Holding

The disinvestment of ITDC's hotel property is a policy decision of the Government, not contrary to law, and the employees' constitutional claims under Articles 14, 21 and 311 are untenable; therefore the writ petitions are dismissed.

Summary

The petitioners, employees of ITDC's Hotel Agra Ashok, challenged the Government of India's decision to disinvest the hotel by selling it to a private party, alleging the sale price was too low, the transfer of their services without consent violated Articles 14, 21 and 311, and that the Voluntary Retirement Scheme (VRS) should be extended to them. The respondents argued that disinvestment is a policy decision of the Government, not subject to extensive judicial scrutiny, and that the transfer agreement protected the employees' service conditions. The Court examined the nature of disinvestment as a policy decision, the applicability of constitutional protections to employees of a public sector undertaking, and the contractual terms of the share purchase agreement. It held that the disinvestment was a lawful policy decision, the employees had no absolute constitutional right to challenge it, and their service conditions were safeguarded under the agreement, rendering the VRS claim untenable. Consequently, the writ petitions were dismissed and the related transfer cases were also disposed of.

Issues considered

The legality of the Government's disinvestment decision in a public sector undertaking and its susceptibility to judicial review.
Whether employees of a public sector undertaking can invoke Articles 14, 21 and 311 of the Constitution to challenge the transfer of their service and the terms of disinvestment.
Whether the Voluntary Retirement Scheme (VRS) or its equivalent must be extended to employees transferred under the disinvestment scheme.
Whether the transfer of service without employee consent is permissible under the Companies Act and relevant case law.
The adequacy of the sale price of the hotel and whether it amounts to an arbitrary or illegal action.

Legislation cited

Companies Act, 1956s. 391, s. 394, s. 617
Employees' Provident Funds and Miscellaneous Provisions Act, 1952

Subjects

disinvestmentpublic sector undertakingjudicial reviewservice conditionsvoluntary retirement schemetransfer of serviceconstitutional rightsArticles 14, 21, 311policy decision

Judgment

ALL INDIA ITDC WORKERS UNION AND ORS. A
v.
ITDC&ORS.

OCTOBER 31, 2006

[DR. AR. LAKSHMANAN AND A.K. MATHUR, JJ.] B

Constitution of India-Articles I 4, 2 I and 311- Disinvestment decision
by Government of India-Sale of a five star hotel property of India Tourism
Development Corporation to a private party-Writ Petitions by Workers C
Union challenging it as being arbitrary and illegal-Held, disinvestment
decision is a policy decision of the Government which should be least
interfered.in judicial review-On facts, the interests of the workers are fully
protected and hence their allegations are baseless.

Petitioners filed Writ Petitions before High Court questioning the D
decision of the Government of India in disinvesting one of the five star Hotels
belonging to Indian Tourism Development corporation (ITDQ by selling it to
a private party as arbitrary and illegal. The petitioners contended that
Government oflndia sold the Hotel far below its market price;'that they belong
to All India Common Cadre , being officers of the ITDC , and hence the
transfer of their services to the new employer is illegal and arbitrary. The E
Writ Petitions of the petitioners were transferred to this Court. The
petitioners filed an application before this Court to dire<'t the respondents to
make applicable the Voluntary Retirement Scheme (VRS) introduced by the
Government of India to them also as they are similarly situated and serving
under similar conditions under which employees of different ITDC Hotels are F
circumstanced and serve the ITDC.

Respondent No. 1 contended that disinvestment is a policy decision of
the Government of India; that this Court has held that the said policy decisions
should be least interfered in judicial review and hence the petitioners have
no absolute right under Articles 14, 21 and 311 of the Constitution oflndia; G
that the petitioners are public sector Undertaking employees and not
Government employees; that the rights of the petitioners are not affected; that,
after disinvestment, it is for the new employer to float VRS to its employees
and hence the petitioners cannot demand to apply the VRS introduced for its
other unit
127 H
128 SUPREME COURT REPORTS (2006] SUPP. 8 S.C.R.

A The Union of India contended that the Public Sector Disinvesment
Commission recommended disinvestment of ITDC as it falls in non-core
category; and that a decision was taken to divest each property of ITDC
individually.

Other respondents contended that the Government of India took a
B decision for disinvestment of the properties owned by respond<;nt No. 1 as
they were running in huge losses; that there is no change in service condition
of the petitioners as per the terms of share purchase agreement; and that
there was no policy decision of VRS to the petitioners.

Disposing of the Transferred cases, the Court
c
HELD: 1.1. Disinvestment in Public Sector Enterprises is a policy
decision of the Government of India. The policy decision should be least
interfered in judicial review and that the workers have no absolute right under
Articles 14, 21and311 of the Constitution oflndia challenge the same.
(138-D-E)
D
1.2. The decision of the Government of India to divest the property was
a policy decision which was not in any manner contrary to the law of the land.
It is evident from the scheme that the terms and conditions of service applicable
to the employees were not in any way being less favourable then 'those
E applicable to them immediately on the date tltereof. The apprehension of the
employees is baseless. (138-G-H; 139-C; 139-F-G]

1.3. The petitioners cannot claim parity in respect of other employees
working under ITDC in different properties. Respondents are under no
obligation to float the VRS scheme since the VRS has to be given only when
F company is retrenches its regular t:mployees. The company is ready to
continue with its employees w~th the same terms and conditions mentioned in
the share purchase agreement The employees cannot compel the management
to introduce VRS scheme. (140-F-H)

1.4. The Government has acted on advise of experts before taking a
G decision to disinvest its shares in ITDC Limited. Even thereafter, through a
fair and transparent process, the Government has ensured that it has got the
best price for its shares. The Government has not received any other higher
offer. The contenthn of the petitioners that the price is less has not been
supported by any documentary evidence. The Government oflndia has ensured
H that the interests of the workmen are fully protected. (143-B-C; 145-B)
,i ALL INDIA ITDC WORKERS UNION v. ITDC [LAKSHMANAN, .I.] 129

Jawaharlal Nehru University v. Dr. K.S. Jawatkar & Ors., (19891 Supp. A
I SCC 679; Bale Employees' Union (Regd.) v. Union of India & Ors., (20021
2 SCC 333 and Board of Trustees, Visakhapatnam Port Trust & Ors. v. TS.N.
Raju & Anr., (2006) 9 SCALE 55 , referred to.

Southern Structurals Staff Union v. Southern Structurals LTD. (1994)
81 Comp. Cases 38J (Mad), referred to. B
Nokes v. Doncaster Amalgamated collieries Ltd (1941) 11 Company
Cases 83 House of Lords, referred to .

CIVIL ORIGINAL JURISDICTION : Transferred Case (Civil) No. 73 of
2002. c
WITH

T.C. (Civil) No. 76/2002.

M.L. Bhat. Purnima Bhat, the appellants in T.C. No. 73/2002. D
Jayant Nath, Suresh Tripathy, Subhash Mishra and Rakesh K. Sharma
for the Appellants in T.C. No. 76/2002.

Rakesh Dwiedi, Arvind Kumar Shukla, Alok Shukla, Sriparana Chatterjee
and lrshad Ahmed for the Respondent No. 4 in T.C. No. 73/2002 and E
Respondent No. 3 in T.C. No. 76/2002.

Ashok Bhan, Varuna Bhandari and D.S. Mahra for the Respondent No.
3 in T.C. No. 73/2002 and Respondent No. 2 in T.C. No. 76/2002.

Gaurav Agarwal, B. Krishna Prasad, Parveen Jain and Suresh Chandra F
Tripathy for the Respondents.

The Judgment of the Court was delivered by

DR. AR. LAKSHMANAN, J. The employees of Hotel Agra Ashok filed
a.writ petition being No. 41650 of200 I in the Allahabad High Court questioning G
the action of the first respondent - India Tourism Development Corporation
(hereinafter called 'the !TDC'), New Delhi to sell Hotel Agra Ashok outrightly
to a private party as arbitrary and illegal. According to them, Hotel Agra
Ashok is one of the biggest hotels at Agra and is a five star hotel having
58 centrally air-conditioned luxurious room and other facilities. It is also their
H
130 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A case that non-implementation of voluntary retirement scheme in respect of the
employees of the Hotel Agra Ashok is totally discriminatory, arbitrary, unjust
and without any rhyme or reason. It is further submitted that because the
Government of India introduced a disinvestment plan with the object to sell
the hotel to a private party which is liable to affect the employees very
B seriously including their service conditions.

The Government of India issued a press communique in the month of
January, 200 I proposing to sell Hotel Agra Ashok for a sum of Rs.2.36 crores
which is wholly inadequate and amounts to a totally distress sale. The
Government has devised a scheme of creating an artificial company i.e. Hotel
C Yamuna View Private Limited 4th respondent herein and the said company has
been incorporated only for the purpose of selling the said hotel after the hotel
is transferred to it. The employees have come to understand thr0ugh press
reports that the hotel is being sold out to one Mis Mohan Singh - respondent
No. 5 and his bid was accepted by the Central Government in pursu!lnce to
t~e advertisement. It is further submitted that the entire Hotel Agra Ashok
D is being sold out only merely for a sum ofRs.3.90 crores whereas the valuation
by the Agra Cantonment Board in the year 1999 of its land and buildings
alone is more than Rs.5.58 crores. Acco.iding to the employees, its market
price at present cannot be less than Rs.20 crores. It is the contention of the
employees that because of the change of ownership of the Hotel, the service
E conditions of the employees should not be changed by the private person -
and that the existing service condit:ons as originally agreed between the
various· employees of the Hotel and the new purchaser must be maintained.
The prayer in the writ petition reads thus:

"(a)a writ, order or djcection in the nature of mandamus restraining
F the respondents from unilatenlly changing the terms and conditions
of all class Ill & IV e:;1ployees of the Hotel in view of the proposed
sale of Hotel Agra Ashok, Agra, to respondent No. 5;

(b) a writ, order or direction in the nature of mandamus directing the
parties concerned to maintain status-quo in respect of the service
G conditions of the petitioners and also in respect of the proposed sale
and transfer of Hotel Agra Ashok to respondent No. 5;

(c) a writ, order or direction in the nature of mandamus commanding
the respondents to enforce and implement and to apply Voluntary
Ret:rement Scheme which has been made applicable only in respect
H of the employees of Ashok Travels and Tours and not in respect of
ALL INDIA ITDC WORKERS UNION v. ITDC [LAKSHMANAN, J.] 131
the employees of Hotel Agra Ashok, Agra; A
(d) any other writ, order or direction as this Hon'ble court may deem
fit and proper in the circumstances of the case, and

(e) award cost of the petition to be paid to the petitioners."

The above writ petition was transferred to this Court and is connected B
with other transferred cases.

The petitioners have also filed I.A. No. 49 of 2004 in transfer case No.
73 of 2002 and made a prayer to direct the respondents to apply Voluntary
Retirement Scheme (YRS) in pursuance of the directions of the Government C
of India vide letter No. I-JS(T)/2002 dated 12.02.2002 and as prayed for by
· them in the writ petition. It is stated in the said IA that the employees of Hotel
Ashok Agra are similarly situated and serving under similar conditions under
which employees of different ITDC Hotels are circumstanced and serve the
ITDC. It is further submitted. that in the case of Hotel Manali Ashok, the YRS
is made applicable during the pendency of the above matters and that the D
employees de not challenge the policy of disinvestment as such. However,
their service rights are to be protected since there is no difference in service
conditions between the employees of Hotel Manali Ashok and Hotel Agra
Ashok, both are similar and equal and the discrimination between the two sets
of employees is violative of Article 14 of the Constitution of India and, E
therefore, both are to be treated similarly.

T.C. No. 76 of 2002 (Arising out of T.P.(C) No. 948 of 2001)

Civil Writ Petition No. 7195 of 2001 was filed by one K.K. Gautham and
7 Ors. in the High Court of Delhi against ITDC, New Delhi and Hotel Yanmna F
View Pvt. Ltd. throug~ its Director Mr. Arvind Mehta, New Delhi.

In the above writ petition, th_e petitioners sought to challenge the
proposed action of respondent No. 1 of transferring out the services of the
petitioners, who are officers of respondent No. 1 to respondent No. 3, a newly
incorporated company. It is stated that the petitioners are presently posted G
in Hotel Agra Ashok in· pursuance of their policy of disinvestment and ITDC
have proposed to sell the said Hotel to a private bidder. The grievance of the
petitioners is that the officers of the !TDC form an All India Common Cadre
in different disciplines and that All India seniority lists are maintained and
career progress takes place on the basis of All India Seniority and that the
H

I
132 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R .

.A officers are governed by common service conditions, pay-scales and rules.
The petitioners questioned the proposed transfer to a new employer as illegal
and arbitrary. The prayer in the above writ petition reads as follows:

"(i) That this Hon 'ble Court may pass a Writ of Certiorari or any
other appropriate writ, order or direction quashing the scheme of
B transfer of services of the petitioners from respondent No. l to
respondent No. 3.

(ii) That this Hon'ble Court may pass a Writ of Certiorari or any
other appropriate writ, order or direction quashing the clause 3 .3
(d) and 3 .5 and such other clauses of the Scheme of Arrangement
c prepared by respondent No. l (Annexure-p-3)

(iii) Award the cost of writ petition to the petitioners: and
(iv) Pass such other or further orders as this Hon'ble Court may
deem fit and proper in the facts and circumstances of the case."

D The above writ petition was also transferred to this Court.

A counter affidavit was filed by the ITDC, respondent No. I through
its Company Secretary. According to them, disinvestment was a policy decision
of the Government of India and that this Court has held that the said policy
decisions should be least interfered in judicial review and that the Government
E employees have no absolute right under Articles 14, 21 and 311 of the
Constitution of India and that the Government can abolish the post itself. It
is further submitted that in the present case, the petitioners are not Government
employees and are merely employees of a public sector undertaking and that
the entire process of disinvestment of the Hotel was carried out by the
F Government of India, Department of Disinvestment and that in terms of the
settlement, the wages of the employees including the petitioners had been
restructured and revised and were operative and that the respondent is not
curtailing them and the rights of the petitioners are not affected in any
manner. It is further submitted that the contention of employees that the
scheme of VRS in respect of the employees of Ashok Travels & Tours (a Unit
G of ITDC) be made applicable tcr the employees of the disinvested Unit - Hotel
Agra Ashok is absolutely untenable because after the disinvestment, it is for
the buyer to float the scheme of VRS in terms of the transferred documents.

In view of the above, it is submitted that the apprehension of the
· petitioners is baseless and liable to be rejected.
H
J

ALL INDIA ITDC WORKERS UNION v. ITDC [LAKSHMANAN, J.] 133

The Union oflndia filed its affidavit in reply through its Under Secretary A
and submitted that successive governments, both at the Centre and the
States have been following the economic policy of disinvestment in Public
Sector Entetprises due to various reasons and in August, 1996, the Central
Government set up a Public Sector Disinvestment Commission to make
recommendations on the identified Central Public Sector Undertakings which B
may be disinvested. It was further submitted that ITDC is a Government
Company as defined under Section 617 of the Companies Act, set up in 1966
and at the relevant time the Government of India was holding about 89.97%
shares in ITDC, which wasfurln:irlg'.33,·hotels~in'.al-hand that ITDC ~as running
heavy losses and its"6~~~panty rates were far-ibelow the"market average
despite the fact that.~its,room~ rents" w~te I6wet than other five star hotels. C
•I .... ~ • ~ ;•$-., -,... ,

The Disinvestment Commission in its report recommended that ITDC
falls in the non-core category and hence disinvestment can go up to 74% or
more. The recommendation was accepted by the Government at the level of
Cabinet Committee on Disinvestment and a decision was taken by Inter-
Ministerial Group and at the level of the Cabinet Committee on Disinvestment D
to divest each property individually rather than altogether or in groups.

Respondent Nos. 4 & 5 filed a separate counter affidavit in reply.
According to them, the Government of India had taken a decision for
disinvestment of the properties owned by respondent No. l as majority of
properties doing hotel business were running huge losses to the tune of E
crores of rupees and unnecessarily increasing the liabilities of the Corporation.
It was submitted that there is no change in service conditions of the employees
as per the terms of share purchase agreement. That after the creation of the
new Company- Hotel Yamuna View Private Limited, all the employees working
with Hotel \Agra Ashok were shifted to the new company which was also a p
subsidiary company of respondent No. 1. Class III and IV employees of the
Hotel approached the High Court and agitated their transfer from ITDC to
Hotel Yamuna View Private Limited by way of a Writ Petition No. 41650 of
2001. The High Court, by way of an interim order, maintained the status quo
regarding service conditions of Class III and IV employees of the hotel and
pursuant to the agreement the Management of the Hotel Agra Ashok was G
transferred to respondent Nos. 4 and 5 on 07.02.2002 and started abiding by
each terms mentioned in the agreement. Accordingly, the service conditions
of the employees working with Hotel Agra Ashok were maintained as before.
Some of the other employees of Hotel Agra Ashok filed civil Writ Petition No.
7195 of2001 before the High Court of Delhi and that the Government of India H
134 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A as per the report of the Disinvestment Commission accepted the same and
transferred the hotel to the respondents and that the decision of the Government
of India to sell its share in ITDC was a policy decision within the ambit of
law on the Constitution of India. With regard to the YRS scheme, it was
submitted that for the employees of Ashok Travels and Tours, YRS Scheme
was introduced by circular dated 02.03.2001 but there was no policy for VRS
B regarding Hotel Agra Ashok. Also under clause 8 of the said circular regarding
introduction of YRS, it is clearly stated that the schemes does not confer any
right whatsoever on any employee to have his request for voluntary retirement
accepted.

C Two rejoinders were filed on behalf of the workers' union to the reply
fited by respondent Nos. 3, 4 and 5.

We heard Mr. M.L. Bhat, learned senior counsel assisted by Ms. Purnima
Bhat, learned counsel in T.C. No. 73 of 2002 and Mr. Jayant Nath, learned
senior counsel assisted by Mr. Suresh Tripathy, learned counsel in T.C. No.
D 76 of 2002 for the respective petitioners and Mr. Rakesh Dwivedi, learned
senior counsel, Mr. Ashok Bhan and Mr. Gaurav Agarwal and Mr. Praveen
Jain, learned counsel for the respective "respondents.

We have carefully perused the averments made in the affidavit and the
reply filed by the respective respondents and the rejoinder by the petitioners.
E Our attention was also drawn to the scheme of arrangement (de-merger)
between ITDC Ltd. and Hotel Yamuna View Private Limited, report of the
Disinvestment Commission and other relevant records and annexures filed in
both the writ petitions.

Mr. M.L. Bhat, learned senior counsel reiterated the submissions in the
F Court and Mr. Jayant Nath, learned senior counsel reiterated the contentions
raised in the writ petition at the time of hearing. After inviting our attention
to the prayer in the respective writ petition, they also invited our attention
to the order passed on 13.12.2001 by the High Court directing maintenance
of status quo regarding service conditions of Class III and IV employees of
G Hotel Agra Ashok. The said interim order was extended up to the next date
of hearing. Our attention was also drawn to the share purchase agreement
clause 9.4 in Article 9 which reads thus:

9.4. The Purchaser will cause the Company to continue to employ all
the regular employees of the Unit which have been transferred to the
H Company on the terms and conditions that shall not be inferior to the
; ALL INDIA ITDC WORKERS UNION v. ITDC [LAKSHMANAN, J.] 135
terms and conditions as applicable to the regular employees on the A
date of transfer of the Unit including with respect to the voluntary
retirement scheme applicable to the Company as per tht: guidelines of
the Department of Public Enterprises, if any, and terms set out in
agreements entered into by ITDC in relation to such regular employees
with staff/workers unions/associations. The Purchaser further
covenants that it shall cause the Company to ensure that:
B

(i) the services of the regular employees will not be interrupted.

(ii) the terms and conditions of service applicable to the regular
employees will not in any way be less favourable than those
applicable to them immediately on the date hereof. c
(iii) it shall not retrench any of its regular employees for a period of
one year from the Closing Date other than any dismissal or
termination of regular employees from their employment in
accordance with the applicable staff regulations and standing
order of the Company or applicable law. D
(iv) in the event of retrenchment of regular employees, the Company
shall pay the regular employees such compensation as·is required
under applicable labour laws on the basis that the service of the
regular employees have been continuous and uninterrupted.
Provided further, that no retrenchment of an Employee would be E
undertaken unless the affected Employee is given benefits which
are higher of (a) the voluntary retirement scheme applicable to
the Company as per the guidelines of the Department of Public
Enterprises as of the date hereof and (b) the benefits/
compensation required to be statutorily given to an employee
under applicable law. F
(v) the Company will only undertake dismissal or termination of the
services of the employees on account of disciplinary action in
accordance with the applicable staff regulations.

(vi) in respect of contract employees the terms and conditions of the
G
relevant contracts shall be fully observed by the Company and
the Purchaser shall keep Government and ITDC indemnified against
damages, losses or claims resulting on account of the Company
failing to observe any of the terms and conditions of such
contracts."
H
136 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A Our attention was also drawn to the order dated 01.02.2002 and, in
particular, last para of page 3 of the said order referring to the status quo order
passed by the High Court regarding service conditions of Class III and IV
employees of the Hotel. Our attention was also invited to clause 3.3(d) and
3.5.

B Learned senior counsel submitted that the employees consent is
necessary before transfer and cited Jawaharlal Nehru University v. Dr. K.S.
Jawatkar and Ors, [1989] Suppl SCC 679. In this case, the Jawaharlal Nehru
University, under Section 5(2) of the Jawaharlal Nehru University Act, 1966,
established a Centre of Post-graduate studies at Imphal and appointed the
C respondent as Assistant Professor on a regular basis and also confirmed him
w.e.f. 29.08.1979. In 1981, the University decided to transfer the Centre to the
Manipur University. Under Section 1(4) of the Manipur University Act, 1980,
the Governor of Manipur made an order which provided for transfer of the
members of the faculties of the Centre to the Manipur University. The question
was whether the transfer of the Centre resulted in transfer of the respondent's
D service to the Manipur University. Answering in negative and rejecting the
Jawaharlal Nehru University's appeal, this Court held:

"The respondent contidues to be an employee of the appellant
University. The contract of service entered ir:ito by the respondent
was a contract with the appellant University and no law can convert
E that contract into a contract between the respondent and the Manipur
University without simultaneously making it either expressly or by
necessary implication, subject to the respondent's consent. The
provision in Manipur University Act for the transfer of the services
of the staff working at the said Centre must be construed as enabling
F such transfer with the consent of the employee concerned. Since the
transfer of the Centre could not result in automatic transfer of the
respondent's service, he continues in the employment of the appellant
University."

The above judgment is distinguishable on facts and on law. The
G Jawaharlal Nehru University case (supra) would indicate that, in that case
there was a purported transfer of the employee from Jawaharlal Nehru
University to the Manipur University_ w.ithout his consent. Admittedly the
JNU did not exercise any control over Manipur University. In the instant case,
the transfer was from ITDC Ltd. to respondent No. 3 Company, the share-
holding patter~ of the two companies were exactly the same. Therefore, it did
H
ALL INDIA !TDC WORKERS UNION v. !TDC [LAKSHMANAN, J.] 137
:... not make any difference to the employees, especially, whe\\ the scheme of de- A
merger itself pr.ovide that the employee will continue in service of the
respondent No. 3 with full benefits including continuity in service. The
provisions of the Companies Act, 1956 were not involved in the JNU's case.
Further the two Universities were totally unconnected entities hence the ratio
of that judgment, in our opinion, is not applicable to the facts in hand. Even B
in the judgment of this Court, in JNU in para 8 it has been observed that at
worst this would not impinge upon the validity of the de-merger scheme. The
effect of that would be that the employee would be deemed to have retrenched
and would be entitled to compensation as such in accordance with law. In the
instant case, the employees never claimed that they may be considered as
retrenched. Even if it is the claim of the petitioners that they have been C
retrenched, the writ petition is not the appropriate proceedings and the
petitioners were required to institute appropriate proceedings as per the
industrial/labour laws.

Mr. M.L. Bhat, learned senior counsel also cited Nokes v. Doncaster
Amalgamated Collieries Ltd ( 1941) 11 Company Cases 83 House of Lords D
fur the proposition that a free citizen in exercise of his freedom is entitled to
chose the employer whom he promises to serve, so that the right to his
services cannot be transferred from one employer to another without his
consent. The Court was considering the whole question, however, as to
whether Section 154 of the Companies Act, 1929 provides a statutory exception E
to that principle. The Lord Chancellor came to the conclusion that the contracts
of personal service are not automatically transferred by an order made under
Section 154. The House of Lords stated as under:

"When the Court makes an order under Section 154 of the Companies
Act, 1929, transferring all the property and liabilities of the transferor F
company to the transferee company, a contract previously existing
between an individual and the transferor company does not
automatically become a contract between the individual and the
transferee company.

The fundamental principle of common law that a free citizen is G
entitled to choose his employer, so that the right to his services
cannot be transferred from one employer to another without his
consent, is not abrogated by the order which could be made under
the section. To effect such an alteration would require explicit clear
words. The right to the service of an employee is not the property of
the transferor company." H
\. ,..._
138 SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R.

A Mr.Jayant Nath, learned senior counsel appearing for the petitioner in
T.C. No. 76 of2002 invited our attention to the prayer_ in the writ petition and
the salient features of the scheme of arrangement and the order passed by
the Department of Company Affairs dated 01.02.2002 allowing the scheme
under Section 391 of the Act.

B Mr. Rakesh Dwivedi, learned senior counsel in his reply submitted that
there will not be any difficulty to continue to employ all the regular employees
of the Union which have been transferred to the Company on the terms and
conditions and the terms set out in the agreement entered into by ITDC in
relation to such regular employees with staff/workers unions/associations. He
c further proceeded to submit that, ifthere is breach of the obligation under the
scheme, the employees can always approach the appropriate forum for
redressal. He also invited our attention to the reply filed by the respective
respondents objecting to the prayer asked for in the writ petition.

We have given our thoughtful consideration to the rival submissions
D made by the respective counsel appearing for the respective parties. In our
opinion, the present writ petitions filed by the employees merits to be
dismissed. Since disinvestment was a policy decision of the Government of
India. This Court also has held that the said pol.icy decision should be least
interfered in judicial review and that the Government employees have no
absolute right under Articles 14, 21 and 311 of the Constitution of India and
E that the Government can abolish the post itself. In the present case, the
petitioners are not government servants and are merely employees of a public
sector undertaking. This apart, the service conditions of the petitioners are
being protected under the new management on the disinvestment of the Hotel
and the fact that other hotels are also in an advanced stage of disinvestment
F in pursuance of the policy decision taken by the Government of India for
disinvestment of the hotel units. We see no reason to interfere with the
aforesaid decision. In case ultimately the petitioners are aggrieved by any
aspect of terms of reference and formalization of agreement and completion
of disinvestment it is always open to the petitioners to approach the courts
for redressal of their grievances.
G
We have already extracted Clause 9.4 of the share purchase agreement
dated 07.02.2002 in paragraphs supra. In our view, the decision of the
·~
Government of India to divest the property was a policy decision which was
not in any manner contrary to the law of the land. Similar policy decision of
the Government of India to disinvest 51 % of this share holding in Bharat
H
ALL INDIA !TDC WORKERS UNION v. ITDC[LAKSHMANAN, J.) 139

Aluminium Company Limited referred to as Balco was challenged before this A
Court and this Court has dealt with the scope of the judicial review in such
economic policy decisions. This Court rejected the contention that the sale
of the shares of the Government oflndia in Balco was legal and the employees
of Balco have ceased to be employees of a government company. However,
it is stated that the service conditions of the employees were not affected by B
the transfer of the shares.

We have also carefully perused the scheme. It is evident from the
scheme itself that all the employees were to bt retained as stipulated in the
transfer documents on the same terms and conditions of service for l year
and they were entitled for payment of gratuity and provident fund as per the C
then existing scheme. The terms and conditions of service applicable to the
employees was not in any way be less favourable than those applicable to
them immediately on the date thereof. The relevant provisions of the transfer
documents relating to disinvestment of Hotel Agra Ashok are being reproduced
herein below:
D
Clause 3.2 (d) of the Scheme of Arrangement reads as follows:

"with effect from the appointed date, all employees of the Transferor
engaged in the Transferred Undertaking shall become the employees
of the Transferee on the terms and conditions on which they are
engaged as on the Appointed Date by the Transferor without any E
interruption of services as a result of this Scheme. The Transferee
agrees that the services of all such employees with the Tranc;ferrcd
Undertaking upto the Appointed Date shall be taken into account for
purposes of all retirement benefits t<:> which they may be eligible in the
Transferor on the Appointed Date."
F
In view of the above, we are of the opinion that the apprehension of
the employees is baseless and is liable to be rejected.

It is also pertinent to notice that ITDC has not participated in the
disinvestment process as the same was carried out by the Ministry of
Disinvestment, Government of India. The safeguards regarding the service G
conditions of the employees have been duly provided in the transfer document
i.e. de-merger scheme and share purchase agreement. This Court also in Ba/co
Employees' Union (Regd.) v. Union of India and Ors, [2002] 2 SCC 333 held
that the employees of the company registered under the Indian Companies
Act do not have any vested right to continue to enjoy the status of the H
140 SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R.

A employee of an instrumentality of the State. .' ~

In the instant case, with the intention to promote the scheme of
disinvestment, the Government issued an advertisement to outright sale of 6
hotels and long term lease for 2 hotels. The property of respondent No. I was
demerged in the name of the new company with the approval of the Company
B Law Board. We have perused the order approving the scheme of arrangement
as annexed and marked as Annexure-C(a)/2. All the employees after the
creation of the new company were shifted to the new company which was
also a subsidiary company oflTDC. Respondent No. 1 invited tenders for sale
of the Hotel. The offer made by Respondent Nos. 4 and 5 was accepted by
C respondent No. l as successful bidder and accordingly, the shares of Hotel
Yamuna View Private Limited were transferred under share purchase agreement
dated 07.02.2002. It is pertinent to notice that at the time of inviting bid, no
such liabilities of VRS to the employees were shown against Hotel Agra
Ashok. All the liabilities were mentioned in the balance sheet of the company
including property tax and water tax to be deposited with the Cantonment
D Board. Respondent Nos. 4 and 5 got the shares of Hotel Yamuna Private
Limited transferred in their favour while share transfer agreement dated
07.02.2002 wherein certain.conditions were put in by respondent No. 1 keeping
in mind the order of the High Court for maintaining the status quo of the class·.
III and IV employees. Pursuant to the agreement, the Management of the
E Hotel was transferred to respondent No. 4.

The employees have also challenged the non-implementation of VRS in
respect of the employees of Hotel Agra Ashok. In our view, the petitioners/
employees cannot claim parity in respect of other employees working under
ITDC in different properties who have been granted benefits under VRS as
F the scheme was never made applicable to the employees working with the
present property. No disclosure of any such introduction of VRS was given
by ITDC at the time of sale, neither was any amount to be deposited by the
purchaser. We are, therefore, of the opinion that respondent Nos. 4 and 5 is
under no obligation to float the VRS scheme because in para 9(4), the VRS
has to be given only when company retrenches its regular employees. But
·G here the company is ready to continue with its employees with the same terms
and conditions mentioned in the share purchase agreement. The employees
are unwilling to continue on the same terms and, therefore, they cannot
compel the management to introduce VRS scheme. When the share purchase
agreement was executed with respondent No. 5, then there was no scheme
H introduced for grant of VRS because prior to the sale the petitioners were
ALL INDIA ITDC WORKERS UNION v. ITDC[LAKSHMANAN, J.] 141
employees ofITDC and not of Hotel Yamuna View Limited. They have already A
objected their transfer to Hotel Yamuna Private Limited. The petitioners are
demanding YRS from ITDC because as per the orders dated 13.12.2001 and
05.03.2002 of the Allahabad High Court, the employees of Hotel Agra Ashok
cannot be transferred to the new company Hotel Yamuna Private Limited.
With intention to escape the liability of contempt, the ITDC specifically asked B
the buyer to maintain the service conditions of the employees on _the same
terms by entering into a share purchase agreement, however, no condition in
this agreement was mentioned for offering YRS. In other words, a YRS scheme
for employees of Ashok Travels & Tours was introduced by circular dated
02.03.2001 but there was no policy for YRS regarding Hotel Agra Ashok. Also
under Clause 8 of the said circular regarding introduction of VRS, it is clearly C
stated that the scheme does not confer any right whatsoever on any employee
. to have their request for veluntary retirement accepted. The respondent has
also no such obligation under para 94 {IV).

This Court in a recent judgment in the case of Board of Trustees,
Visakhapatnam Port Trust & Ors. v. T.S.N. Raju and Anr., (2006) 9 SCALE D
55 (Dr. AR. Lakshmanan and Tarun Chatterjee, 11) while considering the
scheme of voluntary retirement applicable to Port Trusts considered the
scope of entitlement to avail the benefit of the scheme. This Court held that
the Ct.airman of the Port Trust has absolute right either to accept or not to
accept the applications filed by the employees for retirement and the request E
of employees seeking voluntary retirement was not to take effect until and
unless it was accepted in writing by the Port Trust Authorities.

This Court held in para 35 as under:-

"In our opinion, the request of the employees seeking voluntary F
retirement was not to take effect until and unless it was accepted in
writing by the Port Trust Authorities. The Port Trust Authorities had
the absolute discretion whether to accept or reject the request of the
employee seeking voluntary retirement under the scheme. There is no
assurance that such an application would be accepted without any
consideration. The process of acceptance of an offer made by an G
employee was in the discretion of the Po1t Trust. We, therefore, have
no hesitation in coming to the conclusion that the YRS was not a
proposal or an offer but merely an invitation to treat and the
applications filed by the employees constituted an offer."

As already noticed, the Government of India constituted the H

..
142 SUPREME COURT REPORTS (2006] SUPP. 8 S.C.R.

A Disinvestment Commission and accepted the recommendation of i:he said
Commission. A decision was taken by Inter-Ministerial Group and at the level
of the Cabinet Committee on Disinvestment to divest each property individually
rather than altogether or in groups.

It is also beneficial for us to refer to the judgment of Ba/co Employees'
B Union (Regd.) v. Union of India and Ors (supra) by which this Court has
dealt with the scope of the judicial review in such economic policy decisions.
This Court held as follows:-

"34. Applying the analogy, just as the Court does not sit over the
policy of the Parliament in enacting the law, similarly, it is not for this
c Court to examine whether the policy of this disinvestment is desirable
or not.. ....

47. Process of disinvestment is a policy decision involving complex
economic factors. The Courts have consistently refrained from
interfering with economic decisions as it has been recognised that
D economic expediencies lack adjudicative disposition and unless the
economic decision, based on economic expediencies, is demonstrated
to be so violative of constitutional or legal limits on power or so
abhorrent to reason, that the Courts would decline to interfere. In
matters relating to economic issues, the Government has, while taking
E a decision, right to "trial and error" as long as both trial and error are
bona fide and within limits of authority ..

92. In a democracy it is the prerogative of each elected Government
to follow it's own policy. Often a change in Government may result
in the shift in focus or change in economic policies. Any such change
F may result in adversely affecting some vested interests. Unless any
illegality is committed in the execution of the policy or the same is
contrary to law or ma/a fide, a decision bringing about change cannot
per se be interfered with by the Court ....
i-
93. Wisdom and advisability of economic policies are ordinarily not
G amenable to judicial review unless it can be demonstrated that the
policy is contrary to any statutory provision or the Constitution. In
other words, it is not for the Courts to consider relative merits of
different economic polices and consider whether a Vl.•iser or better one
can be evolved. For testing the correctness of a policy, the appropriate r

forum is Parliament and not the Courts
H
)
ALL INDIA !TDC WORKERS UNIONv. ITDC[LAKSHMANAN,J.] 143
98. In the case of a policy decision on economic matters, the courts A
should be very circumspect in conducting any enquiry or investigation
and must be most reluctant to impugn the judgment of the experts
who may have arrived at a conclusion unless the Court is satisfied
that there is illegality in the decision itself."

In the instant case, the Government has acted on advice of experts B
before taking a decision to disinvest its shares in ITDC Limited. Even thereafter,
· through a fair and transparent process as detailed in the reply affidavit of the
Union of India, the Government has ensured that it has got the best price for
its shares. It is also pertinent to notice that the Government has not received
any other higher offer. The contention of the learned senior counsel for the C
writ petitioners that the price is less has not been supported by any
documentary evidence. In similar situation, this Court has observed in Balcq
Employees' Union case (supra) as follows:-

"65 ...... .lt is not for this Court to consider whether the price which was
fixed by the Evaluation Committee at Rs.551.5 crores was correct or D
· not. What has to be seen in exercise of judicial review of administrative
action is to examine whether proper procedure has been followed and
whether the reserve price which was fixed is arbitrarily low and on the
face of it, unacceptable.

66 ...... When proper procedure has been followed, as in this case, and E
an offer is made of a price more than the reserve price then there is
no basis for this Court to conclude that the decision of the Government
to accept the offer of Sterlite is in any way vitiated."

The very same contention raised by the employees in the instant case
was raised by the employees of Balco when the Government of India disinvested F
its majority shares in Balco.

This Court rejected the contention that the sale of the shares of the Government
of lndi~ in Balco was legal as the employees of Balco have ceased to be
employees of a Government Company. It was, inter alia, observed as follows:-
G
"47 .... Even though the workers may have interest in the manner in
which the Company is conducting its business, inasmuch as its policy
decision may have an impact on the workers rights, nevertheless it is
an incitfonce
.... of service for an employee to accept a decision of the
employer which has been honestly taken and which is not contrary
H

..
144 SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R.

A to Jaw. Even a government servant, having the protec~ion of not only
Articles 14 and 16 of the Constitution but also of Article 311, has no
absolute right to remain in service. For example, apart from cases of
disciplinary action, the services of government servants can be
terminated if posts are abolished. If such employee cannot make a
grievance based on part III of the Constitution or Article 3 11 then it
B cannot stand to reason that like the petitioners, non-government
employees working in a company which by reason of judicial
pronouncement may be regarded as a State for the purpose of part III
of the Constitution, can claim a superior or a better right than a
government servant and impugn it's change of status ..
c 48 .... .lf the abolition of a post pursuant to a policy decision does not
attract the provisions of Article 311 of the Constitution as held in
State of Haryana v. Des Raj Sangar and Anr. on the same parity of
reasoning, the policy of disinvestment cannot be faulted if as a result
thereof the employees lose their rights or protection under Articles 14
D and 16 of the Constitution. In other words, the existence of rights of
protection under Articles 14 and 16 of the Constitution cannot possibly
have the effect of vetoing the Government's right to disinvest. Nor
can the employees claim a right of continuous consultation at different
stages of the disinvestment process. If the dis;11vestment process is
gone through without contravening any law, then the normal
E consequences as a result of disinvestment must follow.

49. The Government could have run the industry departmentally or in
any other form. When it chooses to run an industry by forming a
company and it becomes its shareholder then under the provisions of
tl,e Companies Act as a shareholder, it would have a right to transfer
F its shares. When persons seek and get employment with such a
company registered under the Companies Act, it must be pr~sumed
that they accept the right of the directors and the shareholders to
condPct the affairs of the company in accordance with law and at the
same time they can exercise the right to sell. their shares."
G
We may also usefully refer to the decision of the Madras High Court
in the case of (Southern Strur:turals Staff Union v. Southern Structurals Ltd.)
(1994) 81 Comp. Cases 389 (Mad.) wherein the Madras High Court held as
follows:-

H "The employees have no vested right in the employer company
ALL INDIA !TDC WORKERS UNION.v. !TDC [LAKSHMANAN, J.] 145
continuing to be a government company or 'other authority' for the A
purpose of Article 12 of the Constitution of India. The status so
conferred on the employees does not prevent the Government from
disinvesting; nor does it make the consent of the employees a necessary
precondition for disinvestment."

In the case of Balco, as well as in the present case, the Government of B
India has ensured that the interest of the workmen are fully protected. As in
the case of Balco, the shareholder agreement between Government of India
and the purchaser has been reproduced in the reply affidavit filed on behalf
of the Union of India in Transfer Case No. 73 of 2002.

We may also place on record the submission made by learned senior C
counsel Mr. Rakesh Dwivedi that the Government of India cannot have any
objection to a direction to the Hotel Yamuna View Private Limited to float a
YRS scheme keeping in view its obligation under para 9.4(iv) of the share
purchase agreement in terms of the office memo dated 05.05.2000.

A perusal of paragraphs 23, 24, 54, 55 and 56 of the judgment of this
D
Court in Balco would indicate that the above protection of the workers'
interest in similar circumstances has been held by this Court to be adequate
and lawful. This Court in para 55 has observed as follows:-

"55. We are satisfied that the workers' interests are adequately protected E
in the process of disinvestment. Apart from the aforesaid undertaking
given in the Court, the exi!:ting laws adequately protect workers'
interest and no decision affecting a huge body of workers can be
taken without the prior consent of the State Government. Furthermore,
the service conditions are governed by the certified orders of the
Colllpany and any change in the conditions thereto can only be made F
in accordance with law."

Further as per the Demerger Scheme, all the liabilities relating to the
transferred undertaking upto the date of transfer were taken over and were
to be discharged by the transferee. Thus, the transferee is liable to pay all
the liabilities and dues (including gratuity) to the employees on the same G
terms and conditions of service which were applicable to the employees in
the hotel, including the benefits related to the tenure of service in the hotel
upto the date of transfer. As far as the provident fund of the employees is
concerned, the PF accounts of the employees of the hotel in ITDC PF Trust
were transferred by the trust to the new accounts of the concerned employees H

I
146 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A in the Regional Provident Fund Commissioner after the completion of formalities
under the provisions of Employees Provident Funds and Miscellaneous
Provisions Act, 1952.

The demerger of the hotel union from ITDC was a considered decision
taken by the Cabinet Committee on Disinvestment and had the approval of
B the Department of Company Affairs in terms of the Companies.Act, 1956. The
reasons for creating a separate companies has been given in the reply affidavit
and the contents of the same are reiterated in reply.

By order made by the Department of Company Affairs on 04.10.2001,
ITDC was directed to convene a meeting of the creditors of Hotel Agra Ashok
C for the purpose of considering and if thought fit approving with or without
modifications, the scheme and the said order also appointed Mr. S.B. Mathur
D-11 (Retd.) Department of Company Affairs as Chairman for the meeting who
was also to report the result of the meeting to the Department of Company
Affairs on the conclusion of the creditors meeting. A meeting was held on
D 30. l 0.200 l and the Chairman of the said meeting had directly reported the
result of the meeting to the Department of Company Affairs.

It may also be noticed that a fresh petition was filed with the Department
of Company Affairs on 26.12.2001 under Sections 391 and 394 of the Companies
Act for approval to new scheme of agreement between ITDC and Hotel
E Yamuna View Private Limited and their respective shareholders for Hotel Agra
Ashok. The company was also directed vide order dated Ol.Ol.2002 to give
public notice regarding the scheme of arrangement and hearing through
advertisement in a leading English and vernacular daily !lewspapeL The
notice was duly published in Indian Express on 04.01.2002 and Amar Ujala,
F Agra Edition Hindi on 05.01.2002 after prott:cting the interest of the creditors
and hearing the parties the Department of Company Affairs g?ve approval of
the scheme of agreement on Ol.02.2002. The demerger was complete on
0 l .02.2002. It is only thereafter that the share:s of Government oflndia in Hotel
Yamund View Private Limited was solJ to Respondent No. 5 on 07.02.2002 by
the share purchase agreement.
G
It is also brought to our notice at the time of hearing that all the 8
petitioners who have challenged the policy decision of the Government of
India have resigned their job and joined some other service. The statement
was not disputed or denied by learned senior counsel for the petitioners.

H For the foregoing reasons, we hold that there is absolutely no merit or
ALL INDIA !TDC WORKERS UNION v. !TDC [LAKSHMANAN, J.] 147
substance in the contentions raised by learned senior counsel for the A
petitioners. The writ petitions are, therefore, liable to be dismissed and the
policy decision taken by the Government of India to transfer the Hotel Agra
Ashok to Mis Mohan Singh and Yamuna View Private Limited cannot be
assailed at the instance of the employees.

The writ petitions are accordingly dismissed, however, there will be no B
order as to costs. In view of the disposal of the writ petitions, the transfer
cases are also disposed off accordingly.

B.S. Transfer cases disposed off.