Holding

Dismissal of a statutory‑corporation employee without a fair enquiry violates natural justice; the order is void, but the High Court may not award full back‑wages.

Summary

The Supreme Court examined the dismissal of V.N. Vajpayee, a warehouseman employed by the Uttar Pradesh State Warehousing Corporation, a statutory corporation. Vajpayee was dismissed after a preliminary inquiry without being allowed to cross‑examine witnesses or present defence, and was also ordered to pay a sum for alleged misappropriation. He filed a writ petition under Article 226 alleging violation of natural justice. The Court held that the corporation, as a "State" within Article 12, is bound by constitutional guarantees and must conduct a quasi‑judicial enquiry respecting natural justice, even where the specific regulation for enquiry was not yet in force. Consequently, the dismissal order was set aside. However, the Court ruled that the High Court could not order full back‑wages; it could only quash the illegal dismissal. The appeal by the corporation was dismissed, with costs awarded to the employee.

Issues considered

The corporation, as a statutory body, is a "State" within the meaning of Article 12 and thus bound by Articles 14, 16 and 311.
Whether an employee of a statutory corporation has locus standi to invoke Article 226 for relief against dismissal without a departmental enquiry.
Whether the dismissal without opportunity to cross‑examine witnesses violates the principles of natural justice.
Whether the High Court may order reinstatement with full back‑wages or only quash the illegal dismissal.

Legislation cited

Constitution of Indias. Article 12, s. Article 14, s. Article 16, s. Article 226, s. Article 311
Uttar Pradesh State Warehousing Corporation Act, 1956 (repealed by Central Act 58 of 1962)

Subjects

statutory corporationpublic employmentnatural justiceArticle 226dismissaldepartmental enquiryreinstatementback wagesconstitutional lawArticle 12

Judgment

773

(
l-1ANAGING DIRECTOR, UTTAR PRADESH WAREHOUSING
CORPORATION & ANR.
l' .
•
• VINAY NARAYAN VAJPAYEE
January 16, 1980
B
[R. S. SARKARIA AND 0. CHINNAPPA REDDY, JJ.]

·LJ1hour dispute-Employer-A Statutory Corporation-Disnzissed an e1npToyee
'lV-ithout giving an c-pporJunity of being_ heard-Validity of.

·Statutory bodies-Rights of employees under.
Constitu1ion of India-Article 226-Scope of-High Court issued Writ of
c
-Certiorari qutJshing order of di.unissal and ordered reinstatement of en1ployee
with full back l'l-'oges--Il con1petent to order reinstaten1ent.

The respondent was an employee of o statutory body. On allegations of
·theft, misappropriation of stocks and certain other irregularities a preliminary
Cnquiry was conducted by the I\fanaging Director (the appellant) and charge~
were framed against the employee. In the explanation submitted by him he
D
expressly demanded that he wished to cross-examine certain witnesses whose
names were given by him, and wanted to examine certain other persons a!
witnesses. A few months thereafter, the appellant passed the impugned order
I of dismissal and required him to pay Rs. 549 j- on account of certain com·
-I modities allegedly misappropriated by him.

The employee's petition under Article 226 for tQa issue of a writ of certiorari
·was rejected by a single Judge. The Division Bench allowed the writ on the
ground that the Corporation which was required to act in a quasi-judicial
·manner failed to give an opportunity of being heard to the dismissed employee
and that therefore the order of dismissal was bad.

On appeal, the appellant contended that Regulation 16 providing for an
enquiry and giving an opportunity to an employee against whom an enquiry F
·"'tls to be held for misconduct had not come into force when the respondent
was dismissed and, therefore, he had no statutory status and no locus-standi
to maintain the writ which in substance was for specific performance of a
..contract of service.

D~smissing the appeal,
G
HEID : (Per Sarkaria, J.)
1. The impugned· order of dismissal was bad in law and had been rightly· l!et
aside by the High Court [781 F]
(a) Regulations defining duties, conduct and conditions of its employees
framed by statutory bodies have the force of law. The form and content of
contract with a particular employee being preScriptive and statutory, the II
statutory bodies have no free hand in framing the terms and conditions of
tervice to their employees, but are bound to apply them as laid down in the
774 SUPREME COURT REPORTS (!980) 2 S.C.R.

A regulations. The regulations give the employees a statutory stntus oind impose
obligations on the statutory authorities, and that they cannot deviate frorn \
the conditions of service laid down therein. There is no personal element
in public employment and service. Whenever employees rights are affected
by a decision taken under statutory powers the court would presume the •
existence of a duty to observe the rules of natural justice and compliance by •
the statutory body with rules and regulations in1posed by the statute. [779 E·G}
B
Sukhdev Singh v. Bhagat Rani [1975] 3 SCR 619 referred to
In the instant C•Jse the appellant v,.ns a statutory body and, therefore, even
if at the time of dismissal the statutory regulations had not been framed or
had not come into force, employment being public employment, the employer
could not terminate the employee's services without due enquiry in accord-
ance with the regulations in force or in the absence of any regulations, in
c accordance with the rules of natural justice. Such on enquiry into the conduct
of a public employee is of a quasi-judicial character. The respondent was
employed by the Corporation in exercise of the powers conferred on it by the
statute and, th~refore, the Corporation's pO\Ver to dismiss the respondent from
service was derived from this statute. The court would presume the existence
of a duty on the part of the dismissing authority to observe rules of natural
justice and to act in accordance with the spirit of the regulation which was:
D then on the anvil and came into force shortly' after the dismissal. Secondly,
in the instant case no regular departmental enquiry \Vas hekl. The order of
dismissal was passed summarily after perusing the employee's explanation. The
rules of natural justice require that the dismissed e1nployee s·houlJ be given
a reasonable opportunity to deny his guilt, to defend himself and to est"'blish
his innocence which means an opportunity to cross-examine the witnesses
relied upon by the Corporation and an opportunity to lead evidence in defence
E of the charge as also the show-cause notice for the proposed punishment. Such
an opportunity w:\s der.itd to the respondent. [780 G-H; 781 A-D]

Executive Con1n1itee of U.P. State Warehousing Corporation Ltd. v.
Chandra Kiran Tyagi [1970] 2 S.C.R. 250; Ra111ana Dayara111 Shetty v. The
International Airport Authority of India & Ors. A.I.R. 1979 S.C. 1628 referred
to.
F
2. The High Court \Vas in error in directing payment of full back wages
to the dismissed 'employee. [783 EJ

3(a) In exercise of its certiorari jurisdiction under Article 226 of the
Constitution, the High Court acts only in. a supervisory capacity and not as
an. appellate tribunal. It does not review the evidence upon which the inferior
Tribunal proposed to base its conclusion; it simply demolishes the order which
G it considers to be without jurisdiction or n1anifestly erroneou<; but does not
substitute its own view for the vievv of the inferior tribunal. Tn m•Jtters of
employment while exercising its supervisory jurisdiction under Article 226 of
the Constitution over the orders and quasi-judicial proceedings of an admini~
trative authority culminating in dismissal of an employee, the High Court
should ordinarily, in the event of the dismissal being found illegal, ~imply
quash the same and should not further give a positive direction for payment
H to the employees full back wages (although as a consequence of the annulment
of the dimissal the position as it obtained imn1ediatdy before the dismisl!al is
restored). [782 F-H]
u. P. WAREHOUSING CORPN. v. v. N. VAJPAYEE (Sarkaria, J.) 775
,
(b) Whether an employee of a statutory authority should be reinstated in A
public employment with or without full back wages, is a question of fact
depending on evidence to be produced before the triburial. One of the import-
ant factors to be considered in determining whether reinstatement should be
with full back wages and with continuity of employment is to see if after the
• termination of his employment the employee was gainfully employed else-
where. [783 D-EJ
B
In the instant case the employee did not raise an industrial dispute nor
did he invoke the jurisdiction of the Labour Court or Industrial Tribunal but
moved the High Court under Article 226 primarily on the ground of viola-
tion of the principles of natural justice'. [783B-C]
Chinnapp~ Reddy, J. (concurring).
There is hardly any distinction, on principle, between a person directly C
under the employment of the Government and a person under the employ-
ment of an agency or instrumentality of the Governn1ent or a corporation
set up under a statute or incorporated but wholly owned by the Government.
The desire to achieve the objectives enumerated in the preamble to the Consti-
tution has resulted in intense governmental activity in iuanifol& v,:ays. Today,
the Government either directly or through corporations set up by it or O\\Tied
by it, owns or manages a large number of industries and institutions. These D
agencies and instrumentalities, corporations or companies have become the
biggest employers in the country. There is no good reason why if the Govern-
ment is bound to observe the equality ck1uses of the Constitution in the
matter of employment and in its dealing vtith its employees, the Corporations
set up or owned by the Government should not be equally bound and why
instead, such Corporations should- become citadels of patronage and arbitrary
.action. To confine the applicability of the equality clauses, in relation to E
matters of employment, strictly to direct employment under the Governments,
in a country like ours is perhaps to mock at the Constitution and the people.
Some element of public employment is all that is necessary to take the
employee beyond the reach of the rule which denies him access to a court so
as to enforce a contract of employment and denies him the protection of )
Articles 14 and 16. Employees in public sector often discharge the onerous
duties as civil servants and participate in activities vital to the country's F
economy. Many enactments have declared persons in the ~ervice of local
authorities, government companies 0.nd statutory corporations, as public
servants and extended to them the protection which is extended to civil
servants from suits and prosecutions. It is, therefore, but right that the
independence and integrity of those employed in the public sector should be
secured as much as the independence and integrity of civil servants. (784 D-
785 ~ G
Sukhdev Singh & Ors. v. Bhagatram Sardar Singh Raghuvanshi & Anr.
[1975] 3 S.C.R. 619; Ramana Dayaram Shetty v. The International Airport
Authority of India & Ors. AIR 1979 S.C. 1628 referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 274 of 1970.
Appeal by Special Leave from the Judgment and Order dated e
6-8-1969 of the Allahabad High Court in Special Appeal No. 4/67.
M _ N. Phadke and Naunit Lal for the appellants.
12-91SCI/80
776 SUPREME COURT REPORTS [1980] 2 S.C.R.
'
A A. K. Sen, E. C. Agarwala, R. Sathish and V. K. Pandita for the
Respondent. \
"I

The following Judgments were delivered by
SARKARIA, J.-Uttar Pradesh State Warehousing Corporation (for •
short, the Corporation), has preferred this appeal by special/ leavei
B against an appellate judgment, dated August 6, 1969, of a Division
Bench of the High Court of Allahabad. It arises out of these facts :
V. N. Vajpayee, respondent herein, was employed as a Ware-
houseman with the Corporation and at the relevant time was posted at
the Kanpur Warehouse. There was a complaint of theft, misappro-
C priation of stocks and various other irregularities against the respondent.
A preliminary inquiry was held by the Managing Director of the Cor-
poration and charges were framed against him and served upan him
on November 28, 1960, requiring him to submit his explanation and to
indicate the evidence, if any. On receiving the charge-sheet, the res-
pondent addressed a communication, requesting the Managing Director
D to furnish him with certain papers, which were accordingly furnished.
Thereafter, the respondent submitted his explanation on January 19,
1961. In this explanation, he specifically demanded that he v.anted
to cross-examine certain witnesses, the particulars of which were men-
tioned by him. He further gave the names and particulars of certain
E other witnesses, stating that he wanted to examine them, in defence.
Nothing happened thereafter till April 18, 1961, on which date the
Managing Director passed an order dismissing the respondent from
service with effect from the date of his suspension. Later on, a demand
was made from the respondent, requiring him to remit a sum of
(Rs. 549 .61 due to the Corporation on account of certain commodities
F said to have been misappropriated by the respondent on account of
short realisation of storage charges by him.
The respondent then filed a Writ Petition (No. 87 of 1962) under
Article 226 of the Constitution, in the High Court praying for a writ
of certiorari to quash the order of his dismissal on the ground that it '
was violative of the principles of natural justice, inasmuch as he had
G not been given an opportnnity to cross-examine the witnesses and to
establish his innocence. He further prayed for a direction that the
Corporation be restrained from recovering the sum of Rs. 549.61
from him.
In the counter-affidavit, the appellants stated that the respondent
H had also cross-examined the witnesses. It was further urged that there
had also cross-examined the witnesses. It was further urged that there
was no regulation provided for conducting an inquiry in a particular
.u. P. WAREHOUSING CORPN. v. v. N. VAJPAYEE (Sarkaria, J.) 777

manner, and, therefore, the remedy of the respondent was by way of A
' a suit aud he had no locus standi to invoke the extra-ordinary jurisdic-
tion of the Court under Article 226 of the Constitution. It was further
pleaded that the writ petition was delayed and should have been thrown
out on that score, also.
The writ petition was heard by a learned Single Judge of the High
LB

,,.,.,.
Court, who dismissed it, holding that t.he Corporation was not requir-
ed to act in a quasi-judicial manner and that the provisions of Article
. 311 of the Constitution were not applicable to the facts of the case.
.

Aggrieved, the respondent carried a special appeal to a Division
I Bench of the High Court, which has reversed the judgment of the
learned Single Judge, and has held that the Corporation was required
c
to act in a quasi-judicial manner and, therefore, the writ petition was
maintainable. The Division Bench remanded the case for a decision
on merits. After the remand, the lea!"Ded Single Judge by his judg-
ment, dated December 7, 1966, allowed the writ petition, holding that
the principles of natural justice had· been violated. He, therefore,
quashed the order of the respondent's dismissal, but refused to grant
an injunction restraining the appellant for realising Rs. 549.61 from the
respondent. The Corporation again preferred a Special Appeal No. 4
of 1967 to a Division Bench of the High Court, which dismissed that
appeal by a judgment, dated August 6, 1969. Hence this appeal by
the Corporation. E
The main contention of th~. learned counsel for the appellants is
that at the relevant time, Regulation I 6 providing for an enquiry and,
giving an opportunity to the employee had not come into force; conse-
quently, the respondent had no statutory status and had. theretorn no
lor:us standi to maintain the writ petition. It is submitted that the
F
only remedy of the respondent was to file a suit for damages on
account of his alleged wrongful dismissal. Support for this contention
has been sought from a decision of this Court in Executive Committee
of U.P. State Warehousing Corporation Ltd. v. Chandra Kiran
Tyagi('). Reference has also been made to Sirsi Municipality v.
Cecelia Kam Francis Tellis.(') G
~. On the other hand, Shri A. K. Sen, appearing for the respondent,
submits that since the decision of this Court in U.P. State Ware/wus-
ing Corporation (ibid), the laW' has undergone a change. It is pointe<J
out that the appellant is a Corporation constituted under a statute and
is owned and controlled by the State Government and its employees.
H
(I) [1970] 2 S.C.R. 250.
(2) [1973] 3 S.C.R. 348.
778 SUPREME COURT REPORTS Ll<J80] 2 S.C.R.

A therefore, have a statutory status. It is argued that even in the ab-
\
sence of Regulation 16 providing for a departmental enquiry, the appel-
lant was bound to hold an enquiry and to give, in compliance with the
rules of natural justice, lull :ind fair opportunity to the respondent to de-
fend himself and repel the charges levelled against him. It is maintained
that such an opportunity was denied to him because he was not al!cw-
B ed to examine witnesses cited by him in defence. Reference in cM-
nection with the proposition propounded has been made to SukiLiev
Singh & Ors. v. Bhagatram Sardar Singh Raghuvanshi & Anr.(')
We will first notice Chandra Kiran Tyagi's case, which is the sheet-
ar,chor of the appellants' arguments. The facts of that case were
c somewhat similar. Tyagi was a Warehouseman in the employment of
the U.P. State Warehousing Corporation Limited. After recei\·ing
Tyagi's explanation, the Enquiry Officer did not take any evidence in
respect of any charge. Instead, he met various persons and collected
information, and gave his findings on the various charges on the basis
of the enquiries made by him and the records. Even the information
n so collected was not put to Tyagi. On the basis of those findings of
the Enquiry Officer, Tyagi was dismissed from service. Tyagi filed a
suit challenging his dismissal. He prayed for a declaration for rn-
instatement on the ground that the relationship was one of personal
service. Speaking through Vaidialingam, J. this Court held that a
declaration to enforce a contract of personal service will not normally
E
be granted. It was noted that there are three exceptions to this ruk :
(i) appropriate cases of public s~rvants who have been dismissed from
service in contravention of Article 311, (ii) dismissed workers under
industrial and labour law; and (iii) when a statutory body has acted
in breach of a mandatory obligation imposed by a statute. It was fur.
F ther held that though the impugned order was made in breach of the
regulation contrary to the terms and conditions of the relationship bet-
ween the appellant (employer) and the respondent (employee), but,
it would not be in breach of any statutory obligation, because, the Act
does not guarantee any statutory status to the respondent; nor does it
impose any obligation on the appellant in such matters. Therefore,
G the violation of regulation 16(3) as alleged and established in that
case, could only result in the order of dismissal being held to be
wrongful, and in consequence, making the appellant liable for damages,
but could not have the effect of treating the respondent as still in ser-
vice or entitling him to reinstatement.
H The authority of the rule in Tyagi's case, to the effect, that an em-
ployee of such a statutory body even if it be owned and managed by
(ll [1975] 3 S.C.R. 619 .

•
u. P. WAREHOUSING CORPN. v. v. N. VAJPAYEE (Sarkaria, J.) 779

the Government does not enjoy a statutory status, appears to have A
been eroded by the later decisions of this Court, particularly the pro-
ncuncement in Sukhdev Singh's case (ibid). The statutory bodies in
that case were : Oil and Natural Gas Commission, Industrial Finance
Corporation and Life Insurance Corporation. All the three bodies
wer,(' created under separate stututes enacted by the Central Legisla-
ture. It was clear from the Oil and Natural Gas Commission Act, B
1954, that the Commission created by it, acts as an agency of the
Central Government. Similarly, by virtue of the Industrial Finance

r. )
Corporation Act, 1948, the Finance Corporation is under the control
a.nd management of the Central Government. The Life Insurance
Corporation is similarly owned and managed by the. Government and
c
call be dissolved only by the Government in view of the provisi011s of
the Life Insurance Act, 1956. All the three statutes constituting the
three statutory corporations enabled them to make regulations which
provide, inter alia, for the terms and conditions of employment and
services of their employees. Questions arose : (i) whether the regu-
lations have the force of law, and (ii) whether the statutory corpora- D
tions are 'State' within the meaning of Article 12 of the Constitution.
Ray, C.J., speaking for himself and Chandrachud and Gupta JJ., held
that the regulations framed by these stututory bodies for the purpose
of defining the duties, conduct and conditions of its employees have
the force of Jaw. The form and content of the contract with a parti-
cular employee is prescriptive and statutory. The notable feature is E
that these statutory bodies have no free hand in framing the conditions
and terms of service of their employees. They are bound to apply the
terms and conditions as laid down in the regulations. These regula--
tio•s are not only binding on the authority but also on the public.
They give the employees a statutory status and impose obligations on
the statutory authorities, who cannot deviate from the conditions of F
• serlice.
-\

; It was further made clear that an ordinary individual, in the case of
master and servant contractual relationship, enforces breach of con-
' tract, the remedy being damages because personal service is not G
capable of enforcement. In the case of statutory bodies, huwever,
there is no personal element whatsoever because of the impersonal
character of the bodies. In their case, the element of public employ-
ment and service and the support of statute require observance of rules
and regulations. At page 634 of the Report, the learned Chief Jus-
tice significantly reiterated that "whenever a man's rights are affected H
by decision taken under stututory powers, the Court would presume
>, the existence of a duty to observe the rules of natural justice and com-
780 SUPREME COURT REPORTS (1980) 2 S.C.R.

A pliance with rules and regulations imposed by statute... The Court
then referred to U.P. Warehousing Corporation and Indian Airlines
Corporation cases and held that these decisions were rn direct con-
flict with an earlie.r decision of this Court in Naraindas Barot v. Divi-
sional Controller, S.T.C.,(') and were wrongly decided. The Court
followed the decision in Sirsi Municipality (ibid).
B
Mathew J. in his separate but concurring judgm~nt, pointed out
how the concept of the State has undergone draetic changes in recent
years. A State is an abstract entity and can act oniy through the
instrumentality or agency of natural or juridical persons. With the --
advent of a welfare State the framework of civil service administration
c becarne increasingly insufficient for handling the new tasks which were
often of a specialised and highly technical character For this reason,
a policy of public administration through separate Corporations which
would operate largely according to business principles and be sepa-
rately accountable, was evolved. Such public corporations constituted
under enactments, became a third arm of the Government. The
D
employees of public corporation are not civil servants. In so far as public
corporations fulfil public tasks on behalf of the Government, they
are public authorities and, as such, subiect to control by Government.
The public corporation being a creation of the State is subject to the
constitutional limitation as the State itself.
' .
E The Court thus with a majority of 4-1 held tilat the statutory bouies
then under consideration were 'authonties' within tr' meaning of Arti-
cle 12 of the Constitution and though their empl"yees were not sen ants
of the Union or of a State, yet they had a statutory status.

The appellant is a Corporation constituted under the Uttar Pradesh
-
F State Warehousing Corporation (Act 28) of 1956, which was subse-
quently replaced by the Central Act 58 of 1962. It is a statutory
body wholly controlled and managed by the Government. Its status
1s analogous to that of the Corporalions which were under considera-
tion in Sukhdev Singh's case (ibid). The ratio of Sukhdev Singh's
case, therefore, squarely applies to the present case. Even if at the
G time of the dismissal, the statutory regulations had not been framed
or had not come into force, then also the employment of the respon-
dent was public employment and the statutory body, the employer,
could not terminate the services of its employee without due enquiry
in accordance with the statutory Regulations, if any in force, or in tl1c
absence of such Regulations, ir. <teccrdoucc with the rules of natural
u justice. Such an ~nquiry into ti1e c<.)T]duct o[ a public employee is of
(!) [1966] 3 S.C.R. 40.
u. P. WAREHOUSING CORPN. v. V. N. VAJPAYEE (Sarkaria, J.) 781

a quasi-judicial character. The respondent wa; employed by the A
appellant-Corporation in exercise o! tile powers conferred .on it by the
statute which created it. The appellants' power to dismiss the respon-
dent from service was also derived from the statute. The Court would
therefore, presume the existence of a duty on the part of the dismissing
authority to observe the rules of natural justice, and to act in accord-
ance with the spirit of Regulation 16, which was then on the anvil and B
came into force shortly after the impugned dismissal. The rules of
natural justice in the circumstances of the case, required that the res-
pondent should be given a reasonable opportunity to deny his guilt,
to defend himself and to establish his innocence which means and in-
cludes an opportunity to cros~-cJcamiee the witnesses relied upon by c
the appellant-Corporation and an opportunity to lead evidence in
defence of the charge as also a show-cause notice for the proposed
punishment. Such an opportunity was denied to the respondent in
the instant case. Admittedly, the respondent was not allowed to kad
evidence in defence. Further, he was not allowed to cross-
examine certain persons whose statements were not recorded by the D
Enquiry Officer (Opposite Party No. 1) in the pre>ence of the res-
~ndent. There was controversy on this point. But it was clear to
the High Court from the report of enquiry by the Opposite Party No. 1
that he relied upon the reports of some persons and the statements of
some other persons who were not examined by him. A regular depart-
mental enquiry takes place only after the charge-sheet is drawn np and E
served upon the delinquent and the latter's explanation is obtained.
In the present case, no such enquiry was held and the order of dismis-
sal was passed summarily after perusing the respondent's explanation.
The rules of natural justice in this case, were honoured in total breach.
The impugned order of dismissal was thus bad in law and had been
rightly set aside by the High Court.
F

Before passing on to the next question we may in fairness mention,
that Mr. Asok Sen had cited two more decisions, also. The first was
a recent judgment of the House of Lords in Melloch.v. Aberdeen Cor-
poration('), wherein Lord Wilberforce in his speech (at pages 1595-
1596 of the Report) observed that in cases in which there is an ele- G
ment of public employment or service, or support by statute or some-
thing in the nature of an office or a status, which is capable of protec-
tion, then irrespective of the terminology used, and even though in
some inter parties aspects the relationship may be called that of master
and servant, there may be essential procedural requirement to be ob-
B
served on grounds of natural justice. The second decision is Ramana
(l) [1971] I W.L.R.1578.
782 SUPREME COURT REPORTS [1980] 2 S.C.R.
A Dayaram Shetty v. The International Airport Authority of India &
Ors.(')
In Ramana Dayaram Shelly's case (ibid) Bhagwati, J. after mak-
ing an exhaustive survey of t,he decisions of this Court and of American
Courts, summarised some of the factors which are considered to deter-
B mine whether a Corporation is an agency or instrumentality of
Government. We do not think it necessary to burden this judgment
by a detailed discussion of these cases because in the instant case, -all
the material factors exist which show beyond doubt that the Uttar
Pradesh State Warehousing Corporation constituted under the Central
Act 28 of 1956, is an agency or instrumentality of the Government,
c and the relationship between the Corporation and its employees is not
purely that of m-aster and servant, founded only on contract. Indeed,
it was not seriously disputed that the respondent was in public employ-
ment, and the Corporation is an authority within the meaning of Arti-
cle 12 of the Constitution.
D Further contention of the learned counsel for the appellants is
that even if the dismissal of the respondent was wrongful, the High
Court could only quash the same, bnt it could not in the exercise of
its certiorari jurisdiction under Article 226 of the Constitution give
the further direction that the employee should be reinstated in service
with full back wages. It is maintained that in giving this further
E
direction, the High Court had overleaped the bounds of its jurisdic-
tion.
There appears to be force in this contention. It must be remem-
bered that in the exercise of its certiorari jurisdiction under Article
226 of the Constitution, the High Court acts only in a supervisorY
F capacity and not as an appellate tribunal. It does not review the
evidence upon which the inferior tribunal proposed to base its con-
clusion; it simply demolishes the order which it considers to be
without jurisdiction or manifestly erroneous, but does not, as a rule,
substitute its own view for those of the inferior tribunal. In other
G words, the offending order or the impugned illegal proceeding is
quashed and put out of the way as one which should not be used to
the detriment of the writ petitioner. Thus in matters of employ-
ment, while exercising its supervisory jurisdiction under Article 226
of the Constitution, over the order and quasi-judicial proceeding of
an administrative authority-not being a proceeding under the indus-
H trial law/labour law before an industrial/labour tribunal--<:ulminating
in dismissal of the employee, the High Court should ordinarilv. in
11) A.I.R. 1979 S.C. 1628.
U. P. WAREHOUSING CORPN. V. V. N. VAJPAYEE 783
(Chinnappa Reddy,!.)
the event of the dismissal being found illegal, simply qnash the same A
and should not further give a positive direction for payment to the
employee full back wages (although as a consequence of the annul-
ment of the dismissal, the position as it obtained immediately before
the dismissal is restored), such peculiar powers can pr6£erly be
exercised in a case where the impugned adjudication or award has
been given by an Industrial Tribunal or Labour Court. The instant
case is not one under Industrial/Labour Law. The respondent-
employee never raised any industrial dispute, nor invoked the juris-
dictiop. of the Labour Court or the Industrial Tribunal. He directly
moved the High Court for the exercise of its special jtJlisdiction
under Article 226 of the Constitution for challenging the order of
dismissal primarily on the ground that it was violative of the principles
c
of natural justice which required that his public employment should
not be terminated without giving him a due opportunity to defend
himself and to rebut the charges against him. Furthermore, whe-
ther a wor~m_an or employee of a statutorY authority should be rein-
stated in public employment with or without full back wages, is a
question of fact depending on evidence to be produced before the
!ribunal. If after the termination of his employment the workman/
employee was gainfully employed elsewhere, thl)J is one of the im-
portant factors to be considered in determining whether or not the
reinstatement should be with full back wages and with conti~uity of
employment. For these two fold reasons, we are of opinion that the E
High Court was in error in directing payment to the employee full
back WG)?fS.

For the foregoing reasons wh\le upholding the judgment of the
High Court with regard to the quashing of the order of dismiss~! of
the respondent on the ground of its being invalid, we delete the direc- F
tion for payment to the respondent full back wages. Excepting this
modification, the appeal is dismissed. However. in the circumstan-
Ce!', the appellant-Corporation shall pay the costs of the responden4
in this Court.
CHINNAPPA REDDY, J.-The respondent-employee was dismissed G
from service. The employer dismissed him, without observing the
principles of natural justice. This has been found by the High Court
who quashed the order of dismissal in a proceeding under Art. 226
of the Constitution. The employer has appealed. The employer
claims that a declaration to enforce a contract of personal service can-
not be granted by the Court. The only remedy of the employee, he
pleads, is to file a suit for damages for wrongful dis'missal. The
answer of the employee is that the employer is a statutory Corpora-
784 SUPREME COURT REPORTS [1980] 2 S.C.R.

A tion whose employees have statutory status, and that the employer
is bound by the regulations made under the statute as also to observe
the principles of natural justice. Breach of the regulations or failure
to observe the principles of natural justice entitles the employee to
invoke the jurisdiction of the High Court under Article 226 of the
Constitution.
B
The question whether breach of statutory regulations or failures to
observe the principles of natural justice by a statutory Corporation
w:ll entitle an employee of such Corporation to claim a declaration of
continuance in service and the question whether the employee is en-
titled to the protection of Arts. 14 and 16 against the Corporation
c were considered at great length in Sukhdev Singh & Ors. v. Bhagatram
Sardar Singh Raghuvanslzi & Anr.(1) The question as to who may
be considered to be agencies or instrumentalities of the Government
was also considered, again at some length, by this Court in Ramana
Dayaram Shelly v. The International Airport Authority of India &
Ors.(')
D
I find it very hard indeed to discover any distinction, on principle,
between a person directly under the employment of the Goverrnnent •
and a person under the employment of an agency or instrumentality
of the Government or a Corporation, set up under a statqte or in-
corporated but wholly owned by the Government. It is self evident
...
E and trite to say that the function of the State has long since ceased
to be confined to 'the preservation of the public peace. the exaction of
taxes and the defence of its frontiers. It is now the function of the
State to secure 'social, economic and political justice·. to preserve _,/''"
'liberty of thought, expression, belief, faith and worship', and to
ensure 'equality of status and of opportunity'. That is the procla-
mation of the people in the preamble to the Constitution. The desire
to attain these objectives has necessarily resulted in intense
Governmental activity in manifold ways. Legislative and executive
activity have reached very far and have touched very many
aspects of a Gitizen's life. The Government, directly or through the '
Corporations, set up by it or owned by it, now owns or manages, a
G
large number of industries and institutions. It is the biggest builder
in the country. Mammoth and minor irrigation projects, heavy and
light engineering projects, projects of various kinds are undertaken
by the Government. The Government is also the biggest trader in
the country. The State and the multitudinous agencies and Corpora-
tions set up by it are the principal purchasers of the produce and
(!) [1975] 3 S.C.R. 619.
(2) A.I.R. 1979 S.C. 1628.
U. P. WAREHOUSING CORPN. V. V. N. VAJPAYEE 785
(Channappa Reddy, !.)
the products of our country and they control a vast and complex A
machinery of distril;JUtion. The Government, its agencies and instru-
mentalities, Corporations set up by the Government under statutes
and Corporations incorporated under the Companies Act but owned
by the Government have thus become the biggest employers in the
country. There is no good reason why, if Government is bound to B
observe the equality clauses of the c0nstitution in the matter of em-
ployment and in its dealings with the employees, the Corparations
set up or owned by the Government should not be equally bound and
why, instead, such Corporations could become citadels of patronage
and arbitrary action. In a country like ours which teems with popu-
lation, where the State, its agencies, its instrumentalities and its c
Corporations are the biggest employers and where millions seek em-
ployment and security, to confirm the applicability of the equality
clauses of the constitution, in relation to matters of employment,
strictly to direct employment under the Government is perhaps to
mock at the Constitution and th~ people. Some element of public,
employment is all that is necess·ary to take the employee beyond the D
reach of the rule which denies him access to a Court so enforce a
contract of employment and denies him the protection o1' Arts. 14
and 16 of the Constitution. After all employment in the public;
sector has grown to vast dimensions and employees in the public
sector often discharge as onerous duties as civil servants and partici-
pate in activities vital to our country's economy. In growing reali- E
zation of the importance of employment in the public sector, Parlia-
ment and the Legislatures of the States have declared persons in the
service of local authoritie8, Government companies and statutory
corporations as public servants and, extended to them by express
enactment the protection usually extended to civil servants from suits
F
and prosecution. It is, therefore, but right that the independence
and integrity of those employed in the public sector should be secur-
ed as much as the independence and integrity of civil servants.
,
I agree with what has been said by my brother Sarkaria .r. I
' have added a few lines to emphasise some aspects of the problem. G

PB.R. Appeal dismissed.