JUDGMENT
S.S. Subramani, J.
1. Defendant in O.S. No. 1750 of 1982, on the file of the City Civil Court, Madras is the appellant.
2. Respondent (plaintiff) filed the above suit to declare that his removal from the defendant/Corporation as its Area Officer, as confirmed by the Managing Director of the Tamil Nadu Civil Supplies Corporation, is null and void, and consequentially for reinstatement of the plaintiff in the service of the defendant-Corporation as it Area Officer. In the alternative, the defendant may be ordered to pay the plaintiff such compensation as the court may deem fit and proper, and other consequential reliefs.
3. The material averments are as follows: Plaintiff joined the defendant-Corporation as an Assistant in the year 1973 and was promoted as Assistant Superintendent in the middle of 1974, and was thereafter appointed as a Collection Superintendent towards the end of the year 1974. The post of Collection Superintendent was abolished, and a new post called Area Officer was created. Plaintiff was appointed as one such Area Officer. Under his charge, there were nine shops spread over a vast area of three miles, and it is said that apart from the nine shops, two more additional shops were also given under his supervision. Since that post itself was created only in 1975, no Rules were framed, nor was there any Circular issued regarding the work that has to be done. It is seen that the plaintiff was transferred from Royapuram to Pulianthope Area, on 19.11.1975. While functioning as Area Officer in Pulianthope, he was served with a suspension order on 11.12.1975 (Ex.A-1) by the Senior Regional Manager. It was said therein that an enquiry into grave charges against the plaintiff was contemplated, and hence he was placed under suspension. A charge memo (Ex.A-2) was given on 7.10.1976. In the charge memo, it was said that there was some shortages in stock in four retail shops and there were also some financial irregularities resulting in the misappropriation of Rs. 34,460.63. It was further said in that charge that the Area Officer, who was responsible for immediate control and supervision of the shops, should have been vigilant in the discharge of his duties.
4. In Ex.A-2, it was said that within 15 days from the date of receipt of the memo, the plaintiff must put in his written statement of defence to the above charges. He was also directed to fill up a questionnaires enclosed to the memo. A written explanation was submitted, and the plaintiff also informed the Department that he wanted a personal enquiry regarding the same. In Ex.B-3, which was the questionnaire, the plaintiff said that he wanted a detailed personal enquiry regarding the charges alleged against him. A further explanation was also sent as per Ex.B-4. The enquiry was posted to 4.3.1977. But nothing happened on that date, and he was summoned to appear on 21.3.1975. On that date, since that office was being shifted from one place to another, no enquiry was held on that day also. Immediately after the suspension and issue of memo, a physical verification was conducted on 31.7.1975, for which no notice was given to the plaintiff. The plaintiff was expecting that he will be getting notice fixing the date for enquiry. But he received only the order of dismissal dated 25.3.1978, issued by the General Manager. A statutory appeal was provided under the Rules and, therefore, an Appeal was also filed under Ex.A-10 on 15.5.1978. Even though the receipt of the appeal was acknowledged, plaintiff was not made known about the fact of his appeal and, therefore, the plaintiff received a letter dated 22.11.1979 wherein the copy of the Order dismissing the appeal was also enclosed. The same was dated 6.6.1979. In that Order, it was only stated that ‘the authorities have carefully looked into the matter, and I do not find any ground to interfere with the finding of the Disciplinary Authority. The appeal is, therefore, rejected.’ It is the Order of dismissal and the appellate order that are sought to be declared as invalid, on the ground that they are in violation of the principle of natural justice, and the plaintiff was not heard. It is also contended that even the alleged personal verification was done behind his back, and before the enquiry dated 4.3.1977, even the officers who were in charge of the various shops had admitted that they had misappropriated the funds, which was not taken into account either by the General Manager or by the Appellate Authority. He also said that the deficiency, even if any, can only be after he was transferred from Royapuram to Pulianthope, and the personal verification 21 days after his transfer, according to him, was actuated by mala fides.
5. The defendant, in his written statement, disputed the claim of the plaintiff and said that everything was done in accordance with law. The principle of natural justice was not violated. The suit is barred by limitation and also the suit for personal service is barred under Section 14 of the Specific Relief Act. The remedy of the plaintiff after dismissal, even if it is wrongful, is only to recover damages and not for reinstatement. The defendant-Corporation prayed for dismissal of the suit.
6. The trial court, after an exhaustive enquiry, both oral and documentary, came to the conclusion that the entire procedure adopted by the defendant was illegal. The fundamental principles of natural justice were not. Even complied with, and the Order itself was passed without notice to the plaintiff and even certain files have been fraudulently created to victimise the plaintiff. The suit was decreed holding that the suit is not barred by limitation. It was also held that being a Government company, the suit for re-instatement is maintainable, for, it comes within the definition of ‘State’ as defined in Article 12 of the Constitution of India. The suit was decreed as prayed for with costs. Defendant was directed to reinstate the plaintiff with all consequential benefits.
7. The aggrieved defendant filed an appeal before the lower appellate Court as A.S.No. 157 of 1986. The lower appellate court also confirmed the findings of the trial court and dismissed the Appeal, however, without any order as to costs. It is against the concurrent judgments, the defendant has preferred this second appeal.
8. At the time of admission of the Second Appeal, the following substantial questions of law were raised for consideration:
(1) Whether the plaintiff can invoke the jurisdiction of Civil Court in dispute in the case?
(2) Whether the suit is barred by limitation? and
(3) Whether the plaintiffs, in law, entitled for reinstatement or whether he can only seek for damages?
9. I will deal with the question of limitation first.
10. Learned Counsel for the appellant submitted that the Order of dismissal by the General Manager is dated 25.3.1978, and a suit filed beyond three years from the date of dismissal is hopelessly barred by limitation. According to him, an unsuccessful appeal will not extend the period of limitation, and the right to sue had accrued from the date of order. According to me, under Article 113 of the Limitation Act, the suit ought to have been filed within three years from the date on which the cause of action had accrued. The cause of action, according to the learned Counsel, is the date of initial order, and not the order of the appellate authority. For the said purpose, learned Counsel relied on the decision reported in Sita Ram Goel v. The Municipal Board, Kanpur and Ors. . That is also a case of wrongful dismissal of a municipal employee which was challenged in a civil court. In that case the order of dismissal was dated 5.3.1951 and the same was communicated to the servant on 19.3.1951. A statutory appeal was provided and the plaintiff in that case appealed to the Government on 7.4.1951. The Government dismissed the appeal on 7.4.1952, and the same was communicated on the next day. Within a few months, he filed a suit for compensation for wrongful dismissal. The Supreme Court held that the suit was barred by limitation. Their Lordships said that the principle of merger as in a civil court decree is not applicable to departmental proceedings and, therefore, there cannot be suspension of limitation when appeal is filed. It was held that the cause of action arose when the initial order of dismissal came to the passed and the appellate judgment by the State Government is of no avail. As per Section 326 of the Uttar Pradesh Municipalities Act, any suit has to be filed within six months from the date of the order. Since the suit was filed beyond six months, the question was, whether the suit is barred by limitation. Holding that the appeal before the Government was of no avail, their Lordships said that the suit was barred by limitation. If this principle is accepted, it cannot be doubted that this suit is also barred. But I find that this decision is no longer good law.
11. The correctness of the decision in Sita Ram Goel v. The Municipal Board, Kanpur was challenged before the Supreme Court in S.S. Rathore v. State of Madhya Pradesh 1988 S.C.C. (Supp.) 522. In that case, a dismissal order was challenged and a similar contention on limitation was taken. All the Courts held following the principle in that the period of unsuccessful appeal cannot be taken into consideration and the suit was barred. The matter was taken before the Supreme Court. The Bench also held against him. He filed a review petition. Their Lordships said that A.I.R. 1958 S.C. 1036 requires reconsideration. The Reference order is reported in (1988) S.C.C. Supp. 522 (supra).
12. The case was referred before a seven Judges Bench of the Supreme Court and finally the decision reported in Sita Ram Goel v. The Municipal Board, Kanpur was reversed and the same is reported in S.S. Rathore v. State of Madhya Pradesh . Their Lordships said that even in departmental appeal, the principle of merger will apply, and if a statutory Appeal is provided, limitation will start only from the date of final disposal of the appeal. In paragraphs 17 to 20, their Lordships dealt with the entire matter and held thus:
In this background if the original order of punishment is taken as the date when cause of action first accrues for purposes of Article 58 of the Limitation Act, great hardship is bound to result. On one side, the claim would not be maintainable if laid before exhaustion of the remedies; on the other, if the departmental remedy though availed is not finalised within the period of limitation, the cause of action would no more be justiciable having become barred by limitation. Redressal of grievances in the hands of the departmental authorities take an unduly long time. That is so on account of the fact that no attention is ordinarily bestowed over these matters and they are not considered to be governmental business of substance. This approach has to be deprecated and authorities on whom power is vested to dispose of appeals and revisions under the Service Rules must dispose of such matters as expeditiously as possible. Ordinarily, a period of three to six months should be the outer limit. That would discipline the system and keep the public servant away from a protracted period of litigation.
We are satisfied that to meet the situation as has arisen here, it would be appropriate to hold that the cause of action first arises when the remedies available to the public servant under the relevant Service Rules as to redressal are disposed of. The question for consideration is, whether it should be disposal of one appeal or the entire hierarchy of reliefs as may have been provided. Statutory guidance is available from the provisions of Sub-sections (2) and (3) of Section 20 of the Administrative Tribunals Act. There, it has been laid down:
20 (2) For the purposes of Sub-section (1) a person shall be deemed to have availed of all the remedies available to him under the relevant service rules as to redressal of grievances,-
(a) if a final order has been made by the government or other authority or officer or other person competent to pass such order under such rules, rejecting any appeal preferred or representation made by such person in connection with the grievance; or
(b) where no final order has been made by the government or other authority or officer or other person competent to pass such order with regard to the appeal preferred or representation made by such person, if a period of six months from the date on which such appeal was preferred or representation was made has expired.
(3) For the purposes of Sub-sections (1) and (2), any remedy available to an applicant by way of submission of a memorial to the President or the Governor of a State or to any other functionary shall not be deemed to be one of the remedies which are available unless the applicant had elected to submit such memorial.
We are of the view that the cause of action shall be taken to arise not from the date of the original adverse order but on the date the order of the higher authority where a statutory remedy is provided entertaining the appeal or representation is made and where no such order is made, though the remedy has been availed of, a six months’ period from the date of preferring of the appeal or making of the representation shall be taken to be the date when cause of action shall be taken to have first arisen. We, however, make it clear that this principle may not be applicable when the remedy availed of has not been provided by law. Repeated unsuccessful representations not provided by law are not governed by this principle.
(Italics supplied)
13. Without referring to the judgment of the Bench consisting of Seven Judges, a subsequent decision of the Supreme Court has also reiterated the same principle, and the same is reported in State of Punjab and Ors. v. Gurdev Singh . It was held in that case thus:
For the purposes of the present case, it may be assumed that the order of dismissal was void, inoperative and ultra vires, and not voidable. But nonetheless the impugned dismissal order has at least a de facto operation unless and until it is declared to be void or nullity by a competent body or court. If an Act is void or ultra vires it is enough for the Court to declare it so and it collapses automatically. It need not be set aside. The aggrieved party can simply seek a declaration that it is void and not binding upon him. A declaration merely declares the existing state of affairs and does not quash’ so as to produce a new state of affairs. Therefore, the party aggrieved by the invalidity of the order has to approach the court for relief of declaration that the order against him is inoperative and not binding upon him. He must approach the court within the prescribed period of limitation. If the statutory time limit expires the court cannot give the declaration sought for. The view that if the dismissal, discharge or termination of services of an employee is illegal, unconstitutional or against the principles of natural justice, the employee can approach the court at any time seeking declaration that he remains in service, cannot be accepted.
Article 113 of the Limitation Act prescribes a time limit of three years. According to the third column in Article 113, time commences to run when the right to sue accrues. The words “right to sue” ordinarily mean the right to seek relief by means of legal proceedings. Generally, the right to sue accrues only when the cause of action arises, that is, the right to prosecute to obtain relief by legal means. The suit must be instituted when the right asserted in the suit is infringed or when there is a clear and unequivocal threat to infringe that right by the defendant against whom the suit is instituted.
In the instant cases, the respondents were dismissed from service. May be illegally. The order of dismissal has clearly infringed their right to continue in the service and indeed they were precluded from attending the office from the date of their dismissal. They have not been their salary from that date. The right to sue, therefore, arose from the date of passing the order of dismissal or from the date of rejection of the departmental appeal/revision against such order, as the case may be. As such the suits were barred by limitation they must be dismissed.
(Italics supplied)
14. In this case, it is not disputed by the appellant that there was a statutory appeal and the appellant did file an appeal as evidenced by Ex.A-10. Even though he filed an appeal, he was not informed about the fate of his appeal, and he had to file a representation before the Chief Minister’s Grievance Cell. It was only then, he was informed that his appeal was already dismissed on 6.6.1979. The suit was filed in March, 1982, i.e., well within three years period from the date of appellate order. Since Sita Ram Goel v. The Municipal Board, Kanpur is no longer good law, and the subsequent decisions of the Supreme Court have held that the limitation will accrue only from the date of the appellate Order, the contention of the appellant that the present suit is barred, is rejected.
15. Questions 1 and 3 are concerning the maintainability of the suit, i.e., whether civil court has jurisdiction and whether reinstatement could be ordered.
16. In a case governed by master and servant relationship alone, the contention of the learned Counsel for the appellant has to stand. Under Section 14 of the Specific Relief Act, a contract of personal service cannot be enforced. If a servant is dismissed by his master, he cannot enforce the contract against the master saying that he still continues in service. His remedy is only for damages for wrongful dismissal. But now there are certain exceptions to the same. Under the Industrial Disputes Act, if a workman is dismissed against the provisions of the Statute, the Statute provides for reinstatement. Article 311 of the Constitution also ‘protects’ a Government servant from being illegally dismissed or removed from service. Likewise, servants of the State-owned Corporations and Statutory Bodies who come within Article 12 of the Constitution are also protected from such illegal orders.
17. The finding of the Courts below is that the dismissal of the plaintiff was without complying with the principle of natural justice, and, not even an enquiry was conducted. After receiving his explanation, he was informed that the case will be posted on 4.3.1977 and thereafter it was adjourned to 21.3.1977. On 21.3.1977, no enquiry was conducted since the office was being shifted from one place to another. The plaintiff only received a communication that he has been dismissed from service. When this was challenged before the Civil court, the defendant produced before the trial court a file stating that an enquiry was conducted on 4.3.1977, and there is also an endorsement alleged to have been made by the plaintiff that he has nothing more to say than what has been stated in the statement. This endorsement was denied by the plaintiff. It there was such a statement, there was no necessity for the defendant to issue a notice to the plaintiff, asking him to appear on 21.3.1977, for further enquiry. Admittedly the endorsement is not in the hand of the plaintiff and the Officer who has written that endorsement also has not entered the witness box. The finding of the Courts below is that such an, endorsement was made in the file fraudulently with an intention to harass the plaintiff. The finding of the courts below is further seen that each and every step was taken by the defendant without any good faith, and every action by them was illegal and void.
18. Learned Counsel for the appellant did not seriously canvass the concurrent findings rendered against the Department. In fact, on going through the records, the finding also cannot be challenged as perverse. What the trial court as well as the lower appellate court has done is only to conclude lower appellate court has done is only to conclude what they have seen from the file. The fact that the file contains only what the lower appellate Court has seen, is not seriously disputed.
19. If the dismissal order of the plaintiff is void, for having violated the principle of natural justice, then, the only question is, whether he is entitled to reinstatement, or entitled to get only damages. If it is a relationship of pure master and servant alone, what the learned Counsel for the appellant says might be accepted.
20. In this case, the defendant is Tamil Nadu Civil Supplies Corporation, a Government-owned Company, as defined under the Companies Act. Learned Counsel submitted that since it is a registered company, it is not a ‘State’ coming under Article 12 of the Constitution, and, therefore, the remedy is only for damages.
21. The said contention cannot be accepted in view of the following decisions of the Supreme Court: In Ajay Hasia and Ors. v. Khalid Mujib Sehravardi and Ors. their Lordships were considering whether a Registered Society is a ‘State’ under Article 12 of the Constitution. It was held thus:
An authority falling within the expression other authorities’ is, by reason of its inclusion within the definition of ‘State’ in Article 12 subject to the same constitutional limitations as the Government and is equally bound by the basic obligation to obey the constitutional mandate of the Fundamental Rights enshrined in Part III of the Constitution. But the definition of ‘state’ in Article 12 which includes an ‘authority’ within the territory of India or under the control of the Government of India is limited in its application only to Part III and by virtue of Article 36, to Part IV: it does not extend to Part XIV or any other provision of the Constitution.
The test for determining if an authority falls within the definition of State in Article 12 is, whether it is an instrumentality or agency of the Government. The inquiry has to be not as to how the juristic person is born but why it has been brought into existence. It is, therefore, immaterial whether the corporation is created by a statute or under a statute. The concept of instrumentality or agency of the Government is not limited to a corporation created by a statute but is equally applicable to a company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression “authority” in Article 12. The tests for determining as to when a corporation can be said to be an instrumentality or agency of Government, given in International Airport Authority case, are not conclusive or clinching, but they are merely indicative indicia which have to be used with care and caution, because while stressing the necessity of a wide meaning to be placed on the expression other authorities’, it must be realised that it should not be stretched so far as to bring in every autonomous body which as some nexus with the government within the sweep of the expression.
Applying the principles, their Lordships held in Central Inland Water Transport Corporation v. Brojo Nath Ganguly . that a Government owned company also will be a ‘State’. In that case, their Lordships were considering the removal from service an employee under the Central Inland Water Transport Corporation Limited. Their Lordships said that the Government-owned Company will be an instrumentality of the State though it is registered under the Companies Act. The relevant portions of the said decision read thus:
A State must have a relatively permanent legal organisation, determining its structure and the relative powers of its major governing bodies or organs. That is to be found in its Constitution. While Article 308 read with other provisions of Part XIV of the Constitution show that the word ‘State’ applies to the federating units (other than the State of J & K) which altogether constitute the Union of India, Article 12 as also Article 36 define the expression ‘the State’ so as to extend its meaning by the use of the word ‘includes in Article 12 to include within it also what otherwise may not have been comprehended by that expression when used in its ordinary legal sense. The expression “the State” in Article 12 includes -(1) the Government of India, (2) Parliament of India, (3) the government of each of the states which constitute the Union of India, (4) the legislature of each of the States which constitute the Union of India (5) all local authorities within the territory of India, (6) all local authorities under the control of the Government of India, (7) all other authorities within the territory of India, and (8) all other authorities under the control of the Government of India. The State, being an abstract entity, acts through its agencies or instrumentalities. By extending the executive power of the Union and of each of the States to the carrying on of any trade or business, Article 298 does not convert either the Union of India or any of the States which collectively form the Union business activity, for the executive power of the Union and of the States, whether in the field of trade or business or in any other field, is always subject to constitutional limitations and particularly the provisions relating to Fundamental Rights in Part III and is exercisable in accordance with and for the furtherance of the Directive principles of State Policy.
The trading and business activities of the State constitute “public enterprise.” The structural forms in which the government operates in the field of public enterprise are many and varied. These may consist of government departments, statutory bodies, statutory corporations, government companies etc. The immunities and privileges possessed by bodies so set up by the Government under Article 298 are subject to Fundamental Rights and exercisable in accordance with and in furtherance of the Directive Principles of State of Policy.
For the purposes of Article 12, court must necessarily see through the corporate veil to ascertain whether beyond that veil is the face of an instrumentality or agency of the State. If there is an instrumentality or agency of the State which has assumed the garb of a government company as defined in Section 617 of the Companies Act, it does not follow that it there by ceases to be an instrumentality or agency of the State.
Applying the above test to the present case, it is clear that the appellant-Corporation is ‘the State’ within the meaning of Article 12. It is nothing but the government operating behind a corporate veil, carrying out a governmental activity and governmental functions of vital public importance through the instrumentality of a Government Company. Merely because it has so far not the monopoly of inland water transportation is not sufficient to divest it of its character of an instrumentality or agency of the State.
The same principle was followed in the case of an employee of the India Tourism Development Corporation, which was also a Government-owned Company. The case is reported in O.P. Bhandari v. India Tourism Development Corporation Limited and Anr. .
22. A similar question came for consideration in State Enterprises v. C.I.D.C. of Maharashtra Ltd. . There also, the question was whether a Government-owned Company was a ‘State’ and whether a writ could be issued. In paragraph 7 of that Judgment, it was held thus:
Respondent 1 is ‘State’ within the meaning of Article 12 and in its dealings with the citizens of India it would be required to act within the ambit of Rule of Law and would not be permitted to conduct its activities arbitrarily.
23. Learned Counsel for the appellant did not argue the point of maintainability of the suit. Under Section 9 of the Code of Civil Procedure, any suit of civil nature is cognizable by a Civil Court. Nobody has a case that the suit filed by the plaintiff is not of civil nature. There is also no other bar in instituting the suit. Question Nos. 1 and 3 are also found against the appellant.
24. In the result, the defendant/appellant is directed to reinstate the plaintiff within one month from today. After the appeal was filed, as per Order of this Court, some amount was deposited for payment to the plaintiff, and it is said that the said amount has been received by the plaintiff. Whatever balance amount that is payable to the plaintiff in consequence of this judgment also will be paid within one month from to-day. On the arrears of salary, the plaintiff also will be entitled to interest at the rate of 6% per annum from the date of suit till date of payment. Plaintiff also will be entitled to all consequential benefits, and he must be deemed to have been in service for all purposes. The second appeal is dismissed with costs, with the above directions.