B.P Singh, J.:— The petitioner, Bihar State Co-operative Marketing Union Limited (herein after referral to as ‘the Biscomaun’) has preferred this application under Articles 226 and 227 of the Constitution of India for quashing the order of the Presiding Officer, Labour Court, Patna, dated 18.11.1991 holding that the order terminating the services of respondent no. 3 was illegal, and that respondent no. 3 is entitled to reinstatement with full back wages. The aforesaid Presiding Officer, Labour Court is the prescribed authority under the Bihar Shops and Establishment Act.

2. The facts of the case are that Biscomaun is a Co-operative Society registered under the Bihar and Orissa Co-operative Societies Act. It was being managed by a Managing Committee till it was superseded by the Government of Bihar on 30th July 1988. The Government appointed an Administrator vesting in him all the powers of the Board of Directors. The affairs of Biscomaun had reached a stage when the Government of Bihar had no option but to supersede the Managing Committee of the Society and to appoint an Administrator. The Administrator so appointed observed large scale irregularities in the management of the Society, and he came across cases of irregular/invalid appointments made by the then Managing Committee which involved Biscomaun into heavy financial liability. Respondent no. 3 herein applied on 7.12.1987 for appointment as Development Officer/Range Officer. The application (Annexure-1) discloses that he based his claim for appointment on the ground that his father had rendered 40 years of service to Biscomaum, and that he being a son of a retired employee, had a preferential claim for appointment. The Chairman of the Society on 7.12.87 itself endorsed the application to the Managing Director. On 12.12.1987 the Advisor, Rehabilitation, Biscomaun, recommended for appointment of respondent no. 3 as a special case having regard to the service rendered by his father. On the recommendation of the Advisor, the Managing Director put up a note on 27.12.87 to the Chairman recommending the appointment of respondent no. 3 as a special case. He suggested that respondent no. 3 may be initially designated as Development Officer (Fertiliser), and may be appointed on probation for six months. The initial appointment cold be made purely on adhoc temporary basis in order to avoid complications, specially in view of the rehabilitation programme initiated by the Reserve Bank of India. Thereafter on 28.12.1987 respondent no. 3 was appointed as Development Officer, Fertiliser, on a purely ad-hoc basis and was put on probation for a period of six months. The letter of appointment (Annexure-2) was signed by the Managing Director. On the very next day respondent no. 3 submitted his joining report which was accepted. On 30th July, 1988, the Managing Committee of Biscomaun was superseded, and the Government of Bihar appointed an Administrator. All appointments made after 1st July, 1985 were reviewed, and it was then detected that respondent no. 3 had been appointed to the post of Development Officer, Fertiliser, which post did not exist. It was also found that his application had been dealt with in a special manner, and without by advertisement or notice, he had been appointed. There was no policy to appoint sons of retired employees on compassionate grounds, because appointment could be made on compassionate ground only where the bread earner of the family died in harness. A report was submitted by the Special Officer (Administration) to the Administrator of Biscomaun, and agreeing with the report, the Administrator by his order dated 11.10.1988 decided to terminate the services of respondent no. 3, as the same had been made illegally. An order was issued on 17.10.88/8.11.88 terminating the services of respondent no. 3 on the ground that his appointment was illegal and irregular. The order also mentions that he shall get one month's salary in lieu of one month's notice. The aforesaid order has been annexed as Annexure-4. The endorsement mentions the fact that a demand draft for Rs. 1904,60, bearing no. 0500241 dated 1.11.1988, being one month's salary, was enclosed therewith. Respondent no. 3 challenged the order (Annexure-4) terminating his services in an application filed before the Presiding Officer Labour Court-cum-Authority under the Bihar Shops and Establishment Act. In the application filed under section 26 of the Act respondent no. 3 contended that the order terminating his services was illegal and did not comply with the requirements of section 26(1) of the Bihar Shops and Establishment Act. It is the case of respondent no. 3 that before terminating his employment no opportunity was given to him to show cause. The order was, therefore, arbitrary. It was further his case that he had not been paid one month's salary in lieu of notice as mandatorily required by section 26(1) of the Act.

3. By the impugned order the Authority held that the petitioner was initially appointed for a period of six months on probation. Since he was appointed on 28.12.1987, on completion of that period he became a regular employee of Biscomaun. He therefore, accepted the case of respondent no. 3 that after successfully completing the period of probation he became a regular employee of Biscomaun. The order of termination was issued on 8.11.1988 much after he had become a regular employee of Biscomaun. He further held that the order passed by no. 3 Administrator was arbitrary, because no opportunity was given to respondent no. 3 of being heard in the matter before the order was passed. He further held that the appointment, when made, was legal since it was made by the authority competent to make the appointment. He also recorded a finding of fact that one month's pay in lieu of notice had not been paid to respondent no. 3, and hence the provisions of section 26 of the Act were not complied with. The order was, mere-fore, illegal. Having held that the order terminating his services was illegal, the Authority further held that the respondent no. 3 was entitled to reinstatement in service with full back wages.

4. It was contended before us on behalf of Biscomaun that the appointment of respondent no. 3 being illegal, the Administrator was fully justified in terminating the services of respondent no. 3. This was sought to be supported on two grounds. It was firstly contended that the appointment had been made in breach of the principle enshrined in Articles 14 and 16 of the Constitution of India, it was secondly contended that the appointment was made in contravention of the staff Regulations framed by Biscomaun. It was submitted that the appointment was given to respondent no. 3 more as favour. The mere fact that the father of respondent no. 3 was a retired employee of Biscomaun, did not confer upon respondent no. 3 a right of being appointed on that ground alone, it was submitted that in fact the rules only provide for appointment on compassionate ground in cases where an employee dies in harness. In the instant case the father of respondent no. 3 had retired from service after availing the benefit of three years extension of service. He was living on the date on which the respondent no. 3 was appointed. The appointment was, therefore, made on extraneous consideration. It was also contended that respondent no. 3 was appointed as a special case. The post did not exist, and in any event the post was neither advertised nor were names called for from the Employment Exchange, nor was any competitive test held. Respondent no. 3 approached the Chairman of Biscomaun and managed to get an appointment. It was, therefore, contended that the appointment was illegal being in breach of the principles enshrined in Articles 14 and 16 of the Constitution of India.

5. It is difficult to uphold the contention so urged on behalf of the petitioner. The question of invoking Articles 14 and 16 of the Constitution of India will arise only if it is held that Biscomaun is ‘State’ within the meaning of Article 12 of the Constitution of India. So far as this Court is concerned, the question is not res integra, and is concluded by a binding precedent of this Court in the case of Harender Narain Banker v. State of Bihar (1985 P.L.J.R 1078). In that case the question squarely arose for consideration by the Court whether the Bihar State Co-operative Marketing Union Ltd., a society registered under the Bihar and Orissa Co-operative Societies Act, 1935 is in essence, an instrumentality or agency of the State and, consequently, amenable to the writ jurisdiction of the High Court. After exhaustive consideration of the case law on the subject a Division Bench of this Court held that Biscomaun is in no way an instrumentality or agency of the State. It is a Co-operative Society registered under the Bihar and Orissa Co-operative Societies Act, 1935, and it followed inevitably that it was not amenable to writ jurisdiction under Article 226 of the Constitution of India.

6. In view of the aforesaid decision of this Court the first limb of the argument must be rejected, since the question of applicability of Articles 14 and 16 of the Constitution will not apply in the instant case. At the time when the appointment was made, Biscomaun was a registered Co-operative Society being managed by its Managing Committee consisting of Board of Directors, Managing Director and the Chairman and was, therefore, not State within the meaning of Article 12 of the Constitution of India. Its action, therefore, could not be tested on the touchstone of Art-tiles 14 and 16 of the Constitution of India. No doubt, after appointment of an Administrator, the actions of the Administrator can be said to be the actions of the State and his actions must pass the test of fairness and reasonableness.

7. The second limb of the argument is that since the appointment was made contrary to the staff Regulations, the appointment must be held to be illegal. A reference is made to Section E of the Staff Regulations of Biscomaun, and under the heading ‘Appointment’ Regulation (b) provides as hereunder.

“(b) In case of direct appointment, the Union shall invite applications through advertisement in newspapers and shall send requisition to the Employment Exchange for sending names of suitable and qualified persons. The selection shall be made by a Cemmittee consisting of not less than three persons. The Registrar, Co-operative Societies, Bihar, shall be requested to be a member of the Committee or to depute a representative in case of appointment to the post of First and Second Grades. The Committee shall hold written test and interview in case of appointment to the Second and third grades, while appointment to the Fourth grade may be made after interview. In case of appointment to Grade-I the Board shall decide the mode of selection. As a result of written test and/or interview a panel shall be prepared strictly on merit. The Union shall require the candidates to file applications, with such particulars as may be prescribed in the application form, which shall include names of two persons of high status and integrity, not being relatives of the candidate, to whom a reference could be made regarding the candidate's character and antecedents.”

8. It cannot be disputed that Biscomaun is bound by its Regulations and, therefore, recruitment by direct appointment should have been made only after applications were invited through newspapers and after requiring the Employment Exchange to send names of suitable and qualified persons. The selection was to be made in the manner prescribed by the Regulation. In the instant case the procedure prescribed by the Regulation was not followed when respondent no. 3 was appointed. The evidence of respondent no. 3 also supports this conclusion. Therefore, there can be no difficulty in holding that the appointment was illegal, being in breach of the Regulation. That, however, does not bring the dispute to an end, because if an illegal appointment was sought to be terminated, the Illegal nature of the appointment only provided a justification for the action so that it could be said that in terms of section 26 of the Bihar Shops and Establishment Act, the action of the employer terminating the employment was based on reasonable cause. The action could not be characterized as arbitrary or without any reasonable cause.

9. In coming to the conclusion that the termination of employment of respondent no. 3 was not for a reasonable cause, the prescribed Authority attached considerable importance to the fact that the principles of natural justice had not been complied with by affording respondent no. 3 an opportunity of being heard before his services were terminated. As observed earlier, Biscomaun is not “State” within the meaning of Article 12 of the Constitution of India. However, it is equally well-settled that an Administrator appointed under the Bihar and Orissa Co-operative Societies Act, who is a Government servant and exercises statutory authority must act fairly and reasonably. His actions have to be judged in the same manner as State action, but it must not be forgotten that he still acts on behalf of a Society which is not “State”. The twin tests of reasonableness and fairness must, therefore, be applied having regard to the provisions of the statute which are applicable-to the case. Even if the action of the Administrator can be assailed in a writ petition before this Court, in judging the reasonableness and fairness of his action, one cannot disregard the statute, namely, the Bihar Shops and Establishment Act particularly section 26 thereof which applies to the case of termination of employment by the Society. Section 26(1) and the first proviso are relevant, and they read as follows:—

“Notice of the dismissal or discharge—(1) No employer shall dismiss or discharge or otherwise terminate the employment of any employee who has been in his employment continuously for a period of not less than six months, except for a reasonable cause and after giving such employee at least one month's notice or one month's wages in lieu of such notice:

Provided that such notice shall not be necessary where the services of such employee are dispensed with on a charge of such misconduct as may be prescribed by the State Government, supported by satisfactory evidence recorded at an enquiry held for the purpose:”

10. The Act, therefore, makes a distinction between a case of dismissal on a charge of misconduct and a case where the employment is terminated for a reasonable cause. In the case of dismissal for misconduct, the Authority is required to be satisfied that the order terminating the employment on a charge of misconduct is supported by satisfactory evidence recorded at an enquiry held for the purpose. This obviously brings into play the audi alteram partem rule. Such a requirement is not insisted upon where the termination is not on a charge of misconduct. In such cases where a person has been in employment continuously for a period of not less than six months, it has to be established that the termination of the employment is for a reasonable cause. Additionally, the employer is required to give such an employee at least one month's notice or one month's wages in lieu of notice. The action of the Administrator, therefore, must be tested for its fairness and reasonableness by reference to the provisions of section 26(1) of the Act which are applicable to the facts of the case. There is no requirement that the concerned employee must be afforded an opportunity of being heard before an order of termination is passed, except in a case where his services are dispensed with on a charge of misconduct. It would, therefore, not be fair to import an additional condition not envisaged by the Act, and insist that the rule of audi alterem partem will also apply to a case where the employer is not ‘State’ and the termination of employment is sought to be justified for a reasonable cause, on the ground of the appointment being contrary to law and the rules, and not on the ground of misconduct. [(See 1990 (4) SCC. Page 35]. Reliance placed by the authority upon the judgment reported in A.I.R 1991 (S.C) 309 is misplaced, because that was a case where the employer was the State of Bihar and their Lordships were not considering a case of termination of employment by a society which was not ‘State’ and whose actions had to be justified in the light of the provisions of a statute, such as the Bihar Shops and Establishment Act, which permits termination of employment for a reasonable cause in cases where the termination is not on the ground of misconduct. The statute requires that the reasonable cause must be established before the prescribed Authority, and additionally provides for grant of monetary compensation in appropriate cases. It cannot be lost sight of that though the actions of the Administrator are amenable to writ jurisdiction, he all the same exercises powers on behalf of Biscomaun, which is not “State” as held by the Court. I have, therefore, no doubt that the services of respondent no. 3 were terminated for a reasonable cause, and the action of the Administrator in doing so was neither unreasonable nor unfair.

11. The Act however, requires that before an order of termination can be upheld, it must not only be shown that the order was based on reasonable ground, but also that the concerned employee was given the mouth's notice or one month's wages in lieu of notice. The question as to whether respondent no. 3 was in fact paid one month's wages in lieu of notice, therefore, acquires significance. I shall consider that question hereafter.

12. The order of termination (Annexure-4) bears the date 17-10-88/8.11.88. It can, therefore, be safely assumed that the order was not issued before 8.11.88 The endorsement mentions that a demand draft for Rs. 1904,60, being one month's salary was enclosed with the order. The case of respondent no. 3 is that he was not paid one month's wages in lieu of notice. His specific case was that what he had been paid represented only the arrears of salary. The Authority, therefore, has rightly observed that the onus was upon the petitioner to prove that one month's wages in lieu of notice was paid to respondent no. 3 when the order of termination was passed. The authority has considered the evidence of respondent no. 3, and has noticed his specific plea in paragraph no. 4 of his cross-examination. He admitted that whatever amount was lastly paid to him was his arrears of salary and not one month's wages in lieu of notice. On the other hand, the petitioner examined only one witness, namely, O.P.W 1, Md. Suleman. He produced a copy of the salary sheet marked Ext. A. This could hardly be of any help to the petitioner, because Ext. A only showed that an amount of Rs. 232/- was paid after deduction of festival advance amounting to Rs. 750/-. This obviously related to the pay bill for the month of October 1988. According to O.P.W 1 the wages in lieu of notice was sent by demand draft on 8.11.1988 No material was produced to substantiate the case that one month's wages in lieu of notice was paid to respondent no. 3 by demand draft despatched on 8.11.1988 The petitioner was bound to prove that one month's wages in lieu of notice had been paid to the employee whose services had been terminated. If the amount had been paid as claimed by O.P.W 1, it would not have been difficult for the petitioner to produce evidence before the Authority to prove that fact. It appears that no effort was made to prove that fact. The deposition of O.P.W 1 has been annexed as Annexure-B to the counter affidavit filed on behalf of respondent no. 3. I have carefully gone through the deposition of the witness and there is nothing in his deposition to prove the fact that respondent no. 3 had been paid one months's wages in lieu of notice by demand draft Apart from merely stating this fact, the witness did not produce any documentary evidence, which the should have produced, in support of the claim. In the case of demand draft further particulars should have been given as to the mode of service. The receipt, if any, could have been produced. Even documentary evidence from the Bank could be produced for proving the fact that an amount representing one month's wages was in fact paid to respondent no. 3. There is complete lack of evidence on this aspect of the matter and, therefore, I cannot find fault with the finding of the Authority that the petitioner had failed to prove that one month's pay in lieu of notice was paid to respondent no. 3 at the time of termination of his employment. It must, therefore, be held that though there was reasonable cause for terminating the employment of respondent no. 3, the order of termination of employment was bad in view of non-compliance with the requirement of section 26(1) of the Bihar Shops and Establishment Act which additionally requires the employer to give to the employee, whose services are terminated, one month's wages in lieu of notice.

13. I, therefore, hold that the Authority under the Act was not justified in holding that the termination of the employment of respondent no. 3 was not for a reasonable cause, but the finding of fact recorded by the Authority, that one months wages in lieu of notice had not been paid to respondent no. 3, is justified. The question then arises as to what relief should be granted to respondent no. 3. Since the Authority under the Act came to the conclusion that the termination of the employment was not for a reasonable cause, and in breach of the provisions of section 26(1) of the Act, he was justified in ordering reinstatement with all other consequential benefits. However, since I have held that the employment of respondent no. 3 had been terminated for a reasonable cause, the matter requires to be reconsidered by the Authority. Sub-section 5(b) of section 26 of the Act confers power on the prescribed Authority to give relief to the employee by way of reinstatement or money compensation or both. The facts of the case disclose that respondent no. 3 had worked for about ten months only, and his appointment was made contrary to the Regulation, more by way of a personal favour. The termination of he employment was bonafide and for a reasonable cause, though one of the requirements of section 26(1) of the Act was not complied with, in-as-much as one month's wages in lieu of notice was not paid to respondent no. 3. The question that still arises for consideration is as to whether in the facts and circumstances of the case the award of money compensation may not be fair and appropriate. I wish to express no opinion on this question, because it is for the prescribed Authority, having regard to all the facts and circumstances of the case to exercise its jurisdiction under sub-section (5)(b) of section 26 of the Act. If it comes to the conclusion that money compensation may be fair and appropriate in the facts and circumstances of the case, it is for the prescribed Authority to calculate and award the aforesaid compensation to respondent no. 3. In these circumstances, I am of the opinion that though the termination of the employment of respondent no. 3 is in breach of the provisions of section 26(1) of the Act, since the termination was for a reasonable cause, the matter as to whether money compensation may not be fair and appropriate in the facts and circumstances of the case requires to be considered by the Authority. I, therefore, remit this matter to the Presiding Officer, Labour Court-cum-Authority under the Act to consider what relief should be granted to respondent no. 3 in the facts and circumstances of the case.

14. This writ application is allowed to the extent indicated above. There shall be no order as to costs.

15. S.K Chattopadhyaya, J.:—I agree.