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K.S. Negi v. Director Of Factories, G.T. Road Kanpur And Others - WRIT - A No. 64946 of 2006 [2007] RD-AH 14204 (18 August 2007)


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Civil Misc. Writ Petition No.64946 of 2006

K.S. Negi   ...... Petitioner


Director of  Factories and others ......Respondents


Hon'ble Prakash Krishna, J.

By means of the present petition the petitioner who has been working as Welfare Officer in the respondent company (M/s. I.T.C. Ltd.) has sought a writ of Mandamus commanding the respondent company not to terminate his services w.e.f. 8th of February, 2007 and has also sought  the quashing of the order dated 9th of November, 2006 ( Annexure -1 to the writ petition) with usual reliefs.  A writ of Mandamus commanding the respondents No. 1 and 2 to prosecute the officers of the respondents company for acting in breach of the provisions contained in the Welfare Officers Rules has also been claimed.

The writ petition was heard at the admission stage itself finally. As agreed upon by the learned counsel for the parties after exchange of counter and rejoinder affidavits, it is being decided finally.  

The facts of the case in brief are as follows:-

M/s. ITC Ltd.,  a company incorporated under Companies Act having Head Quarter at Kolkata, appointed the petitioner as Labour Welfare Officer in ITC Ltd., (hereinafter called as Company) at Saharanpur.  The respondent company carries on business of manufacture and sale of FMCG products including cigarettes.  The petitioner was appointed as Labour Welfare Officer through the appointment letter dated 13th of June, 1986 and has been working since then.  The respondent company by means of the impugned communication dated 9th of  November 2006 (Annexure -1) informed the petitioner  that in terms of clause 14 (a) of  the letter of employment dated 13th of June, 1986, his services with ITC Ltd. will stand terminated, as of closing hours of  work on 8th of February 2007.

Feeling aggrieved against the aforesaid communication/notice of termination the present writ petition has been filed.

Shri K.P.Agrawal,  Learned Senior Advocate assisted by Ms. Swati Rani Gupta contended that the services of the petitioner are governed by statutory provisions of  service as contained in U.P.  Factories Welfare Service Rules 1955 (hereinafter to referred as Welfare Rules) and the appointment of the petitioner being statutory appointment,  his services can be terminated only in accordance with the statutory provisions as contained under Welfare Rules.  His contention is that the petitioner is holding a public office as his duties are not towards the activities of the respondent company but to look after the welfare of the workmen and discharge the duties as contained in the Welfare Rules.  He submitted that the office of the Welfare has been created under Section 49 of the Factories Act read with Welfare Rules framed under the aforestated Factories Act.  The gist of the argument is that the post of Welfare Officer is a public/statutory office. Indisputably, the permission having not been sought for from the Labour Commissioner, the service of the petitioner cannot be terminated in the matter as it has been sought to be done by the impugned order.

In reply, Shri S.P. Gupta, Senior Advocate, assisted by Shri Yashwant Verma, submitted that the present writ petition is not maintainable as the respondent company is a public limited company and is incorporated under the provisions of the Companies Act 1956.  The company is not discharging any public duty or function nor it is a State or an instrumentality of State.  It is not under the financial control of the State or Central Government and it does not fall within the definition of 'State' or 'instrumentality' of   'State' as understood under Article 12 of the Constitution of India.  On merits the notice of  termination having been issued to the petitioner in the exercise of right conferred on it under clause 14 (a) of the letter of appointment signed by the petitioner, no grievance can be  raised by the petitioner at this stage.  In other words, the submission is that the respondent company has invoked the right conferred on it in pursuance of the mutual agreement arrived at in between the parties. The exercise of the said right is not as a measure of  punishment and as such the provisions of  Welfare Rules have no application to the facts of the case.

The following two points, thus, fall for determination in the present writ petition:-

1.Whether the writ petition is maintainable in the facts and circumstances of the case against the respondent company?

2.Whether in view of the provisions of  Welfare Rules, 1955  the notice dated 9.11.2006 given by the respondent company terminating services of the petitioner w.e.f. 8th of February 2007 is sustainable?

Shri S.P. Gupta, the Learned Senior Counsel strenuously submitted that the present writ petition is not maintainable as the respondent company is not a State nor instrumentality of the State within the meaning of Article 12 of the Constitution of India.  It is not in dispute that the respondent company is not getting any financial assistance either from the State Government or the Central Government and is carrying on the business of manufacturing cigarettes etc.  It is involved in manufacturing of commercial goods.  Reliance has been placed on a judgment of the Apex Court  V.S.T. Industries Ltd. Vs. V.S.T. Industries Workers  Union and another (2001) 1 SCC 298  wherein it was held by the Apex Court that a company incorporated under the Companies Act, 1956 with the object of manufacture and sale of cigarettes and whose shares are traded among the members of the general public through various stock exchanges in the country as  manufacturing of cigarettes does not amount discharging such activities  which will amount to public duty.  The company of that case was engaged in the business of  manufacture and sale of cigarettes.  It was running a canteen being under an obligation under Section 46 of a Statute for the welfare of workmen wherein the establishment more than 250 workmen were employed.  In this factual situation it was held that running of  canteen by the company was only a labour welfare device for the benefit of its work force unlike a provision where the Pollution Control Act makes it obligatory even on a private company not to discharge certain effluent.  In such cases public duty is owed to the public in general nor specifically any person or group of persons.  The running of canteen was considered a part of  condition of service of workmen and therefore, it was found that there is no justification to hold that such activities will amount to public duty.  Overruling the judgment of Andhra Pradesh High Court it was held as follows:-

"In the present case, the appellant is engaged in the manufacture and sale of cigarettes.  Manufacture and sale of cigarettes will not involve any public function.  Incidental to that activity there is an obligation under Section 46 of the Act to set up a canteen when the establishment has more than 250 workmen.  That means, it is a condition of service in relation to a workman providing better facilities to workmen to discharge their duties properly and maintain their own  health or welfare.  In other words, it is only a labour welfare device for the benefit of its workforce unlike a provision where the Pollution Control Act makes it obligatory even on a private company not to discharge certain effluents.  In such cases public duty is owed to the public in general and not specifically to any person or group of persons.  Further the damage that would be caused in not observing them is immense.  If merely, what can be considered a part of the conditions of service of a workman is violated then we do not think there is any justification to hold that such activity will amount to public duty.  Thus, we are of the view that the High Court fell into error that the appellant is amenable to writ jurisdiction. "

In the case of V.S.T Industries Ltd. (Supra), the Apex Court has referred a passage from the book of De Smith, Woolf & Jowell's Judicial Review of Administrative Action, 5th Edn., in para 7 thereof.  The said passage,  as quoted in the afore stated judgment,  is reproduced below:

"7. In de Smith, Woolf and Jowell's Judicial Review of Administative Action, 5th Edn.,  it is noticed that not all the activities of the private bodies are subject to private law, e.g., the activities by private bodies may be governed by the standards of public law when its decisions are subject to duties conferred by statute or when, by virtue of the function it is performing or possibly its dominant position in the market, it is under an implied duty to act in the public interest.  By way of illustration, it is noticed  that a private company selected to run a prison although  motivated by commercial profit should be regarded, at least in relation to some of its activities, as subject to public law  because of the nature of the function it is performing.  This is because the prisoners, for whose custody and care it is responsible, are in the prison in consequence of any order of the court, and the purpose and nature of their detention is a matter of public concerned and interest.  After detailed discussion, the learned authors have summarized the position with the following propositions:-

(1)The test of whether a body is performing a public function, and is hence amendable to judicial review, may not depend upon the source of its power or whether the body is ostensibly a "public" or a "private" body.

(2)The principles of judicial review prima facie govern the activities of bodies performing public functions.

    (3) However, not all decisions taken by bodies in the course of their public functions are the subject-matter of judicial review.  In the following two situations judicial review will not normally be appropriate even though the body may be performing a public function:

(a) Where some other branch of the law more appropriately governs the dispute between the parties.  In such a case, that branch of the land and its remedies should and normally will be applied; and

(b) Where there is a contract between the litigants.  In such a case the express or implied terms of the agreement should normally govern the matter.  This reflects the normal approach  of English law, namely, that the terms of a contract will normally govern the transaction, or other relationship between the parties, rather than the general law.  Thus, where a special method of resolving disputes (such as arbitration or resolution by private or domestic tribunals) has been agreed upon by the parties (expressly or by necessary implication), that regime, and not judicial review, will normally govern the dispute."

The para-3(b) reproduced  above  from the aforesaid book is relevant for the purposes of the present case.  It has been provided therein that in case of a contract between the litigants, the express or implied terms of the agreement should normally  govern the matter.  

The next case relied upon by the counsel is Federal Bank Ltd. Versus Sagar Thomas & others AIR 2003SC 4325.  The question was whether a writ can be issued against a private company carrying on banking business as a scheduled Bank.  Dis-agreeing with the view of the High Court, the Apex Court has held that merely regulatory  provisions to ensure banking activity carried on by private bodies  work within a discipline, do not confer any status upon the company nor puts any such obligation  upon it which may be enforced through issue of writ under Art. 226 of the Constitution.  In this case a disciplinary action was being  taken against an employee  by the Bank.  It was held that the Bank was not trying to enforce any statutory duty, therefore the writ cannot be said to be maintainable.   It also  considered  effect of banking policy laid down by the Reserve Bank of India to be followed by the Banks as provided under section 5(c)(a) of the Banking Regulation Act.  The Supreme Court took the view that the  private companies carrying on the business  of  or commercial activity of banking does not  mean  that they discharge any public function or public duty. The banking policy  laid down by the Reserve Bank to be followed by the Banks are regulatory measures applicable to those carrying on those commercial activity in banking and these companies   are to act according to these provisions  failing which certain consequences  follow  as indicated in the Act itself.

It has  also considered  its earlier decision  in U.P State Cooperative Land Development Bank Ltd. Versus Chandra  Bhan Dubey AIR  1999 SC 753.  The Registrar of the Cooperative Societies U.P is the trustee for the purpose of securing the fulfillment of the obligations of the State Land Development Bank to the holders of debentures  issued by the Board of Directors.  The State Government  constitutes  a Guarantee Cooperative Fund under section 9 of the Act involved therein for the purpose of meeting losses that might arise on account of loans advanced by the Land Development Banks.  The guarantee fund is  maintained by the Finance Department of the State Government.  In these factual backgrounds,  it was held that the U.P State Cooperative Land Development Bank Ltd. though registered as a Cooperative Society is  an instrumentality of the State and its Employees have a statutory protection under the statutory rules.

Shri K.P.Agarwal, Learned Senior Advocate for the petitioner therefore, is not right in his submission that a writ petition  is maintainable against the Cooperative Societies registered under the Societies  Registration Act in all circumstances.   In the case of U.P State Cooperative Land  Development Bank(Supra) a definite finding was recorded that the said Bank is  instrumentality of the State and its employees have statutory protection  under the statutory rules.  The State Government  provides the funds by constituting a guarantee  for the purposes of meeting losses.  Coming to the facts on hand, it is not in dispute that the respondent company i.e  I.T.C  Ltd., is a Public Ltd. Company and no fund is provided to it either by the State Government or by the Central Government.  The company is  a public Ltd. Company  and is registered  under the Companies Act.  It is difficult to say that the respondent company which is carrying on the  business of sale  and manufacture of FMCG products including cigarettes is discharging any public function,  more so in view of the decision of the Apex Court in the case of V.S.T Industries Ltd.(Supra).  

At this stage it was submitted by the learned counsel for the petitioner that the Welfare Officers Recruitment & Conditions of  Service Rules 1952  is a complete code  by itself.  It makes provisions for the recruitment of the Welfare Officers.  It lays down a pay scale for them by Section 3 of the aforesaid Rules.  By Rule 8 it  lays down their status.  By Rule 8(8) it lays down under what conditions he would be entitled to gratuity.  The  qualifications for recruitment as  Welfare  Officer are contained in Clause (9) and (10) and the conformation  part is contained in clause (12)  Punishment is provided in clause (15).  It is further provided that if any punishment  is to be imposed it must  have the concurrence of the Labour Commissioner.  Clause (17) is the provisions in respect of his duties.  Clause (18) specifically lays down that no duty other than those contained  in clause (17) can be taken from a Welfare Officer.  Clause (21) deals with the age of retirement and clause (22)  deals with the application of the U.P Industrial peace (Timely Payment of Wages) Act, 1978.  For ready reference clauses (18) and (21) are being reproduced below:

"(18) No Welfare Officer  shall be allowed to perform any other duties except those mentioned in Rule 17 or to hold any other office or post without the previous sanction of the Labour Commissioner or the State Government.

(21) The age of superannuation of the Welfare Officer shall be the same as applicable to other senior executives of the factory."

The said rules lay down  the minimum age and qualification that must be possessed  by a Welfare Officer, prescribes  his duties and   privileges given to him by the  management  and also prescribes for imposition of  punishment, if any,  with  concurrence of the Labour Commissioner. .

A close reading of the said Welfare Rules would clearly show that the  status of a Welfare Officer is that of a senior executive of the factory and would be governed by the same rules in regard to dearness allowances, pension, P.F, leave, housing, medical and other facilities.  The requirement of a Welfare Officer in the  given fact is mandatory  but it is difficult to say that either the Welfare Officer or the Appointing Company  discharges any public duty or function.  The company is required to appoint Welfare Officer under the prescribed conditions.

The appointment of a Welfare Officer is a part of Labour Welfare Scheme. The main function of the company is to manufacture and  sell  cigarettes.  The appointment of a  Welfare Officer is only incidental  for  running of the factory.  It cannot be said that by appointing a Welfare Officer, the company is discharging any  public function or duty.  In this fact situation the  controversy involved  herein  is fully covered by the decision of the Apex Court in the case of V.S.T Industris  Ltd. (Supra).  Therein also it was obligatory to provide a canteen  in the factory premises in pursuance of section 46 of the Factories Act which obliges a factory having employees  more than  250 workmen to provide such a canteen.   In this  fact situation, it was held that provision of a canteen as per the Factories  Act is only a welfare device for the benefit of its workforce unlike a provision where the Pollution Control  Act  makes it obligatory even on a private company  not to discharge  certain effluents.  It was held that if  there is a breach of service conditions of a workman  then it is difficult to hold that such activity will amount to public duty.

The learned counsel for the petitioner has  also placed reliance upon a full Bench  decision of this Courtin  S.P. Srivastava and another versus Banaras Electric Light and Power Co. Ltd.  & others  1968(16)  F.L.R 386.  In this case the question of maintainability  of the writ petition  was not involved  therein.   Although it relates to termination of service of Labour  Welfare Officer  in pursuance of contract of  service between the appellant and the company  but the matter was not  brought to the High Court directly.  It was referred to the Labour Court  first  and thereafter the decision of Labour Court  was challenged  by the company  in a writ petition  against the award  given by the Labour Court.   Further reliance was placed  upon  Synthetics & Chemicals Ltd.  versus G.C.Kumar and others 1972 (25) F.L.R 146.   On a review of authorities and laws the following principles  were laid down:

1.Mandamus may issue to a trading corporation to compel it to do its duty which is of a public nature.

2.A duty is of a public nature if it is imposed  by charter, common law or statute.

3.Mandamus may issue to restore a person to a corporate office if the office is of a public nature.

4.The office is of a public nature if it is created by a statute and the duties of the office affect the general public or a section thereof.

5.Art. 226 empowers the High Court to issue a writ in the nature of mandamus.  The power  may be exercised, keeping in regard the broad and fundamental principles which guide the issue of mandamus.

The said decision should be read and understood in the light of the subsequent decisions of the Apex Court referred to above.

Viewed as above, I am of the opinion that the present writ petition is not maintainable as it is principally against the action of I.T.C Ltd., a company registered under the Companies Act which is not discharging any public function or duties.

In  the case of Bihari Lal Chauhan  versus Director of Factories, U.P Kanpur  & another 2003(2) AWC 1069 it is has held that a  writ petition against the company is not maintainable.  It repelled the petitioner's argumnent  who was an employee of the company and challenged the transfer order,   holding  that merely because there are statutory rules  governing the services of the petitioner, it does not mean that the respondent company is an instrumentality of the State.   If the plea of the learned counsel for the petitioner is accepted, then logically it will have to hold that a writ can be issued against the private  factory owner since every factory is governed by statutory rules i.e the Factories  Act, Industrial Disputes Act etc.  Such a view cannot be countenanced.  It is in very exceptional cases, where a public duty is imposed upon the person concerned,  that a writ can be issued.

Very recently a Full Bench decision of this Court M.K.Gandhi & others versus Director of Education U.P, Lucknow & Others (2005) 3 UPLBEC 2187 examined the issue as to whether the Central Board of Secondary Education (Board)  comes  within the definition  of 'State'.  In this case also a writ petition challenging a termination order of  service of Teacher of Delhi Public School which is recognized  with the Central Board of Secondary Education (Board) was filed.   It was held that such a writ is not maintainable for violation of  by laws that do not have statutory force or meant for enforcement of private contract between  the school and the teacher.

Viewed as above, it is held that the present writ petition is not maintainable.

Even otherwise also on merit I find no force in the petitioner's contention.  The main thrust of the argument of the petitioner is that the termination of the service of the petitioner  without  the previous  concurrence of the Labour Commissioner  is bad and illegal.  In this regard, the petitioner's counsel submits that the impugned order is by way of punishment as the petitioner  has disobeyed  his order of transfer passed earlier.  It appears from the record that the management of the Company  passed an order dated 25.7.2006  and another order dated 3.8.2006  transferring the petitioner from Sharanpur to its head office at Kolkata.  The said orders were challenged by the petitioner by filing a writ petition No. 39246 of 2006.  No interim order  was passed therein  as it was expected that the writ petition  itself  will  be disposed of shortly.  It was contended that since the petitioner did not  give his joining at Kolkata,  the impugned order has been passed.   Shri S.P.Gupta, the learned Senior Counsel  submits that the impugned order has been passed as per terms of the service agreement entered into  by the petitioner.   A copy of the service agreement entered into  by the petitioner with the company dated 17.6.1986 has been annexed as annexure  2 to the writ petition.  Clause-14(a) of the said agreement  reads as follows:

" Your employment on confirmation as Welfare Officer may be terminated at any time by either party  giving to the other ninety days notice in writing of its mere intention in the behalf."

Indisputably the said contract has been signed by the  petitioner  as is evident from the last (page 25 of the paper book).   It was rightly pointed out by the Shri  Gupta, learned Senior Advocate for the respondent that the validity of the aforesaid clause is not under challenge.  However, the counsel for both the parties have placed  reliance  upon a judgment of the Apex Court in Associated  Cement  Companies  Ltd. versus P.N.Sharma and another  AIR 1965 SC 1595  in support of the their respective cases.

Shri K.P.Agarwal, learned senior counsel for the petitioner submits that since the impugned order has been passed  without the concurrence of the Labour Commissioner,  it is therefore, bad, as laid down in the above case.

Shri S.P.Gupta, learned counsel for the respondent on the other hand submits that on a close reading  of the aforesaid decision, it is evident that it supports his case.   As in the present case also,  the order impugned was not passed by way of punishment, rather it was passed in pursuance of the contract entered into between the parties.  

To appreciate the rival contention, it is desirable to notice the relevant facts of that case, in some detail.  It was a case under Punjab Welfare Officers Recruitment and Conditions of  Service Rules (1952).  Validity  of Rule 6 was questioned before the Apex Court.  The rule was held valid.  The Apex Court in Paragraph-37  which is relevant for our purposes held that the appeal filed by the Welfare Officer was not competent.  The  services of the Welfare Officer  was terminated  in exercise of the power conferred on the employer under the contract of employment. No concurrence  was given by the Labour Commissioner to the termination order.  It was held that  that the scheme of the relevant Rules appears to be that if the management applies for concurrence, and the concurrence is not given by the Labour Commissioner, the management can appeal under Rule 6(5).   It was further held that appeal will lie only against an order of punishment mentioned in clause (v) of sub-rule (3)  of Rule 6 has been imposed upon him.  The Apex Court  has held that since the order of termination was not by way of punishment, the appeal preferred by the Welfare Officer  was not competent.

Rules 15 & 16  of  U.P Factories  Welfare Officers Rules 1955  reads as follows:

"15. Punishments - (1) The management  may impose any one or more of the following  punishments on a Welfare Officer:

(i)  Censure,

(ii) Withholding of increments including stoppage at any efficiency   bar,

          (iii)Reduction to lower stage in the time-scale,

(iv) Suspension, and

(v)  Dismissal, or termination of service in any other manner:

Provided that no punishment  shall be inflicted unless the Welfare Officer has first been informed of the grounds on which it is proposed to take action and has been afforded an adequate opportunity  of defending himself:

 Provided further that the management shall not impose any punishment   other than censure except with the previous concurrence of the Labour Commissioner.

(2) The Labour Commissioner shall given the Welfare Officer an opportunity to explain the circumstances appearing against him and, if necessary, of being heard in person, when a reference is made under sub-rule(1).

16. (1) A  Welfare Officer, who is subjected to punishment under clause (v) of sub-rule (1) of rule 15, may appeal to the State Government against the order of punishment made by the management with the concurrence  of the Labour Commissioner, within 30 days from the receipt  of the order by him. The decision of the State Government  shall be final and binding.

(2)  The State Government may pass such interim orders as may be necessary, pending the decision of an appeal filed under sub-rule (1)."

The submission of Shri S.P.Gupta, learned senior counsel for the respondent is that the order of termination has been passed by the respondent not by way of punishment but in exercise of right conferred on it in pursuance of the contract of employment.  He submits that since the respondent-company has invoked  contractual right, the petitioner is bound by the terms of the contract and  cannot raise any grievance.

Shri K.P.Agarwal, learned senior counsel on the other hand submits that the impugned order has been passed by way of punishment as provided  under section 15(1)(v) of afore stated rule of 1955.

Considered the respective submissions of the learned counsel for the parties, it is not in dispute that  Clause- 14(a)  of the agreement, reproduced above gives right to  either party  to terminate the contract by giving 90 days notice in writing to the other party.  At the cost of repetition, it may be stated here that the legality and validity  of the aforesaid clause has not been questioned either in the writ petition or during the course of argument.    In this view of the matter, it is a case of invoking clause-14(a)  of the contract of employment  and as such, the question of previous concurrence of Labour Commissioner as provided by the  second proviso of Rule 15 of Rules 1955 does not arise.  The above view finds support from the judgment of the Apex Court in the case of Associated Cement Companies Ltd. (Supra).   In paragraph 38 the Apex Court  considered the argument that the substance of an order and not the form is relevant.  It has observed that if  it is established that impugned order amounts punishment, then no doubt it would be a legitimate plea on behalf of the  Welfare Officer  that prior concurrence of the Labour Commissioner  was not obtained.   Further, it has been observed that in such cases, it is no doubt  open to the Court to consider  the substance of the matter and not to treat the form in which the order terminating the services of an employee has been passed, conclusive.  But  cases may occur in which it would be safe to conclude that the order of discharge  and that the employer  passed such an order,  because it was not its intention to cast any slur on its employee, even though it thought it necessary to terminate his services.  In the case on hand, there is no material to show that the impugned order was passed by way of punishment.

Viewed as above, I find no merit in the contention of the learned senior Advocate  for the petitioner that the notice dated 9.11.2006 given by the respondent company terminating the services of the petitioner  with effect from  8.2.2007 is in any way illegal or contrary to law, as no prior concurrence of the Labour Commissioner was obtained. It is a case where the employer has invoked clause 14(a) of the contract of service. In the absence of any material or pleading, it is not correct to say that the impugned order is by way of punishment.  

There is no merit in the writ petition.  The writ petition is dismissed but no order as to costs.

                                                                           (Prakash Krishna, J.)

Date 18.8.2007


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