Company deemed 'State' under Constitution; Termination ruled unjustifiable; Contracts void; Workers entitled benefits

The Supreme Court held that the appellant company qualified as a "State" under Article 12 of the Constitution due to deep government control. The termination of the respondents' services under an arbitrary clause was deemed unjustifiable and violative of Article 14. The employment contract was declared void for allowing arbitrary termination, entitling the respondents to various benefits. The appeals were dismissed, and the legal heirs of a deceased respondent were granted benefits.

---

---

Issues Involved:
1. Whether the appellant company is a "State" within the meaning of Article 12 of the Constitution.
2. Whether the termination of the respondents' services was valid and enforceable under the terms of the employment contract.

Detailed Analysis:

1. Whether the appellant company is a "State" within the meaning of Article 12 of the Constitution:

The Supreme Court examined whether the appellant company, a public limited company, qualifies as a "State" under Article 12 of the Constitution. The company was initially held by various entities, including government bodies, and later, the majority of its shares were transferred to a government company. The respondents argued that the company was under the control of the government and thus should be considered a "State."

The Court considered several factors to determine if the company was under deep and pervasive control of the government, including:
- Administrative, Financial, and Functional Control: The Court referred to previous judgments, such as Virendra Kumar Srivastava v. U.P. Rajya Karmachari Kalyan Nigam, which emphasized examining administrative, financial, and functional control to determine if an entity is a State.
- Governmental Control: The Court noted that the government appointed directors, issued directives, and had significant influence over the company's operations.
- Financial Support: The appellant company did not receive significant financial support from the government, indicating a lack of deep financial control.
- Public Functions: The company carried out various business activities without monopoly status and faced competition, suggesting it did not perform public functions closely related to governmental functions.

Based on these factors, the Court concluded that the appellant company was under deep and pervasive control of the government, making it a "State" within the meaning of Article 12. This rendered the company amenable to writ jurisdiction under Article 226 of the Constitution.

2. Whether the termination of the respondents' services was valid and enforceable under the terms of the employment contract:

The respondents challenged their termination, arguing it was arbitrary and violated Article 14 of the Constitution. The appellant company terminated the respondents' services under Clause 11(a) of the appointment letter, which allowed termination with three months' notice without assigning any reason.

The Court examined the validity of this clause and the termination process:
- Arbitrary Termination: The Court referred to previous judgments, such as West Bengal State Electricity Board v. Desh Bandhu Ghosh, which held that arbitrary termination without inquiry or reason violates Article 14.
- Unconscionable Clause: The Court found Clause 11(a) to be unconscionable and violative of Article 14, as it allowed termination without just cause or due process.
- Natural Justice: The Court emphasized the importance of natural justice and fair treatment in employment, rejecting the "hire and fire" policy adopted by the appellant company.

The Court held that the termination clauses in the employment contract were unjustifiable and unenforceable. The contract of employment was deemed void to the extent that it allowed arbitrary termination. The respondents were entitled to relief, including arrears of wages, terminal benefits, and statutory benefits like gratuity and provident fund.

Judgment:
The appeals were dismissed, and the Court directed that the legal heirs of the deceased respondent were entitled to the benefits of the judgment, including arrears of wages and other terminal benefits. The appellant company was held to be a "State" under Article 12, and the termination of the respondents' services was found to be arbitrary and unenforceable.

---