DalcoEngg. (P) LTD. v. Satish Prabhakar Padhye, 2010 4 SCC 378

In this case, two cases were presented at the Supreme Court of India where the explanation sought was similar by both the cases. The parties to the respective suits sought the meaning and co-relation of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, with certain relevant provisions of the Companies Act, 1956.

Introduction

In this case, two cases were presented at the Supreme Court of India where the explanation sought was similar by both the cases. The parties to the respective suits sought the meaning and co-relation of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, with certain relevant provisions of the Companies Act, 1956.

The definition of “establishment” under the Section 2(k) of the former Act was called in question and whether such applicability of the definition was extended to the non-statutory corporations was sought as the contentions against were claiming that such only extends to statutory corporations.

The term “corporation established by or under a Central, Provisional or State Act” was claimed to be having a special significance or such a meaning in the context with regards to the former Act for the benefits of the Disabled persons.

A reliance was sought by the appellants on the matter of analysing the statute relating to the Disabled persons and their employment on which the arguments presented consisted of the Indian statutes with the international treaties for which India is a Signatory.

Here we are starting with the further explanation of this case.

Facts

Jointly two cases were brought before the Supreme Court of India (hereinafter referred as the “Apex Court”) requiring clarity upon the same crux of Law.

In Dalco Engineering Private Ltd v. Shree Satish Prabhakar Padhye & Ors,[1]

An employee as a telephone operator for Dalco was employed for over twenty years and was dismissed as he developed hearing impairment. The High Court in a prior ruling had held that, Dalco being a private company, falls under the term “establishment” under section 2(k) of the “Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995” (hereinafter referred as the “Disabilities Act”) and thus had consequently acted as a breach in law by such a dismissal of Mr. Padhye. The High Court made orders directing Dalco to re-instate such dismissed employee, as the aggrieved party for the claim, in an alternative position with the same benefits.

In the Fancy Rehabilitation Trust & Anr v. Union of India & Ors,[2]

The Fancy Rehabilitation Trust, being a public trust with several people with disabilities employed, got a house-keeping contract with a private company. The Private Company terminated the contract later, and the said Trust filed a writ petition before the High Court sought the quashing of such notice terminating the contract. The High Court held that the private company not to be an “establishment” as per the definition under section 2(k) of the 1995 Act and dismissed the writ petition.

Issues

In Dalco Engineering Private Ltd v Shree Satish Prabhakar Padhye & Ors[3]

The Appellant, Dalco Engineering Private Ltd (Dalco), is incorporated under the provisions of the Companies Act 1956, as a private limited company. The respondent, Mr. S.P. Padhye, a Telephone Operator employed by Dalco since over two decades. Dalco terminated Respondent’s service on 31.12.2000 stating that an 85% (Eighty Five Percentage) reduction in his ability to hear is developed, and it incapacitated him from performing his work, thus, the respondent further complained at the Disability Commissioner about the fitness and efficiency when he joined the said employment. He claimed, that Dalco continued his employment, finding him any suitable alternative post. The Disability Commissioner made an order on 12.10.2001 placing the suggestion regarding Dalco to re-employ the respondent for discharge of any suitable work, this suggestion was rejected. The respondent further claimed that instead of the Disability Commissioner merely making an order, should have issued a direction as per the section 47 of the Disabilities Act. And thus, the respondent filed a writ petition seeking the following remedies:

i.          Quashing of the order of the Commissioner suggesting Dalco to reinstate.

ii.         Such directions to impose the provisions of the Disabilities Act by ordering the employer to re-employ respondent in such a suitable post with retrospective effect from the moment of such expulsion of respondent inclusive of the same pay and service benefits as at the time of such expulsion.

Prior to this appeal, the High Court ruled in favour of the respondent on 23.12.2005 and also directed Dalco to re-instate the respondent in a suitable post with immediate effect. The High Court observed that being a private limited company, Dalco was an “establishment” as defined by section 2(k) of the Disabilities Act. Furthermore, it was held that section 47 of the 1995 Act required Dalco not to dispense with the services of any such employee who acquired a disability.

In Fancy Rehabilitation Trust & Anr v Union of India & Ors[4],

The Fancy Rehabilitation Trust (hereinafter referred as the “Trust”), appellant here, being a public trust functioning for the betterment of people with specially physical and mental disabilities. The Trust entered in a house-keeping contract with a private company. As per the contract on 24.06.2000, the Trust exercised its duties and employed several people with disabilities. Further, the private company terminated the said contract. A complaint was filed with the Disability Commissioner by the Trust on 22.06.2006, followed by a writ petition to the concerned High Court praying the quashing of notice which stipulates termination of the contract. On 19.09.2006 High Court held that, the private company was not an “establishment” as under the provisions of section 2(k) of the Disabilities Act, and it also held that the earlier decision in S.P. Padhye was incorrect as it disregarded previous binding precedence of the High Court.

Contentions

  1. By S.P. Padhye and the Trust, Reliance was placed on section 47 of the Disabilities Act stating that “no establishment shall dispense with, or reduce in rank, an employee who acquires a disability during his service”, also stipulated that a company incorporated under the Companies Act is a corporation as under section 2(k) of the Disabilities Act which states that an establishment includes a corporation established under a Central, Provisional, or State Act. Also claimed that a corporation can be referred to a company, that the Companies Act being a Central Act and, therefore, such a company incorporated and registered as under the Companies Act is a corporation to be established under a Central Act. They made observations that the use of the words “by or under” is vital also further contended that “a corporation established by an act” would make reference to a corporation brought into existence by such an Act, and “a corporation established under an Act” would refer to any such company which is incorporated under the Companies Act. It was further contended that the terms used in a socio-economic statute such as the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act 1995, which aimed to provide full participation and equality, should be interpreted liberally. Also further referring that the Proclamation of the Full Participation and Equality of the People with Disabilities in the Asian and Pacific Region, India being its signatory. Furthermore it was also submitted that, scheme of the Disabilities Act does not restrict its applicability merely to government or statutory corporations, as under section 39 of the Disabilities Act mandates all educational institutions for at least 3% reservation of the total seats for the persons with disabilities and also section 44 compels non-discrimination in transport which is inclusive of taking special measures to allow such to persons with disabilities, thus, it was argued that all establishments whether statutory or non-statutory should comply with the Act.
  2. By the Dalco and the Union of India, the contentions placed were that the term “corporation established by or under a Central, Provisional or State Act” makes a reference to a statutory corporation where it is brought into existence by a statute, and thus it does not include such a company that is incorporated as per the provisions of the Companies Act.

Summary of Court Decision and Judgement

  1. The Apex Court held its judgement in favour of the employers (Dalco and the Union of India) in both the respective cases, the court contemplated that the process of establishment of the company is not under the Companies Act also that in case of an incorporated company, it does not owe its existence to the Companies Act. As per the statute, an incorporated company is formed by the act of seven or more persons (or two or more person in case of a private company) who are associated for any such lawful purpose subscribing their respective names to the Memorandum of Association and by adherence to the requirements with regards to the registrations under Companies Act and thus a company is though registered and incorporated as per the provisions of the Companies Act but it is not established under this Statute.
  2. Furthermore, the court also made a reference to the word “established” referred merely coming into existence by virtue of an enactment and it does not refer to a company, which, since it comes into existence, is further governed adherence to the provisions of the Companies Act. Also, the phrase “established by or under” referred with the statutory corporation as it is contrasted from a non-statutory corporation incorporated or any such registered as per the Companies Act and the provisions thereto.
  3. The Court also held that, the inclusion of only a specific prescribed category of companies incorporated as per the Companies Act under the definition of “establishment” which necessarily and thus impliedly excludes any other types of a company registered with the Companies Act from the definition of establishment.
  4. While further emphasizing upon the Constitutional relevance the court contemplated that, the legislative intent to define establishment so as to be synonymous with the definition of “State” under Article 12 of the Constitution of India, Private employers, whether it be individuals, partnerships, proprietary concerns or any such companies (other than Government companies) are absolutely excluded from the “establishments” under section 47 of the Disabilities Act. Furthermore it stated that, if such was the intention of the legislature to further prevent discrimination of persons with disabilities in any kind of employment then the provision(s) in the statute would have been described as sheerly “non-discrimination in employment” and also the words “any employer” would have used in place of “establishment”. Also, this demonstrated the clear legislative intent to apply the provisions under section 47 only with the employment by the State and not being applicable to the employment of others.
  5. The Court agreed in respect to socio-economic statutes should be interpreted liberally, however, it held that the application of a provision of a socio-economic legislation is unable to expand by the judicial interpretation where the legislature does not intent to extend, or in such a manner where it exceed against the provisions of the concerned statute itself or any such constitutional limitations. In this instance there exist a clear indication in the statute itself contemplating the benefit which is intended to be limited with a particular class of employees that is employees of enumerated establishments.
  6. Regarding the most vital contentions, the court observed and stated that, the term “corporation established by or under a Central, Provisional or State Act” is not a term which has any special significance or meaning in the context with regards to the Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act 1995, it is a term used in various enactments for referring to the statutory corporations to be contrast from non-statutory corporations. The Court reasoned that any such interpretation of the term with any such inclusion of the private sector would be overriding the distinction prescribed by the Constitution between the statutory corporations which are “state” and the non-statutory bodies and corporations.
  7. The Apex Court also held that only under the government educational institutions and the educational institutions which are receiving such aid from the government, to be falling under section 39 of the Disabilities Act also that it does not use the word “establishment”.
  8. While making the judgement the Court did not consider whether section 44 of the Disabilities Act has its applicability over the non-statutory corporations under the transport sector as that issue was irrelevant under the present case.
  9. The Court held, reasonably, that as Dalco and the private company (in the Trust’s case) were not establishments as per the meaning of section 2(k) of the Disabilities Act, Section 47 of the Act is inapplicable from the purview of the statute.

Analysis

  1. The Court delivered a correct interpretation as the act of merely coming into existence by the virtue of an enactment is termed as “established” and it does not refer to a company which is governed as per Companies Act, and the words “established by or under” refers with implied reference to the statutory corporation as it is contrasted from a non-statutory corporation being incorporated or any such registration under the provisions of the Companies Act.
  2. The court while it held with regards to the Section 39 of the Disabilities Act, only the government educational institutions and such other government aided educational institutions are to be considered while construing the respective section, also it does not use the word “establishment”, is as the language of the statute clearly contemplates.
  3. The term “corporation established by or under a Central, Provisional or State Act” does not consist any special significance or any such special meaning in the context with regards to the Disabilities Act rather it is a term used in various such enactments for making a reference to the statutory corporations and to be contrast from non-statutory corporations.
  4. Any such inclusion where only a specific prescribed category of companies which are incorporated as per the Companies Act are under the definition of “establishment” which literally impliedly exclude all other types of company registered with the Companies Act from the definition of establishment under the Disabilities Act.
  5. The legislative intent to define establishment can be directly linked with the definition of “State” under Article 12 of the Constitution of India, Private employers, whether it be individuals, partnerships, proprietary concerns or any such companies (other than Government companies) are absolutely excluded from the “establishments” under section 47 of the Disabilities Act.

Conclusion

  1. The High Court earlier in the Fancy Rehabilitation Trust & Anr v Union of India &Ors made it clear stating about the concerned Employer in this matter is not an establishment as per the section 2(k) of the Disabilities Act also stated the High Court under the Dalco Engineering Private Ltd v Shree Satish Prabhakar Padhye & Ors held an incorrect judgement as the binding precedence on the High Court were disregarded.
  2. Even if the language of the statute is not consistent  the explicit words such as statutory and non-statutory, the Apex Court construed the intent of the Legislature of structuring the Disabilities Act, and observed the applicability of the Act to the extent of Statutory Corporations.
  3. The term “corporation established by or under a Central, Provisional or State Act” makes a reference to a statutory corporation where it is brought into existence by a statute, and thus it does not include such a company that is incorporated as per the provisions of the Companies Act.

Also read Zee Telefilms & Anr. v. Union of India & Ors.


[1] CIVIL APPEAL NO.1886 OF 2007

[2] CIVIL APPEAL NO. 1858 OF 2007

[3]2010) 4 SCC 378

[4]2007) ILLJ 1073 Bom