16 December 2011
Supreme Court
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GRIDCO LIMITED Vs SADANANDA DOLOI .

Bench: CYRIAC JOSEPH,T.S. THAKUR
Case number: C.A. No.-011303-011303 / 2011
Diary number: 10863 / 2008
Advocates: RAJ KUMAR MEHTA Vs SUBHASISH BHOWMICK


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             REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.11303 OF 2011 (Arising out of SLP (C) No.10164 of 2008)

GRIDCO Limited & Anr. …Appellants        

Versus

Sri Sadananda Doloi & Ors. …Respondents

J U D G M E N T

T.S. THAKUR, J.

1. Leave granted.

2. Two questions fall for our determination in this appeal  

by special leave, which arises out of a judgment and order  

dated 2nd April,  2008, passed by a Division Bench of the  

High Court of Orissa whereby Writ Appeal No.11 of 2003  

filed by respondent No.1 has been allowed, order dated 26th  

September,  2003, passed by a Single  Judge of  the High  

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Court  in  O.J.C.  No.2225 of  2001 set  aside  and order  of  

termination of the services of respondent No.1. quashed.   

3. The questions are:

1. What was the true nature of the appointment of the  

respondent?   In  particular,  was  the  appointment  

regular or simply contractual in nature? and

2. If  the  appointment  was  contractual,  was  the  

termination thereof vitiated by any legal infirmity to  

call  for  interference  under  Article  226  of  the  

Constitution?

4. Before  we  advert  to  the  questions  and  possible  

answers to the same, we may briefly set out the facts in  

the backdrop:      

5.   The  appellant-Grid  Corporation  of  Orissa  Ltd.  

(‘GRIDCO’  for  short)  is  a  company wholly  owned by the  

Government of Orissa.  By an advertisement notice dated  

28th May, 1996, issued by the appellant, applications were  

invited from eligible candidates for appointment against the  

post of Senior General Manager: HR Policy, Job Evaluation,  

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Appraisal, Remuneration.  Respondent No.1 was one among  

several others who applied for selection and appointment  

against the said post.  A Selection Committee constituted  

by  the  appellant  short-listed  three  candidates  including  

respondent No.1-Shri Sadananda Doloi for an appointment.  

The  Corporation  eventually  issued  a  letter  dated  8th  

January,  1997,  by  which  it  offered  to  the  respondent,  

appointment as Senior General Manager on contract basis  

for a period of three years subject to renewal on the basis  

of his performance. Clause (3) of the letter stipulated the  

tenure of the proposed appointment as under:

“(3) Period:- The tenure of appointment as Sr. General  Manager  (HRD)  is  for  a  period  of  three  years  on  contract basis subject to renewal on the basis of your  performance. This contract of employment is, however  terminable even during this three year term on three  months’ notice or on payment of three months salary in   lieu thereof by either side.”

6. A  formal  order  of  appointment  dated  6th February,  

1997, was, in due course, issued in favour of respondent  

No.1  by  the  appellant-Corporation,  which  embodied  the  

condition  regarding  the  tenure  of  his  appointment  as  

contained  in  the  initial  offer.  Clause  (12)  of  the  

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appointment  letter  further  stipulated  that  the respondent  

shall be governed by the Grid Corporation Officers Service  

Regulations, 1996.  

7. The  respondent  joined  the  appellant-Corporation  as  

Senior General Manager (HRD) on 30th April, 1997.  With  

the  coming  into  force  of  the  Grid  Corporation  Officers  

Service  Regulations,  1996,  the  Officers  working  in  the  

Corporate Office of  GRIDCO were re-designated including  

respondent No.1, whom the Corporation re-designated as  

Chief General Manager (HR). Respondent No.1 soon after  

re-designation  wrote  a  letter  dated  29th October,  1997,  

requesting  for  an  amendment  of  Clause  (2)  of  the  

appointment letter to bring the same in conformity with the  

Para  13(3)  of  the  GRIDCO  Officers  Regulations.  That  

request of the respondent was accepted and Clause (2) of  

the Appointment Order dated 6th February, 1997, amended  

to read as under:

“(2) Period:- Your tenure of appointment shall be on a  contract  basis  initially  for  a  period  of  three  years  &  renewable thereafter for such period(s) as the Board or  the Committee of the Board may prescribe until  you  attain  the  age  of  superannuation  as  provided  in  GRIDCO Officers Service Regulations. This contract of   

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employment is, however, terminable even during this  three year term on three months’ notice or on payment   of three months’ salary in lieu thereof by either side.”

8. On the expiry of the contractual period of three years  

stipulated  in  the  appointment  letter  the  appellant-

Corporation  extended the employment  of  the  respondent  

upto  3rd November,  2000,  by  a  letter  dated  29th March,  

2000, on the same terms and conditions as were stipulated  

in  the  appointment  letter.   Respondent  No.1,  however,  

made  a  representation  to  the  Chairman-cum-Managing  

Director  of  the  appellant  on  3rd June,  2000,  seeking  

extension  of  his  tenure  till  superannuation.  In  the  

meantime,  the  extended  period  of  his  employment  also  

expired  whereupon  the  Corporation  granted  to  the  

respondent  a  further  extension  of  one  year  upto  3rd  

November,  2001,  on  the  same  terms  and  conditions  as  

stipulated in the letters dated 6th February, 1997, and 29th  

October,  1997.  Two  further  representations  dated  22nd  

November,  2000,  and  13th February,  2001,  to  the  

appellant-Corporation  for  extension  of  the  tenure  of  

appointment till superannuation did not find favour with the  

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appellant.  Instead the appointment of the respondent was  

terminated in terms of an order dated 19th February, 2001  

with three months’ salary in lieu of notice paid to him.  

9. Aggrieved  by  the  termination  of  his  services,  

respondent no.1 filed a writ petition in the High Court of  

Orissa for issue of a Writ of Certiorari quashing the same on  

several grounds. A learned Single Bench of the High Court,  

however,  dismissed  the  said  petition  holding  that  the  

appointment  of  the  writ  petitioner,  respondent  herein,  

being purely temporary and contractual in nature and the  

termination being in no way stigmatic, the respondent had  

no  legal  right  to  claim  continuance  in  service.  The  writ  

petition was, on that basis, dismissed.

10. Respondent No.1 then filed Writ Appeal No.11 of 2003  

which was heard and allowed by a Division Bench of the  

High Court of Orissa in terms of the impugned judgment  

and order. The Division Bench held that ‘introduction of a  

contractual condition’ in a regular appointment under the  

State was opposed to the principles of Articles 14 and 16 of  

the  Constitution,  and  that  the  freedom  of  contract  was  

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rendered illusory by an unequal bargaining power between  

a citizen seeking appointment to public service on the one  

hand and a giant employer like a State Corporation on the  

other. The order passed by the learned Single Judge was on  

that reasoning set aside by the High Court and the order  

terminating the services of respondent No.1 quashed.

11. We  have  heard  learned  counsel  for  the  parties  at  

considerable  length  and  propose  to  take  up  the  two  

questions that we have formulated for  determination  ad-  

seriatim.    

Re: Question No.1

12. As noticed earlier, while the learned Single Judge has  

held the appointment of the respondent to be contractual in  

nature and termination thereof to be valid and permissible  

in terms of the contract, the Division Bench has in appeal  

taken  the  view  that  the  appointment  was  a  regular  

appointment  that  could  not  be  terminated  summarily  by  

issuing  a  notice  or  paying  three  months’  salary  in  lieu  

thereof.  It  is  trite  that  the power to make a contractual  

employment  is  implicit  in  the  power  to  make  a  regular  

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permanent appointment unless the statute under which the  

authority exercises its powers and discharges its functions  

or the Rules & Regulations governing recruitment under the  

authority  specifically  forbid  the  making  of  such  an  

appointment. No such prohibition has been pointed out to  

us in the present case. All that was argued was that the  

Rules did not at the relevant time specifically provide for  

making a contractual employment.  That is, in our opinion,  

no reason to hold that an appointment made on contractual  

basis would constitute a breach of the Rules or that such an  

appointment  had  to  be  necessarily  treated  as  a  regular  

appointment.  Having  said  that,  let  us  now  see  the  

background  in  which  the  appointment  was  made  in  the  

present  case.  As  seen  above,  the  selection  process  

culminating in the appointment of the respondent started  

with  the  publication  of  an  advertisement  to  fill  up  two  

vacancies  of  human  resource  professionals  at  senior  

management  level.  The  advertisement,  it  is  common  

ground,  did  not  indicate  the  nature  of  appointment  

(whether regular or contractual) that may be offered to the  

selected candidates. The absence of any such indication in  

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the advertisement notice did not, in our opinion, make any  

material difference having regard to the fact that the offer  

of  appointment  made  to  respondent  No.1  in  terms  of  

appellant-Corporation’s  letter  dated  8th January,  1997,  

specifically  described  the  appointment  to  be  a  tenure  

appointment.  A careful reading of paragraph 3 of the offer  

letter  leaves  no  manner  of  doubt  that  the  tenure  of  

appointment  offered  to  the  respondent  No.1  as  Senior  

General  Manager,  HRD was  limited  to  a  period  of  three  

years subject to renewal on the basis of his performance. It  

also  made  it  abundantly  clear  that  the  contract  of  

employment  was terminable  even during the currency of  

the  three  years  term  on  three  months’  notice  or  on  

payment of three months’ salary in lieu thereof by either  

side.  We find  it  difficult  to  read  any  element  of  regular  

appointment in the offer made to the respondent or any  

assurance that the appointment is in the nature of a regular  

appointment or that the respondent was on probation to be  

regularised  on  satisfactory  completion  of  his  probation  

period.  That  apart,  appointment  order  issued  on  6th  

February, 1997, also specifically embodied the stipulation  

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regarding the tenure as it  was in clause (3) of the offer  

letter.  

13. It is not the case of the respondent that there was any  

uncertainty or ambiguity in the appointment made by the  

respondent in so far as the tenure on the post to which he  

was  appointed,  was  concerned.  What  puts  the  matter  

beyond any shadow of doubt is the understanding of the  

respondent evident from his letter dated 29th October 1997  

asking for an amendment of clause (2) of the appointment  

order so as to bring the same in conformity with para 13 of  

the  GRIDCO Officers’  Regulation.  The  request  manifestly  

demonstrated that the parties were ad idem regarding the  

tenure of  appointment  given to the respondent  and that  

while the initial contract period was limited to three years  

the same could be renewed by the Board or the Committee  

of  the  Board  until  the  respondent  attained  the  age  of  

superannuation as provided in the GRIDCO Service Officers  

Regulations.  It  is  quite  evident  that  reference  to  the  

superannuation of the respondent in this appointment letter  

was only in the nature of providing an outer limit to which  

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the employment on contract could have been extended. It  

did  not  suggest  that  there  was  any  specific  or  implied  

condition  of  employment  that  the  respondent  would  

continue to serve till he attains the age of superannuation.  

Even after the amendment of clause (2) of the appointment  

letter, the condition that the contract of employment could  

be terminated at any time during the period of three years  

on three months’ notice or payment of three months’ salary  

in  lieu  thereof  by  either  side  continued  to  be  operative  

between  the  parties.  The  fact  that  the  appellant-

Corporation extended the tenure upto 3rd November, 2000,  

in the first place and upto 3rd November, 2001 later, is also  

suggestive of the parties having clearly understood that the  

appointment was a tenure appointment, extendable at the  

discretion  of  the  Board  of  Directors/Corporation.  These  

extensions,  it  is  noteworthy,  were  themselves  subject  to  

the  terms  and  conditions  stipulated  in  the  appointment  

letter  which,  inter-alia,  provided  that  the  arrangement  

could be terminated by either party on three months’ notice  

or on payment of three months’ salary in lieu thereof.  In  

the  totality  of  the  above  circumstances,  we  are  of  the  

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opinion  that  the  nature  of  appointment  made  by  the  

appellant-Corporation was contractual  and not  regular  as  

held by the Division Bench of the High Court.

14. There is  one other aspect to which we must advert  

before we part with the question of nature of appointment  

offered to the respondent. The appointment order issued in  

favour  of  the  respondent  specifically  stated  that  the  

respondent  will  be  governed  by  the  GRIDCO  Officers  

Service Regulations,  1996. With the coming into force of  

the said Regulations, the respondent was re-designated as  

Chief  General  Manager,  HR  which  was  in  terms  of  the  

Regulations, a post in the Executive Grade of E-10. This re-

designation  was  not  at  any  stage  questioned  by  the  

respondent. On the contrary it was he who had prayed for  

amendment of clause (2) of the appointment letter to bring  

the same in tune with para 13(3) of the GRIDCO Officers  

Service Regulation. Para 13(3) of the Regulations reads as:

“13(3): The appointment to grades above E-9 shall be  on a contract basis initially for a period of 3 years and  renewable thereafter for such period(s) as the Board or  the  Committee  of  the  Board may prescribe  until  the  Officer attains the age of superannuation as provided in  these Regulations.”

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15. The above makes it manifest that an appointment to  

the  post  in  category  E-10  could  be  made  only  on  a  

contractual  basis.  The  Regulations  do  not  envisage  a  

regular appointment at E-10 level to which the respondent  

stands  appointed  on  the  terms  of  the  contract  of  

employment.  That being the case it is difficult to see how  

the  said  appointment  could  be  treated  to  be  a  regular  

appointment  when  the  Rules  did  not  permit  any  such  

appointment.  We  may  mention  to  the  credit  of  learned  

senior  counsel  who  appeared  for  the  respondent  that  

although at one stage an attempt was made to argue that  

the appointment of the respondent was regular in nature,  

that line of argument was not pursued further and in our  

opinion,  rightly  so  having  regard  to  what  we  have  said  

above. Such being the case the question of the so called  

unequal bargaining power of the parties did not have any  

relevance or role to play in the facts and circumstances of  

the case.  Question No.1 is answered accordingly.

Re: Question No.2

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16. This question has to be answered in two distinct parts.  

The  first  part  relates  to  the  aspect  whether  the  order  

passed by the appellant-Corporation is amenable to judicial  

review and if  so  what  is  the  scope  of  such  review.  The  

second part of the question is whether on the standards of  

judicial review applicable to it, the order of termination is  

seen to be suffering from any legal infirmity.  Before we  

refer to certain decisions of this Court that have dealt with  

similar issues in the past we may at the outset say that  

there  was  no  challenge  either  before  the  High  Court  or  

before us as to the competence of the authority that passed  

the termination order. There was indeed a feeble argument  

that the order was mala fide in character but having regard  

to the settled legal  position regarding the proof  of  mala  

fides and the need for providing particulars to substantiate  

any such plea, we are of the view that the charge of mala  

fide does  not  stand  scrutiny.  Neither  before  the  learned  

Single Judge nor before the Division Bench was the ground  

based on  mala fides seriously argued by the respondent.  

What was contended on behalf of the respondent was that  

the appellant-Corporation did not act fairly and objectively  

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in taking the decision to terminate the arrangement. It was  

contended that  the decision  to  terminate  the contractual  

employment was not a fair and reasonable decision having  

regard to the fact that the respondent had performed well  

during his tenure and the requirement of the Corporation to  

have a Chief General Manager (HR) continued to subsist. In  

substance,  the  contention  urged  on  behalf  of  the  

respondent  was  that  this  Court  should  reappraise  and  

review the material touching the question of performance  

of the respondent as Chief General Manager (HR) as also  

the question whether the Corporation’s need for a General  

Manager  (HR)  had  continued  to  subsist.   We regret  our  

inability to do so.  It is true that judicial review of matters  

that fall in the realm of contracts is also available before  

the superior courts, but the scope of any such review is not  

all pervasive.  It does not extend to the Court substituting  

its  own  view  for  that  taken  by  the  decision-making  

authority.   Judicial  review  and  resultant  interference  is  

permissible where the action of the authority is mala fide,  

arbitrary,  irrational,  disproportionate  or  unreasonable  but  

impermissible if the petitioner’s challenge is based only on  

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the ground that the view taken by the authority may be  

less  reasonable  than  what  is  a  possible  alternative.  The  

legal position is settled that judicial review is not so much  

concerned with the correctness of the ultimate decision as  

it is with the decision-making process unless of course the  

decision  itself  is  so  perverse  or  irrational  or  in  such  

outrageous  defiance  of  logic  that  the  person  taking  the  

decision can be said to have taken leave of his senses.  

17. In  Shrilekha Vidyarthi & Ors. v. State of U.P. &  

Ors. (1991) 1 SCC 212,  the State Government had by a  

circular terminated the engagement of all the government  

counsels  engaged  throughout  the  State  and  sought  to  

defend the same on the ground that  such  appointments  

being contractual in nature were terminable at the will of  

the  government.  The  question  of  reviewability  of  

administrative action in the realm of contract was in that  

backdrop examined by this Court.  The Court also examined  

whether  the  personality  of  the  State  Government  

undergoes  a  change  after  the  initial  appointment  of  

government  counsels  so  as  to  render  its  action  immune  

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from judicial scrutiny. The answer was in the negative.  The  

Court held that even after the initial appointment had been  

made and even when the matter is in the realm of contract,  

the State could not cast off its personality and exercise a  

power unfettered by the requirements of Article 14 or claim  

to be governed only by private law principles applicable to  

private individuals. The Court observed:              

“…  we are also clearly of the view that this power is  available  even  without  that  element  on  the  premise  that after the initial appointment, the matter is purely  contractual. Applicability of Article  14 to all executive  actions  of  the  State  being  settled  and  for  the  same  reason its applicability at the threshold to the making  of a contract in exercise of the executive power being  beyond  dispute,  can  it  be  said  that  the  State  can  thereafter cast off its personality and exercise unbridled  power unfettered by the requirements of Article  14 in  the  sphere  of  contractual  matters  and  claim  to  be  governed  therein  only  by  private  law  principles  applicable to private individuals whose rights flow only  from the terms of the contract without anything more?  We have no hesitation in saying that the personality of   the  State,  requiring  regulation  of  its  conduct  in  all   spheres  by  requirements  of  Article  14,  does  not  undergo such a radical change after the making of a  contract merely because some contractual rights accrue  to  the  other  party  in  addition.  It  is  not  as  if  the  requirements of Article  14 and contractual obligations  are alien concepts, which cannot co-exist.”

18. Recognizing the difference between public and private  

law activities of the State, this Court reasoned that unlike  

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private  individuals,  the  State  while  exercising  its  powers  

and discharging its functions, acts for public good and in  

public  interest.   Consequently  every  State  action  has  an  

impact on the public interest which would in turn bring in  

the minimal requirements of public law obligations in the  

discharge of such functions.  The Court declared that to the  

extent, the challenge to State action is made on the ground  

of being arbitrary, unfair and unreasonable hence offensive  

to  Article  14  of  the  Constitution,  judicial  review  is  

permissible. The fact that the dispute fell within the domain  

of  contractual  obligations  did  not,  declared  this  Court,  

relieve the State of its obligation to comply with the basic  

requirements of Article 14.  The court said :

“This  factor  alone is  sufficient  to import  at  least  the  minimal  requirements  of  public  law  obligations  and  impress with this character the contracts made by the  State or its instrumentality. It is a different matter that  the  scope  of  judicial  review  in  respect  of  disputes  falling within the domain of contractual obligations may  be more limited and in doubtful cases the parties may  be relegated to adjudication of their rights by resort to  remedies  provided  for  adjudication  of  purely  contractual  disputes.  However,  to  the  extent,  challenge is made on the ground of violation of  Article  14 by alleging that  the impugned act  is  arbitrary,  unfair  or  unreasonable,  the  fact  that  the  dispute  also  falls  within  the  domain  of  contractual  obligations  would  not  relieve  the  

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State of  its  obligation to comply with the basic  requirements  of  Article  14. To  this  extent,  the  obligation is  of  a public  character invariably in every  case  irrespective  of  there  being  any  other  right  or  obligation in addition thereto. An additional contractual   obligation cannot divest the claimant of the guarantee  under Article  14 of non-arbitrariness at the hands of  the State in any of its actions.”

(emphasis  supplied)

19. In Assistant Excise Commissioner & Ors. v. Issac  

Peter & Ors. (1994) 4 SCC 104, the dispute related to  

supply of additional quantities of arrack demanded by the  

license-holder.  Supply of arrack was, however, controlled  

by the Government and the entire transaction relating to  

the  supply  and  sale  of  arrack  was  based  on  licenses  

granted under the relevant rules to persons who emerged  

successful  in a public  auction.   The Government claimed  

that the only obligation cast upon it under the Rules was to  

provide the monthly quota of arrack to each license-holder,  

supply of additional quantity being discretionary with the  

authorities.  The license-holders, on the other hand, argued  

that  supply  of  additional  quantity  was  implicit  in  the  

conditions of the license.  In support they relied upon the  

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past practice and argued that if the supply is limited to the  

monthly quota only it would not be possible for the license  

holder  to  pay  even  the  license  fee.  The  license-holders  

questioned the refusal  of the State Government to issue  

additional quantities of arrack as unfair and unreasonable.  

This court, however, rejected that contention and held :

“Doctrine  of  fairness  or  the  duty  to  act  fairly  and  reasonably is a doctrine developed in the administrative  law field  to  ensure  the  Rule  of  Law  and  to  prevent  failure of justice where the action is administrative in  nature. Just as principles of natural justice ensure fair  decision  where  the  function  is  quasi-judicial,  the  doctrine  of  fairness  is  evolved  to  ensure  fair  action  where  the  function  is  administrative.  But  it  can  certainly not be invoked to amend, alter or vary  the  express  terms of  the  contract  between the  parties. This is so, even if the contract is governed by  statutory  provisions,  i.e.,  where  it  is  a  statutory  contract – or rather more so.”

(emphasis supplied)

20. Taking note of the decision of this Court in Shrilekha  

Vidyarthi’s case (supra), this court held that there was no  

room  for  invoking  the  doctrine  of  fairness  and  

reasonableness against one party to the contract, for the  

purpose of altering or adding to the terms and conditions of  

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the contract merely because it  happens to be the State.  

The Court said :

“It  was  a  case  of  termination  from a  post  involving  public  element.  It  was  a  case  of  non-government  servant holding a public office, on account of which it  was held to be a matter within the public law field. This  decision  too  does  not  affirm  the  principle  now  canvassed  by  the  learned Counsel (that  being  of  incorporating the doctrine of fairness in contracts where  State is a party). We are, therefore, of the opinion  that in case of contracts freely entered into with  the State, like the present ones, there is no room  for  invoking  the  doctrine  of  fairness  and  reasonableness against one party to the contract  (State), for the purpose of altering or adding to  the terms and conditions of the contract, merely  because it happens to be the State. In such cases,  the  mutual  rights  and  liabilities  of  the  parties  are  governed by the terms of the contracts (which may be  statutory  in  some  cases)  and  the  laws  relating  to  contracts. It must be remembered that these contracts  are entered into pursuant to public auction, floating of   tenders or by negotiation. There is no compulsion on  anyone to enter into these contracts. It is voluntary on  both sides.”

(emphasis supplied)

21. In conclusion, the Court made it clear that the opinion  

expressed by it was only in the context of contracts entered  

into between the State and its citizens pursuant to public  

auction, floating of tenders or by negotiation.  The court  

considered it unnecessary to express any opinion about the  

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legal position applicable to contracts entered into otherwise  

than by public auction, floating of tenders or negotiation.

22. In  State  of  Orissa  v.  Chandra  Sekhar  Mishra  

(2002) 10 SCC 583, the respondent had been appointed  

as  a  Homeopathic  Medical  Officer  whose  services  were  

subsequently  terminated  by  issue  of  a  notice.  While  

rejecting the challenge to the termination order, the Court  

observed  “when  the  respondent  was  only  a  contractual  

employee, there could be no question of his being granted  

the relief  of being directed to be appointed as a regular  

employee.”

23. We may  also  refer  to  the  decision  of  this  court  in  

Satish Chandra Anand  v. Union of India (AIR 1953  

SC  250),  where  the  petitioner,  an  employee  of  the  

Directorate General of Resettlement and Employment, was  

removed from contractual employment after being served a  

notice of termination.  The contract of service in that case  

was  initially  for  a  period  of  five  years  which  was  later  

extended.  A  five-Judge  Bench  hearing  the  matter,  

dismissed  the  petition,  challenging  the  termination  

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primarily on the ground that the petitioner could not prove  

a breach of a fundamental right since no right accrued to  

him as the whole matter rested in contract and termination  

of  the contract  did  not  amount  to dismissal,  or  removal  

from service  nor  was  it  a  reduction  in  rank.  The  Court  

found  it  to  be  an  ordinary  case  of  a  contract  being  

terminated by notice under one of its clauses.  The Court  

observed :

“10.  There  was  no  compulsion  on  the  Petitioner  to  enter into the contract he did. He was as free under the  law as any other person to accept or reject the offer   which was made to him. Having accepted, he still had  open to him all  the rights and remedies available to   other persons similarly situated to enforce any rights  under  his  contract,  which  has  been  denied  to  him,  assuming there are any, and to pursue in the ordinary  Courts of the land, such remedies for a breach as are  open  to  him  to  exactly  the  same  extent  as  other  persons  similarly  situated.  He  has  not  been  discriminated against and he has not been denied the  protection of any laws which others similarly situated  could claim…

11. …

……...

The Petitioner has not been denied any opportunity of   employment or of  appointment.  He has been treated  just  like  any  other  person  to  whom  an  offer  of   temporary  employment  under  these  conditions  was  made.  His  grievance  when  analysed,  not  one  of  personal  differentiation  but  is  against  an  offer  of   temporary employment on special terms as opposed to  

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permanent employment. But of course the State can  enter  into  contracts  of  temporary  employment  and impose special terms in each case, provided  they are  not  inconsistent  with  the Constitution,  and  those who chose to accept those terms and  enter into the contract are bound by them, even as  the State is bound.”

(emphasis supplied)

24. In Parshotam Lal Dhingra v. Union of India (AIR  

1958 SC 36), this court followed the view taken in Satish  

Chandra’s case (supra).  Any reference to the case law on  

the subject would remain incomplete unless we also refer to  

the decision of the Constitution Bench of this court in Delhi  

Transport Corporation v. D.T.C. Mazdoor Congress  &  

Ors.  (1991) supp (1) SCC 600, where this  Court  was  

dealing with the constitutional validity of Regulation 9 (b)  

that authorized termination on account of reduction in the  

establishment  or  in  circumstances  other  than  those  

mentioned in clause (a) to Regulation 9 (b) by service of  

one month’s notice or pay in lieu thereof.  Sawant, J. in his  

concurring  opinion  held  that  the  provision  contained  the  

much hated rules of hire and fire reminiscent of the days of  

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laissez faire and unrestrained freedom of contract and that  

any such rule would have no place in service conditions.   

25. To  the  same  effect  was  an  earlier  decision  of  this  

Court in  Central Inland Water Transport Corporation  

Ltd. & Anr. v. Brojo Nath Ganguly & Anr. (1986) 3  

SCC 156, where the Court had refused to enforce an unfair  

and unreasonable contract or an unfair and unreasonable  

clause in a contract entered into between parties who did  

not have equal bargaining power.  

26. A conspectus of the pronouncements of this court and  

the development of  law over the past  few decades thus  

show that there has been a notable shift from the stated  

legal position settled in earlier decisions, that termination  

of a contractual employment in accordance with the terms  

of  the contract  was permissible  and the  employee could  

claim no protection  against  such  termination  even  when  

one of the contracting parties happened to be the State.  

Remedy for a breach of a contractual condition was also by  

way  of  civil  action  for  damages/compensation.  With  the  

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development  of  law  relating  to  judicial  review  of  

administrative actions, a writ Court can now examine the  

validity of a termination order passed by public authority.  

It is no longer open to the authority passing the order to  

argue that its action being in the realm of contract is not  

open to judicial review.  A writ Court is entitled to judicially  

review the action and determine whether  there was any  

illegality,  perversity,  unreasonableness,  unfairness  or  

irrationality  that  would  vitiate  the  action,  no  matter  the  

action is  in  the realm of  contract.   Having said that  we  

must add that judicial review cannot extend to the Court  

acting as an appellate authority sitting in judgment over  

the decision. The Court cannot sit in the arm chair of the  

Administrator  to  decide  whether  a  more  reasonable  

decision or course of action could have been taken in the  

circumstances. So long as the action taken by the authority  

is not shown to be vitiated by the infirmities referred to  

above and so long as the action  is  not  demonstrably  in  

outrageous defiance of logic, the writ Court would do well  

to respect the decision under challenge.

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27. Applying the above principles to the case at hand, we  

have no hesitation in saying that there is no material  to  

show  that  there  is  any  unreasonableness,  unfairness,  

perversity  or  irrationality  in  the  action  taken  by  the  

Corporation.  The  Regulations  governing  the  service  

conditions  of  the employees  of  the Corporation,  make it  

clear  that  officers  in  the  category  above  E-9  had  to  be  

appointed only on contractual basis.  

28. It is also evident that the renewal of the contract of  

employment  depended  upon  the  perception  of  the  

management as to the usefulness of the respondent and  

the need for  an  incumbent  in  the position  held  by him.  

Both these aspects rested entirely in the discretion of the  

Corporation.  The respondent was in the service of another  

employer  before  he  chose  to  accept  a  contractual  

employment offered to him by the Corporation which was  

limited in tenure and terminable by three months’ notice on  

either side.  In that view, therefore, there was no element  

of  any  unfair  treatment  or  unequal  bargaining  power  

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between the appellant  and the respondent to call  for  an  

over-sympathetic  or  protective  approach  towards  the  

latter.  We need to remind ourselves that in the modern  

commercial  world, executives are engaged on account of  

their expertise in a particular field and those who are so  

employed are free to leave or be asked to leave by the  

employer.  Contractual appointments work only if the same  

are mutually beneficial to both the contracting parties and  

not otherwise.  

29. In  the  result,  we  allow  this  appeal,  set  aside  the  

impugned  judgment  and  order  passed  by  the  Division  

Bench  of  the  High  Court  of  Orissa  dismissing  the  Writ  

Appeal No.11 of 2003. We, however, direct that the salary  

and allowances if any paid to respondent No.1 pursuant to  

the impugned judgment shall not be recovered from him.  

Parties shall bear their own costs in this Court as also in  

the courts below.               

……………………..…………..…J. (CYRIAC JOSEPH)

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……………………..…………..…J. (T.S. THAKUR)

New Delhi December 16, 2011

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