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Madhya Pradesh High Court · body

2003 DIGILAW 1000 (MP)

H K SINGARE v. M P STATE MINING CORPORATION LTD

2003-08-22

S.P.KHARE

body2003
Judgment ( 1. ) THIS is a writ petition under Articles 226 and 227 of the Constitution of india for quashing the order dated 21-6-1995 (Annexure P-l) and order dated 26-8-1995 (Annexure P-Y) by which the services of the petitioners have been transferred to a private company and their lien has been terminated. ( 2. ) IT is not in dispute that the petitioners were the permanent employees of the respondent No. 1 M. P. State Mining Corporation Limited. This Corporation sold its Tin Smelting Plant to respondent No. 2 M/s. Dravya industrial Chemicals Limited, Raipur for Rs. 60 lacs. This Plant was running into losses. The services of 35 employees working in this Plant were declared surplus and these posts were abolished by order dated 21-7-1995 (Annexure p-4 ). The petitioners were transferred to the private company on terms and conditions which they were enjoying in the Corporation. Now the respondent no. 2 Company is also not running the Plant and it is not paying the salary of the petitioners. They have been directed by the respondent No. 2 to contact the respondent No. 1 by the notice dated 13-5-2002 (Annexure A- l ). The corporation is not taking them in service. ( 3. ) THE petitioners case is that their consent for their transfer to the private company was obtained by coercion and undue influence. The corporation Management threatened them to terminate their services if they do not sign on the consent letter. Their consent was not free and voluntary. According to the petitioners they had their lien in the corporation and that could not be terminated. It is further stated by them that in the meeting held on 9-3-1995 an agreement was reached that the petitioners would continue to have their lien in the Corporation. Copy of that agreement is Annexure P- X. But their lien was terminated by order dated 26-8-1995 (Annexure P-Y ). ( 4. ) THE case of the respondent No. 1 is that the petitioners voluntarily gave their consent for their transfer to the private company. There was no coercion or undue influence. There was no threat. Their services were transferred on the same terms and conditions of service which they were having in the Corporation. ( 4. ) THE case of the respondent No. 1 is that the petitioners voluntarily gave their consent for their transfer to the private company. There was no coercion or undue influence. There was no threat. Their services were transferred on the same terms and conditions of service which they were having in the Corporation. It is submitted that in case the petitioners had not been transferred to the private company they would have been retrenched and therefore, their transfer was more beneficial for them. It is also pleaded by the respondent No. 1 that there was no agreement that the petitioners would continue to have their lien in the service of the Corporation. The minutes of the meeting were prepared but no assurance was given to the petitioners that they would have such lien. The demand of the petitioners in this respect was not accepted. Now they are employees of the respondent No. 2 company and if that company is closing the Plant then the remedy of the petitioners is against the present employer. ( 5. ) LEARNED Counsel for both the sides have been heard. The petitioners have produced a copy of the minutes dated 9-3-1995 (Annexure p- X) of the meeting between the Chairman and other officers of the Corporation on the one hand and the representatives of the employees on the other. It has been stated therein that full protection would be given to the employees so far as their security of tenure and conditions of service are concerned. The transfer of undertaking to any private company would be after careful scrutiny of the offer. The representatives of the employees expressed a natural apprehension that the private company after keeping them in service for a short time may turn them out of employment or they may wind up the business after earning the profit. On this the Chairman of the Corporation stated that at the time of negotiations with the private company it would be kept in view that the company would not resort to such tactics. The Chairman was also the principal Secretary of the Mining Department of the State Government. He has specifically assured the employees that he would properly consider the question of the employees retaining their lien in the service of the Corporation. The Chairman was also the principal Secretary of the Mining Department of the State Government. He has specifically assured the employees that he would properly consider the question of the employees retaining their lien in the service of the Corporation. It is further stated that the welfare of the employees would be the paramount consideration and nothing would be done contrary to law. The Chairman gave a guarantee, as per Clause 12 of the minutes, that the employees would get their future salary and they should have no apprehension of being thrown out of the employment. In the end again there is an assurance as per instructions of the Chief Minister that no employee would be rendered jobless and the service conditions would not be less advantageous. In any case the employees would continue to have their salary in future. ( 6. ) BY the letter dated 21-6-1995 (Annexure P-l) the Managing director of the Corporation informed the employees that the Tin Smelting plant is being sold to the respondent No. 2 company and this company would provide the same terms and conditions of service to them. The employees were asked to give their consent for their permanent transfer to this Private Company on the proforma enclosed with the letter. It was stated in this letter that those employees who do not give their consent they would be transferred to the other offices of the Corporation and in their place the junior employees would be transferred to the respondent No. 2 and if they do not give their consent they would be retrenched from service. It was also stipulated that in case the reply is not given upto 28-6-1995 it would be deemed that the employees are willing for their transfer to the respondent No. 2 Company. The language and tenor of this letter shows that there was a wield threat that in case the employees do not give their consent their services would be terminated. There is no mention in this letter about the assurance given by the chairman in the minutes that the question of the retention of lien by the employees in the Corporation would receive proper consideration. There is no other order or communication regarding that assurance. The petitioners filled in the prescribed consent letter and their services were transferred to the respondent No. 2 company by order dated 26-8-1995 (Annexure P-Y) of the corporation. There is no other order or communication regarding that assurance. The petitioners filled in the prescribed consent letter and their services were transferred to the respondent No. 2 company by order dated 26-8-1995 (Annexure P-Y) of the corporation. Their services in the Corporation were terminated. It was stated in this order that the employees would have no lien in the Corporation. Similar orders were issued in respect of other employees. ( 7. ) THE apprehension of the employees was real and not imaginary. The letter dated 3-12-1998 of the employees goes to show that the payment of salary to them was stopped and they were being treated very shabbily by the respondent No. 2. ( 8. ) THE respondent No. 2 addressed the letter dated 13-5-2002 (Annexure A- l) to the petitioners that it is closing down the factory and they should approach the Corporation for alternative employment. The petitioners submitted their application on 16-5-2002 to the Corporation to take them back in service but no action has been taken by the Corporation. ( 9. ) THE reply of the Corporation in the form of additional return submitted on 11-9-2002 is that the petitioners have no lien in the Corporation and therefore, they can not be taken back in the service of the Corporation and their remedy is against the respondent No. 2 only. ( 10. ) IT is clear from the above narration that the petitioners never surrendered their lien consciously or voluntarily. The lien was their vested right. They signed on the consent letters on dotted lines as they were threatened that their services would be terminated or their fellow employees would suffer this consequence. Before sending the letter dated 21-6-1995 to the employees the Chairman did not consider at all about the lien of these employees. In all fairness before sending this letter the Chairman as per his assurance in the minutes ought to have bestowed consideration on the crucial aspect of the lien of the employees. That was given a go by. By the order dated 26-8-1995 and subsequent orders the lien of the petitioners was terminated unilaterally. There was no express consent by the petitioners for termination of their lien. Their consent for transfer to the private company appears to have been obtained from them by coercion and undue influence. That was given a go by. By the order dated 26-8-1995 and subsequent orders the lien of the petitioners was terminated unilaterally. There was no express consent by the petitioners for termination of their lien. Their consent for transfer to the private company appears to have been obtained from them by coercion and undue influence. The apprehension of the employees that they would be turned out of employment by the private company after some time came true. It is a case of inequality of bargaining power in the employees and, therefore, the petitioners can not be said to have forfeited their lien in the Corporation. The Corporation is an instrumentality of the State and it is expected to behave in just, fair and reasonable manner. The petitioners could not be deprived of their lien in the Corporation so lightly and in the manner it has been done. The minutes of the meeting referred above go to show that the Chairman of the Corporation as parens patriae declared that the welfare of the employees would be paramount consideration and their claim for retention of lien in the Corporation would be duly considered and that right was taken away without telling them that it is being done before the order to the effect that the lien has been terminated was passed. ( 11. ) THE petitioners reposed full confidence in the Chairman of the corporation. They were not on equal footing with the Chairman or the managing Director of the Corporation. They occupied an inferior position. The confidence which the petitioners reposed in the Chairman and the managing Director was betrayed. These officers of the Corporation were in a dominating position. There was inequality between the parties and the officers took advantage of the situation by making the promises and not fulfilling them before obtaining the consent letter. Section 16 of the Contract Act applies. The officers held the real and apparent authority on the employees and they also stood in fiduciary relation. They could not exploit the situation to their own use. The consent of the employees was obtained by them by threat and by abusing the confidence. There was no explicit consent for surrender of the lien. A higher duty was upon the officers to tell the employees that by signing the proforma they would forfeit their lien. They could not exploit the situation to their own use. The consent of the employees was obtained by them by threat and by abusing the confidence. There was no explicit consent for surrender of the lien. A higher duty was upon the officers to tell the employees that by signing the proforma they would forfeit their lien. The duty was to tell the whole truth and to make a full disclosure. The officers were in a position to dominate the will of the employees and they used that influence to obtain their consent. The presumption of undue influence arises. There was inequality of bargaining power and the bargain was unconscionable. ( 12. ) WHERE one of the parties to a contract is in position to dominate the will of the other and the contract is apparently unconscionable, that is, unfair the law presumes that the consent must have been obtained by undue influence. That legal position is borne out from Section 16 (3) of the Contract act. If the transaction is unfair and it is found that the bargaining power of one of the contracting parties was "grievously impaired" that party has to be relieved of the bargain. There is developing law of economic duress. The victim of the duress has no other choice except to "take it or leave it". He has hobsons choice. There should be no exploitation of the needy. There has to be judicial intervention in cases of unfair bargains where there is no regard for conscience and the transaction on the face of it is unreasonable. Such contracts are known as contracts of Adhesion and the Court can declare that the weaker party in the bargain need not adhere to it. ( 13. ) THE Courts can relieve a party from contractual obligation on the ground of "inequality of bargaining power". Gross inequality of bargaining power, together with terms unreasonably favourable to the stronger party, may confirm indications that the transaction involved elements of deception or compulsion, or may show that the weaker party had no meaningful choice, no real alternative, or did not in fact assent or appear to assent to the unfair terms. In Central Inland Water Transport Corpn. Vs. In Central Inland Water Transport Corpn. Vs. Brojo Nath Ganguly, (1986) 3 scc 156 , the Supreme Court has observed that an unconscionable bargain or contract is one which is irreconcilable with what is right or reasonable or the terms of which are so unfair and unreasonable that they shock the conscience of the Court. The Supreme Court has further observed that the test of reasonableness or fairness of a clause in a contract where there is inequality of bargaining power is another theory recognised in the sphere of law of contracts. The Courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or a clause in a contract, entered into between parties who are not equal in bargaining power. This principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties or where the inequality is the result of circumstances, whether of the creation of the parties or not or where the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them or where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rule as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. ( 14. ) THE principle laid down by the Supreme Court in the above mentioned case has been approved by the Constitution Bench in Delhi Transport Corporation Vs. D. T. C. Mazdoor Congress, AIR 1991 SC 101 . It has been observed in this case that the Court would relieve the weaker parties from unconstitutional contractual obligations, unjust, unfair, oppressive and unconscionable rules or conditions when the citizen is really unable to meet on equal terms with the State. D. T. C. Mazdoor Congress, AIR 1991 SC 101 . It has been observed in this case that the Court would relieve the weaker parties from unconstitutional contractual obligations, unjust, unfair, oppressive and unconscionable rules or conditions when the citizen is really unable to meet on equal terms with the State. It is to find whether the citizen, when entered into contracts or service, was in distress need or compelling circumstances to enter into contract on dotted lines or whether the citizen was in a position of either to "take it or leave it" and if it finds to be so, the Court would not shirk to avoid the contract by appropriate declaration. ( 15. ) IN view of the above discussion it must be held that the consent letter obtained by the Corporation from the petitioners was by coercion, undue influence and the order dated 26-8-1995 by which the lien of the petitioners was terminated is unreasonable and unconscionable. This is against the public policy incorporated in Section 23 of the Contract Act. The termination of lien was one-sided affair and the petitioners did not give any consent for termination of their lien. Their consent for their transfer to the private company was under the stress of circumstances and as already stated it was in the form "take it or leave it". Therefore, the petitioners who are permanent employees of the corporation and had the lien in the service of the Corporation could not be deprived of the same by obtaining such consent letters from them. As already mentioned the Chairman of the Corporation gave definite assurance to consider the question of retention of lien by the petitioners and then did not consider that aspect at all, and the Corporation by the impugned order dated 26-8-1995 unilaterally terminated the lien of the petitioners in the service of the Corporation. This can not be countenanced by the Court. The petitioners got the temporary reprieve by working under the private company and soon they realised that their apprehension was real and was not unfounded. Private company stopped paying their salary and then directed them to go to the corporation to seek further employment. This petition was filed in the year 1996 and the subsequent developments have been incorporated by both the sides by amendment and by additional return. Private company stopped paying their salary and then directed them to go to the corporation to seek further employment. This petition was filed in the year 1996 and the subsequent developments have been incorporated by both the sides by amendment and by additional return. The picture which emerges from the events shows that the petitioners were deprived of their lien without their real consent and therefore, it must be held that they continue to retain their lien in the service of the Corporation. ( 16. ) IN the result this petition is allowed. Impugned orders dated 21-6-1995 (Annexure P-l) and dated 26-8-1995 (Annexure P-Y) are quashed. Respondent No. 1 M. P. State Mining Corporation Limited is directed to reinstate the petitioners in the service of the Corporation. Writ Petition allowed.