Writ Petition Not Maintainable for Private Contractual Disputes Against Private Companies Performing Public Functions: Allahabad High Court - 2024-04-08

Allahabad High Court: Writ Petition Not Maintainable in Private Employment Dispute Against Company Undergoing Insolvency, Despite Public Function

Allahabad, India – The Allahabad High Court recently dismissed a writ petition filed by an employee of a private construction company, Gayatri Projects Limited, which is undergoing Corporate Insolvency Resolution Process (CIRP). The court, presided over by Justice JJ. Munir , ruled that a writ petition under Article 226 of the Constitution is not maintainable to resolve purely private contractual disputes, even if the company is engaged in public functions like highway construction.

The petitioner, Reddy Veerraju Chowdary, sought a writ of mandamus directing Gayatri Projects Limited, through its Insolvency Professional, to accept his resignation, issue relieving and no-objection certificates, and settle his dues including salary arrears and gratuity. Chowdary, an Associate General Manager, resigned in May 2023 after serving the company since 2005, citing dissatisfaction. His resignation came after the company faced insolvency proceedings initiated by the National Company Law Tribunal (NCLT), Hyderabad Bench, in November 2022.

Case Background and Arguments

Chowdary contended that despite serving a month's notice and handing over charge, the company failed to relieve him or settle his dues. He argued that repeated requests were ignored, compelling him to file the writ petition.

The respondents, Gayatri Projects Limited and the Insolvency Professional, argued that the writ petition was not maintainable against a private company. Furthermore, they claimed Chowdary had deserted his post without proper handover, essential for ongoing highway projects worth ₹3500 crores. They asserted his presence was crucial for project completion and audit, particularly for projects in Varanasi, where he was stationed. While acknowledging no intention to withhold dues, they emphasized procedural formalities needed completion before his release.

Court's Observation on Maintainability and Public Function

The High Court addressed the preliminary objection regarding the writ petition's maintainability against a private entity. Justice Munir clarified that unlike Article 32's scope (for Supreme Court), Article 226 empowers High Courts to issue writs even to a 'person' or 'authority,' including private entities discharging 'public functions.'

The court acknowledged Gayatri Projects Limited, despite being private, was engaged in the public function of constructing national and state highways. Quoting from the judgment: "But, the Company, now in the hands of the Interim Resolution Professional, are engaged in the discharge of the essentially public function of construction of National Highways, State Highways and Public Roads."

However, the court emphasized that the dispute was fundamentally rooted in a contract of service. "Here, the relief that the petitioner seeks is not about Company's public functions as such. It is a matter or a dispute that arises out of the contract of service between the petitioner on one hand and the Company on the other." The court reasoned that the Insolvency Professional merely represented the company and did not alter the contractual relationship between the petitioner and the company.

Reliance on Supreme Court Precedent: Binny Ltd. v. V. Sadasivan

The court heavily relied on the Supreme Court's decision in Binny Ltd. and another v. V. Sadasivan and others (2005) 6 SCC 657 . This precedent clarified that while Article 226 can extend to private bodies performing public functions, it is not applicable to enforce purely private contracts unless there is a public law element involved.

Justice Munir cited excerpts from Binny Ltd. , emphasizing that judicial review under Article 226 is a "public law remedy" available against bodies performing "public law functions." The Supreme Court in Binny Ltd. underscored that even though Article 226 is widely worded, it cannot be used to enforce private contracts.

Final Verdict and Implications

Ultimately, the Allahabad High Court held the writ petition to be not maintainable. The court clarified, "The dispute between the petitioner and the Company about the petitioner resigning and walking away, without handing over charge, arises out of the contract of employment. The Company being essentially a private body and no face or establishment of the State, a breach of the contract of employment, either by the petitioner or the Company, unless it be the breach of some law or a statutory rule, would not entitle the petitioner to maintain a writ petition under Article 226 of the Constitution."

The dismissal does not prevent Chowdary from seeking recourse in other competent legal forums for his contractual grievances. This judgment reinforces the principle that writ jurisdiction under Article 226 is not a substitute for enforcing private contracts, even against entities performing public functions, unless a demonstrable public law element is involved. The case underscores the distinction between a company's public function and purely private employment disputes, particularly in the context of insolvency proceedings.