Company. It is also stated in the letter that the Company assumed that it would not be subject to any scrutiny by the Committee on Public Enterprises or by the Public Accounts Committee. The suggestion made by the Company was accepted by the State Government by its letter dated 11/11/1971

(16) A very significant fact which supports the petitioners contention that the Company is controlled by the Government is the exemption claimed by the Company under the Monopolies and Restrictive Trade Practices Act 1969 (M.R.T.P. Act for short). The said Act does not apply in certain cases as provided in see 3 thereof Under clause (b) of sec. 3 of the M.R.T.P. Act the does not apply to any undertaking owned or controlled by Government. In this connection it is very interesting to refer to the letter dated 11/02/1972 (Annexure M to the affidavit dated 23/08/1985 filed on behalf of the petitioners) addressed by the Company to the Secretary to the Government of India Department of Company Affairs. New Delhi. In this letter claim was made by the Company that it is an undertaking owned or controlled by the Government within the meaning of Sec. 3(b) of the M.R.T.P. Act. It was stated he M.R.T.P. Act was not applicable to the Company and therefore to the Company and should be de registered under Sec. 26(3) of the said Act. Same this letter throws considerable light on the controvert before me it is necessary to set out the entire text of the letter which is as a followed. "At the commencement of the Monopolies and Restrictive Trade Practices Act 1969 the total value of the assets of this Company was not less that Rs. 20 errors within the meaning of sec. 20(a)(i) of the said Act and therefore deemed it prudent to apply for registration of the Company under sec. 96(1) of the said Act. Accordingly this Company has been registered under certificate of Registration No. 9/1118/70-M(B) dated the 24/10/1970. However on the facts set out hereafter this Company is aa undertaking owned or controlled be the Government within meaning of sec. 3(b) of the said Set and the said Act is not applicable to it. We therefore hereby apply for the de-registration of the Company under sec. 26(3) of the said Act. 1 This Company was sponsored by the Government of Gujarat and issued subscribed and paid up share capital is held as shown in the statement answered hereto and married Annexure A It will be observed from the said statement that 49.03 per except of to share capital of the Company is held by the Government of Gujarat and 31.86 per sent of the share capital is held by the nationalised financial institutions banks and insurance companies. Thus 30.89 per cent of the total issued subscribed and paid up share capital of the Company is held by the Government and nationalised Financial institutions banks and insurance companies. 2 Companys first Board of Director was nominated by the Government of Gujarat. Under Arts 140 of the Articles of Association of the Company the Government of Gujarat is entitled to nominate and appoint one-third of the total number of Directors of the Company subject to the rights of the financial institutions like IDBI IFC LIC and ICICI under Article 142 read with the relevant provisions of the loan and underwriting agreements entered into between the Company and skid institutions The IDBI is entitled to nominate and appoint not more than tow Directors and the IFC LIC and ICICI are each entitled to nominate and appoint one Director on who Hoard of Directors of the Company. The nominee Directors of the averments of Gujarat and the Financial Institutions are to be permanent Directors not liable to retire by rotation or be removed by the Company and are not required to hold any qualification shares. The Chairman and Managing director of the Company are to be appointed out of the Directors nominated by the Government of Gujarat 3 The present Board of Directors of the Company consists of the following members :- (1) Shri Jaykrishna Harivallbhdas Chairman (Nominated by the Government of Gujarat) Industrialist. (2) Shri Arvind N. Mafatlal. Industrialist. (3) Shri H. M. Patel I.C.S. (retired). (4) Shri Arvind N. Lalbhai Industrialist. (5) Shri R. B. Amin Industrialist. (6) Shri T. K. Patel Member of Parliament and Chairman Gujarat State Co- operative Marketing Society Limited. (7) Shri Rohit C. Mehta Industrialist. (8) Shri F. N. Rana I.A.S. (retired.) (9) Shri L. R. Dalal I.C.S. Chief Secretary to the Government of Gujarat (Nominated by the Government of Gujarat). (10) Shri M. D. Rajpal I.A.S. Additional Chief Secretary to the Government of Gujarat (11) Dr. S. R. Subramanian (Nominated by the Industrial Devilment Bars India) (12) Shri F.J. Heredia I.A.S. Managing Director. (Nominated by the Government of Gujarat. 4 It may be observed from the above lint that Directors at Serial Nos. 1 9 and 12 are the nominees of the Government of Gujarat and Director it Serial No. 11 is the nominee of IDBI Director at Serial Nos. 8 and 10 have been appointed as rotational Directors on the Board at the request of the (Government of Gujarat. Directors at Serial Nos. 2 3 4 and 5 were included in the Board when the first Board was constituted by the Government of Gujarat in 1962. Directors at Serial Nos. 6 and 7 were appointed in consultation with the Government of Gujarat. At the national Directors in Serial Nos. 2 3 4 5 6 7 8 and 10 have re-elected on the Board from time to time with the consent and support of the Government of Gujarat and the nationalised financial institutions banks and insurance companies who all together held 80.89 per cent of the total issued prescribed and paid no share capital of the Company. It may also be appreciate d that but for the consent and support of the Government of Gujarat and the Nationalised financial institutions Banks and Insurance Companies none of the notional Directors can be elected and the Board of the Company. Thus all the Directors on the Board and there because they enjoy the full confidence of the Government of Gujarat and the nationalised financial institutions Banks and insurance companies. 5 The Managing Director of the Company who is a nominee by the Government of Gujarat and who is Invariably an I.A.S. officer of the Gujarat cadre has been vested with substantial powers of management and exorciser full control over the day-to-day affairs of the Company. 6 Under Article 230 of the Articles of Association of the Company the Government so long as it holds at least 25 per cent of the paid up share capital of the Company is entitled to direct the Company to hate its accounts for full gear audited by the Comptroller and Auditor General of India made the said Government has in fact directed such audit. 7 The Government of Gujarat in effect exercise substantial control over the affairs and working of the Company in several always including issue of directives from time to time which the Company has invariably obeyed and carried out. To wit the said Government directed the Company: (i) in 1965 to step retail sale of fertilizers from its Farmers Information Centres: (ii) in 1970 to place in entire insurance with LIC only; (iii) in 1971 to reduce the price of its O.A.P. Fertilizers by Rs. 95 per tonne; (iii) in 1971 to place the Companys Annual report and Amount before the State Legislature;

On the considerations set out above we regard that the Central Government may be pleased to cancel the registration of the Company.

(17) Petitioners also strongly rely on a letter dated 23/09/1974 addressed by the Company to the Chief Secretary to Government on Gujarat on the subject of additional water supply scheme 10 MGD from Mahi river or GSFC. In this letter it was stated by the Company that it was considering of establishing facilities for the MGD Water Supply to meet requirement of water for the expansion scheme that would be undertaken by it. Paragraphs 2 and 3 of this letter on which reliance was placed by the petitioners read as follows:

" In view of the above we should like of reserve site in Mahi River held as shown in the enclosed plan. The site proposed to be reserved is in between existing wells or Baroda Municipal Corporation (BMC) and Gujarat Industrial Development Corporation (GIDC.). Drawing showing location or the proposed site along with locations of wells of Gujarat Refinery and GSFC BMC and GIDC is enclosed herewith. The site desired to be reserved is show shaded in red on this drawing. We would request you to please allocate and reserve the above site and issue notification to this effect to that no other agency may locate; their site tin this area. District Collector and Superintending Engineer Public works Department. may be informed in this regard".

It was urged that unless the Company was controlled by the Government it could not have made request as. contained in the said letter. It is urged on behalf of the respondents that Gujarat Refinery Gujarat Industrial Development Corporation and Baroda Municipal Corporation had reserved sites in the Mahi river urged for water scheme and therefore merely because the Company made similar request it could not be said that it was controlled by Government. It is however significant to note that the Corporations and Gujarat Refinery for which. the cities were reserved in Mahi river bed were local authorities or the Government Undertakings. It is not pointing out that any Corporation or Company other than the local authorities or the Government owned corporations or the Company was given site in Mahi river bed for after scheme. The above fact When considered in the light of the other facts stated above cannot be said to have no significance or bearing on the question in controversy.

(18) The Company is engaged in the manufacture of fertilizers. Fertilizers a used in cultivation of land and increasing agricultural produce. Having re urged to the important contribution which the fertilizers make in increasing the agricultural outside they are concerned by the Fertilizers (Control) Order 1957 Clause 13 of the said Order places restriction on manufacture or sale etc. of the Fertilizers. Schedule I of the said Order lays down varieties of Fertilizers with specifications. The movement to Fertilizers is controlled by the Fertilizers (Movement Control) Order 1913 It is also not disputed that substantial quantities of fertilizers are got distribute throat Co-operative Societies by the Company as a part of the policy of the States Government. It was having regard to the important part played by the Fertilizers in the agricultural activity that the Government Gujarat held decided to set use fertilizers Project in Gujarat. in was in pursuance of the decision taken by the Government of Gujarat to set up a fertilizers Project on priority basis that the Company was estzablislled. Government of Gujarat not only contributed to the extent of 49.03 per cent in the equity share capital but also kept control over the Company. As discussed above two thirds of the Directors on the Board of Directors Chairman of the Board of Directors land banging Director or Managing Directors are directly commodity new appointed or nominated by the State Government. Besides the State Government institutions and Corporations owned by Union of India filed quite shares and have a right to nominated Directors. In fact act already pointed out above no Director can be appointed without to the support of the Government of Gujarat. These and other. factors discussed above and the facts set out in letter dated 11/02/1972 Annexure M advanced to above clearly establish instance of deep and pervasive control by the Government of Gujarat and such control indicates that the Company is a State agency or manufacturing. It also cannot be disputed that the function of the (Company in manufacturing fertilizers is of public importance in this the Government is vitally interested Further as pointed out above initially the State Government itself wanted to set up Fertilizers project but later on decided to establish the Company. This is also a strong factory supporting the inference of the Company being an instrumentalily or agency of the State Government. The cumulative effect of all the relevant factors set out above prove beyond doubt that the Company is State within the meaning of Article 12 of the Constitution and is subject to the samc constitutional limitations as the Government. It must therefore be held that the Company is amenable to jurisdiction of this Court under Article 226 of the Constitution.

(19) Before parting with this controversy relating to Article 12 of the Constitution I may mention that strong reliance was placed by the respondents on the decision of the Kerala High Court in K. M. Thomas v. Cochin Refineries Ltd. reported in A.I.R. 1982 Kerala 248. In this decisions the learned Single Judge of Kerala High Court after examining the facts relating to the Cochin Refineries Limited in the light of the decisions of the Supreme Court came to the conclusion that Cochin Refineries Limited could not be said to the an instrumentality of State within the meaning of Article 12 of the Constitution. Each case depends on its own facts and it was having regard to the facts which obtained in that case than the came Judge took the view that Cochin Refineries Limited was not an instrumentality of the State within the meaning of Article 12. No new principles are laid down by the learned Judge. I therefore fail to see how this decision can be of any assistance to the Company. The next question which falls for my consideration is whether it was open to the Company to discharge the petitioners from the service under Rule 44 of its Service Rules as has been done by its Managing Director respondent No. 2 herein. Rule 44 has been set out able. Relying on this made it was urged on behalf of the Company that the Company would have discharged from service its employees in Grade I or II (i) for sufficient reasons by the competent appointing authority or (ii) by three months notice in writing or by payment of three months basic by and durance allowance as in force from time to time in lieu of such notice. Relevant part of the rule on which reliance is placed by the Company printed in the book entitled Service Rules published by the Company reads as under :

"After confirmations an employee in Grade I or II may be discharged form the service of the Company for sufficient reasons by the competent appointing authority or he may leave or discontinue from the service or the Company after giving three months notice in writing in that behalf or by payment of three months basic pay and dearness allowance as in force from time to time in lieu be such notice".

This part of the rule is already set out above while reproducing the entire rule 44 The Company sought to place reliance on the last portion of he part of the rule set not above namely or the Company after giving three months notice in writing in lieu of such notice. If the rule is read as a whole in other words the above part is read along with the subsequent or latter part of the rule it is obvious that the word or in or the Company after riving three months notice is a misprint and it should read as of. This part of the rule permits the employee in grade I and/or II to leave or direction form service of the Company. Word or as printed does not make sense. If the entire rule is read similar provisions indicated that the ard other employees contained in the latter Part or the rule clearly indicates that the aforesaid part permits the employee to leave or discontinue form serviced of the Company. To say the least it is most surprising that so far as confirmed grade I or grade II employee is concerned the competent appointing authority can discharge him from service for sufficient reasons. In other words if there are no sufficient reasons the employee cannot be discharged from service: Expression sufficient reasons or sufficient cause is used in many statutes and rules. The use of the expression itself indicates that an enquiry is contemplated before an employee can be discharged. How can the competent authority record sufficient reasons without affording an oppprtunity of being heard to the employee who is ought to be discharged In other words it is implicit in the rule to hold an enquiry before the employee could be discharged under rule 44. This conclusion is strengthened by the provision contained in Chapter VII of the Rules which deals with Conduct Discipline and Appeals. Rule 120 enumerates penalties which can be imposed on employee who commits willful breach of any of the rules or any of his duties or who displays negligence inefficiency or indolence or who knowingly willing intentionally or negligently causes any loss or damage whether pecuniary or otherwise to the Company or to any is its properties or who knowingly wilfully or intentionally does anything detrimental to the interests or prestige of the Company for in conflict with its instructions or who commits s breach of deception or is guilty of disobedience or of any other act on misconduct or misbehavior. One of the penalties enumerated in Rule 120 is discharge from service. Clause (i) of rule 120 provides that no penalty shall be imposed on any employee unless the appointing authority or such other authorised empowered in this behalf is satisfied that a fair and proper enquiry was made and the charges living to the penalties were proved. Rule 44 has to be read with rule 120 and when so tend its leaves no room for doubt that before imposing penalty of discharge from service on an employee it is necessary to hold a fair and proper enquiry and the competent authority has to reach the condition on the basis of such enquiry that the charges levelled against the employee are proved.

(20) In the instant case admittedly no enquiry much less fair and proper enquiry has been held against the petitioners before imposition of penalty of discharge from service on them. Farther the requirement of rule 44 of recording sufficient reasons had also not been complied with the competent authority inasmuch as the impugned orders above not disclose or relevant any reasons for discharge of the petitioners from service. It is not enough to recorded reasons on the file. Reasons for which the content authority decided to discharge an employee from service must be reflected in the order of discharge. It is not disputed that petitioners had right to prefer appeal against the impugned orders under rule 122 of the service Rules. How ground the petitioners have exercised this right of appeal effectively without knowing the reasons for which they were discharged from service. Admittedly reasons Recorded in the file were not disclosed to the petitioners before they filed appeals. In act the reasons were produced for the first time before the Court. To ask the petitioners to prefer appeal without revealing them reason for their discharge amounts to nagged of their right to appeal. the competent authority it must he held has acted in violation of the provision of rules 44 120 and 122 in passing the impugned orders of discharge from service.

(21) The reasons which are recorded for discharge of the petitioners from service and which are placed on records clearly indicate that there were allegations of misconduct against the petitioners and it was on account of such allegations that petitioners have been I discharged from service. When there are allegations misconduct and it is on the basis of such allegations that an em- ployee is sought to be discharged it is incumbent upon the authority by concerned to held an enquiry into the allegations and give an adequate opportunity to the employee against whom the allegations are made to meet those allegations. Unless employee is given such an opportunity principles of natural justice would he violated.

(22) In Board of Trustees of the Port of Bombay v. Dilipkumar Raghaverndranath Nadkarni and others A.I.R. 1983 S.C. 109 it was observed The expression life does not merely can note animal existence or a continued drudgery through life. The expression life has a much wider nothing. Where therefore the outcome of a departmental enquiry is likely to adversely effect reputation or livelihood of a person some of the finances of human civilization which make life worth living would be jeopardized and the same can be put in jeopardy only by law which inheres fair procedures In this context one can recall the famous words of Chapter II of Bhagwad Gita: Sambhavitsya Chakeerti Marnad atirichyate". In Olga Tellis v. Bombay Municipal Corporation (1985) 3 S.C.C. 545 the Supreme Court observed as follows:-

"As we have stated above while summing up the petitioners case the main plank of their argument is that the right to lire which is guaranteed by Article 21 includes the right to livelihood and since they will be deprived of their livelihood in they are etude from their slum and pavement dwellings their eviction is that amount to deprivation of their in and is hence unconstitutional. For purposes of argument we will assume the factual correctness of the premise that if the petitioners are evicted from their dwellings they will be deprived of their livelihood. Upon that assumption the question which we have to consider. is whether the right to life includes the right to livelihood. We see only the answer to that question namely that it does. The sweep of the right to life conferred by Article 8 21 is wide and far reaching. It does not mean merely are cannot be extinguished or taken away as for example by the imposition and execution but one death sentence except according to procedure established by law. That is but one aspect of the right to life. An equally important facet of that light is the right to liveli hood because no person can live without the means of living that is the means of live lihood. If the right to livelihood is not treated as a part on the Constitutional right to life the easiest way of depriving a person of his light to life would be to deprive him of his means of livelihood to the point of abrogation. Such deprivation would not only denude the life of its effective content and meaningfulness but it would make life impossible to live. And yet such deprivation would not have to be in accordance with the procedure established by law if the right to livelihood is not regarded as a part of the right to life.......".

".....The State may not by affirmative action be compellable to provide adequate means of livelihood or work to the citizens. But any person who. is deprived of his right to livelihood except according to Just and fair procedure established by law can challenge the deprivation as offending the right to life... conferred by Article 21".

(23) Petitioners as a result of their discharge from service would be deprived of their means of livelihood. They cannot be deprived except according to the just and fair procedure established by law. The impugned orders therefore violate Article 21 of the Constitution as urged on behalf of the petitioners. It is true that if the Company was not held to be State within the meaning of Article 12 of the Constitution petitioners could not have successfully sought protection of Article 21 of the Constitution But since in my view the Company is State within the meaning of Article 12 of the Constitution petitioners are entitled to protection of Article 21. Petitioners therefore could not have been discharged from service except by observing the principles of natural justice. In other words they could not have been discharged from service without holding enquiry in regard to the allegations made against them Sand without giving them an opportunity of being heard to meet with the allegations. .. .. .. .. ..

(24) In the light of the above discussion it must be held that the impugned orders discharging the petitioners from service are illegal arbitrary and unjustified. They therefore deserve to be quashed and set aside.

(25) No other contention or relief claimed in the petition was pressed before me.

(26) In the result this petition is allowed. The impugned order Annexures A1 to A5 a discharging petitioners Nos. 2 to 6 from service are quashed and set aside. The respondents are directed to reinstate the petitioners in service from the date they were discharged from service with all consequential monetary and other benefits. Petitioners shall be reinstated in service on or before 31/10/1985 and the direction regarding giving them monetary and other benefits shall be complied with before 30/11/1985

(27) made absolute with costs. petition allowed.