Employees declining absorption in new DPSUs shall remain on deemed deputation until retirement.

The Government corporatised the Ordnance Factory Board (OFB), transferring its production units to seven wholly government-owned Defence Public Sector Undertakings (DPSUs), and transferred OFB employees to those entities on deemed deputation.

The applicants, including members of the Indian Ordnance Factories Service (IOFS), challenged the process for seeking options between permanent absorption in a DPSU and continuation in government service.

They contended that the service framework and consequences for employees who declined absorption were unclear, and sought protection of their service conditions and IOFS cadre interests.

The Government subsequently issued an O.M. dated 15 June 2026 providing that employees who did not opt for absorption would remain on deemed deputation until retirement, and amended Rule 37 of the CCS (Pension) Rules, 2021 to that effect.

The Tribunal heard the applications together.

1. Whether the applicants had a vested legal right not to exercise an option between permanent absorption in a DPSU and continuation in government service on deemed deputation.

2. Whether the option process should be restrained because the service framework for employees declining absorption was allegedly unclear or inadequate.

Rule 37(2) of the CCS (Pension) Rules, 2021 provides that, after the relevant public sector undertaking frames its rules and regulations, government servants on deemed deputation are to be asked to choose between reverting to government service and seeking permanent absorption.

The Tribunal also relied on the proviso inserted below Rule 37(7), which provides that specified former OFB employees who do not opt for absorption will remain on deemed deputation in the DPSUs until retirement.

In reviewing the Government’s corporatisation policy, the Tribunal applied the principle that courts generally do not review the merits of policy choices unless they are unlawful, unconstitutional, mala fide, or arbitrary: Bajaj Hindustan Ltd. v. Sir Shadi Lal Enterprises Ltd., (2011) 1 SCC 640, including its reliance on BALCO Employees’ Union v. Union of India, (2002) 2 SCC 333.

It also cited Dr. N.C. Singhal v. Union of India, (1980) 3 SCC 29, on the Government’s authority over the creation and abolition of posts.

It also cited In re: Distribution of Essential Supplies and Services During Pandemic, (2021) 7 SCC 772, recognising both executive primacy in policymaking and the courts’ power of judicial review.

The Tribunal found that the Government’s later measures addressed the principal concern raised by the applicants: employees who declined permanent absorption could remain government servants on deemed deputation until retirement and continue to be governed by applicable Central Government service rules.

It therefore held that the applicants had not established an infringement of a statutory or constitutional right warranting a direction to halt the option process.

The process was authorised by Rule 37 and formed part of the Government’s corporatisation policy; absent a demonstrated legal or constitutional defect, the Tribunal would not interfere with that policy.

Both original applications were dismissed; interim orders were vacated, pending miscellaneous applications were disposed of, and there was no order as to costs.