Ram
Pravesh Singh & Ors Vs. State of Bihar & Ors [2006] Insc 607 (22 September 2006)
B.P.
Singh & R V Raveendran Raveendran, J.
Appellants
who were the employees of Futwah Phulwarisharif Gramya Vidyut Sahakari Samiti
Ltd., a co-operative society under liquidation, have challenged the order dated
30.9.2002 passed by the Patna High Court, dismissing their appeal (L.P.A.
No.1030/2002) against the order dated 24.2.2002 passed by a Single Judge
rejecting their writ petitions.
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Prior to 1976,
Bihar State Electricity Board (for short, 'the Board') was supplying
electricity to the rural areas surrounding Patna.
In the
year 1976, the Bihar Government, the Board and Rural Electrification
Corporation brought into existence a society registered under the Bihar Co-operative
Societies Act, known as the 'Futwah - Phulwarisharif Gramya Vidyut Sahakari
Samiti Ltd. (for short 'the Society') to implement a REC Scheme for better
distribution of electricity to rural areas. The state government granted a
licence dated 24.8.1976 to the society, under section 3 of the Indian
Electricity Act, 1910 ('Act' for short) to supply electricity to the Futwah and
Phulwari Sharif Blocks, for a period of 20 years, with options to the licencee
to extend the period of licence.
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By letter dated
23.4.1993, the Board recommended to the State Government, to revoke the licence
granted to the Society and merge the Society with the Board, assigning three
reasons :
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The purpose for
which the Society was created no longer existed.
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The Society was
drawing electricity from multiple points in the Board's distribution network,
making it difficult to ascertain the actual quantity of electricity drawn by
the Society.
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The financial
position and management of the Society was in a very bad shape and huge arrears
were due from the Society to the Board, in spite of Board supplying it to the
Society at 7 paise per unit (as against the Board's cost price of 90 to 115
paise per unit).
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The State
Government, after considering the matter, issued a notification dated 25.4.1995,
in exercise of its power under sections 4 and 5 of the Act revoking the licence
dated 24.8.1976 granted to the Society. The State Government also constituted a
Committee to evaluate the assets of the society which had to be transferred to
the Board. The Committee was also required to consider whether it would be
useful for the Board to absorb some of the employees of the Society. At a
Meeting held on 18.9.1995 (as per Minutes drawn up on 10.11.1995), the said
Committee made the following suggestions :
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The Society
should be liquidated in view of the cancellation of the licence;
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The Liquidator
of the Society should realize the amounts due to the Society and also invite
claims from creditors of the Society for settlement of claims;
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The amounts due
in regard to the electricity supplied up to the date of cancellation
(25.4.1995) should be credited to the Society, and the amounts due for
electricity supplied thereafter should be received by the Board;
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The accounts
relating to the income and expenditure of the Society and the Board be
maintained separately, from the date of cancellation of licence, so that they
could settle the accounts between them; and
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The Board should
consider taking work from the employees of the society and pay salary to them.
The Board may also consider absorbing the eligible employees of the Society
after examining whether they were qualified for the posts and were duly
appointed and whether their pay-fixation has been properly done.
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The State
Government by letter dated 2.1.1996 requested the Board to implement the
suggestion of the Committee relating to the employees of the society that the
Board should take work from the employees of the society and pay their
salaries, and also consider the absorption of eligible employees. Some assurance
was also held out in 1996 on the floor of the Legislature that the Board will
be persuaded to take over the undertaking of the society with its employees.
However,
thereafter, the State Government took a decision that the assets and
liabilities of the society should be transferred to the Board, but not the
services of the employees of the Society. The said decision was communicated by
the Secretary, Energy Department to the Secretary, Cooperative Department and
the Board, by letter dated 24.2.1997.
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In view of the
rejection of the proposal for absorption of services of employees of the
Society by the Board, several representations were sent by the Administrator of
the Society to the State government to absorb the services of the employees of
the society. The Administrator of the Society also furnished a list of
employees of the Society with particulars of designations and educational and
technical qualifications to the State Government. The number of employees is
225 ranging from Engineers to Class IV employees. The said list was forwarded
by the State Government to the Board on 14.7.1999 with a request to ascertain
the existing vacancies in the Board. There were some more correspondence
relating to the suggestions from various quarters, for absorption of the
suitable and fit employees of the Society by the Board.
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But the Board
did not absorb the services of the employees of the Society. Therefore, the
employees of the society (appellants) filed CWJC Nos.1503 of 2000 and 14394 of
2001 seeking a direction to the Board to absorb them in equivalent posts with
continuity of service and also pay their arrears of salaries, allowances and
other dues. They contended that they had a right, both in law and in equity, as
also a 'legitimate expectation' to be absorbed into the services of the Board,
for the following reasons :
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The Committee
constituted by the State Government had recommended that the Board should take
work from the employees of the society and ultimately absorb them;
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The employees of
the society have a 'legitimate expectation' that they should be absorbed by the
Board for the following reasons :
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Initially
several private companies were generating and distributing electricity in the
State. When the Board was constituted, the undertakings of all those private
companies were taken over and their employees were all absorbed in the services
of the Board.
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Whenever the
undertaking of any company or institution was taken over by any statutory body
or corporation, the services of employees of such undertaking are also normally
taken over.
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When an
'undertaking' is purchased, in the absence of an intention to the contrary, all
the assets and liabilities, as also the services of all employees are
transferred to the purchaser and therefore the Board cannot refuse to absorb
them.
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When certain
departments were abolished by the State of Bihar, this Court and the High Court had passed several orders directing
absorption of the retrenched employees in other departments of the state
government.
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The society was
constituted by the Board and the state government to discharge the functions
which were earlier being carried on by the Board. The licence granted to the
society to distribute electricity was subsequently revoked on the
recommendation of the Board. The Board has expressed its readiness to take over
the undertaking of the Society. The Board has in fact taken over the assets of
the Society and discharging the functions of the society without any
interruption, on revocation of the Society's licence on 25.4.1995.
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The Board had
extracted some work from the employees of the society from 25.4.1995 till May,
1996.
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There are large
number of vacancies in the Board in various categories of posts and there would
be no difficulty for absorption of their services by the Board.
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All the
employees of the society have crossed the maximum age limit for seeking fresh
employment and if they were not absorbed by the Board, they will be deprived of
their livelihood.
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The society was
an instrumentality of the State Government and the Board, and answered the
definition of 'State' within the meaning of that expression in Article 12 of
the Constitution of India. When the undertakings of such instrumentality of the
state was taken over by another instrumentality of the State, 'fairness in
action' which is one of the hallmarks of a 'State' require that the rights of
the employees are protected by providing for their absorption in an appropriate
manner.
The
State Government, in its counter, while denying the claim of the writ
petitioners, however, admitted that in August, 2001, it had taken a decision
that when the prohibition against recruitment in the Board is lifted and
appointments are made in future, preference should be given to the eligible
employees of the society if necessary by granting relaxation of the age limit.
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A learned single
Judge of the High Court rejected the said contentions and consequently,
dismissed the writ petitions by order dated 24.2.2002. He held :
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The state
government had not given any specific direction to the Board to absorb the
services of the employees of the society.
Any
decision taken by the state government that as and when prohibition against
recruitment was lifted and appointments were to be made, the Board should give
preference to the eligible employees of the society, was not by itself a
direction to the Board.
At all
events, having regard to section 78A of the Electricity (Supply) Act, 1948 the
State Government can issue direction only in regard to matters of policy, but
could not issue a direction to appoint or absorb any employee of the society in
its service as that would amount to encroachment of Board's power under section
15 of the Act -- vide Rakesh Ranjan Verma vs. State of Bihar [1992 Suppl.(2)
SCC 343].
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Even if the
society was to be considered as an instrumentality of the State, that would not
assist the appellants to contend that the society was an extension of the
Board, nor cast any obligation on the Board to absorb the employees of the
society.
When
the licence granted under section 3 of the Act was revoked and the undertaking
of the Society (licencee) was agreed to be purchased by Board, the provisions
of the Act governed the matter and those provisions did not enable the
appellants to claim any right of being absorbed in the services of the Board.
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The fact that
the Board took over the undertakings of the private companies which were
generating and distributing electrical power till then, along with the services
of the employees of such private undertakings, did not have any relevance to
the appellants' claim for absorption. The undertakings and services of
employees of the erstwhile licencees were taken over several decades ago when
the Board was constituted and when the Board was financially and
administratively in a completely different position. As the financial position
of the Board was presently precarious due to various circumstances, in
particular, setting up of Jharkhand State Electricity Board following the
reorganization of the state of Bihar and as the Board itself was considering
retrenchment of large number of its existing employees, it cannot be compelled
to take over the services of the employees of the society in the absence of any
legal right in the appellants.
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It could not
direct absorption on equitable grounds. Any equitable consideration of the
claim of the appellants cannot ignore the financial position of the Board,
howsoever sympathetically the court may view the plight of the appellants. The
state government, being interested in the welfare of the employees of the
society had considered several alternatives to rehabilitate the employees of
the Society. In the course of exploring the various alternatives, information
was sought by the Government, views were expressed and assurances were made on
the floor of the House, to explore the possibility of the Board absorbing the
services of the employees of the society. But that did not create any right in
the employees of the society to seek employment from the Board. In the absence
of any specific decision by the Board or assurance by the Board to absorb the
services of the appellants, the principle of 'legitimate expectation' was not
attracted.
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Having regard to
Section 7 and 7A of the Act, when the undertaking of a licensee was purchased
by the Board, there was no obligation on the part of the Board to absorb the
employees of the erstwhile licensee.
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The Letters
Patent Appeal filed by the appellants against the said decision of the learned
single Judge was dismissed by a Division Bench by a brief order dated
30.9.2002, both on the ground of limitation and on merits, thereby affirming
the decision of the learned single judge.
The
said order is challenged in this appeal. On the contentions urged, the
following question arises for our consideration :- Whether there is any obligation
on the part of the Board - either contractual or statutory, or on equitable
considerations-to absorb the services of the appellants? Contractual Obligation
:
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The licence
granted to the society under section 3 of the Indian Electricity Act, 1910 was
revoked by the State Government on 25.4.1995. It is no doubt true that on such
revocation, the Board took over the entire activities of the society relating
to distribution of power to the licensed areas. The Board also gave its
concurrence to purchase the undertaking of the society. But the Board neither
entered into any contract with the society, nor gave any assurance to the
Society or its employees to absorb the employees of the society into its
service.
Therefore,
obviously, there is no contractual obligation on the part of the Board to
absorb the services of the appellants.
Statutory
Obligation:
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Section 3 of the
Act dealt with grant of licence by the State Governmnet to any person to supply
energy in any specified area.
Section
4 dealt with revocation of such licences. The provisions that would have effect
when a licence was revoked, were listed in section 5. Section 6 gave the option
to the Electricity Board and the State Government to purchase the undertaking
of a licensee, in the circumstances mentioned therein. Section 7 provided for
vesting of the undertaking of the licensee sold to a purchaser under section 5
or 6.
Section
7A provided for determination of the purchase price. None of these provisions
of the Act required the purchaser of the undertaking to take over the services
of the employees of the Society. The appellants have not been able to show any
other statutory provision which entitles them to seek absorption by the Board.
Hence, there is no statutory obligation to absorb them into Board's service.
Equitable
considerations :
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Realising that
the appellants had no contractual or statutory right, learned counsel for the
appellants sought to derive support for the claim on equitable considerations,
by placing reliance on an amalgam of the principles relating to legitimate
expectation, fairness in action and natural justice, reiterating the
contentions urged before the High Court.
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It may be true
that when the Board took over the undertakings of the erstwhile private
licencees several decades ago, it also took over the services of the employees
of such private licensees. It is also possible that this Court in exercise of
its jurisdiction under Article 142, on the facts of a given case, might have
directed that the persons, whose services had been terminated on account of
closure of an instrumentality of the State, be continued in the service of
Government Departments or other Government Corporations. It may also be true
that certain enactments providing for transfer of undertakings in pursuance of
nationalization or otherwise, had also provided for continuation/transfer of
the services of the employees of the undertakings to the transferee. But these
do not attract the principle of 'legitimate expectation'.
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What is
legitimate expectation? Obviously, it is not a legal right.
It is
an expectation of a benefit, relief or remedy, that may ordinarily flow from a
promise or established practice. The term 'established practice' refers to a
regular, consistent predictable and certain conduct, process or activity of the
decision-making authority. The expectation should be legitimate, that is,
reasonable, logical and valid.
Any
expectation which is based on sporadic or casual or random acts, or which is
unreasonable, illogical or invalid cannot be a legitimate expectation. Not
being a right, it is not enforceable as such. It is a concept fashioned by
courts, for judicial review of administrative action. It is procedural in
character based on the requirement of a higher degree of fairness in administrative
action, as a consequence of the promise made, or practice established. In
short, a person can be said to have a 'legitimate expectation' of a particular
treatment, if any representation or promise is made by an authority, either
expressly or impliedly, or if the regular and consistent past practice of the
authority gives room for such expectation in the normal course. As a ground for
relief, the efficacy of the doctrine is rather weak as its slot is just above
'fairness in action' but far below 'promissory estoppel'. It may only entitle
an expectant :
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to an
opportunity to show cause before the expectation is dashed; or
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to an
explanation as to the cause for denial. In appropriate cases, courts may grant
a direction requiring the Authority to follow the promised procedure or
established practice. A legitimate expectation, even when made out, does not
always entitle the expectant to a relief. Public interest, change in policy,
conduct of the expectant or any other valid or bonafide reason given by the decision-maker,
may be sufficient to negative the 'legitimate expectation'.
The
doctrine of legitimate expectation based on established practice (as contrasted
from legitimate expectation based on a promise), can be invoked only by someone
who has dealings or transactions or negotiations with an authority, on which
such established practice has a bearing, or by someone who has a recognized
legal relationship with the authority. A total stranger unconnected with the
authority or a person who had no previous dealings with the authority and who
has not entered into any transaction or negotiations with the authority, cannot
invoke the doctrine of legitimate expectation, merely on the ground that the
authority has a general obligation to act fairly.
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In Union of India
v. Hindustan Development Corporation [1993 (3) SCC 499], this Court explained
the nature and scope of the doctrine of 'legitimate expectation' thus :
"For
legal purposes, the expectation cannot be the same as anticipation. It is
different from a wish, a desire or a hope nor can it amount to a claim or
demand on the ground of a right. However earnest and sincere a wish, a desire
or a hope may be and however confidently one may look to them to be fulfilled,
they by themselves cannot amount to an assertable expectation and a mere
disappointment does not attract legal consequences. A pious hope even leading
to a moral obligation cannot amount to a legitimate expectation. The legitimacy
of an expectation can be inferred only if it is founded on the sanction of law
or custom or an established procedure followed in regular and natural sequence.
Again it is distinguishable from a genuine expectation. Such expectation should
be justifiably legitimate and protectable.
Every
such legitimate expectation does not by itself fructify into a right and
therefore it does not amount to a right in the conventional sense."
[Emphasis supplied] This Court also explained the remedies flowing by applying
the principle of legitimate expectation :
"
it is generally agreed that legitimate expectation gives the applicant
sufficient locus standi for judicial review and that the doctrine of legitimate
expectation is to be confined mostly to right of a fair hearing before a
decision which results in negativing a promise or withdrawing an undertaking is
taken. The doctrine does not give scope to claim relief straightaway from the
administrative authorities as no crystallized right as such is involved. The
protection of such legitimate expectation does not require the fulfillment of the
expectation where an overriding public interest requires otherwise. In other
words where a person's legitimate expectation is not fulfilled by taking a
particular decision then decision-maker should justify the denial of such
expectation by showing some overriding public interest. Therefore even if
substantive protection of such expectation is contemplated that does not grant
an absolute right to a particular person. It simply ensures the circumstances
in which that expectation may be denied or restricted. A case of legitimate
expectation would arise when a body by representation or by past practice
aroused expectation which it would be within its powers to fulfil. The
protection is limited to that extent and a judicial review can be within those
limits.
But as
discussed above a person who bases his claim on the doctrine of legitimate
expectation, in the first instance, must satisfy that there is a foundation and
thus has locus standi to make such a claim. In considering the same several
factors which give rise to such legitimate expectation must be present. The
decision taken by the authority must be found to be arbitrary, unreasonable and
not taken in public interest. If it is a question of policy, even by way of
change of old policy, the courts cannot interfere with a decision. In a given
case whether there are such facts and circumstances giving rise to a legitimate
expectation, it would primarily be a question of fact. If these tests are
satisfied and if the court is satisfied that a case of legitimate expectation
is made out then the next question would be whether failure to give an
opportunity of hearing before the decision affecting such legitimate
expectation is taken, has resulted in failure of justice and whether on that
ground the decision should be quashed. If that be so then what should be the
relief is again a matter which depends on several factors." (emphasis
supplied).
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In Punjab
Communication Ltd. v. Union of India - 1999 (4) SCC 727, this Court observed :
"The
principle of legitimate expectation is still at a stage of evolution. The
principle is at the root of the rule of law and requires regularity,
predictability and certainty in the Governments dealings with the public The
procedural part of it relates to a representation that a hearing or other
appropriate procedure will be afforded before the decision is made."
"However, the more important aspect is whether the decision maker can
sustain the change in policy by resort to Wednesbury principles of rationality
or whether the court can go into the question whether the decision-maker has
properly balanced the legitimate expectation as against the need for a change..
In sum, this means that the judgment whether public interest overrides the
substantive legitimate expectation of individuals will be for the
decision-maker who has made the change in the policy. The choice of the policy
is for the decision-maker and not for the court. The legitimate substantive
expectation merely permits the court to find out if the change in policy which
is the cause for defeating the legitimate expectation is irrational or perverse
or one which no reasonable person could have made."
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Recently, a
Constitution Bench of this Court in Secretary, State of Karnataka v. Umadevi [2006 (4) SCC 1]
referred to the circumstances in which the doctrine of legitimate expectation
can be invoked thus :
"The
doctrine can be invoked if the decisions of the administrative authority affect
the person by depriving him of some benefit or advantage which either
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he had in the
past been permitted by the decision-maker to enjoy and which he can
legitimately expect to be permitted to continue to do until there have been
communicated to him some rational grounds for withdrawing it on which he has
been given an opportunity to comment; or
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he has received
assurance from the decision-maker that they will not be withdrawn without
giving him first an opportunity of advancing reasons for contending that they
should not be withdrawn."
Another
Constitution Bench, referring to the doctrine, observed thus in Confederation
of Ex-servicemen Associations vs. Union of India [JT 2006 (8) SC 547] :
"No
doubt, the doctrine has an important place in the development of Administrative
Law and particularly law relating to 'judicial review'. Under the said doctrine,
a person may have reasonable or legitimate expectation of being treated in a
certain way by an administrative authority even though he has no right in law
to receive the benefit. In such situation, if a decision is taken by an
administrative authority adversely affecting his interests, he may have
justifiable grievance in the light of the fact of continuous receipt of the
benefit, legitimate expectation to receive the benefit or privilege which he
has enjoyed all throughout. Such expectation may arise either from the express
promise or from consistent practice which the applicant may reasonably expect
to continue." "In such cases, therefore, the Court may not insist an
administrative authority to act judicially but may still insist it to act fairly.
The doctrine is based on the principle that good administration demands
observance of reasonableness and where it has adopted a particular practice for
a long time even in absence of a provision of law, it should adhere to such
practice without depriving its citizens of the benefit enjoyed or privilege
exercised."
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Let us now
examine whether the principles of legitimate expectation can have any
application in this case. What transpired several decades ago when the Board
commenced its operations and when its finances were sound, cannot have any
bearing on its action in the year 1995. The position of the Board vis-`-vis the
Society in 1995 was completely different from the position of the Board
vis-`-vis the several ex-licensees when the Board took over their undertakings
several decades back. Further, the assumption that whenever an undertaking is
taken over, transferred or purchased, the transferee or purchaser should
continue the services of the employees of the erstwhile owner of the
undertaking, is not sound. In fact, statutory provisions seem to indicate
otherwise. Section 25-FF of the Industrial Disputes Act, 1947 provides that
where the ownership or management of an undertaking is transferred, whether by
agreement or by operation of law, from the employer in relation to that
undertaking to a new employer, every workman who has been in continuous service
for not less than one year in that undertaking immediately before such transfer
shall be entitled to notice and compensation in accordance with the provisions
of Section 25-F, as if the workman had been retrenched, except in the cases
mentioned in the proviso thereto.
Therefore,
the natural consequence of a transfer of an undertaking, unless there is a
specific provision for continuation of the service of the workmen, is
termination of employment of its employees, and the employer's liability to pay
compensation in accordance with Section 25F. In Anakapalle Co-operative
Agricultural and Industrial Society Ltd. v. Workmen [AIR 1963 SC 1489], a
Constitution Bench of this Court rejected the contention of the employees that,
on transfer of the undertaking, the employees of the undertaking should be
absorbed by the purchaser/transferee of the undertaking. This Court held :
"This
double benefit in the form of payment of compensation and immediate
re-employment cannot be said to be based on any considerations of fair play or
justice. Fair play and justice obviously mean fair play and social justice to
both the parties. It would, we think, not be fair that the vendor should pay
compensation to his employees on the ground that the transfer brings about the
termination of their services, and the vendee should be asked to take them back
on the ground that the principles of social justice require him to do so. and
in that sense, the said compensation is distinguishable from gratuity.
Therefore,
if the transferor is by statute required to pay retrenchment compensation to
his workmen, it would be anomalous to suggest that the workmen who received
compensation are entitled to claim immediate reemployment in the concern at the
hands of the transferee."
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The Board had
never agreed nor decided to take services of any of the employees of the
Society. In fact, it is not even the case of the appellants that the Board had
at any point of time held out any promise or assurance to absorb their
services. When the licence of the Society was revoked, the State Government
appointed a Committee to examine the question whether the Board can take over
the services of the employees of the Society. The Committee no doubt
recommended that the services of eligible and qualified employees should be
taken over. But thereafter the State Government considered the recommendation
and rejected the same, apparently due to the precarious condition of the Board
which itself was in dire financial straits, and was contemplating retrenchment
of its own employees. At all events, any decision by the State Government
either to recommend or direct the absorption of the Society's employees was not
binding on the Board, as it was a matter where it could independently take a
decision. It is also not in dispute that for more than two decades or more,
before 1995, the Board had not taken over the employees of any private
licencee. There was no occasion for consideration of such a course. Hence, it
cannot be said that there was any regularity or predictability or certainty in
action which can lead to a legitimate expectation.
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The appellant
next submitted that this Court, in some cases, has directed absorption in
similar circumstances. Reliance is placed on the decision in G. Govinda Rajulu
v. Andhra Pradesh State Construction Corporation Ltd. -- 1986 (Supp) SCC 651.
We extract below the entire judgment :
"We
have carefully considered the matter and after hearing learned counsel for the
parties, we direct that the employees of the Andhra Pradesh State Construction
Corporation Limited whose services were sought to be terminated on account of
the closure of the Corporation shall be continued in service on the same terms
and conditions either in the government departments or in the government
corporations. The writ petition is disposed of accordingly. There is no order
as to costs." The tenor of the said order, which is not preceded by any
reasons or consideration of any principle, demonstrates that it was an order
made under Article 142 of the Constitution on the peculiar facts of that case.
Law
declared by this Court is binding under Article 141. Any direction given on
special facts, in exercise of jurisdiction under Article 142, is not a binding
precedent. Therefore, the decision in Govindarajulu cannot be the basis for
claiming relief similar to what was granted in that case. A similar contention
was negatived by the Constitution Bench in Umadevi (supra) :
"The
fact that in certain cases, the Court directed regularization of the employees
involved in those cases cannot be made use of to found a claim based on
legitimate expectation."
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We will now
consider the contention that the appellants are entitled to relief based on the
principle of fairness in action, on equitable considerations. Learned counsel
for the appellants relied on two decisions of this Court in support of his
contention Gurmail Singh v. State of Punjab [1991 (1) SCC 189] and Kapila
Hingorani v. State of Bihar [2003 (6) SCC 1].
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The observations
in Gurmail Singh (supra) on which reliance is placed are extracted below :
"This
is where, as here, the transferor and/or transferee is a State or a State
instrumentality, which is required to act fairly and not arbitrarily (see the
recent pronouncement in Mahabir Auto Stores v. Indian Oil Corporation -- 1990
(3) SCC 752) and the court has a say as to whether the terms and conditions on
which it proposes to hand over or take over an industrial undertaking embody
the requisite of "fairness in action" and could be upheld. We think
that, certainly, in such circumstances it will be open to this Court to review
the arrangement between the State Government and the Corporation and issue
appropriate directions. Indeed, such directions could be issued even if the
elements of the transfer in the present case fall short of a complete
succession to the business or undertaking of the State by the Corporation, as
the principle sought to be applied is a constitutional principle flowing from
the contours of Article 14 of the Constitution which the State and Corporation
are obliged to adhere to."
"It
was very fair on the part of the State Government to decide that, as the
tubewells would be operated by the Corporation, it would be prudent to run them
with the help of the appellants rather than recruit new staff therefore and
that the government should bear the burden of any losses which the Corporation
might incur as a result of running the tubewells. But having gone thus far, we
are unable to see why the government stopped short of giving the appellants the
benefit of their past services with the government when thus absorbed by the
Corporation. Such a step would have preserved to the appellants their rightful
dues and retirement benefits. The conduct of the government in depriving the
appellants of substantial benefits which have accrued to them as a result of
their long service with the government, although the tubewells continue to be
run at its cost by a Corporation wholly owned by it, is something which is
grossly unfair and inequitable. This type of attitude designed to achieve
nothing more than to deprive the employees of some benefits which they had
earned, can be understood in the case of a private employer but comes ill from
a State Government and smacks of arbitrariness. Acting as a model employer,
which the State ought to be, and having regard to the long length of service of
most of the appellants, the State, in our opinion, should have agreed to bear
the burden of giving the appellants credit for their past service with the
government. That would not have affected the Corporation or its employees in
any way except to a limited extent indicated below and, at the same time, it
would have done justice to the appellants.
We think,
therefore, that this is something which the State ought to be directed to
do." "But in a case where one or both of the parties is a State
instrumentality, having obligations under the Constitution, the court has a
right of judicial review over all aspects of transfer of the undertaking. It is
open to a court, in such a situation, to give appropriate directions to ensure
that no injustice results from the changeover." These observations have to
be understood in the background of the facts of that case. The appellants
therein were tubewell operators in the Public Works Department (PWD) of the
State Government. The State took a decision to transfer all tubewells to a
Corporation wholly owned and managed by the State and as a consequence all the
permanent posts with reference to the Tubewell Circle in the PWD were abolished. Notices were served in terms of
Section 25F of the Industrial Disputes Act. When those notices were challenged,
they were set aside on the ground that they were not in consonance with clause
[c] of Section 25F. The State Government issued fresh notices of termination
and they were also set aside by the High Court on the ground that they did not
conform to clause [b] of Section 25F. Thereafter, the State Government served
fresh notices terminating the services in accordance with Section 25F for the
third time. The third round notices were also challenged. But the High Court
upheld the notices of retrenchment. The order of the High Court was challenged
before this Court. During the pendency of the long drawn litigation, the newly
formed Corporation decided to take over their services by extending them the
same scale of Pay, which they were getting when they were in the employ of the
State Government. Therefore, the only grievance that survived for consideration
before this Court related to appellants therein being treated as fresh
appointees on the dates of their respective appointment by the corporation,
thereby denying them the benefit of their past service and seniority. It is in
the context of examining the said grievance, this Court made the aforesaid
observations. As noticed above, retrenchment under Section 25-FF was found to
be valid. The Corporation had voluntarily taken over the services of the
retrenched employees. The question whether the transferee or the purchaser of
the undertaking should absorb the services of the employees of the previous
employer was not in issue and therefore, the said decision is of no assistance.
On the other hand, what may be relevant are the following observations of the
Constitution Bench in Uma Devi (supra) :
"Obviously,
the State is also controlled by economic considerations and financial
implications of any public employment. The viability of the department or the
instrumentality of the project is also of equal concern for the State. The
State works out the scheme taking into consideration the financial implications
and the economic aspects. Can the court impose on the State a financial burden
of this nature by insisting on regularization or permanence in employment, when
those employed temporarily are not needed permanently or regularly? As an
example, we can envisage a direction to give permanent employment to all those
who are being temporarily or casually employed in a public sector undertaking.
The burden may become so heavy by such a direction that the undertaking itself
may collapse under its own weight. It is not as if this had not happened. So,
the court ought not to impose a financial burden on the State by such
directions, as such directions may turn counterproductive."
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The decision in
Kapila Hingorani (supra) is an interim order in a public interest litigation.
In the State of Bihar, various Government companies and
public sector undertakings had not paid salaries to their workmen and other employees
for a long time, resulting in deaths and suicides of several employees. The
petitioner therein wanted the State to bear the responsibility for payment of
salaries.
The
State resisted the petition on the footing/contending that the liabilities of
the company cannot be passed on to the State by taking recourse to the doctrine
of lifting the veil or otherwise. This Court issued certain interim directions
for disposal of all liquidation proceedings in regard to the Government
companies in question and appointment of a Committee to scrutinize (ascertain)
the assets and liabilities of the company. This Court also directed the State
Government to deposit a sum of Rs.50 crores before the High Court for
disbursement of salaries to the employees. During the course of the said
interim order, this Court observed as follows :
"The
government companies/public sector undertakings being "States" would
be constitutionally liable to respect life and liberty of all persons in terms
of Article 21 of the Constitution of India. They, therefore, must do so in
cases of their own employees. The Government of the State of Bihar for all intent and purport is the
sole shareholder. Although in law, its liability towards the debtors of the
company may be confined to the shares held by it but having regard to the deep
and pervasive control it exercises over the government companies; in the matter
of enforcement of human rights and/or rights of the citizen to life and
liberty, the State has also an additional duty to see that the rights of
employees of such corporations are not infringed.
The
right to exercise deep and pervasive control would in its turn make the
Government of Bihar liable to see that the life and liberty clause in respect
of the employees is fully safeguarded. The Government of the State of Bihar, thus, had a constitutional
obligation to protect the life and liberty of the employees of the
government-owned companies/ corporations who are the citizens of India. It had an additional liability
having regard to its right of extensive supervision over the affairs of the
company." The said observations made in an interim order with reference to
the State's obligations will not be of any avail to seek employment under the
Board. We are not concerned in these appeals about the rights of the employees
of the Society vis-a-vis the Society or the State Government. We are concerned
with a specific question as to whether they can seek absorption under the
Board. We may in this behalf refer to the decision of this Court in Bhola Nath
Mukherjee v. Government of West Bengal [1997 (1) SCC 562] relating to transfer
of a licensee's undertaking to a State Electricity Board, as a consequence of
revocation of the licence. In that case the Board initially allowed the
employees of the erstwhile licensee to continue in its service but subsequently
introduced terms which rendered them fresh appointees from the date of take
over of the undertaking. The question that arose for consideration was whether
the employees were entitled to compensation under Section 25FF of the Act; and
whether the liability for payment of such compensation under Section 25FF of
the Act was on the transferor or the Board. This Court held that employees had
no right to claim any retrenchment compensation from the Board, nor did they
have any right to claim to be in continuous employment on the same terms and
conditions, after the purchase of the undertaking by the Board. The said
decision clearly recognises that the Board has no obligation towards the
employees of the previous owner of the undertaking.
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We therefore
find no reason to interfere with the order of the High Court. The appeal is
dismissed.
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