Untwalia, J.:— In this case an important and difficult question of law in regard to the interpretation of certain Articles in Part XIV of the Constitution has arisen. Petitioner No. 1 is the Chini Mazdoor Sangh, Guraru, a Trade Union having its office at Guraru Mills in the district of Gaya; the other two petitioners are employed in the Sugar Factory at that place. The said Factory was the property of Gaya Sugar Mills Ltd., which Company went into liquidation since 14-11-1951, Shri D.C Mehta was appointed its Official liquidator on 1-2-52. The Factory was leased out for two years commencing from 6-12-52 to the Co-operative Development and Cane Marketing Union Ltd., Guraru by the Official liquidator. For subsequent periods it was leased out to S.K.G, Sugar Ltd. Eventually, the said Factory was sold to the State of Bihar, which took possession of the Factory and continued employment of all workers of the Factory since 26-1-62. The Factory is directly under the management and control of the State of Bihar, respondent No. 1. It is managed through the Special Officer, Chini Mill, Guraru, respondent No. 3. He has been put under the control of the Cane Commissioner, Government of Bihar, respondent No. 2, who is the Under-Secretary of the Department of Cane and Co-operation.

2. The petitioners case further is that the Union made demands several times to declare the services of the workers as Government service and grant allowances and facilities accordingly. The demands were not accepted by the Government the deficit or the surplus of the accounts of the Factory goes to the general revenue of the State of Bihar. When a question arose before the Labour Tribunal in respect of payment of bonus under the Payment of Bonus Act in regard to the sugar factories of Bihar and their workmen, the Government took the stand in Reference Case No. 8 of 1966 that the Guraru Sugar Factory is not liable to pay bonus under the said Act, as exemption has been granted to the Government concerns. The Industrial Tribunal accepted that stand of the State of Bihar and exempted the Guraru Sugar Factory from payment of bonus. The letters written on behalf of the petitioners are annexures 1 and 1/1. The stand taken on behalf of the Government before the Industrial Tribunal is contained in annexure 2 and the order of the Tribunal is annexure 3. By another letter dated 12-2-68 (annexure 4) a demand was made on behalf of the workmen to grant them privilege leave at the rate of one day for eleven days. A reply was given by the Special Officer, respondent No. 3 on 15-2-1968, a copy of which is annexure 5, stating therein that the service in the Factory was different from Government service; hence leave according to the scale applicable to the Government servants could not be given. By supplementary affidavit many letters have been filed to show that the Factory is directly owned by the Government, managed by it and payments are made to the workmen from the Government fund. The facts pleaded by the petitioners have not been controverted by any counter-affidavit nor have they been refuted at the time of the hearing of this application, The question for consideration, therefore, is what rule or law governs the service conditions of the employees of the Guraru Factory which is owned and directly managed depart-mentally by the Government of Bihar Mr. Ranen Roy, learned counsel for the petitioners, submitted that all the employees of the Factory are holding posts in connection with the affairs of the State of Bihar within the meaning of Article 309 of the Constitution and they hold civil posts under the State for the purposes of Articles 310 and 311 of the Constitution. This stand of the petitioners was strenuously combated by learned Government Pleader No. 1. After determining this question, it will have to be further determined which rule or law governs the service conditions of the different types of employees of the Guraru Sugar Factory, even if their service conditions are governed by the law or the rule made under Article 309 of the Constitution.

3. Part XTV of the Constitution is headed “Services under the Union and the States”. Chapter I of this Part deals with ‘Services’ and Chapter II makes provision in regard to Public Service Commissions either for the Union or for the States. There is no other Part or Article of the Constitution, which deals with Services under the Union and the States. In a welfare State activities of the State are numerous. The primary function of the State to govern is not the only function of the State in modern times. The conception of State and Government performing only the regal and sovereign functions gradually embraced the wider sphere of the activities of the State Within its activities first came rendering of certain essential services to the citizens by running charitable institutions, such as hospitals, eta or by rendering essential services of communication and transport through railways or the like. Gradually the State started entering into commerce, trade, and industry Many such activities of the State have been undertaken by formation of Public Companies or Corporations, and since they have distinct entities from the State, it has been consistently held that employees of such Corporations or the Companies, even though they are under the State control in which almost the entire shares are held by the State, are not entitled to the protection of Article 311 of the Constitution [vide M. Verghese v. Union of India, AIR 1963 Cal 421, Prafuila Kumar v. Calcutta & T. Corporation. AIR 1963 Cal 116, Barada Kanta v. State of West Bengal, AIR 1963 Cal 161, Suprasad v. State Bank of India, AIR 1962 Cal 72, Baleshwar Prasad… v. Agent, State Bank Of India, Gaya…Opposite Party., AIR 1958 Pat 418, Ram Babu v. Divisional Manager, L.I.C, AIR 1961 All 502, Abdul v. Garo Hills District Council AIR 1961 Assam 69, Tara Singh Ujagar Singh…Plaintiff; v. Union Of India,…Defendant., AIR 1960 Bom 101, Kapoor Singh v. Union of India, AIR 1960 Madh Pra 119, Subodh Ranjan v. N.A.O Callaghan, AIR 1956 Cal 532 B. Dass Mal v. Union of India, ILR (1955) Punj. 1279 : (AIR 1956 Punj 42), and Ranjit Ghosh v. Damodar Valley Corporation, AIR 1960 Cal 549]. The question at issue before us does not seem to have been canvassed or decided directly in any case. An employee of a State-owned Factory would undoubtedly be a Government servant because the owner of the Factory being the State, the Government is the master and the employee is the servant and all the ingredients of law relating to master and servant are fulfilled to make him a Government servant.

4. The question for consideration, however, is whether he is a person appointed to public services and post in connection with the affairs of the State. The expression “public services” has got a different connotation. They are the persons who are in the State service either being members of the All India Service or of the State Civil Service and hold posts and perform public duties in connection with the regal or sovereign activities of the State. In my opinion, the phrase “in connection with the affairs of the Union or of any State” does not govern, as if was not necessary to so govern, the expression ‘public services’ but it governs the term ‘posts’. Learned Government Pleader argued that the affairs of the State must mean the regal or sovereign activities of the State; they cannot mean commercial, trading or industrial activities. In support of this argument, he placed reliance upon a decision of the Privy Council in Henry Greer Robinson v. State of South Australia, AIR 1931 PC 254 and the decision of East Punjab High Court in Governor-General in Council v. H. Peer Mohd Khuda Bux AIR 1950 East Punj 228, which decisions were given with reference to the law as provided in Section 123 of the Evidence Act. In that section a privilege has been granted in regard to the evidence derived from any unpublished official records relating to any affairs of State, and such an evidence cannot be given except with the permission of the Officer at the head of the department concerned. Learned counsel submitted that the term “affairs of State” occurring in Section 123 of the Evidence Act has been interpreted to mean the regal and the sovereign functions of the State and the same meaning must be attached to the identical expression occurring in the Constitution. In my opinion, on the basis of the Privy Council decision, learned Government Pleader is not quite correct in his submission that it has been so held by the Judicial Committee because the only observation occurring at page 261 (column 2) in the judgment of Lord Blanesburgh is—

“But the exercise of the power in the present case is especially appropriate seeing that the documents have come into existence with reference to the commercial activities of the State, and that they are the documents of a Department of State which has now been disbanded……

5. The observation would merely mean that such a privilege should not be readily granted with reference to the documents that have come into existence in regard to the commercial activities of the State, Had it been correct to say that documents relating to the commercial activities of the State are documents not relating to the affairs of the State, it would have been so stated in the judgment. In the Full Bench decision of the East Punjab High Court, Khosla, J., after considering a number of authorities, has said at page 233 (column 2)—

“It is, therefore, sufficiently clear that the expression ‘affairs of State’ as used in Section 123 of the Evidence Act, has a restricted meaning, and on the weight of authorities both in England and in this country, I would define ‘affairs of State’ as matters of a public nature in which the State is concerned and the disclosure of which will be prejudicial to the public interest or injurious to national defence, or detrimental to good diplomatic relations.”

6. The lucid discussion of the law, if I may say so with respect, by the learned Judge, would clearly indicate that the underlying principle of granting the privilege under Section 123 of the Evidence Act is that the disclosure of such documents will be prejudicial to the public interest or Injurious to national defence or detrimental to good diplomatic relations or the like. Such a principle cannot be attracted in all matters of affairs of the State: it can only be attracted if they are matters of a public nature in which the State is concerned. In my opinion, therefore, the narrow meaning given to the expression “affairs of State” used in Section 123 of the Evidence Act must be confined to that section. It is a well established canon of interpretation of a constitutional document that it has got to be liberally construed. If the narrow construction as urged on behalf of the State is put to the same expression used in Article 309 of the Constitution, it would mean that the Constitution-makers made certain provisions with reference to some class of Government servants. To my mind, the expression “affairs of the State” in Article 309 should be construed to take within its sweep all the affairs and activities of the State in which it indulged in modern times.

7. In Rai Sahib Ram Jawaya Kapur v. The State of Punjab, AIR 1955 SC 549 it was held that the executive power of the Union and of each State shall extend to the carrying on of any trade or business. The Allahabad High Court earlier had taken a contrary view. The law laid down by the Supreme Court was incorporated in Article 298 by the Constitution (Seventh Amendment) Act, 1956. Reference to Articles 289 and 298 would support the view I have expressed above that the State can enter into trade, business or industry, earn income as a commercial unit, may be subjected to payment of Union taxation and yet it will be the activities of the State which would undoubtedly be covered by the expression “affairs of the State” occurring in Article 309 of the Constitution. A person appointed to a post in recruitment and conditions of service can be regulated by the Acts of the appropriate Legislature or in absence of any Act by the Governor of the State under the rule-making power conferred upon him by the proviso to Article 309.

8. Article 310 applies to members of Defence Service or of a Civil Service of the Union or of an All India Service and to any person holding any post connected with defence or any civil post under the Union or the State. Article 311 does not apply to members of Defence Service or holding any post connected with defence. The protection under Article 311 is meant for a person who is a member of the Civil Service of the Union or of an All India Service or a Civil Service of a State or holds a civil post under Union or a State. Broadly speaking, therefore, the service under the Union or the State has been divided in two categories Defence Service and Civil Service. In the State of Assam v. Kanak Chandra Dutta. AIR 1967 SC 884 it has been said by Bachawat, J., delivering the judgment on behalf of the Court at p. 886 (column 1)—

“There is no formal definition of ‘post’ and ‘civil post’. The sense in which they are used in the Services Chapter of Part XIV of the Constitution is indicated by their context and setting. A civil post is distinguished in Article 310 from a post connected with defence; it is a post on the civil as distinguished from the defence side of the administration, an employment in a civil capacity under the Union or a State…….”

9. In column 2 of the same page, the learned Judge has further said—

“A post under the State is an office or a position to which duties in connection with the affairs of the State are attached, an office or a position to which a person is appointed and which may exist apart from any independently of the holder of the post.”

10. In Roshan Lal Tandon v. Union of India. AIR 1967 SC 1889. Ramaswami J., while repelling the argument that a condition of service of a Government servant was contractual and could not be altered after his appointment to his prejudice, has said at page 1894 (Column 2)—

“It is true that the origin of Government service is contractual. There is an offer and acceptance in every case. But once appointed to his post or office, the Government servant acquires a status and his rights and obligations are no longer determined by consent of both parties, but by statute or statutory rules which may be framed and altered unilaterally by the Government.”

11. A passage which has been given from Salmond and Williams on Contracts in the Judgment of the learned Judge would indicate that there may be status obligations in every Service apart from contractual obligations. But the point to be emphasised here is that the condition of service of a Government servant can be altered in exercise of the power of the Legislature or in absence of any Act by the President or the Governor in case of Government servants without their consent. I see no reason to hold that a Government servant working in commercial unit of the Government is neither associated with the defence nor he belongs to the Civil Service nor can he be said to be holding a civil post it is difficult to place him in a third category when, as I have already said, no such category is postulated by any Part of the Constitution.

12. It is well known that in this country in the beginning of the 20th Century many railways were run by Private Companies and not by the Government. At the present time except a few light railways the entire railway administration in the country is in the hands of the Central Government This indicates that running a railway is not a regal or sovereign activity of the State. And, yet nobody has ever urged that a railway employee is not subject to the provisions of Part XIV of the Constitution. In Moti Ram Deka v. General Manager, North East Frontier Railway, AIR 1964 SC 600 even in regard to a peon of the railway where the argument was whether the rule framed under proviso to Article 309 of the Constitution could take away the constitutional guarantee given to such a person holding civil post under Article 311, it was held it could not be so done.

13. It is, no doubt, true that the provisions of the Industrial Disputes Act, 1947 (Central Act 14 of 1947) and the Industrial Employment (Standing Orders) Act, 1946 (Central Act 20 of 1946) are attracted to certain undertakings or concerns run by, or on behalf of, the Government Even in the case of a hospital which was not run on a commercial basis, it was held by Supreme Court in The State of Bombay v. The Hospital Mazdoor Sabha, AIR 1960 SC 610 that Section 2(j) of the Industrial Disputes Act will make the institution an industry because the only activities of the Government which can be properly described as regal or sovereign activities are outside the scope of the said provision. These are functions which a constitutional Government can undertake for governance and which no private citizen can undertake. But that is no reason for holding that for purposes of Part XIV of the Constitution the employees are not holding civil post.

14. This leads to the acceptance of the argument which was put forward on behalf of the State as also on behalf of the petitioners that in so far as conditions of service of persons employed in the Guraru Sugar Factory are governed by the Acts of the appropriate Legislature Including Central Acts 14 of 1947 and 20 of 1946, they would be so governed. If the conditions of service are governed by Certified Standing Orders framed under Central Act 20 of 1946, they would continue to govern their conditions of service, but of those employees who are not covered by the definition of ‘workmen’ given in that Act, the conditions of service can be governed only by the Bihar Service Code, namely, the rules framed by the Governor under proviso to Article 309.

15. In S. Mohan Singh v. Patiala and East Punjab States Union, AIR 1954 Pepsu 136 it was held that the Managing Director of the Bank of Patiala which was held to be a commercial concern owned and controlled by the State Government held a civil post as that expression was used in Articles 310 and 311 of the Constitution. Reliance in that case was placed upon the decision of the Privy Council in R. Venkata Rao v. Secretary of State, AIR 1937 PC 31 where a Reader in the Government Press, Madras, was accepted to hold an office in the Civil Service of the Crown of India within the scope of Section 240(1) of the Government of India Act, 1935. In earlier days, ‘Civil Service’, reference to which was made in Section 96-B of the Government of India Act, 1919 and Section 240 of the Government of India Act 1935, generally meant the Civil Service of the Government servants performing the governmental functions. But in absence of any other provision in the present constitution, the same expression must be interpreted to take within its ambit the service of the persons serving under Government in its commercial activities.

16. In Kishan Chander Nayar v. The Chairman, Central Tractor Organisation, AIR 1962 SC 602 an employee of the Central Tractor Organisation, Ministry of Food and Agriculture, Government of India, was held to have been deprived of his constitutional right contained in Article 16(1) of the Constitution. Even though such a decision could be given on the footing that the Government servant is not of the kind governed by Article 309 of the Constitution, the emphasis can be laid with reference to this judgment that in activities like that of the Central Tractor Organisation the Government servant is treated on the same footing as other Government servants connected with the regal and sovereign functions of the State I see no reason as to why they should not be so treated for the purposes of Part XIV of the Constitution. The protection under Article 311 of the Constitution was held to be available to the Manager of the Government Reserve Foodgrains Depot at Pandavapura in the case of M. Narasimhachar v. State Of Mysore , AIR 1960 SC 247. These decisions would lend support to the view I have expressed above.

17. I may also in passing make reference to Article 828 in Halsbury's Laws of England, Simonds (3rd) Edition, Volume 7, at page 392, which would indicate that servants of Government are civil servants; certain restrictions are put on one class of civil servants but not on the excepted classes which include persons in industrial grades or in grades certified for the purpose as industrial grades.

18. In my opinion, therefore, if has got to be held that the petitioners and, as a matter of that, the employees of the Guraru Sugar Mills hold civil posts under the Government of Bihar. Service conditions of such employees who are covered by the Certified Standing Order framed in accordance with Central Act 20 of 1946 are to be governed according to those Standing Orders; in matters not covered by them they, and the other employees who are not covered by Standing Orders, are to be governed by the rules which have been framed by the Governor, namely the Bihar Service Code or which may be framed by him in exercise of the powers conferred on him by Article 309 of the Constitution All of them will also be entitled to protection under Article 311 of the Constitution. The application is accordingly allowed and the respondents are directed by a writ of mandamus to treat the employees of the Guraru Sugar Factory as persons holding civil posts liable to be governed by service conditions in accordance with this judgment. There will be no order as to cost.

S.N.P Singh, J.:— I agree.

19. Petition allowed.