Supreme Court of India
AVAS VIKAS SANSTHAN AND ANR.versusAVAS VIKAS SANSTHAN ENGINEERS ASSN. AND ORS.
- Citation
- 2006 INSC 185
- Decided
- 28 March 2006
- Disposal
- Disposed off
- Bench
- H K SEMA
Holding
A State may abolish posts and cannot be compelled by a writ of mandamus to retain employees; employees who accepted the alternative‑employment scheme are estopped from claiming pay protection, service continuity, or 5th Pay Commission benefits, and daily wage workers cannot be treated as regular employees.
Summary
The Rajasthan Government dissolved Avas Vikas Sansthan (AVS) after it incurred heavy losses and offered its 604 employees alternative employment in various local bodies, conditional on affidavits that they would not claim continuity of service or pay protection. The employees accepted the scheme, but the Rajasthan High Court later granted them pay protection, service continuity, and 5th Pay Commission benefits, treating daily wage workers as regular employees. On appeal, the Supreme Court held that a State can abolish posts and cannot be compelled by a writ of mandamus to retain employees; the employees were estopped from challenging the terms of the scheme they had accepted. Consequently, the Court ruled that no pay protection, service counting, or 5th Pay Commission benefits were payable, and daily wage workers could not be placed on par with regular staff. The Court directed the State to implement the original scheme without the additional benefits and dismissed the employees' appeals.
Issues considered
- The power of a State to abolish posts and whether a writ of mandamus can compel continued employment.
- Whether employees who accepted alternative employment via affidavits are estopped from claiming pay protection, service continuity, or other benefits.
- Applicability of Article 14 of the Constitution and Section 23 of the Contract Act to the scheme.
- Whether daily wage workers can be treated as regular employees for the purpose of benefits.
- Whether the 5th Pay Commission recommendations apply to former AVS employees.
Legislation cited
- Constitution of Indias. Article 12, s. Article 14
- Indian Contract Act, 1872s. Section 23
- Societies Registration Act, 1860
Subjects
abolition of postsalternative employmentestoppelpay protectionservice continuity5th Pay Commissiondaily wage workerscontract Act Section 23Article 14Article 12state as employerwrit of mandamus
Judgment
A AV AS VIKAS SANS THAN AND ANR.
v.
AVAS VIKAS SANSTHAN ENGINEERS ASSN. AND ORS.
MARCH 28, 2006
B [H.K. SEMA AND DR. AR. LAKSHMANAN, JJ.]
Constitution of lndia, 1950·-Articles 12 and 14--Contruct Act, 1872-
Section 23--State Government dissolved a State Society incurring heavy
C losses--Employees of the Society filed Writ Petition before High Court
contending that the Society was an agent of the State and hence their
services could not terminated being government employees-State formulated
a Scheme of providing alternative employment to the employees in various
local bodies subject to certain terms and conditions upon filing ofan afjidavit-
Employees accepted alternative employment and filed affidavits-Single Judge
D of the High Court quashed the scheme of providing alternative emp/vyment-·
Division Bench of the High Court set aside order of the Single Judge--High
Court. however, directed the State to give pay protection, continuity of past
service for pensionarylretiral benefits and the benefit of 5th Pay Commission
on notional basis to the employees··-High Court also treated daily wagers
E as regular appointees and made available the benefits given to regular
employees--Correctness of-Held, State has the power to abolish posts--Court
cannot issue a Writ of Mandamus to the State to continue with the services
of the employees-On facts, employees are estoppedfrom claiming the benefits
and challenging the terms and condititons of the Scheme since they have
accepted the Scheme and filed affidavits-There is also no pleading in the
F Writ Petition that the terms and conditions of the Scheme are contrary to the
provisions of the Contract Act, 1872 or is violative of Article 14 of the
Constitution of fndia-Hence the employees cannot claim the benefit of pay
protection, continuity in service and the benefit under the 5th Pay Commission--
Daily wagers cannot be put on par with regular employees under any law and
G hence no relief is granted to them-State, however, may sympathetically
consider absorption subject to the conditions laid down.
Appellant No. I-a Society registered under the Societies Registration
Act, 1860, was formed as a result ofa Scheme formulated by Housing and
-
Urban Development Corporation to set up a chain of building centres in
H 516
AVAS VJKAS SANSTHAN 1•. AVAS VIKAS SANSTHAN ENGINEERS ASSN. 5 J7
the State. After a few years, the Society incurred heavy losses and it could A
not pay salaries to its employees. State Government took a decision to dissolve
the Society.
Employees of the Society filed Writ Petitions before High Court
challenging the action of the State and the Housing Board contending that
their services could not be terminated since the Society was an agent of the B
State and the State Housing Board and hence, the termination orders, if any,
passed be quashed and they be retained in service with benefit of their past
services; and that the order of the State to take them into service in the local
bodies of the State at the lowest grade of services without any benefit of past
services be quashed. The State and its Housing Board contended in the Writ C
Petition that the Society was not a State under Article 12 of the Constitution
of India since it was neither financially nor administratively controlled by
the State.
During the pendency of the Writ Petitions before the High Court,
the State offered alternative employment in various local bodies of ihe D
State subject to filing of an affidavit accepting the terms and conditions.
The employees accepted the terms and conditions and filed !lffidavits.
Single Judge of the High Court allowed the Writ Petition of the
employees. The High Court directed the State to pay unpaid salaries to
the employees. The High Court also directed the State Housing Board to E
create a new cell and take the employees into it and quashed the policy of the
State Government to give alternative employment in various local bodies.
The State Government, Housing Board and the Society filed appeals
before the Division Bench of the High Court. The employees also filed an
appeal before the Division Bench of the High Court. The High Court F
maintained the direction of payment of unpaid salary to the employees but set
aside the quashing of the policy of the State of providing alternative
employment in various local bodies. The High Court, however, directed
the State to give pay protection; continuity of past service for pensionary/
retiral benefits; and the benefit of 5th Pay Commission on notional basis G
to the employees. The High Court also treated daily wagers as regular
appointees and made available the benefits given to regular employees.
Hence the appeals filed by State, Housing Board, Society and the
employees.
The State contended that the abolition of a post is an inherent right of H
518 SUPREME COURT REPORTS [2006] 3 S.C.R.
A an employer particularly if there was lack of funds or heavy loss; that the
employees, whose services have been terminated, have no right to seel!. re-
employment or absorption in other departments of the State; that, even though
there was no legal obligation to offer alternative employment, it framed a
scheme and offered employment in other local bodies of the State; that the
B directions of the High Court will create additional financial burden upon the
various local bodies which absorbed the employees; that the employees have
submitted affidavits to the State stating that their alternative employment with
local bodies will be treated as fresh appointments and would not claim continuity
of service, seniority, pay protection etc.; that the employees are estopped from
challenging the terms and conditions of the alternative employment after filing
C the affidavit; that the employees did not claim that the terms and conditions of
alternative employment are unfair or that there was allegation that the
employees were coerced or unduly influenced to submit the affidavit; that the
benefit of 5th Pay Commission are not available to them since they were not
government employees; that the daily wagers have 110 right to seek regular
appointment from the State; that the Rajasthan Civil Services Rules, 1969
D are not applicable as the employees were not government servants; and
that they did not raise any ground in the Writ Petition that the decision
to liquidate the Society was ma!afide and that the decision should be quashed.
The employees contended that the State should act as a model employer
E exhibiting fairness of action towards the employees; that they should be given
pay protection, seniority, continuity of service for pensionary/retiral benefits;
that the terms and conditions of the alternative employment violate Article
14 of the Constitution of India and that the settlement is void under section
23 of the Contract Act, 1872; that any undertaking to the Court and
contractual arrangement resultant thereto does not oust the jurisdiction or
F the power of the Court to hear case or grant relief; and that the daily wage
employees should be treated on par with other employees and should be entitled
to similar benefits.
Disposing of the appeals, the Court
HELD: 1.1. The power to abolish a post, which may result in the holder
G
thereof ceasing to be a Government Servant, has got to be recognized. The
measure of economy and the need for streamlining the administration to make
it more efficient may induce any State Government to make alterations in the
staffing pattern of the civil services necessitating either the increase or the
decrease in the number of posts or abolish the post. In such an event, the
H Court cannot, by a writ of mandamus, direct the employer to continue
AVAS VIKASSANSTflAN v. AVAS VIKAS SANS THAN ENGINEERS ASSN.. 5 J9
employing such employees as have been dislodged. The employees of the A
Society have accepted alternative employment imd filed an affidavit They cannot
now say that the judgment of the Division Bench of the High Court should be
given effect. To they are estopped from claiming the benefits and challenging
the terms and conditions of the fresh employment. The employees have no
right to resile from the affidavits filed before the High Court. At no point of B
time, the employees raised any dispute as regards the fairness of the
settlement. Having obtained the benefit, it was not open to them to turn down
without justifiable reasons to contend that the settlement was not fair and
they should be given pay protection, continuity of service for retiral benefits
and placing the employees on par in the receiving Department.
[537-F, G; 538-A-D] C
1.2. The State has acted fairly and benevolently even though it has no
constitutional and legal obligation to offer alternative employment to the
employees on the abolition of the posts. The State framed a scheme and offered
employment in other local bodies of the government by relaxing the rules of
such bodies and the terms and conditions were fixed without financial D
economic compulsions of the State. Thus the terms and conditions of such
alternative employment cannot be challenged. There is also no pleading in
the Writ Petition that the conditions contained in the affidavit of undertaking
are contrary to Section 23 of the Contract Act, 1872 or violative of Article
14 or inconsistent with the Directive Principles of State Policy of the E
Constitution of India. The State is directed to strictly adhere to and implement
its decision to offer employment in other local bodies in letter and spirit. All
the erstwhile employees, if not already employed, should be employed in the
local bodies as per the scheme formulated by the State in a war footing.
[535-E; 540-C, D]
F
Rajendra v. State of Rajasthan, [1999) 2 SCC 3i7 and S.K. Nilajkar v.
Telecom District Manager, (2003) 4 SCC 27, relied on.
M. Ramanathan Pillai v. State of Kera/a, (1973) 2 SCC 650; K.
Rajendran v. State of Tamil Nadu, (1982) 2 SCC 273; Bank of India v. O.P.
Swarnakar, (2003) 2 SCC 721; State of Uttaranchal v. Jagpal Singh Tyagi, G
(2005] 8 SCC 49; Central Inland Water Transport Corporation Ltd and Anr.
v. Brajo Nath Ganguly and Anr., (1986) 3 SCC 156; Delhi Transport
Corporation v. D. TC Mazdoor Congress and Ors., (1991( I Supp. l SCC 600;
Gurmail Singh v. State of Punjab, [1991) l SCC 748; Prakash Ramachandra
v. Maruthi, (1995] Supp. 2 SCC 539; National Building Construction
Corporation v. Raghunathan,. (1998] 7 SCC 66; Federal Bank Ltd. Sagar H
520 SUPREME COURT REPORTS (2006] 3 S.C.R.
A Thomas, (20031 IO SCC 733 and Pradeep Kumar Biswas v. Indian Institute
of Chemical Biology, (20021 5 SCC 111, referred to.
1.4. There is a Cabinet decision of the State that no pay protection should
be granted to the employees. The cabinet decision was taken after taking into
consideration the views of the Finance Department as it has huge financial
B burden on the local bodies offering re-employment after relaxing their own
recruitment rules. The undertaking by the employees when they were
absorbed into other local bodies had the same stipulation. This being so, the
claim for pay protection by the employees at this late stage cannot be made.
Due to the absence of any legal right for pay protection to the employees,
C such claims cannot be sought for. In the absence of any legal right of pay
protection and fresh employment consequent upon on fresh appointment on
humanitarian grounds, the decision of the High Court to grant protection of
pay is unsustainable and liable to be interfered with.
1535-G, H 536-A; 538-DI
D 1.5. There is a Cabinet decision of the State that the benefit of past
service is not to be counted for any purpose. The undertaking by the
employees when they were absorbed into other local bodies had the same
stipulation. Under the provisions of the Society Employees Service
Regulation, 1993, the employees were having the benefit of contributing
provident fund and were not entitled to any other pensionary/retiral
E benefits. The employees have withdrawn provident fund including the
employer's contribution after termination of service from the Society. Thus
the services rendered by the employees with the Society cannot be counted
for the purpose of pensionary/retiral benefits since such benefits were not
available to them even in their parent organization. Therefore, such claim
p for counting services rendered in the Society for the pensionary/retiral
benefits cannot be made.1536-B; 539-A-q
1.6. The recommendations of the 5th Pay Commission is applicable
only to Government Servants. Since the employees of the Society are not
government servants, they are not entitled to the benefits under 5th Pay
G Commission Report. In the Writ Petition, there was no prayer for grant
of benefit of 5th Pay Commission. Thus the High Court has erred in directing
that the benefit of the recommendations of the 5th Pay Commission shall be
given to the employees of the Society on notional basis. The employees would
be governed by the terms and conditions of the local bodies where they have
H been re-employed.1539-D, El
AVAS VIKAS SANSTHAN v. AVAS VIKAS SANSTHAN ENGINEERS ASSN. [LAKSHMANAN, J.J 521
A.I. Railway Parcel and Goods Porters Union v. Union of India and A
Ors., 12003) 11SCC590, referred to.
1.7. The daily wage employees cannot be put on par with regular
employees under any law prevalent as of date. The finding of the High Court
that they can be treated on par with regular employees and be given various
reliefs is wrong and erroneous under law. Therefore, no relief is granted to B
the daily wage employees as their claim is not justified under law. However,
the State may sympathetically consider absorption of these employees in the
vacancy available if any in future by giving them preference to other new
applicants in any of their local bodies etc. subject to the stated conditions laid
down. (536-G, H; 537-A) C
Punjab State Electricity Board v. Malkiat Singh, 12005) 9 SCC 22,
referred to.
1.8. The State Civil Servkes (Absorption of Surplus Personnel) Rules,
1969 are applicable only to the government servants. The employees of D
the Society are not government servants and hence the Rules are not
applicable to them. (541-D]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5302/2004.
From the Judgment dated 3.5.2002 of the High Court of Rajasthan i11 E
D.B. Civil Special Appeal No. 315/2002 in SBCWP No. 1750/1999.
With C.A. Nos. 5303, 5305-5308, 5309-5311, 5312-5316, 5317-5322,
' 5323-5327, 5328-5330, 5331-5336, 5337, 5339, 5342-5348, 5349-5351, 5352-
5354, 5356, 5357-5359, 5360-5365, 5366-5370, 5371-5376, 5377-5381, 5382-
5385, 5386-5392, 5338 and 5340-5341 of 2004. F
Vijay Hansaria, Dr. Rajeev Dhawan, B.D. Sharma, Jatinder Kumar
Bhatia, Sushi! Kumar Jain, A.P. Dhamija, H.D. Thanvi, Prashant, Ms. Rani
Maheshwari, Ms. Pratibha Jain, Manish Kumar, Ansar Ahmad Chaudhary,
Ch. Shamsuddin Khan, Ms. Shobha, Annam D.N. Rao, Ms. Shweta Verma,
Aruneshwar Gupta, Naveen Kumar, Anil Kumar Gupta-II and Mrs. K. Sharda G
Devi for the appearing parties.
The Judgment of the Court was delivered by
DR. AR. LAKSHMANAN, J. This batch of appeals arise from the
H
522 SUPREME COURT REPORTS (2006] 3 S.C.R.
A common final judgment and order dated 03.05.2002, passed by the High Court
of Judicature for Rajasthan at Jaipur in D.B. Civil Special Appeal No. 31512002
etc. etc. in S.B.C.W.P. No. 1750/99 etc. etc. whereby the High Court partly
allowed the appeal of the appellants-herein by holding that the employees
(respondents) are entitled to re-employment and the various reliefs claimed by
them.
B
Since all the appeals involve common question of law, they have been
heard together with the consent of concerned parties and are being disposed
of by this judgment.
C Facts in brief
Avas Vikas Sansthan (in short 'the AVS') was registered as a Society
under the Societies Registration Act, l 860 on 17 .11.1988. The AVS was
brought into existence to achieve certain objectives. The objects of the society
were to collect in formation regarding low cost technology for construction of
D houses, undertake field studies for development of appropriate low cost
building materials, undertake construction works, imparting practical training
etc. in the State of Rajasthan.
The AVS was brought into existence as a result of the Scheme formulated
by the Housing and Urban Development Corporation, New Delhi, to set up
E chain of building centres in the State of Rajasthan.
Appellant No.2 the Rajasthan Housing Board sanctioned a sum of Rs.
l-5 lakhs per building centre and provided land free of cost for setting up of
9 such centres in Rajasthan. The AVS was to raise its own resources; the
State Government or the Rajasthan Housing Board did not have any control
F over the AVS. The AVS had employed the respondents.
The AVS started functioning in the year 1989, but in the year 1997, it
began to incur heavy losses and could not pay its employees their salaries
after 0 I. 12. 1998. The Rajasthan Government decided that, in view of the
G financial and administrative conditions of the AVS, it should be dissolved
and the State Government directed the appellant-the Rajasthan Housing Board
to take immediate steps to liquidate the AVS. The State Government also
directed that the employees of the f VS would be adjusted on priority on the
vacant posts of Municipal Boards, Municipal Councils, Jaipur Development
Authority and other local bodies whenever posts fell vacant on the retirement
H of the employees of such local bodies. By the resolution of the AVS dated
AVAS VIKAS SANSTHAN v. AVAS VIKAS SANS THAN ENGINEERS ASSN. (LAKSHMANAN, J.] 523
26.03.1999, the A VS was dissolved. A
The respondents (employees), feeling that their services might be
terminated, filed a writ petition in the High Court on 26.03.1999, made the
following averments:
* AVS is only an agent of the State Government of Rajasthan and B
of the Rajasthan Housing Board.
* The services of the respondents, who were employees of the
State Government/Rajasthan Housing Board, could not be
terminated by the Rajasthan Housing Board or the State
Government or the A VS and c
* Also if any termination order be passed it be quashed and they
might be retained in service with benefit of their past services in
all respects.
* The Governmentmder dated 15.03.1999 was challenged by which D
the respondents were to be taken in service by local bodies viz.
Panchayat, JD.A. etc. at the lowest grade of services without
any benefit of past services.
A VS terminated the services of all its 46 daily wage employees on
31.03.1999.
E
On 01.06.1999, State Government issued an order which contained
directions regarding the manner in which the employees of the A VS would
be given first appointment in the local self-Government institutions in
Rajasthan without benefit of past service. The condition, which was put by
the Government was that, they would be given employment on the lowest p
post of pay drawn in A VS of direct recruitment and on the minimum of the
grade and no benefit of past service would be given to them. An option was
also given to the employees to retire under Voluntary Retirement Scheme, if
they so desired.
The Rajasthan Housing Board and the State Government of Rajasthan G
contested the writ petitions by filing replies.
* It was averred, inter alia, in the reply by the Rajasthan Housing
Board that A VS was a registered Society under the Societies
Registration Act, 1860.
H
524 SUPREME COURT REPORTS [2006] 3 S.C.R.
A • And it was neither financially nor administratively controlled by
the State Government or the Housing Board and hence the said
AVS could not be said to be a 'State' within the meaning of
Article 12 of the Constitution of India and the employees were
not employees of the State Government or Rajasthan Housing
Board, they had no remedy against the State Government or the
B petitioner- Housing Board.
During the pendency of the writ petitions, an offer was made to the
employees of the AVS to agree to be given new appointment in local self
Government institutions on the condition mentioned in order dated 01.06.1999
C of the State Government and the employee:; were asked to submit undertaking
in the form of affidavits that they were willing to take employment in the
Municipal Boards, Municipal Councils, J.D.A etc. on the conditions set out
in the order and that on such affidavits being filed, they would be given
employment in such local Government institutions.
D The respondents and all the other permanent employees of the AVS
submitted their affidavits and were given employment in the Municipal Boards,
Municipal Councils, and J.D.A.
Learned Single Judge of the High Court allowed the writ petition and
held as under:-
E
(a) Employees will be entitled to salary for the period worked by
them;
(b) Rajasthan Housing Board to create a new cell in the name of the
Low Cost Housing Centre or any other name and the employees
F would be employed in the said centre;
(c) The policy of the State Government to give alternate employment
was quashed. However, the employees were given option to
continue in the said employment if they so choose.
Feeling aggrieved, the Rajasthan Housing Board, the AVS and the
G State Government preferred appeals before the Division Bench of the High
Court.
The Division Bench disposed of all the appeals by the impugned order.
The Division Bench maintained the direction to pay unpaid salary. The direction
H to constitute a Low Cost Housing Centre and the quashing of State
AVAS VIKAS SANSTHAN v. AVAS VIKAS SANS THAN ENGINEERS ASSN. [LAKSHMANAN, J.J 525
Government decision to provide alternate employment was set aside. However, A
the Division Bench on the appeal filed by the employees directed grant of
following benefits:
(i) pay protection;
(ii) service to be counted for the purpose of pension and other B
retirement benefits;
(iii) benefit of fixed period higher pay scale available to Government
employees under Government Order dated 25.01.1992;
(iv) benefit of 5th Pay Commission to be available on notional basis;
(v) one Narendra Kumar Sharma and few other daily wagers to be C
treated as regular appointees as they were selected but not
appointed on regular basis till date of dissolution;
(vi) certain employees including Brijesh Kumar Goel and R.K. Saini
who were working at Latur Project in Maharashtra were also
entitled to alternative employment in local bodies. D
PARTICULARS OF APPEALS
The appeals in the present batch of cases may be divided in the
following three categories:
E
A. The following 12 appeals have been filed by the RHB and AVS:
Civil Appeal Nos. 5302/04, 5317-5322/04, 5312-5316/04, 5309-
5311/04, 5323-5327/04, 5328-5330/04, 5331-5336/04, 5342-
5348/04, 5305-5308/04, 5337/04, 5303/04.
B. The following 11 appeals have been filed by the State of p
Rajasthan:
Civil Appeal Nos. 5339/04, 5371-5376/04, 5366-5370/04, 5309-5352-
5354/04, 5377-5381/04, 5357-5359/04, 5360-5365/04, 5386-5392/04,
5382-5385/04, 5356/04.
C. The following appeal have been filed by the Employees: Civil G
Appeal Nos. 5349-5351/04.
Against the decision of the Division Bench of the High Court,
the appellants preferred the above appeals to this Court.
We heard Mr. Vijay Hansaria, learned senior counsel appearing for the H
526 SUPREME COURT REPORTS [2006] 3 S.C.R.
A appellant and Dr. Rajeev Dhawan, learned senior counsel, Mr. Aruneshwar
Gupta and Ms. Shobha, learned counsel appearing for the respective
respondents.
Mr. Vijay Hansaria, learned senior counsel for the appellants made the
following submissions:
B
(a) That after the dissolution of the AVS, in the writ petition
preferred by the respondents no ground was taken saying that
the liquidation was ma/a fide nor was it prayed that the decision
to liquidate be quashed.
c (b) That on 18.05.1999 Cabinet decision was taken to absorb the
employees of the AVS 'in principle' as decided on 09.03.1999 by
prescribing certain terms and conditions after considering the
opinion of the Finance Department.
(c) That there is no conflict between the Cabinet decisions dated
09.03.1999 and 18.05.1999, neither is there any change in policy
D
of the State Government nor the State Government has gone
back on any promise made earlier. In the cabinet decisions dated
09.03.1999 only an 'in principle' decision was taken to adjust
the employees of the AVS in other local bodies and 'modalities'
of adjustment was worked out in the Cabinet decision dated
E 18.05.1999.
(d) Thereafter the State Government wrote to all local bodies for
appointment of employees of the AVS in their departments along
with ·affidavits filed by the employees of the AVS showing their
willingness to take employment in other local bodies. In 2000,
F all the employees of the AVS were given alternate employment
as fresh employment on certain terms and conditions. All the
employees have submitted affidavits inter-alia stating that their
appointment with local bodies will be treated as fresh appointment
and will not claim continuity of service, seniority, pay protection
etc. and that they will withdraw writ petition. Several employees
G have even filed application for the withdrawal of the writ petition
in terms of their undertakings.
(e) The writ petition was not amended challenging the terms of
undertaking filed by the employees of Sansthan for securing
employment with the local bodies. There is no allegation in the
H
AVAS VIKAS SANSTHAN v. AVAS VIKAS SANSTHAN llNGINEERS ASSN. [LAKSHMANAN, J.] 527
writ petition that the employees were coerced/forced/unduly A
influenced to submit the undertaking.
Submissions on Merit
It was submitted by Mr. Hansaria that abolition of posts is a matter of
policy and is an inherent right of the employer particularly on the closure of B
a project due to lack of funds and heavy loss. The natural consequence of
abolition of posts in any organization is the termination of services of the
employees engaged in such organization. It was further urged that the
employees whose services have been terminated as a consequence of abolition
of posts have no right to seek re-employment or absorption in other C
departments. Learned senior counsel relied on the view taken by this Court
way back in 1973 in the case of M Ramanathan Pillai v. State of Kera/a,
[1973] 2 sec 650 that 'the discharge of the civil servant on account of
abolition of post held by him is not an action which is proposed to be taken
as a personal penalty but it is an action concerning the policy of the State
whether a permanent post should continue or not. The power to abolish any D
civil post is inherent in every sovereign government. And such abolition will
not entail any right on the person holding the abolished post the right to re-
employment or to hold the same post.
Learned senior counsel relied on the decision in K. Rajendran v. State
of Tamil Nadu, [1982] 2 sec 273 on the same issue in which this Court has E
held that, 'the question whether a person who ceases to be Government
servant according to law should be rehabilitated by giving an alternative
employment is, as the law stands today, a matter of policy on which the
Court has no voice.'
Citing the decision of this Court in the case of Rajendra v. State of F
Rajasthan, [1999] 2 SCC 317 and S.M Nilajkar v. Telecom District Manager,
[2003) 4 SCC 27 learned senior counsel submitted that when a project has
been shut down due to want of funds the employer cannot by a writ of
mandamus be directed to continue employing such employees as have been
dislodged because such a direction would amount to requisition for creation G
of posts though not required by the employer and funding such posts though
the employer did not have the funds available for the purpose. And also that
the same will act as a disincentive to the state to float such schemes in future.
With regard to the employment .of 604 employees of the AVS, it was
argued that the State of Rajasthan had no legal obligation to offer alternative H
528 SUPREME COURT REPORTS (2006) 3 S.C.R.
A employment to the erstwhile employees of the Sansthan. But the State of
Rajasthan did frame a scheme and offered employment in other local bodies
of the government. Therefore the terms and conditions of such alternative
employment cannot be challenged.
It was also submitted that additional financial burden will fall upon the
B various local bodies which have absorbed the employees of the AVS, if the
directions of the Division Bench of the Rajasthan High Court are enforced.
It was further argued that the employees of the AVS did accept the alternative
employment with the terms and conditions set out initially by way of an
affidavit and therefore they are now estopped from claiming benefit and
C challenging the terms and conditions of the fresh employment by citing the
decision in the case of Bank of India v. O.P.Swarnakar, [2003] 2 SCC 721
which laid down that, "the scheme is contractual in nature. The contractual
right derived by the employees concerned, therefore, could be waived. The
employees concerned having accepted a part of the benefit could not be
permitted to approbate and reprobate nor can they be permitted to resile from
D their earlier stand."
Placing reliance on a very recent decision of this Court in the State of
Uttaranchal v. Jagpal Singh Tyagi, [2005] 8 SCC 49, learned senior counsel
submitted that. "the employees did not, at any point of time. claim that the
terms of settlement were not fair, therefore after obtaining some benefit, it
E was not open to the employees to later tum away without justifiable cause
and contend that the settlement was not fair."
On the question of Pay Protection and for counting services rendered
in the AVS for pension and other retiral benefits claimed by the respondents,
F the arguments put forward by the appellant was that on facts the Cabinet
decision of 18-05-1999 specifically states that "no pay protection should be
granted to the employees", the same was conveyed by the Rajasthan Housing
Board letter dated 01-06-1999. This decision was taken after considering the
views of the Finance Department. So also the undertaking by the employees
when they were absorbed into other local bodies had the same stipulation,
G therefore at this later stage such pay protection and counting of services for
pension and other retiral benefits cannot be claimed for.
Coming to the claim of the respondents for the benefit of the Government
order date 25.01.1992, it was argued by the appellants that the Government
Order in question is applicable only to 'government servants' and as such the
H employees of A VS are not entitled to the benefit of the said government
AVAS VIKAS SANSTHAN v. AVAS VIKAS SANSTHAN ENGINEERS ASSN. [LAKSHMANAN. J.J 529
--- order. And also the employees would be governed by the terms and conditions A
of the local bodies where they have been reemployeq. So also the benefit of
the 5th Pay Commission is applicable only to government employees. Since
the employees of the AVS are not govt. employees they are not entitled to
the benefit of the 5th Pay Commission.
With regard to appointment of 46 daily wage employees, it was argued B
that after the dissolution of the Society, there is no right on the part of any
employee to be re-employed. Therefore, it was argued that the daily wagers
have no right seeking regular appointment. The decision of this Court in the
case of Punjab State Electricity Board v. Malkiat Singh, (2005] 9 SCC 22 was
relied on. It was held that, "it is settled law that mere inclusion of name of C
a candidate in the select list does not confer on such candidate any vested
right to get an order of appointment". Thus it was argued that the Writ issued
by the Division Bench of the High Court to treat the daily wagers at par with
the regular appointees of Avas Vikas Sansthan is wrong.
Further it was argued by the appellant that the decision in the case of D
Central Inland Waters Transport Corporation Limited & Anr. v. Brojo Nath
Ganguly & Anr., [1986] 3 SCC 156 and Delhi Transport Corporation v.
D. T. C. Mazdoor Congress & Ors., [I 991] Supp I SCC 600 have no application
hi:re because those cases relate to a term in the employment that even services
of a permanent employee can be terminated on 3 months notice without
assigning any reason and such condition was specifically assailed therein. E
The present matter relates to providing alternative employment to the
employees of an organization that is liquidated and posts have been abolished.
In such circumstances the employees of an organization that is liquidated has
no right to seek re-employment.
It was argued that the reliance placed by the respondents on the
F
provisions of Rajasthan Civil Services Rules, 1969 is wholly misconceived
as the Rules mentioned apply only to government servants. Therefore, these
rules will not apply to employees of the AVS.
Dr. Rajeev Dhawan, learned senior counsel for the respondent submitted G
as follows:-
According to learned senior counsel, the judgment of the Division Bench
of the Rajasthan High Court is correct in so far as it gave:
(a) Pay protection (including benefit of higher scales for completing H
530 SUPREME COURT REPORTS [2006] 3 S.C.R.
A of 9, 18 and 27 years)
(b) Counting of service for retiral benefits for long standing employees
of the AYS.
Submissions on law
B
The State is expected to act as a model employer exhibiting 'fairness of
action' towards long standing employees. Learned senior counsel relied on
the decision of this Court in Gurmail Singh v. State of Punjab, [ 1991] I SCC
748. It was laid down by this Court that even though according to the
provisions of Section 25-FF of the Industrial Disputes Act, 1947, retrenchment
C compensation has been paid and accepted, the State was under a duty to treat
employees who were on deputation and those who were dismissed equally
because the state was a "model employer" exhibiting "fairness in action".
It was argued that the above case is an authority for the proposition that
where a state body is shut down, it is part of the obligations of the state as ·
D a model employer dedicated to fairness in action that subject to adjustments,
employees who were on deputation and those who are dismissed should be
absorbed subject to similar equities:-
There should necessarily be: -
E * Pay protection where appointments are made on a lower scale.
* Counting of Service for retiral benefits
* Placing the employees on par in the receiving departments
including salary
F Gurmail Singh (supra) has also laid down that it would not be fair to
allow absorbed employees to steal a march over the employees in the
department into which they are absorbed. However the regular appointees of
such local bodies should not be put at a disadvantageous position by the loss
of seniority due to the absorption of the employees of the AVS.
G Following the decision in the case of Central Inland Waters Transport
Corporation limited (supra), it can be observed that:
I. Unfair labour contracts shock the conscience and are opposed to
public policy.
H 2. Such unconscionability could be caused by economic duress
AVAS VIKAS SANS THAN '· AVAS VIKAS SANS THAN ENGINEERS ASSN. [~AKSHMANAN, J.J 53 J
3. Inequality of bargaining powers vitiates contracts, such contracts A
also violate Article 14 of the Constitution
4. This Court in the present case applied Section 23 of the Contract
Act and held the contract to be unconscionable and void.
"The principle deducible from the above discussions on this part of the case B
is in consonance with right and reason, intended to secure social and economic
justice and conforms to the mandate of the great equality clause in Article
14. This principle is that the courts will not enforce and will when called upon
to do so, strike down an unfair and unreasonable contract or an unfair or
unreasonable clause in the contract, entered into by two parties who are not
equal in bargaining power. It is difficult to give an exhaustive list of all C
bargains of this type. No court can visualize the different situations which can
arise in the affairs of men; one can only attempt to give some illustrations."
Further, learned senior counsel submitted that this Court in Delhi
Transport Corporation v. DTC Mazdoor Congress, (supra) approved the
Central Inland decision (supra) and struck down the unconscionable 'hire & D
fire' clause.
Our attention was invited to certain observations made by Ramaswamy,
J. and B.C. Ray, J; which are as under:-
!. The State cannot impose unconscionable conditions and stated E
that such contracts were contrary to Article 14.
2. Public policy in contract be construed accordingly and be drawn
from the constitution.
B.C. Ray, J. observed that there should not be any limitation on the freedom
F
of contract and specifically approved Central Inland decision (supra) in respect
of such contracts being contrary to Article 14 guaranteed under the
Constitution. This Court further observed that, "The court has, therefore the
jurisdiction and power to strike or set aside the unfavourable terms in contract
of employment which purports to give effect to unconscionable bargain
violating Article 14 of the constitution." G
It was further observed in the case of Prakash Ramachandra v. Maruthi,
[1995] Supp 2 SCC 539 that any undertaking to the court and contractual
arrangement resultant thereto does not oust the jurisdiction or the power of
the court to hear cases or grant relief.
H
532 SUPREME COURT REPORTS (2006] 3 S.C.R.
A Learned counsel for the respondents while citing the decision in National
Building Construction Corporation v. Raghunathan, (1998] 7 SCC 66 argued
that a legitimate expectation is created where employees have been assured
absorption on one basis, which is there altered to their detriment under coercive
circumstances where they have not been paid and acted on the previous
promise that they have tried to enforce in court. It was further argued that
B the decisions cited by the appellant on Article 311 and abolishing civil posts
are exceptional and irrelevant to the present controversy.
Therefore, according to learned senior counsel, the law clearly establishes
that,
c (a) The State must be a model employer and show fairness in action
(b) Even where all statutory requirements (such as Section 25 FF)
and technicalities have been complied with, the State must be fair
enough to absorb employees on a minimal fairness basis which
includes:
D
(i) protection to pay scale
(ii) counting of past service for pensionary benefits
(iii) no seniority over new employees in the new organization
E (iv) equal treatment in future with all employees
(c) Unconscionable contracts and undertakings are contrary to section
23 of the Indian Contract Act, public policy, Article 14 of the
Constitution and Directive Principles of state policies.
( d) Undertakings not accepted by the lower court (and even if
F accepted) do not inhibit this Court's jurisdiction to hear a matter and
grant relief.
With regard to the argument of the appellant's counsel that:-
(a) the employees should not be given pensions;
G
(b) the Division Bench should not have ordered increments at 7, 13
& 27 years as are available to other employees the learned counsel
argued that, if this was made practicable, the employees after
joining the new department cannot be meted out discriminatory
H
treatment. TI1ey will lose seniority, but they cannot be denied
-
AVAS VIKAS SANSTHAN .-. AVAS VIKAS SANSTHAN ENGINEERS ASSN. [LAKSHMANAN, J.] 533
benefits available to others. The respondent's counsel also stated A
that a situation cannot be created where, a former A VS worker
has no pension or Provident Fund and also not to discriminate
by not to extending 9, 18 & 27 years of service which would be
available to others.
Mr. Aruneshwar Gupta, learned counsel for the respondent made the B
~- following submissions:-
That A VS falls within the definition of 'other authorities' under Article
12 of the Constitution and was managed, controlled and owned by the State
of Rajasthan and was dealing with the affairs of the State by referring to the
decisions of this Court in Federal Bank Ltd. v. Sagar Thomas, [2003] IO SCC C
733 and Pradeep Kumar Biswas v. Indian Institution of Chemical Biology,
(20021 s sec 111.
It was further argued that the learned Single Judge clearly held that the
entitlement of the employees was not on any humanitarian ground but because D
the employees had a right to be absorbed and to be treated in a reasonable,
just and proper manner.
According to Mr. Aruneshwar Gupta, the employees, who have been
absorbed in the other authorities, were entitled to the following reliefs:-
!. Fitment in the stage of the pay scale, which they were already E
drawing in the Avas Vikas Sansthan and consequent increments.
2. Arrears of pay on the basis of the above statement.
3. Seniority of the A VS vis-a-vis employees in the authorities in
which they were absorbed. They are entitled to seniority in the p
other undertakings etc. on the basis of date of their substantive
appointment. Therefore inter se seniority of the employees of
Avas Vikas Sansthan who were absorbed in other authorities.
4. Corresponding designation of post in the authorities in which
they were absorbed. G
Ms. Shobha, learned counsel appearing for the daily wagers submitted
that some of the daily wagers were declared qualified but kept in the waiting
list for non-availability of sanctioned vacant posts. According to her, the
High Court has rightly appreciated the facts and circumstances of the present
.'- controversy issued appropriate directions for absorption and that the balance H
534 SUPREME COURT REPORTS (2006] 3 S.C.R.
A of equity lies in their favour in view of the fact that the respondents have
successfully cleared the exemption for regular appointment and had to remain
in the waiting list on the pretext that no vacant sanctioned post is available.
It was also submitted that the appellants have absorbed/adjusted numerous
employees of the AVS but few of them including the respondents have been
left on the pretext that they were not the regular appointed employees.
B Concluding her arguments, she submitted that they are also entitled for similar
treatment being duly selected employees of the AVS. It is also relevant to
mention that the employees were not appointed against any project and the
termination order was passed due to financial inviability of the AVS and not
because of some fault of respondent No. I.
c We have carefully considered the lengthy submissions made by learned
counsel appearing for both the parties. We have also perused all the pleadings,
annexures as well as the judgments of both the Single Judge and the Division
Bench of the Rajasthan High Court
D In our opinion, the submissions made by learned senior counsel for the
AVS merit acceptance and stand to reason in the peculiar facts and
circumstances of the case. Though the arguments of Dr. Rajeev Dhawan and
Mr. Aruneshwar Gupta, learned counsel appearing for the employees are
attractive on the first blush, yet on a careful reconsideration of the same, it
has no merits.
E
In our view, after the liquidation of the AVS due to any reason unless
such liquidation was malafide, there exists no right on the employees of such
liquidated society for reemployment. In the present case, the Rajasthan
Government did formulate a scheme to absorb the employees of the society
F into various other organizations with various terms and conditions to which
the respondent employees agreed. There is no allegation in the writ petition
that the employees were coerced/forced/unduly influenced to submit the
undertaking. Therefore, at a later stage it is unfair to take claims of service
conditions other than the ones that are stipulated and accepted earlier.
G In the case of Rajendra v. State of Rajasthan. [1999] 2 sec 317 and
SM. ¥ilajkar v. Telecom District Manager, [2003] 4 SCC 27 where a project
has been shut down due to want of funds the employer cannot by a writ of
mandamus be directed to continue employing such employees as have been
dislodged because such a direction would amount to requisition for creation
of posts though not required by the employer and funding such posts though
H the employer did not have the funds available for the purpose. This finding
-·
AVAS VlKAS SANS THAN "'· AVAS VlKAS SANS THAN ENGINEERS ASSN. {LAKSHMANAN, J.J 53 5
is applicable in the present matter and therefore the finding of the High Court A
is not fair to common conscience and also that the same will act as a
disincentive to the state to float such schemes in future thereby reducing the
employment opportunities of many.
POWER TO ABOLISH CIVIL POSTS
B
It is settled law that the power to abolish any civil post is inherent in
every sovereign government. and such abolition will not entail any right on
the person holding the abolished post the right to reemployment. or to hold
the same post. In the present case, the State Government was benevolent
enough to float a. scheme to absorb such employees whose posts were C
abolished. Therefore, in our opinion, the arguments advanced by counsel for
the respondents with regard to unfairness meted out to the employees of
Avas Vikas Sansthan hold no water.
With regard to 604 employees of the AVS, it was argued that the State
of Rajasthan had no legal obligation to offer alternative employment to the D
erstwhile employees of the A VS. But the State of Rajasthan in all fairness did
frame a scheme and offered employment in other local bodies of the
government. Thus, the terms and conditions of such alternative employment
cannot be challenged. We are of the opinion, that the decision of the High
Court granting relief of reemployment wiL'i pay protection, seniority and
pension is erroneous. We, therefore, direct the State of Rajasthan to strictly E
adhere to and implement its decision to offer employment in other local
bodies in letter and spirit.
We further make it clear that all the erstwhile employees, if not already
employed, should be employed in the local bodies as per the scheme formulated F
by the Government of Rajasthan in a war footing.
PAY PROTECTION
On the question of Pay Protection claimed by the respondents, it is seen
from the Cabinet decision of 18.05.1999 that "no pay protection should be G
granted to the employees". The same was conveyed by the Rajasthan Housing
Board vide letter dated 01.06.1999. This decision was taken after considering
the views of the Finance Department. So the undertaking by the employees
when they were absorbed into other local bodies had the same stipulation.
This.being so, such claim for pay protection, at this late stage, cannot be
made. Thus, considering the categorical condition that the employees will not H
536 SUPREME COURT REPORTS [2006) 3 S.C.R.
A be given any pay protection, and moreover due to the absence of any legal
right for pay protection to the employees of the AVS, such claims, in our
opinion, cannot be sought for.
With regard to the claim of the respondents for counting services
rendered in the AVS, the Cabinet decision of 18.05.1999 specifically states
B that "the benefit of past service is not to be counted for any purpose". The
same was conveyed by the Rajasthan Housing Board letter dated O1.06.1999.
Therefore the undertaking by the employees when they were absorbed into
other local bodies had the same stipulation; therefore at this late stage such
claim for counting services rendered in the A VS for the pension and other
C retiral benefits, in our opinion, cannot be made.
Since the employees of the A VS are not treated as government servants,
they are not entitled to claim the benefit of Government Order dated 25.01.1995,
which is specifically applicable only to government employees and the benefit
of the 5th Pay Commission Report also stands inapplicable as this was not
D a claim that was sought by the respondents at any stage in any court that
had entertained this matter. Also the Rajasthan Civil Services (Absorption of
Surplus Personnel) Rules, 1969 will not apply as such to these employees of
the AVS as they clearly do not fall within the definition of Surplus Personnel
as defined in the Rajasthan Civil Services (Absorption of Surplus Personnel)
Rules, 1959.
E
As regards the question of whether Rajasthan Housing Board can be
considered 'State' under Article 12 of the Constitution, no serious arguments
were made by either counsel .for the parties and, therefore, we are not
expressing any opinion on the same and decide the other issues on the basis
F of the arguments advanced.
RIGHTS OF DAILY WAGERS
With regard to the appointment of 46 daily wage employees after the
dissolution of the Society, we hold that, in the facts and circumstances of this
G case there is no right on the part of any employee to be re-employed. Also ·
daily wage employees cannot, by any stretch of imagination, be put on par
with regular employees under any law prevalent as of date. The finding of
the Division Bench that they can be treated on par with regular employees
and be given various reliefs is wrong and erroneous under law. Therefore, we
are not granting any relief to the daily wage employees as their claim is not
H justified under law. However, the Government of Rajasthan may
AVAS VIK.AS SANSTHA~ •. AVAS VIKASSANSTIIAN ENGINEERS ASSN. {LAKSHMANAN, J.J5J7
sympathetically consider absorption of these employees in the vacancy A
available if any in future by giving them preference to other new applicants
in any of their local bodies etc. subject to the following conditions:
I. The employees will be entitled to salary/wages from the date of
their re-employment and shall not claim for any past period;
2 The employees will not be entitled to pay protection, benefit of
B
GO dated 25.01.1992, 5th Pay Commission and the service
rendered by the employees will not be considered for pension
and/or other retrial benefits;
3. The appointmeni of Degree holder/Diploma holder Engineers
shall be on the post of Junior Engineer on the minimum scale of C
pay;
4. The appointment of employees of Administrative Department
would be on the post of Junior Clerk on the minimum scale of
pay;
D
5. The appointment would be subject to suitability and physical
fitness;
6. The alternative employment would be granted subject to
availability of vacancy preferably within a period of 3 months.
If they are absorbed in future the same will be treated as a fresh E
employment and employees/appointees will be governed by the rules ·and
regulations of the absorbing Department if they are found suitable.
POWER TO ABOLISH POSTS AS A MEASURE OF ECONOMY:
It is well settled that the power to abolish a post which may result in F
the holder thereof ceasing to be a Government Servant has got to be recognized.
The measure of economy and the need for streamlining the administration to
make it more efficient may induce any State Government to make alterations
in the staffing patte_m of the civil services necessitating either the in~rease or
the decrease in the number of posts or abolish the post. In such an event, a G
Department which was abolished or abandoned wholly or partially for want
of funds, the Court cannot, by a writ of mandamus, direct the employer to
continue employing such employees as have been dislodged. In the instant
case, the State of Rajasthan has framed a scheme and offered alternative
employment in the other local bodies as a Welfare State on humanitarian H
538 SUPREME COURT REPORTS [2006] 3 S.C.R.
A grounds. As already noticed, the employees of the AVS have accepted
alternative employment on terms and conditions of the loct1l bodies and
having filed a solemn statement by way of affidavit that they will not claim
continuity of service by protection of seniority etc. nor will they challenge
the terms of such employment and shall also withdraw the writ petition filed
by them. They cannot now go around and say that the judgment of the
B Division Bench should be given effect to. In our view, they are estopped from
claiming the benefits and challenging the terms and conditions of the fresh
employment. The employees have no right to resile from the affidavits filed
before the High Court. We have searched in vain in order to see as to whether
there is any material to show that the settlement was intended to frustrate the
C order passed by the High Court. At no point of time, the employees raised
any dispute as regards the fairness of the settlement. Having obtained the
benefit, it was not open to them to tum down without justifiable reasons to
contend that the settlement was not fair and they should be given pay
protection, counting of service for retiral benefits and placing the employees
on par in the receiving Department. The cabinet decision of not granting pay
D protection was taken after taking into consideration the views of the Finance
Department as it has huge financial burden on the local bodies offering re-
employment after relaxing their own recruitment rules. In our view, the aforesaid
categorical condition that the employees would not be entitled to pay protection
and in the absence of any legal right of pay protection and fresh employment
E consequent upon on fresh appointment on humanitarian grounds, the decision
of the High Court to grant protection of pay is unsustainable and liable to be
interfered with.
Dr. Rajeev Dhawan, learned senior counsel for the respondents, cited
many decisions. Those cases, in our view, is distinguishable on facts and on
F law. In those cases, the High Court has directed protection of pay on the facts
and circumstances as can be seen from a perusal of the same.
The cabinet decision dated 18.05.1999 specifically decided that their
period of earlier service shall nut be valid fur any purpose. This was
specifically conveyed by the State Government to the Rajasthan Housing
G Board vide letter dated 0 I .06.1999 and also the letter of the State Government
dated 26.02.2000 to the various local bodies. It is stated that one of the terms
of re-employment would be that earlier service tenure shall not be considered
for any purpose. Furthermore, under the provisions of the AVS Employees
Service Regulation, 1993, the employees of the AVS were entitled to provident
H fund. Rule 14 provide as under:-
AVAS VIKAS SANS THAN "· AVAS VIKAS SANS THAN ENGINEERS ASSN. [LAKSHMANAN, J.] 5J 9
"An employee of Sansthan shall be required to subscribe to the A
Contributory Provident Fund in accordance with such Rules as may
be prescribed by the Board of Management."
The employees of the A VS were having the benefit of contributing
provident fund and were not entitled to any other pensionary/retiral benefits.
The employees have withdrawn provident fund including the employer's B
contribution after termination of service from the A VS. It is thus crystal clear
that the services rendered by the employees with AVS cannot be counted for
the purpose of pension and other retiral benefits since such benefits were not
available to them even in their parent organization and it was a specific
condition of fresh employment that their past services with A VS will not be C
considered for any purpose.
Even in A.I. Railway Parcel & Goods Porters Union v. Union of India
& Ors, [2003) I 1 SCC 590 at 603 page 34 one of us was a member (Dr. AR.
· Lakshmanan, J while giving various directions in the matter of regularisation
of contract labour, this Court did not direct that the services rendered by the D
contract labourers with the contractor wou Id be counted for the purpose of
grant of retiral benefits by the principal em pioyer. The recommendations of
the 5th Pay Commission is applicable only to Government Servants and as
such the employees of AVS who are not government employees are not
entitled to 5th Pay Commission even in the writ petition filed by the
organisation there was no prayer for grant of benefit of 5th Pay Commission. E
Thus, the High Court has erred in directing that the benefit ofrecommendations
of 5th Pay Commission shall be given to the employees of the A VS on
notional basis. We make it clear that the employees would be governed by
the terms and conditions of the local bodies where they have been re-employed.
At the time of hearing, a submission under the heading doubts of
F
financial bona fides was made. It is submitted that the said plea is without
any pleading in the writ petition. There is no pleading either on facts or in
the grounds in the writ petition that the averments contained in the note dated
09.03.1999 and 18.05.1999 to the effect that the AVS has no capital base or
reserve capital and has huge financial outstanding is incorrect. It is also not G
in dispute that the employees of the AVS could not be paid salaries of
December, 1998 that amounted to about more than Rs.2 crorcs nor the writ
petitioners/respondent employees have argued either before the Single Judge
or before the Division Bench of the High Court that the liquidation of the A VS
was ma/a fide and or extraneous consideration. So also there is no averment H
540 SUPREME COURT REPORTS (2006] 3 S.C.R.
A in the writ petition as regards the constitution of the AVS or the work of the
AVS being transferred to the AVS. As a matter of fact, the AVS was incorporated
under the Companies Act in the year 1996 and the AVS has majority share
holding in A VS in the absence of any other pleading and contention raised
before the High Court such submission on facts cannot at all be countenanced
before this Court in the present proceedings. Likewise, the submission made
B by learned counsel appearing for the employees that the State has gone back
on its decision and they have coerced the employees to agree to certain
conditions cannot at all be countenanced.
FAIRNESS IN AC110N:
c In our opinion, the State of Rajasthan has acted fairly and benevolently
though the State has no constitutional and legal obligation to offer alternative
employment to the employees of the A VS upon abolition of posts. Consequent
to the liquidation of the AVS itself, it had framed a scheme to adjust the
employees in other local bodies by relaxing the rules of such bodies and
D terms and conditions were fixed without financial economic compulsions of
the State. The present case is one of liquidation of an organisation and
consequent abolition of post in the said organisation. There is also no pleading
that the conditions contained in the undertaking are contrary to Section 23 of
the Contract Act or violative of Article 14 of the Constitution or inconsistent
E with the directive principles of state policy. The Central Inland Waterways
case (supra) and Delhi Transport Corpn. case (supra) relied on by these
employees, in our view, have no application of the present case and
distinguishable on facts and law. Those cases relate to a term in the
employment that even services of a permanent employee can be terminated
on 3 monihs' notice without assigning any reason and such condition was
F specifically assailed therein. However, the present case relates to providing
alternative employment to the employees of an organisation that is liquidated
and posts have been abolished. In such circumstances, this Court has held in
a number of cases that the employees have no right to seek re-employment
in any other organisation. So also, there has been no challenge in any of the
G case decided by the High Court to the terms and conditions of undertaking
that they were unfair, arbitrary and are contrary to public policy and as such
violative of Section 23 of the Contract Act or Article 14 of the Constitution
of India or any directive principles of state policy.
The question of legitimate expectation has also not been raised at any
H stage and as such cannot be agitated before us in this court.
AVAS VIKAS SANSTHAN "· AVAS VIKAS SANS THAN ENGINEERS ASSN. [LAKSHMANAN, J.] 54 J
The reliance on the provisions of Rajasthan Civil Services (Absorption A
of Surplus Personnel) Rules, 1969 is wholly misconceived in as much as the
said rule apply only to "surplus personnel" who were "appointed to various
services or posts in connection with the affairs of the state" in terms of Rule
2 of the said Rules. Surplus personnel have been defined in Rule 3(1) as
follows:
B
"Surplus Personnel" or "Surplus Employee" means the Government
servant to whom the Rajasthan Services Rules, 1951 apply and who
are declared surplus by the government or by the appointing authority,
under directions of the government, on their being rendered surplus
to the requirements of a particular department of the government due C
to the reduction of posts or abolition of offices therein as measures
of economy or on administrative grounds but in whose case the
Government decides not to terminate their services but to retain them
in service by absorption on other posts."
A bare perusal of the aforesaid Rule clearly demonstrates that the rules are D
applicable only to the Government servants to whom Rajasthan Service Rules,
1951 apply. The employees of Avas Vikas Sansthan are not government
servants nor Rajasthan Service Rules, 1951 were applicable to them and as
such the provisions of Rajasthan Civil Services (Absorption of Surplus
Personnel) Rules, 1969 are not applicable in the present case.
E
Further submissions of the learned counsel that the employees must be
posted on the posts earlier held by them is without any merit since these
employees had no right to claim adjustments to other local bodies. The Cabinet
decision dated 18.05.1999 have categorically stated as under:
"All these appointments should be made to the lowest posts and F
engineers should be appointed only on the post of Junior· Engineers
and Employees of Administrative Departments should be appointed
only on the post of Junior Clerk."
So also all these employees have given undertaking not to raise any
dispute in the matter. Thus this contention is untenable and is liable to be G
rejected.
For the foregoing reasons, the impugned judgments of the High Court
are set aside and we hold that all the civil appeals filed by the Rajasthan
Housing Board, the A VS and the State of Rajasthan are allowed. The Civil H
542 SUPREME COURT REPORTS [2006] 3 S.C.R.
A Appeals filed by the employees stand dismissed. No costs.
Order
It was submitted by Mr. Badridas Shanna, learned counsel for the ....
appellants, that the above appeals are of an ,entirely different type in which
B the respondent had challenged the order dated 25.04.1998 of the Avas Vikas
Sansthan and by that letter/order, it was pointed out that 10 employees
including Mr. Radha Krishan Karwashra had not accepted to join and do the
alternative work offered to them and, therefore, those persons were treated as
no more in the service of the Avas Vikas Sansthan. That the order of
25.04.1998 was not at all related to dismissal of service of employees as a
C result of dissolution of the Society. It was submitted that the writ petitions
challenging the said order dated 25.04.1998 are still pending in the High Cou1t
at Jaipur in writ petition Nos. 5370/1998 and 5383/1998. Since this fact was
pointed out by Mr. Badridas Shanna during the time of hearing of these
appeals, we do not consider the merits of the claim made in this appeal. In
D view of this, the above appeals are delinked from the batch of appeals in Civil
Appeals Nos. 5302/2004. etc. etc. and disposed of accordingly. Both parties
are at liberty to pursue the pending writ petitions before the High Court in
accordance with law. No costs.
B.S. Appeals disposed of.
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