2005 (8) TMI 685 - SC - Indian Laws

Supreme Court: Limits on Article 226 Writs Against Private Companies

Binny Ltd. & Anr. Versus Sadasivan & Ors. and Mr. D.S. Veer Ranji Versus CIBA Specialty Chemicals (I) Ltd. & Ors.

The Supreme Court held that writ petitions under Article 226 against private companies are generally not maintainable unless there is a public law element ... Whether the decision of the High Court invoking the extraordinary jurisdiction under Article 226 of the Constitution was incorrect and that the Court should not 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? Issues Involved:1. Maintainability of writ petitions under Article 226 against private companies.2. Applicability of public law principles to private employment contracts.3. Validity of termination clauses in employment contracts under Section 23 of the Indian Contract Act.4. Jurisdiction of High Courts in enforcing private employment contracts through writ petitions.Issue-wise Detailed Analysis:1. Maintainability of Writ Petitions under Article 226 Against Private Companies:The Supreme Court examined whether writ petitions under Article 226 of the Constitution could be maintained against private companies. It was argued that the writ petitions were not maintainable as the companies were private entities and not public authorities. The Court reiterated that the jurisdiction under Article 226 is a public law remedy and is generally not available to enforce private contracts unless there is a public law element involved. The Court held that the High Court's jurisdiction under Article 226 is wide but should be exercised primarily against public authorities or bodies performing public functions.2. Applicability of Public Law Principles to Private Employment Contracts:The Court discussed the applicability of public law principles to private employment contracts. It noted that judicial review is designed to prevent abuse of power by public authorities. However, Article 226 allows for writs against private entities if they are discharging public functions. The Court cited various precedents, including the Praga Tools Corporation case and VST Industries Limited case, to emphasize that private contractual disputes are typically governed by private law remedies unless a public law element is present.3. Validity of Termination Clauses in Employment Contracts under Section 23 of the Indian Contract Act:The respondents argued that the termination clauses in their employment contracts were void under Section 23 of the Indian Contract Act as they were against public policy. The Court referred to the Central Inland Water Transport Corporation Ltd. case, where a termination clause was held void for being arbitrary. However, the Court distinguished the present cases by noting that the companies involved were private entities and not public sector undertakings. It held that the principles of public policy and fairness applicable to public sector undertakings do not extend to private entities in the same manner.4. Jurisdiction of High Courts in Enforcing Private Employment Contracts through Writ Petitions:The Court examined whether High Courts could enforce private employment contracts through writ petitions. It held that writs of mandamus could be issued against private bodies only if they are discharging public functions. The Court emphasized that the remedy under Article 226 is not generally available for enforcing private contracts. It noted that the appropriate remedies for disputes arising from private employment contracts are through civil litigation or labor law enactments, not through writ petitions.Conclusion:The Supreme Court concluded that the writ petitions filed by the respondents were not maintainable as the companies were private entities and the disputes were purely contractual without any public law element. The Court set aside the High Court's declaration in Civil Appeal No. 1976 of 1998 and dismissed the appeal arising out of SLP (Civil) No. 6016 of 2002, leaving the appellants to seek redressal through appropriate civil or labor law forums.