Notice of Motion No. 1420 of 1999,Suit No. 2121 of 1999

19th August, 1999

Petitioner Counsel: Mr. C. U. SINGH i/b. SANJAY UDESHI & Co.
Respondent Counsel: Mr. VIRAG TULZAPURKAR with Ms. CHANDARANA i/by SHAH DESAI DOIJODE & PHATARPHEKER ,Ms. N. D. BUCH

Cases Cited:
Ashok Kumar Srivastav Vs. National Insurance Company Ltd., (1998) 4 SCC 361 [Para 3]
Nandganj Sihori Sugar Co. Ltd., Rae Bareli Vs. Badrinath Dixit, (1991) 3 SCC 54 [Para 5]
S. R. Tiwari Vs. The District Board, Agra., AIR 1964 SC 1680 [Para 7]
Executive Committee of Vaish Degree College, Shamli Vs. Lakshmi Narain & Ors., AIR 1976 SC 888 [Para 7]

JUDGMENT

JUDGMENT :- The plaintiff has filed this suit for a declaration that the plaintiff continues in employment even after 9th January, 1999 and is entitled to work and salary. Notice of Motion has been taken out with a prayer for injunction restraining the defendants from acting on the letter of termination dated 9th January, 1999, and for a direction to pay to the plaintiff his monthly salary in full from January, 1999 and month to month basis thereafter.

2. The plaintiff was appointed by the Defendant No.1 as General Manager (Personnel and Administration). The Defendant No.1 is a company incorporated and registered under the Companies Act, 1956, which is engaged in the manufacture of synthetic fibres and yarn. On 19th November, 1993, the Board for Industrial and Financial Reconstruction (BIFR) sanctioned Rehabilitation Scheme for Defendant No.1. The BIFR also directed the defendant No.1 to appoint the Defendant No.2 as part-time Chairman. He was so appointed on 29th April, 1994. The Performance Appraisal Report of the plaintiff given by the Defendant No.4 till 1994 was very good. By Resolution dated 29th April, 1994, the Defendant No.2 was given all the powers of the earlier Chairman. By a further Resolution dated 15th March, 1996, all the powers of management of the company earlier vested in the Chairman, were delegated with immediate effect to the defendants No.3 and 4. The Defendant No.2 had not been given any powers by this Resolution. Subsequently, in a meeting dated 29th November, 1996, it was observed that the normal procedure of the Executive submitting issues for decision to the Executive Vice-chairman should continue. However, in exceptional circumstances where decisions are delayed adversely affecting the financial functioning of the company, the Executive concerned or any of the Executive Vice Chairman may refer issue to the Chairman who may take the decision in consultation with the Executive Vice-Chairman. If such decisions are not implemented in time, the Chairman should bring it before the Board of Directors, for such action as deemed appropriate. On 27th October, 1998, the Defendant No.4 informed the Board of Directors that there is a failure of duty by the plaintiff. On 30th October, 1998, the Board of Directors requested the Defendant No.2 to look into the matter. Thereafter the plaintiff was not informed of anything, but served with an order of termination on 12th January, 1999. The letter is dated 9th January, 1999. During this period, there have been certain moves to replace the Defendant No.2 on the recommendation of the operating agent. But it appears that no order of replacement of the Defendant No.2 has been passed till today.

3. The short controversy before this Court is as to whether or not the plaintiff can be granted the reliefs as prayed for in the Notice of Motion, i.e. a direction to the defendants to permit the plaintiff to join duty and to pay the salary of the plaintiff from month to month. Mr. C.U. Singh, in support of the Notice of Motion has submitted that earlier the law had been settled that no relief of reinstatement could be granted to an employee of a private limited company. Yet the Supreme Court has now held that a suit for declaration together with a mandatory injunction for reinstatement is maintainable. For this proposition the learned counsel has relied upon a Judgment of the Supreme Court in the case of Ashok Kumar Srivastav Vs. National Insurance Company Ltd. and Ors reported in (1998) 4 Supreme Court Cases 361. The learned counsel has relied particularly on paragraphs 2, 4, 5, 15, 16, 18 and 19 of the Judgment. These paragraphs are as follows :

"2. The appellant claims to be still in the service of National Insurance Company Limited (the respondent) as a Probationary Inspector on the contention that the order passed by the respondent on 13-3-1982 terminating his probation is bad in law. He succeeded in the trial court where he filed the suit for a declaratory decree and also in the first appellate court, but he was non-suited by the High Court in the second appeal filed by the respondent. Hence he has come up in this Court with this appeal."

"4. The appellant filed the suit in the Munsif's Court, Gorakhpur for a decree declaring that the said notice of termination is illegal and void and that he continues to be in service of the Company with all the benefits flowing from the post. The respondent Company contested the suit by filing a written statement in which it was contended, inter alia, that the suit is not maintainable under Section 34 of the Specific Relief Act, 1963 (for short "the Act") and that the notice of termination of the appellant is legal and valid."

"5. However, the respondent Company did not participate during evidence stage and hence the trial court proceeded with the suit ex parte and a decree was passed in terms of the plaint on 25-1-1991. The appellant took out execution proceedings in which he claimed a sum of Rs. 1,02,861 as arrears of pay due to him from the date of notice of termination. The respondent resisted the execution by putting forth various contentions including that the decree is unenforceable and void as the same was passed without jurisdiction. The executing court has repelled all such objections by its order dated 7-9-1991."

"15. Thus, the legal position is clear and the respondent cannot now reagitate the question regarding maintainability of the suit under Section 34 of the Act. However, learned Counsel adopted an alternative contention before us that the suit is in effect one for specific enforcement of a contract and such a suit is not conceived under section 14 of the Act and hence it is not maintainable. According to the learned Counsel, the reliefs claimed in the suit, if granted, would result in specific enforcement of a contract of employment. Section 14(1)(a) of the Act makes it clear that a contract of employment is not specifically enforceable since non-performance of it can be compensated by money, contended the counsel."

"16. The said contention is based on a fallacious premise that the suit was for enforcement of a contract of employment. The respondent was appointed on certain terms and pursuant to such appointment he worked within the scope of such employment. Termination of his employment purportedly in terms of the same contract is challenged by him by praying for a declaration that such termination is invalid and, therefore, he continues in the same employment. Maintainability of a suit cannot be adjudged from the effect which the decree may cause. It can be determined on the basis of the ostensible pleadings made and the stated reliefs claimed in the plaint."

"18. Chapter 11 contains a fasciculus of rules relating to specific performance of contracts, Section 14 falls within that chapter and it points to contracts which are not specifically enforceable. Powers of the court to grant declaratory reliefs are adumbrated in Section 34 of the Act which falls under Chapter VI of the Act. It is well to remember that even the wide language contained in Section 34 did not exhaust the powers of the court to grant declaratory reliefs. In Vemareddi Ramaraghava Reddy Vs. Konduru Seshu Reddy and in Supreme General Films Exchange Ltd. Vs. Brijnath Singhji Deo this Court while interpreting the corresponding provision in the preceding enactment of 1877 (Section 42) has observed that (SCC Headnote) -

"Section 42 merely gives statutory recognition to a well-recognised type of declaratory relief and subjects it to a limitation, but it cannot be deemed to exhaust every kind of declaratory relief or to circumscribe the jurisdiction of courts to give declarations of right in appropriate cases falling outside Section 42,".

"19. The position remains the same under the present Act also. Hence the mere fact that a suit which is not maintainable under Section 14 of the Act is not to persist with its disability of non-admission to civil courts even outside the contours of Chapter II of the Act. Section 34 is enough to open the corridors of civil courts to admit suits filed for a variety of declaratory reliefs."

4. The learned Counsel has submitted that earlier the relief of reinstatement was restricted only to employees who were covered by Article 311 of the Constitution of India or by the Industrial Disputes Act, or if there was a breach of a statutory duty by a statutory body. He submits that these exceptions had been carved out by the Supreme Court on the basis that no specific performance could be granted of a contract of personal service. But according to the counsel, the Courts always have the jurisdiction to grant the relief of injunction in special circumstances. For this proposition the learned counsel has relied upon a commentary contained in the law of Termination of Employment, fifth Edition by Robert Upex, published by London Sweet & Maxwell 1997. Certain cases have been mentioned in the commentary in paragraphs 10.82, 10.87, 10.89, 10.91, 10.92, 10.93.

5. Mr. Tulzapurkar, however, has submitted that the matter is squarely covered by a Judgment of the Supreme Court in the case of Nandganj Sihori Sugar Co. Ltd., Rae Bareli & another Vs. Badrinath Dixit and others reported in (1991) 3 Supreme Court Cases 54. The learned Counsel has relied upon paragraphs 8, 9, 10, 11 and 12 of the aforesaid Judgment. These paragraphs are as follows :

"8. In Halsbury's Laws of England (4th edn., Volume 44, at para 407) it is stated:

"407. Contracts for personal work or services - A judgment for specific performance of a contract for personal work or services is not pronounced, either at the suit of the employer or the employee. The court does not seek to compel persons against their will to maintain continuous personal and confidential relations. However, this rule is not absolute and without exception. It has been held that an employer may be restrained from dismissing an employee in breach of contract if there is no loss of confidence between the employer and employee or if (at least in a contract of employment to carry out a public duty) the employee has been dismissed in a manner which does not comply with statutory or contractual regulations governing dismissal. No court may, whether by way of an order for specific performance of a contract of employment or an injunction restraining a breach or threatened breach of such a contract, compel an employee to do any work or attend at any place for the doing of any work.

This principle applies not merely to contracts of employment, but to all contracts which involve the rendering of continuous services by one person to another, such as a contract to work a railway line ....."

"9. As stated by this Court in Executive Committee of Vaish Degree College, Shamli Vs. Lakshmi Narain. (SCC p. 71, para 18)

".... a contract of personal service cannot ordinarily be specifically enforced and a court normally would not give a declaration that the contract subsists and the employee, even after having been removed from service can be deemed to be in service against the will and consent of the employer. This rule, however, is subject to three well recognised exceptions - (i) where a public servant is sought to be removed form service in contravention of the provisions of Article 311 of the Constitution of India ; (ii) where a worker is sought to be reinstated on being dismissed under Industrial Law; and (iii) where a statutory body acts in breach or violation of the mandatory provisions of the statute."

"10. A contract of employment cannot ordinarily be enforced by or against an employer. The remedy is to sue for damages. (See Section 14 read with Section 41 of the Specific Relief Act; See Indian Contract and Specific Relief Acts by Pollock and Mulla, 10th edn., page 983). The grant of specific performance is purely discretionary and must be refused when not warranted by the ends of justice. Such relief can be granted only on sound legal principles. In the absence of any statutory requirement, courts do not ordinarily force an employer to recruit or retain in service an employee not required by the employer. There are, of course, certain exceptions to this rule, such as in the case of a public servant dismissed from service in contravention of Article 311 of the Constitution; reinstatement of a dismissed worker under the Industrial Law; a statutory body acting in breach of statutory obligations, and the like. (S.R. Tiwari Vs. District Board, Agra; Executive Committee of U.P. State Warehousing Corporation Vs. C. K. Tyagi; Executive Committee of Vaish Degree College, Shamli Vs. Lakshmi Narain, see Halsbury's Laws of England, 4th edn., Volume 44, paragraphs 405 to 420)."

"11. On the facts of this case, the High Court was clearly wrong in issuing a mandatory injunction to appoint the plaintiff. Even if there was a contract in terms of which the plaintiff was entitled to seek relief, the only relief which was available in law was damages and not specific performance. Breach of contract must ordinarily sound in damages, and particularly so in the case of personal contracts. Assuming that a contractual relationship arose consequent upon the letters addressed by defendant 3 to defendant 1, the plaintiff was a total stranger to any such relationship, for, on the facts of this case, no relationship of a fiduciary character existed between the plaintiff and defendant 3 or other defendants. Neither on principles of law or equity nor under any statute did the plaintiff acquire an enforceable right by reason of the letters exchanged between defendants 1 and 3. The plaintiff had no privity of any kind to their relationship. No collateral contract to which the plaintiff was a party did arise on the facts of this case. At no time was defendant 3 acting as an agent of the plaintiff. There is no express or implied contract which is enforceable by the plaintiff (See Halsbury's Laws of England, 4th edn., Volume 9, paragraphs 334 to 342),"

"12. The plaintiff's counsel suggests that the claim is justifiable on the basis of legitimate exceptions for appointment. There is no specific plea or evidence to support any such contention. Whatever expectations might have arisen from the letters of defendant 3, they could not have in law given rise to any right enforceable by specific performance."

6. The learned counsel has further submitted that the declaration which can be granted by this Court under Section 34 of the Specific Relief Act is always limited in its operation by the provisions of Section 14 (1)(a) and 14(1)(b) of the Specific Relief Act. There is a further limit contained in Section 41(e) of the Specific Relief Act. He submits that an unwilling employer cannot be compelled to keep in service, an employee whose services are no longer required. On the other hand, Mr. C.U. Singh has laid a considerable amount of stress on the point that in the facts and circumstances of the present case, the order of termination has been issued by the defendant No.2, who had no authority whatsoever to issue the order of termination. Rules of natural justice have been wholly ignored. Even a domestic enquiry has not been held. Action could have been taken by the Defendant No.2 only with the consent of the Defendants No.3 and 4., In fact, the Defendant No.3 is supporting the cause of the plaintiff. According to the learned counsel, this shows that the management had actually not lost confidence in the plaintiff. Relying on the commentary mentioned earlier, he submits that loss of confidence cannot be imputed to the management arbitrarily. The employer must show to the Court that the loss of confidence is based on reasonable grounds. No such grounds exist in the present case. Therefore,, the plaintiff is entitled to the injunction during the pendency of the suit.

7. I have considered the argument put forward by the learned counsel at length. In my view, the law has been settled with regard to the grant of declaration and mandatory injunction in the case of contracts for personal service by the Supreme Court in a number of cases. Two of those cases are S.R. Tiwari Vs. The District Board, Agra reported in AIR 1964 Supreme Court 1680 and Executive Committee of Vaish Degree College, Shamli and others Vs. Lakshmi Narain and others reported in AIR 1976 Supreme Court 888. In Vaish Degree College. The Supreme Court has held as under :

"The relief of declaration and injunction under the provisions of Specific Relief Act is purely discretionary and the plaintiff cannot claim it as of right."

It is further held that the contract of personal service cannot ordinarily be specifically enforced and the Court normally would not give a declaration that the contract subsists. An employee even after having been removed from service cannot be deemed to be in service against the will and the consent of the employers. Thereafter the Supreme Court has recognised three exceptions viz. (i) where a public servant is sought to be removed from service in contravention of provisions of Article 311 of the Constitution of India, (ii) Where the workers are sought to be reinstated on being dismissed under the Industrial Law, (iii) Where a statutory body acts in breach or violation of the mandatory provisions of the statute. This law has been reiterated by the Supreme Court in the case of Badrinath Dixit (Supra). In paragraph 10 of the aforesaid Judgment it is held as follows:

"10. A contract of employment cannot ordinarily be enforced by or against an employer. The remedy is to sue for damages. (See Section 14 read with Section 41 of the Specific Relief Act; see Indian Contract and Specific Relief Acts by Pollock and Mulla, 10th edn., page 983). The grant of specific performance is purely discretionary and must be refused when not warranted by the ends of justice. Such relief can be granted only on sound legal principles. In the absence of any statutory requirement, courts do not ordinarily force an employer to recruit or retain in service an employee not required by the employer. There are, of course, certain exceptions to this rule, such as in the case of a public servant dismissed from service in contravention of Article 311 of the Constitution; reinstatement of a dismissed worker under the Industrial Law; a statutory body acting in breach of statutory obligations, and the like, (S. R. Tiwari Vs. District Board, Agra; Executive Committee of U.P. State Warehousing Corporation vs. C. K. Tyagi; Executive Committee of Vaish Degree College, Shamli Vs. Lakshmi Narain, see Halsbury's Laws of England, 4th edn., Volume 44, paragraphs 405 to 420)."

8. Thus, it becomes clear that in the absence of any statutory requirement, the Courts do not ordinarily force an employer to recruit or retain in service an employee not required by the employer. In my view, the aforesaid ratio laid down by the Supreme Court has not been expanded by the latest Judgment of the Supreme Court in the case of Ashok Kumar Srivastav. The Supreme Court has rather held in paragraphs 18 and 19 of the Judgement, that the declaration which can be granted under section 34 is subject to the limits placed by Section 14 of the Specific Relief Act.

9. A perusal of the same would show that the Supreme Court has held that the same limitation was applicable to Section 42 of the 1877 Act being para materia to Section 34 of the present Act. In paragraph 15 the Supreme Court has held as follows:

"15. Thus, the legal position is clear and the respondent cannot now reagitate the question regarding maintainability of the suit under Section 34 of the Act. However, learned counsel adopted an alternative contention before us that the suit is in effect one for specific enforcement of a contract and such a suit is not conceived under Section 14 of the Act and hence it is not maintainable. According to the learned counsel, the reliefs claimed in the suit, if granted, would result in specific enforcement of a contract of employment. Section 14(1)(a) of the Act makes it clear that a contract of employment is not specifically enforceable since non-performance of it can be compensated by money, contended the counsel,".

10. On the basis of this Mr. C. U. Singh has submitted that the provisions of Section 14(1)(a) would not preclude the Courts from granting the relief of injunction. Relying on the commentary, Mr. C.U. Singh had elaborated that injunction can only be refused in the case of loss of confidence. Where the parties retain mutual confidence, it would give rise to "special circumstances" for grant of injunction. He further submits that the rule that there can be no specific performance of contract of personal service, was evolved by the English Courts, at a time when Industrial and Commercial establishments were small in size. There was interaction between the management and the employee. With the growth in the size of the corporations, there is hardly any interaction between the employer and employee. Thus, the relationship is no longer a contract of personal service. I am unable to subscribe to the view canvassed by Mr. C.U. Singh. The term personal service cannot be given a limited meaning, depending on the size of the organisation. Contract of personal service is confined to service under a purely private employer. The relationship of master and servant is governed by the Contract. There is no intervention by Article 311 of the Constitution, Industrial Law or any other Statutory Law or rule.

11. In my view, the observations made in paragraph 16 of the Judgment, clearly show that the Supreme Court has distinguished the spheres in which Section 14 and Section 34 of the Specific Relief Act operate. Apart from this, Section 41(e) of the Specific Relief Act specifically provides that injunction cannot be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. Thus, even if a declaration could be granted under section 34 of the Specific Relief Act, no relief of injunction could be granted in view of Section 14(1)(a), (b) read with 41(e). In Vaish Degree College the Supreme Court has clearly held that a contract of employment cannot ordinarily be enforced by or against an employer. The remedy is to sue for damages. This is so because the provisions of Section 14(1)(a) would be applicable after the declaration is given under Section 34 of the Specific Relief Act, to the effect that the contract of personal service is subsisting. Section 41 specifically provides that an injunction cannot be granted to prevent breach of a contract, the performance of which would not be specifically enforced. The effect of a declaration under Section 34 is that, it states what the rights of the parties are, without containing any coercive order. The declaration is not a direction for specific enforcement of the contract. The Court merely declares that the contract having been illegally terminated continues to subsist. The specific performance of the contract by way of a permanent injunction can only be granted, if the provisions of section 14 read with Section 41 are not applicable. Otherwise, the remedy of the plaintiff lies in a claim for damages.

In view of the above, I find no merit in the Notice of Motion. The same is hereby dismissed with no order as to costs.

Notice of motion dismissed.