OFFICIAL LIQUIDATOR v. DAYANAND & Ors.

Judgment

#1. H 2. State of Kamataka v. Uma Devi, [2006] 3 SCR. UP. SEB. v. Pooran Chand Pandey, [2007] 10 SCR 920. _,-1 ~ 'r r· ~ ..... OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 333 review can be exercised in such matters only if it is shown that A the action of the employer is contrary to any constitutional or statutory provisions or is patently arbitrary or vitiated by ma/a fides - In the instant case, directions given by High Courts for creation of supernumerary posts to facilitate absorption of company paid staff are unsustainable and are set aside. B Legitimate Expectation - Held: At the root of legitimate In the instant case, there is nothing to , c expectation is the constitutional principle of rule of law, which ' requires regularity, predictability and certainty in government dealings with public - show that any competent authority had ever given any assurance to company paid staff that they wo 11ld get absorbed , against sanctioned posts or that there would be no abolition of posts meant to be filled by direct recruitment- On the other hand, they knew that their employment would come to an end on expiry of the tenure specified in the Jetter of appointment or on cessation of liquidation proceedings - Therefore, doctrine of legitimate expectation cannot be invoked. D In the offices of Official Liquidators attached to ·different High Courts there were two categories of E emplo}1ees: (i) those recruited in terms of rules framed under the proviso to Article 309 of the Constitution of India, against the posts sanctioned by the Department of Company Affairs, Government of India,\ and paid salary and allowances from the Consolidated Fu'nd of India; and F (2) the persons engaged by the Official Liquidators pursuant to sanction accorded by the Court concerned under Rule 308 of the Companies (Court) Rules, 1~9 and paid from the company fund. In the year 1978, Ministry of Law, Justice and Company Affairs, Government of India framed a Scheme providing for absorption of suitable and eligible company paid staff to lhe extent of 50% of vacancies in direct recruitment quota of Group C posts. G Writ petitions were filed by the Company paid staff H 334 SUPREME COURT REPORTS [2008] 15 S.C.R. 0 A before the Calcutta High Court and the Kerala High Court claiming, inter alia, status of and parity in salary and allowances with permanent Central Government employees appointed in the office of Official Liquidators. Both the High Courts held in favour of the writ petitioners. B Appeals were filed before the Supreme Court by the Government of India and the Official Liquidators. A writ petition, numbered as W.P.(C) No. 473/88, filed by the Company paid staff engaged by the Official Liquidator attached to the Delhi High Court was also transferred to c the Supreme Court and heard alongwith the appeals. The Court3 while dismissing the appeals filed by the Government of India and allowing the writ petition of the company paid staff, stayed operation of the judgments of the High Courts and the order in the writ petition, and gave opportunity to the Central Government to absorb the company paid staff by framing a Scheme modeled on the line of the 1978 Scheme within six months. The Government of India framed and notified the new scheme called the '1999 Scheme' for absorption of the company E paid staff against 50% of vacancies in direct recruitment quota. The authorities concerned undertook the exercise of absorption of the company paid staff. Meanwhile writ petitions were filed in the Calcutta High Court claiming absorption of all the company paid staff in the regular cadres and to treat them at par with Central Government employees. A similar writ petition was filed before the Delhi High Court wherein a further prayer was made for absorption of company paid staff in Group D posts also. The High Courts held in favour of the writ petitioners observing that the Supreme Court in the earlier decision G had given directions to absorb all the company paid staff. Aggrieved, the Official Liquidators filed the instant appeals. F

#3. Govt. of India and Ors. v. Court Liquidator's Employees Association and H Others. (1999) 2 Suppl. SCR 62 = [1999) 8 SCC 560. OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 335 ""....-t ......,,,, Allowing the appeals, the Court A • \-- ... ..,. ... ·- HELD: 1.1. This Court in the earlier case of Court Liquidator's Employees Association* not only gave an opportunity to the Government of India to frame and implement a new scheme modeled on the 1978 Scheme , but also stayed the operation of the orders impugned in the appeals and the one passed in the writ petition. It · would not be correct to say that this Court endorsed the directions given by the Calcutta High Court and the ' Kerala High Court for absorption of company paid staff c without any rider. [Para 32] [379-C, D, E] B *Govt. of India and Ors. v. Court Liquidator's Employees Association and Others, [1999] 2 Suppl. SCR 62 = [1999] , 8 sec 560, referred to D

1.2. The use of the words "failing which the judgments under appeal and the order in WP (C) No.4731 88 will stand confirmed" in paragraph 25 of the judgment in Court Liquidators' Employees Association case, leaves no manner of doubt that the orders passed by the High Courts and the one passed by this Court in the writ petition were to become effective only if the Government of India had not framed new scheme modeled on the 1978 Scheme. Government of India not only framed and notified the 1999 Scheme within the time given by the Court, but also issued guidelines for implementation of F the same. Therefore, the orders passed by the Calcutta High Court and the Kerala High Court and the direction given by this Court in the writ petition will be deemed to have become ineffective and inoperative and the respondents cannot derive any benefit from those orders G and directions. [Para 32] [379-F, G, H; 380-A] E

2.1. The respondents are not entitled to absorption against the sanctioned posts in Group C of the Department of Company Affairs, Government of India, as H 336 SUPREME COURT REPORTS [2008] 15 S.C.R. B A of right. It is not in dispute that the respondents were engaged by the Official Liquidators pursuant to the sanction accorded by the Courts concerned under Rule 308 of the Companies (Court) Rules 1959 and, from the inception of their employment, they are being paid from the fund created by disposal of the assets of the companies in liquidation. They were neither selected in accordance with the procedure prescribed by the rules framed under the proviso to Article 309 of the Constitution nor were they appointed against the posts c sanctioned by the Government of India. It is thus clear that the company paid staff constitute a separate and distinct class. Therefore, they cannot be heard to complain violation ofArticles 14 and 16 of the Constitution on the · ground that even after having worked for more than one decade, they have not been absorbed in the regular cadre, under the Government. [Para 34, 35 and 92] [381- C;-382-A-D; 425-F, G] 0 E

2.2. In Secretary, State of Karnataka v. Uma Devi* the Constitution Bench of this Court has held that there is no fundamental right in those who have been employed on daily wages or temporarily or on contractual basis, to claim absorption in service. The Constitution Bench clarified that the earlier decisions which run counter to the principles settled by it stood denuded of their status I F as precedents. [Paras 52 and 54] [396-D; 398-C] *State of Karnataka v. Uma Devi, [2006] 3 SCR 953 = [2006] 4 SCC 1; A. Umarani v. Registrar, Cooperative [2004] 7 SCC 112; Jawaharlal Nehru Societies, G Technological University v. T. Sumalatha (Smt.) and Others, [2003] 10 SCC 405; Director, Institute of Management Development, U.P. v. Pushpa Srivastava, [1992] 3 SCR 712 = [1992] 4 SCC 33; Dr. M.A. Haque and Others v. Union of India and Others, [1993] 2 SCR 1 = [1993] 2 sec 213; J & K Public Service Commission v. Dr. ·Narinder Mohan, [1993) 3 Suppl. SCR 900 = [1994] 2 sec 630; Dr. H + . J ~ , OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 337 Arundhati Ajit Pargaonkar v. State of Maharashtra, [1994] A Suppl. 3 SCC 380; Union of India v. Kishan Gopa/ Vya$, (1996] 7 SCC 134; Union of India v. Moti Lal, [1996] 2 SCR 727 = [1996] 7 SCC 481; Hindustan Shipyard Ltd. v. Dr. P. Sambasiva Rao, [1996] 7 SCC 499; State of H.P. v. Sures/1 Kumar Verma, [1996] 1 SCR 972 = [1996] 7 SCC 562; Dr. B Surinder Singh Jamwal v. State of J&K, [1996] 3 Suppl. SCR 663 = [1996] 9 SCC 619; E. Ramakrishnan v. State of Kera/a, [1996] 5 Suppl. SCR 533 = [1996] 10 SCC 565; Union of India and Others v. Bishambar Dutt, [1996] 7 Suppl. SCR 650 = [1996] 11SCC341; Union oflndia v. MahenderSingh, c [1996] 9 Suppl. SCR 199 = [1997] 1 sec 247; P. Ravindran and Others v. Union Territory of Pondicherry anti Others, [1996] 7 Suppl. SCR 1S8 = [1997] 1 SCC 350; Ashwani Kumar and Others v. State of Bihar and Others, [1997] 2 SCC 1; Santosh Kumar Verma and Others v. State D of Bihar and Others, [1997] 2 sec 713; State of U.P. and Others v. Ajay, (1997] 4 SCC 88; Patna University v. Dr. Arnita Tiwari, [1997] 7 SCC 198; Madhyamik Shiksha Parishad v. Anil Kumar Mishra, [2005] 5 SCC 122; Delhi Deve/opme:nt Horticulture Employees' Union v. Delhi Administration, Delhi, [1992] 1 SCR 565 = [1992] 4 sec 99, relied on. E . Narender Chadha v. Union of India, [1986] 1 SCR: 211 = [1986] 2 SCC 157; Dhirendra Chamoli v. State of U.P.l [1986) 1 SCC 637; Surinder Singh and Another v. Engineer in-Chief, CPWD and Others, [1986) 1 SCC 639; H. C. Puttaswamy v. Hon'ble Chief Justice of Karnataka High Court, Bangalore, [1990) 2 Suppl. SCR 552 = [1991) 2 .Supp. SCC 421; Bhagwati Prasad v. Delhi State Mineral Development Corporation, [1990] 1 SCC .361; Jacob M. Puthuparambil v. Kera/a Water Authority, [1991] 1 SCC 28; G State of Haryana v. Piara Singh, [1992) 4 SCC 118; Randhir Singh v. Union of India, (1982) 3 SCR 298 = [1982] 1 SCC 618; R.N. Nanjundappa v. T. Thimmiah, [1972]-tSCC 409l Daily Rate Casual Labour v. Union of India, (1988] 1 SCR ! 598 = [198~] 1 SCC 122; Bhagwati Prasad v. DeJhi State H F 338 SUPREME COURT REPORTS [2008] 15 S.C.R. A Mineral Development Corporaiion, [1990] 1 SCC 361; Dharvvad District P. W.D. Literate Daily Wage Employees Association and others v. State of Karnataka and others, (1990] 1 SCR 544 = (1990] 2 sec 396 and State of Haryana v.· Piara Singh, [1992] 4 SCC 118, held inapplicable. B

2.3. By virtue of Article 141 of the Constitution, the judgment in Uma Devi's case is binding on all the courts including this Court till the same is overruled by a larger Bench. However, a two-Judges Bench of this Court in C Pooran Chand Pandey's case has attempted to dilute the Constitution Bench judgment by suggesting that the said decision cannot be applied to a case where regularization has been sought for in pursuance of Article 14 of the Constitution and that the same is in conflict with the · D judgment of the seven-Judges Bench in Maneka Gandhi's case. 4 This was not called for. In view of the facts in Pooran Chande Pandey's case, the two-Judges Bench had no occasion to make any adverse comment on the binding character of the Constitution Bench judgment in E Uma Devi's case. Therefore, the comments and observations made in Pooran Chandra Pandey's case should be read as obiter and the same should neither be treated as binding by the High Courts, Tribunals and other judicial fora nor should they be relied upon or made F basis for bypassing the principles laid down by the (Paras 57, 59 Constitution Bench in Uma Devi's case. and 71] (400-H; 401-A-D; 403-B, 0, E; 411-E] UP. SEB v. Pooran Chand Pandey, [2007] 10 SCR 920 G = [2007] 11 sec 92, overruled. Indian Drugs and Pharamaceuticals Ltd. v. Workmen (2007] 1 SCC 408; Gangadhar Pillai v. Siemens Ltd., [2007] 1 SCC 533; Kendriya Vidya/aya Sangathan v. L. V. H 4. Maneka Gandhi v. Union of India, [1978] 2 SCR 621 [1978] 1 SCC 248. -., -"f OFFICIAL LIQUIDATOR v. DAY ANAND AND ORS. 339 Subramanyeswara, Aeronautics Ltd. v. Dan Bahadur Singh, [2007] 6 SCC 207, referred to. [2007] 5 SCC 326; Hindustan A State of Orissa v. Sudhanshu Sekhar Misra, AIR (1968) SC 647; State of Gujarat v. Ambica Quarry Works, [1987] 1 SCC 213; Bhavnagar University v. Palitana Sugar Mill Pvt. Ltd., [2003] 2 SCC 111 and Bharat Petroleum Ltd. v. N.R. Viramani, [2004] 8 SCC 579, cited. 8

2.4.There have been several instances of different 1 Benches of the High Courts not following the judgments/ C orders of coordinate and even larger Benches. In some cases, the High Courts have gone to the extent of ignoring the law laid down by this Court without any tangible reason. Likewise, there have been instances in which smaller Benches of this Court have either ignored D or bypassed the ratio of the judgments of the larger Benches including the Constitution Benches. These cases are illustrative of non-adherence to the rule of judicial discipline. Discipline is sine qua non for effective and efficient functioning of the judicial system as also for E sustaining the system. Therefore, it has become necessary to reiterate that disrespect to constitutional ethos and breach of discipline have grave impact on the credibility of judicial institution and encourages chance litigation. Predictability and certainty is an important ! F hallmark of judicial jurisprudence and increase in the frequency of conflicting judgments of the superior judiciary will do incalculable harm to the system inasmuch as the courts at the grass root will not be able to decide as to which of the judgments lays down the G correct law and which one should be followed. [Para 60 and 70] [403-F, G; 410-D, E, F] Mahadeolal Kanodia v. Administrator General of W.B. 1960 (3) SCR 578; Lala Shri Bhagwan v. Ram Chandra AIR 1965 SC 1767; Union of India v. Raghubir Singh 1989 (2) H 340 SUPREME COURT REPORTS [2008] 15 S.C.R. A SCC 754; Sundarjas Kanya/al Bhatija and others v. Collector, Thane 1989 (3) SCC 396; Dr. Vijay Laxmi Sadho v. Jagdish 2001 (2) SCC 247; Pradip Chandra Parija and others v. Pramod Chandra Patnaik and others 2002 (1) SCC 1; Bharat Petroleum Corpn. Ltd. v. Mumbai Shramik Sangha 2001 (4) B SCC 448; State of Bihar v. Kalika Kuer and others 2003 (5) SCC 448; State of Punjab v. Devans Modern Breweries Ltd. 2004 (11) SCC 26; Central Board of Dwaoodi Bohra Community v. State of Maharashtra 2005 (2) SCC 673; State of UP. and others v. Jeet S. Bisht and another 2007 (6) SCC 586; UP. Gram Panchayat Adhikari Sangh v. Daya Ram Saroj 2007 (2) SCC 138; Gair Board, Ernaku/am v. Indira Devi P.S. 1998 (3) SCC 259 and Coir Board, Ernakulam, Kera/a State v. Indira Devai P.S. 2000 (1) SCC 224, relied on. c I , D

3.1. The 1999 Scheme does not suffer from any legal or constitutional infirmity insofar as it provides for absorption of the company paid staff only to the extent of 50% vacancies in direct recruitment quota of Group C posts. Since the 1999 Scheme was framed by the E Government of India in furtherance of the opportunity given by this Court and no deviation is shown to have been made from 1978 Scheme insofar as Group 'C' posts are concerned, the same cannot be dubbed as arbitrary, irrational or unreasonable, simply because all the F company paid staff who were in position as on 27 .8.1999 may not get absorbed in the regular cadre. [Para 38 and 92] [384-E, F; 425-G, H]

3.2. However, it appears that from 1985 onwards employees were also appointed who could be eligible for absorption in Group D posts. The Government of India should have, while framing the 1999 Scheme, taken cognizance of the presence of such staff and made appropriate provision for their absorption. Its failure to do so has certainly resulted in unintended discrimi.nation G H ;· I )- :.. ~ r I ~ >'~ ~ ~ ~ ; . >-. OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 341 --~ ··qua one section of the company paid staff. The A ,.,. Government of India is, therefore, directed to frame a scheme, modeled on the 1999 Scheme, also for absorption of eligible and suitable employees against Group D posts. [Para 93) [426-F, G; 427-A, BJ ; ).· ~ ..l. 8

4.1. The decision taken by the Government of India to reduce the number of posts in direct recruitment quota and consequential abolition of posts in the Department of Company Affairs is not vitiated by arbitrariness or violation of the doctrine of equality or malafides. The plea c of the respondents that the Government of India has in the garb of implementing the policy decision taken in 2001 abolished a large number of posts in the direct recruitment quota thus making the 1999 Scheme redundant, cannot be accepted. The respondents have neither assailed the decision of the Government to abolish the posts on the ground of malafides nor could they show that the exercise undertaken by the Screening Committee to reduce the number of posts in regular cadre of Department of Company Affairs is vitiated by arbitrariness or non-application of mind or the same is E influenced by extraneous reasons. [Para 29,40 and 92] [376-G, H; 377-A; 387-E, F; 426-A, B] D

4.2. Creation and abolition of posts, formation and structuring/ restructuring of cadres, prescribing the F source and mode of recruitment and qualifications and criteria of selecUon etc. are matters which fall within the exclusive domain of the employer. Although the decision of the employer to create or abolish posts or cadres or to prescribe the source or mode of recruitment and lay down the qualification etc. is not immune from judicial review, the Court will always be extremely cautious and circumspect in tinkering with the exercise of discretion by the employer. The Court cannot sit in appeal over the judgment of the employer and ordain that a particular post or number of posts be created or filled by a particular G H 342 SUPREME COURT REPORTS [2008] 15 S.C.R A mode of recruitment. The power of judicial review can be exercised in such matters only if it is shown that the action of the employer is contrary to any constitutional or statutory provisions or is patently arbitrary or vitiated by malafides. In the instant case, the directions given by the High Courts for creation of supernumerary posts to facilitate absorption of the company paid staff are unsustainable and are set aside. [Para 41 and 46] [387- G, H; 388-A, B; 390-B] B D Secretary, State of Karnataka v. Uma Devi 2006(3) SCR C 953=2006 (4) SCC 1; State of Haryana v. Navneet Verma 2007 (11) SCR 762 = 2008 (2) SCC 65; M. Ramanatha Pillai v. State of Kera/a 1974 (1) SCR 515 = 1973 (2) SCC 650; Kedar Nath Bahi v. Stat~ of Punjab 1974 (3) SCC 21; State of Haryana v. Des Raj Sangar 1976 (2) SCR 1034 = 1976 (2) SCC 844; Dr. N. C. Singhal v. Union of India 1980 (3) SCR 44 = 1980 (3) SCC 29; Avas Vikas Sanghathan v. Engineers Association 2006 (3) SCR 516 = 2006 (4) SCC 132; Divisional Manager, Aravali Golf Club and another v. Chander Hass and another 2007 (12) SCR 1084 =(2008) 1 E SCC 683 and Delhi Development Horticulture Employees Union v. Delhi Administration, Delhi and others 1992 (4) SCC 99, relied on. F

5.1. The doctrine of legitimate expectation cannot be invoked for sustaining the directions given by the High Courts of Calcutta and Delhi for creation of supernumerary posts to facilitate absorption of all company paid staff in the regular cadres. At the roof of the principle of legitimate expectation is the constitutional principle of rule of law, which requires regularity, G predictability and certainty in government's dealings with the public. There is nothing on record to show that any competent authority of the Government of India had ever given any assurance much less made a promise to the respondents that they would get absorbed against the H sanctioned posts or that there would be no abolition of \ ·"'{ I ' • ., ., ''"""' ••" I r )r- I OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 343 posts meant to be filled by direct recruitment. As a matter A of fact, the respondents joined as company paid staff knowing fully well that they were being employed as additional staff in connection with the liquidation proceedings and on the basis of sanction accorded by the Court concerned and further that they will have no B right to seek absorption. They also knew that their employment will come to an end on the expiry of the tenure specified in the letter/order of appointment or on cessation of the liquidation proceedings. Further, there is nothing in the language of Rule 308 of the 1959 Rules c from which it can be inferred that those employed as additional staff in connection with the liquidation proceedings will, in future, be absorbed in the regular cadres. [Para 77, 78 and 90] [415-D, E, F; 416-C; 424-G; 426-C] D State of Karnataka v. Uma Devi 2006 (3) SCR 953; Navjyoti Coop. Group Housing Society v. Union of India 1992 (4) SCC 477; Food Corporation of India v. Kamdhenu Cattle Feed Industries 1993(1) SCC 71; Union of India and Ors. v. Hindustan Development Corporation and Ors. 1993(3) SCC E 499; Punjab Communications Ltd. v. Union of India 1999(4) SCC 727; J.P. Bansal v. State of Rajasthan 2003(5) SCC 134; Dr. Chancha/ Goyal (Mrs.) v. State of Rajasthan 2003(3) SCC 485; Ku/deep Singh v. Govt. of NCT of Delhi 2006(5) SCC 702 and Ram Pravesh Singh v. State of Bihar 2006(8) SCC 381, referred to. F The Authority of Law by J. Raz, (1979) Ch. 11, referred to. Council of Civil Services Union v. Minister of the Civil Service 1985 AC 374 (HL), referred to.

5.2. The 1978 Scheme as also the 1999 Scheme are merely illustrative of compassionate approach adopted by the Government of India to facilitate absorption of the company paid staff against the sanctioned posts to the G H 344 SUPREME COURT REPORTS [2008] 15 S.C.R. iA extent of 50% of vacancies in the direct recruitment quota. These schemes cannot be read as a charter of legitimating the claim of the company paid staff for absorption in the Government service de hors the availability of vacancies, more so, when the Government B has taken a rational policy decision to reduce direct recruitment to various services in a phased manner. [Para 90] .[424-H; 425-A, B] D

6.1. The respondents are not entitled to have their pay fixed in the regular scales and other monetary c benefits at par with regular employees working under the Official Liquidators. The approach of the High Courts that similarity in the nature of work of the company paid staff on the one hand and regular employees on the other, is by itself sufficient for invoking the principle of equal pay for equal work, is clearly erroneous. The respondents were employed/engaged by the Official Liquidators · pursuant to the sanction accorded by the Court under Rule 308 of the 1959 Rules and they are paid salaries and allowances from the company fund. They were neither E appointed against sanctioned posts nor they were paid out from the Consolidated Fund of India. Therefore, the mere fact that they were doing work similar to the regular employees of the office of the Official Liquidators cannot be treated as sufficient for applying the principle of equal pay for equal work. The directions given by the High Courts for bringing about parity between the company paid staff and regular employees· in the matter of pay, allowances etc. are set aside. [Para 72, 76, 92 and 95] [414-C-G; 426-D; 427-G] F