# BINNY LTD. AND ANR v. V. SADASIV AN AND ORS

- **Citation:** [2005] Supp. 2 S.C.R. 421
- **Court:** Supreme Court of India
- **Decided:** 2005-08-08
- **Case number:** Civil Appeal No. 1976of1998
- **Bench:** K.G. Balakrjshnan, P. Venkatarama Red')!
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/binny-ltd-and-anr-v-v-sadasiv-an-and-ors-20934
- **Pages:** 22

## Headnote

Constitution of India 1950
Article 226-Writ Remedy-Available against whom--Scope of Writ of
mandamus-Whether available against private party-Held, writ remedy
though pre-eminently a public law ren1edy is available against a private party
if such party is discharging a public function-Scope of remedy is determined
by the nature of the duty to be enforced, rather then the identity of the
authority against whom it is sought.
A
B
c
Article 226-Writ jurisdiction-Mandamus-Held, contractual duties
D
cannot be enforced by writ of mandamus unless there is some public law
element and the contractual power is used for a public purpose.
Article 226-Writ jurisdiction, scope of-Enforcement of contractual
duties-Services of respondents tern1inated as per the agreement of service
by giving one months salary-Respondents filed writ petition in the High
Court for a declaration that the service agreement and the order of
termination was illegal and void-Relief granted by the High Co .. rt-On
appeal, held, public policy principle cannot be applied in the matter of
employment of workers by private persons on the basis of contracts entered
into between them, unless a public element is involved-The decision of the
employers to terminate services of the employees cannot be said to have any
element of public policy and the remedy of the respondents is to seek
redressal in civil law or labour law-Further held, it was not appropriate
to construe those contracts of employment as being opposed to public policy
under section 23 of the Contract Act, 1872 as clause 9 provide for an inquiry
in case of termination for misconduct.
Appellant company suspended operations of the mill as its premises
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got flooded with rain water and issued orders of termination to the
respondents-employees as per clause 8 of their agreement of employment.
Respondents filed writ petition for a declaration that clause 8 of the
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SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.
A
agreement and order of termination thereunder was void and illegal and
violative of section 23 of the Contract Act, 1872. They also contended that
the service agreement was violative of Article 21 of the Constitution and
the closure of the mill was against section 25 F and 25 N of the Industrial
Disputes Act, 1947.
B
The High Court held that clause 8 of the agreement was void and
unenforceable as being violative of section 23 of the Contract Act, 1872
and gave the declaration sought for. Hence the present appeal by the
appellant company.
C
The appellant company contended that :
D
E
I. The jurisdiction under Article 226 could not be invoked against
a private authority who was discharging its function on the basis of
contract entered into by the employer and the employees.
2. As there was alternative efficacious remedy available to
respondents, the discretionary jurisdiction under Article 226 could not be
exercised. Remedy available to the workers was only ordinary civil
litigation.
3. As they were neither public authorities nor their action involved
public law element, remedy of writ of mandamus was not available.
4. The High Court was wrong in invoking extraordinary jurisdiction
under Article 226.
F
Allowing the appeal, the court
G
H
HELD : 1.1. Superior Court's supervisory jurisdiction of judicial
review is invoked by an aggrieved party in myriad cases. High Courts in
India are empowered under Article 226 of the Constitution to exercise
judicial review to correct administrative decisions and under this
jurisdiction High Court can issue to any person or authority, any direction
or order or writs for enforcement of any of the rights conferred by Part
III of the Constitution for any other purpose. The jurisdiction conferred
on the High Court under Article 226 is very wide. However, this is a
public law remedy and is available against a body or person performing
public law function. [429-A-C]
BINNY LTD. v. V. SADASIV AN
423
1.2 A writ of mandamus or the remedy under Article 226 is preA
eminently a public

## Text

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BINNY LTD. AND ANR.
V.
V. SADASIV AN AND ORS.
AUGUST 8, 2005
[K.G. BALAKRJSHNAN AND P. VENKATARAMA RED')!, JJ.]
Constitution of India 1950
Article 226-Writ Remedy-Available against whom--Scope of Writ of
mandamus-Whether available against private party-Held, writ remedy
though pre-eminently a public law ren1edy is available against a private party
if such party is discharging a public function-Scope of remedy is determined
by the nature of the duty to be enforced, rather then the identity of the
authority against whom it is sought.
A
B
c
Article 226-Writ jurisdiction-Mandamus-Held, contractual duties
D
cannot be enforced by writ of mandamus unless there is some public law
element and the contractual power is used for a public purpose.
Article 226-Writ jurisdiction, scope of-Enforcement of contractual
duties-Services of respondents tern1inated as per the agreement of service
by giving one months salary-Respondents filed writ petition in the High
Court for a declaration that the service agreement and the order of
termination was illegal and void-Relief granted by the High Co .. rt-On
appeal, held, public policy principle cannot be applied in the matter of
employment of workers by private persons on the basis of contracts entered
into between them, unless a public element is involved-The decision of the
employers to terminate services of the employees cannot be said to have any
element of public policy and the remedy of the respondents is to seek
redressal in civil law or labour law-Further held, it was not appropriate
to construe those contracts of employment as being opposed to public policy
under section 23 of the Contract Act, 1872 as clause 9 provide for an inquiry
in case of termination for misconduct.
Appellant company suspended operations of the mill as its premises
E
F
G
got flooded with rain water and issued orders of termination to the
respondents-employees as per clause 8 of their agreement of employment.
Respondents filed writ petition for a declaration that clause 8 of the
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SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.
A
agreement and order of termination thereunder was void and illegal and
violative of section 23 of the Contract Act, 1872. They also contended that
the service agreement was violative of Article 21 of the Constitution and
the closure of the mill was against section 25 F and 25 N of the Industrial
Disputes Act, 1947.
B
The High Court held that clause 8 of the agreement was void and
unenforceable as being violative of section 23 of the Contract Act, 1872
and gave the declaration sought for. Hence the present appeal by the
appellant company.
C
The appellant company contended that :
D
E
I. The jurisdiction under Article 226 could not be invoked against
a private authority who was discharging its function on the basis of
contract entered into by the employer and the employees.
2. As there was alternative efficacious remedy available to
respondents, the discretionary jurisdiction under Article 226 could not be
exercised. Remedy available to the workers was only ordinary civil
litigation.
3. As they were neither public authorities nor their action involved
public law element, remedy of writ of mandamus was not available.
4. The High Court was wrong in invoking extraordinary jurisdiction
under Article 226.
F
Allowing the appeal, the court
G
H
HELD : 1.1. Superior Court's supervisory jurisdiction of judicial
review is invoked by an aggrieved party in myriad cases. High Courts in
India are empowered under Article 226 of the Constitution to exercise
judicial review to correct administrative decisions and under this
jurisdiction High Court can issue to any person or authority, any direction
or order or writs for enforcement of any of the rights conferred by Part
III of the Constitution for any other purpose. The jurisdiction conferred
on the High Court under Article 226 is very wide. However, this is a
public law remedy and is available against a body or person performing
public law function. [429-A-C]
BINNY LTD. v. V. SADASIV AN
423
1.2 A writ of mandamus or the remedy under Article 226 is preA
eminently a public law remedy and is not generally available as a remedy
against private wrongs. It is used for enforcement of various rights of the
public or to compel the public/statutory authorities to discharge their duties
and to act within their bounds. It may be used to do justice when there is
wrongful exercise of power or a refusal to perform duties. This writ is
B
admirably equipped to serve as a judicial control over administrative
actions. This writ could also be issued against any private body or 11erson,
specially in view of the words used in Article 226 of the Constitution.
However, such private authority must be discharging a public function
and the decision sought to be corrected or enforced must be in discharge of
a public function. The scope of mandamus is determined by the nature of C
the duty to be enforced, rather than the identity of the authority against
whom it is sought. If the private body is discharging a public function and
.the denial of any right is in connection with the public duty imposed on
such body, the public law remedy can be enforced. The duty cast on the
public body may be either statutory or otherwise and the source of such
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power is immaterial, but, nevertheless, there must be the public law element
in such action. The courts always retained the discretion to withhold the
remedy where it would not be in the interest of justice to grant it. It is also
to be noticed that the statutory duty in: posed on the public authorities may
not be of discretionary character. (440-FH; 441-A-B; 430-B-C]
1.3 It is difficult to draw a line between the public functions and
private functions when it is being discharged by a purely private rnthority.
A body is performing a "public function" when it seeks to achieve some
collective benefit for the public or a section of the public and is accepted
E
by the public or that section of the public as having authority to do so.
F
Bodies therefore exercise public functions when they intervene or
participate in social or economic affairs in the public interest. (431-C-D]
Dwarkanath v. Income Tax Officer, (1965] 3 SCR 536; Regina v. Panel
on Take-overs and Mergers, Ex parte Datafin Pie., (1987) 1 QB 815 and
Council of Civil Services Union v. Minister for the Civil Service, (1985) AC
G
374, relied on.
Wade and Forsyth, Administrative law (9th ed.) OUP p.621; de Smith,
Woolf & Jowell, Judicial Review of Administrative Action (5th ed.) chapter
3 para 0.24; Halsbury 'slaws of England, 3rd ed. Vol. 30, p. 682, referred
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SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
A
to.
B
2.1 A distinction has always been drawn between the public duties
enforceable.by mandamus that are statutory and duties arising merely
from contract. Contractual duties are enforceable as matters of private
law by ordinary contractual remedies such as damages, injunction, specific
performance a,nd declaration. In contractual matters even in respect of
public bodies, the principles of judicial review have got limited application.
The interpretation and implementation of clause in a contract cannot be
the subject matter of a writ petition. Whether the contract envisages
actual payment or not is a question of construction of contract. If a term
C
of a contract is violated, ordinarily, the remedy is not a writ petition
under Article 226. There must be a public law element and it cannot be
exercised to enforce purely private contracts entered into between the
parties. [430-E-F; 441-F-H; 442-B-C]
D
2.2 A contract would not become statutory simply because it is for
construction of public utility and it has been awarded by a statutory body.
But nevertheless it may be noticed that the Government or Government
authorities at all levels is increasingly employing contractual techniques
to achieve its regulatory aims. It cannot be said that the exercise of those
powers are free from the zone of judicial review and that there would be
E
no limits to the exercise of such powers, but in normal circumstances,
judicial review principle cannot be used to enforce the contractual
obligations. When that contractual power is being used for public purpose,
it is certainly amenable to judicial review. The power must be used for
lawful purposes and not unreasonably. (441-C-E]
F
2.3 The decision of the employer in these two cases to terminate the
services of their employees cannot be said to have any element of public
policy. Their cases were purely governed by the contract of employment
entered into between the employees and the employer. It is not appropriate
to construe those contracts as opposed to the principles of public policy
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and thus void and illegal under section 23 of the Contract Act. The
remedy available to the respondents is to seek redressal of their grievance
in civil law or under the labour law enactments. (441-E-F; 442-B-C]
Praga Tools Corporation v. CA. !manual, [1969] I SCC 585; VST
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Industries Ltd. v. VST Industries Workers' Union, [2001] I SCC 298; General
BINNY LTD. v. V. SADASIVAN [BALAKRISHNAN, J.]
425
Manager, Kisan Sahkar Chini Mills limited, Sultanpur, UP v. Satru11han
Nishad, (2003] 8 SCC 639; Federal Bank Ltd. v. Sagar Thomas, (2003) 10
SCC 733; State of UP. v. Bridge & Roof Co., (1996) 6 SCC 22 and Kera/a
State Electricity Board v. Kurien E. Kalathil, (2000) 6 SCC 295, followed.
Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti
Mahotsav Smarak Trust & Ors. v. V. R. Rudani, (J 989) 2 SCC 691; Central
Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, [1986) 3
SCC 156 and Delhi Transport Corporation v. DTC Mazdoor Congress,
(1991] Supp. 1 SCC 600, distinguished.
A
B
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1976of1998.
C
From the Judgment and Order dated 2.12.97 of the Madras High Court
in W.P. No.I 1862 of 1996.
WITH
C.A. No. 4839 of 2005.
Dr. Rajiv Dhawan, Ms. Indira Jaisingh, (NP), Shasidharan, V. Balaji,
Ms. A. Radhakrishnan, Ms. T.S. Santhi, P.N. Ramalingam, Bharat Sangal,
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Ms. Sangeeta Panicker and R.R. Kumar for the Appellants.
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Jamshed Cama, S. Guru Krishna Kumar, Mrs. Srikala, C.K.M. Singh,
S.R. Setia, K. Gulati, Ms. Seema Sundd, Mrs. Manik Karanjawala for the
Respondents.
The Judgment of the Court was delivered by
K.G. BALAKRISHNAN, J. : Leave granted in SLP(C ) No. 60 I 6/2002
and the appeal is heard along with Civil Appeal No. I 976/l 998. In these two
appeals, common questions of law arise for consideration.
In Civil Appeal No. I 976/1998, narration of brief facts is necessary to
understand whether the reliefs as prayed for by respondents 2 to 36 could
have been granted by the High Court. Each of the respondents was working
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as member of the management staff of the appellant company, which was
engaged in the manufacture of cloth. The respondents were originally
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SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
appointed in the appellant-company in various jobs such as Clerks, Machine
Overlookers, Supervisors, etc. According to these respondents, from 1981
onwards, the appellant company started insisting on them to be designated
as management staff with the object of avoiding payment of overtime wages.
The respondents signed an agreement with the Management acceding to the
request of the appellant company, but they continued to perform the same
duties as before. The appellant company contended that there was incessant
rain in the night of 12.6.1996 when the entire company premises was flooded
with water and it caused serious damage to the plant and machinery and
finished-stock and the appellant company stayed all the operations and
informed the Commissioner of Labou:- that water had entered the mill
premises causing serious damage to the plant and machinery and management
had no other alternative but to suspend the operations of the mill. Order of
termination was issued to the respondents invoking Clause 8 of the agreement
dated 12.3.1991 entered into by the respondents with the appellant company.
As per clause 8 of the agreement, the Management had a right to terminate
the services without assigning any reason by just giving one month's notice
or salary in lieu thereof. Appellant contended that all these respondents were
drawing salary of more than Rs. 1,600 per month and they were not
'workmen' under the Industrial Disputes Act, 1947. The respondents filed
Writ petition No. 11862/1996 for a Declaration that Clause 8 of the
Agreement read with Order of termination dated 31. 7 .1996 issued by the
appellant company was void and illegal and violative of Section 23 of the
Indian Contracts Act. The respondents had also contended that the agreement
entered into by the respondents with the appellant company was violative of
Article 21 of the Constitution and the closure of the mill was against Section
25F and 25N of the Industrial Disputes Act, 1947, and they sought for a
direction to reinstate them in service with continuity of service and all
consequential benefits. The appellant-company contended that the Writ
Petition was not maintainable as the appellant company was a private body;
therefore, the question of granting the declaration sought would not arise. It
was also contended that there was alternative efficacious remedy available
to them and therefore, the discretionary jurisdiction under Article 226 of the
Constitution of India should not be exercised. The appellant company also
contended that the respondents were not entitled to seek a Writ of Mandamus
as the appellant was a private company and the decision of the appellant
company to terminate the services of the respondents is not liable to be the
subject matter of judicial review. According to the appellant company, they
were neither 'public authorities' nor their action involved public law element,
BINNY LTD. v. V. SADASIVAN [BALAKRISHNAN, J.]
427
for which remedy of Writ of Mandamus was available. The Writ Petition was
considered by the Division Bench of the Madras High Court. The Court held
that Clause 8 of the agreement entered into between the respondents 2 to 36
and the appellant was void and unenforceable against the respondents as
being violative of Section 23 of the Indian Contracts Act. Reliance was placed
on Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly,
[ 1986] 3 SCC I 56 and the High Court ultimately held that in the proceedings
under Article 226, the respondents herein would not be entitled to get the
relief of reinstatement and back wages and the court granted only a
declaratory relief to the effect that the termination order was illegal and the
respondents had to work out an appropriate remedy before the appropriate
forum.
In the appeal arising out of SLP (Civil) No. 6106/2000, the appellant
was employed as a Corporate Legal Manager with the Isl respondent
company, which is a private limited company engaged in the manufacture
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of chemicals. The services of the appellant were terminated with effect from
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l.6.!998. The appellant sought for the issue of a Writ or other appropriate
Order to quash or set aside the Termination Order dated l.6.1998. He also
sought for a Writ of Mandamus directing the respondents to allow the
appellant to report for work in the same grade and pay-scale to which he was
originally employed. The respondent company contended that the Writ
Petition was not maintainable as the respondent company was a private
E
employer and the appellant was working under a private contract of
employment. The Writ Petition filed by the appellant was referred to a larger
Bench in view of the important question of law raised by the parties and the
Full Bench of the Bombay High Court elaborately considered the question
and held that the appellant was not entitled to the remedy sought for and the
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Writ Petition was not maintainable. The Full Bench held that by terminating
the services of the appellant, the Company was not discharging any public
function and, therefore, the action sought to be challenged by the appellant
was not amenable to the jurisdiction of judicial review.
We heard the learned Counsel on either side. Reference was made to
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various decisions on the subject.
The contention of the appellant in Civil Appeal No. 1976/1998 was that
the decision ·or the High Court invoking the extraordinary jurisdiction under
Article 226 of the Constitution was incorrect and that the Court should not
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SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
have interfered with the decision of a private limited company and that the
powers under Article 226 cannot be invoked against a private authority who
is discharging its functions on the basis of the contract entered into between
the employer and the employees. It was contended that the remedy available
to the workers was only ordinary civil litigation. It was also contended that
there was no public law element in the action taken by the appellant against
the employees and, therefore, the public law remedy of judicial review had
no application.
Employees who are respondents in that appeal contended that their
contract with the appellant was per se illegal and void as it was opposed to
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Section 23 of the Indian Contracts Act. It was argued that under similar
circumstances, this court had given direction to redress the grievances of the
employees. Reference was made to Central Inland Water Transport
Corporation ltd. v. Brajo Nath Ganguly, [1986] 3 SCC 156 and it was
contended by the respondent employees that the decision to terminate their
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services was based on a specific clause in the contract which by itself is void
in view of Section 23 of the Indian Contracts Act. Therefore, the High Court
was justified in giving a declaratory relief in their favour.
In Civil Appeal arising out of SLP (Civil) No. 6016 of 2002, the
appellant contended that the action of the respondent was illegal and void
and his services should not have been terminated by the employer. According
to the appellant, even if the decision-making authority is a private body or
not an 'authority' coming within the purview of Article 12 of the Constitution,
on wider issues, the jurisdiction of the High Court under Article 226 can be
invoked to set aside the illegal act and to protect the fundamental rights of
the aggrieved party. The learned Counsel for the respondent representing the
company submitted that the appellant had been rightly discharged from the
services and the company being a private authority was not amenable to the
writ jurisdiction of the High Court. It was submitted that under the powers
of judicial review by the High Court, a public action alone could have been
challenged and the decision to terminate the service of an employee on the
ground that his services were unsatisfactory does not have any public law
element and, therefore, the High Court has rightly rejected the contentions
advanced by the appellant therein.
We have carefully considered the various contentions urged by the
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partie§'on either side. In order to decide the question, it is necessary to trace
BINNY LTD. v. V. SADASIV AN [BALAKRISHNAN, J.]
429
the history of law relating to judicial review of public actions.
Superior Court's supervisory jurisdiction of judiciol review is invoked
by an aggrieved party in myriad cases. High Courts in India are empowered
under Article 226 of the Constitution to exercise judicial review to correct
administrative decisions and under this jurisdiction High Court can issue to
any person or authority, any direction or order or writs for enforcement of
any of the rights conferred by Part lil .or for any other purpose. The
jurisdiction conferred on the High Court under Article 226 is very wide.
However, it is an accepted principle that this is a public law remedy and it
is available against a body or person performing public law function. Before
considering the scope and ambit of public law remedy in the light of certain
English decisions, it is worthwhile to remember the words of Subha Rao J.
expressed in relation to the powers conferred on the High Court under Article
226 of the Constitution in Dwarkanath v. Income Tax Officer, [ l 965] 3 SCR
536 at pages 540-41:
"This article is couched in comprehensive phraseology and it ex
facie confers a wide power on the High Courts to reach injustice
wherever it is found. The Constitution designedly used a wide
language in describing the nature of the power, the purpose for
which and the person or authority against whom it can be exercisetl.
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It can issue writs in the nature of prerogative writs as understood
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in England; but the scope of those writs also is widened by the use
of the expression "nature", for the said expression does not equate
the writs that can be issued in India with those in England, but only
draws an analogy from them. That apart, High Courts can also issue
directions, orders or writs other than the prerogative writs. It enables
the High Court to mould the reliefs to meet the peculiar and
complicated requirements of this country. Any attempt to equate the
scope of the power of the High Court under Article 226 of the
Constitution of India with that of the English Courts to issue
prerogative writs is to introduce the unnecessary procedural
restrictions grown over the years in a comparatively small country
like England with a unitary form of Government into a vast country
like India functioning under a federal structure. Such a construction
defeats the purpose of the article itself."
The Writ of Mandamus lies to secure the performance of a public or
a statutory duty. The prerogative remedy of mandamus has long provided the
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SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.
normal means of enforcing the performance of public duties by public
authorities. Originally, the writ of mandamus was merely an administrative
order from the sovereign to subordinates. In England, in early times, it was
made generally available through the Court of King's Bench, when the
Central Government had little administrative machinery 0f its own. Early
decisions show that there was free use of the writ for the enforcement of
public duties of all kinds, for instance against inferior tribunals which refused
to exercise their jurisdiction or against municipal corporation which did not
duly hold elections, meetings, and so forth. In modem times, the mandamus
is used to enforce statutory duties of public authorities. The courts always
retained the discretion to withhold the remedy where it would not be in the
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interest of justice to grant it. It is also to be noticed that the statutory duty
imposed on the public authorities may not be of discretionary character. A
distinction had always been drawn between the public duties enforceable by
mandamus that are statutory and duties arising merely from contract.
Contractual duties are enforceable as matters of private law by ordinary
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contractual remedies such as damages, injunction, specific performance and
declaration. In the Administrative Law (Ninth Edition) by Sir William Wade
and Christopher Forsyth, (Oxford University Press) at page 621, the
following opinion is expressed:
"A distinction which needs to be clarified is that between public
duties enforceable by mandamus, which are usually statutory, and
duties arising merely from contract. Contractual duties are enforceable
as matters of private law by the ordinary contractual remedies, such
as damages, injunction, specific performance and declaration. They
are not enforceable by mandamus, which in the first place is
confined to public duties and secondly is not granted where there
are other adequate remedies. This difference is brought out by the
relief granted in cases of ultra vires. If for example a minister or
a licensing authority acts contrary to the principles·ofnaturaljustice,
certiorari and mandamus are standard remedies. But if a trade union
disciplinary committee acts in the same way, these remedies are
inapplicable: the rights of its members depend upon their contract
of membership, and are to be protected by declaration and injunction,
which accordingly are the remedies employed in such cases."
Judicial review is designed to prevent the cases of abuse of power and
neglect of duty by public authorities. However, under our Constitution,
Article 226 is couched in such a way that a writ of mandamus could be issued
BINNY LTD. v. V. SADASIVAN [BALAKRISHNAN, J.]
431
even against a private authority. However, such private authority must be
A
discharging a public function and that the decision sought to be corrected or
enforced must be in discharge of a public function. The role of the State
expanded enonnously and attempts have been made to create various
agencies to perfonn the governmental functions. Several corporations and
companies have also been fanned by the government to run industries and
B
to carry on trading activities. These have come to be known as Public Sector
Undertakings. However, in the interpretation given to Article 12 of the
Constitution, this Court took the view that many of these companies and
corporations could come within the sweep of Article 12 of the Constitution.
At the same time, there are private bodies also which may be discharging
public functions. It is difficult to draw a line between the public functions
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and private functions when it is being discharged by a purely private
authority. A body is perfonning a "public function" when it seeks to achieve
some collective benefit for the public or a section of the public an<l is accepted
by the public or that section of the public as having authority to do so. Bodies
therefore exercise public functions when they intervene or participate in
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social or economic affairs in the public interest. In a book on Judicial Review
of Administrative Action (Fifth Edn.) by de Smith, Woolf & Jowell in Chapter
3 para 0.24, it is stated thus:
"A body is performing a "public function" when it seeks to achieve
some collective benefit for the public or a section of the public and
E
is accepted by the public or that section of the public as having
authority to do so. Bodies therefore exercise public functions when
they intervene or participate in social or economic affairs in the
public interest. This may happen in a wide variety of ways. For
instance, a body is perfonning a public function when it provides
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"public goods" or other collective services, such as health care,
education and personal social services, from funds raised by taxation.
A body may perfonn public functions in the fonn of adjudicatory
services (such as those of the criminal and civil courts and tribunal
system). They also do so if they regulate commercial and professional
activities to ensure compliance with proper standards. For all these
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purposes, a range of legal and administrative techniques may be
deployed, including: rule-making, adjudication (and other fonns of
dispute resolution); inspection; and licensing:
Public functions need not be the exclusive domain of the state.
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Charities, self-regulatory organizations and other nominally private
institutions (such as universities, the Stock Exchange, Lloyd's of
London, churches) may in reality also perform some types of public
function. As Sir John Donaldson M.R. urged, it is important for the
courts to "recognise the realities of executive power" and not allow
"their vision to be clouded by the subtlety and sometimes complexity
of the way in which it can be exerted". Non-govern.nental bodies
such as these are just as capable of abusing their powers as is
government."
In Regina v. Panel on Take-overs and Merges, Ex parte Datafin Pie.
And Another, (1987) 1 Queen's Bench Division 815, a question arose whether
the Panel of Take-overs and Mergers had acted in concert with other parties
in breach of the City Code on Take-overs and Mergers. The panel dismissed
the complaint of the applicants. Though the Panel on Take-over and Mergers
was purely a private body, the Court of Appeal held that the supervisory
jurisdiction of the High Court was adaptable and could be extended to any
body which performed or operated as an integral part of a system which
performed public law duties, which was supported by public law sanctions
and which was under an obligation to act judicially, but whose source of
power was not simply the consent of those ov~r whom it exercised that
power; that although the panel purported to be part of a system of selfregulation and to derive its powers solely from the consent of those whom
its decisions affected, it was in fact operating as an integral part of a
governmental framework for the regulation. of financial activity in the City
of London, was supported by a periphery of statutory powers and penalties,
and was under a duty in exercising what amounted to public powers to act
judicially; that, therefore, the court had jurisdiction to review the panel's
decision to dismiss the applicants' complaint; but that since, on the facts,
there were no grounds for interfering with the panel's decision, the court
would decline to intervene.
Lloyd L.J, agreeing with the opinion expressed by Sir John Donaldson
MR. held:
"I do not agree that the ~ource of the power is the sole test whether
a body is subject to judicial review, nor do I so read Lord Diplock's
speech. Of course the source of the power will often, perhaps
usually, be decisive. If tht: source of power is a statute, or subordinate
BINNY LTD. v. V. SADASIV AN [BALAKRISHNAN, J.]
433
legislation under a statute, then clearly the body in question will be
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subject to judicial review. [fat the end of the scale, the source of
power is contractual, as in the case of private arbitration, then clearly
the arbitrator is not subject to judicial review.
In that decision, they approved the observations made by lord Diplock
in Council a/Civil Service Unions v. Minister for the Civil Service, (1985)
A.C. 374, 409 wherein it was held :
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" ... for a decision to be susceptible to judicial review the decisionmaker must be empowered by public law (and not merely, as in
arbitration, by agreement between private parties) to make decisions
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that, if validly made, will lead to administrative action or abstention
from action by an authority endowed by law with executive powers
which have one or other of the consequences mentioned in the
preceding paragraph. The ultimate source of the decision-making
power is nearly always nowadays a statute or subordinate legislation
made under the statute; but in the absence of any statute regulating D
the subject matter of the decision the source of the decision-making
power may still be the common law itself, i.e., that part of the
common law that is given by lawyers the label of 'the prerosative.'
Where this is the source of decision·making power, the power is
confined to executive officers of central as distinct from local
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government and in constitutional practice is generally exercised by
those holding ministerial rank"
It is also pertinent to refer to Sir John Donaldson MR. in that TakeOver Panel case :
"In all the reports it is possible to find enumerations of factors giving
rise to the jurisdiction, essential or as being e.<clusive of other
factors. Possibly the only essential elements are what can be
described as a public element, which can take many different forms,
and the exclusion from the jurisdiction of bodies whose sole source
of power is a consensual submission to is jurisdiction."
The above guidelines and principles applied by English courts cannot
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be fully applied to Indian conditions when exercising jurisdiction under
Article226 or 32 of the Constitution. As already stated, the power of the High
Courts under Article 226 is very wide and these powers have to be exercised H
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SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
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by applying the constitutional provisions and judicial guidelines and violation,
if any, of the fundamental rights guaranteed in Part III of the Constitution.
In the matter of employment of workers by private bodies on the basis of
contracts entered into between them, the courts had been reluctant to exercise
the powers of judicial review and whenever the powers were exercised as
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against private employers, it was solely done based on public law element
involved therein.
This view was expressly stated by this Court in various decisions and
one of the earliest decisions is The Praga Tools Corporation v. Shri C.A.
/manual and Others, [1969] 1 SCC 585. In this case, the appellant company
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was a company incorporated under the Indian Companies Act and at the
material time the Union Government and the Government of Andhra Pradesh
held 56 per cent and 32 per cent of its shares respectively. Respondent
workmen filed a writ petition under Article 226 in the High Court of Andhra
Pradesh challenging the validity of an agreement entered into between the
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employees and the company, seeking a writ of mandamus or an order or
direction restraining the appellant from implementing the said agreement.
The appellant raised objection as to the maintainability of the writ petition.
The learned Single Judge dismissed the petition. The Division Bench held
that the petition was not maintainable against the company. However, it
granted a declaration in favour of three workmen, the validity of which was
challenged before this Court. This Court held at pages 589-590 as under:
" .... that the applicant for a mandamus should have a legal and
specific right to enforce the performance of those dues. Therefore,
the condition precedent for the issue of mandamus is that there. is
in one claiming it a legal right to the performance of a legal duty
by one against whom it is sought. An order of mandamus is, in form,
•·
a command directed to a person, corporation or any inferior tribun.al
requiring him or them to do is particular thing therein specified
which appertains to his or their office and is in the nature of a public
duty. It is, however, not necessary that the person or the authority
on whom the statutory duty is imposed need be a public official or
an official body. A mandamus can issue, for instance, to an official
of a society to compel him to carry out the terms of the statute under
or by which the society is constituted or governed and also to
companies or corporations to carry out duties placed on them by the
statutes authorizing their undertakings. A mandamus would also lie
BINNY LTD. v. V. SADASIV AN [BALAKRISHNAN, J.]
435
against a company constituted by a statute for the purpose of
fulfilling public responsibilities [Cf. Halsbury's Laws of England
(3rd Ed.), Vol.II p 52 and onwards].
The company being a non-statutory body and one incorporated
under the Companies Act there was neither a statutory nor a public
duty imposed on it by a statute in respect of which enforcement
could be sought by means of a mandamus, nor was there in its
workmen any corresponding legal right for enforcement of any such
statutory or public duty. The High Court, therefore, was right in
holding that no writ petition for a mandamus or an order in the
nature of mandamus cpuld lie against the company."
It was also observed that when the High Court had held that the writ
petition was not maintainable, no relief of a declaration as to invalidity of
an impugned· agreement between the company and its employees could be
granted and that the High Court committed an error in granting such a
declaration.
In VST Industries Limited v. VST Industries Workers' Union & Anr.,
[2001] l SCC 298, the very same question came up for consideration. The
appellant-company was engaged in the manufacture and sale of cigarettes.
A petition was filed by the first respondent under Article 226 of the
Constitution seeking a writ of mandamus to treat the members of the
respondent Union, who were employees working in the canteen of the
appellant's factory, as employees of the appellant and for grant of monetary
and other consequential benefits. Speaking for the Bench, Rajendra Babu,
J., (as he then was), held as follows :
"7. In de Smith, Woolf and Jowel/ 's Judicial Review of Administrative
Action, 5th Edn., it is noticed that not all the activities of the private
bodies are subject to private law, e.g., the activities by private bodies
may be governed by the standards of P.u!>lic when its decisions are
subject to duties conferred by statute or when by virtue of the
function it is performing or possible its dominant position in the
market, it is under an implied duty to act in the public interest. By
way of illustration, it is noticed that a private company selected to
run a prison although motivated by commercial profit should be
regarded, at least in relation to some of its activities, as subject to
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B
c
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SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.
public law because of the nature of the function it is performing.
This is because the prisoners, for whose custody and care it is
responsible, are in the prison in consequence of an order of the court,
and the purpose and nature of their detention is a matter of public
concern and interest. After detailed discussion, the learned authors
have summarized the position with the following propositions :
(1)
The test of a whether a body is performing a public function,
and is hence amenable to judicial review, may not depend upon
the source of its power or whether the body is ostensibly a
"public" or a "private" body.
(2)
The principles of judicial review prima facie govern the
activities of bodies performing public functions.
(3)
However, not all decisions taken by bodies in the course of
their public functions are the subject matter of judicial review.
In the following two situations judicial review will not normally
be appropriate even though the body may be performing a
public function.
(a) Where some other branch of the law more appropriately
governs the dispute between the parties. In such a case, that
branch of the Jaw and its remedies should and normally will
be applied; and
(b) Where there is a contract between the litigants. In such a
case the express or implied terms of the agreement should
normally govern the matter. This reflects the normal approach
of English law, namely, that the terms of a contract will
normally govern the transaction, or other relationship between
the parties, rather than the general law. Thus, where a special
method of resolving disputes (such as arbitration or resolution
by private or domestic tribunals) has been agreed upon by the
parties (expressly or by necessary implication), that regime,
and not judicial review, will normally govern the dispute.
Applying the above principles, this Court held that the High Court
rightly held that it had no jurisdiction.
BINNY LTD. v. V. SADASIVAN [BALAKRISHNAN, J.]
437
Another decision on the same subject is General Manager, Kisan
A
Sahkar Chini Mills Limited, Sultanpur, UP v. Satrughan Nishad and Ors.,
[2003] 8 SCC 639. The appellant was a cooperative society and was engaged
in the manufacture of sugar. The respondents were the workers of the
appellant and they filed various writ petitions contending that they had to be
treated as permanent workmen. The appellant challenged the maintainability
B
of those writ petitions and applying the principles enunciated :n VST
Industries' case (supra), it was held by this Court that the High Court had
no jurisdiction to entertain an application under Article 226 of the Constitution
as the mill was engaged in the manufacture and sale of sugar which would
not involve any public function.
In Federal Bank Limited v. Sagar Thomas & Ors., [2003] IO SCC 733,
the respondent was working as a Branch Manager of the appellant Bank. He
was suspended and there was a disciplinary enquiry wherein he was found
guilty and dismissed from service. The respondent challenged his dismissal
by filing a writ petition.