C. P. Mathew v. The Union of India — 1982 DIGILAW 411 (MAD)

JUDGMENT 1. The petitioner joined the services of the second respondent, Hindustan Photo Films Manufacturing Co. Ltd. (for short the Management) as early as in 1961 as a Technical officer. In 1976 he was promoted as Works Manager. He was in charge of the two factories of the Management, one at Ooty and the other at Ambattur. On 27.10.1980 the Management informed the petitioner that his services stood terminated under Clause 13.1 of the Hindustan Photo Films Services Rules for Officers (for short Service Rules). A Cheque for Rs. 5,000 being two months basic salary was enclosed. Against the said order the petitioner preferred an appeal before the Board of Directors on 29-12-1980. The Appeal was rejected by the Board on 10-4-1981. It is, in these circumstances, the petitioner has filed this writ petition to quash the order passed by the Management terminating his services. 2. The communication dated 27.10.1980 states : 'Pursuant to the resolution of the Board of Directors dated 25th October, 1980 and the terms of clause 13.1 of the Hindustan Photo Films Service Rules for officers, you are hereby notified that your services are terminated with immediate effect and as required by the said Rules, a cheque for Rs. 5,000 representing two months basic pay in lieu of notice is enclosed. 3. Before I deal with the contentions raised by Mr. B. R. Dolia on behalf of the petitioner and the learned Solicitor General for the Management, it is necessary to refer to the relevant provisions of the service Rules. The rules apply to all officers of the company who are in the pay scales of Rs. 450 - 800, Rs. 400 - 950 and above. The service Rules deal with recruitment, probation, promotion, fixation of pay on promotion, verification of date of birth, disqualification for appointment, training and development, performance appraisal and increments, crucial date of increments, transfer, deputation of Officers to other organisations, superannuation, termination of employment, contributory provident fund, leave entitlement, other amenities and gratuity In this context the relevant rules to which reference was made at the time of argument may be referred to Rule 9 of the Service Rules reads thus : "9. Performance appraisal and increments : 9.1 Increments shall be granted by the Management to an Officer on the basis of performance which will be reviewed once in a year in accordance with the performance appraisal system of the company. Increments will not be automatic, but based on the performance appraisal review and the recommendations of the appropriate promotion committee referred to in paras 4.2.1 and 4.2.2. In the event of an Officer being found unsuitable for continuation in the Company's services based on the appraisal of his performance, he is liable to be terminated from the services of the Company after giving due notice as stated in para 13.1 Rule 12 of the Service Rules reads thus : "12. Superannuation - Retirement. 12.1 Every Officer appointed to the services of the Company shall retire when he completes the age of 58 years on the last day of the month in which he completes 58 years. ...... ...... ...... ......" Rules 13. of the Service Rules states : "13. Termination of employment 13.1 In the case of termination - resignation of the services of an Officer, notice shall be given by either party for the period shown below or payment of basic pay shall be made for the period in lieu of notice : (1) In the case of permanent employees ....... 2 months (2) In the case of Officers on probation and under-training" 1 months No notice will be required in any case for termination of employment on attaining the age of superannuation, viz., 58 years of age. 13.2 The pay and allowance or any other amounts due to an officer leaving the services of the company without giving proper notice or without his resignation being accepted shall be liable for forfeiture in whole or in part as the Company may decide. 4. The Management has also framed Conduct, Discipline and Appeal Rules for officers and Supervisors (for short Conduct Rules). Rules 5 of the Conduct Rules states that without prejudice to the generality of the term "misconduct" the following acts of omission and commission shall be treated as misconduct. As many as 24 items are mentioned therein. The note to the rule states that the said instances of misconduct are illustrative in nature and not exhaustive. Rules 5 of the Conduct Rules states that without prejudice to the generality of the term "misconduct" the following acts of omission and commission shall be treated as misconduct. As many as 24 items are mentioned therein. The note to the rule states that the said instances of misconduct are illustrative in nature and not exhaustive. Rule 20 of the Conduct Rules provides for suspension of an Officer/Supervisor where a disciplinary proceeding against him is contemplated or is pending or where a case against him in respect of any criminal offence is under investigation or trial. Rule 23 provides for penalties that might be imposed on the Officer/Supervisor for misconduct committed by him or for any other good and sufficient reasons. The penalties are divided into two categories, viz. minor penalties and major penalties. Minor penalties are such as censure, withholding of increments of pay with or without cumulative effect, withholding of promotion and recovery from pay or such other amount as may be due to him of the whole or part of the pecuniary loss caused to the company by negligence or breach of orders. Major penalties refer to reduction to a lower grade or post or to a lower stage in a time scale; removal from service which shall not be a disqualification for future employment, i.e., termination and dismissal. Explanation to Rule 23 refers to certain acts which will not amount to a penalty within the meaning of the Conduct Rules. Clause (vi) of the Explanation to Rule 23 of the Conduct Rules reads thus : "vi. Explanation to Rule 23 refers to certain acts which will not amount to a penalty within the meaning of the Conduct Rules. Clause (vi) of the Explanation to Rule 23 of the Conduct Rules reads thus : "vi. Termination of Service : (a) of an Officer/Supervisor appointed on probation during or at the end of period of probation, in accordance with the terms of his appointment; (b) of an Officer/Supervisor appointed in a temporary capacity, otherwise than under a contract or agreement, on the expiration of the period for which he was appointed, or earlier in accordance with the terms of his appointment; (c) of an officer/Supervisor appointed under a contract or agreement, in accordance with the terms of such contract or agreement; and (d) of any Officer/Supervisor on reduction of establishment based on first come last go principle; Rules 24 states thus : "The disciplinary authority, as specified in the schedule, or any authority higher than it may impose and of the penalties specified in Rule 23 on any officer/Supervisor : Rules 25 deals with the procedure for imposing major penalties : It runs thus : "25. (1) No order imposing any of the major penalties specified in Clauses (e) (f) and (g) of Rules 23 shall be made except after an inquiry is held in accordance with this rule." The details of the manner in which the enquiry has to be held are contained in Sub-Rules (2) to (19) of Rules 25. Rules 26 deals with action on the inquiry report. Rule 27 contains the procedure for imposing minor penalties. Rule 32(i) states that Officer/Supervisor may appeal against an order imposing upon him any of the penalties specified in Rule 23 or against the order to suspension referred to in Rule 20. Rule 33 deals with the power of review. Rule 36.5 deals with the continuation of the disciplinary proceedings which might be instituted against an Officer/Supervisor before his date of superannuation, even after his date of retirement. Rule 36.6 empowers the appointing authority to institute a departmental proceeding against a retired employee in respect of any event which took place not more than four years before such institution. The Schedule to the Conduct Rules prescribed the appointing authority, disciplinary authority/competent authority and appellate authority in respect of various grades of officers. 5. Rule 36.6 empowers the appointing authority to institute a departmental proceeding against a retired employee in respect of any event which took place not more than four years before such institution. The Schedule to the Conduct Rules prescribed the appointing authority, disciplinary authority/competent authority and appellate authority in respect of various grades of officers. 5. I may at the very outset that he learned Solicitor General appearing for the Management did not contest the position that a Writ Petition would be maintainable against the Hindustan Photo Films Manufacturing an agency or an instrumentality of the State. 6. Mr. Dolia, raised the following contentions : (1) An element of public employments is involved in the service of the petitioner with the Management. In the circumstances, though the employment of the petitioner with the Management originated in a contract, subsequently the petitioner obtained a statutory status. Consequently, it will be open to this Court in exercise of its powers under Art. 226 of the Constitution of India to give a declaration that he continued to be in the employment of the Management if it was found that the termination of the services of the petitioner was in violation of the principles of natural justice and contrary to the service regulations. The relationship of the petitioner and the Management could not be considered thereof as one of master and servant, (2) The order of termination in the instant case was passed by merely giving two months notice. Under Rule 9.1 of the Service Rules an Officer would be entitled to increments on the basis of the performance to be reviewed once in a year in accordance with the performance appraisal system. According to the said rule, in the event of an office being found unsuitable for continuation in the Company's Services based on the appraisal of his performance, he is liable to be terminated from the services of the Company after giving due notice as stand in Rule 13.1 of the Service Rules. Rule 13.1 which provides for two months notice being given in the case of permanent employees and one months in the case of officers on probation and under-training must be read subject to Rule 9.1 of the service Rule. Rule 13.1 would be attracted only when an Officer is found unsuitable on the appraisal of his performance. Rule 13.1 which provides for two months notice being given in the case of permanent employees and one months in the case of officers on probation and under-training must be read subject to Rule 9.1 of the service Rule. Rule 13.1 would be attracted only when an Officer is found unsuitable on the appraisal of his performance. Further, the Management ought to have conducted an enquiry on the question whether the petitioner was unsuitable for continuation in the service of the Management. The failure to do so amounted to a violation of the principles of natural justice. This would be particularly so because the petitioner has a right to continue in service till the date of his superannuation, (3) In view of the fact that the order of termination, was passed without conforming to the principles of natural justice, the order was arbitrary, mala fide in law and based on no appraisal of performance, especially when there was sufficient evidence to show that he petitioner had been rated well in respect of his duties by the Management, (4) Rule 13.1 is liable to be struck down on the ground that it confers an arbitrary power on the Management and that it is violative of Art. 14 of the Constitution of India, (5) In any event, the order of termination has case a stigma on the petitioner and consequently is punitive in character, though it is worded innocuously. In the circumstances, the order is vitiated by a failure to conform to the principles of natural justice. 7. The learned Solicitor General, however, contended that the relationship between the Management and the petitioner is that of master and servant pure and simple. The Rules are not statutory. The management, though amenable to the jurisdiction of the Court under Art. 226 of the Constitution of India, in the sense that it is an instrumentality or agency of the Government. Consequently, the petitioner cannot have the status of a civil servant and, therefore, Art. 311 of the Constitution of India would stand excluded. If that be so, then the relationship between the petitioner and the Management must be considered to be purely contractual. In such a situation. Art. 14 of the Constitution of India would not be attracted. Consequently, the petitioner cannot have the status of a civil servant and, therefore, Art. 311 of the Constitution of India would stand excluded. If that be so, then the relationship between the petitioner and the Management must be considered to be purely contractual. In such a situation. Art. 14 of the Constitution of India would not be attracted. The Supreme Court has held that Art. 14 would apply in the case of contracts only at the threshold when the Government grants a contract and once a contract is entered into the relationship between the parties must be dealt with according to the terms of the contract. Rule 13.1 of the Service Rules cannot, therefore, be said to be violative of the Constitution of India. Further, the learned Solicitor General argued that Rule 13.1, is not dependent on Rule 9.1. Under Rule 13.1 the Management has got an independent power to terminate the service of an officer by giving two months notice or salary for the said period in lieu of notice. The contention of the petitioner that the order of termination cast a stigma and is punitive in character and, therefore, violative of the principles of natural justice cannot be sustained. The order on the face of it shows that no stigma is cast of the petitioner. There are no averments regarding mala fides, in the affidavit. The provision regarding the penalties contained in Rule 23 of the conduct Rules could not be attracted to the facts of this case. The petitioner's service have been terminated because he was found on an appraisal of his performance that he was unsuitable to be continued in the service of the Management. 8. The provision regarding the penalties contained in Rule 23 of the conduct Rules could not be attracted to the facts of this case. The petitioner's service have been terminated because he was found on an appraisal of his performance that he was unsuitable to be continued in the service of the Management. 8. On the basis of the contentions urged before me by the learned counsel for the petitioner and by the learned Solicitor General on behalf of the Management, the following points arise for determination : (1) Whether the relationship between the Management and the petitioner is that of master and servant or whether an element of public employment is involved, (2) Whether Rule 13.1 of the Service Rules confers an unfettered power on the Management to terminate the services of the petitioner by giving two months notice or salary in lieu thereof or whether the powers conferred on the Management under Rule 13.1 can be exercised only if the conditions in Rule 9.1 are satisfied, (3) Assuming that Rule 13.1 confers an independent power on the Management to terminate the service of an officer by giving two months notice or salary in lieu of notice, whether Rule 13.1 is arbitrary and violate of Art. 14 of the Constitution of India, (4) Whether the order of termination of the service of the petitioner is vitiated by mala fides, (5) Whether the order of termination of the services of the petitioner is punitive in character and is violative of the principles of natural justice. 9. As I have already stated, it is not disputed by the learned Solicitor General that the Management is a State within the meaning of Art. 12 of the Constitution of India inasmuch as it is and agency or instrumentality of the State. The fact that the Management is a State within the meaning of Art. 12 of the Constitution of India does not however, make it a department of the Government, as contended by the learned Solicitor General. In State of Punjab v. Raja Ram (AIR 1981 S.C. 1994) the Supreme Court was concerned with the question whether the Food Corporation of India is a department of the Government. The Supreme Court answered the question in the negative. There, the Supreme Court came to the conclusion that the Food Corporation of India was an agency or instrumentality of the Central Government. The Supreme Court answered the question in the negative. There, the Supreme Court came to the conclusion that the Food Corporation of India was an agency or instrumentality of the Central Government. However, The Supreme Court observed thus : "Even the conclusion, however, that the Corporation is an Agency or instrumentality of the Central Government does not lead to the further inference that the Corporation is a Government Department. The reason is that the F.C. Act has given the Corporation an individuality apart from that of the Government. In any case, the Corporation cannot be divested of its character as a 'company' within the meaning of the definition in Clause (e) of S. 3 of the L.A. Act, for it completely fulfills the requirements of that Clause, as held by above." The same principles apply to the Management in this case which is the Hindustan Photo Films Manufacturing Company Ltd. The Management is an autonomous body capable of acquiring, holding and disposing of property and having the power to contract. It may also sue or be sued by its own name. It has an individuality part from that of the Government. From this it can only follow that an officer of the Management cannot have the status of a civil servant and the protection of Art. 311 of the Constitution of India. But the question that still remains to be considered is whether there is an element of public employment in the service of the petitioner. When once it is conceded that the Management is a State within the meaning of Art. 12 of the Constitution of India, then part III of the Constitution of India would be attracted. The question will then arise whether there is an element of public employment involved in the case of the petitioner's services with the Management. In Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, [1975-I L.L.J. 399], the question arose whether the Oil and Natural Gas Commission, the Life Insurance Corporation of India and the Industrial Finance Corporation would be "authorities" under Art. 12 of the Constitution of India and whether its employees would be entitled to the protection of Arts. 14 and 16 of the Constitution of India. Ray, C.J., on behalf of Chandrachud and Gupta, JJ. and on his own behalf held that the said bodies were authorities within the meaning of Art. 12. 14 and 16 of the Constitution of India. Ray, C.J., on behalf of Chandrachud and Gupta, JJ. and on his own behalf held that the said bodies were authorities within the meaning of Art. 12. of the Constitution of India and that the Rules and Regulations framed by these bodies had the force of law. They further held that the employees of these statutory bodies had a statutory status and they were entitled to a declaration of being in employment when their dismissal or removal was in contravention of statutory provisions, though they were not servants of the Union or the State. Mathew, J., in his Separate but concurring judgment also held that the said Corporations were State within the meaning of Art. 12 of the Constitution of India and that the regulations framed by the said Corporations had the force of law. The learned Judge observed as follows : "Even assuming that the regulations have no of law, I think since the employment under these Corporations is public employment, an employee would get a status which would enable him to obtain declaration for continuance in service if he was dismissed or discharged contrary to the regulations". After discussing the original concept of employment under the laws of master and servant and the observations of Lord Wilberforce in Mallech v. Aberdeen Corporation (1971 I WLR 1578) the learned Judge observed thus : "I think that employment under public corporations of the nature under consideration here is public employment and, therefore, the employee should have the protection which appertains to public employment." The learned Judge then referred to the observation of Lord Evershed in McCleland v. Northern Ireland Health Board (1957 All E.R. 129) and observed as follows : "And he also pointed out that the position of the employer board and one of its servants is very different : (The loss or damage to the board occasioned by the departure of one of its servants would, save in very exceptional circumstances, be negligible. To a servant, certainly a servant in the position of the appellant, the security of employment with the Board for the period of working life is of immense value). This approach to public employment goes some way towards the reversal of the common law position. To a servant, certainly a servant in the position of the appellant, the security of employment with the Board for the period of working life is of immense value). This approach to public employment goes some way towards the reversal of the common law position. In public employment where there is an appointment to a permanent post, there should be presumption that the employee cannot be given notice and the servant can only be dismissed for misconduct or specified reasons." The learned Judge then referred to the observations of Lord Stendale, M. R. in Hanson v. Radoliffe, U. D. C. (1922 2 Ch. 490) and again observed thus : "That apart, the regulations framed by these. Corporations were intended to be binding upon them and were the bases on which the employment were made. As the employments were under Corporation created by status for carrying on business of public importance, they were public employment. And even if the regulations have not got the force of law, I think the principle laid down by Justice Frank further in Vitarelli v. Seaton, (359 U.S. 535 at 546-547), should be given the situation : He said. An executive Agency must be rigorously held to the standards by which its professes its action to be judged ..... Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such Agency, that procedure must be scrupulously observed ...... This judicially evolved Rule of administrative law is now firmly established, if I may add, rightly so. He that takes the procedural sword shall perish with that sword." In Managing Director v. Vijay Narayan Vajpayee [1980-I L.L.J. 222], the question arose whether the U.P. Warehousing Corporation was an Agency or instrumentality of the Government, whether its employee had any statutory status and whether he could invoke the principles of natural justice. The Supreme Court held that the U.P. Warehousing Corporation was a State within the meaning of Art. 12 of the Constitution of India and the ratio in Sukdev Singh's case [1975-I L.L.J. 399], would apply to the facts of that case. The Supreme Court held that the U.P. Warehousing Corporation was a State within the meaning of Art. 12 of the Constitution of India and the ratio in Sukdev Singh's case [1975-I L.L.J. 399], would apply to the facts of that case. Sarkaria, J., observed thus : "Even it at the time of the dismissal, the statutory regulations had not been framed or had not come into force, then also, the employment of the respondent was public employment and the employer, the statutory body, could not terminate the services of its employee without the due enquiry in accordance with the statutory regulations, if any, in force, or in the absence of such regulations, in accordance with the rules of natural justice." The learned Judge after referring to the decision of the House of Lords in Melloch v. Aberdeen Corporation (1971-I WLR. 1578) and the decision of the Supreme Court in Ramana Devaram Shetty v. The International Airport Authority of India, [1979-II L.L.J. 217] observed thus : "We do not think it necessary to burden this judgment by a detailed discussion of these cases because in the instant case, all the material factors exist which show beyond doubt that the Uttar Pradesh State Warehousing Corporation constituted under the Act 58 of 1956, is an Agency or instrumentality of the Government, and the relationship between the Corporations and its employees is not purely that of master and servant founded only on contract. Indeed it was not seriously disputed that the respondent is in public employment and the Corporation is an authority within the meaning of Art. 12 of the Constitution." Chinnappa Reddi, J. in his concurring judgment observed as follows : "I find it very hard indeed to discover any distinction on principle between a person directly under the employment of the Government and a person under the employment of an Agency or instrumentality of the Government or a Corporation set up under a statute or incorporated but wholly owned by the Government"...... In a country like ours which teems with population, where the State, its Agencies, its instrumentalities and the Corporations are the biggest employers and where millions seek employment and security, to confine the applicability of the equity clauses of the Constitution, in relation to matters of employment, strictly to direct employment under government is perhaps to mock at the Constitution and the people. Some element of public employment is all that is necessary to take the employee beyond the reach of the rule which denies him access to a court to enforce a contract of employment and denies him the protection of Arts. 14 and 16 of the Constitution. After all employment in the public sector has grown to vast dimensions and employees in the public sector often discharge as enormous duties as civil servants and particularly participate in activities vital to our country economy. In growing realisation of the importance of employment in the public sector, Parliament and Legislatures of the States have declared persons in the service of local authorities, Government Companies and statutory corporations as public servants and extended to them by express enactment the protection usually extended to civil servants from suits and prosecution. It is, therefore, but right that the independence and integrity of those employed in the public sector should be secured as mush as the independence and integrity of civil servants. I agree with what has been said by my brother Sarkaria J., I have added a few lines to emphasises the problem." In A. R. Joshi v. State Bank of India, (1981) Lab. I.C. 1012, it washed by the Delhi High Court thus : "The State Bank of India having been constituted under the Act is a statutory body. The power to employ officers and others exercisable by the Bank is a statutory power. Therefore, the employment of the employees of the Bank is a statutory employment. Therefore, when an employee is charged with misconduct and disciplinary proceeding are held against him by the Bank Authorities the employee is entitled to invoke the principles of natural justice." 10. The question whether the Bharat Earth Movers Ltd., Hindustan Machines Tools Ltd., and Karnataka Agro Industries Corporation Limited fell within the meaning of the word State as defined in Art. 12 of the Constitution of India and its employee would be entitled to the protection of Arts. 14 and 16 of the Constitution, arose for consideration before Rama Jois, J., in T. S. Srinivasa Murthy v. Bharat Earth Movers Ltd., [1982-I L.L.J. 868]. The learned Judge came to the conclusion that those bodies are State. The learned Judge then posed the question whether the relationship between the employees of the various Corporations and the Corporations was contractual or one of status. The learned Judge came to the conclusion that those bodies are State. The learned Judge then posed the question whether the relationship between the employees of the various Corporations and the Corporations was contractual or one of status. The learned Judge after referring to the decision of the Supreme Court in Sukhdev v. Bhagatram (supra) and U. P. Warehousing Corporation v. Vijay Narayan Vajpayee (supra) observed thus : "Therefore, in my view, except in the case of special post which forms a class by itself in respect of which a Government Company or a statutory Corporation may enter into a specific contract of service on special terms and conditions having regard to its nature of duties and duration, in respect of persons appointed to its regular service and posts, the conditions of service of persons appointed to its regular service and posts, the conditions of service of persons appointed to such posts have to be governed by the rules which may be framed and altered unilaterally by each of the companies having due regard to the exigencies of public employment and applied to its employees, which of course must conform to the fundamental rights ........ Therefore, except those appointed on contract basis to any special post for a specified period, the relationship between all other appointed on its regular establishments is one of status and not contract. The Companies and the Bank being State for purpose of Part III in regulating the recruitment and conditions of service of persons appointed to their services must conform to Art. 14 and a specific fact of it incorporated in Art. 16". The learned Judge ultimately observed thus : "For the above reasons, I hold that the employment under the Government Companies and the Bank is public employment and not private. The learned Judge ultimately observed thus : "For the above reasons, I hold that the employment under the Government Companies and the Bank is public employment and not private. The relationship between these bodies and their employees is essentially one of status though its origin is in contract." In C. I. W. Transport Corporation v. P. Sen (86 Calcutta Weekly Notes 609) a Bench of the Calcutta High court was called upon to decide whether the Central Inland Water Transport Corporation Limited was a State within the meaning of Art. 12 of the Constitution of India and whether the Joint Financial Adviser and the Chief Accounts Officer of the Corporation was entitled to file a writ petition challenging his dismissal from service or he was only entitled to file a suit for damages. The Bench following the decision of the Supreme Court in Sukhdev Singh v. Bhagatram (supra), U. P. Warehousing Corporation v. Vijay Narayan Vajpayee (supra) and Som Prakash v. Union of India [1981-I L.L.J. 79], held that the Corporation was an agency or instrumentality of the Central Government and was an authority and therefore a State within the meaning of Art. 12 of the Constitution. The learned Judge further held that in a case where the company is an authority and, therefore, a State within the meaning of Art. 12 of the Constitution in a matter of dispute between the company and the officers, the company must follow the rules of natural justice and must act fairly and justly. In R. M. Joshi v. Reserve Bank of India [1982-I L.L.J. 77] a Full Bench of the Delhi High Court was called upon to answer two questions, viz, whether the Reserve Bank of India Staff Regulations were not statutory in character and were contractual and whether the employees could maintain a Writ Petition on the ground that they had a right to equality under the Constitution or any other constitutional rights. The Full Bench speaking through Deshpande, C.J., opined that the Staff Regulations of the Reserve Bank of India were not statutory and were promulgated in exercise of executive power. However, the learned Chief Justice on behalf of the Full Bench held that the Writ Petition would be maintainable. The Full Bench speaking through Deshpande, C.J., opined that the Staff Regulations of the Reserve Bank of India were not statutory and were promulgated in exercise of executive power. However, the learned Chief Justice on behalf of the Full Bench held that the Writ Petition would be maintainable. The learned Chief Justice in this context observed as follows : "The mere fact, however, that the staff Regulations are not statutory does not always mean that any attempt to enforce them would be based on a contract and as such the proper subject-matter of a suit and not of a writ petition under Art. 226 of the Constitution. The reason is that a standardized contract of service with the State or a public authority by a large class of employees stands on a different footing from an ordinary contract between two individual or even a contract by an individual with the Government. The State and the public authority are not free like an ordinary employer to deal with such a standarized class of their employees. They are under constitutional and statutory obligations. It is these fetters on the powers of the employer that give a status other than contractual to the employees of the State or a public authority. If, therefore, depends on the nature of the rights sought to be enforced by the employees of the State or public authority, whether the particular right is contractual or statutory or constitutional." After referring to a number of decisions the learned Chief Justice observed as follows : "The reason is that those executive instructions are regarded not merely as conditions of service contract, but rather the incidents of status of public servants. If constitutional rights are claimed by the petitioners, the contractual origin of these conditions of service will not come in the way ... For instance the right of equality guaranteed by Arts. 14 and 16 of the Constitution will prevent the authority which is the State under Art. 12 of the Constitution from contravening the said fundamental right. It will not then matter that the conditions of service are contractual. The State in dealing with different classes of its employees cannot say that is not bound by the fundamental rights of its employees merely because the employment originates in a contract and may be governed by conditions of service which are in the form of a contract. It will not then matter that the conditions of service are contractual. The State in dealing with different classes of its employees cannot say that is not bound by the fundamental rights of its employees merely because the employment originates in a contract and may be governed by conditions of service which are in the form of a contract. The question whether a servant of the State or of statutory authority can enforce his right against the employer under Art. 226 depends upon whether his right is based not only on contract by also on the Constitution or a statute. Once he is able to show that either a statutory or constitutional provisions is contravened by the State he would be able to maintain the Writ Petition under Art. 226 of the Constitution and would be granted relief thereunder. On the other hand if no constitutional or stature protection is enjoyed by him, then his right would remain merely contractual and it cannot be enforced under Art. 226 of the Constitution. Our answer to the reference, therefore, is that while the Reserve Bank of India Staff Regulations are not statutory in character and are contractual, the question whether the writ petitions are maintainable would depend on whether the petitioners have the right to equality under the Constitution or any other constitutional rights and whether any such right is contravened by the action of the Bank." 11. The following principles, therefore, emerge from above decisions. The employees of public corporations or Companies which fall within the definition of the word 'State' under Art. 12 of the Constitutional of India do not have the status of a civil servant. However, the relationship between such employer and the employees is not purely that of master and servant, though the relationship might have originated in contract. An element of public employment is necessarily involved in the relationship. In other words the relationship is one of status. That being so, the employees would be entitled to the protection of Art. 14 and 16 of the Constitution of India, though not Art. 311 of the Constitution. Since the employment under the corporation is public employment, an employee would get a status which would enable him to obtain declaration for continuance of service if he is dismissed or discharged contrary to the service regulations. JUDGMENT 1. Since the employment under the corporation is public employment, an employee would get a status which would enable him to obtain declaration for continuance of service if he is dismissed or discharged contrary to the service regulations. JUDGMENT 1. The petitioner joined the services of the second respondent, Hindustan Photo Films Manufacturing Co. Ltd. (for short the Management) as early as in 1961 as a Technical officer. In 1976 he was promoted as Works Manager. He was in charge of the two factories of the Management, one at Ooty and the other at Ambattur. On 27.10.1980 the Management informed the petitioner that his services stood terminated under Clause 13.1 of the Hindustan Photo Films Services Rules for Officers (for short Service Rules). A Cheque for Rs. 5,000 being two months basic salary was enclosed. Against the said order the petitioner preferred an appeal before the Board of Directors on 29-12-1980. The Appeal was rejected by the Board on 10-4-1981. It is, in these circumstances, the petitioner has filed this writ petition to quash the order passed by the Management terminating his services. 2. The communication dated 27.10.1980 states : 'Pursuant to the resolution of the Board of Directors dated 25th October, 1980 and the terms of clause 13.1 of the Hindustan Photo Films Service Rules for officers, you are hereby notified that your services are terminated with immediate effect and as required by the said Rules, a cheque for Rs. 5,000 representing two months basic pay in lieu of notice is enclosed. 3. Before I deal with the contentions raised by Mr. B. R. Dolia on behalf of the petitioner and the learned Solicitor General for the Management, it is necessary to refer to the relevant provisions of the service Rules. The rules apply to all officers of the company who are in the pay scales of Rs. 450 - 800, Rs. 400 - 950 and above. The service Rules deal with recruitment, probation, promotion, fixation of pay on promotion, verification of date of birth, disqualification for appointment, training and development, performance appraisal and increments, crucial date of increments, transfer, deputation of Officers to other organisations, superannuation, termination of employment, contributory provident fund, leave entitlement, other amenities and gratuity In this context the relevant rules to which reference was made at the time of argument may be referred to Rule 9 of the Service Rules reads thus : "9. Performance appraisal and increments : 9.1 Increments shall be granted by the Management to an Officer on the basis of performance which will be reviewed once in a year in accordance with the performance appraisal system of the company. Increments will not be automatic, but based on the performance appraisal review and the recommendations of the appropriate promotion committee referred to in paras 4.2.1 and 4.2.2. In the event of an Officer being found unsuitable for continuation in the Company's services based on the appraisal of his performance, he is liable to be terminated from the services of the Company after giving due notice as stated in para 13.1 Rule 12 of the Service Rules reads thus : "12. Superannuation - Retirement. 12.1 Every Officer appointed to the services of the Company shall retire when he completes the age of 58 years on the last day of the month in which he completes 58 years. ...... ...... ...... ......" Rules 13. of the Service Rules states : "13. Termination of employment 13.1 In the case of termination - resignation of the services of an Officer, notice shall be given by either party for the period shown below or payment of basic pay shall be made for the period in lieu of notice : (1) In the case of permanent employees ....... 2 months (2) In the case of Officers on probation and under-training" 1 months No notice will be required in any case for termination of employment on attaining the age of superannuation, viz., 58 years of age. 13.2 The pay and allowance or any other amounts due to an officer leaving the services of the company without giving proper notice or without his resignation being accepted shall be liable for forfeiture in whole or in part as the Company may decide. 4. The Management has also framed Conduct, Discipline and Appeal Rules for officers and Supervisors (for short Conduct Rules). Rules 5 of the Conduct Rules states that without prejudice to the generality of the term "misconduct" the following acts of omission and commission shall be treated as misconduct. As many as 24 items are mentioned therein. The note to the rule states that the said instances of misconduct are illustrative in nature and not exhaustive. Rules 5 of the Conduct Rules states that without prejudice to the generality of the term "misconduct" the following acts of omission and commission shall be treated as misconduct. As many as 24 items are mentioned therein. The note to the rule states that the said instances of misconduct are illustrative in nature and not exhaustive. Rule 20 of the Conduct Rules provides for suspension of an Officer/Supervisor where a disciplinary proceeding against him is contemplated or is pending or where a case against him in respect of any criminal offence is under investigation or trial. Rule 23 provides for penalties that might be imposed on the Officer/Supervisor for misconduct committed by him or for any other good and sufficient reasons. The penalties are divided into two categories, viz. minor penalties and major penalties. Minor penalties are such as censure, withholding of increments of pay with or without cumulative effect, withholding of promotion and recovery from pay or such other amount as may be due to him of the whole or part of the pecuniary loss caused to the company by negligence or breach of orders. Major penalties refer to reduction to a lower grade or post or to a lower stage in a time scale; removal from service which shall not be a disqualification for future employment, i.e., termination and dismissal. Explanation to Rule 23 refers to certain acts which will not amount to a penalty within the meaning of the Conduct Rules. Clause (vi) of the Explanation to Rule 23 of the Conduct Rules reads thus : "vi. Explanation to Rule 23 refers to certain acts which will not amount to a penalty within the meaning of the Conduct Rules. Clause (vi) of the Explanation to Rule 23 of the Conduct Rules reads thus : "vi. Termination of Service : (a) of an Officer/Supervisor appointed on probation during or at the end of period of probation, in accordance with the terms of his appointment; (b) of an Officer/Supervisor appointed in a temporary capacity, otherwise than under a contract or agreement, on the expiration of the period for which he was appointed, or earlier in accordance with the terms of his appointment; (c) of an officer/Supervisor appointed under a contract or agreement, in accordance with the terms of such contract or agreement; and (d) of any Officer/Supervisor on reduction of establishment based on first come last go principle; Rules 24 states thus : "The disciplinary authority, as specified in the schedule, or any authority higher than it may impose and of the penalties specified in Rule 23 on any officer/Supervisor : Rules 25 deals with the procedure for imposing major penalties : It runs thus : "25. (1) No order imposing any of the major penalties specified in Clauses (e) (f) and (g) of Rules 23 shall be made except after an inquiry is held in accordance with this rule." The details of the manner in which the enquiry has to be held are contained in Sub-Rules (2) to (19) of Rules 25. Rules 26 deals with action on the inquiry report. Rule 27 contains the procedure for imposing minor penalties. Rule 32(i) states that Officer/Supervisor may appeal against an order imposing upon him any of the penalties specified in Rule 23 or against the order to suspension referred to in Rule 20. Rule 33 deals with the power of review. Rule 36.5 deals with the continuation of the disciplinary proceedings which might be instituted against an Officer/Supervisor before his date of superannuation, even after his date of retirement. Rule 36.6 empowers the appointing authority to institute a departmental proceeding against a retired employee in respect of any event which took place not more than four years before such institution. The Schedule to the Conduct Rules prescribed the appointing authority, disciplinary authority/competent authority and appellate authority in respect of various grades of officers. 5. Rule 36.6 empowers the appointing authority to institute a departmental proceeding against a retired employee in respect of any event which took place not more than four years before such institution. The Schedule to the Conduct Rules prescribed the appointing authority, disciplinary authority/competent authority and appellate authority in respect of various grades of officers. 5. I may at the very outset that he learned Solicitor General appearing for the Management did not contest the position that a Writ Petition would be maintainable against the Hindustan Photo Films Manufacturing an agency or an instrumentality of the State. 6. Mr. Dolia, raised the following contentions : (1) An element of public employments is involved in the service of the petitioner with the Management. In the circumstances, though the employment of the petitioner with the Management originated in a contract, subsequently the petitioner obtained a statutory status. Consequently, it will be open to this Court in exercise of its powers under Art. 226 of the Constitution of India to give a declaration that he continued to be in the employment of the Management if it was found that the termination of the services of the petitioner was in violation of the principles of natural justice and contrary to the service regulations. The relationship of the petitioner and the Management could not be considered thereof as one of master and servant, (2) The order of termination in the instant case was passed by merely giving two months notice. Under Rule 9.1 of the Service Rules an Officer would be entitled to increments on the basis of the performance to be reviewed once in a year in accordance with the performance appraisal system. According to the said rule, in the event of an office being found unsuitable for continuation in the Company's Services based on the appraisal of his performance, he is liable to be terminated from the services of the Company after giving due notice as stand in Rule 13.1 of the Service Rules. Rule 13.1 which provides for two months notice being given in the case of permanent employees and one months in the case of officers on probation and under-training must be read subject to Rule 9.1 of the service Rule. Rule 13.1 would be attracted only when an Officer is found unsuitable on the appraisal of his performance. Rule 13.1 which provides for two months notice being given in the case of permanent employees and one months in the case of officers on probation and under-training must be read subject to Rule 9.1 of the service Rule. Rule 13.1 would be attracted only when an Officer is found unsuitable on the appraisal of his performance. Further, the Management ought to have conducted an enquiry on the question whether the petitioner was unsuitable for continuation in the service of the Management. The failure to do so amounted to a violation of the principles of natural justice. This would be particularly so because the petitioner has a right to continue in service till the date of his superannuation, (3) In view of the fact that the order of termination, was passed without conforming to the principles of natural justice, the order was arbitrary, mala fide in law and based on no appraisal of performance, especially when there was sufficient evidence to show that he petitioner had been rated well in respect of his duties by the Management, (4) Rule 13.1 is liable to be struck down on the ground that it confers an arbitrary power on the Management and that it is violative of Art. 14 of the Constitution of India, (5) In any event, the order of termination has case a stigma on the petitioner and consequently is punitive in character, though it is worded innocuously. In the circumstances, the order is vitiated by a failure to conform to the principles of natural justice. 7. The learned Solicitor General, however, contended that the relationship between the Management and the petitioner is that of master and servant pure and simple. The Rules are not statutory. The management, though amenable to the jurisdiction of the Court under Art. 226 of the Constitution of India, in the sense that it is an instrumentality or agency of the Government. Consequently, the petitioner cannot have the status of a civil servant and, therefore, Art. 311 of the Constitution of India would stand excluded. If that be so, then the relationship between the petitioner and the Management must be considered to be purely contractual. In such a situation. Art. 14 of the Constitution of India would not be attracted. Consequently, the petitioner cannot have the status of a civil servant and, therefore, Art. 311 of the Constitution of India would stand excluded. If that be so, then the relationship between the petitioner and the Management must be considered to be purely contractual. In such a situation. Art. 14 of the Constitution of India would not be attracted. The Supreme Court has held that Art. 14 would apply in the case of contracts only at the threshold when the Government grants a contract and once a contract is entered into the relationship between the parties must be dealt with according to the terms of the contract. Rule 13.1 of the Service Rules cannot, therefore, be said to be violative of the Constitution of India. Further, the learned Solicitor General argued that Rule 13.1, is not dependent on Rule 9.1. Under Rule 13.1 the Management has got an independent power to terminate the service of an officer by giving two months notice or salary for the said period in lieu of notice. The contention of the petitioner that the order of termination cast a stigma and is punitive in character and, therefore, violative of the principles of natural justice cannot be sustained. The order on the face of it shows that no stigma is cast of the petitioner. There are no averments regarding mala fides, in the affidavit. The provision regarding the penalties contained in Rule 23 of the conduct Rules could not be attracted to the facts of this case. The petitioner's service have been terminated because he was found on an appraisal of his performance that he was unsuitable to be continued in the service of the Management. 8. The provision regarding the penalties contained in Rule 23 of the conduct Rules could not be attracted to the facts of this case. The petitioner's service have been terminated because he was found on an appraisal of his performance that he was unsuitable to be continued in the service of the Management. 8. On the basis of the contentions urged before me by the learned counsel for the petitioner and by the learned Solicitor General on behalf of the Management, the following points arise for determination : (1) Whether the relationship between the Management and the petitioner is that of master and servant or whether an element of public employment is involved, (2) Whether Rule 13.1 of the Service Rules confers an unfettered power on the Management to terminate the services of the petitioner by giving two months notice or salary in lieu thereof or whether the powers conferred on the Management under Rule 13.1 can be exercised only if the conditions in Rule 9.1 are satisfied, (3) Assuming that Rule 13.1 confers an independent power on the Management to terminate the service of an officer by giving two months notice or salary in lieu of notice, whether Rule 13.1 is arbitrary and violate of Art. 14 of the Constitution of India, (4) Whether the order of termination of the service of the petitioner is vitiated by mala fides, (5) Whether the order of termination of the services of the petitioner is punitive in character and is violative of the principles of natural justice. 9. As I have already stated, it is not disputed by the learned Solicitor General that the Management is a State within the meaning of Art. 12 of the Constitution of India inasmuch as it is and agency or instrumentality of the State. The fact that the Management is a State within the meaning of Art. 12 of the Constitution of India does not however, make it a department of the Government, as contended by the learned Solicitor General. In State of Punjab v. Raja Ram (AIR 1981 S.C. 1994) the Supreme Court was concerned with the question whether the Food Corporation of India is a department of the Government. The Supreme Court answered the question in the negative. There, the Supreme Court came to the conclusion that the Food Corporation of India was an agency or instrumentality of the Central Government. The Supreme Court answered the question in the negative. There, the Supreme Court came to the conclusion that the Food Corporation of India was an agency or instrumentality of the Central Government. However, The Supreme Court observed thus : "Even the conclusion, however, that the Corporation is an Agency or instrumentality of the Central Government does not lead to the further inference that the Corporation is a Government Department. The reason is that the F.C. Act has given the Corporation an individuality apart from that of the Government. In any case, the Corporation cannot be divested of its character as a 'company' within the meaning of the definition in Clause (e) of S. 3 of the L.A. Act, for it completely fulfills the requirements of that Clause, as held by above." The same principles apply to the Management in this case which is the Hindustan Photo Films Manufacturing Company Ltd. The Management is an autonomous body capable of acquiring, holding and disposing of property and having the power to contract. It may also sue or be sued by its own name. It has an individuality part from that of the Government. From this it can only follow that an officer of the Management cannot have the status of a civil servant and the protection of Art. 311 of the Constitution of India. But the question that still remains to be considered is whether there is an element of public employment in the service of the petitioner. When once it is conceded that the Management is a State within the meaning of Art. 12 of the Constitution of India, then part III of the Constitution of India would be attracted. The question will then arise whether there is an element of public employment involved in the case of the petitioner's services with the Management. In Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, [1975-I L.L.J. 399], the question arose whether the Oil and Natural Gas Commission, the Life Insurance Corporation of India and the Industrial Finance Corporation would be "authorities" under Art. 12 of the Constitution of India and whether its employees would be entitled to the protection of Arts. 14 and 16 of the Constitution of India. Ray, C.J., on behalf of Chandrachud and Gupta, JJ. and on his own behalf held that the said bodies were authorities within the meaning of Art. 12. 14 and 16 of the Constitution of India. Ray, C.J., on behalf of Chandrachud and Gupta, JJ. and on his own behalf held that the said bodies were authorities within the meaning of Art. 12. of the Constitution of India and that the Rules and Regulations framed by these bodies had the force of law. They further held that the employees of these statutory bodies had a statutory status and they were entitled to a declaration of being in employment when their dismissal or removal was in contravention of statutory provisions, though they were not servants of the Union or the State. Mathew, J., in his Separate but concurring judgment also held that the said Corporations were State within the meaning of Art. 12 of the Constitution of India and that the regulations framed by the said Corporations had the force of law. The learned Judge observed as follows : "Even assuming that the regulations have no of law, I think since the employment under these Corporations is public employment, an employee would get a status which would enable him to obtain declaration for continuance in service if he was dismissed or discharged contrary to the regulations". After discussing the original concept of employment under the laws of master and servant and the observations of Lord Wilberforce in Mallech v. Aberdeen Corporation (1971 I WLR 1578) the learned Judge observed thus : "I think that employment under public corporations of the nature under consideration here is public employment and, therefore, the employee should have the protection which appertains to public employment." The learned Judge then referred to the observation of Lord Evershed in McCleland v. Northern Ireland Health Board (1957 All E.R. 129) and observed as follows : "And he also pointed out that the position of the employer board and one of its servants is very different : (The loss or damage to the board occasioned by the departure of one of its servants would, save in very exceptional circumstances, be negligible. To a servant, certainly a servant in the position of the appellant, the security of employment with the Board for the period of working life is of immense value). This approach to public employment goes some way towards the reversal of the common law position. To a servant, certainly a servant in the position of the appellant, the security of employment with the Board for the period of working life is of immense value). This approach to public employment goes some way towards the reversal of the common law position. In public employment where there is an appointment to a permanent post, there should be presumption that the employee cannot be given notice and the servant can only be dismissed for misconduct or specified reasons." The learned Judge then referred to the observations of Lord Stendale, M. R. in Hanson v. Radoliffe, U. D. C. (1922 2 Ch. 490) and again observed thus : "That apart, the regulations framed by these. Corporations were intended to be binding upon them and were the bases on which the employment were made. As the employments were under Corporation created by status for carrying on business of public importance, they were public employment. And even if the regulations have not got the force of law, I think the principle laid down by Justice Frank further in Vitarelli v. Seaton, (359 U.S. 535 at 546-547), should be given the situation : He said. An executive Agency must be rigorously held to the standards by which its professes its action to be judged ..... Accordingly, if dismissal from employment is based on a defined procedure, even though generous beyond the requirements that bind such Agency, that procedure must be scrupulously observed ...... This judicially evolved Rule of administrative law is now firmly established, if I may add, rightly so. He that takes the procedural sword shall perish with that sword." In Managing Director v. Vijay Narayan Vajpayee [1980-I L.L.J. 222], the question arose whether the U.P. Warehousing Corporation was an Agency or instrumentality of the Government, whether its employee had any statutory status and whether he could invoke the principles of natural justice. The Supreme Court held that the U.P. Warehousing Corporation was a State within the meaning of Art. 12 of the Constitution of India and the ratio in Sukdev Singh's case [1975-I L.L.J. 399], would apply to the facts of that case. The Supreme Court held that the U.P. Warehousing Corporation was a State within the meaning of Art. 12 of the Constitution of India and the ratio in Sukdev Singh's case [1975-I L.L.J. 399], would apply to the facts of that case. Sarkaria, J., observed thus : "Even it at the time of the dismissal, the statutory regulations had not been framed or had not come into force, then also, the employment of the respondent was public employment and the employer, the statutory body, could not terminate the services of its employee without the due enquiry in accordance with the statutory regulations, if any, in force, or in the absence of such regulations, in accordance with the rules of natural justice." The learned Judge after referring to the decision of the House of Lords in Melloch v. Aberdeen Corporation (1971-I WLR. 1578) and the decision of the Supreme Court in Ramana Devaram Shetty v. The International Airport Authority of India, [1979-II L.L.J. 217] observed thus : "We do not think it necessary to burden this judgment by a detailed discussion of these cases because in the instant case, all the material factors exist which show beyond doubt that the Uttar Pradesh State Warehousing Corporation constituted under the Act 58 of 1956, is an Agency or instrumentality of the Government, and the relationship between the Corporations and its employees is not purely that of master and servant founded only on contract. Indeed it was not seriously disputed that the respondent is in public employment and the Corporation is an authority within the meaning of Art. 12 of the Constitution." Chinnappa Reddi, J. in his concurring judgment observed as follows : "I find it very hard indeed to discover any distinction on principle between a person directly under the employment of the Government and a person under the employment of an Agency or instrumentality of the Government or a Corporation set up under a statute or incorporated but wholly owned by the Government"...... In a country like ours which teems with population, where the State, its Agencies, its instrumentalities and the Corporations are the biggest employers and where millions seek employment and security, to confine the applicability of the equity clauses of the Constitution, in relation to matters of employment, strictly to direct employment under government is perhaps to mock at the Constitution and the people. Some element of public employment is all that is necessary to take the employee beyond the reach of the rule which denies him access to a court to enforce a contract of employment and denies him the protection of Arts. 14 and 16 of the Constitution. After all employment in the public sector has grown to vast dimensions and employees in the public sector often discharge as enormous duties as civil servants and particularly participate in activities vital to our country economy. In growing realisation of the importance of employment in the public sector, Parliament and Legislatures of the States have declared persons in the service of local authorities, Government Companies and statutory corporations as public servants and extended to them by express enactment the protection usually extended to civil servants from suits and prosecution. It is, therefore, but right that the independence and integrity of those employed in the public sector should be secured as mush as the independence and integrity of civil servants. I agree with what has been said by my brother Sarkaria J., I have added a few lines to emphasises the problem." In A. R. Joshi v. State Bank of India, (1981) Lab. I.C. 1012, it washed by the Delhi High Court thus : "The State Bank of India having been constituted under the Act is a statutory body. The power to employ officers and others exercisable by the Bank is a statutory power. Therefore, the employment of the employees of the Bank is a statutory employment. Therefore, when an employee is charged with misconduct and disciplinary proceeding are held against him by the Bank Authorities the employee is entitled to invoke the principles of natural justice." 10. The question whether the Bharat Earth Movers Ltd., Hindustan Machines Tools Ltd., and Karnataka Agro Industries Corporation Limited fell within the meaning of the word State as defined in Art. 12 of the Constitution of India and its employee would be entitled to the protection of Arts. 14 and 16 of the Constitution, arose for consideration before Rama Jois, J., in T. S. Srinivasa Murthy v. Bharat Earth Movers Ltd., [1982-I L.L.J. 868]. The learned Judge came to the conclusion that those bodies are State. The learned Judge then posed the question whether the relationship between the employees of the various Corporations and the Corporations was contractual or one of status. The learned Judge came to the conclusion that those bodies are State. The learned Judge then posed the question whether the relationship between the employees of the various Corporations and the Corporations was contractual or one of status. The learned Judge after referring to the decision of the Supreme Court in Sukhdev v. Bhagatram (supra) and U. P. Warehousing Corporation v. Vijay Narayan Vajpayee (supra) observed thus : "Therefore, in my view, except in the case of special post which forms a class by itself in respect of which a Government Company or a statutory Corporation may enter into a specific contract of service on special terms and conditions having regard to its nature of duties and duration, in respect of persons appointed to its regular service and posts, the conditions of service of persons appointed to its regular service and posts, the conditions of service of persons appointed to such posts have to be governed by the rules which may be framed and altered unilaterally by each of the companies having due regard to the exigencies of public employment and applied to its employees, which of course must conform to the fundamental rights ........ Therefore, except those appointed on contract basis to any special post for a specified period, the relationship between all other appointed on its regular establishments is one of status and not contract. The Companies and the Bank being State for purpose of Part III in regulating the recruitment and conditions of service of persons appointed to their services must conform to Art. 14 and a specific fact of it incorporated in Art. 16". The learned Judge ultimately observed thus : "For the above reasons, I hold that the employment under the Government Companies and the Bank is public employment and not private. The learned Judge ultimately observed thus : "For the above reasons, I hold that the employment under the Government Companies and the Bank is public employment and not private. The relationship between these bodies and their employees is essentially one of status though its origin is in contract." In C. I. W. Transport Corporation v. P. Sen (86 Calcutta Weekly Notes 609) a Bench of the Calcutta High court was called upon to decide whether the Central Inland Water Transport Corporation Limited was a State within the meaning of Art. 12 of the Constitution of India and whether the Joint Financial Adviser and the Chief Accounts Officer of the Corporation was entitled to file a writ petition challenging his dismissal from service or he was only entitled to file a suit for damages. The Bench following the decision of the Supreme Court in Sukhdev Singh v. Bhagatram (supra), U. P. Warehousing Corporation v. Vijay Narayan Vajpayee (supra) and Som Prakash v. Union of India [1981-I L.L.J. 79], held that the Corporation was an agency or instrumentality of the Central Government and was an authority and therefore a State within the meaning of Art. 12 of the Constitution. The learned Judge further held that in a case where the company is an authority and, therefore, a State within the meaning of Art. 12 of the Constitution in a matter of dispute between the company and the officers, the company must follow the rules of natural justice and must act fairly and justly. In R. M. Joshi v. Reserve Bank of India [1982-I L.L.J. 77] a Full Bench of the Delhi High Court was called upon to answer two questions, viz, whether the Reserve Bank of India Staff Regulations were not statutory in character and were contractual and whether the employees could maintain a Writ Petition on the ground that they had a right to equality under the Constitution or any other constitutional rights. The Full Bench speaking through Deshpande, C.J., opined that the Staff Regulations of the Reserve Bank of India were not statutory and were promulgated in exercise of executive power. However, the learned Chief Justice on behalf of the Full Bench held that the Writ Petition would be maintainable. The Full Bench speaking through Deshpande, C.J., opined that the Staff Regulations of the Reserve Bank of India were not statutory and were promulgated in exercise of executive power. However, the learned Chief Justice on behalf of the Full Bench held that the Writ Petition would be maintainable. The learned Chief Justice in this context observed as follows : "The mere fact, however, that the staff Regulations are not statutory does not always mean that any attempt to enforce them would be based on a contract and as such the proper subject-matter of a suit and not of a writ petition under Art. 226 of the Constitution. The reason is that a standardized contract of service with the State or a public authority by a large class of employees stands on a different footing from an ordinary contract between two individual or even a contract by an individual with the Government. The State and the public authority are not free like an ordinary employer to deal with such a standarized class of their employees. They are under constitutional and statutory obligations. It is these fetters on the powers of the employer that give a status other than contractual to the employees of the State or a public authority. If, therefore, depends on the nature of the rights sought to be enforced by the employees of the State or public authority, whether the particular right is contractual or statutory or constitutional." After referring to a number of decisions the learned Chief Justice observed as follows : "The reason is that those executive instructions are regarded not merely as conditions of service contract, but rather the incidents of status of public servants. If constitutional rights are claimed by the petitioners, the contractual origin of these conditions of service will not come in the way ... For instance the right of equality guaranteed by Arts. 14 and 16 of the Constitution will prevent the authority which is the State under Art. 12 of the Constitution from contravening the said fundamental right. It will not then matter that the conditions of service are contractual. The State in dealing with different classes of its employees cannot say that is not bound by the fundamental rights of its employees merely because the employment originates in a contract and may be governed by conditions of service which are in the form of a contract. It will not then matter that the conditions of service are contractual. The State in dealing with different classes of its employees cannot say that is not bound by the fundamental rights of its employees merely because the employment originates in a contract and may be governed by conditions of service which are in the form of a contract. The question whether a servant of the State or of statutory authority can enforce his right against the employer under Art. 226 depends upon whether his right is based not only on contract by also on the Constitution or a statute. Once he is able to show that either a statutory or constitutional provisions is contravened by the State he would be able to maintain the Writ Petition under Art. 226 of the Constitution and would be granted relief thereunder. On the other hand if no constitutional or stature protection is enjoyed by him, then his right would remain merely contractual and it cannot be enforced under Art. 226 of the Constitution. Our answer to the reference, therefore, is that while the Reserve Bank of India Staff Regulations are not statutory in character and are contractual, the question whether the writ petitions are maintainable would depend on whether the petitioners have the right to equality under the Constitution or any other constitutional rights and whether any such right is contravened by the action of the Bank." 11. The following principles, therefore, emerge from above decisions. The employees of public corporations or Companies which fall within the definition of the word 'State' under Art. 12 of the Constitutional of India do not have the status of a civil servant. However, the relationship between such employer and the employees is not purely that of master and servant, though the relationship might have originated in contract. An element of public employment is necessarily involved in the relationship. In other words the relationship is one of status. That being so, the employees would be entitled to the protection of Art. 14 and 16 of the Constitution of India, though not Art. 311 of the Constitution. Since the employment under the corporation is public employment, an employee would get a status which would enable him to obtain declaration for continuance of service if he is dismissed or discharged contrary to the service regulations.