Holding

Permanent absorption of an employee in a public sector corporation requires an order or notification issued by the corporation itself; external notifications are insufficient.

Summary

The respondent, D.K. Jain, a member of the Indian Audit and Accounts Service, was appointed Director (Finance) of Fertilizer Corporation of India (FCI) for a term of five years under Article 69 of the corporation's Articles of Association. He later accepted a two‑year appointment as Director (Finance) of Cement Corporation of India (CCI) and voluntarily relinquished his post at FCI. After being removed from CCI, Jain claimed that he had been permanently absorbed by FCI, relying on a notification issued by the Assistant Comptroller and Auditor General stating that his retirement from government service was "consequent upon his permanent absorption" in FCI. The Delhi High Court issued a writ of mandamus directing FCI to reinstate Jain as Director (Finance). The Supreme Court held that permanent absorption can only be effected by an order or notification issued by the corporation itself; external correspondence or a third‑party notification is insufficient. Since FCI never issued such an order, Jain was not permanently absorbed and the High Court's mandamus was erroneous. Consequently, the appeal was allowed and the High Court judgment set aside.

Issues considered

Whether a notification issued by the Assistant Comptroller and Auditor General stating "consequent upon permanent absorption" is sufficient to deem an employee permanently absorbed in a public sector undertaking.
Whether the corporation must issue its own order or notification to effect permanent absorption.
Whether the High Court erred in directing the corporation to reinstate the respondent through a writ of mandamus.

Legislation cited

Central Civil Services (Pension) Rules, 1972s. Rule 37

Subjects

permanent absorptionpublic sector undertakingappointmentreinstatementwrit of mandamusservice lawgovernment notificationcivil service pension rules

Judgment

)
A FERTILIZER CORPORATION OF INDIA
v.
UNION OF INDIA AND ORS.

FEBRUARY 19, 1996

B [J.S. VERMA, N.P. SINGH AND S.P. BHARUCHA, JJ.)

SelVice Law:

Fertilizer C01poration of India-Articles 66, 69 of tlie A1ticles of As-
C sociation-Pennanent abs01ption of a govemment se1vant in a C01pora-
tion-An order or notification has to be issued by the Corporation-A finding
cannot be recorded merely on the basis of some c01respondence or notifica-
tion issued by others-Wlit issued by the High Cowt to the C01poration to
take back the employee in se1Vice on the ground that he was pennanently
....
absorbed in the COJporation-Held : Uncalled for and hence set aside.
D
• The Respondent was working in the Junior Administrative grade in
the Indian Audit and Accounts Service. While he was on deputation in the
Bureau of Public Enterprises, he was selected by the Public Enterprises
Selection Board for the post of Director (Finance) in the Appellant-Cor-
E poration. He was appointed with effect from 8.6.1982, in terms of Article
69 for a period of five years or till the age of his superannuation, whichever
was earlier.

After two years of joining, another order was issued on 12.11.1984
saying that the Respondent had been appointed in the same post in the
F Cement Corporation of India Ltd. for a period of two years. The Respon-
dent was requested to hand over charge w.e.f. 24.11.1984. The Respondent
made a request to the authorities to fix the term as five years so that he
may not be denied the benefit given to him earlier. However, on his own
request the Respondent was relieved from the Appellant- Corporation on
5.12.1984. He was removed from the post of Director (Finance) in the
G Cement Corporation of India on 20.1.1986, by the President of India. When
the Respondent wanted to rejoin the Appellant-Corporation, he was in-
formed that his services with them had ceased immediately on his appoint-
ment in the Cement Corporation of India Ltd. The Respondent submitted
before the higher authorities that his permanent absorption in the Appel-
H lant-Corporation was condition precedent to his appointment with them
816
F.C.I. v. U.0.1. 817

and further even the order of retirement of the Respondent form his A
original post stated that "consequent upon his permanent absorption· in
Fertilizer Corporation ..... he is deemed to have retired". The Appellant-
Corporation refused to take him back on the ground that after he had been
relieved from the post as desired by him, there was no question of his
continuing in the said post.
B
The Respondent filed a Writ petition which was allowed and direc-
tion was given to the Appellant-Corporation to take back the Respondent
in service as Director (Finance ) w.e.f. 20.10.1986 and in case the post of
Director (Finance) was not available, then he should be appointed in
another equivalent post with all consequential benefits. c
The Appellant-Corporation submitted that the claim of the Respon-
dent that he had been appointed on permanent basis in the Corporation
was not borne out from records, that the said claim has been made by the
respondent only after he was removed from the post of Director (Finance)
of the Cement Corporation of India, that the respondent had been ap- D
pointed for a fixed tenure of five years and there was no question of his
being absorbed on permanent basis in the appellant-corporation; that even
before the expiry of the said period of five years, the respondent of his own
volition left the service of the Corporation to join the Cement Corporation
of India and there was no question of his coming back to the Appellant- E
Corporation to join the post of Director (Finance) or any equivalent post
and that merely on the basis of notification issued by the Government
retiring the Respondent from service mentioned that, "consequent upon
his permanent absorption in the Fertilizers Corporation of India Limited",
it cannot be held that the respondent had been absorbed in the Corpora-
tion on permanent basis and any such· statement shall be of no conse- F
quence so far as the Appellant-Corporation was concerned.

The Respondent-employee contended that in his communication to
the Comptroller Auditor General of India, he has given his consent for
permanent absorption in the Appellant-Corporation and agreed for ter- G
mination of his lien. He also referred to the retirement order issued by the
Government mentioning the permanent absorption.

Allowing the appeal, this Court

HELD : 1. The High Court was in error in issuing writ of mandamus H
)
818 SUPREME COURT REPORTS [1996] 2 S.C.R.

A to the appellant corporation to take back the respondent in service as
Director (Finance). [823-H]

2.1. The question whether the respondent was appointed on per-
manent b.asis or was absorbed at any stage by the appellant Corporation on
permanent basis had to be traced and found out on basis of orders issued
B · by the appellant Corporation. It was an admitted position that no such
order has been issued by the appellant Corporation at any stage. [826-C]

2.2. It was difficult to hold merely on the basis of the notification
issued by the Assistant Comptroller and Auditor General, that stated that
C "consequent upon the permanent absorption of the respondent in the
Fertilizer Corporation of India", the respondent had been permanently
absorbed in the appellant corporation. For the permanent absorption of
the respondent, the appellant Corporation had to issue an order or
notification to that effect. That finding could be recorded by a Court
merely on basis of some correspondence or order or notification issued by
D others. [825-E-F]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 660 of
1991.

From the Judg_ment and Order dated 24.8.90 of the Delhi High Court
E in C.W.P. No. 228~~0f 1986.

G.L. Sanghi, N.B. Shetye and P.D. Tyagi for the Appellants.

Anil Kr. Gupta, Ashok Sharma, Girish Chandra, Krishan Mahajan,
AS. Rawat, D.S. Mahara and S.N. Terdol for the Respondents.
F
The Judgment of the Court was delivered by ...
N.P. SINGH, J. This appeal has been filed on behalf of the Fertilizer
Corporation of India Ltd. (hereinafter referred as the 'Corporation') for -
'

setting aside the judgment dated 24.9.1990 of the High Court by which the
G . writ petition filed on behalf of respondent No. 4 Shri D.K. Jain,
(hereinafter referred to as the 'respondent') has been allowed and a
direction has been given to the appellant-Corporation to take back the .said
respondent in service as Director (Finance) w.e.f. 20.4.1986. A further
direction has been given that in case the post of Director (Finance) had
H already been filled up by somi;": other incumbent and it was not possible to
F.C.I. v. U.0.1. [N.P. SINGH, J.] 819

appoint the respondent against the said post, then he should be appointed A
in another equivalent post with all consequential benefits.

The respondent joined the Indian Audit and Accounts Service in the
year 1958 and was holding a substantive post in junior administrative grade
of Rs. 1500 - 100 - 3000 w.e.f. 15.7.1982. While the respondent was working
as Joint Adviser (Finance), Bureau of Public Enterprises, on deputation B
from his parent cadre of Indian Audit and Accounts Service, he was
selected by Public Enterprises Selection Board for the post of Director
(Finance) for the Corporation. By an order dated 8.6.1982 issued by the
Government of India, Ministry of Petroleum, Chemicals and Fertilizers the
respondent was appointed as Director (Finance) of the said Corporation. C
Article 66 of the Articles of Association of the Corporation which
provides for the appointment of Director says :

"66.(1) The Directors representing the Govt. shall be appointed by
the President of India. All other members of the Board of Direc- D
tors shall be appointed by the President of India in consultation
with the Chairman of the Board of Directors and shall be paid
such salary and or allowance as the President may from time to
time determine.

(2) All the Directors except the Managing Director, Executive E
Director/s and Functional Director/s shall retire at the end of their
term, not exceeding three years from the date of their appointment.
The Managing Director, Executive Director/s and Functional
Director/s shall retire on his/their ceasing to hold the office of the
Managing Director, Executive Director/s and Functional Direc- p
tor/s. A retiring Director shall be eligible for re-appointment.

(3) The presiden.t shall have tl1e power to remove any Director
including the Chairman, the Managing Director, Executive Direc-
tor/s and Functional Director/s from office at any time and in his
absolute discretion. G
(4) The President shall have the right to fill any vacancy in the
office of a Director cause by retirement, removal, resignation,
death or otherwise."

The respondent after having been appointed as Director on the Board of H
820 SUPREME COURT REPORTS l1996] 2S.C.R.

A the Corporation was also appointed in terms of Article 69 of the Articles
of Association of the Corporation as Director (Finance) of the said Cor-
poration for a period of five years or till the age of his superannuation,
whichever was earlier.

Pursuant to the aforesaid order, the respondent joined the Corpora-
B tion on 17.7.1982. On 12.11.1984 another order was isrned by the Govern-
ment of India, Ministry of Industry (Department of Industrial
Development) in respect of the said respondent saying that the President
had been pleased to appoint the said respondent who was then Director
(Finance) of the Corporation as Director (Finance) of the Cement Cor-
C poration of India Ltd. for a period of two years. The relevant Part of the
order is as follows :

"ORDER

In pursuance of Article 95(a) and (b) of the Articles of Association
D of the Cement corporation of India Limited, the President is
pleased to appoint Shri D.K. Jain, at present Director (Finance),
Fertiliser Corporation of India Limited as Director (Finance),
Cement Corporation of India Limited for a period of two years
with effect from the date he assumes charge of the post of Director
E (Finance) in the Cement Corporation of India Limited."

The Chairman and Managing Director of the appellant-Corporation
issued an order on 22.11.1984 saying :

" "On his appointment as Director (Finance) in the Cement
F Corporation of India Ltd., notified yide Ministry of Industry's
Order No. 10-16/84-Com. dated 12th November, 1984 and sub-
sequent request from the same Ministry for his early release as per
their letter dated 17th November, 1984 and the clearance given by
the Ministry of Chemicals and Fertilizers, it has been decided to
release Shri D .K. Jain, Director (Finance) with effect from 24th
November, 1984 (Forenoon).

He is advised to hand over the charge of his office to Shri S.
Padmanabhan, Dy. General Manager (Finance), who would look
after the work of Finance Division, in the Corporate Office, untill
H further orders."
F.C.I. v. U.0.1. [N.P. SINGH, J.] 821

It may be mentioned that before the aforesaid order dated 22.11.1984 A
was issued by the appellant-Corporation releasing the respondent w.e.f.
24.11.1984 the respondent had addressed a letter on 15.11.1984 to Shri Iyer,
Director, Government of India, Ministry of Industry (Department of In-
dustrial Development) saying that he had been appointed in June 1982 as
Director (Finance) in the appellant-Corporation and his tenure had been B
fixed at five years, as such his appointment for two years in the Cement
Corporation of India shall be a distinct disadvantage to him, and a request
was made:

"In view of above, I would request that my term of appointment
in the Cement Corporation of India Limited be kept at five years C
so that I may not be denied the benefit which was conferred earlier
by the Government at the time of appointment in the Fertilizer
Corporation of India Limited more so when I am not gaining
monetary advantage in joining the Cement Corporation of India
Limited..........." D

On 3.12.1984 yet another order was issued in respect of respondent
by appellant-Corporation saying :

"Further to Memo of even number dated 23rd November, 1984
and as requested by Shri D .K. Jain, Director (Finance) he will E
stand relieved from the services of the Corporation as Director
(Finance) with effect from the afternoon of 5th December, 1984.

Shri Jain is advised to hand over the charge to Shri S. Pad-
manabhan, Dy. General Manager (Finance). His dues relating to
Provident Fund/E.L. will be settled as per rule of the Corporation. F

{P.L. KUKREJA)
Chairman & Managing Director"

On 5.12.1984 the respondent relinquished the charge of the post of G
Director (Finance) of the appellant-Corporation saying :

"I hereby relinquish the charge of the post of Director
(Finance) FCI with effect from the afternoon of 5th December,
1984 to take up my assignment as Director (Finance), Cement
Corporation of India. There are no papers which need to be H
822 SUPREME COURT REPORTS (1996] 2 S.C.R.

A handed over as all the related files are in the respective sections
and departments.

Sd/-
(D.K. Jain)
Director (Finance)"
B
He assumed the charge of the post of Director (Finance) in Cement
Corporation of India on 6.12.1984.

Unfortunately by an order dated 20.1.1986 issued by the Government
C of India, Ministry of Industry (Department of the Public Enterprises) the
respondent was removed from the post of Director (Finance) in the
Cement Corporation of India. The aforesaid order said :

"ORDER

WHEREAS the Preside11t is of the opinion that it is in the
D
public interest to do so; . '

NOW, THEREFORE, in exercise of the powers conferred by
Article 95 (d) of the Article of Association of Cement Corporation
of India Limited, New Delhi, the President is pleased to terminate
E forthwith the services of Shri D.K. Jain as Director (Finance) in
the Cement Corporation of India Limited and also remove him
forthwith from the Board of Directors of the said Corporation.

The President is further pleased to decide that Shri D .K. Jain
will be paid three months' pay and allowances, as admissible under
F the rules of the Corporation, in lieu of . the period of notice
prescribed in para 1(1) of the Ministry's letter No. 10(18)/84-Com.,
dated the 4th February, 1985.

By order and in the name of the President.
G
Sd/-
E.V.L. Prasada Rao
Under Secretary to the Govt. of India"

The respondent addressed a communication dated 17.4.1986 to the
H Secretary, Department of Fertilizers, Ministry of Agriculture saying that he
F.C.I. v. U.0.1. [N.P. SINGH, J.] 823

had received a reply from the appellant- Corporation vide their letter dated A
14.4.1986 that his employment with that Corporation had ceased immedi-
ately on respondent being relieved on the afternoon of 5.12.1984 conse-
quent to his appointment as Director (Finance) in the Cement Corporation
. of India. The respondent made a grievance in the said letter that the
appellant-Corporation had not created a permanent post for his permanent
B
absorption. In that connection, respondent said :

"It may please be recalled that my permanent absorption in
Fertilizer Corporation of India was a material condition precedent
to my appointment with the Corporation and retirement from
Indian Audit & Accounts Service. This was stipulated both by me C
and my cadre authority, i.e. the Comptroller & Auditor General
of India through various letters on the subject both before and
after my joining the Corporation in July, 1982."

Our attention was drawn to a communication dated 10.6.1983 ad- D
dressed by Under Secretary to the Government of India to the Comptroller
and Auditor General of India referring to the sanction of the President to
the permanent absorption of the respondent in the appellant-Corporation
in public interest w.e.f. 17.7.1982. In this connection, a reference was also
made on behalf of the respondent to a notification dated 21.6.1983 issued
by the Asstt. Comptroller and Auditor General saying : E

"Consequent upon his permanent absorption in the Fertilizer
Corporation of India Ltd. (A Central Public Sector Undertaking).
New Delhi, in public interest, with effect form 17th July, 1982
(AN.), Shri D.K. Jain, I.A. & A.S., is deemed to have retired from F
Government Service with effect from the same date in terms of
Rule 37 of the Central Civil Services (Pension) Rules, 1972."

When the appellant-Corporation refused to take back the respondent to
the post of Director (Finance) on the ground that after the said respondent
had been relieved for the said post as desired by him, there was no question G
of his continuing on the said post, the respondent filed a writ petition
before the High Court. That writ petition as already mentioned above
allowed by the High Court and a direction was given to the appellant to
take back the said respondent in service as Director (Finance) w.e.f.
20.4.1986. H
824 SUPREME COURT REPORTS [1996] 2 S.C.R.

A According to the appellant-Corporation, the claim of the respondent
that he had bi;:§n appointed on permanent basis in the Corporation is not
borne out from records of the Corporation and the said Claim has been
made by the respondent only after the said respondent was removed from
the post of Director (Finance) of the Cement Corporation of India. It was
B pointed out that the respondent had been appointed by the appellant-Cor-
poration for a fixed tenure of five years there was no question of his being
absorbed on permanent basis in the Corporation. Even before the expiry
of the said period of five years, the respondent of his own volition left the
service of the Corporation to join the Cement Corporation of India. In this
background, after his removal from the Cement Corporation of India, there
C was no question of the respondent coming back to appellant-Corporation
to join the post to Director (Finance) or any equivalent post.

There is no dispute that at no stage any order was issued by the
appellant-Corporation absorbing the respondent in the service of the Cor-
D poration on permanent basis. The only order which issued in respect of
respondent's appointment under Article 66(1) of the Articles of Associa-
tion of the Corporation on 8.6.1982 said in clear and unambiguous words
that the appointment of the respondent as Director (Finance) was for a
period of five years or till the age of superannuation, whichever was
earlier. This o.rder was never modified or substituted at any stage. The
·E stand of the appellant~Corporation appears to be that merely on the basis
of notification issued on 21.6.1983 retiring the respondent from the
Government service w.e.f. 17.7.1982, saying "consequent upon his per-
manent absorption in the Fertilizers Corporation of India Limited", it
cannot be held that the respondent had been absorbed in the Corporation
p on permanent basis. Any such statement in the notification issued by the
Assistant Comptroller and Auditor General shall be of no consequence so
far the appellant-Corporation was concerned.

It is unfortunate that the respondent for his better prospects in life
stepped out from service of the Central Government to the service of the
G appellant-Corporation and then to the Cement Corporation of India. But
the fact remains that in this process, he has landed in a situation where he
cannot claim that either he continued in the service of the Central Govern-
ment or the appellant- Corporation till the date of his superannuation. Not
only the order of appointment of the respondent by the President in the
H appellant-Corporation is clear, specific and unambiguous regarding his five
F.C.l.v. U.0.1.[N.P.SINGH,J.] 825

years term, the respondent has also understood it in the same manner. A
After he was removed from the Cement Corporation of India, in his
aforesaid communication dated 17.4.1986 to the Secretary, Department of
Fertilizers, Ministry of Agriculture he said :

"..... This indicates that the Fertilizer Corporation had not
created a permanent post to accommodate my lien consequent to
B
my permanent absorption with them in terms of Ministry of
Finance, Government of India letter No. A- 39020/14/83-EC dated
10th June, 1983 conveying President's sanction to that effect. If
that be so my deemed retirement from Indian Audit & Accounts
Service as notified by the Comptroller and Auditor General of C
India through Notification No. 3740/GE.l/J-13/P;F.Pt.III dated 21st
June, 1983 was not covered by the rules and regulations and
therefore, ultra-vires."

In other words, in the aforesaid communication he claimed that his resig- D
nation from the Indian Audit and Accounts Service itself was ultra-vires
and he shall be deemed to be continuing in the said service after his
removal from the Cement Corporation of India. In this background, ac-
cording to us, it is difficult to hold merely on basis of aforesaid notification
dated 21.6.1983 issued by the Assistant Comptroller and Auditor General
saying that "consequent upon the permanent absorption of the respondent E
in the Fertilizers Corporation of India" that the respondent had been
permanently absorbed in the appellant-Corporation. For the permanent
absorption of the respondent, the appellant-Corporation had to issue an
order or notification to that effect. That finding cannot be recorded by a
court merely on basis of some correspondence or order or notification F
issued by others.

The counsel appearing on behalf of respondent referred to different
communication addressed by the respondent for his permanent absorption.
A reference was also made to a communication dated 4.5.1983 addressed
by the respondent .to the Comptroller and Auditor General of India in G
which he said that he was giving his consent for permanent absorption in

- the Corporation effective from 17.7.1982 and similarly he was agreeing for
termination to his lien in the Indian Audit & Accounts Service from that
date. Reliance was also placed on the aforesaid notification dated 21.6.1983
issued by the Assistant Comptroller and Auditor General which has H

•
826 SUPREME COURT REPORTS [1996] 2 S.C.R.

A already been referred to above in which it has been said that "consequent
upon permanent absorption in the Fertilizers Corporation of India" the <'
respondent shall be deemed to have retired from the Government service.
According to us what the respondent desired and how the Assistant
Comptroller and Auditor General understood in respect of appointment
of the respondent in the appellant- Corporation shall not be binding on the
B appellant-Corporation. The question whether the respondent was ap-
pointed on permanent basis or was absorbed at any stage by the appellant-
Corporation on permanent basis has to be traced and found out on basis
of orders issued by the appellant-Corporation. It is an admitted position
that no such order has been issued by the appellant- Corporation at any
C stage.

Apart from that, before the expiry of period for five years for which
the respondent had been appointed by the appellant- Corporation, respon-
dent of his own left the appellant-Corporation and at his request and as
desired by him he was relieved from the service of the Corporation.
D Thereafter there was no occasion for the respondent to claim the post of .
Director (Finance) in the appellant-Corporation. The High Court has
missed the real issue involved and was in error in issuing writ of mandamus
on the appellant-Corporation to take the said respondent in service as
Director (Finance) w.e.f. 20.4.1986.
E Accordingly the appeal is allowed. The order of the High Court is
set aside. In the facts circumstances of the case, there shall be no order as
to costs.

V.M. Appeal allowed.

-