-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION WRIT PETITION NO.386 OF 199 WRIT PETITION NO.386 OF 199 WRIT PETITION NO.386 OF 1995 Shri R.D.Avhad, of Pune, Indian Inhabitant, residing at Ganpati Housing Society, 41, Gujarat Colony, Kothrud, Pune-411 029. .. Petitioner. Vs 1. The Maharashtra State Farming Corporation Ltd, 270 Bhamburda Senapati Bapat Marg, Pune-411 016. 2. The Hon’be Minister for Revenue and Forest and Chairman of Maharashtra State Farming Corporation Ltd, Mantralaya, Bombay-400 032. 3. The Additional Chief Secretary, to Government of Maharashtra, Revenue and Forest Department, Mantralaya, Bombay-52. .. Respondents. Mrs Meena H.Doshi, for the petitioner. Shri Prashant Naik, for respondent no.1. Respondent no.2, though served absent. Shri Y.D.Mulani, AGP for respondent no.3. CORAM : B.H.MARLAPALLE & D.B.BHOSALE,JJ. CORAM : B.H.MARLAPALLE & D.B.BHOSALE,JJ. CORAM : B.H.MARLAPALLE & D.B.BHOSALE,JJ. DATE : March 23rd, 27th & 28th, 2006. DATE : March 23rd, 27th & 28th, 2006. DATE : March 23rd, 27th & 28th, 2006. ORAL JUDGMENT : (PER B.H.MARLAPALLE,J.) ORAL JUDGMENT : (PER B.H.MARLAPALLE,J.) ORAL JUDGMENT : (PER B.H.MARLAPALLE,J.) 1. In this petition, the petitioner has brought in question the order of termination dated 28.9.1993 passed -2- by the management of the respondent no.1-corporation on account of abolition of the post of Controller-Stores and Purchase held by the petitioner and the subsequent order dated 30.9.1993 informing the petitioner that he stood terminated from the service of respondent no.1 from the afternoon of 30.9.1993. 2. The petitioner was employed as an Assistant by an order dated 18.10.1972 in the Sales and Purchase Department at the Head Office of respondent no.1 on an initial pay of Rs.190/- per month. He was thereafter confirmed and promoted to the post of Superintendent in the Stores and Purchase Section as per the order dated 15.4.1978. By the further order dated 30.6.1979, he was appointed as In-charge Controller of Stores and Purchase with effect from 1.7.1979 in the pay scale of Rs. 440-940 (pre-revised). He was offered the post of Controller of Stores and Purchase as per the Board resolution dated 9.9.1980 in the pay scale of Rs.1100-1600. The petitioner holds the qualifications of B.Sc., LL.B with a Post Graduate Diploma in Materials Management and Diploma in Taxation Laws. 3. Respondent no.1 is a company incorporated under the Companies Act,1956 with its registered office at Pune and is a Government company within the meaning of section 617 -3- of the said Act as the entire shareholding of the company is held by the State of Maharashtra. The agricultural land declared surplus on the enforcement of the Maharashtra Agricultural Lands (Ceilings and Holdings) Act, 1961 in different parts of the State was handed over to respondent no.1 for cultivation/management and for which it was incorporated. In addition to the Board of Directors to be appointed by the Governor of Maharashtra, the post of Managing Director is occupied by an IAS officer deputed by the State Government and almost all the members of the Board of Directors are senior bureaucrats, except the Chairman and the Vice-Chairman who are normally the Cabinet Minister for Revenue and the Minister of State for Revenue respectively. Though the respondent no.1 is expected to generate its own income from the cultivation of thousands of hectors of land which came in possession of the State Government, as and when required the State Government has been sanctioning additional funds to the said respondent for running its activities which are required to be carried out strictly as per the Articles of Association. 4. It appears that an administrative decision was taken to close certain departments which were not found to be effectively contributing to the economic activities of the respondent-company and accordingly by an order dated -4- 21.5.1993 the Stores and Purchase department came to be abolished by the Managing Director of respondent no.1. The resolution by circulation dated 31.7.1993 was taken out to abolish certain posts including the petitioner’s post and in the 260th meeting held on 28.8.1993 the Board of Directors accepted the new staffing pattern which excluded the post of Controller of Stores and Purchase and some other posts. It is further required to be noted that after the office order dated 21.5.1993 was issued by the Managing Director, respondent no.1-company announced a voluntary retirement scheme by its circular dated 23.6.1993 and the said scheme was made applicable in the first phase to the employees working on Belwandi, Changdeonagar, Gangapur, Harigaon, Laxmiwadi, Ravalgaon, Sakarwadi and Tilaknagar farms as well as the employees in the head office. As per the said scheme, the employees accepting the VRS would be paid the monetary compensation at the rate of one and half months pay (basic + dearness allowance) for each completed year of service and the amount that may be arrived at by multiplying the balance number of months service remained till the age of superannuation by one month’s pay and there was no right to claim any additional compensation either under the Industrial Disputes Act, 1947 or under any statutory provisions, if applicable. The petitioner responded to the said scheme by submitting his application dated -5- 28.6.1993 presumably perhaps he was responding to the fact that the department he was heading the department which was ordered to be closed down. As per the impugned order dated 28.9.1993 the said application for VRS was rejected. On receiving the termination orders, the petitioner submitted an appeal dated 5.10.1993 to the Minister for Revenue who was the Chairman of respondent no.1 company. The appeal concluded in para 3 in the following words: "In view of the facts and circumstances explained hereinabove, I make this humble appeal with a request to give suitable directives to the corporation to accept my request for voluntary retirement and give all the monetary benefits as are admissible under the voluntary retirement scheme, 1993 for which purpose I will forever be grateful to you." Though the petitioner claims that the Chairman passed an order of stay to the termination order on or about 24.2.1994 he was informed by a communication dated 6.9.1994 that his appeal was dismissed on account of abolition of the post held by him and the Stores and Purchase Department having been closed as per the order dated 21.5.1993. The appeal was held to be devoid of merits and therefore dismissed. This order also has been challenged by way of amendments with the leave of this -6- Court. 5. While granting Rule, no interim relief was ordered in this petition and in fact Rule earlier issued on interim relief came to be discharged by the order dated 10.11.1996. When the petition was taken up for final hearing on 3.3.2003, the petitioner’s proposal to approach respondent no.1 with a fresh request for extending benefits of the VRS was noted and he was granted liberty accordingly. Respondent no.1 was required to consider such representation objectively and, of course, without prejudice to their rights and contentions, but with an endeavour to resolve the dispute amicably within four weeks. Though the petitioner submitted fresh representation, it appears the same was turned down. On 28.6.2004, the petition was dismissed for nonprosecution and pursuant to the order passed in CA (ST) No.18379 of 2004 it was restored and directed to be heard peremptorily. The State of Maharashtra, through the revenue ministry, has not filed any reply, though the respondent no.1 has opposed the petition by filing the replies. 6. Having considered the arguments advanced by both the parties before us, the following issues arise for our considerations in this petition. -7- (a) Legality of the decision taken by respondent no.1-company, to close the Stores and Purchase Department and to abolish the post held by the petitioner, i.e. Controller, Stores and Purchase Department. (b) Legality of the impugned order of termination. (c) Whether the petitioner would be entitled for absorption in other equivalent post or for the benefit of voluntary retirement as per the scheme of 1993 even on answering the above two issues against him. (d) If the first issue is answered against the Corporation, whether the petitioner will be entitled for reinstatement with consequential reliefs. Continued on 27.3.06 Continued on 27.3.06 Continued on 27.3.06 7. On the first issue regarding the decision of the Corporation to wind up the Stores and Purchase Department and declare the post of Controller, Stores and Purchase as surplus, we have noted that the Articles of Association governed the management of the Corporation. Article 71 deals with the maximum number of Directors and as per Article 72 the Directors shall be appointed by the Governor. The Governor shall have the power to remove any Director including the Chairman or the Vice Chairman at any time in his absolute discretion and the Governor will have the right to fill in any vacancy in the office of a -8- Director caused by retirement, removal, resignation, death or otherwise. As per Article 73, the Board of Directors of the Corporation shall be entitled to exercise all such powers and to do all such acts and things as the Corporation is authorised to exercise, save and except that the Board will not be exercising such powers which are required to be exercised or done by the company in its General Meeting. Article 74 deals with the specific powers of the Board. As per Article 81, the Managing Director or in his absence the Secretary may at any time convene a meeting of the Board of Directors and the questions arising at any meeting shall be decided by majority of votes. As per Article 82, a meeting of the Board of Directors shall be held for the despatch of the business of the company atleast once in every three calender months and under Article 83 the quorum for a meeting of the Board of Directors shall be one-third of its strength or two Directors, whichever is higher. Under Article 84, a meeting of the Board of Directors for the time being at which a quorum is present, shall be competent to exercise all or any of the authorities, powers and discretion by or under the Articles of the company for the time being vested in or exercisable by the Board of Directors generally. As per Article 89, a resolution in writing signed by all the Directors shall, subject to section 289 of the Act, be as valid and -9- effectual as if it has been passed at a meeting of the Board of Directors duly called and constituted. It is thus clear that the Board of Directors is responsible for the management of the Corporation and to take decisions in discharge of its functions to manage the Corporation. The Board is assisted by the Managing Director, at the first place and the Secretary. The Managing Director is the Chief Officer of the Corporation and reporting to the Board of Directors. The Chairman and Vice Chairman of the Corporation are the Minister for Revenue and State Minister for Revenue respectively and nominated by the Governor. The Board has the authority to take due administrative actions to revamp the Corporation’s different arms, sections or departments or farms. 8. On 21.5.1993, an Office Order was taken out by the Corporation under the signature of the Managing Director. In the said order, the workload available to the Stores and Purchase Department was examined and it was decided that abolition of the said department was not against the interest of the Corporation and on the contrary it would be beneficial for its overall business. It was also noted that the Managers of some other departments were given powers for purchases upto certain limits and bulk purchases as such being handled by the Stores and Purchase Department in the Head Office had almost become extinct. -10- The remaining work of the Stores and Purchase Department on its abolition was distributed amongst the various Departments like Engineering, Farm management, Administration etc and the employees working in the Stores and Purchase Department were directed to be transferred to these three Departments as per the names shown in the order. In support of this issue of decentralisation of the purchase activities, a tender notice dated 14.6.1993 has been placed on record so as to show that the Chief Officer, Farm Management had invited tenders for the purchase of 30000 matric tons of the composed fertilisers and other fertilizers. There are more than one such tender notices which show that the purchase activities were being handled by the respective officers or the Managing Director after the Stores and Purchase Department was closed. 8A. On 23.6.1993, the Corporation announced the Voluntary Retirement Scheme based on the decision that was taken in the 259th meeting of the Board of Directors held on 22.3.1993. In the said meeting of the Board of Directors the Corporation’s prevailing conditions regarding income and expenses as well as the steps to be taken for improvement in its performance, were discussed. The Board was of the view that to curtail the financial liability by way of recurring expenditure, some -11- departments of the Corporation would be required to be abolished and the employees working in such departments abolished could have to be either offered benefits of the voluntary retirement scheme or absorbed in other departments. The voluntary retirement scheme (VRS) set out the terms and conditions and also the additional financial benefits available to an employee applying for the same. The Scheme was open to all categories of the employees irrespective of their locations. The 260th meeting of the Board of Directors was held on 28.8.1993 to discuss the Agenda circulated including the resolution by circulation dated 31.7.1993. The learned counsel for the Corporation has placed before us the Resolution-Register and we have noted that for the meeting dated 28.8.1993 there was full quorum and the resolution under circulation dated 31.7.1993 was also placed before it. The applications in response to the voluntary retirement scheme were also placed before the Board and the resolutions came to be passed unanimously. Resolution no.4(c) stated that the Corporation shall abolish the following four posts: (i) Controller, Stores and Purchases, (ii) Marketing Manager, (iii) Superintendent, Selection Group and (iv) Deputy Executive Engineer (Civil), as the departments headed by these officers were to be abolished and the activities to be carried out by these departments will be merged with some other -12- departments. 8B. There is no dissent to the resolution passed in the meeting held on 28.8.1993 and the Board further authorised the Managing Director to take steps for implementation of the said resolution. The Articles of Association do not require the resolutions to be approved by the Government or His Excellency the Governor unless such resolutions were regarding additional financial requirements, engagement of officers of a particular scale, additions to the departments and removal of certain officers by way of punishment or their suspension. Passing of the resolution to abolish certain departments and to declare the concerned heads as surplus as passed by the Board of Directors on 28.8.1993, in our considered opinion, did not require prior sanction of the State Government or His Excellency the Governor. The abolition of the post of Controller, Stores and Purchase, relates back to the order passed by the Managing Director on 21.5.1993, the circulated resolution dated 31.7.1993 and finally the resolution passed by the Board of Directors in its 260th meeting held on 28.8.1993. We do not agree with the arguments advanced before us regarding the alleged illegality of the resolutions or decisions taken. We hold that the decisions of the Corporation to abolish the departments, like Stores and Purchase and Marketing etc -13- and consequently declare the heads of those departments as surplus, do not suffer from any illegality or the Board has not acted without powers. Even though, the Corporation is a public sector undertaking and a State instrumentality under Article 12 of the Constitution, it cannot be deprived of its powers to streamline its activities to make it financially more viable and/or to enable it to come out of the financial crises. Allowing such undertakings to shed its extra fat would certainly better the public interest. To ease the financial burden, when faced with unfavourable business conditions and continued losses, the State undertakings ought to be allowed to abolish some of its departments and dispense with the surplus staff. We must recognise the respondent Corporation’s power to abolish certain posts to streamline its activities and remove the concerned employees when faced with continued losses. 9. Consequently, the next issue that we are required to consider is the challenge to the impugned order passed by the Managing Director on 28.9.1993 informing the petitioner that he would stand terminated from the employment of the Corporation from 30.9.1993 and the order dated 30.9.1993 terminating the petitioner’s service from that date. The first order dated 28.9.1993 has been passed by the Managing Director, whereas the second order -14- dated 30.9.1993 has been passed by the Chief Administrator (Finance) on the basis of the first order. Mrs Doshi, learned counsel for the petitioner, has challenged these orders on various grounds. It was submitted that the respondent-Corporation, being the State instrumentality within the meaning of Article 12 of the Constitution, it has to act in fairness and the right of equality guaranteed under Article 14 of the Constitution was denied to the petitioner. The impugned orders were arbitrary, capricious and were not supported by any authority in law. It was contended that before the said orders were passed, it was necessary for the Corporation to seek prior approval from His Excellency the Governor under Article 74(5) of the Articles of Association and this being a condition precedent, failure to obtain such an approval vitiated the order from its inception,i.e. from 28.9.1993 itself. It was alleged that the purchase activities of the Corporation were not reduced, leave alone being totally eliminated and, therefore, there was no justification in terminating the petitioner’s service. The petitioner also alleged that the meetings of the Board of Directors were not held before the Office Order dated 21.5.1993 was issued and the reasons stated in the said order were, ex-facie, bad and were set out with an ulterior motive. The learned counsel for the petitioner also challenged the authority of the Managing Director to -15- circulate the Board resolution on 31.7.1993. The reasons for abolition of the posts were illegal and were malafide. The impugned orders were passed in colourable exercise of the management’s powers. It was further submitted that there being no service Rules framed by the Corporation, the power to terminate an officer’s service simplicitor on account of the post having been declared as surplus was not available with the Corporation and in any case such power could not be exercised without prior approval of the Governor under Article 74(5). 10. Per contra, Mr Naik, learned counsel for the Corporation, has at the threshold taken an objection to the maintainability of the petition on the ground that the Corporation is not a State instrumentality within the meaning of Article 12 of the Constitution and in any case the impugned orders were based on the resolutions passed by the Corporation, i.e. the Board of Directors, who have the ultimate responsibilities for the management of its affairs. As per Mr Naik, Article 74 (5) did not come into play in the case of discharge simplicitor and the impugned orders did not amount to an order of removal or an order of punishment. He denied that the orders suffered from any malice, arbitrariness or colourable exercise of the management’s powers. The Corporation decided to revamp its activities so as to reduce its financial liability and -16- accordingly the Board had resolved to abolish certain departments and the Stores and Purchase was one such department headed by the petitioner. As the department was decided to be abolished, the Board of Directors in its meeting held on 28.8.1993 decided to declare the post of Controller-Stores and Purchase, as surplus and, therefore, the petitioner came to be terminated from the service by the impugned orders by way of discharge simplicitor and the said order is neither stigmatic nor by way of any penal action. The petitioner was removed from the service solely for the reason that his post was abolished and he was found surplus. Continued on 28.3.2006 Continued on 28.3.2006 Continued on 28.3.2006 11. On the first objection by the Corporation on the maintainability of this writ petition, we have considered the Articles of Association and the decisions of the Apex Court in the case of Ajay Hasia and others Vs. Khalid Mujib Sehravardi and ors, (1981) 1 SCC 722, Pradeep Kumar Biswas, (2002) 5 SCC 111, and MS Zee Telephilm Ltd Vs Union of Inia, AIR 2000 (5) SCC 2677. We have no doubt, in our mind, that the Government of Maharashtra exercises functional, financial and managerial control over the -17- respondent-Corporation and the said control is deep and pervasive. Hence, we reject the contention that the respondent-Corporation does not fall within the ambit of Article 12 of the Constitution. 12. Article 74 (5) reads thus:- "74 (5). To appoint and at their discretion, remove or suspend such managers, secretaries, officers, clerks, agents and servants for permanent, temporary or special services as it may from time to time, think fit, and to determine its powers and duties and fix their salaries or emoluments and to require security in such instances and to such amount as it thinks fit; provided that no appointment to a post, the maximum pay of which is more than Rs.1500/- per mensum shall be made without the prior approval of the Governor and no such officer shall be suspended, removed or in any way penalised in his service matters without the prior approval of the Governor." The learned counsel for the petitioner has placed reliance on the proviso in support of her contentions that the impugned orders are orders of removal and, therefore, they could not have been issued without the prior approval of the Government. Per contra, the Corporation states that -18- the Articles of Association are binding on it for the purposes of carrying out its activities and the same cannot be relied upon by the employees while challenging the orders of termination as they do not form the service conditions nor can they be treated as the service Rules. 13. The respondent-Corporation, being the State instrumentality, the termination of service of any employee is subject to challenge on the ground of arbitrariness, unfairness as well as inequality. Such challenge will have to be tested on the backdrop of Articles 14 and 21 of the Constitution. Admittedly, the petitioner was holding the post of Controller, Stores and Purchase, in the pay scales of Rs.1100-1700 and the said post squarely fell within the ambit of the proviso below to Article 74(5). We have no doubt in our mind that if an officer in the pay scales of Rs.1100-1700 is sought to be suspended, removed or in any way penalised by the respondent-Corporation the prior approval of the Governor shall be a condition precedent. However, in the instant case, we have to examine whether the impugned orders of termination amounted to orders of removal as contemplated under the proviso to Article 74(5) and this issue is no more res integra in view of the decision in the case of M.Ramanatha Pillai Vs State of Kerala and another, (1973) 2 SCC 650 wherein it has been held by the Constitution -19- Bench that the termination of service on account of abolition of the post does not amount to dismissal or removal in service jurisprudence. We have already held that the decision of abolition of the post in the instant case did not suffer from any illegality and there is no dispute that the impugned orders do not carry any stigmatic remark or they do not attach any stigma against the petitioner. It is an order of discharge simplicitor and solely on