Government
of Andhra Pradesh & Ors Vs. V.S.R.Murthy & Ors [2001] Insc 494 (18 September 2001)
S. Rajendra
Babu & D.P. Mohapatra Rajendra Babu, J. :
[With
C.A.Nos.6746/2000, 6750/2000, 6747/2000, 6748/2000 & 6749/2000]
When
certain proceedings were pending before the Board of Industrial and Financial
Reconstruction (BIFR) a settlement was reached between the employees of Bus
Body Division and 1537 employees of M/s Hyderabad Allwyn Ltd. [for short HAL]
and their management under Section 12 of the Industrial Disputes Act, 1947
[hereinafter referred to as the Act]. Memorandum of Understanding [MOU] was
also reached on 28.3.1993 with M/s Voltas Lt., Government of Andhra Pradesh and
HAL.
In
that MOU, one of the clauses provided as follows :
As
regards employees numbering 1486, HAL will enter into satisfactory arrangements
with the Government of A.P.for their deployment elsewhere.
The
Government of Andhra Pradesh thereafter considered the modalities of placement
of 1486 employees of the company and a Cabinet Sub-Committee was constituted
which considered the recommendations made by a High Power Committee and the
operating agency appointed by BIFR. The Managing Director, HAL was asked to
identify the 1486 employees and allot them to the various Heads of the Departments
as indicated in Annexure II thereto as an interim measure to be effective from
1.4.93. The placement of individuals was to be decided by the Committee of
Officers constituted under their order dated 31.3.1993. It was also stated that
separate orders will be issued creating supernumerary posts for these
employees.
Thereafter,
the Government accepted recommendations of the Committee of Officers creating
supernumerary posts in the Government Departments requiring the Heads of
Departments to maintain a separate muster roll and acquittance register for the
individuals allotted to them.
The
Heads of Departments were asked to issue temporary posting orders, which shall
be in operation till final orders of allotment were issued in pursuance of
decisions of the Empowered Committee. In the meanwhile, BIFR published a draft
scheme on 22.2.1994. Under the scheme, amongst other things, it was provided
for the establishment of a new company Auto Company by the Government of Andhra
Pradesh to which the employees of the HAL working in its auto division shall be
deemed to have been transferred with effect from 28.3.93. It was further stated
that the transferor company had identified the number of surplus employees of
the transferor company who would be transferred and absorbed by the Government
of Andhra Pradesh and the Government of Andhra Pradesh has by its order dated
28.4.1993 completed the modalities for placement of 1486 employees in various
Government departments and State level public enterprises. It was also stated
that the aforesaid transfer of the Watch undertaking to the Watch Company
together with the transfer of the employees engaged in or connected with the
Watch undertaking as also the transfer of the employees in the Auto division
and the surplus employees so identified would be completed before the sanction
of the scheme. On 4.4.1994, BIFR sanctioned the scheme.
On
28.7.1994, the High Power Committee submitted its report to the Government
advising against absorption of surplus staff of public sector undertakings in
Government services for three reasons: [1] the same were creating unrest
amongst the Government employees who were already in service; [2] there was no
provision in the rules under which surplus employees of the public sector
undertakings could be given placement in Government service in any cadre; and
[3] such lateral induction of employees of public sector undertakings was bound
to lead to endless litigation. The Committee recommended to the Government to
take a decision not to absorb or induct surplus staff of public sector
undertakings into Government service in future. The Government approved the
recommendations of the High Power Committee. On 1.10.1996, the Government
issued a notification mentioning the difficulties in the matter of regularisation
of the surplus workers and the decision to abolish all the supernumerary posts
with effect from 30.11.1996 and to provide for payment of an amount for
rehabilitation equal to 1½ months pay including Dearness Allowance for every
year of completed service subject to a minimum amount of Rs.30,000/- for each
employee in addition to other statutory dues.
An
ordinance was promulgated which came into effect from 30.11.1996 prohibiting
absorption of employees of State Public Sector Undertakings in Government
service and cancelling all orders of Government appointing any employee of the
state public sector undertakings to any post in a public service on the ground
that the undertaking had become sick or was likely to become sick or was closed
or was likely to be closed. The ordinance was replaced by the Andhra Pradesh
Absorption of Employees of State Government Public Sector Undertakings into
Public Service Act, 1997.
The
validity of the Ordinance and the Act was challenged in a batch of writ
petitions before the High Court. A full bench of the High Court allowed the
writ petitions and set aside the impugned G.O. while declaring that the
impugned ordinance or the Act will not affect the rights of the parties as
protected under the BIFR scheme. The High Court found that the surplus
employees of the HAL were already absorbed and they are the employees of the
State alone and, therefore, the impugned Act or the Ordinance cannot affect
their rights. The High Court also found that the BIFR scheme could not be defeated
by a legislation to be made by the State and arbitrariness is writ large in
this case and the Government cannot sack the employees drafted by them for no
fault of theirs. The argument raised on behalf of the appellants on the
economic capacity of the State was also rejected by the High Court. The High
Court, however, gave a finding that the surplus employees deployed by the
Government will continue to be workmen. It was also found by the High Court
that the termination of services of the employees was not on account of any
retrenchment following the provisions of the Industrial Disputes Act but on the
ground that the industry has become sick. The scheme for absorption of the
employees was complete and implemented and if it is not complete, the Government
is bound to complete this exercise.
Special
leave petitions were preferred by the Government before this Court and this
Court made an interim order on 24.2.1999 allowing the appellants to place the
difficulties in implementing the scheme before the BIFR and directed the BIFR
to pass such orders as they deem fit after hearing the parties irrespective of
the observations made by the High Court in the judgment under appeal.
By an
order made on 12.5.1999, the BIFR rejected the application filed by the appellants.
M/s Allwyn Watches Ltd., which is also covered by the BIFR scheme, was ordered
to be closed down with effect from 29.2.2000 and identical voluntary retirement
scheme was accepted by more than 90% of the employees as on that date and out
of a total number of 2147 employees of that company, 2135 had been relieved and
given benefits under the voluntary retirement scheme and the remaining 12
employees had been retained for winding up operations. The said employees are
all stated to be senior to the workmen who are the respondents in the present
batch of cases and that scheme was challenged before this Court in Dayakar
Reddy vs. MD, Allwyn Auto Ltd. & Ors., 2000 (9) SCC 247, and this Court
upheld the scheme implemented by the State Government in respect of the
employees of the erstwhile Allwyn Auto Ltd., a company formed by way of
implementation of this very BIFR scheme and issued appropriate directions to
the company with regard to extension of the benefits of the voluntary
retirement scheme to workmen who had not opted for the same.
Shri P.P.Rao,
learned Senior Advocate appearing for the appellants, contended as follows:
1.
Section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985
[hereinafter referred to as the SICA] cannot override the provisions of the A.P.Prohibition
of Absorption of Employees of State Government Public Sector Undertakings into
Public Service Act, 1997 which, in pith and substance, is a law falling within
the scope of Entry 41 of List II of Seventh Schedule to the Constitution of
India i.e. State Public Services. The overriding effect given by Section 32 of
the SICA is limited to laws made by Parliament with respect to the items
enumerated in Lists I & III and it cannot extend to laws enacted by the
State Legislature with respect to any matter in List II. The finding of the
High Court to the contrary is erroneous and unsustainable.
2.
Para 9(c) of the BIFR scheme has to be read subject to Section 18(1)(da) of the
SICA. Therefore, the scheme cannot be understood to require the Government to
permanently absorb the surplus staff in question contrary to the statutory
provisions governing recruitment to public services of the State.
3. The
State Government did not make any firm commitment to permanently absorb the
1486 employees contrary to the rules governing recruitment to Government
departments and other public sector undertakings.
4.
Availability of work is a pre-condition for absorption. When the Government
found that there were already surplus employees without work, it cannot be
forced to absorb the 1486 employees.
5. The
finding of the High Court that the workmen have already been permanently
absorbed is incorrect. In any event, retrenchment of surplus staff is an
inherent right of the Government.
6. The
doctrine of promissory estoppel is subject to exceptions.
The
Government cannot be compelled to carry out a representation or promise which
is contrary to law or which was outside the authority or power of the officer
of the Government or of the authority to make. That doctrine must also yield
when the equality so requires.
7. In
view of the High Courts finding that the surplus employees deployed by the
Government will continue to be workmen only and the termination of their
services was not on account of retrenchment under the Act, it will be open to
the Government of A.P.to retrench them under the Act in which case the
compensation payable under the Act will be far less than the compensation
offered by the Government in G.O.Ms.No. 192 dated 1.10.1996. The High Court
failed to appreciate this aspect and erred in quashing the G.O. which is more
beneficial to the employees as the scale of compensation provided is three
times more than what is provided in the Act.
8.
Assuming without admitting that the BIFR scheme is binding on the Government
notwithstanding the A.P.Act No.14 of 1997, the BIFR ought to have allowed the
State Governments request to modify the scheme so as to facilitate a golden
handshake in terms of G.O.Ms.No.192 dated 1.10.1996. The reasons given by the
BIFR for rejecting the Governments request are unsustainable.
In
support of the aforesaid propositions, Shri P.P.Rao relied upon the decisions
of this Court in Prafullah Kumar Mukherjee vs. Bank of Commerce, LR 74 IA 23; A.S.Krishna
vs. State of Madras, 1957 SCR 399; State of Rajasthan vs. G.Chawla, 1959 Supp.
(1) SCR 904; State of A.P. vs. McDowell & Co., 1996 (3) SCC 709; P.N.Krishna
Lal vs. Government of Kerala, 1995 Supp.(2) SCC 187; Management of Dandakaranya
Project v. Workmen, 1997 (2) SCC 296; N.Ramanatha Pillai v. State of Kerala,
1974 (1) SCR 515; K.Rajendran v. State of Tamil Nadu, 1982 (3) SCR 628; Union
of India vs. Godfrey Philips, 1985 Supp. (3) SCR 123; Kasinka Trading v. Union
of India, 1995 (1) SCC 274; Excise Commissioner, U.P. vs. Ram Kumar, 1976 Supp.
SCR 532.
Shri M.N.Rao,
learned Senior Advocate appearing for the respondents, submitted that the
finding of the High Court that the surplus employees of HAL were already
absorbed and they are the employees of the State and, therefore, the impugned
Act has no application to them should be sustained by us followed by the
finding of the High Court that termination is not on account of retrenchment
but on the ground that the industry has become sick and the scheme of
absorption was complete and having been implemented pursuant to the agreement
entered into by the Government of Andhra Pradesh and the various other parties
and the Government should not now be allowed to turn back from solemn
undertaking given before the BIFR and other authorities and such a question
should not be allowed to be agitated in the court and the view expressed by the
High Court should be upheld by us.
Act
No. 14 of 1997 is effective from November 26, 1996. The said Act declares that no
employee of a State Government Public Sector Undertaking shall be or shall ever
be deemed to be entitled to absorption into public service from the date of the
commencement of the Act only on the ground that such undertaking has become
sick or is likely to become sick or is closed or is likely to be closed and
accordingly. The Act is effective from a date long after the scheme was
sanctioned by the BIFR on 4.4.1994. Clauses (c) and (d) of the scheme provides
as follows:
(c) the
transferor company has identified the number of surplus employees of the
transferor company who would be transferred and absorbed by the Government of
A.P.. The Government of A.P. has vide its order G.O.Ms. No.180 dated 28th April, 1993 completed the modalities for
placement of 1486 employees in various Government Departments and State level
public enterprises.
(d)
The aforesaid transfer of the Watch undertaking to the Watch Company together
with the transfer of the employees engaged in or connected with the Watch
undertaking as also the transfer of the employees of the Auto Division and the
surplus employees identified as aforesaid would be completed before the
sanction of this Scheme.
The
underlined portion in clause (c) will make it clear that the Government has
completed the modalities for placement of 1486 employees in various Government
Departments and State level public enterprises. It is also made clear that the
transfer of the surplus employees identified as aforesaid would be completed
before the sanction of the scheme. The scheme having been already sanctioned by
the BIFR, it must be taken that the employees in different establishments have
been identified and their placement in the various Government Departments and
the public sector undertakings is complete. It is not necessary to look into
any other document. The reports of the various Committees and the Government
orders issued thereon will have no relevance at all. When the necessary
material had been placed before the BIFR and the BIFR had gone into the same
and thereafter sanctioned the scheme in the manner stated above, we think the
finding recorded by the High Court that the surplus employees of HAL have been
absorbed in the services of the Government and they are employees of the State
is justified.
The sequiter
is that when the Act was made effective from 26.11.1996, the Act cannot have
any application to the present employees at all. It may be for the purpose of
convenience or for other reasons the Government may have placed them in
supernumerary posts or other kinds of posts but it was publicly declared before
a competent statutory forum that the modalities for placement of 1486 employees
in various Government Departments and State level public enterprises are
complete and, therefore, that position cannot now be doubted or disputed.
In
this background, we do not think it is necessary for us to go into the complex
questions of the competence of the State Legislature to enact the Act, effect
of the Act, application of doctrine of promissory estoppel, the manner in which
the same would operate in spite of the scheme framed under the SICA and whether
in the light of Section 32 of the SICA the scheme would override the Act or
not. These questions become academic and the correctness of decision on
questions of law recorded by the High Court on these aspects is left open to be
agitated in appropriate proceedings.
The
High Court has given a finding that the workmen in question as enumerated in
the scheme of the BIFR referred to earlier have been deployed in the Government
Departments or the state public sector undertakings and they do not cease to be
workmen merely because they are employed in the Government Departments. The
view expressed by the High Court in this regard is justified and is not under
challenge by respondents before us either. Therefore, it is not necessary for
us to examine any further on this aspect of the matter.
A
contention is raised by the learned Advocate General before the High Court that
the respondent-employees being workmen their services could be retrenched under
the provisions of Section 25-F of the Industrial Disputes Act as the industries
in question from which they are drafted have become sick. The High Court, in
our view, rightly rejected that contention by stating when the workmen in
question have become employees of the Government the industries becoming sick
would be irrelevant. If the services of the workmen in question are terminated
for other reasons as provided under the Industrial Disputes Act, the respective
parties can work out their respective rights as provided under that Act.
Shri P.P.Rao
further contended that M/s Allwyn Watches Ltd. to which some of the employees
who were senior to the respondent employees were absorbed under the BIFR scheme
and which is allowed to be closed down and 2135 have been relieved and given
benefits under the Voluntary Retirement Scheme and only 12 employees have been
retained for winding up operations and that matter came up before this Court in
Dayakar Reddys case [supra] and this Court did not interfere with the
implementation of the scheme but on the other hand gave extension of time to
claim the benefits arising under such VRS scheme.
But
this factor does not have any bearing on the present case because even in
certain flourishing and prosperous companies many of the employees volunteer to
retire on account of their personal reasons depending upon whether benefits
arising therein would be advantageous to them. If such attractive schemes are
offered to the employees in the present case also, as to what the employees
would do, is not for us to predict. Particularly when the employees have been
held to be workmen and we have left open the question as to whether they can
invoke the provisions of the Industrial Disputes Act, it is for them to decide
as to whether action should be taken or not. Therefore, the fact that the
voluntary retirement scheme being applied in M/s Allwyn Watches Ltd. would not
influence us to deviate from the approach made by us in the matter.
Whether
absorption of the employees by the Government would be a drain on the public
exchequer was a matter certainly present to the mind of the Government before
taking various steps culminating in the scheme sanctioned by the BIFR. In
trying to solve various problems, the Government has to balance several
interests and devise methods to suit the needs of the situation. In the present
case, when certain industries had become sick and a large number of employees
were likely to be uprooted and thus a human problem arose, the Government
sought to work out certain solutions which resulted in a scheme framed by the
BIFR, now to say that such a scheme could not have been framed and that scheme
would affect the rights of the other employees of the Government or likely to
affect the finance of the Government is only the result of unimaginative narrow
thinking on the part of the Government by relying on bureaucracy used to the
usual red tapism. To depend upon the reports of the bureaucracy, which cannot
take decision of such large magnitude involving human problem, would only
indicate that the realities of the matter are ignored. It is only after due
deliberation and after considering the financial and administrative
implications the previous orders of the Government had been passed leading to a
scheme framed by the BIFR has not been duly appreciated in the proper
perspective by the Government. Hence, challenge to the order of BIFR made on
12.5.1999 is unsustainable. In that view of the matter, if the Government was
merely guided by the reports of the bureaucracy and not on the ground realities
and thereafter the Ordinance has been promulgated under a misconception
thinking it would be applicable to the present employees, we think, the attempt
of the Government has misfired.
In the
result, we dismiss these appeals subject to the observations made in the course
of this order. No costs.
...J.
[ S.
RAJENDRA BABU ] ...J.
[
D.P.MOHAPATRA ] SEPTEMBER
18, 2001.
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