Dr. S. Muralidharan vs Government of India and Madras Fertilizers Limited

N. Paul Vasanthakumar, J.—By consent of both sides, the writ petition is taken up for final disposal even at the admission stage.

The prayer in the writ petition is to quash the order dated 16.2.2010 communicated by the second respondent and direct the respondents 1 to 3

to reinstate the petitioner as Chairman and Managing Director of the third respondent Company (Madras Fertilizers Limited) with pay and

allowances and all attendant benefits from the date of termination i.e., from 16.2.2010 to till date of reinstatement.

The brief facts necessary for disposal of the writ petition are as follows:

(a)The petitioner was appointed as Chairman and Managing Director of the third respondent Company (a Public Sector Undertaking included in

Schedule-B, Government of India) with effect from 23.7.2008 by order dated 21.7.2008. The petitioner was selected for by the Public

Enterprises Selection Board (PESB). On 24.12.2008, the terms and conditions of his appointment were issued, according to which his

appointment is for a term of five years or till the date of his superannuation or until further orders.

(b) Before joining in the said post, the petitioner served in various management posts in Public Sector Undertakings viz.,

- Deputy General Manager in ITI Limited, Bangalore

Director Finance/Acting CMD in Hindustan Photo Films Manufactuing Co. Ltd., Ooty;

Director, Finance in M/s. Andrew Yule & Co. Ltd., Kolkatta;

The petitioner was also nominated to various Boards as Director/Chairman, Tide Water Oil Co., Ltd. West Bengal; Filament Ltd.; Bengal

Chambers of Commerce; Indian Potash Ltd.;, Fertilizers Association of India; Hoogly Printing Ltd.; Fortune Biotech, Hyderabad; Chairman of

Coal Companies; Chairman of Bengal Coal Ltd.; Bhir Boom Coal Co. Ltd.; and Katras Jerriah Coal Co. Ltd. Etc.

(c) According to the petitioner, throughout his career, he maintained excellent and exemplary record of service and after knowing the said fact, the

petitioner was appointed as Chairman and Managing Director of the third respondent Company from 23.7.2008.

(d) According to the petitioner when he took charge of the third respondent Company, it was a sick company and application was pending before

the BIFR for declaring it as a sick company under the Sick Industrial Companies (Special Provisions) Act, 1985 and after he took over the

management, he initiated several measures to redeem the company from its state of sickness and in the year 2009 the Company achieved profits.

The progress of the company on month to month basis was also intimated to the first respondent through letter dated 27.10.2009.

(e) On 12.2.2010, the petitioner was invited for an introductory meeting of the Parliamentary Consultative Committee held on 16.2.2010 and the

petitioner attended the meeting as requested. On the same day the impugned order was passed informing the petitioner that his services have been

terminated and he is removed from service immediately as per para 1.1 of the terms and conditions of his appointment communicated through letter

dated 24.12.2008. According to the petitioner no shortcoming as regard his performance or any lapse on his part was ever noticed.

(f) The said order of removal is challenged in this writ petition on the ground that paragraphs 1.1 and 1.2 of the appointment order and the terms

and conditions of appointment should be read together before any action is taken and as far as the petitioner''s case is concerned, no review of his

performance was made in terms of Clause 1.2 of the appointment order, after he took over as C.M.D. of the third respondent Company and

without reviewing his performance as required under Clause 1.2, issuing termination order straight away under Clause 1.1 is illegal and arbitrary.

(g) According to the petitioner, he received the prestigious Bharat Gaurav award on 7.1.2010 for his outstanding performance and meritorious

services. Apart from that, he was conferred with an award for his excellence in the field of fertilizers.

(h) It is also stated in the affidavit that the petitioner should have been given an opportunity before termination; that the impugned order has been

passed without any reason; that the petitioner''s legitimate expectation to continue in the post for five years is affected; and that, the impugned order

is passed against public interest as the petitioner made the third respondent company as a profit earning company, which was a sick company

when he took over the administration. The order was served on the petitioner on 17.2.1020 with undue haste, which lacks bona fide.

The respondents 1 and 2 have filed counter affidavit contending as follows:

(i) The order of appointment clearly states that the appointment of the petitioner is for a period of five years or till the date of superannuation or

until further orders, whichever event occurs earliest. The terms and conditions issued on 24.12.2008 contained a clause stating that his appointment

may be terminated during his tenure by either side of three months notice, or in payment of three months salary in lieu thereof, and after expiry of

first year his performance will be reviewed to enable the Government to take a decision about his continuance for the balance period.

(ii) Petitioner''s appointment is a contractual appointment governing the terms and conditions of the contract. The decision regarding continuation or

otherwise is to be taken by the Board as per the policy/procedure issued by the Public Enterprises Selection Board (PESB), which is the

recommending authority of selection of functionary. PESB is headed by the Chairman and comprises of three other members, appointed by the

Appointment Committee of the Union Cabinet, which is an independent body functioning completely on non-partisan and objective manner.

(iii) The procedure for review by PESB stipulates that after completing the first year of appointment, there will be review and Special Performance

Report (SPR) will be sent to the administrative Ministry in the prescribed format. The minimum acceptable scope in SPR is 40 points out of 50

with no single attribute having a score less than three. In case there is no acceptable score, then photo copy of up-to-date ACR is required to be

submitted to PESB for holding a joint appraisal meeting to consider the confirmation or otherwise.

(iv) After the first year in office, on review, the petitioner scored only 22.44 points out of 50 and in some of the attributes his scores were less than

three out of five in the SPR. The Reporting Officer assessed the performance of the petitioner both in respect of generic attributes viz., leadership

abilities, team building, ability to build strategic vision, business sense and communication skills and functional attributes (such as fulfilment of

memorandum of understanding targets, increase in market share for urea, changes in market capitalisation, performance management and

introduction of efficient system/BPR) and found his performance to be below acceptable standards in almost all respects.

(v) The Reporting Officer also found that assessment of performance of the Company in respect of functional attributes indicated a decline,

compared to previous years and the performance of the petitioner is charecterised by the absence or lack of introduction of new systems or

initiatives for improving human resources and/or business processes.

(vi) The joint appraisal meeting was first held at PESB on 10.9.2009 wherein certain clarifications were called for. The next meeting was held on

26.10.2009 in which, apart from the PESB members, the meeting was attended by the petitioner and Secretary, Fertilizers. In the meeting held on

26.10.2009, the members of the Board wanted to know the performance of the petitioner from July, 2008 to July, 2009, particularly, the

performance of the plant for the same period in the previous year. Petitioner gave a reply on 27.10.2009 which was forwarded to the PESB along

with comments for taking a decision. Petitioner was given opportunity by PESB, an independent body through direct interaction to defend his

performance.

(vii) In comparison with previous year, the production of Ammonia and Urea, capacity utilisation of Ammonia and Urea, energy consumption

efficiency for urea, sales, cash profit, net profit, etc., indicated deterioration of performance during the first one year period of tenure of the

petitioner. Same was the position even for the prior period from September, 2007 to July, 2008. The said fact was also taken note of and the

PESB submitted its recommendation on 27.11.2009 stating that for the interest of the department, the petitioner need not be continued as C.M.D.

Beyond 22.7.2009.

(viii) After taking into account the totality of the circumstances, including the oral submission of the petitioner, it was decided to terminate the

petitioner, during the course of the meeting as well as on the basis of the performance of the petitioner reflected in the document. In the said

background with the approval of the minister the issue was forwarded to the competent authority i.e., Appointment Committee of the cabinet,

which in turn decided to terminate the tenure/contract of the petitioner as C.M.D., Madras Fertilizers Ltd., forthwith by giving him three month''s

salary in lieu of three months notice, by invoking para 1.1 of the terms and conditions of the appointment. Petitioner having been appraised of the

terms and conditions of the appointment, is also bound by the said terms and conditions and there is no illegality in the said order of termination.

(ix) The claim made by the petitioner that due to his efforts the company became profit earning, is denied by stating that one Director (Tech) Sri.

Sahar Mathews joined in the third respondent Company in August, 2009, and he took effective steps for improvement of plant performance and

capacity utilisation. Consequently the performance of the plant improved substantially from August, 2009 onwards and upto July, 2009, the

capacity utilisation for Ammonia as well as Urea production, which was below under percentage, after July, 2009, it exceeded 100%.

(x) The condition contained in para 1.2 of the terms and conditions of appointment was also followed while taking the decision and therefore there

is no illegality or violation of the principles of natural justice as alleged by the petitioner while taking the decision.

Mr. N. Vijay Narayan, learned Senior Counsel appearing for the petitioner submitted that the petitioner having been appointed for a period of

five years or till superannuation, is entitled to continue till anyone of the contingency happens, and terminating the petitioner without stating any

reason, particularly when various reasons stated in the counter affidavit filed by the respondents 1 and 2, by giving three months salary is stigmatic.

The learned Senior Counsel also submitted that the performance appraisal has not been made one year prior to the order of termination and

therefore paragraphs 1.2 of the terms and conditions of appointment has not been followed while passing the impugned order. Learned Senior

Counsel also cited the judgments of the Supreme Court reported in Dr. Mrs. Sumati P. Shere Vs. Union of India (UOI) and Others, ; Abhujit

Gupta Vs. S.N.B. National center, Basic Sciences and Others, ; and 2007 (2) LLN 607 (Indian Airlines Ltd. v. P.D. Kanan).

Mr. M. Raveendran, learned Additional Solicitor General, appearing for the respondents 1 and 2 on the other hand submitted that the petitioner

is bound by the order of appointment as well as the terms and conditions issued subsequently. The petitioner having accepted the appointment with

the above conditions and as there is a clause in the order of appointment, which gives discretion to the appointing authority either to continue the

petitioner for a term of five years or till superannuation or until further orders, a discretion is given to the respondents 1 and 2 to terminate the

services of the petitioner by giving three months salary in lieu of the notice period and the same is scrupulously followed in this case. The

performance of the petitioner was also assessed by the competent authority and while assessing the performance, petitioner was also heard and his

remarks were also considered and therefore there is no illegality in the order of termination and the petitioner''s vested right is not affected. The

learned Additional Solicitor General cited the decisions reported in Krishnadevaraya Education Trust and Another Vs. L.A. Balakrishna, ;

Pavanendra Narayan Verma Vs. Sanjay Gandhi P.G.I. of Medical Sciences and anr, ; and Kendriya Vidyalaya Sangathan Vs. Arunkumar

Madhavrao Sinddhaye and Another, in support of his contentions.

Mr. Habibullah Basha, learned Senior Counsel appearing for the third respondent, while adopting the arguments of the learned Additional

Solicitor General, submitted that the petitioner having raised certain contentions in the affidavit and stated the facts, the respondents 1 and 2 were

forced to contradict the same by filing detailed counter affidavit and on that basis the decision arrived at by the competent authority cannot be

treated as punitive measure or stigmatic and the order of termination being order of termination simpliciter and the respondents having reserved

their right to terminate at any time, the petitioner cannot make any grievance about the impugned order and there is no ground to interfere with the

impugned order.

I have considered the rival submissions of the learned Senior Counsels for the respective parties.

The order of appointment issued to the petitioner dated 21.7.2008 reads as follows:

Government of India

Ministry of Chemicals & Fertilizers

Department of Fertilizers

Shastri Bhawan, New Delhi

Dated: 21 July, 2008

In pursuance of Articles 99 & 107 of the Memorandum & Articles of Association of Madras Fertilizers Limited, the President is pleased to

appoint Shri S. Muralidharan, Director (Finance), Andrew Yule & Company Limited, Kolkata to the post of Chairman and Managing Director

(CMD), Madras Fertilizers Limited (MFL) in schedule ''B'' scale of pay of Rs. 25750-650-30950/-, for a period of five years with effect from the

date of assumption of charge of the post or till the date of his superannuation or until further orders, whichever event occurs the earliest.

The other terms & conditions of Shri Muralidharan''s appointment as Chairman & Managing Director (CMD), Madras Fertilizers Limited

(MFL) will be issued separately.

Hindi version will follow.

In the said appointment order it is clearly stated that the petitioner is appointed for a period of five years with effect from the date of assumption of

charge of the post or till the date of superannuation or until further orders, whichever event occurs the earliest. It is also stated therein that the other

terms and conditions of appointment will be issued separately. Admittedly other terms and conditions of the appointment was issued on

24.12.2008. Paragraphs 1.1 and 1.2 of the terms and conditions reads as follows:

1.1 Period:- The period of his appointment will be w.e.f. 23.07.2008 (F.N) in the first instance till date of his superannuation or until further orders,

whichever event occurs earlier and in accordance with the provisions of the Companies Act. The appointment may, however, be terminated even

during this period by either side on 3 months notice or on payment of three months salary in lieu thereof.

1.2 After expiry of the first year on the post, the performance of Shri S. Muralidharan will be reviewed to enable the Government to take a view

regarding continuance or otherwise for the balance period of tenure.

The petitioner not only accepted the order of appointment and joined in the post as C.M.D. of the third respondent Company, but also

accepted the terms and conditions without any demur. Initially his performance was found to be good. However, according to the counter affidavit

filed by the respondents 1 and 2, he has not satisfied the minimum acceptable score in the specific Special Performance Report (SPR) i.e., 40

points out of 50 and minimum single attribute should be not less than three. It is stated in the counter affidavit that after the first year in office, the

petitioner could score 22.44 points out of 50. The minimum required points to be scored is 40 points. The Reporting Officer submitted petitioner''s

performance report by stating that the performance was below acceptable standards in almost all standards, which was verified based on various

parameters and the functional attributes indicated a decline compared to previous years. It is also stated in the counter affidavit that a joint

appraisal meeting of PESB was held on 10.9.2009 and the petitioner was directed to submit certain clarifications in the next meeting held on

26.10.2009. Petitioner gave his reply on 27.10.2009 with regard to the queries raised, particularly the comparative performance of the previous

year. Petitioner''s reply along with the comments of the PESB was sent to the department for taking a decision and after considering the same

including that of the reply submitted by the petitioner, decision to terminate the petitioner was taken and therefore the petitioner cannot contend that

he was not heard before taking a decision to terminate his service.

11.The order of termination reads as follows:

No.85/3/2008-HR-

I Government of India

Ministry of Chemicals & Fertilizers

(Department of Fertilizers)

Shastri Bhavan, New Delhi,

Dated 16th February, 2010

ORDER

The Competent Authority has decided to terminate the tenure/contract of Shri S. Muralidharan, Chairman & Managing Director, Madras

Fertilizers Limited (MFL), by making a payment of three months'' salary in lieu of notice period and removing him from service immediately as per

para 1.1 of letter No.85/3/2008-HR-I, dated 24.12.2008 governing the terms & conditions of his appointment as Chairman & Managing Director

of M/s. Madras Fertilizers Limited (MFL).

From the reading of the impugned order it is evident that it is not stigmatic in any manner and it is a termination simpliciter. The appointment order

as well as the terms and conditions of the appointment clearly states that the petitioner''s service is for five years term or until superannuation or

until further orders. The petitioner having accepted the said order of appointment with the above said condition, has no right to claim that he should

be permitted to continue and his services cannot be terminated before he attains the age of superannuation or completes five years of service by

applying the principles of estoppel. The performance of the petitioner having been assessed as required as per para 1.2 of the terms and conditions

of the appointment, and the decision having been taken by the competent authority as per para 1.1 of the terms and conditions, there is no illegality

in the impugned order of termination issued to the petitioner.

12.(a) In the decision reported in Kendriya Vidyalaya Sangathan Vs. Arunkumar Madhavrao Sinddhaye and Another, , the Supreme Court

considered the issue regarding the termination simpliciter or punitive and the similar condition contained in the order of appointment, which was

exercised while terminating the service of the respondent in the said case. In paragraphs 10 and 11 of the Judgment it is held thus,

10....One of the terms of the appointment order (offer of appointment) dated 25-6-1974 was that his services were terminable by one month�s

notice on either side without assigning any reasons. The respondent accepted the appointment order and joined duty and thereby accepted the

conditions of appointment, namely, that his services were terminable by one month�s notice without any reasons being assigned. His services

were terminated vide notice dated 21-3-1975 with effect from 30-4-1975 in terms of the appointment order. The order terminating the services of

the respondent is a wholly innocuous order and does not contain any stigma against him. It may also be noted that the notice of termination of

services was served upon the respondent when he had put in less than 9 months of service.

The question which arises for consideration is, whether the order of termination of services of the respondent had been passed by way of

punishment or it had been passed in accordance with the conditions mentioned in the appointment order by which the respondent had been

appointed on a temporary post of Physical Education teacher. If it is found that the termination of services was by way of punishment, another

question may arise whether a formal departmental enquiry was held prior to the passing of termination order and whether the respondent was given

adequate opportunity to defend himself in the said enquiry. It will be seen that the complaint made by Capt. V.K. Balasubramanyam about forcing

his son Master V.K. Srinivasalu to do six rounds (4 km) around the school when he was having chest pain and was unwell and further forcing him

to do PT and other exercises in spite of the advice of the doctor and also giving him beating was forwarded by the Principal to the regional office

of the Kendriya Vidyalaya Sangathan, Bombay. The Assistant Commissioner of the Kendriya Vidyalaya Sangathan asked the Principal to submit a

report along with original statements of the students, who had been subjected to beating by the respondent. The Principal was not an eyewitness to

the incident relating to Master V.K. Srinivasalu and also of the corporal punishment which was awarded by the respondent to the other students.

Therefore, in order to ascertain the complete facts it was necessary to make enquiry from the students concerned. If in the course of this enquiry

the respondent was allowed to participate and some queries were made from the students, it would not mean that the enquiry so conducted

assumed the shape of a formal departmental enquiry. No articles of charges were served upon the respondent nor were the students asked to

depose on oath. The High Court has misread the evidence on record in observing that articles of charges were served upon the respondent. The

limited purpose of the enquiry was to ascertain the relevant facts so that a correct report could be sent to the Kendriya Vidyalaya Sangathan. The

enquiry held can under no circumstances be held to be a formal departmental enquiry where the non-observance of the prescribed rules of

procedure or a violation of principle of natural justice could have the result of vitiating the whole enquiry.There cannot be even a slightest doubt that

the Assistant Commissioner, Kendriya Vidyalaya Sangathan, Bombay Region, terminated the services of the respondent in accordance with the

terms and conditions mentioned in his appointment order which expressly conferred power upon the appointing authority to terminate the

respondent�s services by one month�s notice without assigning any reasons. The services of the respondent were, therefore, not terminated

by way of punishment.

(Emphasis Supplied)

In the said decision, the Supreme Court followed its earlier decisions and upheld the similar order of termination, even though prior to passing an

order of termination simpliciter, an enquiry was conducted and recommended to take disciplinary action against the said employee of Kendriya

Vidyalaya Sangathan, Bombay.

(b) In the decision reported in Krishnadevaraya Education Trust and Another Vs. L.A. Balakrishna, it is held that merely because a committee was

appointed to go into the general performance of each staff based on records and an opinion was formed regarding proficiency and gave a finding

that the proficiency was not upto the mark and an order of termination was passed against the probationer based on the said proficiency, the same

cannot be treated as an order of punishment. In paragraphs 6 and 7 of the Judgment it is held as follows:

If such an order is challenged, the employer will have to indicate the grounds on which the services of a probationer were terminated. Mere fact

that in response to the challenge the employer states that the services were not satisfactory would not ipso facto mean that the services of the

probationer were being terminated by way of punishment. The probationer is on test and if the services are found not to be satisfactory, the

employer has, in terms of the letter of appointment, the right to terminate the services.

In the instant case, the second order which was passed terminating the services of the respondent was innocuously worded. Even if we take into

consideration the first order which was passed which mentioned that a Committee which had been constituted came to the conclusion that the job

proficiency of the respondent was not up to the mark, that would be a valid reason for terminating the services of the respondent. That reason

cannot be cited and relied upon by contending that the termination was by way of punishment.

(c) In Pavanendra Narayan Verma Vs. Sanjay Gandhi P.G.I. of Medical Sciences and anr, it is held that mere filing of counter affidavit to deny the

averments made in the affidavit by the employer, where the facts are narrated and the order of termination, which is otherwise valid, cannot be

invalidated by reason of any statement made in any affidavit seeking to justify the order. In paragraphs 34 and 35 it is held thus,

That an affidavit cannot be relied on to improve or supplement an order has been held by a Constitution Bench in Mohinder Singh Gill and

Another Vs. The Chief Election Commissioner, New Delhi and Others,

When a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be

supplemented by fresh reasons in the shape of affidavit or otherwise.

Equally, an order which is otherwise valid cannot be invalidated by reason of any statement in any affidavit seeking to justify the order. This is

also what was held in State of Uttar Pradesh and Another Vs. Kaushal Kishore Shukla,

The allegations made against the respondent contained in the counter-affidavit by way of a defence filed on behalf of the appellants also do not

change the nature and character of the order of termination.

(Emphasis Supplied)

13.The decisions cited by the learned Senior Counsel for the petitioner will not help the petitioner in any way.

(i) In Dr. Mrs. Sumati P. Shere Vs. Union of India (UOI) and Others, the termination order was based on unsatisfactory performance and he was

not informed of his unsatisfactory service and therefore the order was found to be unfair.

(ii) In Abhujit Gupta Vs. S.N.B. National center, Basic Sciences and Others, the Supreme Court taking note of the stigmatic order, interfered with

the order of punishment of the probationer.

(iii) The decision reported in 2007 (2) LLN 607 (Indian Airlines Ltd. v. Prabha D. Kanan) is for the proposition that while judicially reviewing the

order, the Court may require the employee to produce the order to find out whether the action was bona fide or not.

In this case, there is no allegation of mala fide made against the respondents or any individual by the petitioner in his affidavit. Counter affidavit

clearly establishes the due application of mind on the part of the competent authority, before arriving at a decision. Petitioner was also given notice

and at the time of review of his performance, he has also submitted his reply, which was also considered by the competent authority while taking

the decision. Thus, fair play in action is fully established in this case.

The petitioner''s appointment having been for a term of five years or till superannuation or until further orders, whichever is earlier, a discretion

is vested with the respondents to pass the order of termination at any time. The only requirement is to give three months notice or to pay three

months salary in lieu of that and the said condition has been complied with in this case. The impugned order having been found as not stigmatic and

the same is passed in a fair manner, no case is made out to interfere with the said order.

The writ petition is dismissed. The petitioner is directed to hand over the key of the quarters within two weeks. No costs. Connected

miscellaneous petitions are also dismissed.