K.N Singh and Gopinath, JJ.:— By means of this petition under Article 226 of the Constitution petitioner has claimed relief for issue of writ of certiorari quashing the order dated 18.10.82 terminating the petitioner's services and restraining the respondents from interfering with his functioning as Director (Technical) National Textile Corporation (U.P) Ltd. Kanpur.
2. In July, 1976, the petitioner was appointed as Production Manager of Patlad Textile Mills, Patlad (Gujrat) Ltd. a unit of National Textile Corporation. The petitioner was, later on, appointed General Manager of Raj Nagar Textile Mills in Gujrat. In November, 1980, the petitioner was transferred to National Textile Corporation West Bengal (WBAB & Co) Calcutta. In May, 1982, the petitioner was transferred to National Corporation (U.P) and appointed as Director (Technical N.T.C (U.P). Kanpur. While the petitioner was posted at Calcutta, questions were raised in the Parliament that the petitioner was a dismissed employee of the State Government and even then he had been employed as Director of one of the subsidiary, companies of the National Textile Corporation on the basis of forged documents. On a direction issued by the Central Government, the N.T.C Ltd. New Delhi directed the Chairman-Managing Director, N.T.C (WBAO) Ltd. Calcutta, to obtain petitioner's explanation about his dismissal from service of West Bengal National Textile Corporation, West Bengal, and also the allegations of concealment of facts about his dismissal. On 17.5.82 the petitioner submitted his explanation which was considered by the N.T.C New Delhi. Thereafter, the Board of Directors of N.T.C (U.P) Ltd. decided to terminate the petitioner's services. Accordingly the Chairman-cum-Managing Director issued the termination order as contained in his letter dated 18.10.82 terminating his services with effect from that date. Aggrieved, the petitioner has challenged the validity of the order terminating his services. Sri Palok Basu, learned counsel for the petitioner, urged (1) the order of termination though innocuous on its face was issued by way of punishment without affording opportunity of defence to the petitioner, (2) the termination of petitioner's services is arbitrary and violative of Articles 14 and 16 of the Constitution and (3) the petitioner being the Director of a Company could be removed only in accordance with Section 284 of the Companies Act.
3. National Textile Corporation, New Delhi, is a Government Company within the meaning of Section 617 of the Companies Act. It is a holding Company which has got a number of subsidiary Government Companies including N.T.C (Gujrat) Ltd. N.T.C (U.P) Ltd., and N.T.C (WBAO). The petitioner's services were terminated at a time when he was employed as Director (Technical) N.T.C (U.P) Kanpur, which is also a Government Company. The petitioner had been appointed as a Director by the Board of Directors under Article 85(d) read with Article 133 of the Articles of Association of N.T.C, (U.P) Ltd. Kanpur. It appears that a direction was issued by the N.T.C, New Delhi, the holding Company, to its subsidiary Company N.T.C (U.P) for terminating the petitioner's services. The Board of Directors of the N.T.C (U.P) resolved to terminate the petitioner's services at its meeting in accordance with the direction of the holding Company. The petitioner's services were terminated in accordance with the Articles of Association which regulated terms of contract of service.
4. The petitioner's contention, that the order of termination was passed by way of punishment without giving any opportunity to the petitioner, is misconceived. On receipt of the complaint that the petitioner was a dismissed employee from a State Government Undertaking the petitioner's explanation was obtained. In his explanation the petitioner admitted that formerly he was employed in the West Bengal Spinning and Weaving Mill, a State Undertaking of West Bengal. There was some dispute with the management as a result of which they term-inated his services; but, he challenged the order of termination and the dispute was pending in the Court. He asserted that since the matter was sub-judice he did not consider it necessary to mention it in his application seeking employment in the National Textile Corporation. On enquiry the Corporation found that the petitioner had been dismissed from service, a writ petition filed by him before Calcutta High Court against that order had also been dismissed and the petitioner had concealed these material facts. In the counter affidavit it is further asserted that the petitioner's conduct with N.T.C (Gujrat) Ltd. was not satisfactory and there were serious complaints against him of manipulating accounts and fabricating documents as a result of which the Corporation had lost confidence in him. It is thus, apparent that on receipt of a complaint, petitioner's explanation was obtained and a preliminary inquiry was held. Thereafter his services were terminated.
5. The petitioner contends that since inquiry was held and the petitioner was found guilty of concealment of material facts, the order of termination, in substance, is punitive in nature. We find no merit in this contention. When a preliminary inquiry is held by the employer to ascertain the correctness of the allegations made against its employee and if thereafter it decides to terminate the services by simple order of termination without taking any disciplinary proceedings to punish the employee, the order of termination cannot be said to be punitive in nature. In Champaklal Chimanlal Shah v. Union Of India .(1) the Supreme Court observed that a preliminary inquiry is usually held to determine whether a prima facie case for formal departmental inquiry is made out, and it is very necessary that the two should not be confused. The mere fact that some kind of preliminary inquiry is held against a temporary servant and following that enquiry the services are dispensed with in accordance with the contract or the specific service rule would not mean that the termination of service amounted to infliction of punishment of dismissal or removal within the meaning of Article 311(2).
6. The form of the order is not conclusive to its true nature. The entirety of circumstances preceding or attendant on the impugned order must be examined by the Court and the over-riding test will always be whether the misconduct is a mere motive or is the very foundation of the order. In the instant case it is apparent that no punitive action was taken against the petitioner. The allegation relating to the petitioner's conduct was only a motive and not foundation. In State of U.P v. Ram Chandra Trivedi, (2) the Supreme Court held that a temporary government servant had no right to post under the contract of service and the service rules regulating the conduct of service the State had a right to terminate his services by giving him one month's notice. Therefore, the order of termination which was ex-facie innocuous in nature could not be held to be punitive after holding an enquiry into the motive behind the order. In Oil and Natural Gas Commission v. Dr. Md. S. Iskander Ali, (3) the Supreme Court held that even if misconduct, negligence and inefficiency may be the motive or the inducing factor which influenced the employer to terminate the services of the employee, a power which the employer undoubtedly possessed, even so as under the terms of appointment of the employee such a power flowed from the contract of service, termination of service could not be termed as penalty or punishment. It is not necessary to multiply cases on the question. Suffice it to say that it is now well settled that where under the terms of contract the services of an employee is liable to be terminated, an order of termination, simpliciter, cannot be termed as an order of punishment merely because the employer held a preliminary enquiry to satisfy itself before passing the termination order. In the instant case there is no denying the fact that the Board of Directors bad appointed the petitioner under Articles of Association and it had power to terminate the petitioner's services and the contract of service did not contemplate any enquiry or opportunity being given to the petitioner before terminating his services. The order of termination cannot, therefore, be said to be an order of punishment.
7. Learned counsel then urged that mere explanation was not sufficient as no charges were framed, no enquiry was held and the petitioner was not afforded any opportunity to produce his defence or to cross-examine witnesses. He, further, urged that even though the National Textile Corporation is a Government Company, its entire share capital is owned by the Government and the Government exercises effective control over it, as such the Corporation was an instrumentality of State and “State” within the meaning of Article 12 of the Constitution. Placing reliance on the Supreme Court decision in Ramana Dayaram Shetty v. The International Airport Authority of India(4), Ajay Hasia etc. v. Khalid Mujib Suheravardi(5), and Som Prakash Rekhi v. Union of India, (6) learned counsel urged that the petitioner was an employes of the State and as such, he was entitled to reasonable opportunity of defence. In tne decisions relied upon by the petitioner it was held that where a Corporation was instrumentality or an 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 the government. An instrumentality or agency of the Government is ‘authority’ within the meaning of Article 12. The Supreme Court, observed that the concept of instrumentality or agency of the Government is not limited to a Corporation created by a statute but is equally applicable to a company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the company or society is an instrumentality or agency of the Government so as to fall within the meaning of the expression “authority” in Article 12. It is not necessary to go deeper into the matter to decide the question as to whether the National Textile Corporation is an authority as in our opinion even assuming it to be so, the provisions of Article 311 of the Constitution are not applicable, Even if the National Textile Corporation is authority and a juristic unit within the meaning of Article 12 of the Constitution, the petitioner would be entitled to the protection of his fundamental rights and Part III and IV of the Constitution would only be applicable. Since the petitioner's services have been terminated in accordance with the terms of contract, no question of violation of petitioner's fundamental rights arises.
8. The petitioner does not hold a civil post under the Union Government or under the State Government. Merely because he was employed in a Government Company which is “State” within the meaning of Article 12 of the Constitution, he is not entitled to the constitutional protection of Article 311 as available to a Government servant. In Dr S.L Agarwal v. General Manager, Hindustan Steel Ltd.† ,(7) the question whether an employee of Hindustan Steel Ltd which was entirely financed by the Government and its management was directly under the responsibility of the President of India, was holding a civil postand entitled to constitutional protection of Article 311 of the Constitution was considered. The Supreme Court held that the Government company even though completely financed and controlled by the Government could not be treated as department of the Government as service of the Company could not be treated as service under the Union or State Government. The Supreme Court, therefore, held that the Hindustan Steel Ltd. was not a department of the Government and its employees were not the servants of it holding posts under the State and as such they were not entitled to the protection of Article 311. In Som Prakash Rekhi v. Union of India, (supra) the decision in Dr. S.L Agarwal's case was reiterated. These decisions make it apparent that an employee of a Government company is not entitled to the constitutional protection of Article 311 of the Constitution. That being so, the petitioner's contention that the impugned order of termination is an order of punishment and since no reasonable opportunity of defence was given to him, the order is vitiated, must be rejected. The considerations which are to be taken into account in determining the validity of the termination of the services of a Government servant cannot be applied to an order of termination of an emplyee of a Government Company. The petitioner's explanation was obtained and his version was considered by the Corporation before terminating his services. In the absence of any rules, the principles of natural justice stood satisfied and no further opportunity was necessary to be afforded to the petitioner.
9. Learned Counsel's contention that the termination of petitioner's services is arbitrary and violative of Article 14 of the Constitution is devoid of any merit. The averments contained in two counter affidavits filed on behalf of the Corporation make it amply clear that the Corporation was not satisfied with the petitioner's work and conduct and he was found to have concealed material facts relating to his dismissal from a Government undertaking and as such, it took a decision to terminate the petitioner's services. There was, thus, good reason for terminating the petitioner's services which by any stretch of imagination cannot be held to be arbitrary or discriminating.
10. Learned counsel for the petitioner then urged that the petitioner being a Director of the Government Company could be removed only in accordance with the procedure laid down by Section 284 of the Companies Act, 1956. The Board of Directors had no authority to remove the petitioner who was a Director of the company. Section 284 lays down that a company may, by ordinary resolution to remove a director. On receipt of notice of resolution to remove a director, the company shall forthwith send a copy thereof to the director concerned, and if he makes representation to the company, the same may be placed before the committee of the company for consideration. It was urged that the procedure prescribed by Section 284 was not followed, as such the petitioner's removal from the office of the Director is rendered illegal. Section 284, no doubt, provides procedure for re???oval of a director of a company by ordinary resolution at a meeting of the shareholders of the company. But the selection is not exhaustive. A director may cease to hold office by retirement, dismissal, removal, or by vacating his office voluntarily. He may be removed, by the Board of Directors or share-holders at a meeting of the company. Section 284 merely provides for removal of a director by share-holders and prescribe procedure for the same, it does not prohibit removal of a director otherwise than in accordance with Section 284. Sub-section 7(b) of Section 284 lays down that nothing in the section shall be taken as derogating from any power to remove a director which may exist apart from this section. The Section itself therefore contemplates removal of a director in addition to the provisions contained in the Section. Thus where the Articles of Association confer powers on the Board of Directors to remove the Managing Director or other Directors, such power is not affected by the provisions of Section 284.
11. Article 84 of the Memorandum and Articles of Association of National Textile Corporation (Uttar Pradesh) Limited provides for constitution of Directors. Article 85 makes provision for appointment of Chairman-cum-Managing Director and other directors. Article 85(d) provides that Chairman-cum-Managing Director and the Directors shall be entitled to be appointed whole time Directors. Article 86(c) provides that the Chairman-cum-Managing Director and the Directors shall have the power to remove any whole time Director appointed in accordance with Article 85(d) at any time, in their absolute discretion. Thus, a Director appointed under the Articles of Association by the Board of Directors is liable to be removed at any time. The petitioner was appointed a whole time Director under Article 85(d) and his services have been terminated by the Board of Directors in exercise of their powers under Article 86(c) The Articles of Association do not place any fetter on the power of the Board of Directors to remove a Director from service. The powers of the Board of Directors with regard to removal of Director remains unaffected by Article 284 of the Companies Act. The impugned order of termination, therefore, is not violative of Section 284 of the Companies Act. In the result, for the reasons stated above, we hold that the petitioner is not entitled to any relief.
12. The petition fails and is, accordingly, dismissed with costs.