Holding

The Uttar Pradesh Absorption Rules do not apply to IERT as it is not a public corporation established under a Uttar Pradesh Act, and consequently the retrenched employees are not entitled to absorption.

Summary

The Institute of Engineering and Rural Technology (IERT), a society registered under the Societies Registration Act, 1860, decided to close one of its centres, retrenching 105 employees. The employees filed a writ petition seeking their absorption under the Uttar Pradesh Absorption of Retrenched Employees of Government/Corporations in Government Service Rules, 1991. A Single Judge of the Allahabad High Court held IERT to be wholly owned and controlled by the State and ordered absorption; the High Court on special appeal reversed, finding IERT not an instrumentality of the State. On appeal, the Supreme Court examined whether IERT qualified as a "public corporation" under the Rules and whether the Rules could apply to the retrenched employees. The Court held that the Rules apply only to bodies corporate established or constituted by a Uttar Pradesh Act, which IERT was not, being a society under a Central Act, and therefore the employees were not entitled to absorption. The appeals were dismissed.

Issues considered

Whether the Institute of Engineering and Rural Technology (IERT) is an instrumentality of the State for the purpose of applying the Uttar Pradesh Absorption Rules.
Whether the Uttar Pradesh Absorption of Retrenched Employees of Government/Corporations in Government Service Rules, 1991 apply to the retrenched employees of IERT.

Legislation cited

Companies Act, 1956s. 617
Constitution of Indias. Article 309
Societies Registration Act, 1860s. 1, s. 10, s. 13, s. 14, s. 2, s. 3, s. 5, s. 6, s. 7, s. 8

Subjects

absorption rulesretrenched employeesinstrumentality of statesocieties registration actpublic corporationUttar Pradesh labour lawclosure of institutionemployee rights

Judgment

MOHAMMAD SADIQ AND ORS. A
'y
v.
STATE OF UTIAR PRADESH AND ORS.

SEPTEMBER 21, 2007

[DR. ARIJIT PASAYAT AND LOKESHWAR SINGH PANTA,JJ.] B

y Labour Laws:
Uttar Pradesh Absorption of Retrenched Employee of
Government/Corporations in Government Service Rules, 1991-ss. c
2(b) and 2(c)-Closure of Institution registered under Societies
Registration Act-Retrenchment of its employees-Writ Petition-
Single Judge of High Court directing absorption of retrenched
employees holding the institution as an instrumentality of the
Government-Order of Single Judge reversed by Division Bench of D
High Court-On appeal, held: The retrenched employees are not
A
entitled to be absorbed-Absorption Rules are not applicable to the
Institution in question-As the Institution is not an instrumentality of
the State and the same has not been constituted under any Uttar
Pradesh Act-Societies Registration Act, 1860. E
The institution, ofwhich the appellants were the employees, was
registered under Societies Registration Act, 1860. It decided to close
.
>.
down one ofits centres and the workmen employed therein, were to
be retrenched after paying compensation. Appellants-retrenched
F
employees filed Writ Petition. Single Judge of High Court allowed
the same holding that the Institution was wholly owned, controlled
and managed by the State Government and directed appointment
of the employees by their absorption in any other institution of State
Government. Special appeal, thereagainst was allowed by High
G
-y Court holding that the institution was not an instrumentality of the
State Government and hence could not be termed as State
Government or a public Corporation.
In appeal to this Court, appellant contended that even though,
189 H
190 SUPREME COURT REPORTS [2007] I 0 S.C.R.

.. A the institution was registered under Societies Registration Act, that
does not mean that it was not established or constituted under any
State Act, and hence they were entitled to protection under Uttar
Pradesh Absorption of Retrenched Employees of Government/
Corporation in Government Service Rules, 1991.
B
Dismissing the appeals, the Court
HELD: 1. Uttar Pradesh Absorption of Retrenched Employees
of Government/Corporations in Government Service Rules, 1991 '"(
are not applicable to the Institution. A bare reading of ss. 2(b) and
C 2(c) of the Absorption Rules, makes the positions clear that in order
to bring application of the Rules the public corporation has to be a
body corporate established or constituted by or under any Uttar
Pradesh Act. The fundamental requirement is that the corporation
should have been constituted by or under any Uttar Pradesh Act.
D Undisputedly, the Societies Registration Act is a Central Act. The
Institution is not an instrumentality of the State and/or could not be
termed to be State Government or a public Corporation. There was
no material placed before the High Court to establish that IERT is
an instrumentality of the State.
E . [Paras 3, 7, 8, 9 and 10] [192-D-E; 193-A-B; 198-A-B-C]
2. Even if a society or institute is registered under the Societies
Registration Act and some functionaries of the State Government
are the members of the institute, such an institute may not be termed
as an instrumentality of the State, if deep and pervasive control over \
F the affairs of the institute was not with the State Government. There
is basic distinction between a Society and a Corporation.
[Para 7] [193-B-C]
Pradeep Kumar Biswas v. Indian Institute of Chemical Biology
G and Ors., [2002] 5 SCC 111; Board a/Trustees, Ayurvedic and Unani
Tibia College, Delhi v. State ofDelhi (Now Delhi Adminstration) and
Anr., AIR (1962) SC 458, relied on.
Ajay Hasia and Ors. v. Khalid Mujib Sebravardi and Ors., [1981]
1 sec 722, referred to.
H
~
MOHAMMADSADIQv. STATEOFUTTARPRADESH 191
[PASAYAT,J.]

y CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4590 of A
2004.
From the Judgment and Order dated 13.02.2004 of the High Court
of Judicature at Allahabad in Special Appeal No. 681 of2002.
P. Vishwanantha Shetty, S.J. Aristotle, Yatish Mohan, E.C. Vidya B
Sagar, Shekhar Prit Jha and Dr. Bheem Pratap Singh for the Appellants.
Dinesh Dwivedi, Niranjana Singh, Abhishek Chaudhary and Seita
Vaidyalingam for the Respondents.
The Judgment of the Court was delivered by c
DR. ARIJIT PASAYAT, J. 1. These appeals are inter-linked and
are directed against common judgment of the Allahabad High Court. By
the impugned judgment the order passed by the learned Single Judge was
set aside.
D
....l.
2. Background facts in a nutshell are as follows:
Retrenched employees of Institute of Engineering and Rural
Technology (for short 'IERT'), 105 in number, filed a writ petition against
the State ofU.P. and its functionaries as well as the IERT praying for
quashing the order dated 24.3.1999 by which it was decided that the E
Training-cum-Production Centre ofIERT was to be closed down w.e.f.
31.3 .1999 and the workmen employed were to be retrenched after paying
..
,,:
compensation.
While allowing the writ petition the learned Single Judge gave F
directions which essentially read as follow:-
"... The respondents are directed to prepare a list of the employees
who were appointed prior to 1.10.1986 in the production-cum-
training Centre ofIERT, and were working continuously till the date
of their retrenchment i.e. 31.3.1999 by excluding those who have G
retired, or have not given their option for absorption, to be
absorbed in the vacancies in other polytechnics of the State of
Government, which are recognized and funded or in any other
technical institution, or any post which it may deem to be fit, in
accordance with their eligibility and after relaxing age and other H
192 SUPREME COURT REPORTS [2007] 10 S.C.R.

A tenns and conditions of recruitment. As and when petitioners are
offered absorption on any equivalent post, they will vacate the
quarters occupies by some of them in the premises ofIERT. Since
petitioners have accepted retrenchment compensation, no direction
with regard to payment of salary is required to be given. The
B State Government is directed to draw the list, prepare the scheme
and to offer appointment by absorption, preferably within a period
of four months. There is no order as cost."
3. The present respondents questioned correctness of the order by
filing special appeal before the High Court. By the impugned judgment
C the High Court ~llowed the special appeal. It held that IERT is not an
instrumentality of the State and/or could not be tenned to be State
Government or a public Corporation. It was held that the finding of
learned Single Judge that IERT is wholly owned, controlled and managed
by the State Govern1nent is not correct.
D
4. Learned counsel for the appellants submitted that the basic
questions are as follows:- )....

(a) Whether IERTwas an instrumentality of the State.
(b) Whether the Uttar Pradesh Absorptions of Retrenched
E
Employees of Government/Corporations in Government
Service Rules, 1991 (in short the 'Absorption Rules') is
applicable to the writ petitioners-appellants.
(c) Whether after receiving compensation, the concerned
F employees could question the closure.
5. It was submitted that IERT is registered under the Societies
Registration Act, 1860 (in short the 'Societies Act') and in tenns of the
Absorption Rules the concerned employees were entitled to be given
protection of the Absorption Rules. It is submitted that the expression
G "established" means that the institution has come into existence and,
therefore, even though IERT has been registered under the Societies Act,
that does not mean it is not established or constituted under any Uttar
Pradesh Act.

H
-~ MOHAMMADSADIQv. STATEOFUTTARPRADESH 193
[PASAYAT,J.]
6. In response, learned counsel for the respondent submitted that A
the concept of "established" or "constituted" is different from a body
registered under the Societies Act.
7. The contentions raised need consideration. It has been accepted
that there was no material placed before the High Court to establish that
IERT is an instrumentality of the State. In Pradeep Kumar Biswas v. B
Indian Institute of Chemical Biology and Ors., [2002] 5 SCC 111, it
has been clearly stated that even if a society or institute is registered under
the Societies Act and some functionaries of the State Government are
the members of the institute, such an institute may not be termed as an
instrumentality of the State, if deep and pervasive control over the affairs c
of the institute was not with the State Government Texts formulated in
Ajay Rasia and Ors. v. Khalid Mujib Sehravardi and Ors., [1981] I
sec 722 were highlighted. There is basic distinction between a society
and a corporation. In Board of Trustees, Ayurvedic and Unani Tibia
College, Delhi v. State of Delhi (Now Delhi Administration) and Anr., 0
AIR (1962) SC 458, it was inter alia held as follows:
"(9) The first and foremost question is whether the old Board was
a corporation in the legal sense of that word. What is a
Corporation? Corporations may be divided into two main classes,
E
namely, corporations aggregate and corporations sole. We are not
concerned in the present case with corporation sole. "A
Corporation aggregate has been defined as a collection of
individuals united into one body under a special denomination,
•
~
having perpetual succession under an artificial form, and vested by
the policy of the law with the capacity of acting in several respects F
as an individual, particularly of taking and granting property, of
contracting obligations and of suing and being sued, of enjoying
privileges and immunities in common, and of exercising a variety
of political rights, more or less extensive, according to the design
of its institution, or the powers conferred upon it, either at the time G
~ of its ~reation or at any subsequent period of its existence".
(Halsbury's Laws of England, 3rd Edn. Vol. 9, page 4.) A
corporation aggregate has therefore only one capacity, namely, its
corporate capacity. A corporation aggregate may be a trading
H
SUPREME COURT REPORTS [2007] 10 S.C.R.
~
194

A corporation or a non-trading corporation. The usual examples of
a trading corporation are ( 1) charter companies, (2) companies ~
incorporated by special acts of parliament, (3) companies
registered under the Companies Act, etc. Non-trading
corporations are illustrated by (1) municipal corporations, (2)
B district boards, (3) benevolent institutions, (4)universities etc. An
essential element in the legal conception of a corporation is that
its identity is continuous, that is, that the original member of
members and his or their successors are one. In law the individual
corporators, or members, of which it is composed are something
c wholly differentfrom the corporation itself; for a corporation is a
legal persona jru,1 as much as an individual. Thus, it has been held
that a name is essential to a corporation; that a corporation
aggregate can, as a general rule, only act or express its will by
deed under its common seal; that at the present day in England a
D corporation is created by one or other of two methods, namely,
by Royal Charter of incorporation from the Crown or by the
authority of Parliament that is to say, by or by virtue of statute.
There is authority of long standing for saying that the essence of a
corporation consists in (1) lawful authority of incorporation, (2)
the persons to be incorporated, (3) a name by which the persons
E
are incorporated, (4) a place, and (5) words sufficient in law to
show incorporation. No particular words are necessary for the
creation of a corporation; any expression showing an intention to
incorporate will be sufficient.
F 10. The learned Advocate for the petitioners has referred us to
various provisions of the Societies Registration Act, 1860 and has
'
_....__

contended that the result of these provisions was to make the
Board a corporation on registration. It is necessary now to read
some of the provisions of that Act. The Act is entitled an Act for
G the registration ofliterary, scientific and charitable societies and the
preamble states that it was enacted for improving the legal condition
of societies established for the promotion ofliterature, science, or
the fine arts, or for the diffusion of usefi,11 knowledge etc., or for
charitable purposes. Section 1 of the Act states that any seven or
H more persons associated for any literary, scientific, or charitable
~ MOHAMMADSADIQv. STATEOFUTTARPRADESH 195
[PASAYAT,J.]
purpose, or for any such purpose as is described in Section 20 of A
y the Act may, by subscribing their names to a memorandum of
association and filing the same with the Registrar or Joint-stock
Companies form themselves into a society under the Act. Section
2 lays down that th~ memorandun1 of association shall contain and ·
one of the particulars it must contain is ''the objects of the society". B
Section 3 deals with registration and the fees payable therefor.
Sections 5 and 6 are important for our purposes and should be
read in full.
"5. The property, movable and immovable, belonging to a
society registered under this Act, if not vested in trustees, shall be c
deemed to be vested, for the time being, in the governing body of
such society, and in all proceedings, civil and criminal, may be
described as the property of the governing body of such society
by their proper title.
D
6. Every society registered under this Act may sue or be sued
in the name of the president, chairman, or principal secretary, or
trustees, as shall be determined by the rules arid regulations of the
society, and, in default of such deterrllination, in the mune of such
person as shall be appointed by the governing body for the
E
occasion:
Provided that it shall be competent for any person having a claim
or demand against the society, to sue the president or chairman,
or principal secretary of the trustees thereof, if on an application
•
/i--. to the governing body some other officer or person be not F
nominated to be the defendant."
Section 7 provides for non-abatement of suits or proceedings and
the continuance of such suits or proceedings in the name of or
against the successor of the person by or against whom the suit
G
was brought. Section 8 says that if a judgment is recovered against
a person or officer named on behalf of the society, such judgment
shall not be put in force against the property, movable or
immovable, or against the body of such person or officer, but against
the property of the society. Section 10 provides that in certain
H
196 SUPREME COURT REPORTS [2007] IO S.C.R.

A circumstances mentioned therein a member of the society may be
sued by the society; but if the defendant shall be successful in any
such suit brought at the instance of the society and shall be adjudged
to recover his costs, he may elect to proceed to recover the same
from the officer in whose name the suit was brought, or from the
B society. Sections 13 and 14 provide for dissolution of societies and
the consequences of such dissolution. These provisions have also
an important bearing on the questions before us and are quoted in
full.
"13. Any number not less than three-fifths of the members of
c any society may detennine that it shall be dissolved, and thereupon
it shall be dissolved forthwith, or at the time then agreed upon, and
all necessary steps shall be taken for the disposal and settlement
of the property of the society, its claims and liabilities, according
to the rules of the said society applicable thereto, if any, and, if
D not then as the governing body shall find expedient, provided that,
in the event of any dispute arising among the said governing body
or the members of the society, the adjustment of its affairs shall be
referred to the principal court of Original civil jurisdiction of the
district in which the chief building of the society is situate, and the
E Court shall make such order in the matter as it shall deem requisite:
Provided that no society shall be dissolved unless three-fifths
of the members shall have expressed a wish for such dissolution
by their votes delivered in person, or by proxy, at a general meeting
convened for the purpose :
F
Provided that whenever any Government is a member of, or a
contributor to, or otherwise interested in any society registered
under this Act, such society shall not be dissolved, without the
consent of the Government of the State of registration.
G
14. If upon the dissolution of any society registered under this
Act there shall remain, after the satisfaction of all its debts and
liabilities, any property whatsoever, the same shall not.be paid to
or distributed among the members of the said society or any of
them, but shall be given to some other society, to be determined
H
MOHAMMADSADIQv. STATEOFUTTARPRADESH 197
[PASAYAT,J.]
by the votes of not less than three-fifths of the members present A
r personally or by proxy at the time of the dissolution, or, in default
thereof, by such Court as aforesaid :
Provided, however, that this clause shall not apply to any society
which shall have been founded or established by the contributions
of shareholders in the nature of a Joint Stock Company." B

8. The other crucial question is whether the Absorption Rules applied
to IERT. The relevant provisions in the rules read as follows:
"In exercise of the powers conferred by the proviso to Article 309
of the Constitution, the Governor is pleased to make the following C
rules to provide for the absorption in Government Service of the
retrenched employees of the Government or of Public
Corporations.
THE UTTAR PRADESH ABSORPTION OF RETRENCHED D
EMPLOYEES OF GOVERNMENT OR PUBLIC
CORPORATIONS IN GOVERNMENT SERVICE RULES,
1991.
xx xx xx xx
E
2(b) "Public Corporation" means a body corporate established or
constituted by or under any Uttar Pradesh Act expect a
University of local authority constituted for the purpose of
Local Self Government and includes a government Company
within the meaning of Section 617 of the Companies Act, 1956 F
in which the State Government has prepondering interest.
2(c) "Retrenched Employees'' means a person who was appointed
on a post under the Government or a public corporation on
or before October 1, 1986 in accordance with the procedure
laid down for recruitment to the post and was continuously G
working in any post under the Government or such corporation
up to date of his retrenchment due to reduction in, or winding
up of, any establishment or the Government of the Public
Corporation, as the case may be and in respect of whom a
certificate of being retrenched employees has been issued by H
198 SUPREME COURT REPORTS [2007] 10 S.C.R.

A his appointing authority.''
9. A bare reading of the provisions makes the positions clear that in
order to bring application of the Rules the public corporation has to be a
body corporate established or constituted by or under any Utrar Pradesh
Act.
B
10. The fundamental requirement is that the corporation should have
been constituted by or under any Uttar Pradesh Act. Undisputedly, the
Societies Act is a Central Act.
11. The impugned judgment of the High Court does not suffer from
C any infirmity to warrant interference. The appeals are dismissed but without
any order as to costs.
K.K.T. Appeals dismissed.