TaxTMI 
TaxTMI 
2019 (8) TMI 917
X X X X Extracts X X X X
X X X X Extracts X X X X
....employee of the company, Petronet LNG Limited, is the victim of highhandedness OF corrupt officers present within the company. Since the petitioner is a whistle blower against the corruption and has made various financial corruption charges against the respondent no.6, he being in the commanding position victimizing the petitioner without any rhyme and reason so that the petitioner be kept silence against the corruption. 3. The Petronet LNG Limited is a joint venture company formed by the Government of India to import LNG and set up LNG terminals in the country. It involves India‟s 4 leading central public undertaking companies namely GAIL, ONGC, IOCL & BPCL and these four PSU‟s have 50% share equity in the Petronet LNG Limited, thus, falls within the definition of "State' under Article 12 of the Constitution of India. As per section 17.3.2 of HR policies of Petronet LNG Limited, the person equal to the post of Vice President and above is entitled for one club membership. The petitioner being in the position of senior Vice President applied for one club membership and the company made direct payment to the club and thereby he was allowed to take one club membership b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e incharge of business development, head of procurements, head of projects and finance with him. 4. Being aggrieved by the aforesaid unethical practice of respondent no.6, the petitioner made a confidential letter/representation to the Chairman of the company as well as Chief Vigilance Commissioner and Director CBI. The petitioner on 02.07.2018 wrote a letter to the Chairman of the Petronet LNG Limited about the financial and procedural irregularities committed by respondent no.6 in awarding foundation day celebrating contract to M/s Pine Tree Pictures Pvt. Ltd. owned by his family friends on the basis of nomination despite of the fact that the candidature of M/s Pine Tree Pictures Pvt. Ltd. had not been considered by the tender committee and without inviting any further tender, respondent No.6 without approval of tender committee awarded contract in favour of M/s Pine Tree Pictures Pvt. Ltd. for Rs.55 lakhs and made advance payment without any bank guarantee violating rules and regulations of the company and with this letter the petitioner attached a copy of the approval note and the page of facebook showing, the proprietor of M/s Pine Tree Pictures Pvt. Ltd. family friend of r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Hon‟ble Corporate Office and Finance Minister, Petroleum Minister, Cabinet Secretary, CVC, CBI, CAG, Secretary, Minister of Corporate Affairs, CVO etc. 7. Learned counsel for the petitioner submits that it is established that respondent no.6 has repeatedly violated the Companies Act 2013, rules made thereunder and rules & regulations of PLL and Board approved policy for doing corruption. The corruption by MD & CEO (respondent no. 6) of a company having significant role in energy security of country is a matter of national concern and cannot be confined to company alone. If a MD & CEO (respondent no.6) of the company is involved in corrupt practices, employees are duty bound to object and can write with supporting information/documents to higher authorities, various transparency, accountability, investigation bodies of Government etc. for urgent action in the matter to prevent damage to company and country. Accordingly, the petitioner being "Whistle Blower" informed about following serious financial irregularities by MD & CEO (respondent no.6), mentioned in paragraph 20k in a tabular form of "Grounds" in the petition to various authorities such as Chairman PLL, Board membe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for the petitioner argued that the name of the Company is "Petronet LNG Limited", so it is a "public Limited Company" as per Section '4- Memorandum -(1)" of Companies Act 2013 and not a "Private Company" as wrongly mentioned at several places in counter affidavits by the respondents. PLL was formed as a joint venture company by Government of India in 1998, in pursuance of cabinet decision on 04.07.1997. The PLL is the instrumentality of Government because it comes under purview of "other authorities" of "state" under Article 12 of the Constitution of India, because: (a) That the deep and pervasive control is exercised by government over administrative, financial and functional activities of PLL. (b) That the central government directive dated 06.03.2007 to PLL regarding fixation of gas prices was upheld by Hon‟ble Supreme Court of India. (c) That there is significant financial control by 50% shareholding by four Central Government PSUs. (d) That the PLL fall within the purview of CVC. 10. Thus, it is submitted that the writ petition is maintainable as PLL is "state" within the meaning of Article 12 of the Constitution of India. To streng....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l of the company, before GNCTD entered into the SHA with IDFC, had been fully subscribed to and paid-up by the GNCTD. Even after having entered into the SHA with IDFC, GNCTD's share capital contribution continues to be 50%, which is significant and therefore "Substantial" for the purpose of the Act." 13. From the above judgement, it is obvious that 50% shareholding subscribed by Central Government Public Sector Undertaking in PLL is a significant holding. "59. Merely because, the petitioner company is not receiving financial aid or assistance in the form of debt from the government, and the salaries and other expenses of the petitioner are being paid out of the conclusion that the petitioner company is not "substantially financed" by the Government." (Annexure J-2) 14. Moreover, in the case of Petronet LNG Ltd. vs. Indian Petro Group and Another in CS(OS) No. 1102/2006, this court, under para 64 of its judgement pronounced on 13.04.2009 held as under: "64. Though the plaintiff disputes that it performs any governmental or public function, it does not deny being a company with an equity base of Rs. 1200 crores, of which 50% is subscribed by Central Government....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase of Ajay Hasia and Ors vs. Khalid Mujib Sehmavardi & Ors: AIR 1981 SC 487, the Hon‟ble Supreme Court has also emphasized in para-11 as below: "11. The court emphasized that the concept of agency or instrumentality of the government is not limited to a corporation or society created by a statute but is equally applicable to a company or a society and in each individual case would have to be decided on a consideration of relevant factors."(Annexure J-5) 18. In case of Shree Anandi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna jayanti Mahotsav Smarak Trust & Ors. vs. V.R. Rudani: AIR 1989 SC 1607, the Hon‟ble Supreme Court of India in para 19 considered the scope and extent of power of High Court to issue writs to those bodies performing public functions. The Supreme Court after referring to De Smith‟s Judicial Review of Administrative action and relevant case law held as under: "19. The term "authority" used in Article 226, in the context, must receive a liberal meaning unlike the term in article 12. Article 12 is relevant only for the purpose of enforcement of fundamental right under Article 32. Article 226 confers power on the High Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... once the disciplinary authority approves the initiation of the disciplinary proceeding, the charge sheet can be drawn up by an authority other than the disciplinary authority. This would destroy the underlying protection guaranteed under article 311(1) of the constitution of India. Such procedure would also do violence to the protective provision contained under Article 311(2) which ensures that no public servant is dismissed, removed or suspended without following a fair procedure in which he/she has been given a reasonable opportunity to meet the allegations contained in the charge sheet. Such a charge sheet can only be issued upon approval by the appointing authority i.e. Finance Minister." "55. Although number of collateral issues had been raised by the learned counsel for the appellants as well as the respondents, we deem it appropriate not to opine on the same in view of the conclusion that the charge sheet/ charge memo having not been approved by the disciplinary was non-est in the of law." (Annexure J-7) 22. Learned counsel for the petitioner argued that the respondents placed reliance on two judgements of Hon‟ble Supreme Court of India and had filed copy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g not been approved by the Board of PLL being Disciplinary Authority under section 178 (2) of the Companies Act 2013, is non-est in the eyes of law. The disciplinary process is to germinate from Board of PLL being the disciplinary authority. 25. It is further argued that counsel for the respondents has shown the noting on the file to this court containing alleged approval of charge-sheet by MD & CEO i.e. respondent no.6 and placed reliance on this approval. Learned counsel further argued that the competent authority (CA) towards the disciplinary action and punishment is MD & CEO i.e. respondent no.6 and placed reliance on sections 4.4.3 and 4.4.3.6 of HR Policies-Section 4-Standards of Conducts & Performance annexed as Annexure SA-1 and copy of minutes of Nomination and remuneration committee meeting annexed as Annexure SA-2 with the supplementary affidavit filed by the respondent nos.4, 5 & 6. Thus, it is necessary for clarification in the matter to reproduce relevant sections 6, 178 (2), 179 (1) and 179 (3) of the Companies Act 2013 and the same are, therefore, reproduced as below: "Section -6 6. Act to override, Memorandum, Articles etc.-Save as otherwise ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n respect of loans; (g) to approve financial statement and the Board's report; (h) to diversify the business of the company; (i) to approve amalgamation, merger or reconstruction; (j) to take over a company or acquire a controlling or substantial stake in another company; (k) any other matter which may be prescribed: Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the manager or any other principal officer of the company or in the case of a branch office of the company, the principal officer of the branch office, the powers specified in clauses (d) to (f) on such conditions as it may specify: Provided further that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of monies on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of monies or, as the case may be, a making of loans by a bankin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....13. Thus, the approval of charge-sheet by MD & CEO i.e. respondent No.6 is illegal & bad in law as he has no authority of disciplinary action against the petitioner under provision of the Companies Act, 2013. Therefore, approval of charge-sheet by MD & CEO is null &void and non-est in the eyes of law. 28. In the case of M/s Sahani Silk Mills (P) Ltd & Ors vs. ESI Corporation: AIR 1994 SCW 3832, it is held as below; "6. By now it is almost settled that the legislature can permit any statutory authority to delegate its power to any other authority, of course, after the policy has been indicated in the statute itself within the framework of which such delegatee is to exercise the power. The real problem or the controversy arises when there is a sub- delegation. It is said that when Parliament has specifically appointed authority to discharge a function, it cannot be readily presumed that it had intended that its delegate should be free to empower another person or body to act in its place." 29. Reliance is also placed on Government of Andhra Pradesh vs. M.A. Majeed & Anr.: 2006 (2) AIR Kar R 443 and submitted that a statutory authority is required to do something in a p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or others, (vii) The Adjudicator shall decide the issue with reference to material on record and not reference to extraneous material or on extraneous considerations. If any one of these fundamental rules is breached, the will be vitiated." 33. In State of U.P. & Ors vs. Saroj Kumar Sinha: AIR 2010 SC 3131, the Hon‟ble Supreme Court of India in paragraph 26 and 28 has held as under: "26. Inquiry officer acting in a quasi judicial authority is in the position of an independent adjudicator. He is not supposed to be a representative of the department/disciplinary authority/Government. His function is to examine the evidence presented by the department, even in the absence of the delinquent official to see as to whether the unrebutted evidence is sufficient to hold that the charges are proved." "28. When a department Inquiry is conducted against the Government servant it cannot be treated as a casual exercise. The Inquiry proceedings also cannot be conducted with a closed mind. The Inquiry officer has to be wholly unbiased. The rules of natural justice are required to be observed to ensure not only that justice is done but is manifestly seen to be done." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the findings of the committee. 38. As regards charge no.1 is concerned, it is submitted that a confidential letter dated 01.05.2018 (P/2), written by the petitioner to Shri K.D. Tripathi, Secretary, MOPNG with a copy to CVC and Director CBI, wherein, he made false allegation. Thus, the allegation against the petitioner is highly sensitive and confidential information is disclosed into public domain by writing that letter which amounts to misconduct under H.R. Policy of PLL. 39. The findings of the Inquiry Committee (EC) as recorded under para 5.6, 5.7 and 8 of the EC report dated 18.12.2018 (P/9) are reproduced below; "5.6 In the opinion of EC, all these authorities (except Secretary, MOPNG and Chairman PLL) are public functionaries of the country and any communication addressed to them amounts to putting the communication into public domain." "5.7 Disclosure of the confidential information relating to the tender process as contained in the letter dated 01.05.2018 clearly amount to "disclosing into public domain" and hence violation of secrecy and confidentiality of the said information relating to tender processes." "5.8 The said acts/omissions c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er "Public Interest Disclosure and Protection of Informs" Resolution 2004 exposing corruption of respondent No. 6 by misusing office. The petitioner enclosed approval note dated 01.06.2018, with compliant dated 02.07.2018, as documentary evidence in support of his allegation against respondent No.6. From the complaint it is clear that respondent no.6 awarded a work order of Rs. 55.00 lakh to a already disqualified firm M/s Pine Tree Pictures (P) Ltd, on nomination basis in utter violation of company‟s laid down procedure. The director of M/s Pine Tree Picture Pvt. Ltd. Shri Gautam Chaturvedi, is a family friend of respondent No.6. Respondent No. 6 approved 75% advance payment without any bank guarantee in gross violations of rules and regulations. 43. As regards charge no.3 is concerned, it is as per clause 17.4.2 of HR policies that the petitioner is entitled for one club membership. Accordingly petitioner acquired membership of Chelmsford Club in Delhi. The charge against the petitioner is that he is entitled for corporate membership club and that he acquired individual membership of the Chelmsford club by misrepresenting the facts and thus misconducted. The findings of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ii. In email dated 12.10.2018 (P-29) petitioner informed respondent No.6 and others if approval of board of directors was obtained for setting up of the Inquiry committee. If so, a copy of the approval was sought by the petitioner from respondent No.6, which was not supplied. iii. In email dated 29.10.2018 (P/30) petitioner informed that respondent No.6 has not furnished copy Board of director‟s approval for constituting the Inquiry committee. Petitioner also informed that it would be illogical for petitioner to attend the unconstitutional Inquiry committee. iv. In email dated 13.11.2018 (P/31) petitioner informed respondent No.6 that appointing authority of the petitioner is board of directors through NRC (Nomination & remuneration Committee) and that approval of board had not been obtained before proceeding. On bogus charge sheet and that in the absence of approval of board, charge sheet cannot be issued to the petitioner. Petitioner further informed that it would be illogical for petitioner to attend unconstitutional Inquiry committee. 47. Accordingly, the petitioner has attempted to establish that the entire disciplinary proceedings are unconstitution....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se 4.4.3.6 of the HR Policy the competent authority (CA) towards disciplinary action and purpose of punishment is CEO & MD for the officers and directors concerned for the operational and supporting staff...." Relevant clause 4.4.3.6 is reproduced as under :- "4.4.3.6 The competent authority (CA) towards disciplinary action and purpose of punishment is CEO & MD for officers and directors concerned for the operational and supporting staff....." 52. Section 4 of the standard of conducts and performance of the HR Policy (PLL) which is duly approved by the Board of Directors and applicable on the employees including the petitioner clearly lays down the process to be followed by HR department in consultation with the functional head and the MD & CEO for any action including disciplinary proceedings against a delinquent employee and powers of the MD & CEO (respondent No. 6). The relevant clauses are extracted below :- "4.4.3 If any act of misconduct is proved against an employee any of the following punishments, commensurate with the offence can be inflicted. • Fine. • Warning or censure. • Stoppage not exceeding four days ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and remuneration committee but shall not chair such committee...." (2) The nomination and remuneration committee shall identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the board their appointment and removal and shall carry out evaluation of every director's performance...." 55. It is thus clear that in view of section 178, if any penalty of removal is imposed then the procedure prescribed under section 178 of the Companies Act, 2013 would be required to be followed. However, for minor and other penalties not envisaged under Companies Act 2013, the MD and CEO would be the competent authority. Hence if any punishment is awarded other than 4.4.3 (e) and (f) of standards of conducts and performance of the HR Policy, MD& CEO is the competent authority. If the punishment falls under 4.4.3 (e) and (f) of standards of conducts and performance of the HR Policy, then the MD & CEO will forward the case to the NRC under section 178 of the Companies Act, 2013, since any removal or demotion of senior management personnel category should be recommended to the board by the NRC.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e unconstitutional, void, wrong and against the principles of natural Justice and in contravention of provision of Article 311 of the Constitution of India. 60. The challenge before this court is the Inquiry report of the Inquiry committee dated 18.12.2018 pursuant to a charge-sheet dated 21.08.2018. The present petition has been filed at the stage when the Inquiry report dated 18.12.2018 was sent to the petitioner vide letter dated 24.12.2018 and one weeks‟ time was granted to him to make the representation. It is not in dispute that, at his request, vide letter dated 04.01.2019 he was granted further time to submit his representation by 11.01.2019 against the representation. However, instead of making the representation, the petitioner filed the present writ petition challenging the Inquiry report as well as charge-sheet. 61. Further case of the petitioner is that the charge-sheet has been issued by an incompetent authority as it has been issued by the Senior Manager HR; under Section 178 of the Companies Act, 2013 the appointing authority of the petitioner is the Board of Directors. Since the approval of the Board of Directors was not obtained, the charge-sheet is li....