# S. L. AGARWAL v. GENERAL MANAGER, HINDUSTAN STEEL LTD

- **Citation:** [1970] 3 S.C.R. 363
- **Court:** Supreme Court of India
- **Decided:** 1969-12-19
- **Case number:** Civil Appeal No. 524 of 1967
- **Bench:** M. Hidayatullah, A. N. Grover, A. N. Ray, P. Jaganmohan Reddy, !. D. Dua
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/s-l-agarwal-v-general-manager-hindustan-steel-ltd-5005
- **Pages:** 7

## Headnote

Constitution of. India, Art. 311-Civil post under Union or StatePost held under
Hindustan Steel Ltd.
whether such a
post-Holder
whether entitled to ;r:::iction of Article.
The services of t::e appellant as Assistant Surgeon in the Hindustan
Steel Ltd., Ranchi wcro terminated purportedly in terms of his contract
of employment. In a petition under Art. 226 he claimed that the termination was wrongful inasmuch as it was really by way of punishment and
Art. 311 of the Constitutic>n had not been complied with. The company
resisted the ground by saying that Art. 311 was not applicable ro 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 dismi~ed 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 Art. 311(2) is availab:e to the categories of persons mentioned in els. (a)(b) and (c) of Art. 311(1). Tue
appellant did not fall in the categories mentioned in els. (ol and (b). He
did hold a civil post as opposed to a military post but cl. (c) further re·
quired that it must be under the Union or a State.
In view of the existence of shareholders, of capital
raised bY the
issuance df 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 Go,·ernment
nor were the servants of it holding posts under the S.tate. 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 em~
ployee of Hindustan Steel Ltd., did not answer the description df a holder
of 'a ci.vil post under the Union' as stoted in Art. 311. The High Court
was therefore right in not affordin~ him the protection of that Article.
[367 D; 369 C-E]
State of Bihar v. Union of India. C.A. Nos. 512-513/69 dt. 19-9-1969
and Fraga Tools Corporation v. C. V. /manual & Ors. C.A. No. 612 1966
dt. 19-2-1969,. applied.
Subodh Ran;an Ghosh v. Sindhri Fertilizers and Chemicals Ltd. A.l.R.
1957 Pat. IO, approved.
M. Verghese v. Union oj India
&
Ors.
A.l.R.
1963
Cal.
421,
Lac/uni and Ors. v. Military Secretary to'1he Governrnent _of Bihar, A.I.R.
1956 Pat. 398, Ram Babu Rathaur v. Divisional Mana~er. life Insurance
Corporation of India, A.LR. 1961 All. 503, Damrvlr.r Vailey Corporation
v. Provat Roy, LX C.W.N. 1023 and
Tami'" v. fla1111afcrd,
[1950] l
K.B.D. 18, referred to.
364
SUPREME COURT REPORTS
(1970) 3 S.C.R.
(ii) The 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.

## Text

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363
S. L. AGARWAL
v.
GENERAL MANAGER, HINDUSTAN STEEL LTD.
December 19, 1969
[M. HIDAYATULLAH, C.J., A. N. GROVER,
A. N. RAY, P.
JAGANMOHAN REDDY AND !. D. DUA, JJ.j
Constitution of. India, Art. 311-Civil post under Union or StatePost held under
Hindustan Steel Ltd.
whether such a
post-Holder
whether entitled to ;r:::iction of Article.
The services of t::e appellant as Assistant Surgeon in the Hindustan
Steel Ltd., Ranchi wcro terminated purportedly in terms of his contract
of employment. In a petition under Art. 226 he claimed that the termination was wrongful inasmuch as it was really by way of punishment and
Art. 311 of the Constitutic>n had not been complied with. The company
resisted the ground by saying that Art. 311 was not applicable ro 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 dismi~ed 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 Art. 311(2) is availab:e to the categories of persons mentioned in els. (a)(b) and (c) of Art. 311(1). Tue
appellant did not fall in the categories mentioned in els. (ol and (b). He
did hold a civil post as opposed to a military post but cl. (c) further re·
quired that it must be under the Union or a State.
In view of the existence of shareholders, of capital
raised bY the
issuance df 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 Go,·ernment
nor were the servants of it holding posts under the S.tate. 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 em~
ployee of Hindustan Steel Ltd., did not answer the description df a holder
of 'a ci.vil post under the Union' as stoted in Art. 311. The High Court
was therefore right in not affordin~ him the protection of that Article.
[367 D; 369 C-E]
State of Bihar v. Union of India. C.A. Nos. 512-513/69 dt. 19-9-1969
and Fraga Tools Corporation v. C. V. /manual & Ors. C.A. No. 612 1966
dt. 19-2-1969,. applied.
Subodh Ran;an Ghosh v. Sindhri Fertilizers and Chemicals Ltd. A.l.R.
1957 Pat. IO, approved.
M. Verghese v. Union oj India
&
Ors.
A.l.R.
1963
Cal.
421,
Lac/uni and Ors. v. Military Secretary to'1he Governrnent _of Bihar, A.I.R.
1956 Pat. 398, Ram Babu Rathaur v. Divisional Mana~er. life Insurance
Corporation of India, A.LR. 1961 All. 503, Damrvlr.r Vailey Corporation
v. Provat Roy, LX C.W.N. 1023 and
Tami'" v. fla1111afcrd,
[1950] l
K.B.D. 18, referred to.
364
SUPREME COURT REPORTS
(1970) 3 S.C.R.
(ii) The 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.
CIVIL APPELLATE JURISDICTION : Civil 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 S. S. 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 C.J. 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.
Ex. P-3 is the Contract
• of Service which he entered into with the Company. Under the
terms of the contract ihere was a further period of probation.
During the period of probation the Company could terininate 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
given 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 yeats.
The appellant passed the probation period and he was entitled 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 the Company.
Ex. P-4 represents the procedure for imposing
'.l)lajor penalties and for l'llnishment 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.
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s. L. AGARWAL v. lllNDUSTAN STEEL_ (Hidayatullah, C.J.)
365
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Holey who complained of eold, 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,
I
but the appellant aenied 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
C
was being held by th~ 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 terminated 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 terminatl D
ed in terms of his employment.
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The appellant thereupon filed a petition under Art. 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 Art. 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 Art. 311 of
the Constitution.
The Company resisted the ground by saying
that Art. 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
Art. 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 de.-
· ~·
fending 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
SUPREME COURT REPORTS
(1970] 3 S.C.R.
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-,
ployees of a Corporation such as the Hindustan Steel Ltd., are
eatit!ed to the protection of Art. 311 ? 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.
Art. 311, on which this contention is based, reads as follows :
"311. 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.
(2) No 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-
(a) where 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;
(b) where 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.
( 3) If 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:'
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s. L. AGARWAL v. HINDUSTAN STEEL (Hidayatullah, C.J.) 367
Clause (2) of the article, which gives the protection open'
with the words "no such pzrson as aforesaid" and these words
take one back to clause (1) whkh describes the person or pers0ns to whom the p«ote;;tion L intended to go.
Cb;3~ (!) speaks
cf (i) p~rsom who arc member" cf (a) a Civil Service of the
Uab:i, or (b) an AU-India S:i-vice 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 Art. 311 (I) 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 appellant relies on some obiter observations of a single Judge
in
M. Verghese v. 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
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
inapplicable in cert~in respects .. and conferred unlimited powers
of management on the President {)f India and his nominees.
He
also found that Hindustan Steel Limited was entirely owned by
the Union of India.
From this the learned Juqge wished to
infer that Hindustan Steel Limited was really a department of
the Government but he did not express this opinion and decided
ll)A.l.R.1963Cal.421.
.,
368
SUPREME COURT REPORTS
[ 1970) 3 S.C.R.
:the case on another point. The appellant contends that the conclusion which the learned single Judge did not draw in the Cal-
.cutta 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 v. Union of India and
Anr. (') Hindust~n Steel Limited was not held to be a "State"
for purposes of Art. 131. The question whether Hindustan Steel
Limited was subject to the jurisdiction of the High Court under
Arts. 226 and 227 was left open.
In dealing with the above
conclusion, reference was made to the incorporation of Hindustan Steel Limited as an independent company and thus a distinct entity. In Praga Tqo/s Corporation v. C. V. !manual and
Ors.(') 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 autho·
rity of the Union Government.
Similar views were also expressed in the High Courts. In Lachmi and Others v. Military Secretary to the Government of Bihar('), the expression "civil post
under the Union or the State" was held to mean that the civif
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 Raj
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_ ca•e-Subodh Ranjan Ghosh v. Sindhri Fer.
tilizers and Chemicals Ltd.(' )-the employees of the Sindhri
Fertilizers were held not entitled to the protection of Art. 311.
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.
He1 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 v. Divisional Manager,
Life In·
surance Corporation of India(') and another in Damodar Valley
'Corporation v. Provat Roy( 6 ). Our brother Ramaswami relied
(I) Civil Appeals Nos. 512-513 etc. of 1969 decided on 19.9.1969.
(2) Civil Appeal No. 612 of 1966 decided on February 19, 1969.
(3) A.l.R. 1956 Pat. 398.
(4) A.LR. 1957 Pat. IO.
{5) A.LR. 1961 All. 503.
(6) LX C.W.N. 1023.
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s. L. AGARWAL v. HINDUSTAN STEEL (Hidayatullah, CJ.) 369in particular upon an English case Tamlin v. Hannaford(').
1111
that case it was held in relation to a business that although the
minister was really !μcharge, the corporation was different from.
the Crown and the services of the corporation were not civil ser-·
vices.
Justice P. B. Mukherjee of the Calcutta High Court, to.
whose judgment we referred earlier distinguished the Englisa
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 O! to have § 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 r_aised by the issuance of shares, the lack
of connection between . the finances of the corporation and th,J
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 Art. 311. The High·
Court was therefore right in not affording him the ' protection.
The appeal fails and is dismissed but in the circumstances of the
case we make no order about costs.
G.C.
· Appeal dismissed-
•
(I) [19Si)j l K.~)'.>.,J,8 ...