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Brahma Dayal Mehta v. Sr. Personnel Executive Indian Drugs And Pharmaceuticals Ltd. And Others
Structured Summary of the Opinion (S.K. Dhaon, J.)
Factual and Procedural Background
The Indian Drugs and Pharmaceuticals Limited (I.D.P.L.), a Government of India undertaking incorporated under the Companies Act, 1956 (whose entire share capital is held by the Central Government), operates a unit at Virbhadra (Rishikesh), District Dehradun, which runs an Intermediate College (the College). The petitioner was the Principal of the College until the events in dispute. The petitioner was born on 1 October 1930.
On or before 28 April 1988 the Senior Personnel Executive of I.D.P.L. communicated to the petitioner that he would retire from service on attaining the age of superannuation on 30 September 1988. The petitioner challenged the legality of that communication by filing the present writ petition under Article 226 of the Constitution.
Affidavits have been exchanged between the parties. Although the petition had not been formally admitted at the time, the parties' counsel consented to hear the petition and the court proceeded to finally dispose of it.
Relevant documentary background on record includes:
- The College is recognised under section 2(d) of the U.P. Intermediate Education Act, 1921 (the Act) for preparation of Board examinations.
- There is an approved scheme of administration prepared under the Act; the scheme governs terms and conditions of service of the Principal and provides that terms under the Act and Regulations prevail in the event of conflict.
- The petitioner was appointed Principal by communication dated 1 January 1972, which stated that service conditions would be in accordance with the Education (Amendment) Act, 1958 of U.P. and specified terms and conditions.
- The College does not receive grant-in-aid from the State Government.
Legal Issues Presented
- Whether the petitioner, as Principal of a recognised institution run in accordance with the scheme and Regulations under the Act (notably Regulation 21), is entitled to continue in service until the age of 60 years.
- Whether Section 16-G of the U.P. Intermediate Education Act, 1921 applies to employees of the College run by I.D.P.L., or whether an exemption in Section 16-H operates to exclude those employees because the College is maintained by the Central Government or an instrumentality thereof.
- Whether the College run and financed by I.D.P.L. is to be regarded as being "maintained" by the Central Government within the meaning of Section 16-H.
- Whether the petitioner is precluded from seeking relief under Article 226 (on the ground that he is attempting merely to enforce a contractual obligation) or is entitled to invoke public-law remedies based on statutory rights under the Act and Regulations.
Arguments of the Parties
Petitioner's Arguments (as represented in the opinion)
- Regulation 21 (of the Regulations made under the Act) confers a legal right on the petitioner to continue as Principal until he attains the age of 60 years.
- Section 16-G gives statutory recognition to certain service conditions and renders inconsistent contractual provisions void to the extent of repugnancy; therefore the petitioner can enforce his statutory right by writ.
- An interpretation of Section 16-H that would render sub-section (2) redundant should be avoided; the legislature deliberately distinguished between Government and local bodies/instrumentalities when drafting Section 16-H.
Respondent / I.D.P.L.'s Arguments (as represented in the opinion)
- I.D.P.L. contended that Section 16-G does not apply to employees of the College because Section 16-H exempts recognised institutions "maintained by the Central Government" (and the College is maintained by I.D.P.L., a Central Government undertaking).
- Sri B.D. Agarwal (for respondents) contended the College should be deemed to be maintained by the Central Government for the purposes of subsection (1) of Section 16-H.
- It was further argued that the petitioner was attempting to enforce a contractual obligation and thus could not invoke Article 226 to enforce what was essentially a contractual right.
- A faint submission was made that the petitioner was estopped from asserting the right because he had accepted higher emoluments and advantages in the service.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Western Coal Fields Limited v. Special Area Development Authority, Colaba (1982 1 SCC 125) | Even where the entire share capital of a company is subscribed by the Government of India, the company retains a separate corporate personality; ownership of shares by the Government does not mean the company itself is owned by the Government. | The court used this authority to support the proposition that I.D.P.L., although wholly Government-owned, is a separate corporate entity and that assets and operations vested in the company do not automatically make the College an institution "maintained by the Central Government" within Section 16-H. |
| Heavy Engineering Mazdoor Union v. State of Bihar (1969 1 SCC 765) | Reinforces the principle that a company incorporated under the Companies Act with entire shareholding by the Central Government is a separate juristic person and does not carry on industry under the authority of the Central Government merely by virtue of shareholding. | The court cited this decision to underline the separate corporate existence of a Government company (such as I.D.P.L.) and to show that central ownership of shares does not automatically render activities of the company as governmental acts for the purpose of statutory exemptions. |
| C.V. Raman v. Management of Bank of India (1988 3 SCC 105) | Holds that nationalised banks and the State Bank of India may be regarded as establishments "under the Central Government" for the purpose of statutory exemptions where there is deep and pervasive control by the Central Government. | The court considered this authority as demonstrating that where deep and pervasive control exists the characterisation as "under the Central Government" may follow; but the court distinguished the present facts, observing that even if I.D.P.L. were under deep and pervasive control, it would not automatically follow that the College run and financed by I.D.P.L. is maintained by the Central Government for Section 16-H purposes. |
| Ajay Hasia (passage quoted in C.V. Raman; cited in text) | Passage emphasizes that despite corporate form, reality of pervasive government control may make a corporation an instrumentality through which government acts. | The court noted the passage (as discussed in C.V. Raman) but applied it cautiously — accepting that pervasive control can alter characterisation, yet holding that even pervasive control over I.D.P.L. would not, on statutory construction of Section 16-H, automatically bring the College within the exemption. |
Court's Reasoning and Analysis
The court's analysis proceeded in a series of interrelated steps grounded in statutory construction, the nature of the corporate form and the statutory scheme governing recognised institutions:
-
Statutory framework and primary question:
Section 16-G of the Act provides that persons employed in a recognised institution are governed by conditions prescribed by Regulations and that any agreement inconsistent with the Act or Regulations is void. Regulation 21 (a Regulation under the Act) governs retirement age for the Principal. The short question posed by the court was whether the petitioner is entitled to continue until 60 years of age under Regulation 21, as opposed to the age of retirement fixed under I.D.P.L.'s Rules (58 years).
-
Respondent's reliance on Section 16-H:
I.D.P.L. argued Section 16-H exempts recognised institutions "maintained by the Central Government" from the operation of Section 16-G, thereby rendering Section 16-G inapplicable to employees of the College. The court examined the text of Section 16-H, including its two sub-sections: subsection (1) exempts institutions maintained by State or Central Government; subsection (2) allows the State Government to declare exemptions in the case of institutions maintained by a local body.
-
Construction of Section 16-H and legislative intent:
The court placed weight on subsection (2) as indicating the legislature's intention to distinguish between direct government maintenance and institutions maintained by instrumentalities or local bodies. The existence of subsection (2) — permitting different treatment for institutions maintained by local bodies — shows the legislature contemplated a distinction between an institution maintained directly by a government and an institution maintained by another authority.
-
Meaning of "maintained":
The court interpreted "maintained" to mean "to pay or furnish the means of keeping up" — i.e., the duty to defray all expenses of an institution. While financial control is an important incident of maintenance, the ideal under Section 16-H is direct maintenance by the Central or State Government; there must be a rational relationship of direct maintenance.
-
Effect of corporate personality (application of precedents):
Relying on Western Coal Fields and Heavy Engineering Mazdoor Union, the court observed that a company incorporated under the Companies Act and wholly owned (in share capital) by the Central Government remains a distinct juristic entity. The mere fact that the Central Government subscribes the share capital and that the Government exerts control over the company does not by itself convert the company's institutions into institutions maintained by the Central Government for the purposes of Section 16-H.
-
Distinguishing C.V. Raman:
The court acknowledged C.V. Raman, which held nationalised banks could be considered establishments "under the Central Government" because of deep and pervasive control. However, the court distinguished that principle: even assuming I.D.P.L. is under deep and pervasive central control, it does not automatically follow that the College run and financed by I.D.P.L. is maintained by the Central Government for Section 16-H. The statutory text and structure (notably subsection (2)) indicate that instrumentalities of the Government are not to be equated with the Government for the purposes of the exemption.
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Availability of writ jurisdiction and contractual contention:
The court rejected the contention that the petitioner was merely enforcing a contractual obligation and hence could not seek relief under Article 226. The College is a recognised institution run under the compulsory scheme of administration prepared and approved under Section 16-A. Section 16-G confers statutory service conditions (and nullifies inconsistent contractual terms). Regulation 21 thus confers a legal right enforceable by writ; consequently Article 226 is available.
-
Rejection of estoppel argument:
The court rejected the submission that the petitioner was estopped from asserting his statutory rights because he had accepted higher emoluments; the Act and Regulations prescribe minimum salaries and allow institutions to pay higher emoluments but do not permit service conditions that detrimentally conflict with statutory guarantees.
Holding and Implications
Holding:
The petition is allowed. The communication dated 28 April 1988 from the Senior Personnel Executive, I.D.P.L. (respondent No.1) is quashed. The respondents are directed not to retire the petitioner from service as Principal of I.D.P.L. Inter College, Virbhadra, until the petitioner attains the age of 60 years. The petitioner is entitled to costs.
Implications:
- Direct effect: The immediate consequence is that the petitioner retains his post as Principal until age 60, and the specific retirement communication is invalidated; he is awarded costs.
- On statutory interpretation: The court construed Section 16-H to mean that exemption from Section 16-G for institutions "maintained by" the Central or State Government contemplates direct maintenance by the Government itself; instrumentalities or companies owned by the Government do not automatically qualify as being "maintained by the Central Government" for that purpose.
- On remedies: The court confirmed that statutory rights created by the Act and Regulations (such as Regulation 21) are enforceable by writ under Article 226, and inconsistent contractual provisions are void to the extent of repugnancy under Section 16-G.
- Broader precedent: The opinion applies existing precedents (as catalogued above) to the statutory construction issue; the court did not assert the creation of a novel legal doctrine beyond its application of principles of statutory construction and the established authorities cited.
Note: This summary strictly reflects only the content and reasoning contained in the provided opinion and does not add facts or infer matters not expressly stated in that text.
S.K Dhaon, J.:— The Indian Drugs and Pharmaceuticals Limited (hereinafter referred to as the I.D.P.L) has a unit situated in Virbhadra (Rishikesh) District Dehradun. I.D.P.L runs an Intermediate College Virbhadra (hereinafter referred to as the College). On or before 28th April, 1988, the petitioner was the Principal of the College. His date of birth is 1st October, 1930. On 28th April, 1988, the Senior Personnel Executive of the I.D.P.L informed the petitioner that he will retire from the service of the Company on attaining the age of superannuation on 30th September, 1988. The legality of this communication is being impugned in the present writ petition.
2. Affidavits have been exchanged between the parties, although the petition has not been formally admitted as yet. However, with the consent of the counsel for the parties we heard this petition with a view to finally dispose of the same. We are, therefore, doing so. I.D.P.L is a Government of India undertaking incorporated tinder the Companies Act, 1956. The Central Government has hundred percept shares in it. The Company has various units all over the country and one such unit is situated at Virbhadra (Rishikesh). The entire control over the Company is of the Ministry of Companies, Government of India and the entire investment is of the Central Government. The College is recognised under section 2 d) of the U.P Intermediate Education Act, 1921 (hereinafter referred to as the Act) for the purposes of preparing candidates to the examinations of the Board. The State Government does not give any grant-in-aid to the College. There is a duly approved schedule of administration prepared under the provisions of the Act and the Regulations made thereunder and the College is run in accordance with the said scheme.
3. Annexure I to the writ petition is a photostat copy of the communication dated 17th June, 1987, of the Regional Deputy Director of Education, Garhwal Region, to the Secretary/Principal of the College wherein it is mentioned that the Deputy Director has accorded approval to the scheme of administration and a copy of the scheme is being forwarded. The scheme is before us. We are satisfied that the same is in accordance with the provisions of the Act and he Regulations framed thereunder A perusal of the various clauses of the scheme of administration makes it clear that the terms and conditions of the service of the Principal of the College shall be those as laid down under the various provisions of the Act and the Regulations framed thereunder. It is also provided that in the event of conflict between the provisions of the Act and the Regulations framed thereunder or any other condition of service provided for elsewhere, the terms as laid down under the Act and the Regulations will operate. Annexure II to the writ petition is a photostat copy of the communication dated 1st January, 1972, issued to the petitioner whereby he was informed that he had been appointed as Principal. It was specifically stated therein.
“Your service conditions will be in accordance with the provisions of Education (Amendment) Act, 1958 of the Government of U.P and on the following terms and conditions:”
4. There are other documents on record to indicate that the petitioner was duly appointed as Principal on the recommendation of the Selection Committee as envisaged by the Act and the Regulations framed thereunder.
5. It is not in dispute that Regulation 21 as contained in Chapter III of the Regulations framed under the Act provides that the age of retirement of a Principal is ??? years. It is also not in dispute that the age of retirement of an employee of IDPL as fixed under the relevant Rules of the Company is 58 years. The short question is whether the petitioner is entitled to continue as a Principal of the College, on the basis of Regulation 21, till he attains the age of 60 years.
6. Section 16-G of the Act, inter alia, provides that every person employed in a recognised institution shall be governed by such conditions of service as may be prescribed by Regulations and any agreement between the management and such employee, in so far as it is inconsistent with the provisions of the Act or with the Regulations, shall be void. It is an admitted position that the College is a recognised institution within the meaning of the Act. Realising the rigor of the provisions as contained in Section 16G, the only argument advanced on behalf of I.D.P.L is that Section 16-G will not apply to the employees of the College. This submission is based entirely on the provisions of Section 16-H of the Act. They read:—
“16-H. Exemption of certain classes of Institutions from the operation of certain Sections.—(1) The provisions of Section 16-A, 16-B, 16-C, sub-section (2) to sub-section (13) of Section 16-D and Sections 16-E, 16-F and 16-G shall not apply to recognised institutions maintained by the State Government or the Central Government.
(2) In the case of recognised institutions maintained by a local body, the State Government may declare that all or any of the provisions referred to in sub-section (1) shall not apply or shall apply subject to such alterations, modifications or additions as it may make and the provisions, if any, so made applicable, shall have effect notwithstanding any thing inconsistent therewith contained in any other law for the time being in force.”
7. Learned counsel for the parties have made their submissions on the footing that I.D.P.L is an Instrumentality of the state for the purposes of Part III of the Constitution. We, therefore, do not consider it necessary to record any finding as to whether I.D.P.L is performing any governmental function. We are, therefore, left with the limited question as to whether the College is maintained by the Central Government.
8. Sri K.N Tripathi, learned counsel for the petitioner, has submitted that if the Legislature intended to exempt a recognised institution maintained by the instrumentality of either the Central Government or the State Government from the purview of Section 16-G, it would not have enacted sub-section (2). He further submits that an interpretation which renders a provision superfluous or redundant should be eschewed. There si force in this submission. Sub-section (1) of Section 16-G, as it now stand, had substantially the same contents when it was introduced initiall into the Act by U.P Act No. 35 of 1958 By that Act Section 16-H was also inserted. Article 12 of the Constitution provides and always provided that “the State” includes, inter alia, all local or other authorities within the territory of India or within the control of the Government of India,. Article ??? did not contain the definition of local authority. However, Article 367 mandates, inter alia, that unless the context otherwise requires the General Clauses, Act, 1897 shall apply for the interpretatio of the Constitution. In sub-section (31) of Section 3 of the General Clauses Act, 1897 “Local authority” is defined to mean “a municipal committee, a district board…………or other authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund”. The Legislature of Uttar Pradesh was aware of Article 12. It was also aware of the definition of local authority as contained in the General Clauses Act, 1897 Yet in sub-section (2) of Section 16 it empowered the state Government to exempt a recognised institution maintained by a local body from the operation of all or any of the provisions as contained in sub-section (1) of Section 16-H. It, therefore specifically provided for the exemption of an instrumentality of a state in sub-section (2). It is thus clear that for the purposes of Section 16-H it drew a distinction between the State Government and its instrumentality and between the Central Government and its instrumentality. In its wisdom, it did not exempt a recognised institution maintained either by the instrumentality of the State or of the Central Government from the operation of Section 16-G and other provisions referred to in sub-section (1) of Section 16-H. It did so designedly and purposely. Therefore, it is evident that an instrumentality, either of the State Government or of the Central Government, cannot assert that a recognised institution maintained by it is exempt from the provisions of Section 16-G and the other provisions referred to in sub-section (1) of Section 16-H. The consequence is that the provisions of Section 16-H will apply to a recognised institution maintained by an instrumentality of the Central Government.
9. Sri B.D Agarwal contends that the College will be deemed to be maintained by Central Government for the purposes of sub-section (1) of Section 16-H. The word “maintained” has not been defined in the Statute under consideration. In the Shorter Oxford English Dictionary the following meaning, among others, is given to the word “maintained”
“to keep in being: to preserve unimpaired, to pay or furnish the means of keeping up of; to keep supplied or equipped; to keep in repair”.
10. In the context and setting of Section 16-H the word “maintained”, in our opinion, should be given the meaning: to pay or furnish the means of keeping up of. Therefore, there can be no difficulty in taking the view that the duty to maintain an institution shall include the duty of defraying all the expenses of maintaining the institution. Again, maintenance of an institution in Section 1-H is not confined to ??? control alone. Financial control may be one of the incidents of the maintenance of an institution, but there is not the end all in Section 16-H the ideal appears to be that an institution should be directly maintained by the Central Government or the State Government. There should be a rational relationship between the State Government or the Central Government and the institution.
11. In Section 2(f) of the Act “State Government” is defined to mean “The Government of Uttar Pradesh”. The same definition is to be found in Section 4(42-C) of the U.P General Clauses Act. Therefore, so far as recognised institutions maintained by the State Government are concerned, they shall, for the purposes of Section 16-H be deemed to be recognised institutions maintained by the Government of Uttar Pradesh. If an institution is to be maintained by the Government of Uttar Pradesh, it is implicit that the maintenance of such an institution by the instrumentality of the State Government stands completely excluded. The expression “Central Government” is not defined in the Act. The definition of the Genetral Clauses Act is not helpful at all to resolve the controversy. However, to us, it appears that the Legislature of Uttar Pradesh in Section 16-H has used the expression “Central Government” in the same sense in which it uses the expression “State Government”. Therefore, the Legislature meant to convey the idea that the recognised institutions should be maintained by the Government of India so as to bring them within the ambit of Section 16-H. In this behalf, we find a clue in Article 12 of the Constitution. There the expression “Government of India” is used twice. In Article 77(3) also we find that the expression “Government of India” has been used. Therefore, in our opinion, it will be logical to take the view that in Section 16-H the Legislature intended that the recognised institutions should be maintained by the Government of India.
12. In Western Coal Fields Limited v. Special Area Development Authority Colaba . 1982 1 SCC 125. it is held that even though the entire share capital of Companies has been subscribed by the Government of India, it cannot be predicated that companies themselves are owned by the Government of India. The Companies which are incorporated under the Companies Act, have a corporate personality of their own, distinct from the Government of India. The lands and buildings are vested in and owned by the Companies; the Government of India only owns the share capital. In this case reference is made, among others, to the case of Heavy Engineering Mazdoor Union v. State of Bihar . 1969 1 SCC 765. In this case it is held that a Company incorporated under the Companies Act and the entire share holding of which is contributed by the Central Government (a Government Campany) does not carry on an industry under the authority of the Central Government within the meaning of Section 2(a) of the Industrial Disputes Act, 1947. It is emphasised that an incorporated company has a separate existence and law recognises it as a jurist person separatey and distinct from its members. The mere fact that the entire share capital of the Company is contributed by the Central Government and the fact that all its shares are held by the President and certain Officers of the Central Government do not make any difference to that position.
13. Strong reliance is placed by Sri B.D Agarwal on the decision of the Supreme Court in the case of C.V Raman v. Management of Bank of India . 1988 3 SCC 105. In this case the controversy is whether the Nationalised Banks and the State Bank of India are establishments under the Central Government witnin the meaning of Kerala shops Acts and the Andhra Pradesh Shops Act. Section 4 of the said Acts provided for exemptions of certain persons and establishments. Clause (c), which has been interpreted in this case, reads:
“(c) establishments under the Central and State Governments, local authorities, the Reserve Bank of India, a railway administration…………………………and cantoment authorities”.
14. It has been held that for the purposes of the exemption under section 4 the State Bank and the Nationalised Banks are establishments under the Central Government Sri Agarwal laid considerable emphasis on paragraph 11. In this paragraph their Lordships are commenting on a portion of a passage in Ajay Hasia's case. This portion reads:—
“It is undoubtedly true that the corporation is a distinct juristic entity with a corporate structure of its own and it carries on its functions on business princples with a certain amount of autonomy which is necessary as well as useful from the point of view of effective business management, but behind the formal ownership which is cast in the corporate mould, the reality is very much the deeply pervasive presence of the government. It is really the government which acts through the instrumentality or agency of the corporation and the juristic veil of corporate personality worn for the purpose of convenience of management and administration cannot be allowed to obliterate the true nature of the reality behind which is the government.”
15. Their Lordships have taken the view that even though the State Bank of India and the nationalised banks may not be owned as such by the Central Government and its employees may not be the employees of the Central Government they certainly will fall within the purview of the expression “punder the Central Government”, in view of the existence of deep and pervasive control of the Central Government over these banks.
16. Assuming that the Central Government is in deep and pervasive control over I.D.P.L and assuming I.D.P.L is under the Central Government, it does not follow that the College, which is run and financed by the I.D.P.L is maintained by the Central Government of India. On the reasoning of the Supreme Court, as contained in paragraph 12, any local body in this State will fall under the expression “under the State Government”. Yet in sub-section (2) of Section ???-H such a local body has been given a different treatment from the State Government as in sub-section (1) of Section 16-H. In sub-section (1) of-Section 16-H, as we have already indicated, an exemption to an institution maintained by the State Government is automatic and direct; whereas in sub-section (2) the exemption to an institution maintained by a local body is not automatic. It is dependent upon the declaration of the State Government. We, therefore, reiterate that even if I.D.P.L is under the Central Government, the College run by it will not be considered to be maintained by the Central Government for the purposes of Section 6-H.
17. In the last resort, Sri Agarwal contends that the petitioner is, in fact, trying to enforce a contractual obligation by means of this writ petition and, therefore, Article 226 is not available to him. This argument is to be rejected as stated. The College is a recognised institution under the Statute. It is run in accordance with the scheme of administration which has got to be prepared and approved compulsorily as enjoined by Section 16-A of the Act and the other provisions. Section 16-G of the Act gives statutory recognition to certain service conditions. Regulations framed under the Act, particularly Regulation 21, confer a legal right upon the petitioner to continue in the college till he attains the age of 60 years. Section 16-G also takes care of any provision in a contract which runs contrary to the statutory terms of contract as laid down in the provisions of the Act and the Regulations. It makes it clear that any terms of contract inconsistent with the terms of contract as provided for in the Statute will be void to the extent of repugnancy. Correspondingly, the Committee of Management of an institution is enjoined to act in accordance with the Statute. Therefore, there can be no escape from the conclusion that an aggrieved employee, including a Principal, will be fully entitled to invoke the provisions of Article 226 of the Constitution.
18. A faint submission has been made that the petitioner having taken advantage of the higher emoluments given to him and the other advantages of the service, which are not available to the Head of the institutions of other recognised Colleges, is estopped from asserting his legal right to continue in employment till he attains the age of 60 years. This submission does not impress us. Provisions of the Act and the Regulations framed thereunder stipulate the payment of minimum salary They also stipulate certain facilities which must be provided by an institution. They do not prohibit an institution from paying to its employees, including its Principal, higher salary or better emoluments. They also do not prohibit any institution from providing for better service conditions. However, any service condition, which may act to the detriment of an employee and which may be in conflict with the statutory terms and conditions of service, must give way to the conditions which have been guaranteed by the Statute.
19. This petition succeeds and is allowed The communication dated 28th April, 1988 of the Senior Personal Executive I.D.P.L, the respondent No. 1, is quashed The respondents are commanded not to retire the petitioner from service as Principal of I.D.P.L Inter College Virbhadra till he (the petitioner) attains the age of 60 years. The petitioner shall be entitled to his costs.
20. Petition Allowed.
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