IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR 

S. P. SINHA, Advocate, for the petitioner. 

T. C. NAIK, Advocate, for the respondent. 

ORDER 

D. N. DHARMADHIKARI, J. - By this petition under Article 226 of the Constitution of India the petitioner assails the order of termination of his services. By order, dated 10/29 November, 1986, terminating his services from the respondent company, namely, M.P. Carbide & Chemicals Ltd. from the post of Executive President, have been terminated. 

2. The only fact relevant to be mentioned is that the petitioner was appointed as an Executive of the company on 11 September, 1984, on terms and conditions contained in the order of appointment (Annexure-C). One of the terms of his appointment is that his services would be governed by the rules and regulations of the company framed from time to time. 

3. Shri S. P. Sinha, learned counsel for the petitioner submits, that the respondent company has 51% of equity shareholding of respondent No. 2, M.P. State Industries Corporation, and on its management has more than 50% of directors nominated by the Government and financial institutions owned by the Government. According to the learned counsel, the petitioner was thus in public employment as respondent company falls within the definition of 'State' under Article 12 of the Constitution of India. 

On behalf of respondent company, a return has been filed denying the status of the' company to be 'State' under Article 12 of the Constitution. 

5. Shri T. C. Naik, learned counsel appearing (for the respondent) reports no instructions and did not argue the matter. 

6. The order of termination passed against the petitioner has been assailed on the ground that no enquiry against alleged misconduct was held against him and the order is in breach of principles of natural justice. 

7. The first and foremost question that needs decision is whether the petitioner is in public employment and can seek quashing of the order of termination and consequent relief of reinstatement with arrears of salary or being in private employment, his remedy is only to sue the company for damages if any suffered by his alleged illegal termination of services. 

8. In the petition to describe the respondent company as falling within the definition of 'State' under Article 12 of the Constitution, the following averments have been made : 

"That M.P. State Industries Corporation Ltd. a Madhya Pradesh Government undertaking is a statutory Corporation. It is a promoter of the respondent company. The Industrial Finance Corporation of India and the Industrial Development Bank of India are also statutory Corporation and Government of India undertaking. The M.P. State Industrial Corporation has contributed 30.64% of the capital investment, whereas the Industrial Finance Corporation and the Industrial Development Bank of India have contributed 31.03%. Raigarh Jute and Textile Mills Ltd. is a co-promoter and it has contributed 29.43% whereas public has invested 8.9% of the total capital investment. The M.P. State Industries Corporation has entered into a joint venture with the respondent company. There are in all ten directors of the company out of which seven are nominated from the M.P. State Government and Central Government who are mostly IAS officers. The M.P. State Industries Corporation has the right to nominate one of their directors to be the Chairman of the Board of directors who has a casting vote in addition to his own power to vote. The right to appoint, remove or suspend any employee is vested with the Board of directors. The control of the State Government of M.P. and the statutory financial institution of the Government of India is so deep and pervasive that no immovable property of the respondent company can be disposed of in any manner without the approval of the Board of directors who are mostly nothing but the nominees of the State Government and Central Government. The Board of directors is in charge of general superintendence, direction and control of the affairs of the respondent company and of its income and property is also largely controlled by the nominees of the State and Central Government. Thus the State Government and through the statutory financial Corporation the Central, Government have full control of the working of the respondent company and it is an instrumentality of the State within the meaning of Article 12 of the Constitution of India. A copy of memorandum and articles of association is annexed herewith as Annexure-A, and list of directors is Annexure A-1." 

9. In the return submitted by the respondent company the averments have been denied by explaining the constitution and nature of management of the company in paragraph 2 of the return which is as under : 

"The averment that the respondent company is an instrumentality of the State within the meaning of Articles 12 of the Constitution of India is specifically denied. It is denied that the Industrial Finance Corporation of India and Industrial Development Bank of India have contributed 31.08% of the share capital of the said company. In fact, none of them is holding any share in the said company. It is submitted that the respondent company, viz., M.P. Carbide and Chemicals Ltd., is incorporated under the Companies Act, 1956, and is a company limited by shares registered as such with the Registrar of Companies, Madhya Pradesh, Gwalior and having it's registered office at Purena Udyog Giri, Purena Distt., Panna (MP). M.P. State Industries Corporation Ltd., respondent No. 2, is holding 27.80% of the share capital and Raigarh Jute & Textile Mills Ltd., alongwith its associates, is holding 26.76% of the share capital and the balance 45.38% shares are held by about 17,500 shareholders from the general public. The shares of the said company are listed with the stock exchanges at Calcutta, Bombay, Delhi and Indore. 

It is not disputed that the Board of directors consists of 10 directors. It is however denied that 7 directors are nominated from M.P. State Government and Central Government who are mostly IAS officers. The composition of the Board of directors as on 7.6.1987 is as follows : 

M.P. State Industries Corporation Ltd. 3. Raigarh Jute & Textile Mills Ltd. 2. Financial Institutions 2. Outsiders 3. 

It is specifically denied that the State Government and through the statutory financial Corporation, the Central Government have full control of the working of the respondent company as alleged by the petitioner. 

It is submitted that the managing director of the respondent company is Shri M. P. Jalan - an industrialist from the private sector and the working of the respondent company including the power to acquire or dispose of any immovable property of the company is subject to the control of the Board of directors; but this is strictly in accordance with the provisions contained in the Indian Companies Act, 1956, which provides that all public limited companies will be managed and controlled by the Board of directors, simply because some of the directors of the respondent company happen to be nominees of the statutory Corporation and financial institutions - does not mean that the respondent company is a State within the meaning of Article 12 of the Constitution of India. 

It is further submitted that a petition under Article 226 of the Constitution of India cannot lie against the respondent company and is not maintainable. It is liable to be dismissed accordingly." 

10. In a rejoinder filed by the petitioner, further averments have been made in paragraph 2 which is as under : 

"It is submitted that out of 17 lakh equity shares of Rs. 10 each issued by the company, the M.P. State Industries Corporation has 8,67,000 shares, i.e., 51% of equity shares, while the respondent No. 1 and its associates have only 8,33,000 shares, i.e., 49% upto May, 1985. Thus the State of M.P. which owns M.P. State Industries Corporation, holds major shares, and hence, the company is a State within the meaning of Article 12 of the Constitution of India. The petitioner file the statement of issued, subscribed and paid up share capital as Annexure 'M'. It is further submitted that the registered office of the respondent No. 1 company till May, 1985, was situated in the office of the M.P. State Industries Corporation Ltd., Malviya Nagar, Bhopal, a statutory Corporation of the Government of Madhya Pradesh from where all important affairs of the company were being controlled. It is also submitted that till May, 1985, the shares of the company were not listed with any of the stock exchanges of India. It is further submitted that the three directors shown are of M.P. State Industries Corporation Ltd. and two of Financial Institutions who are appointed by the Madhya Pradesh State Government and Central Government Similarly, out of remaining directors shown as outsiders, two out of three are also appointed at the instance of the Government out of Government officers. Initially, the following two persons were appointed outsider directors - 

(a) Shri B. K. Mookherjee is ex-Chairman and managing director, Allahabad Bank, - a nationalised bank which had financed towards working capital. 

(b) Shri S. P. Bhattacharya is ex-Deputy Director General (Chemicals), DGTD, Ministry of Industry, Government of India. 

Thus, it is clear that the company had seven directors appointed by the Government out of total 10 directors. It may further be submitted that M.P. State Industries Corporation Ltd. has a right to nominate Chairman of the Board of directors who has an additional casting vote. Thus, the overall management of the company is vested in the State Government through the statutory financial Corporation and the Central Government, which makes it clear that it is a State within the meaning of Article 12 of the Constitution of India." 

11. I have considered the above averments made by the parties as also seen the memorandum of association and articles of the company which have been placed on record in a booklet form. 

12. In the considered opinion of this court, merely because the company has some shares subscribed by financial institutions which are 'State' for the purpose of Article 12 of the Constitution and has certain Government nominees on its Board of directors, it cannot be held that there is such in-depth and all pervasive control of the 'State' or Central Government as to treat the company as merely a limb or organ of the 'State', for it being included within the definition of Article 12 of the Constitution. In the case of Ajay Hasia v. Khalid Mujib Sehravardi AIR 1981 SC 487 and in Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986) 3 Comp LJ 1 (SC) : AIR 1986 SC 1571 - certain tests have been laid down to determine whether a private company or body can be held to be an instrumentality or agency of the State to include it within the definition of 'State' under Article 12 of the Constitution. The tests laid down are as under : 

(i) Whether the entire share capital is held by the Government. 

(ii) Whether the Corporation enjoys monopoly status conferred by the State. 

(iii) Whether the functions of the Corporation are governmental functions or functions clearly related thereto. 

(iv) If a department of the Government has been transferred to the Corporation. 

(v) The volume of financial assistance received from the State. 

(vi) The quantum of State control. 

(vii) Whether any statutory duties are imposed upon the Corporation. 

(viii) The character of the Corporation may change with respect to its different functions." 

13. Applying the above tests, it is not possible for this court to hold that the respondent company which is constituted with aims and objects to deal and engage in business of chemical projects is an agency or instrumentality of the 'State'. That ' the company receives financial assistance from State agencies and there is some shareholding of such statutory Corporations constituted by the 'State' - is not a decisive factor. There is no control of the State Government or the Central Government in the affairs of the company and the company is functioning as an autonomous body. 

14. For the aforesaid reason, the employment of the petitioner in the company cannot be held to be a public employment, and this court can grant him no relief in exercise of powers under Article 226 of the Constitution. It would be open to the petitioner to resort to such civil remedy as is available to him in law against the impugned order of his termination from services. Consequently, the petition fails, and is hereby dismissed, but in the circumstances, without any order as to costs.