Appeal No 524 of 1967
Appeal from the judgment and order dated July 19 1966 of the Madhya Pradesh High Court in Misc
Petition No 33 of 1965
P Ram Reddy and section section Khanduja for the appellant
I N Shroff for the respondents
Shyamala Pappu C L Somesekhar and Vineet Kumar for the intervener
The Judgment of the Court was delivered by Hidayatullah CJ
The appellant who appeals by certificate granted by the High Court of Madhya Pradesh was appointed as Assistant Surgeon on probation for one year by the Board of Directors Hindustan Steel Ltd
Ranchi with effect from October 22 1959
After completing his period of probation he was employed on a contract for 5 years
exhibit P 3 is the Contract of Service which he entered into with the Company
Under the terms of the contract there
was a further period of probation
During the period of probation the Company could terminate his service without notice and without assigning any reason
On the completion of the period of probation either side could terminate the contract by 3 months  notice without assigning any reason
The Company could also terminate the employment by giving in lieu of notice three months  salary
This term was applicable till three months immediately before the end of the period of 5 years
If a notice terminating the service was not ven three months before the close of the end of 5 years the contract was automatically extended till the incumbent became superannuated on reaching the age of 55 years
The appellant passed the probation period and he was en titled to three months  notice if his services were to be terminated
The Company maintains certain set of Rules governing the employment of its workmen in addition to the Standing
Orders of
Company
exhibit P 4 represents the procedure for imp sing major penalties and for punishment and appeal
These are extracts from the Disciplinary and Appeal Rules
On September 17 1964 the appellant
was on duty in the Medical Out Patients Department
He examined one Mrs 365 Holey I who complained of cold headache and weakness
It appears that Mrs Holey complained of some misbehaviour on the part of the appellant and her husband reported the matter to the Chief Medical Officer of the Bhilai Steel Plant where the appellant was then posted
The Chief Medical Officer asked for the explanation of the appellant on September 21 1964 but the appellant denied the allegation
Some enquiry was then held
The appellant in his appeal submits that he was not given a copy of the written complaint received from Mr and Mrs Holey
On October 5 1964 some witnesses were examined in the presence of the appellant
Two days previously the statements of Mr and Mrs Holey were also recorded
The enquiry was being held by the Commercial Manager
The appellant then sent a notice to Mr and Mrs Holey charging them with defamation and actually filed a suit on November 17 1964 demanding damages
On December 15 1964 the General Manager ter minated his services with effect from March 15 1965 that is to say after the expiry of three months  notice under the contract
It was stated in the order that the services were being terminated in terms of his employment
The appellant thereupon filed a petition under article 226 of the Constitution in the High Court of Madhya Pradesh claiming inter alia that his services were wrongly terminated without giving him the protection granted by article 311 of the Constitution
He also complained of breach of the principles of natural justice inasmuch as the enquiry was not proper
His contention was that although the action was ostensibly taken according to the terms of the contract of employment he was really punished and he was entitled therefore to the protection of article 3 1 1 of the Constitution
The Company resisted the ground by saying that article 311 was not applicable to the appellant inasmuch as he was employed by a Corporation and neither belonged to the civil service of the Union nor held a civil post under the Union
The High Court in its judgment ruled that the protection of article 311 of the Constitution was not available in the case because the appellant was not entitled to it
It appears that this was the only point urged in the High Court
In the appeal before us attempt was made to enlarge the case by arguing other points namely that the enquiry was not properly conducted that the principles of natural justice were violated and that the appellant had no opportunity of defending himself
None of these points is touched upon in the High Court s judgment and it appears that in the High Court only the constitutional question was raised
Otherwise one would expect the High
Court to have said something about it or the appellant to have said so in the application for certificate or in 366 the proposed grounds filed with that application
We decline to allow these fresh grounds to be urged
The question that arises in this case is  whether the em ployeesof a Corporation such as the Hindustan Steel Ltd are entitledto the protection of article 31 1  This question can only be answered in favour of the appellant if we hold that the appellant held a civil post under the Union
It was conceded before us that the appellant could not be said to belong to the civil service of the Union or the State
article 31 1 on which this contention is based reads as follows  31 1
Dismissal removal or reduction in rank of persons employed in civil capacities under the Union or a State
1 No person who is a member of a civil service of the Union or an all India service or a civil service or a State or holds a civil post under the Union or a State shall be dismissed or removed by an authority subordinate to that by which he was appointed
2No such person as aforesaid shall be dismissed or removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him Provided that this clause shall not apply awhere a person is dismissed or removed or reduced in rank on the ground of conduct which has led to his conviction on a criminal charge bwhere an authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that some reasons to be recorded by that authority in writing it is not reasonably practicable to give to that person an opportunity of showing cause or c where the President or Governor as the case may be is satisfied that in the interest of the security of the State it is not expedient to give to that person such an opportunity
3If any question arises whether it is reasonably practicable to give to any person an opportunity of showing cause under clause 2 the decision thereon of the Authority empowered to dismiss or remove such person or to reduce him in rank as the case may be shall be final 367 Clause 2 of the article which gives the protection opens with the words no such person as aforesaid and these words take one back to clause 1 which describes the person or persons to whom the protection is intended to go
Clause 1 speaks of i persons who are members of a a Civil Service of the Union or b an All India Service or c a Civil Service of a State or ii hold a civil post under the Union or a State
a b and c refer to the standing services which have been created in the Union and the States and which are permanently maintained in strength
In addition to the standing services there are certain posts which are outside the permanent services
The last category in article 311l therefore speaks of such posts on the civil side as opposed to the military side
Incumbents of such posts also receive protection
In the present case the appellant did not belong to any of the permanent services
He held a post which was not borne on any of the standing services
It was however a civil post as opposed to a military post
So far the appellant s case is clear but the clause speaks further that such posts must be under the Union or a State
The question thus is whether the servant employed here can be said to have held the post under the Union or a State  The appellant contends that since Hindustan Steel Limited is entirely financed by the Government and its management is directly the responsibility of the President the post is
virtually under the Government of India
This argument ignores some fundamental concepts in relation to incorporated companies
In support of the contention that the post must be regarded as one under the Union the appeliant relies on some obiter observations of a single Judge in M Verghese vs Union of India and others 1
In that case the petitioners were drivers working for the Durgapur Project under Hindustan Steel Limited
The learned Judge considered the question by analysing the set up of Hindustan Steel Limited
He found that it was a Government company and a private limited company although it did not include in its name any notice Jr that it was a private company
He referred in detail to the various provisions in the Articles of Association as also in the Indian Companies Act which rendered the ordinary company law in applicable in certain respects and conferred unlimited powers
of management on the President of India and his nominees
He also found that Hindustan Steel Limited was entirely owned by the Union of India
From this the learned Judge wished to infer that Hindustan Steel Limited was really a department of the Government but he did not express this opinion and decided 368 the case on another point
The appellant contends that the conclusion which the learned single Judge did not draw in the Calcutta case is the conclusion to draw in this appeal
We must according to him hold that there is no difference between Hindustan Steel Limited and a Department of the Government and that the service under Hindustan Steel Limited is a service under the Union
On the other hand in State of Bihar vs Union of India and Anr1 Hindustan Steel Limited was not held to be a State for purposes of article 131
The question whether Hindustan Steel Limited was subject to the jurisdiction of the High Court under articles 226 and 227 was left open
In dealing with the above conclusion reference was made to the incorporation of Hindus tan Steel Limited as an independent company and thus a distinct entity
In Praga Tools Corporation vs C V Imanual and Ors2 it was pointed out that a company in which 88  of the capital was subscribed by the Union and the State Governments could not be regarded as equivalent to Government because being registered under the Companies Act it had a separate legal existence and could not be said to be either a Government Corporation or an industry run by or under the authority of the Union Government
Similar views were also expressed in the High Courts
In Lachmi and Others vs Military Secretary to the Government of Bihar  the expression civil post under the Union or the State was held to mean that the civil post must be in the control of the State and that it must be open to the State to abolish the post or regulate the conditions of service
Although the case concerned a Mali employed in Rai Bhavan it was held that it was not a post under the State even though the funds of the State were made available for paying his salary
In a later case Subodh Ranjan Ghosh vs Sindhri Fertilizers and Chemicals Ltd  the employees of the Sindhri Fertilizers were held not entitled to the protection of article 31 1
Our brother Ramaswami then Chief Justice noticed that the corporation was completely owned by the Union Government that the Directors were to be appointed by the President of India who could also issue directions
He nevertheless held that in the eye of law the company was a separate entity and had a separate legal existence
In our judgment the decision in the Patna case is correct
It has also the support of a decision re ported in Ram Babu Rathaur vs Divisional Manager Life Insurance Corporation of India5 and another in Damodar Valley  Corporation vs Provat ROY 
Our brother Ramaswami relied 1Civil Appeals Nos
512 513 etc
of 1969 decide on 1991969
2 Civil Appeal No 612 of 1966 decided on February 19 1969
3 4 AIR 1957 Pat
5 6 LX CWN 1023
369 in particular upon an English case Tamlin vs Hannaford1
In that case it was held in relation to a business that although the minister was really incharge the corporation was different from
the Crown and the services of the corporation were not civil services
Justice P B Mukherjee of the Calcutta High Court to
whose judgment we referred earlier distinguished the English case by pointing out certain differences between the Corporation in that case and Hindustan Steel Limited
He pointed out that a in the English Corporation no shareholders were required to subscribe the capital or to have a voice in the affair b the capital was raised by borrowing and not by issuance of shares c the loss fell upon the consolidated fund and d the corpo ration was non profit making
In our judgment these differences rather accentuate than diminish the applicability of the principle laid down in the English case to our case
The existence of shareholders of capital raised by the issuance of shares the lack of connection between the finances of the corporation and the consolidated fund of the Union rather make out a greater independent existence than that of the corporation in the English case
We must therefore hold that the corporation which is Hindustan Steel Limited in this case is not a department of the Government nor are the servants of it holding posts under the State
It has its independent existence and by law relating to Corporations it is distinct even from its members
In these circumstances the appellant who was an employee of Hindustan Steel Limited does not answer the description of a holder of  a civil post under the Union  as stated in the article
The appellant was not entitled to the protection of article 311
The High Court was therefore right in not affording him the protection
The appeal fails and is dismissed but in the circumstances of thecase we make no order about costs
GC Appeal dismissed  1 1950 1 KBD 18


Summary:
The services of the appellant as Assistant Surgeon in the Hindustan Steel Ltd Ranchi were terminated purportedly in terms of his contract of employment
In a petition under article 226 he claimed that the termination was wrongful inasmuch as it was really by way of punishment and article 311 of the Constitution had not been complied with
The company resisted the ground by saying that article 311 was not applicable to the appellant since he was employed by a corporation and neither belonged to the civil service of the Union nor held a civil post under the union
The High Court dismissed the  appellant s petition
In appeal before this Court by certificate the appellant contended that since Hindustan Steel was entirely financed by the Government and its management was directly the responsibility of the President the post was virtually under the Government of India
HELD  i The protection of article 3112 is available to the categories of persons mentioned in cls ab and c of article 311l
The appellant did not fall in the categories mentioned in cls a and b
He did hold a civil post as opposed to a military post but cl
c further required that it must be under the Union or a State
In view of the existence of shareholders of capital raised by the issuance of shares and the lack of connection between the finances of the corporation and the Consolidated Fund of the Union it must be held that Hindustan Steel Ltd was not a department of the Government nor were the servants of it holding posts under the State
It had its independent existence and by the law relating to corporations it was distinct even from its members
In these circumstances the appellant as an employee of Hindustan Steel Ltd did not answer the description of a holder of a civil post under the Union  as stated in article 31 1
The High Court was therefore right in not affording him the protection of that Article
367 D 369 C E State of Bihar vs Union of India CA Nos
512 51369 dt
19 9 1969 and Praga Tools Corporation vs C V Imanual  Ors
CA No 612 1966 dt
19 2 1969 applied
Subodh Raman Ghosh vs Sindhri Fertilizers and Chemicals Ltd AIR 1957 Pat 10 approved
M Verghese vs Union of India  Ors
AIR 1963 Cal
421 Lachmi and Ors
vs Military Secretar to the Government of Bihar Ram Babu Rathaur vs Divisional Manager Life Insurance Corporation of India  Damodar Valley Corporation V Provat Roy ILX CWN 1023 and Tamlin vs Hannaford 1950 1 KBD 18 referred to
364 iiThe contentions sought to be raised by the appellant regarding the validity of the departmental enquiry against him were not touched upon in the High Court s judgment nor mentioned in the proposed grounds filed with the application for certificate
The appellant could not be allowed to urge them for the first time in this Court