Full Judgment Text
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PETITIONER:
GURMAIL SINGH AND ORS. ETC. ETC.
Vs.
RESPONDENT:
STATE OF PUNJAB AND ORS.
DATE OF JUDGMENT25/10/1990
BENCH:
RANGNATHAN, S.
BENCH:
RANGNATHAN, S.
SAWANT, P.B.
KASLIWAL, N.M. (J)
CITATION:
1993 AIR 1388 1990 SCR Supl. (2) 367
1991 SCC (1) 189 JT 1991 (1) 351
1990 SCALE (2)864
ACT:
Industrial Disputes Act, 1947: Section 25F and 25FF and
Punjab Government Notification dated November 30,
1982--Tubewells transferred to Punjab State Tubewell
Corporation--Permanent posts abolished-- Temporary posts
discontinued--Rights of affected employees.
HEADNOTE:
The appellants were in service as tubewell operators in
the Irrigation Branch of the Public Works Department of the
Punjab Government. The State took a decision to transfer all
the tubewells in this branch to the Punjab State Tubewell
Corporation, a company wholly owned and managed by the State
of Punjab. Consequent on this decision, a notification was
issued on 30th November, 1982 abolishing all the posts of
tubewell operators in the Irrigation Branch, and accordingly
notices terminating the services of the appellants were
issued.
The appellants challenged the termination notices before
the High Court contending (i) that the notification by which
the tubewells were transferred was mala fide, the only
object being to frustrate certain claims of the petitioners
which had been judicially recognised; (ii) that the impugned
notices did not fulfill the requirements of clauses (b) and
(c) of section 25F of the Industrial Disputes Act in so far
as the compensation amount of each individual was not deliv-
ered at his door, and the notices under clause (c) were not
sent by registered post; and (iii) that, in case the action
of the State was upheld, the respondent Corporation should
be held to be under an obligation to employ the appellants
with continuity of service and under the same terms and
conditions which they were enjoying prior to their retrench-
ment from the service of the State.
The High Court rejected the petitions flied by the
appellants. The High Court inter alia found that the appel-
lants had been given all the benefits which they had ob-
tained from the court. It was also found that the respondent
corporation had made an offer of re-employment to all the
appellants effective from the date of expiry of the notices
of their retrenchment by the State Government. According to
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the learned
368
Judges, the sole object of the issuance of the notification
was to get rid of the tubewells which were the cause of
constant and ever-increasing loss to the State exchequer and
not any mala fide or extraneous reasons.
The services of the appellants have since been taken
over by the Corporation. Though at one stage the Corporation
had taken the stand that the appellants would be taken as
fresh appointees in the Corporation, it had subsequently
fixed them up at the same level of pay at which they were in
Government service immediately before retrenchment, and they
were also being granted increments on that scale.
There remained two grounds of dissatisfaction: (1) that
the appellants would be junior in service to the tubewell
operators who had been engaged by the Corporation on its own
account before the appellants joined the service of the
Corporation, giving the appellants the apprehension that
their down-gradation in seniority would affect them in case
the Corporation started closing down some of the tubewells
and discharging its staff, and (2) if treated as retrenched
Government servant, they would be able to get terminal
benefits and pension only on the basis of their present
lengths of service in the Government.
Before this Court, the contention of the appellants in
this regard was that the Corporation was really nothing but
a Department of the Government, and that in such circum-
stances, its "corporate veil" had to be torn as under and
its basic identity as department of the Government recog-
nised and given effect to. Alternatively it was argued that
even if the Corporation be taken to be a separate enti-
ty, it was clearly a "successor" to the Government Depart-
ment as the Government had assured the Corporation that, if
it suffered any losses because of the transfer, the losses
would be made good by the Government, that having regard to
the virtual identity of the Corporation and the Government,
this was really a case of the Corporation having taken over
a department of the Government, and that both the Irrigation
Branch of the State Government as well as the Corporation
admittedly constituted an "industry" within the meaning of
the Industrial Disputes Act. and the problem should be
looked at from the point of view of industrial law.
The respondent’s case was that the State’s obligation
came to an end with the payment of retrenchment compensa-
tion, that the Corporation went out of its way to confer a
favour on the appellants by agreeing to take them into its
service; that it would be unfair on the part of the Corpora-
tion to give the appellants benefit of their earlier service
in the
369
Government and make them senior to other employees who had
been serving in the Corporation right from the beginning:
and that this was a fresh employment subject to the normal
rules and regulations of the Corporation and the appellants
had no right to claim any continuity of service in the
circumstances.
Disposing of the appeal, this Court,
HELD: (1) The fact appears to be that the tubewells were
not being operated profitably by the Government and the
Government seems to have taken a decision that it would he
more efficient, economical and prudent to have these tube-
wells run by the Corporation. There is no reason to doubt
the bona fides or the genuineness of this arrangement.
[378B-C]
(2) When individual drafts for the amounts of compensa-
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tion due to the various tubewell operators were forwarded to
the divisional subdivisional offices, sufficiently in time
to be available to be taken by them by 31st August, 1983
there was sufficient compliance with the provisions of
clause (a) of section 25-F. [379C-D]
(3) The running of tubewells constitutes an "industry"
whether in the hands of the government or in the hands of
the Corporation. [381D]
(4) There is no incompatibility in applying some of the
provisions of the Industrial Disputes Act to persons in the
service of the Government. [381D]
State of Bihar v. Industrial Tribunal, [1977] 51 F.J.R. 371.
(5) Notices under clause (c) of section 25-F were sent
to the Labour Department as well as to the employment ex-
change through the poen book. The High Court is right in
pointing out that such a requirement can be treated errone-
ous to hold that unless sent by registered post, the notices
cannot be treated as complying with the statute. [379E]
(6) Where the transferor and transfree is a State or a
State instrumentality, which is required to act fairly and
not arbitrarily, 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". In such circumstances it will be open
to this Court to review the arrangement between the State
Government and the corporation and issue appropriate direc-
tions. The princi-
370
ple sought to be applied is a constitutional principle flow-
ing from the contours of article 14 of Constitution which
the State and Corporation are obliged to adhere to. [387F-H;
388A]
New Gujarat Cotton Mills Ltd. v. Labour Appellate Tribu-
nal, [1957] II L.L.J. 194; Ramjilal Nathulal v. Himabai
Mills Co. Ltd., [1956] II L.L.J. 244; Indian Hume Pipe Co.
’Ltd. v. Bhimarao, [1965] 2 L.L.J. 402; Ban Nigam Karamchari
Kalyan Sangh v. Divisional Logging Manager & Ors., J.T. 1988
2 S.C. 22; Workmen v. Dahingeapara Tea Estate, [1958] 11
L.L.J. 498; Anakapalla Co-op. Agricultural & Industrial
Society Ltd. v. Its Workmen, [1963] Supp.1 S.C.R. 730;
Hariprasad v. Divikar, [1957] S.C.R. 121; Bombay Garage Ltd.
v. Industrial Tribunal, [1953] I L.L.J. 14; Artisan Press v.
L.A.T., [1954] II L.L.J. 14; Kapur v. Shields, [1976] 1
W.L.R. 131; Accountant and Secretarial Services P. Ltd. v.
Union, [1988] 4 S.C.C. 324 and Mahabir Auto Stores v. Indian
Oil Corporation, [1990] 3 S.C.C. 752, referred to.
{7) Looking at the facts of this case in the above
perspective, it appears that the State Government has acted
arbitrarily towards the appellants. The conduct of the
Government in depriving the appellants of substantial bene-
fits 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 seems ill from a State Government and smacks of arbi-
trariness. [388B; 389D-E]
(8) The appellants will be entitled to add their service
in the Government to their length of service in the Corpora-
tion for purposes of computation of their salary, length of
service and retirement benefits. The Corporation is also
directed to ensure, as far as possible, that none of the
appellants are retrenched as surplus on account of any
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closure of tubewells or other like reason until they retire
or leave the service of the Corporation voluntarily for any
reason. The advantage of counting the period of their past
service with the Government will, however, not enable them
to claim any seniority over the former employees of the
Corporation. [391G-H; 390E]
(9) Even before the insertion of section 25FF in the
Act,.the employees of a predecessor had no right to claim
re-employment by the successor in business save in excep-
tional circumstances. Even where
371
available, that claim was not a matter of absolute right but
one 01’ discretion, to be judicially exercised, having
regard to all the circumstances. [391G-H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 105
19 of 1983.
From the Judgment and Order dated 12.9. 1983 of the
Punjab and Haryana High Court in W.P. No. 3798 of 1983.
M.S. Gujral, S.K. Bagga, Ms. Bagga, S.D. Sharma, B,S.
Gupta. P.C Kapur, R.N. Mittal, S.D. Gupta, S,M. Ashri and
K.K. Mohan for the Appellants.
R.S. Sodhi and C.M. Nayyar for the Respondents.
The Judgment of the Court was delivered by
RANGANATHAN, J. The appellants were in service as tube-
well operators in the irrigation branch of the Public Works
Department of the Punjab State. The State took a decision to
transfer all the tubewells in this branch to the Punjab-
State Tubewell Corporation (hereinafter referred to as ’the
Corporation’), a company wholly owned and managed by the
State of Punjab. Consequent on this decision, a notification
was issued on 30th November, 1982 to the effect that "the
posts sanctioned for the Tubewell Circle, Irrigation Branch.
Punjab, are no longer needed in the public interest." It
was, therefore. ordered that all the permanent posts sanc-
tioned for the above circle be abolished with effect from
1.3.1983 and that all temporary posts be discontinued with
effect from the same date. A little earlier, on 31st August,
1982, the petitioners were served with notices in terms of
section 25-F of the Industrial Disputes Act (hereinafter
referred to as ’S. 25F’) terminating their services with
effect from 30th November. 1982. These notices were, howev-
er, set aside as not being in consonance with clause (c) of
section 25-F. The State Government, therefore, issued fresh
notices terminating the services of the petitioners with
effect from March 1, 1983. These notices were also set aside
by the High Court on the ground that they did not conform to
the provisions of clause (b) of section 25(F). Thereupon the
State served fresh notices on the petitioners terminating
their services in terms of section 25-F with effect from
August 31, 1983. The appellants once again approached the
High Court contending that the decision of the State Govern-
ment transferring the tubewells to the Corporation and ter-
372
minating their services was invalid. It was contended: (a)
that the impugned notices did not fulfil the requirements of
clauses (b) and (c) of section 25-F; (b) that the notifica-
tion by which the tubewells were transferred was mala fide,
the only object of the transfer being to frustrate certain
claims of the petitioners which had been judicially recog-
nised; and (c) that, in case the action of the State is
upheld, the respondent Corporation should be held to be
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under an obligation to employ the petitioners with conti-
nutiy of service and under the same terms and conditions
which they were enjoying prior to their retrenchment from
the service of the State.
These contentions were rejected by the High Court. It
held that the notices did not suffer from any defect. It was
pointed out that the writ petitions had been filed before
the expiry of the date from which the retrenchment notice
was to be effective, namely, 31st August, 1983. The re-
trenchment notice itself specifically mentioned that the
retrenchment compensation, as admissible under the rules,
will be paid before the notice of retrenchment took effect
and that it could be collected personally from the respond-
ent’s Sub-Divisional/Divisional Officers. At the instance of
the Court, the State had filed an additional affidavit in
which it was averred that drafts in respect of the amounts
of compensation had been despatched to the divisional of-
fices in the manner following--
Tubewell Division Malerkotla Between 25 to 27 August,
1983
Tubewell Division Hoshiarpur Between 19 to 24 August,
1983
Tubewell Division Jullundur Between 19 to 24 August,
1983
The relevant records showing the despatch of these drafts
were also produced in the court. The High Court was satis-
fied that the State had
despatched individual bank drafts in respect of each of the
employees well in advance of the date of expiry of the
notice period and that the despatch of these drafts to the
divisional offices constituted a good and valid tender. of
the compensation amount to the appellants. The court held
that this was sufficient compliance with the provisions of
clause (b) of section 25-F. So far as the provisions of
clause (c) of section 25-F were concerned, the High Court
was satisfied that the requisite notice in the prescribed
form ’P’ was sent to the Secretary to Government, Labour
Department and the Employment Exchange concerned by personal
delivery duly acknowledged in the peon book of the Depart-
ment. Pointing out that the requirements of clause (c) of
section 25-F
373
were only directory and not mandatory, the High Court was of
the opinion that the notices were not vitiated due to non-
compliance with clause (c) of section 25-F.
Turning to the allegation regarding mala fides, the
contention of the appellants was this. They submitted that
the tubewell operators in the Irrigation Branch of the PWD
had filed a writ petition, being C.W.P. 3340 of 1972, in the
Punjab High Court claiming parity of pay with the tubewell
operators employed in the Public Health Department of the
State Government. That petition was allowed on February 5,
1981. But the respondent authorities failed to implement the
directions contained in that judgment, thus forcing the
petitioners to move a contempt application (No. 221 of
1981). Thereafter, the State authorities gave effect to the
judgment and paid arrears to the petitioners in the writ
petition but did not extend the benefit thereof to the
tubewell operators other than the actual petitioners in the
writ petition. The other tubewell operators, thus denied the
benefits of the judgment, were constrained to file three
more writ petitions seeking the extension of same relief to
them. These writ petitions were allowed on 7.8.1981 in terms
of the earlier decision dated 5.2.1981. The respondent
authorities chose to file S.L.P. Nos. 9195 to 9197 of 198 1
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in the Supreme Court but these were dismissed on 19.2. 1982.
Still, the respondent authorities showed their reluctance to
implement the judgments of the High Court compelling the
petitioners to file three contempt petitions (Nos. 294 to
296 of 1981) against the defaulting authorities. However,
before the disposal of these writ petitions, the State filed
a letters patent appeal against the judgment in C.W.P. No.
3340 of 1972 and obtained an order staying the operation of
the said judgment. Consequent on this, the contempt applica-
tions had to be withdrawn and were dismissed as such on 8.4.
1982. We are told that the letters patent appeals have been
dismissed recently on 7.8. 1990.
Accordingly to the appellants, the authorities took a
decision to transfer the tubewells of the irrigation branch
to the Corporation only with a view to deprive the appel-
lants of the benefit they had gained as a result of the
above litigation. It was pointed out that the Corporation
had come into existence as early as 1970. Its main objects,
as set out in the Corporation’s memorandum of association,
were, inter alia:
XXX XXX
XXX
(2) To take over from the Government of Punjab the existing
system of State owned irrigation and augmentation
374
tubewells along with-connected buildings, assets, works and
any of their projects connected with the installation,
maintenance and operation of the State owned tubewells, with
the rights and liabilities of the Government of Punjab so
far as they relate to such tubewells, buildings, assets,
works or projects.
These assets shall be taken over by the Punjab State Tube-
well Corporation Limited as contribution by the Punjab
Government towards share capital.
XXX XXX
XXX
(19) To enter into any arrangement with the Government of
India, Government of-Punjab, or any other Government or
State or local authority for the purpose of carrying out the
objects of the company for the furthering its interests and
to obtain from such Government or Authority or person any
charters, subsidies, loans, indemnities, grants, contracts,
licences, rights, concessions, privileges or immunities
which the company may think desirable to obtain and exercise
and comply with any such arrangements, rights, privileges
and concessions."
Though the Corporation had been formed so long ago with the
express object of taking over the tubewells of the irriga-
tion branch and though it was operating a large number of
tubewells on its own account since then, no efforts had been
made by the Government to transfer the tubewells belonging
to the State to the Corporation till 1982. Even under the
impugned notification only tubewells belonging to the irri-
gation branch were transferred but not those which were
being operated by the Public Health Department of the same
State. The appellants vehemently contended that all these
facts clearly showed that the sudden decision in 1982 to
transfer the tubewells to the Corporation was intended as a
measure of victimisation of the appellants who were only
fighting for their rights of equal pay with other tubewell
operators in the State.
The High Court did not find any substance in this con-
tention. It pointed out that the idea that eventually the
tubewells belonging to the State should be transferred to
the Corporation had germinated as early as in 1970. Though
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this was not implemented immediately, a decision to transfer
the tubewells to the Corporation had been taken in the light
375
of the recommendations of the Estimates Committee of the
Punjab Vidhan Sabha made in the year 1977-78, that -is,
about three years earlier to the decision of the High Court
dated 5.2.1981 in C.W.P. No. 3340 of 1972. The authorities
had placed before the Court the minutes of a meeting held
under the chairmanship of the Chief Minister of Punjab on
October 18, 1979, wherein it had been decided that, since
irrigation from the State tubewells had not developed as
expected and the State Government was running into a finan-
cial loss on account of the operation of these tubewells,
the same be transferred to the Corporation. It had also been
decided at the meeting that the Government would meet the
loss that may be suffered by the Corporation on account of
the operation and maintenance of these tubewells. In the
light of these facts, the High Court held that there was no
basis for the allegation of the petitioners that the im-
pugned notification had been issued mala fide solely with a
view to deprive the appellants of the benefits they had
obtained from the courts. It was pointed out by the High
Court that the appellants had subsequently been given all
the benefits which they had derived as a result of the writ
petitions. That apart, it was also found that the Corpora-
tion had made an offer of re-employment to all the appel-
lants effective from the date of expiry of the notice of
their retrenchment by the State Government. All this showed,
according to the learned Judges, that the sole object of the
issuance of the notification was to get rid ’of the tube-
wells which were the cause of a constant and ever-increasing
loss to the State exchequer and not any mala fide or extra-
neous reasons.
On contention (c), the High Court observed as follows:
"So far as the alternative relief of re-employment with
continuity of service and pensionary benefits in terms of
the Punjab Civil Service Rules is concerned, the petitioners
cannot be granted the same in view of the provisions of
section 25-FF (of the Industrial Disputes Act) as introduced
on September 4, 1956. In this regard the petitioners have
based their whole claim on certain observations made in two
Division Bench judgments of the Bombay High Court, reported
as New Cotton Mills Ltd. v. Labour Appellate Tribunal and
Others, A.I.R. 1957 Bombay 111 and N.J. Chavan and Others v.
P.D. Sawarkar and Others, A.I.R. 1958 Bombay 133. Besides
there being dissimilarity of facts in those cases and the
instant case, the same relate to a period prior to the
insertion of section 25-FF. In Anakapalle Cooperative Agri-
cultural and Industrial Society
376
Ltd. v. Workmen and Others, AIR 1963 SC 1489, their Lord-
ships of the Supreme Court after noticing the first judgment
of the Bombay High Court referred to above, have held in
categorical terms that such employees can make no claim
against the transferee concern. Otherwise also we are of the
view that the claim of the petitioners is not covered by
section 25-FF of the Act as it has nowhere been pleaded or
established by them that the ownership or management of the
tubewells has been transferred by the State Government to
the corporation either ’by agreement or by operation of
law’. As already pointed out, the transfer of the tubewells
in the instant case has taken place as a result of the
unilateral decision by the State Government. Even if it is
to be accepted to be a case of transfer of the undertaking
by agreement as is suggested by the learned counsel for the
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petitioners, still the wording of the proviso and more
’particularly of clause (b) to section 25-FF clearly indi-
cate that the transfree concern of the management can change
the terms and conditions of the workman. Further on the
facts of the case, we do not see how the petitioners can
claim the benefits or rights of a civil servant while in the
service of the corporation and thereby force the corporation
to say good bye to its rules and regulations."
In the result, the various writ petitions were dismissed and
hence the present appeals.
Before us, practically the same arguments have been
addressed as were addressed before the High Court but with
slight variations. It might appear at first sight that the
appellants have really no cause of grievance inasmuch as,
though retrenched by the State Government, their services
have been taken over by the Corporation. We have also been
informed that the scale of pay of the tubewell operators in
the Corporation is identical with that of those employed by
the State Government. Though at one stage the Corporation
had taken the stand that the appellants will be taken as
fresh appointees in the Corporation, it is now common ground
that the Corporation has fixed them up at the same level of
pay at which they were in Government service immediately
before retrenchment and they are also being granted incre-
ments on that scale. Though these concessions were made
during the pendency of the proceedings on interim applica-
tions made by the appellants, the learned counsel for the
State and Corporation have stated before us that these
benefits would be continued
377
irrespective of the decision in these matters. Thus, in the
result, so far as pay is concerned, the petitioners have
suffered no detriment whatsoever as a result of the action
taken by the Government. There are, however, two grounds of
dissatisfaction which are consequent on the appellants being
treated as fresh appointees who have entered the service of
the Corporation only on the dates of their respective ap-
pointments thereto with the result that all the appellants
will be junior in service to the tubewell operators who had
been engaged by the Corporation, on its own account, between
1970 and the dates on which the appellants joined the serv-
ice of the Corporation. This by itself may also not be much
of a disadvantage to the appellants since many of them are
senior in age the other tubewell operators and may well
retire earlier and we are also told that there are no ave-
nues of promotion from the post of tubewell operators, with
the result that the question of seniority may not be very
material. The apprehension of the petitioners, however, is
that their down-gradation in seniority will affect them in
case the Corporation starts closing down some of the tube-
wells and discharging its staff, an apprehension which is
stated to be not purely hypothetical but quite real. The
second disadvantage is that many of the appellants have put
in a large number of years in the service of the Government.
By being treated as retrenched Government servants, they
will be able to get terminal benefits and pension only on
the basis of their present lengths of their service in the
Government. On the other hand, if they were to continue with
the Corporation under the same terms and conditions which
they were enjoying under the Government, they would get the
advantage of continuity of service and thus be entitled to
substantially higher amounts of pension and other terminal
benefits. On a bought calculation, it is stated that some of
the appellants might stand to lose about Rs.600 to Rs.700
per month as a result of being deprived of the benefit of
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their long service in Government and by being treated as new
recruits in the corporation.
We have heard the learned counsel for the appellants as
well as the counsel for the State and the counsel for the
Corporation. We entirely agree with the reasoning of the
High Court on contentions (a) and (b) earlier set out. We
are also of the opinion that no ulterior motives on the part
of the Government have been established. It is no doubt true
that there was some litigation between the appellants and
the Government but this related to their pay scales and it
is not common ground before us eventually the petitioners
have had the benefit of the higher pay scales which were in
vogue in the Public Health Department. It is no doubt true
that the increased wage bill consequent on these decisions
of the High Court must have made the
378
tubewells in the irrigation branch more unremunerative than
before and may thus have precipitated the decision to trans-
fer the tubewells to the Corporation. However, as pointed
out by the High Court, the decision that there should be a
tubewell Corporation, that the Corporation should, in course
of time, acquire the tubewells belonging to the Government
and that the tubewells of the irrigation branch should be
made over to the Corporation had been taken quite a long
time back. The fact appears to be that the tubewells were
not being operated profitably by the Government and the
Government seems to have taken a decision that it would be
more efficient, economical and prudent to have these tube-
wells run by the Corporation. There is no reason to doubt
the bona fides or the genuineness of this arrangement It is
true that the tubewells in the Public Health Department do
not appear to have been transferred to the Corporation. But
we have no details before us regarding the magnitude of the
State’s problem vis-avis those tubewells and it is difficult
to draw an inference, merely because the tubewells of the
Public Health Department were not transferred to the Corpo-
ration, that the transfer of the tubewells in the irrigation
branch was actuated by a desire to victimise the appellants.
We, therefore, see no substance in this contention of the
appellants.
We do not also see any force in the contentions regard-
ing noncompliance with the provisions of section 25-F of the
Industrial Disputes Act. It is urged on behalf of the appel-
lants that the State has not furnished the details of the
amounts of compensation determined in the case of each
employee and that the State had also taken no steps to
deliver the payment in respect of each employee at his door
by the relevant date. It is submitted that the tender of
compensation under section 25-F, in order to be valid,
should be of the precise amount and should be made simulta-
neously with termination of the service. This, of course, is
correct but the High Court has satisfied itself by looking
into the original records, that drafts in respect of indi-
vidual employees were dispatched in time so as to reach
divisional/sub-divisional offices by 31st of August, 1983.
An attempt was made before us to suggest that there was some
discrepancy between two affidavits filed by the State Gov-
ernment in this behalf. We have perused the said averments
and we find no inconsistency as alleged. It is true that the
amounts were not actually paid or tendered to the workers by
the Corporation directly but the Corporation had evolved a
method of disbursement of compensation in the interest of
the workers’ convenience. Instead of making the appellants,
spread out all over the State, to come to the head office to
collect the compensation and to avoid the inconvenience and
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difficulty of the Corporation making available the compensa-
tion
379
at the doorstep of each employee, the Corporation made
arrangements whereby the tubewell operators could go to the
nearest divisional/sub-divisional office and collect the
amount of compensation due to them. It appears that the
appellants were not interested in taking the compensation
amount. None of them appears to have ascertained whether
these amounts had reached the sub-divisional office and
whether they were for the correct amounts. No instance has
been pointed out to us to show that they were not for the
correct amounts. We do not think we need elaborate further
on this aspect since the relevant records were brought
before the High Court and the High Court was satisfied that
the individual compensation drafts were sent to the various
subordinate offices ready for distribution to the concerned
workers on or before the relevant date. In the circumstances
of this case, we agree with the High Court that when indi-
vidual drafts for the amounts of compensation due to the
various tubewell operators were forwarded to the
divisional/sub-divisional offices, sufficiently in time to
be available to be taken by them by 31st August, 1983, there
was sufficient compliance with the provisions of clause (b)
of section 25-F.
The contention based on clause (c) of section 25-F is
equally baseless. It has been verified that notices were
sent to the Labour department as well as to the employment
exchange through the peon book. There is no reason to doubt
the entries in these books. The suggestion is that they
should have been sent by registered post. As rightly pointed
out by the High Court, such a requirement can be treated
only as directory and not mandatory and it would be errone-
ous to hold that, unless sent by registered post, the no-
tices cannot be treated as complying with the statute. We,
therefore, reject this contention as well.
This leaves for consideration the principal question in
this case as to whether in circumstances such as these, the
State is under an obligation to protect the terms and condi-
tions of service of the tubewell operators. The State’s case
is that it had transferred its tubewells to the Corporation.
The operators, therefore, became surplus and they were
retrenched. Retrenchment compensation was duly paid to them.
It is suggested that the State’s obligation came to an end
with this. It was under no obligation to find any fresh or
alternative employment to the workers. However, being a
welfare State, it did arrange for such alternative employ-
ment. It was obviously under the State’s directions that the
Corporation went out of its way to confer a favour on the
appellants by agreeing to take them into its service. It is
submitted that
380
the Corporation had its own terms and conditions of service
for its employees and could not change those terms and
conditions of service for the benefit of those few employees
whose services had been taken over as an act of commisera-
tion. It would be unfair on the part of the Corporation to
give the appellants benefit of their earlier service in the
Government and made them senior to. other employees who had
been serving in the Corporation right from the beginning. It
is, therefore, submitted that the two chapters of service of
the appellants, one with the Government and the other with
the Corporation are two separate and independent chapters.
The first chapter has come to a close because the State
Government was not able to continue to operate the tubewells
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by itself. The second chapter has commenced with a totally
independent offer by the Corporation to the erstwhile Gov-
ernment servants of an employment in the Corporation. This
is a fresh employment subject to the normal rules and regu-
lations of the Corporation. The appellants have no right to
claim any continuity of service in the circumstances.
Shri Gujral, learned counsel for the appellants has
contended ’before us that the approach which the State
Government wants this Court to adopt is an unrealistic and
purely technical approach. According to him, the Corporation
is realty nothing but a department of the Government. It is
no doubt an independent entity in the sense that it has a
separate legal existence with its own employees and its own
finances to be looked after according to certain rules and
regulations but, says Sri Gujral, in circumstances such as
these, the "corporate veil" of the Corporation has to be
torn as under and the basic identity of the Corporation as a
department of the Government should be recognised and given
effect to.
Alternatively, Shri Gujral argues, even if the Corpora-
tion be taken to be a separate legal entity, it is clearly a
"successor" to the Government department. He points out that
the very memorandum of the Corporation contemplates the
taking over by it of the tubewells belonging to the Govern-
ment together with all the rights and liabilities of the
Government so far as they relate to such tubewells. The
assets taken over are to be treated as contributions of
capital by the Government to the Corporation. It is also
common ground that in this case, while transferring the
tubewells to the Corporation, the Government has assured the
Corporation that, if it suffers any loses because of the
transfer, the losses would be made good by the Government.
The true and real essence of the transaction put through is
that the tubewells, along with all appurtenances, rights and
liabilities, including the liabi-
381
lity to continue the services of the tubewell operators have
been taken over by the Corporation. Having regard to the
virtual identity of the Corporation and the Government, this
is really a case of the Corporation having taken over a
department of the Government though, in form, the Government
has purported to retrench, and the Corporation to re-employ,
the appellants. Shri Gujral submitted that both the irriga-
tion branch of the State Government as well as the Corpora-
tion admittedly constitute an "industry" within the meaning
of the Industrial Disputes Act. Indeed, retrenchment compen-
sation has been offered to the appellants under the Indus-
trial Disputes Act. In these circumstances, Shri Gujral
vehemently contends, the problem before us should be looked
at from the. point of view of industrial law. One should ask
oneself the question: if a similar transaction had been put
through in the private sector by two industrial organisa-
tions, how would the Court could have tackled the problem?
This, according to Shri Gujral, is the proper test to be
applied and, if that is done, he submits, there can be put
one answer to the question in this case.
There is no dispute before us that the running of tube-
wells constitutes an ’industry’ whether in the hands of the
Government or in the hands of the Corporation. As pointed
out by this Court in State of Bihar v. Industrial Tribunal,,
[1977] 51 F.J.R. 371, there is also no incompatibility in
applying some of the provisions of the Industrial Disputes
Act to persons in the service of the Government. We may,
therefore, first examine what position would be if the
principles of industrial law were to be applied to a situa-
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tion where one person succeeds to the business which is
being carried on by another. Shri Gujral contends that there
is preponderant authority for holding that, if those princi-
ples were to apply, the tubewell operators should have, in
the Corporation, the same terms and conditions of service
which they enjoyed when they were in the Government. In
support of this proposition, Shri Gujral relies upon the
decision of the Bombay High Court in New Gujarat Cotton
Mills Ltd. v. Labour Appellate Tribunal, [1957] II LLJ 194.
In that case, the business and undertaking of a cotton mill
was taken over as a going concern by another company. The
successor company, however, declined to continue in its
employment some of the employees of the predecessor company.
Thereupon, the applications were filed by them before the
labour court for an order against the successor company for
reinstatement or reemployment. This application was rejected
by the labour court but, on appeal the Labour Appellate
Tribunal held that the new company could not refuse tO take
them in. It observed (vide Ramjilal Nathulal v. Himabhai
Mills Co. Ltd., [1956] II LLJ 244:
382
"12. Under the civil law, a person who is a successor to a
business is not bound merely because of such succession by
the debts or liabilities of the old business. and even if he
has agreed with his transferor to be so liable, third par-
ties, in the absence of a tripartite arrangement, cannot
enforce such debt or liability against the transferor who
alone continues to remain liable for such debts and liabili-
ties to third parties ......
13. Unlike the civil law, however, the industrial law has
naturally taken a different view with regard to the duties
of a successor in business who has decided to run the same
and in the case of employees of the old concern it has
regarded the rights and obligations of the old concern as
continuing and to be enforceable as against the new manage-
ment and not to be affected by the substitution of the new
management for the old, whenever justice of the case would
require such enforcement ...... The same principles have
also been recognised as of general application by the Madras
High Court in the case of Odeon Cinema, [1954] II LLJ 314 as
shown by the observations of their Lordships at p.319 where
they remark :’The industrial tribunal has cited a number of
decisions of other industrial tribunals, in the course of
which it has been held that where there is a transfer of
business of one management to another, the rights and obli-
gations which existed as between the old management and
their workers continue to exist vis-a-vis the new manage-
ment, after the date of the transfer. The learned counsel
for the petitioners does not challenge the correctness of
these decisions, which really are in application of the
principle embodied in s. 18(c) of the Industrial Disputes
Act ......
(underlining ours)
This view was approved by the Bombay High Court. Speaking
for the Court, Shah, J. observed:
"In our view, in industrial matters, the Court is entitled
and is indeed bound to modify contractual rights and obliga-
tions on considerations of equity and in the larger inter-
ests of the community, such as promotion of industrial peace
and security of employment of workmen. Merely because under
the law of contracts, a claim may not lie at
383
the instance of the applicants to be reemployed or reinstat-
ed by the new company, the claim made by the applicants
cannot be regarded as inadmissible. It appears to have been
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settled by a large number of decisions of the industrial and
labour courts that the industrial law takes a different view
about the duties and obligations of a successor-inbusiness,
and if a successor decides to run the same business which
was carried on by his predecessor, the employees of the old
concern are entitled to submit a dispute before the indus-
trial tribunal regarding their rights and obligations in the
business of the old concern, and those rights and obliga-
tions must be regarded as continuing and enforceable against
the new management and not affected by the substitution of
the new management for the old. In Odeon Cinema v. Workers
of Sagar Talkies, [1954] II LEJ 3 14, it was observed by the
Madras High Court (p. 319):
". .... where there is a transfer of a business
of one management to another, the rights and obligations
which existed as between the old management and their work-
ers continue to exist vis-a-vis the new management, after
the date of the transfer."
It is also implicit is Ss. 114 and 1 15 of the Bombay Indus-
trial Relations Act that the rights and obligations of a
management of an industrial undertaking are enforceable in
proper cases against its successor. It appears from the
terms of S. 18(c) of the Industrial Disputes Act that a
successor to an old undertaking is liable to meet certain
obligations of its predecessors. In our view, therefore, the
absence of a direct contractual relation between the appli-
cants and the new company is by itself not a ground for
rejecting the claim made by the applicants. "
(underlining ours)
Shri Nayar submits that the Bombay case was one in which the
employees of the old concern had only sought ’re-employment"
in the successor concern, a concept quite different from the
concept of continuity in service on the same terms and
conditions and invited our attention to S. 25H of the Act
and to the decision in Indian Hume Pipe Co. Ltd. v. Bhima-
rao, [1965] 2 L.L.J. 402. It is true that the claim in the
Bombay case appears to have been one for re-employment but
the principle laid down in these decisions is in wider
terms, as the passages
384
underlined in the above excerpts will show. We may also
refer in this context to the brief decision of this Court in
Ban Nigam Karamchari Kalyan Sangh & Anr. v. Divisional
Logging Manager & Ors., JT 1988 2 SC 22. In this case, the
petitioners were in the employment of U.P. Forest Corpora-
tion which was appointed agent for collecting tendu leaves.
The Ban Nigam was appointed in place of the Corporation.
Thereupon, the Corporation terminated the services of the
workmen. This Court passed a brief order to the following
effect:
"In the proceeding before the High Court, as also here, the
State and the Nigam have not been impleaded as parties but
learned counsel for the Corporation tells us that it was the
understanding that the Nigam would takeover these 149 work-
men on the same terms and conditions as were applicable when
they were working under the Corporation. Since both the
Corporation and the Nigam are Government concerns as learned
counsel for the Corporation tell us that this was the under-
standing, we direct the Nigam to continue the 149 workmen in
employment on the same terms and conditions as were applica-
ble to them when the Corporation was the agent for collec-
tion of tendu leaves. The list of the 149 workmen is not on
record. Learned counsel for the applicants has undertaken to
provide the list within 24 hours."
There was no doubt an understanding in this case but even
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without this, counsel says, the position would be the same.
It appears that the broad issue as to the rights of such
workmen against a successor-inbusiness was raised but not
decided in Workmen v. Dahingeapara Tea Estate, [1958] II
L.L.J. 498, a case which came up before a five judge Bench
of this Court. The High Court has, however, referred to
decision of this Court in Anakapala Coop. Agricultural and
Industrial Society Ltd. v. Its Workmen, [1963] Supp. 1
S.C.R. 730 and taken the view that the principle enunciated
in the judgments quoted earlier is not valid after the
enactment of S. 25FF of the Act. This section provides that
where there is a transfer of an undertaking by agreement or
operation of law, an employee who loses his job because of
such transfer will have a right to compensation from the
predecessor, except where he gets the benefit of uninter-
rupted service with the new employer on no less favorable
terms than before and will be entitled to compensation in
case he should be retrenched later by the new employer. It
has been construed in the Anakapalla Society case to say
that in such a situation the employee can at best claim
retrenchment compensation from the predecessor on the basis
of a notional
385
retrenchment but will have no right to claim re-employment,
much less on the same conditions as before, from the succes-
sor. It is necessary to extract here certain observations
from judgment in the Anakapalla case (supra) which, if we
may say so with respect, clinch the issue. Gajendragadkar,
J., speaking for a five-Judge Bench of the Court summed up
the earlier legal position thus:
"That takes us to the question as to what would be the
nature of the appellant’s liability to the employees of the
Company. Before S. 25-FF was introduced in the Act in 1956,
this question was considered by industrial adjudication on
general considerations of fair play and social justice. In
all cases, where the employees of the transferor concern
claimed re-employment at the hands of the transferee con-
cern, industrial adjudication first enquired into the ques-
tion as to whether the transferee concern could be said to
be a successor-in-interest of the transferor concern. If the
answer was that the transferee was a successor-in-interest
in business, then industrial adjudication considered the
question of re-employment in the light of broad principles.
It enquired whether the refusal of the successor to give
re-employment to the employees of his predecessor was capri-
cious and unjustified, or whether it was based on some
reasonable and bona fide grounds. In some cases, it appeared
that there was not enough amount of work to justify the
absorption of all the previous employees; sometimes the
purchaser concern needed bona fide the assistance of better
qualified and different type of workers; conceivably, in
some cases, the purchaser has previous commitments for which
he is answerable in the matter of employment of labour; and
so, the claim of re-employment made by the employees of the
vendor concern had to be weighed against the pleas made by
the purchaser concern for not employing the said employees
and the problem had to be resolved on general grounds of
fairplay and social justice. In such a case, it was obvious-
ly impossible to lay down any hard and fast rules. Indeed,
experience of industrial adjudication shows that in resolv-
ing industrial disputes from case to case and from time to
time, industrial adjudication generally avoids--as it
should--to lay down inflexible rules because it is of the
essence of industrial adjudication that the problem should
be resolved by reference to the facts in each case so as to
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do justice to both the parties.
386
It was in this spirit that industrial adjudication ap-
proached this problem until 1956 when S. 25-FF was intro-
duced in the Act. Sometimes, the claim for re-employment was
allowed, or sometimes the claim for compensation was consid-
ered. But it is significant that no industrial decision has
been cited before us prior to 1956 under which the employees
were held entitled to compensation against the vendor em-
ployer as well as re-employment at the hands of the purchas-
er on the ground that it was a successor-ininterest of the
vendor."
The Court then referred to the insertion of S. 25-FF in
1956, the inadequacy of its language in view of Hariprasad
v. Divikar, [1957] SCR 121, the effect of its retrospective
amendment in 1957 and then concluded:
..... and, therefore, in all cases to which S.
25FF applies; the only claim which the employees of the
transferred concern can legitimately make is a claim for
compensation against their employers. No claim can be made
against the transferee of the said concern.
..... By amending S. 25FF, the legislature has
made it clear that if industrial undertakings are trans-
ferred, the employees of such transferred undertakings
should be entitled to compensation, unless, of course, the
continuity of their service or employment is not disturbed
and that can happen if the transfer satisfies the three
requirements of the proviso."
The Supreme Court was dealing with a case of genuine trans-
fer between two parties--a predecessor and a successor--at
arms’ length where the principles of the law of contracts
clearly held the field. The employees of the predecessor had
no privity of contract with the successor and could make no
claims against him. The industrial law, however, safeguarded
his interests by inserting S. 25FF and giving him a right to
compensation against his former employer on the basis of a
notional retrenchment except in cases where the successor,
under the contract of transfer itself, adequately safeguard-
ed them by assuring them of continuity of service. and of
employment terms and conditions. In the result. he can get
compensation or continuity but not both. The present case
before us raises an allied, but sometimes more important
issues. as to whether there cannot be situations in which
the court or
387
industrial adjudicator, should, in the interests of justice,
fairplay and industrial peace, hold the employee entitled to
continuity with the successor without being compelled to be
satisfied with compensation from the predecessor. The Su-
preme Court itself has visualised such a case and made it
clear that if a transfer is fictitious or benami S. 25FF has
no application at all. Of course, in such a case, "there has
been no change of ownership or management and despite an
apparent transfer, the transferor employer continues to be
the real employer and there has to be continuity of service
under the same terms and conditions of service as before and
there can be no question of compensation". A second type of
cases which comes to mind is one in which there is form, and
perhaps also in law, a succession but the management contin-
ues to be in the hands of the same set of persons organised
differently such as in Bombay Garage Ltd. v. Industrial
Tribunal, [1953] 1 L.L.J. 14 and Artisan Press v. L.A.T.,
[1954] II L.L,.J. 424. In such cases, the transferee and
transferor are virtually the same and the over-riding prin-
ciple should be that no one should be able to frustrate the
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intent and purpose of the law by drawing a corporate veil
across the eyes of the court. (see, Palmer, Company Law,
23rd Edn., pages 200-201, paras 8 and 10 and the decision in
Kapur v. Shields, [1976] 1 W.L.R. 131, cited therein). These
exceptions to the above rules, we think, would still be-
operative. But it is not necessary here to decide whether
this principle will help us to identify the corporation with
the State Government in the present case for the present
purposes, particularly as there is a catena of cases which
do not approve of such identification (see Accountant and
Secretarial Services P. Lid: v. Union, [1988] 4 S.C.C. 324
and the cases cited therein.). Leaving this out of account
then, we may turn to a third category of cases, which we
think would also fail as an exception to the principle
behind S. 25FF. 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 S.C.C. 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 inaction" 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 direc-
tions. 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 Corpora-
388
tion are obliged to adhere to. We are making this observa-
tion because it was attempted to be argued on behalf of the
State and the Corporation that only certain assets of the
State ’industry’, viz. the tubewells, were taken over by the
latter and nothing more. We do not quite agree with this
contention but, in view of the approach we propose to adopt,
this aspect is not very material and need not be further
discussed.
Looking at the facts of this case in the above perspec-
tive, it appears to us that the State Government has acted
arbitrarily towards the appellants. It is true that the
State Government was incurring losses and decided to trans-
fer the tubewells to the Corporation. This decision would
have been the most unexceptionable, prudent and perhaps the
only decision that the Government could have taken, if it
had decided to completely cut itself off thereafter from any
responsibility or liability arising out of the operation of
the tubewells. But that the Government did not do. As point-
ed out earlier, the State Government, although transferring
the tubewells, undertook to recoup any losses that the
Corporation might incur as a result of the transfer. The
result, therefore, was that, despite the transfer of tube-
wells to the Corporation the Government continues to bear
the losses arising from this activity. But, while doing so,
it has abridged the rights of the appellants by purporting
to transfer only the tubewells and retrenched the appellants
from service as a consequences. A grievance has been made
that, while several other members of staff belonging to the
irrigation department such as engineers, clerks, etc. have
been sent on deputation to the Corporation, the State has
only chosen to retrench the service of as many as 498 tube-
well operators. This differential treatment may not amount
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to discrimination as contended by the appellants because
those others belonged to categories of Government staff
which could come back to Government service in the event of
the Corporation finding their services unnecessary at a
future date, for one reason or another as they were persons
with general qualifications who could be fitted into the
other work of the irrigation branch. The tubewell operators,
however, could not have been sent on deputation because
there was no possibility at all of their being fitted into
the irrigation branch later, in case the Corporation could
find no use for them because, once the tubewells had been
transferred for good to the Corporation, the Government
could find no openings for them in the service. While,
therefore, we do not agree with the appellant that the State
Government discriminated against the appellants as compared
with the other members of the staff by sending them on
deputation but not the appellants, we think that this treat-
ment meted but to the other staff shows that the Government
did not hesitate to burden the Corpo-
389
ration with the liability of their salary etc. while serving
on deputation which would only augment the losses, if any,
that the Corporation would incur by operating the tubewells.
But when it came to the case of the appellants, the Govern-
ment has considered it fit to retrench their services,
simultaneously making some arrangement or issuing some
directions enabling the Corporation to absorb them as if
they were fresh recruits. The assurance that they would be
paid according to their original scales of pay and at their
original leaves of pay came as a later development only
because of the pending litigation. It was very fair on the
part of the State Government to decide that, as the tube-
wells 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 appel-
lants 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 Govern-
ment. 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.
We would, however, like to clarify that the sole purpose
and object of our above direction is that the appellants
should be entitled to count their past service with the
Government for the purpose of computation of their salary,
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length of service and retirement benefits with the Corpora-
tion. This, however, should not result in the appellants’
claiming any seniority over the staff which the Corporation
has otherwise engage right from its commencement in 1970. To
permit
390
such a claim would result in injustice to those employees
whose seniority is based on their terms and conditions of
service with the Corporation which had been entered into a
long time before the present transfer proposal came to be
implemented. Though, as we have mentioned earlier, seniority
in service is not of much importance in this case as there
is no avenue of promotion to tubewell operators, the ques-
tion of seniority still becomes crucial in case the Corpora-
tion should close down any of the tubewells or decide on the
retrenchment of its staff by reorganising the operation of
tubewells in such a way that some of the staff may become
surplus. In such an event, if the appellants are given the
benefit of their length of service with the Government for
all purposes, some of the present employees of the Corpora-
tion may become liable to be retrenched as junior in length
of service to some of the appellants. Clearly, this should
not be allowed to happen and the Corporation staff should
not suffer merely because the appellants, who have been
subsequently inducted into the Corporation, are given all
the benefits of the length of their service with the Govern-
ment. There can be no question of any of the appellants
being considered senior to such operators on the Corpora-
tion’s establishment. In fact we cannot give such a direc-
tion without giving such operators an opportunity of being
heard. We would, therefore, like to make it clear that,
while the appellants will have, for purposes of computation
of their salary, length of service and retirement benefits
the advantage of counting the period of their service with
the Government, this will not enable them to claim any
seniority over the former employees of the Corporation.
At the same time there is the apprehension of the appel-
lants that if they are treated as juniors to all the Corpo-
ration’s employees, they may be sent out first in case there
is any retrenchment. It is prayed that it should be ensured
that such an eventuality does not affect the present appel-
lants as a result of their being treated as juniors to the
former employees of the Corporation. We are told that this
eventuality is not merely hypothetical but real. This is a
situation that cannot be helped, being one in which the
equities in favour of the appellants will be counter weighed
by those in favour of the Corporation’s direct employees,
The only solution to this difficulty which we can see in for
the Corporation not to retrench the services of any of the
appellants as far as possible whether due to the closure of
some of the tubewells or otherwise. We are informed that a
circular was issued by the Corporation on 13.7.87 and
19.8.87, directing, inter alia, that no fresh appointments
of tubewell operators will be made in the Corporation
against vacancies caused due to retrenchment, resignation or
death of an exist-
391
ing incumbent. Such a direction became necessary because
many of the tubewells of the Corporation had been installed
in the fifties and they had out-lived their optimum lives
and it became necessary to cut down. on the staff. The
continued adoption of this policy for some more time will
help the appellants tide over the crisis envisaged above. We
have already pointed out that most of the appellants, who
have now joined the Corporation, have rendered long years of
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service with the Government and will be retiring from serv-
ice in the next few years. The Corporation can perhaps
manage to continue them i. service without retrenching any
of them on the ground that some of the tubewells have to be
closed down or that some of these operators for some other
reason have become surplus for its needs. If this could be
done, it will be most equitable as it will achieve the
following ends:
(1) it will enable the present appellants to continue in
service till they retire in normal course;
(2) it will protect the interests of the erstwhile operators
of the Corporation who have been serving in the Corporation
from the beginning;
(3) it will not cause any financial prejudice to the Corpo-
ration because of the assurance already given that any
losses incurred by running the tubewells would be borne by
the Government itself; and
it will ensure that the Government acts fairly and
equitably fulfilling the legitimate expectations of its
employees.
For the reasons discussed above, we declare that the
appellants will be entitled to add their service in the
Government to their length of service in the Corporation for
purposes of computation of their salary, length of service
and retirement benefits. The Corporation is also directed to
ensure, as far as possible, that none of the appellants are
retrenched as surplus on account of any closure of tubewells
or other like reason until they retire or leave the service
of the Corporation voluntarily for any reason.
To sum up, even before the insertion of S. 25FF in the
Act, the employees of a predecessor had no right to claim
re-employment by the successor in business save in excep-
tional circumstances. Even where available, that claim was
not a matter of absolute right but of discretion, to be
judicially exercised, having regard to all the
392
circumstances. An industrial tribunal, while investigating
such a claim, had to carefully consider all the aspects of
the matter. It had to examine whether the refusal to give
re-employment was capricious and industrially unjustified on
the part of successor in business or whether he could show
cause for such refusal on reasonable and bona fide grounds
such as want of work, inability of the applicant to carry
out the available work efficiently, late receipt of the
application for re-employment in view of prior commitments
or any other cause which in the opinion of the tribunal made
it unreasonable to force the successor-in-interest to give
re-employment to all or any of the employees of the old
concern. This discretion given to industrial courts is no
longer generally available because of the insertion of
section 25-FF. But in a case where one or both of the par-
ties 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 direc-
tions to ensure that no injustice results from the change-
over. In the present case, the parties to the transfer are a
State on the one hand and a fully owned State Corporation on
the other. That is why we have examined the terms and condi-
tions of the transfer and given appropriate directions to
meet the needs of the situation. We, therefore, direct the
State Government and the Corporation--which is but a wholly
owned State instrumentality bound to act at the behest of
the State--to carry out our directions above, the Corpora-
tion being at liberty to amend its rules and regulations, if
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necessary, to give effect to the same.
We have been given to understand that none of the appel-
lants has taken the compensation amounts tendered by the
State and that the monies are now in deposit with the Corpo-
ration. We have already pointed out that the appellants can
claim either compensation or continuity of service but not
both. We should, therefore, like to make it clear that in
case any of the appellants have been paid any compensation,
that amount will have to be refunded by them before this
order can be given effect to qua them.
The appeals stand disposed of accordingly. There will be
no order regarding costs.
R.S.S. Appeals disposed of.
393