S. Rajamohanan v. The Assistant General Manager — 1984 DIGILAW 239 (KER)

JUDGMENT U.L Bhat, J. 1. This is a petition, filed under Article 226 of the Constitution of India for the following reliefs: 1. To call for the records leading up to Ext. P-5 and to quash the same by a writ of certiorari. 2. To issue a writ of mandamus directing respondents to continue the petitioner in service and to issue an order of confirmation of his service as Inspector Grade I. Originally, the petition was laid against the three respondents viz., Assistant General Manager of the United India Insurance Company Ltd., Southern Regional Office, Madras, Divisional Manager at Trivandrum and the Branch Manager at Quilon. Subsequently, the Chairman cum Managing Director of the Insurance Company has been impleaded as additional fourth respondent. 2. The United India Insurance Company Ltd. (for short 'the Company') is one of the insurance companies in the public sector. In pursuance of an application submitted by the petitioner for appointment to the post of Junior Inspector, Ext. R-1 order dated, 7th July 1976 was issued to him appointing him on probation as Junior Inspector. On 25th October 1978, under Ext. R-2, he was placed in the scale of Gr. I Inspector with effect from 1st August 1978, also on probation. The Company has not issued any order of confirmation. Petitioner passed the Inspectors' Examination held in April, 1980. As per Ext. P-2, dated 30th June 1980, in terms of Ext. R-2, his probationary period was extended by one year with effect from 1st August 1979. On 13th January 1981, under Ext. P-5 he was informed that "As it is not considered feasible to confirm you in the services of the Company, your probation is hereby ceased with immediate effect. Consequently your services are dispensed with" by the first respondent. 3. The arguments advanced on behalf of the petitioner can be summarised as follows: The Company is a State or "other Authority" within the meaning of Art.12 of the Constitution of India. Since the period of probation was over and there was nothing against petitioner's conduct or performance and since the period was not further extended before the expiry of the period of probation nor terminated at the end of the probationary period, it must be deemed that petitioner has been confirmed. The absence of a formal letter of confirmation would not make any difference. Ext. The absence of a formal letter of confirmation would not make any difference. Ext. P-5 though camouflaged as a simple termination of the probation and services of the petitioner, is really a penalty imposed on the petitioner in violation of principles of natural justice and without following the procedure relating to disciplinary action and contravenes Art.14 and 16 of the Constitution. It is punitive in nature and is void. It is also argued that it involves hostile discrimination against the petitioner and is liable to be quashed. There was litigation between the petitioner's brother, also an employee of the Company, on the one hand and the second respondent on the other hand which led to filing of a false complaint by the second respondent against petitioner, his brother and others leading to registration of a crime case. For this reason, second respondent bears ill will against petitioner. Ext. P-5 was brought about at the instance of the second respondent. Petitioner's record is satisfactory. Ext. P-5 is not based on the contract or on the service rules. 4. The submissions made on behalf of the respondents can be summarised as follows: There is no automatic confirmation of probation at the expiry of the period of probation. On the date of Ext. P-5, petitioner was continuing on probation. It was on an assessment of his performance as a probationer that it was decided to terminate his probation and his services. It was a simple termination and therefore there was no obligation to give an opportunity to the petitioner to show cause against termination. It was not punitive, nor did it amount to punishment. It was concluded that it was not desirable to confirm the petitioner and this conclusion led to Ext. P-5 which was not passed at the instance of the second respondent or on account of mala fide motive. The conclusion of the appropriate authority in this behalf cannot be questioned under Article 226 of the Constitution. The facts leading to the complaint against the petitioner and his brother did not influence the first respondent in passing Ext. P-5. The order was passed bona fide. There has been no violation of principles of natural justice or of the Rules. The Company is not a State within the meaning of Article 12 of the Constitution of India. The facts leading to the complaint against the petitioner and his brother did not influence the first respondent in passing Ext. P-5. The order was passed bona fide. There has been no violation of principles of natural justice or of the Rules. The Company is not a State within the meaning of Article 12 of the Constitution of India. Even assuming that it is a State or other Authority, the fundamental rights of the petitioner not having been violated, Article 226 cannot be invoked. The Company is not a party to the Original Petition. 5. The following questions arise for consideration: 1. What exactly was the status of the petitioner on the date of Ext. P-5? 2. What is the nature of Ext. P-5? Whether it is a simple termination or it amounts to a punitive act? 3. If it is the latter, whether it is violation of the Rules and principles of natural justice and if so what is the consequence? 4. Whether Ext. P-5 is arbitrary and violative of Art.14 or Article 16 of the Constitution? 5. Whether the Company is a State under Art.12 of the Constitution of India? 6. Whether, in any event, petitioner is entitled to reinstatement and other consequential reliefs? 6. According to the respondents, on the date of Ext. P-5 petitioner was only a probationer; however, petitioner would contend that it must be deemed that he had been confirmed before that date. In State of Punjab v. Dharam Singh AIR 1968 SC 1210 principles governing such a matter have been laid down. When first appointment or promotion is made on probation for a specific period and the employee is allowed to continue in the post after the expiry of the period without any specific order of confirmation, he should be deemed to continue in his post as a probationer only, in the absence of indication to the contrary in the original order of appointment or service rules. In such a case, an express order of confirmation is necessary to give the employee a substantive right to the post. In such a case, an express order of confirmation is necessary to give the employee a substantive right to the post. From the mere fact that he is allowed to continue in the post after the expiry of the specific period of probation, it is not possible to hold that he should be deemed to have been confirmed, When on completion of the specified period of probation the employee is allowed to continue in the post without an order of confirmation, the only possible view to take in the absence of anything to the contrary in the original order or the service rules is that the initial period of probation has been extended by necessary implication. The Supreme Court specifically dealt with the rules relating to the Punjab Educational Service Class III Rules. The Rules specifically forbids extension of probation beyond three years. Discussing the effect of these rules, the Supreme Court observed that in the face of the specific rule the appointee cannot be deemed to continue in the post as a probationer by implication. Such an implication is negatived by the forbidding rule. In such circumstances, it is permissible to draw the inference that he had been confirmed in the post by implication. 7. I have been referred to another decision of the Supreme Court in Pratap Singh v. Union Territory of kandigarh 1979 (4) SCC 63. The Court actually found that the appointee was not a probationer but only a temporary appointee and therefore the rule of probation did not apply. Hence, the question of deemed confirmation or otherwise did not arise. However, assuming that it was a case of probationer, the Court observed that he shall not be deemed to have been confirmed in the absence of a rule providing for confirmation by implication. 8. We have to examine the facts of the case and the relevant rules to find out the correct position. Ext. R-1 is the original order of appointment of the petitioner as Junior Inspector. Paragraph 2 of the order states that he will be on probation initially for a period of one year which may be extended by one more year at the discretion of the company. Paragraph 3 states that confirmation of service on completion of the, probationary period or extended probationary period, if any, will not be automatic. Paragraph 2 of the order states that he will be on probation initially for a period of one year which may be extended by one more year at the discretion of the company. Paragraph 3 states that confirmation of service on completion of the, probationary period or extended probationary period, if any, will not be automatic. Unless a letter of confirmation is issued by the company, petitioner's service will stand automatically terminated on the expiry of the probationary period. During the probationary period, he will be paid a consolidated allowance of Rs. 250 per month and will not be entitled to other benefits available to regular employees. Upon completion of period of probation to the satisfaction of the company and if confirmed in the services of the company, he will be placed on such basic salary as may be decided upon by the company in the grade as applicable to Inspectors and thereupon he will be eligible to usual benefits as per rules and regulations of the company. Under Ext. R-2, he was designated as Inspector Gr. I with effect from 1st August 1978 and it was stated that his placement will not be deemed as confirmation in the service of the Company. Clause 2 of Ext.R-2 is more or less repetition of clauses 2 and 3 of Ext. R-1. Ext. R-2 also stated that during the initial probationary period, he will be paid a basic salary of Rs. 250 plus D.A., H.R.A., C.C.A., entertainment and conveyance allowance as applicable to Grade I Inspectors. Clause 5 states that upon completion of the stipulated quota of premium and passing the Licentiate Examination within the said probationary period of one year and the terms and conditions of Ext. R-l, the company may confirm him in service as Inspector in Inspectors Gr. I. 9. The Establishment Manual of the Company has been placed before me. Part C contains Rules and Regulations relating to Development Staff. The posts of Inspectors Gr. I and Gr. II fall in this category. R.2(8) states that selected candidates will be put on probation for a period of one year. If the probationer procures a premium income of not less than Rs. 75,000 subject to his passing the Licentiate Examination, he may be considered for confirmation. If, however, the probationary Inspector procures a premium income of at least Rs. II fall in this category. R.2(8) states that selected candidates will be put on probation for a period of one year. If the probationer procures a premium income of not less than Rs. 75,000 subject to his passing the Licentiate Examination, he may be considered for confirmation. If, however, the probationary Inspector procures a premium income of at least Rs. 50,000 in the first 12 months derived from at least 12 clients, subject to his performance otherwise found satisfactory, his probation period may be extended by another 12 months at the end of which he will be considered for confirmation as per the norms stated above. Rule 3 states that Inspectors appointed on probation will be paid consolidated salary during the period they are on probation and on confirmation they will be fitted in the Grade applicable to Inspector Gr. I. Junior Inspectors are dealt with at page 98 onwards. Sub clause (d) of R.7(1) states that selected candidates will be placed on probation for one year which may be extended by another year depending upon their performance. Sub clause (j) states that on completion of satisfactory probation and subject to the passing of the Licentiate Examination, Inspectors will be considered for confirmation. Sub clause (1) states that when a Junior Inspector completes Rs. 50,000 of non traditional business he may be put on probation as regular Inspector Grade I. 10. The rules contemplate probation period of one year in the first instance liable to be extended for another year. But the rules do not prescribe a maximum period of probation; nor do they prohibit extension of the probation period beyond two years. The rules also do not contemplate an automatic confirmation at the expiry of one of two years. What the Rules contemplate is that the probationer may be considered for confirmation on acquiring the requisite qualifications. This has been made clear in Ext. R-l also. No doubt, under Ext. P-2, petitioner's probation period was extended by one year with effect from 1st August 1979. This period expired on 31st July 1980. There is no specific order extending the probation further. Nor is there any order confirming him. Reliance is sought to be placed on the pay slips Exts. P-10 and P-11 for July, 1980 and January, 1980 respectively. Ext. P-11 shows his basic salary as Rs. 250 while Ext. P-10 shows the basic salary as Rs. 265. There is no specific order extending the probation further. Nor is there any order confirming him. Reliance is sought to be placed on the pay slips Exts. P-10 and P-11 for July, 1980 and January, 1980 respectively. Ext. P-11 shows his basic salary as Rs. 250 while Ext. P-10 shows the basic salary as Rs. 265. It is contended that increment having been allowed to him it must be taken that he has been confirmed, even in the absence of a specific order. It has to be seen that increment was granted within the extended period of probation and not thereafter. Ext. P-10 itself describes the petitioner as "on probation". Therefore, the fact that increment had been sanctioned would not evidence a change in status of the petitioner. There is nothing to show that in fact there has been confirmation. The Rules do not contemplate an implied confirmation. I therefore find that on the date of Ext. P-5, petitioner was only a probationer and could not be deemed to be confirmed. 11. The next question is whether Ext. P-5 is a simple termination of the probation and services of the petitioner or it is punitive in nature. If during the period of probation or at the end of it the probationer is found to be unfit to be in service, the employer would certainly have a right to put an end to the probation and remove him from service. If, however, the termination is punitive, the Company should follow the Rules. The General Insurance (Conduct, Discipline and Appeal) Rules, 1975 (for short 'the Disciplinary Rules') have been placed before me. R.23 relates to the penalties to be imposed on employees who commit breach of discipline or who are guilty of any other act prejudicial to good conduct. Mere termination of service of a probationer during or at the end of the period of probation in accordance with the terms of his appointment shall not amount to a penalty within the meaning of the Rule. Removal from service and dismissal are major penalties. R.25 lays down the procedure for imposing major penalties. No major penalty shall be imposed except after an enquiry in accordance with the Rules. When there is any imputation of misconduct or misbehaviour and when there are grounds for enquiring into the truth of the imputation, the competent authority may enquire into the truth thereof. R.25 lays down the procedure for imposing major penalties. No major penalty shall be imposed except after an enquiry in accordance with the Rules. When there is any imputation of misconduct or misbehaviour and when there are grounds for enquiring into the truth of the imputation, the competent authority may enquire into the truth thereof. When it is proposed to hold an enquiry, the competent authority shall frame definite charges on the basis of the allegations. The charges together with the statement of allegations, a list of documents and list of witnesses shall be communicated in writing to the employee and he shall be required to submit within the stipulated time a written statement. On receipt of the written statement denying the charges, the competent authority or an appointed enquiring authority may hold an enquiry. The employee shall be given an opportunity to prepare his defence. He may submit a list of documents and witnesses whom he wants to examine. Oral and documentary evidence may be produced by or on behalf of the competent authority. Witnesses may be cross examined by or on behalf of the employee who will also be entitled to adduce evidence. At the end of the elaborate procedure prescribed, the authority shall prepare a report and forward the records to the competent authority. Rule 26 lays down the procedure for action on enquiry report. Right of appeal also is provided for. If the termination is punitive, it could be done only on conformity with the procedure prescribed by the Rules. 12. Ext. P-5 states that "As it is not considered feasible to confirm you in the services of the Company, your probation is hereby ceased with immediate effect. Consequently your services are dispensed with". The order purports to be termination of service, pure and simple, during the period of probation. If it is really so, the order is unexceptionable. 13. However the form of the order is not always decisive. It may be a camouflage for imposition of a" penalty in which case it could be interfered with. If termination of service is founded on right flowing from contract or service rules, prima facie, it is not a punishment and carries with it no evil consequences or stigma. If termination of service is ordered during or at the end of period of probation, it will not ordinarily and by itself be punishment. If termination of service is founded on right flowing from contract or service rules, prima facie, it is not a punishment and carries with it no evil consequences or stigma. If termination of service is ordered during or at the end of period of probation, it will not ordinarily and by itself be punishment. If termination is founded on and not merely motivated by an alleged act of misconduct on the part of the employee, it visits him with evil consequences or casts stigma on his character and must be considered as punishment; punishment cannot be imposed without following the rules of procedure or principles of natural justice. Once a close connection between the satisfaction of the employer regarding the commission of an alleged act of misconduct by the employee and order of termination is made out, it has to be considered whether it was only motive for passing the order of termination or was the very foundation for passing the order. This has to be decided on a consideration of not merely what is stated in the order, but of the circumstances preceding and attending the order. See State of Punjab v. Sukh Bai AIR 1968 SC 1089 , Appar Apar Singh v. The State of Punjab and others (1974) 1 SLR 71 Indra Pal v. Managing Committee, M. I. College, Thora AIR 1984 SC 1110 , and Anoop Jaiswal v. Government of India AIR 1984 SC 636 . 13A. According to the petitioner, action has been taken on account of an alleged incident in which his brothers were involved. The relevant file has been placed before me. It was alleged that on 19th December 1980 when the second respondent who was proceeding to Alleppey from Quilon on an official trip reached Haripad, another car occupied by several persons including two brothers of the petitioner (of whom Kumara Pillai is an employee of the Company, under suspension) as well as the petitioner came there and prevented second respondent from proceeding in his car. Second respondent was abused. There was an attempt to drag the second respondent out of the car. Kumara Pillai assaulted him physically. Others also manhandled him. Threats were uttered against his life. That was because in a transaction in which petitioner's brothers were involved, the Company had filed a civil suit and there was departmental enquiry as well as CBI enquiry. There was an attempt to drag the second respondent out of the car. Kumara Pillai assaulted him physically. Others also manhandled him. Threats were uttered against his life. That was because in a transaction in which petitioner's brothers were involved, the Company had filed a civil suit and there was departmental enquiry as well as CBI enquiry. On these allegations, second respondent submitted a petition before the Company as well as the police and a crime case was registered against all of them including the petitioner. The Company considered what action should be taken on the complaint of the second respondent. The file shows that the Administrative Officer suggested that a serious view of the incident must be taken and the petitioner must be kept under suspension and charge sheeted along with his brother who was already under suspension. This suggestion was given apparently under legal advice. First respondent agreed with the suggestion on 27th December 1980. The file also shows a counter complaint by the petitioner against the second respondent made before the Company. The file further shows that memo of charges with the necessary enclosures was prepared on 3rd January 1981. At that stage, the Administrative Officer submitted another note pointing out that petitioner was still on probation and his services were liable to be terminated at any time without assigning any reason, and the question whether such action could be taken should be examined. After taking legal advice, first respondent decided to pass Ext. P-5 order. It was thus that Ext. P-5 order came to be passed without assigning any reason for the termination. 13B. From this background, there could be no doubt that alleged misconduct of the petitioner was not merely the motive for terminating the probation and his services. The action was taken in the wake of the decision arrived at by the competent authority to take disciplinary action against him on the basis that he had committed a grave act of misconduct. The allegation regarding the act of misconduct was the real foundation for the action terminating his services. The prima facie satisfaction of the employer regarding the act of misconduct led to the decision to initiate disciplinary proceedings; later the short cut of terminating probation was followed on the same ground. The order visited the petitioner with evil consequences and also involved stigmatisation. The prima facie satisfaction of the employer regarding the act of misconduct led to the decision to initiate disciplinary proceedings; later the short cut of terminating probation was followed on the same ground. The order visited the petitioner with evil consequences and also involved stigmatisation. It was camouflaged as a simple termination order passed in accordance with service conditions; in reality it was a punishment and amounted to punitive removal from service, 14. We have already seen that the Disciplinary Rules have laid down an elaborate procedure for taking disciplinary action leading to imposition of major penalty of removal from service or dismissal. The procedure was not actually followed. He was not given memo of charges. He had no opportunity to defend himself against the very serious allegation of misconduct. No enquiry was held. Therefore, the punitive action taken against him was violative of the Disciplinary Rules. Since the punitive action was taken without giving an opportunity to defend himself. It was violative also of principles of natural justice. 15. The question which next arises for consideration is whether the Company is a statutory or other authority within the meaning of Article 12 of the Constitution of India. While the petitioner would assert that the Company is a State under Article 12, respondent would contend that the Company is only a Government company incorporated under the provisions of the Companies Act and has a separate entity apart from the Government and is not a statutory creature and as such is not State for the purpose of Article 12 of the Constitution. It was at one time thought that a Government company could not under any circumstance be regarded as a State within the meaning of Article 12 of the Constitution as it is not created by the Statute but only incorporated under a statute. It was at one time thought that a Government company could not under any circumstance be regarded as a State within the meaning of Article 12 of the Constitution as it is not created by the Statute but only incorporated under a statute. This proposition could no longer be accepted in the wake of the later decisions of the Supreme Court in Airport Authority AIR 1979 SC 1628 Som Prakash AIR 1981 SC 212 , Ajay Hasia AIR 1981 SC 487 , B. S. Minhas v. Indian Statistical Institute AIR 1984 SC 363 , P. K. Ramachandra Iyer v. Union of India AIR 1984 SC 541 , A. L. Kalra v. Project and Equipment Corporation 1984 (3) SCC 316 These decisions have been followed by this Court in Sofhi v. FACT 1984 KLT 32 (DB) and Kunju Mohammed v. State of Kerala 1984 KLT 403 (FB) A Government Company, though it has a distinct juristic personality, will be treated as an instrumentality of the Government, if it is seen to be a mere agent of the Government, substantially owned and controlled by the Government. The question has to be decided on the features and circumstances existing in each case. The background and history of the Company, its structure, the purpose of incorporation, the public importance of the functions it is intended to perform, financial structure and resources, essential functional character, presence or absence of plenary control resting with the Government, presence or absence of State conferred of State protected monopoly status, existence or otherwise of some element of authority or command etc. are the various areas for examination in deciding whether a Government company is an instrumentality of State. 16. There were a large number of insurance companies prior to 1972. In 1971, the Government of India assumed management of the Companies under the General Insurance (Emergency Provisions) Act, 1971. The general insurance business was nationalised by the General Insurance Business (Nationalisation) Act, 1972 (for short 'the Act'). 16. There were a large number of insurance companies prior to 1972. In 1971, the Government of India assumed management of the Companies under the General Insurance (Emergency Provisions) Act, 1971. The general insurance business was nationalised by the General Insurance Business (Nationalisation) Act, 1972 (for short 'the Act'). According to the preamble of the Act, the purpose of the Act is to provide for the acquisition and transfer of shares of the Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business in the best interest of the community and to ensure that the operation of the economic system does not result in the concentration of wealth to the common detriment, for the regulation and control of such business and for matters connected therewith or incidental thereto. S.2 of the Act declares that the Act is for giving effect to the policy of the State towards securing the principles specified in Article 39 of the Constitution, the expression "State" having the same meaning as in Article 12 of the Constitution. Under S.4 of the Act, on the appointed day, all the shares in the capital of every Indian insurance company shall stand transferred to and vested in the Central Government and out of those shares the Central Government shall immediately thereafter provide for the transfer of not less than ten shares of every such company to such persons as may be specified in the notification to enable the Indian Insurance Company to function as a Government company. S.5 provides for transfer of undertakings of other existing insurers. S.6 provides for the effect of transfer of undertakings. Chap.3 of the Act deals with General Insurance Corporation of India. According to S.9, the Central Government shall form a Government company in accordance with the provisions of the Companies Act, to be known as the General Insurance Corporation of India for the purpose of superintending, controlling and carrying on the business of general insurance. The authorised capital of the Corporation shall be rupees seventy-five crores divided into seventy-five lakhs fully paid up shares of one hundred rupees each, out of which rupees five crores shall be the initial subscribed capital of the Corporation. The authorised capital of the Corporation shall be rupees seventy-five crores divided into seventy-five lakhs fully paid up shares of one hundred rupees each, out of which rupees five crores shall be the initial subscribed capital of the Corporation. Under S.10 of the Act, all the shares in the capital of every Indian insurance company which stand transferred to and vested in the Central Government by virtue of S.4 (with the exception of a few shares) shall immediately after such vesting, stand transferred to and vest in the Corporation. Chap.5 deals with scheme for reorganisation of general insurance business. S.16 enables the Central Government to frame one or more schemes providing for merger in one Indian Insurance Company of any other insurance company or formation of a new company by amalgamation, the transfer to and vesting in the acquiring company of the undertaking of any Indian Insurance Company, the constitution, name and registered office and capital structure of the acquiring company etc., the constitution of a board of management, the alteration of the memorandum and articles of association of the acquiring company and other matters. In framing schemes, the object of the Central Government shall be to ensure that ultimately there are only four companies (excluding the Corporation) and that they are so situate as to render their combined services effective in all parts of India. S.17 requires the schemes to be laid before the Parliament. Chap.6 deals with the functions of the Corporation and acquiring companies and their management. The functions of the Corporation are, broadly speaking, carrying on any part of general insurance business, aiding, assisting, advising the acquiring companies and issuing directions to them in relation to the conduct of the general insurance business. S.19 states that subject to the rules, if any, made by the Central Government and the memorandum and articles of association, it shall be the duty of the acquiring company to carry on general insurance business. It must be secured that the business is developed to the best advantage of the community. S.20 requires that every acquiring company shall distribute the balance of profit as dividend. The profit made by the Corporation shall be dealt with in such manner as may be prescribed. S.21 contains interim provisions for management of Indian Insurance Companies. It must be secured that the business is developed to the best advantage of the community. S.20 requires that every acquiring company shall distribute the balance of profit as dividend. The profit made by the Corporation shall be dealt with in such manner as may be prescribed. S.21 contains interim provisions for management of Indian Insurance Companies. S.23 confers on the Central Government power to issue directions to the Corporation and other acquiring companies in the discharge of their functions in regard to matters of policy involving public interest. S.24 confers on the acquiring companies monopoly in carrying on general insurance business. Under S.31 every officer or employee of the Corporation or acquiring company shall be deemed to be a public servant for the purpose of Chap.9 of Indian Penal Code. S.33 states that no provision of law relating to the winding up of companies shall apply to the Corporation or to an acquiring company and they shall not be placed in liquidation save by order of the Central Government as it may direct. S.39 confers on the Central Government, power to make rules. In particular, the rules may provide for the manner in which profits received by the Corporation may be dealt with, the conditions subject to which the Corporation and the acquiring companies shall carry on general insurance business, reports which may be called for by the Central Government and any other matter which is required to be or may be prescribed. 17. The Central Government ensured that there will be only four companies to transact the business in India. All the remaining existing Indian companies were merged in these four companies. Merger was effected by formulating four schemes. The scheme relating to this case is the United India Fire and General Insurance Company (Merger) Scheme, 1973. This was framed in exercise of powers conferred on the Central Government under S.16(1) of the Act. By virtue of this scheme, the undertaking of every merged company stood transferred to and vested in the transferee company. The details of the merger are laid down in this scheme. All the merged companies stood dissolved without winding up. The transferee company was required to give intimation to the Registrar of Companies as to the dissolution of the merged company and on receipt of intimation the Registrar was to make necessary entries in his record. The details of the merger are laid down in this scheme. All the merged companies stood dissolved without winding up. The transferee company was required to give intimation to the Registrar of Companies as to the dissolution of the merged company and on receipt of intimation the Registrar was to make necessary entries in his record. The shares of the transferee company and the merged companies stood cancelled. The scheme prescribed authorised capital of the company and the manner of allotment of the shares. The memorandum of association and articles of association stood altered as set out in the second schedule to the scheme. Articles 96 to 99 of the Articles of Association were substituted. The new article provide for appointment of Directors with the previous approval of the Central Government, by the Chairman of the Corporation. Extension of term, filling up of vacancies and removal of Directors are to be made by the Corporation also with the previous approval of the Central Government. 17A. No doubt, the company is a company incorporated under the Companies Act. But the provisions of the Act, the scheme and the changes brought about in the memorandum of association and articles of association would show that the company is not merely a company under the Companies Act but something more. It was not directly created by the Act. The creature of the Act, it could be said, was only the Corporation and not the Company. But then the provisions of the Act and the scheme would clearly show that the Company, though not created by the Act, was conceived by the Act. It is a company with a statutory flavour. The company came into being as an instrument of State policy for the implementation of Art.39(c) of the Constitution, that is to secure that the operation of the economic system does not result in concentration of wealth and means of production to the common detriment. This is specifically referred to in the Act. The Act brought about virtual nationalisation of the existing companies. All the shares in the capital of the existing companies stood transferred to and vested in the Central Government. It was the mandate of the Act that the company should function as a Government company. This is specifically referred to in the Act. The Act brought about virtual nationalisation of the existing companies. All the shares in the capital of the existing companies stood transferred to and vested in the Central Government. It was the mandate of the Act that the company should function as a Government company. The shares of the company which stood vested in the Central Government thereafter stood transferred to a&id vested in the Corporation which is a creature of the Act. The provisions of the Act coupled with the scheme and the changes brought about in the memorandum of association , and articles of association would clearly show that the State has deep and pervasive control over the Company. Appointments to the Board of Directors could be done only with the concurrence of the Central Government The Company is to function subject to directions of the Central Government. It is open to the Central Government to make rules. The activity of the Company being of public importance is akin to Governmental activity. The monopoly status conferred on the companies is also significant. In substance, the Company is governed by the scheme framed by the Central Government. It is open to the Central Government to dispense with the provisions of the Companies Act in their application to the Company. All these are sufficient to indicate that the Company is in essence an instrumentality of State, though incorporated under the Companies Act. I therefore hold that Art.12 of the constitution of India is attracted. 18. My attention has been invited to a decision of a learned Single Judge of this Court in Padma Menon v. General Insurance Corporation of India and others 1979 (2) LLJ 1. The learned Judge held that the National Insurance Company Ltd. (one of the four companies referred to above) is not a State or other Authority under Article 12 of the Constitution. This decision rested on the circumstance that the National Insurance Company is a company incorporated under the Companies Act. 19. Another learned Single Judge of the Court has taken a different view in S. Narayani Kutty v. Union of India and others OP 2959 of 1980 holding that the National Insurance Company Ltd. is an instrumentality of State, relying on Som Prakash AIT 1981 SC 212. 19. Another learned Single Judge of the Court has taken a different view in S. Narayani Kutty v. Union of India and others OP 2959 of 1980 holding that the National Insurance Company Ltd. is an instrumentality of State, relying on Som Prakash AIT 1981 SC 212. I may also incidentally refer to a decision of the Madras High Court in United India Fire and General Insurance Company Limited and others v. A. A. Nathan and another 1980 (1) LLJ 369 , of the Calcutta High Court in Amitava Battacharya v. Union of India and others 1980 (1) LLJ 378 and a decision of the Orissa High Court in O. J. C. No. 978 of 1976 (1980 Lab. I. C., N. O. C. 50). These High Courts have taken the view that one or the other of the four companies is a State or other Authority under Article 12 of the Constitution. 20. The decision in Padma Menon's case 1979 (2) LLJ 1 as already pointed out, rested mainly on the basis that a Government company cannot attract Article 12 of the Constitution. It was inspired by the earlier line of decisions of the Supreme Court. The decision in Padma Menon's case 1979 (2) LLJ 1 is contrary to the decisions of the Supreme Court in Som Prakrsh ATR1981 SC 212 as also Ajay Hasia AIR 1981 SC 487 . It is also contrary to a later decision of a Division Bench of this Court in Sofia v. FACT 1984 KLT 32 and of a Full Bench of this Court in Kunju Mohammed v. State of Kerala 1984 KLT 403 . The decision in Padma Menon's case 1979 (2) LLJ 1 cannot any longer be regarded as laying down good law. On the other hand, the decision in O.P. 2595 of 1980 must be taken as having laid down the correct law. 21. Learned counsel for the respondents, Sri Easwara Iyer argued that even assuming that the Company is a State for the purpose of Article 12 of the Constitution, a writ under Article 226 of the Constitution will not lie against it, except for violation of fundamental rights in Chap.3 of the Constitution and in support learned counsel relied on the observations of a Division Bench of this Court in K. S. Sofhi v. FACT 1984 KLT 32 . Learned Counsel for the petitioner would assert that there has been violation of Art.14 and 16 of the Constitution as well as violation of principles of natural Justice in the instant case and that would give jurisdiction to the Court to issue an appropriate writ. 22. In D. B. Belliappa's case AIR 1979 SC 429 , the Court was dealing with a case of termination of the service of a temporary Government servant without assigning any reason and challenged as violative of Art.14, 16 and 311 of the Constitution. The Supreme Court observed: "The protection of Art.14 and 16(1) will be available even to such a temporary Government servant if he has been arbitrarily discriminated against and singled out for harsh treatment in preference to his juniors, similarly circumstanced. It is true that the competent authority had the discretion under the conditions of service governing the employee concerned to terminate the latter's employment without notice. But Such discretion has to be exercised in accordance with reason and fair play and not capriciously. Bereft of rationality and fairness, discretion itinerates into arbitrariness which is the very antithesis, of the rule of law on which our democratic polity is founded. Arbitrary invocation or enforcement of a service condition terminating the service of a temporary employee may itself constitute denial of equal protection and offend the equality clause in Art.14 and 16(1)." (Emphasis supplied) The Supreme Court also observed that: "If the services of a temporary Government servant are terminated in accordance with the conditions of his service on the ground of unsatisfactory conduct or his unsuitability for the job and / or for his work being unsatisfactory or for a like reason which marks him off a class apart from other temporary servants who have been retained in service, there is no question of the applicability of Art.16." In paragraph 24, the Court proceeded to observe as follows: "Conversely, if the services of a temporary Government servant are terminated, arbitrarily, and not on the ground of his unsuitability, unsatisfactory conduct or the like which would put him in a class apart from his juniors in the same service, a question of unfair discrimination may arise, notwithstanding the fact that in terminating his service, the appointing authority was purporting to act in accordance with the terms of the employment. Where a charge of unfair discrimination is levelled with specificity, or improper motives are imputed to the authority making the impugned order of termination of the service, it is the duty of the authority to dispel that charge by disclosing to the Court the reason or motive which impelled it to take the impugned action. 23. In U. P. Warehousing Corporation v. Vijay Narayan AIR 1980 SC 840 , the Court was dealing with a case of dismissal in total breach of the rules of natural justice at a time when statutory regulations had not been framed. The Court observed: "Even if 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 statutory body, the employer could not terminate the services of its employee without 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 Court would therefore, presume the existence of the duty on the part of the dismissing authority to observe the rules of natural justice and to act in accordance with the spirit of Regulation 6, which was then on the anvil and came into force shortly after the impugned dismissal........... ........................................... The rules of natural justice in this case were honoured in total breach. The impugned order of dismissal was thus bad in law and had been. rightly set aside by the High Court." (Emphasis supplied) In a separate but concurring Judgment, Ghinnappa Reddy, J. observed: "There is no good reason why, if Government is bound to observe the equality clauses of the Constitution in the matter of employment and in its dealings with the employees, the Corporations set up or owned by the Government should not be equally bound and why, instead, such Corporations could become citadels of patronage and arbitrary action. ............................................ Some element of public employment is all that is necessary to take the employees 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 Articles 14 and 16 of the Constitution." 24. There is also the recent decision of the Supreme Court in A. L. Kalra v. Project and Equipment Corporation 1984 (3) SCC 316 . There is also the recent decision of the Supreme Court in A. L. Kalra v. Project and Equipment Corporation 1984 (3) SCC 316 . That case dealt with the dismissal of an employee of the Project and Equipment Corporation of India Limited, a company incorporated under the Companies Act. After referring to Royappas case and Ajay Hasia's case AIR 1981 SC 487 , the Court observed: "It thus appears well settled that Art.14 strikes at arbitrariness in executive/administrative action because any action that is arbitrary must necessarily involve the negation of equality. One need not confine the denial of equality to a comparative evaluation between two persons to arrive at a conclusion of discriminatory treatment. An action per sc arbitrary itself denies equal protection by law. The Constitution Bench pertinently observed in Ajay Hasia's case and put the matter beyond controversy when it said 'wherever therefore, there is arbitrariness in State action whether it be of the Legislature or of the executive or of an 'authority' under Art.12, Art.14 immediately springs into action and strikes down such State action'. .................................... It is thus too late in the day to contend that an executive action shown to be arbitrary is not either judicially reviewable or within the reach of Art.14." 25. The Court while noticing that employees of an instrumentality of the State as comprehended in Art.12 are not governed by Part XIV of the Constitution but are entitled to protection conferred by Part III, proceeded to consider whether the protection under Part III is comparatively less effective than the one conferred by Part XIV. The Court noticed the observations of Chinnappa Reddy, J. in U. P. Warehousing Corporation AIR 1980 SC 840 and observed that the distinction sought has no significance. After considering the facts of the case, the Court observed in paragraph 27: "If thus it is satisfactorily established that the employment under such Corporation like the respondent which is an instrumentality of the State, is public employment, it is difficult to entertain the submission of Mr. Sinha which did prevail for some time in the days gone by that contract of public service cannot be specifically enforced." The Court also noticed that the order was passed in violation of principles of natural justice. 26. Let us apply the above principles to the facts of the present case. Petitioner was no doubt a probationary employee of the Company. 26. Let us apply the above principles to the facts of the present case. Petitioner was no doubt a probationary employee of the Company. His services were terminated under a seemingly innocuous order of termination of probation, which in substance and effect is a punitive act. Such a punishment could have been imposed on him only after giving him memo of charges and holding a regular enquiry in which he is given an opportunity to attach the charges against him and defend himself. Such a procedure has not been followed. This is not merely a case where an enquiry was held contrary to principles of natural justice; this is a case where no enquiry was held and yet on the foundation of an alleged serious misconduct he was ousted from service. The ouster constitutes negation of all principles of natural justice and the rules governing the matter and is a negation of the rule of equality. Among the probationers, petitioner has been singled put for harsh treatment, capriciously and in denial of fair play. The service condition enabling termination of probation has been invoked against him arbitrarily and disguising the really punitive nature of the action. The procedure prescribed by the disciplinary Rules should have been followed. Petitioner has been singled out for not following the procedure. His service has been terminated really not on the ground of his unsuitability or unsatisfactory conduct which would put him in a class apart from others but as a punitive measure and thereby he has been subjected to unfair discrimination. This action amounts to an arbitrary action. Arbitrariness is the very antithesis of the equality clauses of the Constitution. The Company is an instrumentality of the State and employment under the Company partakes the quality of public employment. There has been clear violation of Art.14 and 16(1) of the Constitution and of the principles of natural justice. Either way, his ouster is illegal. 27. It is contend by Sri Easwara Iyer, learned counsel for the respondents, that the contract of service cannot be specifically enforced under the Specific Relief Act and therefore even assuming that the impugned action is illegal a writ will not lie to grant any relief to the petitioner. Either way, his ouster is illegal. 27. It is contend by Sri Easwara Iyer, learned counsel for the respondents, that the contract of service cannot be specifically enforced under the Specific Relief Act and therefore even assuming that the impugned action is illegal a writ will not lie to grant any relief to the petitioner. In the case of breach of contract of employment, the remedy may be by way of suit for damages for the breach and the contract may not ordinarily be capable of specific performance; ordinarily even a declaration of invalidity of the breach of contract may not be available. In Industrial Law though, there can be reinstatement also. In case of master and servant in regard to employment under the State or Other Public Body or Local Authority or Statutory Body, there is no personal element because of the impersonal character of these bodies. Those cases involve public employment or service. In case of public employment where the dismissal is ordered in violation of the constitutional provisions, provisions of the Statute or the Rules of in violation of principles of natural justice, the High Court under Art.226 of the Constitution can certainly declare the dismissal to be invalid or void. 28. In Sirsi Municipality v. Cecelia Kom Francis Irllis AIR 1973 SC 855 where the Supreme Court was dealing with a case of an employee of a Municipality dismissed under an action which was violative of principles of natural justice, it was held that the dismissal could be declared as a nullity. 29. In U. P. Warehousing Corporation case AIR 1980 SC 840 , the Court observed: "....the offending order or the impugned illegal proceeding is quashed and put out of the way as one which should not be used to the detriment of the writ petitioner. 29. In U. P. Warehousing Corporation case AIR 1980 SC 840 , the Court observed: "....the offending order or the impugned illegal proceeding is quashed and put out of the way as one which should not be used to the detriment of the writ petitioner. Thus, in matters of employment, while exercising its supervisory jurisdiction under Art.226 of the Constitution, over the orders and quasi judicial proceeding of an administrative authority - Not being a proceeding under the industrial/ labour law before an industrial/labour tribunal - Culminating in dismissal of the employee, the High Court should ordinarily, in the event of the dismissal being found illegal, Simply quash the same and should not further give a positive direction for payment to the employee full back wages (although as a consequence of the annulment of the dismissal, the position as it obtained immediately before the dismissal is restored) ..............." (Emphasis supplied) In A. L. Kukri's case 1984 (3) SCC 316 the Court observed: "Once the order of removal from service is held to be illegal and invalid and the appellant being in public employment, the necessary declaration must follow that he continues to be in service uninterruptedly, this aspect does not present any difficulty and the declaration is hereby granted." The Court also directed payment of 50 per cent of the back wages for the period he was out of service excluding the period for which he had procured an alternative employment. 30. In the light of the above decisions I see no inhibition against this Court granting a writ of certiorari quashing Ext. P-5 and granting an appropriate declaration. However, it is for the Company to consider whether petitioner can be confirmed in service or dealt with otherwise, according to the Rules and Regulations of the Company. 31. The last contention urged by learned counsel for the respondents is that no relief as contemplated above can be granted against the Company treating the Company as State or other Authority under Art.12 of the Constitution of India because the Company is not a party to the Original Petition. Originally, only three officers of the Company were impleaded as respondents. Subsequently, petitioner filed C.M.P. 198/84 of 1984 seeking to implead the fourth respondent who is described as Chairman cum Managing Director of the Company. Originally, only three officers of the Company were impleaded as respondents. Subsequently, petitioner filed C.M.P. 198/84 of 1984 seeking to implead the fourth respondent who is described as Chairman cum Managing Director of the Company. Learned counsel for the respondents points out that the fourth respondent is not the Company as such but only the Chairman cum Managing Director. I see that in the affidavit filed in support of the petition, petitioner has stated: "It has therefore become necessary to implead the United India Insurance Company Limited as a party to the Original Petition, to avoid any possible future objection. In the interests of justice, I respectfully pray that I may be permitted to implead the United India Insurance Company Limited represented by its Chairman cum Managing Director.............. as additional 4th- respondent in the above Original Petition to avoid any plea that the necessary parties have not been impleaded." Of course, more care ought to have been exercised in drafting the petition. However, reading the petition and the affidavit together, there could be no doubt that the additional fourth respondent is actually the Company. This objection therefore fails, In the result, the Original Petition is disposed of in the following manner: 1. Ext. P-5 order is quashed. 2. It is declared that the removal of the petitioner from service of the Company under Ext. P-5 is illegal and void and he continues in the service of the Company as a probationer in accordance with Exts. R-1 and R-2. In the circumstances, there will be no order as to costs.