Court’s Decision
The Bombay High Court (Chief Justice Shree Chandrashekhar and Justice Manjusha Deshpande) dismissed a writ petition challenging the termination of a senior official of the National Stock Exchange (NSE), holding that employment disputes of a purely contractual nature cannot be adjudicated under Article 226 of the Constitution.
The Court ruled that although the NSE may fall within the definition of ‘State’ under Article 12, the petitioner’s grievance concerned a private contractual right, not a public law issue. Hence, no writ of mandamus could lie.
“The High Court does not issue a futile writ. Even if an arguable issue is raised, that by itself is not sufficient for the High Court to exercise writ jurisdiction.”
The Court emphasized that a private contract of employment cannot be enforced through writ jurisdiction, and the appropriate remedy lies in civil law.
Facts
The petitioner had joined the NSE as a Manager in 2001 under an appointment letter that included a clause permitting termination on three months’ notice or pay in lieu thereof. Over time, he was promoted to senior executive positions, eventually serving as Senior Vice President, CKYC and Mutual Funds Division.
In 2018, the Securities and Exchange Board of India (SEBI) initiated proceedings against the petitioner and others based on allegations of governance violations and misuse of confidential data. Acting upon SEBI’s advisory, the NSE launched an internal inquiry and transferred the petitioner from the regulatory department to another division, withholding his bonuses and increments pending investigation.
In 2022, the petitioner was transferred to the Western Regional Office, where, according to him, he was not assigned any meaningful work. Subsequently, on 24 July 2023, NSE terminated his services under Clause 11 of his appointment contract, citing “organizational restructuring and redundancy.”
He received a cheque of ₹21,58,104 towards three months’ salary in lieu of notice and ₹58,09,400 as gratuity — both of which he encashed.
Despite accepting the payments, he filed the writ petition seeking to quash the termination as arbitrary and violative of Articles 14, 16, and 21 of the Constitution, along with reinstatement, back wages, and continuity of service.
Issues
- Whether a writ petition is maintainable under Article 226 against the National Stock Exchange for enforcement of private employment rights.
- Whether the termination of the petitioner’s employment by invoking Clause 11 of his appointment letter violated Articles 14, 16, and 21.
- Whether the NSE, being a recognized stock exchange, is performing a “public function” that subjects its employment actions to judicial review.
Petitioner’s Arguments
The petitioner contended that Clause 11 of the appointment letter, which permitted termination without cause upon notice, was arbitrary and opposed to public policy.
Relying on Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (1986) 3 SCC 156, he argued that such clauses enabling unilateral termination by powerful employers in monopolistic positions were void under Section 23 of the Contract Act as being against public policy and violative of Article 14.
He further argued that NSE, being an “authority” under Article 12, is bound by constitutional guarantees of equality and fairness. Citing K.C. Sharma v. Delhi Stock Exchange (2005) 4 SCC 4, he asserted that stock exchanges discharge public functions under the Securities Contracts (Regulation) Act, 1956, and hence, the termination of an employee by a body performing public duty must satisfy standards of fairness and reasonableness.
The petitioner also argued that the inquiry initiated by SEBI did not culminate in any disciplinary action against him, and yet, the NSE had terminated his employment arbitrarily.
Respondent’s Arguments
The NSE, represented by Senior Advocate Ashish Kamat, objected to the maintainability of the writ petition. He submitted that the dispute was purely contractual and governed by the private employment contract executed between the parties.
Citing K.K. Saksena v. International Commission on Irrigation and Drainage (2015) 4 SCC 670, St. Mary’s Education Society v. Rajendra Prasad Bhargava (2023) 4 SCC 498, and Chanda Deepak Kochhar v. ICICI Bank Ltd. (2020) 5 Mh.L.J. 219, counsel argued that private employment disputes cannot be elevated to public law domain merely because the employer discharges some public functions.
He pointed out that Clause 11 of the appointment letter expressly permitted termination upon notice or pay in lieu thereof. The petitioner had accepted all dues, including notice pay and gratuity, thus acknowledging full and final settlement. Having done so, he was estopped from challenging the termination.
The respondents further argued that NSE is not “State” under Article 12 for purposes of employment disputes, as its employees are governed by internal staff regulations and not by any statutory service rules.
Analysis of the Law
The Bench analyzed the jurisprudence governing writ maintainability in private employment disputes, referring extensively to K.K. Saksena, Binny Ltd. v. Sadasivan (2005) 6 SCC 657, Federal Bank Ltd. v. Sagar Thomas (2003) 10 SCC 733, and St. Mary’s Education Society.
It reiterated that even if a private body performs public functions, a writ under Article 226 would lie only where there is a public law element in the action complained of. Contracts of personal service fall within the realm of private law and cannot be enforced through writ jurisdiction.
The Court underscored that Article 226 is designed for enforcement of public duties, not for adjudicating private disputes, and that employment relationships based on contractual terms cannot be tested on the touchstone of constitutional fairness.
The Bench noted that the petitioner’s termination did not emanate from any statutory rule, but from Clause 11 of his appointment letter, which was voluntarily accepted by him in 2001. Once an employee accepts the contractual terms, including the employer’s right to terminate with notice, he cannot later challenge it as arbitrary.
Precedent Analysis
- St. Mary’s Education Society v. Rajendra Prasad Bhargava (2023) 4 SCC 498 — The Supreme Court held that even if a body performs public functions, disputes arising purely from private contracts of employment cannot be adjudicated under Article 226 unless there is a public law element.
- K.K. Saksena v. ICID (2015) 4 SCC 670 — The Court clarified that writ jurisdiction lies only for public duties, not private contractual obligations.
- Binny Ltd. v. Sadasivan (2005) 6 SCC 657) and Federal Bank Ltd. v. Sagar Thomas (2003) 10 SCC 733) — Writs can be issued against private bodies only if they discharge public functions affecting public rights.
- Central Inland Water Transport Corp. (1986) 3 SCC 156) — The Court had invalidated an unfair termination clause in a public sector undertaking. The High Court distinguished this case, noting that NSE’s employment was purely private and not statutory.
- K.C. Sharma v. Delhi Stock Exchange (2005) 4 SCC 4) — Though stock exchanges may be held “State” under Article 12, disputes involving individual contractual employment rights do not fall within public law domain.
Court’s Reasoning
The Bench observed that even assuming NSE is an “authority” under Article 12, the petitioner’s grievance — termination under a contractual clause — did not involve a public law element.
It held that the appointment, pay, and service terms of NSE employees are entirely governed by private contracts, not by statutory rules or regulations. Therefore, enforcement of such private rights must be pursued through civil suits, not writ petitions.
The Court also emphasized that the petitioner had voluntarily accepted all dues in full and final settlement and had not raised any objection until a year later, which rendered his challenge barred by delay and acquiescence.
“A party who acquiesces and accepts the terms and conditions of appointment cannot turn around and cry foul and challenge the order of termination.”
The Court concluded that no question of violation of Articles 14 or 16 arose, and the petitioner’s claim for reinstatement was wholly outside the scope of judicial review under Article 226.
Conclusion
The Bombay High Court dismissed the writ petition, holding it not maintainable. The Court reaffirmed the settled principle that a contract of personal service cannot be enforced through writ jurisdiction, and private employment disputes must be resolved through civil remedies.
“Merely because the NSE performs certain public functions, its private contractual employment decisions do not fall within the scope of writ jurisdiction.”
Implications
This judgment clarifies the boundary between public and private law in the context of employment disputes involving semi-public institutions. It reinforces that public law remedies cannot be used to enforce private employment contracts, even against bodies performing public functions like the NSE.
It also underscores that acceptance of severance benefits and delay in challenging termination amounts to acquiescence, barring subsequent constitutional challenges.