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PETITIONER: GURMAIL SINGH AND ORS. ETC. ETC.

       Vs.

RESPONDENT: STATE OF PUNJAB AND ORS.

DATE OF JUDGMENT25/10/1990

BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. SAWANT, P.B. KASLIWAL, N.M. (J)

CITATION:  1993 AIR 1388            1990 SCR  Supl. (2) 367  1991 SCC  (1) 189        JT 1991 (1)   351  1990 SCALE  (2)864

ACT:     Industrial Disputes Act, 1947: Section 25F and 25FF  and Punjab   Government   Notification   dated   November    30, 1982--Tubewells  transferred  to   Punjab  State    Tubewell Corporation--Permanent  posts  abolished--  Temporary  posts discontinued--Rights of affected employees.

HEADNOTE:     The appellants were in service as tubewell operators  in the Irrigation Branch of the Public Works Department of  the Punjab Government. The State took a decision to transfer all the  tubewells in this branch to the Punjab  State  Tubewell Corporation, a company wholly owned and managed by the State of  Punjab. Consequent on this decision, a notification  was issued  on 30th November, 1982 abolishing all the  posts  of tubewell operators in the Irrigation Branch, and accordingly notices  terminating  the services of  the  appellants  were issued.     The appellants challenged the termination notices before the High Court contending (i) that the notification by which the  tubewells  were  transferred was mala  fide,  the  only object being to frustrate certain claims of the  petitioners which had been judicially recognised; (ii) that the impugned notices did not fulfill the requirements of clauses (b)  and (c) of section 25F of the Industrial Disputes Act in so  far as the compensation amount of each individual was not deliv- ered at his door, and the notices under clause (c) were  not sent by registered post; and (iii) that, in case the  action of  the State was upheld, the respondent Corporation  should be  held to be under an obligation to employ the  appellants with  continuity  of service and under the  same  terms  and conditions which they were enjoying prior to their retrench- ment from the service of the State.     The  High  Court  rejected the petitions  flied  by  the appellants. The High Court inter alia found that the  appel- lants  had  been given all the benefits which they  had  ob- tained from the court. It was also found that the respondent corporation  had made an offer of re-employment to  all  the appellants effective from the date of expiry of the  notices of their retrenchment by the State Government. According  to

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the learned 368 Judges, the sole object of the issuance of the  notification was  to  get rid of the tubewells which were  the  cause  of constant and ever-increasing loss to the State exchequer and not any mala fide or extraneous reasons.     The  services  of the appellants have since  been  taken over by the Corporation. Though at one stage the Corporation had  taken the stand that the appellants would be  taken  as fresh  appointees  in the Corporation, it  had  subsequently fixed them up at the same level of pay at which they were in Government service immediately before retrenchment, and they were also being granted increments on that scale.     There remained two grounds of dissatisfaction: (1)  that the  appellants would be junior in service to  the  tubewell operators who had been engaged by the Corporation on its own account  before  the appellants joined the  service  of  the Corporation,  giving  the appellants the  apprehension  that their down-gradation in seniority would affect them in  case the  Corporation started closing down some of the  tubewells and discharging its staff, and (2) if treated as  retrenched Government  servant,  they  would be able  to  get  terminal benefits  and  pension only on the basis  of  their  present lengths of service in the Government.     Before  this Court, the contention of the appellants  in this regard was that the Corporation was really nothing  but a  Department  of the Government, and that in  such  circum- stances,  its "corporate veil" had to be torn as  under  and its  basic identity as department of the  Government  recog- nised and given effect to. Alternatively it was argued that     even if the Corporation be taken to be a separate  enti- ty,  it was clearly a "successor" to the Government  Depart- ment as the Government had assured the Corporation that,  if it  suffered any losses because of the transfer, the  losses would be made good by the Government, that having regard  to the virtual identity of the Corporation and the  Government, this was really a case of the Corporation having taken  over a department of the Government, and that both the Irrigation Branch  of the State Government as well as  the  Corporation admittedly  constituted an "industry" within the meaning  of the  Industrial  Disputes  Act. and the  problem  should  be looked at from the point of view of industrial law.     The  respondent’s case was that the  State’s  obligation came  to an end with the payment of  retrenchment  compensa- tion,  that the Corporation went out of its way to confer  a favour  on the appellants by agreeing to take them into  its service; that it would be unfair on the part of the Corpora- tion to give the appellants benefit of their earlier service in the 369 Government  and make them senior to other employees who  had been  serving in the Corporation right from  the  beginning: and  that this was a fresh employment subject to the  normal rules and regulations of the Corporation and the  appellants had  no  right  to claim any continuity of  service  in  the circumstances. Disposing of the appeal, this Court,     HELD: (1) The fact appears to be that the tubewells were not  being  operated profitably by the  Government  and  the Government  seems to have taken a decision that it would  he more  efficient, economical and prudent to have these  tube- wells  run by the Corporation. There is no reason  to  doubt the  bona  fides  or the genuineness  of  this  arrangement. [378B-C]     (2) When individual drafts for the amounts of  compensa-

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tion due to the various tubewell operators were forwarded to the  divisional subdivisional offices, sufficiently in  time to  be  available to be taken by them by 31st  August,  1983 there  was  sufficient  compliance with  the  provisions  of clause (a) of section 25-F. [379C-D]     (3)  The running of tubewells constitutes an  "industry" whether  in the hands of the government or in the  hands  of the Corporation. [381D]     (4) There is no incompatibility in applying some of  the provisions of the Industrial Disputes Act to persons in  the service of the Government. [381D] State of Bihar v. Industrial Tribunal, [1977] 51 F.J.R. 371.     (5)  Notices under clause (c) of section 25-F were  sent to  the Labour Department as well as to the  employment  ex- change  through  the poen book. The High Court is  right  in pointing out that such a requirement can be treated  errone- ous to hold that unless sent by registered post, the notices cannot be treated as complying with the statute. [379E]     (6)  Where the transferor and transfree is a State or  a State  instrumentality, which is required to act fairly  and not arbitrarily, the Court has a say as to whether the terms and  conditions  on which it proposes to hand over  or  take over  an  industrial  undertaking embody  the  requisite  of "fairness in action". In such circumstances it will be  open to  this Court to review the arrangement between  the  State Government and the corporation and issue appropriate  direc- tions. The princi- 370 ple sought to be applied is a constitutional principle flow- ing  from the contours of article 14 of  Constitution  which the State and Corporation are obliged to adhere to. [387F-H; 388A]     New Gujarat Cotton Mills Ltd. v. Labour Appellate Tribu- nal,  [1957]  II L.L.J. 194; Ramjilal  Nathulal  v.  Himabai Mills  Co. Ltd., [1956] II L.L.J. 244; Indian Hume Pipe  Co. ’Ltd. v. Bhimarao, [1965] 2 L.L.J. 402; Ban Nigam Karamchari Kalyan Sangh v. Divisional Logging Manager & Ors., J.T. 1988 2  S.C.  22; Workmen v. Dahingeapara Tea Estate,  [1958]  11 L.L.J.  498;  Anakapalla Co-op.  Agricultural  &  Industrial Society  Ltd.  v.  Its Workmen, [1963]  Supp.1  S.C.R.  730; Hariprasad v. Divikar, [1957] S.C.R. 121; Bombay Garage Ltd. v. Industrial Tribunal, [1953] I L.L.J. 14; Artisan Press v. L.A.T.,  [1954]  II L.L.J. 14; Kapur v.  Shields,  [1976]  1 W.L.R.  131; Accountant and Secretarial Services P. Ltd.  v. Union, [1988] 4 S.C.C. 324 and Mahabir Auto Stores v. Indian Oil Corporation, [1990] 3 S.C.C. 752, referred to.     {7)  Looking  at  the facts of this case  in  the  above perspective, it appears that the State Government has  acted arbitrarily  towards  the  appellants. The  conduct  of  the Government in depriving the appellants of substantial  bene- fits  which have accrued to them as a result of  their  long service with the Government, although the tubewells continue to  be run at its cost by a Corporation wholly owned by  it, is  something which is grossly unfair and inequitable.  This type  of attitude designed to achieve nothing more  than  to deprive  the  employees  of some  benefits  which  they  had earned, can be understood in the case of a private  employer but  seems ill from a State Government and smacks  of  arbi- trariness. [388B; 389D-E]     (8) The appellants will be entitled to add their service in the Government to their length of service in the Corpora- tion for purposes of computation of their salary, length  of service  and  retirement benefits. The Corporation  is  also directed  to  ensure, as far as possible, that none  of  the appellants  are  retrenched  as surplus on  account  of  any

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closure of tubewells or other like reason until they  retire or leave the service of the Corporation voluntarily for  any reason.  The advantage of counting the period of their  past service  with the Government will, however, not enable  them to  claim  any seniority over the former  employees  of  the Corporation. [391G-H; 390E]      (9)  Even  before the insertion of section 25FF  in  the Act,.the  employees of a predecessor had no right  to  claim re-employment  by the successor in business save  in  excep- tional circumstances. Even where 371 available, that claim was not a matter of absolute right but one  01’  discretion,  to be  judicially  exercised,  having regard to all the circumstances. [391G-H]

JUDGMENT:     CIVIL   APPELLATE  JURISDICTION: Civil  Appeal  No.  105 19 of 1983.     From  the  Judgment and Order dated 12.9.  1983  of  the Punjab and Haryana High Court in W.P. No. 3798 of 1983.     M.S.  Gujral, S.K. Bagga, Ms. Bagga, S.D.  Sharma,  B,S. Gupta.  P.C Kapur, R.N. Mittal, S.D. Gupta, S,M.  Ashri  and K.K. Mohan for the Appellants. R.S. Sodhi and C.M. Nayyar for the Respondents. The Judgment of the Court was delivered by     RANGANATHAN, J. The appellants were in service as  tube- well operators in the irrigation branch of the Public  Works Department of the Punjab State. The State took a decision to transfer  all  the tubewells in this branch to  the  Punjab- State Tubewell Corporation (hereinafter referred to as  ’the Corporation’),  a  company wholly owned and managed  by  the State of Punjab. Consequent on this decision, a notification was  issued on 30th November, 1982 to the effect  that  "the posts sanctioned for the Tubewell Circle, Irrigation Branch. Punjab,  are  no longer needed in the public  interest."  It was,  therefore. ordered that all the permanent posts  sanc- tioned  for the above circle be abolished with  effect  from 1.3.1983  and that all temporary posts be discontinued  with effect from the same date. A little earlier, on 31st August, 1982,  the petitioners were served with notices in terms  of section  25-F  of the Industrial Disputes  Act  (hereinafter referred  to  as ’S. 25F’) terminating their  services  with effect from 30th November. 1982. These notices were,  howev- er, set aside as not being in consonance with clause (c)  of section 25-F. The State Government, therefore, issued  fresh notices  terminating  the services of the  petitioners  with effect from March 1, 1983. These notices were also set aside by the High Court on the ground that they did not conform to the provisions of clause (b) of section 25(F). Thereupon the State  served fresh notices on the  petitioners  terminating their  services  in terms of section 25-F with  effect  from August  31, 1983. The appellants once again  approached  the High Court contending that the decision of the State Govern- ment transferring the tubewells to the Corporation and ter- 372 minating  their services was invalid. It was contended:  (a) that the impugned notices did not fulfil the requirements of clauses (b) and (c) of section 25-F; (b) that the  notifica- tion by which the tubewells were transferred was mala  fide, the  only object of the transfer being to frustrate  certain claims  of the petitioners which had been judicially  recog- nised;  and  (c) that, in case the action of  the  State  is upheld,  the  respondent Corporation should be  held  to  be

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under  an obligation to employ the petitioners  with  conti- nutiy  of  service and under the same terms  and  conditions which  they were enjoying prior to their  retrenchment  from the service of the State.     These  contentions were rejected by the High  Court.  It held that the notices did not suffer from any defect. It was pointed  out that the writ petitions had been  filed  before the  expiry of the date from which the  retrenchment  notice was  to  be effective, namely, 31st August,  1983.  The  re- trenchment  notice  itself specifically mentioned  that  the retrenchment  compensation, as admissible under  the  rules, will  be paid before the notice of retrenchment took  effect and that it could be collected personally from the  respond- ent’s Sub-Divisional/Divisional Officers. At the instance of the  Court, the State had filed an additional  affidavit  in which  it was averred that drafts in respect of the  amounts of  compensation had been despatched to the  divisional  of- fices in the manner following-- Tubewell  Division Malerkotla      Between 25 to 27  August, 1983 Tubewell  Division Hoshiarpur      Between 19 to 24  August, 1983 Tubewell Division Jullundur        Between 19 to 24  August, 1983 The  relevant records showing the despatch of  these  drafts were  also produced in the court. The High Court was  satis- fied that the State had  despatched individual bank drafts in respect of each of the employees  well  in  advance of the date of  expiry  of  the notice  period and that the despatch of these drafts to  the divisional  offices constituted a good and valid tender.  of the  compensation amount to the appellants. The  court  held that  this was sufficient compliance with the provisions  of clause  (b)  of section 25-F. So far as  the  provisions  of clause  (c) of section 25-F were concerned, the  High  Court was  satisfied that the requisite notice in  the  prescribed form  ’P’  was sent to the Secretary to  Government,  Labour Department and the Employment Exchange concerned by personal delivery  duly acknowledged in the peon book of the  Depart- ment.  Pointing out that the requirements of clause  (c)  of section 25-F 373 were only directory and not mandatory, the High Court was of the  opinion that the notices were not vitiated due to  non- compliance with clause (c) of section 25-F.     Turning  to  the allegation regarding  mala  fides,  the contention  of the appellants was this. They submitted  that the  tubewell operators in the Irrigation Branch of the  PWD had filed a writ petition, being C.W.P. 3340 of 1972, in the Punjab  High Court claiming parity of pay with the  tubewell operators  employed in the Public Health Department  of  the State  Government. That petition was allowed on February  5, 1981. But the respondent authorities failed to implement the directions  contained  in that judgment,  thus  forcing  the petitioners  to  move  a contempt application  (No.  221  of 1981). Thereafter, the State authorities gave effect to  the judgment  and  paid arrears to the petitioners in  the  writ petition  but  did  not extend the benefit  thereof  to  the tubewell operators other than the actual petitioners in  the writ petition. The other tubewell operators, thus denied the benefits  of  the judgment, were constrained to  file  three more writ petitions seeking the extension of same relief  to them. These writ petitions were allowed on 7.8.1981 in terms of  the  earlier  decision dated  5.2.1981.  The  respondent authorities chose to file S.L.P. Nos. 9195 to 9197 of 198  1

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in the Supreme Court but these were dismissed on 19.2. 1982. Still, the respondent authorities showed their reluctance to implement  the  judgments of the High Court  compelling  the petitioners  to file three contempt petitions (Nos.  294  to 296  of 1981) against the defaulting  authorities.  However, before the disposal of these writ petitions, the State filed a  letters patent appeal against the judgment in C.W.P.  No. 3340 of 1972 and obtained an order staying the operation  of the said judgment. Consequent on this, the contempt applica- tions had to be withdrawn and were dismissed as such on 8.4. 1982. We are told that the letters patent appeals have  been dismissed recently on 7.8. 1990.     Accordingly  to the appellants, the authorities  took  a decision to transfer the tubewells of the irrigation  branch to  the Corporation only with a view to deprive  the  appel- lants  of  the benefit they had gained as a  result  of  the above  litigation. It was pointed out that  the  Corporation had come into existence as early as 1970. Its main  objects, as  set out in the Corporation’s memorandum of  association, were, inter alia: XXX                                                      XXX XXX (2) To take over from the Government of Punjab the  existing system of State owned irrigation and augmentation 374 tubewells along with-connected buildings, assets, works  and any  of  their  projects connected  with  the  installation, maintenance and operation of the State owned tubewells, with the  rights and liabilities of the Government of  Punjab  so far  as  they relate to such tubewells,  buildings,  assets, works or projects. These  assets shall be taken over by the Punjab State  Tube- well  Corporation  Limited  as contribution  by  the  Punjab Government towards share capital. XXX                                                      XXX XXX (19)  To enter into any arrangement with the  Government  of India,  Government  of-Punjab, or any  other  Government  or State or local authority for the purpose of carrying out the objects of the company for the furthering its interests  and to  obtain from such Government or Authority or  person  any charters, subsidies, loans, indemnities, grants,  contracts, licences,  rights,  concessions,  privileges  or  immunities which the company may think desirable to obtain and exercise and  comply with any such arrangements,  rights,  privileges and concessions." Though the Corporation had been formed so long ago with  the express  object of taking over the tubewells of the  irriga- tion  branch and though it was operating a large  number  of tubewells on its own account since then, no efforts had been made  by the Government to transfer the tubewells  belonging to  the State to the Corporation till 1982. Even  under  the impugned notification only tubewells belonging to the  irri- gation  branch  were transferred but not  those  which  were being  operated by the Public Health Department of the  same State.  The appellants vehemently contended that  all  these facts  clearly  showed that the sudden decision in  1982  to transfer the tubewells to the Corporation was intended as  a measure  of  victimisation of the appellants who  were  only fighting  for their rights of equal pay with other  tubewell operators in the State.     The  High Court did not find any substance in this  con- tention.  It pointed out that the idea that  eventually  the tubewells  belonging to the State should be  transferred  to the  Corporation had germinated as early as in 1970.  Though

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this was not implemented immediately, a decision to transfer the tubewells to the Corporation had been taken in the light 375 of  the  recommendations of the Estimates Committee  of  the Punjab  Vidhan  Sabha made in the year  1977-78,  that  -is, about three years earlier to the decision of the High  Court dated  5.2.1981 in C.W.P. No. 3340 of 1972. The  authorities had  placed before the Court the minutes of a  meeting  held under  the chairmanship of the Chief Minister of  Punjab  on October  18, 1979, wherein it had been decided  that,  since irrigation  from  the State tubewells had not  developed  as expected and the State Government was running into a  finan- cial  loss on account of the operation of  these  tubewells, the same be transferred to the Corporation. It had also been decided  at the meeting that the Government would  meet  the loss  that may be suffered by the Corporation on account  of the  operation  and maintenance of these tubewells.  In  the light of these facts, the High Court held that there was  no basis  for  the allegation of the petitioners that  the  im- pugned notification had been issued mala fide solely with  a view  to  deprive the appellants of the  benefits  they  had obtained  from  the courts. It was pointed out by  the  High Court  that the appellants had subsequently been  given  all the benefits which they had derived as a result of the  writ petitions.  That apart, it was also found that the  Corpora- tion  had made an offer of re-employment to all  the  appel- lants  effective  from the date of expiry of the  notice  of their retrenchment by the State Government. All this showed, according to the learned Judges, that the sole object of the issuance  of the notification was to get rid ’of  the  tube- wells which were the cause of a constant and ever-increasing loss to the State exchequer and not any mala fide or  extra- neous reasons. On contention (c), the High Court observed as follows: "So  far  as the alternative relief  of  re-employment  with continuity  of service and pensionary benefits in  terms  of the Punjab Civil Service Rules is concerned, the petitioners cannot  be  granted the same in view of  the  provisions  of section 25-FF (of the Industrial Disputes Act) as introduced on  September 4, 1956. In this regard the  petitioners  have based their whole claim on certain observations made in  two Division Bench judgments of the Bombay High Court,  reported as  New Cotton Mills Ltd. v. Labour Appellate  Tribunal  and Others, A.I.R. 1957 Bombay 111 and N.J. Chavan and Others v. P.D.  Sawarkar and Others, A.I.R. 1958 Bombay  133.  Besides there  being dissimilarity of facts in those cases  and  the instant  case,  the  same relate to a period  prior  to  the insertion of section 25-FF. In Anakapalle Cooperative  Agri- cultural and Industrial Society 376 Ltd.  v. Workmen and Others, AIR 1963 SC 1489,  their  Lord- ships of the Supreme Court after noticing the first judgment of  the  Bombay High Court referred to above, have  held  in categorical  terms  that such employees can  make  no  claim against the transferee concern. Otherwise also we are of the view  that  the claim of the petitioners is not  covered  by section  25-FF of the Act as it has nowhere been pleaded  or established by them that the ownership or management of  the tubewells  has been transferred by the State  Government  to the  corporation  either ’by agreement or  by  operation  of law’. As already pointed out, the transfer of the  tubewells in  the  instant  case has taken place as a  result  of  the unilateral  decision by the State Government. Even if it  is to  be accepted to be a case of transfer of the  undertaking by agreement as is suggested by the learned counsel for  the

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petitioners,  still  the  wording of the  proviso  and  more ’particularly  of clause (b) to section 25-FF clearly  indi- cate that the transfree concern of the management can change the  terms  and conditions of the workman.  Further  on  the facts  of  the case, we do not see how the  petitioners  can claim the benefits or rights of a civil servant while in the service of the corporation and thereby force the corporation to say good bye to its rules and regulations." In the result, the various writ petitions were dismissed and hence the present appeals.     Before  us,  practically the same  arguments  have  been addressed  as were addressed before the High Court but  with slight  variations. It might appear at first sight that  the appellants  have really no cause of grievance  inasmuch  as, though  retrenched by the State Government,  their  services have  been taken over by the Corporation. We have also  been informed that the scale of pay of the tubewell operators  in the Corporation is identical with that of those employed  by the  State Government. Though at one stage  the  Corporation had  taken  the stand that the appellants will be  taken  as fresh appointees in the Corporation, it is now common ground that the Corporation has fixed them up at the same level  of pay  at  which they were in Government  service  immediately before  retrenchment and they are also being granted  incre- ments  on  that scale. Though these  concessions  were  made during  the pendency of the proceedings on interim  applica- tions  made by the appellants, the learned counsel  for  the State  and  Corporation  have stated before  us  that  these benefits would be continued 377 irrespective of the decision in these matters. Thus, in  the result,  so  far as pay is concerned, the  petitioners  have suffered  no detriment whatsoever as a result of the  action taken by the Government. There are, however, two grounds  of dissatisfaction which are consequent on the appellants being treated as fresh appointees who have entered the service  of the  Corporation only on the dates of their  respective  ap- pointments  thereto with the result that all the  appellants will be junior in service to the tubewell operators who  had been engaged by the Corporation, on its own account, between 1970 and the dates on which the appellants joined the  serv- ice of the Corporation. This by itself may also not be  much of  a disadvantage to the appellants since many of them  are senior  in  age the other tubewell operators  and  may  well retire  earlier and we are also told that there are no  ave- nues of promotion from the post of tubewell operators,  with the  result that the question of seniority may not  be  very material.  The apprehension of the petitioners, however,  is that  their down-gradation in seniority will affect them  in case  the Corporation starts closing down some of the  tube- wells  and discharging its staff, an apprehension  which  is stated  to  be not purely hypothetical but quite  real.  The second disadvantage is that many of the appellants have  put in a large number of years in the service of the Government. By  being  treated as retrenched Government  servants,  they will  be able to get terminal benefits and pension  only  on the  basis of their present lengths of their service in  the Government. On the other hand, if they were to continue with the  Corporation under the same terms and  conditions  which they were enjoying under the Government, they would get  the advantage  of continuity of service and thus be entitled  to substantially  higher amounts of pension and other  terminal benefits. On a bought calculation, it is stated that some of the  appellants might stand to lose about Rs.600  to  Rs.700 per  month as a result of being deprived of the  benefit  of

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their long service in Government and by being treated as new recruits in the corporation.     We have heard the learned counsel for the appellants  as well  as the counsel for the State and the counsel  for  the Corporation.  We  entirely agree with the reasoning  of  the High  Court on contentions (a) and (b) earlier set  out.  We are also of the opinion that no ulterior motives on the part of the Government have been established. It is no doubt true that  there was some litigation between the  appellants  and the  Government but this related to their pay scales and  it is  not common ground before us eventually  the  petitioners have had the benefit of the higher pay scales which were  in vogue  in the Public Health Department. It is no doubt  true that  the increased wage bill consequent on these  decisions of the High Court must have made the 378 tubewells in the irrigation branch more unremunerative  than before and may thus have precipitated the decision to trans- fer  the tubewells to the Corporation. However,  as  pointed out  by the High Court, the decision that there should be  a tubewell Corporation, that the Corporation should, in course of  time, acquire the tubewells belonging to the  Government and  that the tubewells of the irrigation branch  should  be made  over  to the Corporation had been taken quite  a  long time  back. The fact appears to be that the  tubewells  were not  being  operated profitably by the  Government  and  the Government  seems to have taken a decision that it would  be more  efficient, economical and prudent to have these  tube- wells  run by the Corporation. There is no reason  to  doubt the bona fides or the genuineness of this arrangement It  is true  that the tubewells in the Public Health Department  do not appear to have been transferred to the Corporation.  But we have no details before us regarding the magnitude of  the State’s problem vis-avis those tubewells and it is difficult to  draw an inference, merely because the tubewells  of  the Public Health Department were not transferred to the  Corpo- ration, that the transfer of the tubewells in the irrigation branch was actuated by a desire to victimise the appellants. We,  therefore, see no substance in this contention  of  the appellants.     We do not also see any force in the contentions  regard- ing noncompliance with the provisions of section 25-F of the Industrial Disputes Act. It is urged on behalf of the appel- lants  that the State has not furnished the details  of  the amounts  of  compensation  determined in the  case  of  each employee  and  that  the State had also taken  no  steps  to deliver the payment in respect of each employee at his  door by  the  relevant date. It is submitted that the  tender  of compensation  under  section  25-F, in order  to  be  valid, should be of the precise amount and should be made  simulta- neously with termination of the service. This, of course, is correct  but the High Court has satisfied itself by  looking into  the original records, that drafts in respect of  indi- vidual  employees  were dispatched in time so  as  to  reach divisional/sub-divisional  offices by 31st of August,  1983. An attempt was made before us to suggest that there was some discrepancy  between two affidavits filed by the State  Gov- ernment  in this behalf. We have perused the said  averments and we find no inconsistency as alleged. It is true that the amounts were not actually paid or tendered to the workers by the  Corporation directly but the Corporation had evolved  a method  of disbursement of compensation in the  interest  of the workers’ convenience. Instead of making the  appellants, spread out all over the State, to come to the head office to collect the compensation and to avoid the inconvenience  and

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difficulty of the Corporation making available the compensa- tion 379 at  the  doorstep  of each employee,  the  Corporation  made arrangements whereby the tubewell operators could go to  the nearest  divisional/sub-divisional  office and  collect  the amount  of  compensation due to them. It  appears  that  the appellants  were not interested in taking  the  compensation amount.  None  of them appears to have  ascertained  whether these  amounts  had reached the  sub-divisional  office  and whether  they were for the correct amounts. No instance  has been  pointed out to us to show that they were not  for  the correct  amounts. We do not think we need elaborate  further on  this  aspect  since the relevant  records  were  brought before the High Court and the High Court was satisfied  that the individual compensation drafts were sent to the  various subordinate offices ready for distribution to the  concerned workers on or before the relevant date. In the circumstances of  this case, we agree with the High Court that when  indi- vidual  drafts  for the amounts of compensation due  to  the various   tubewell   operators   were   forwarded   to   the divisional/sub-divisional  offices, sufficiently in time  to be available to be taken by them by 31st August, 1983, there was sufficient compliance with the provisions of clause  (b) of section 25-F.     The  contention based on clause (c) of section  25-F  is equally  baseless.  It has been verified that  notices  were sent  to the Labour department as well as to the  employment exchange through the peon book. There is no reason to  doubt the  entries  in these books. The suggestion  is  that  they should have been sent by registered post. As rightly pointed out  by  the High Court, such a requirement can  be  treated only as directory and not mandatory and it would be  errone- ous  to hold that, unless sent by registered post,  the  no- tices  cannot be treated as complying with the statute.  We, therefore, reject this contention as well.     This leaves for consideration the principal question  in this case as to whether in circumstances such as these,  the State is under an obligation to protect the terms and condi- tions of service of the tubewell operators. The State’s case is that it had transferred its tubewells to the Corporation. The  operators,  therefore,  became surplus  and  they  were retrenched. Retrenchment compensation was duly paid to them. It  is suggested that the State’s obligation came to an  end with  this. It was under no obligation to find any fresh  or alternative  employment  to the workers.  However,  being  a welfare  State, it did arrange for such alternative  employ- ment. It was obviously under the State’s directions that the Corporation  went out of its way to confer a favour  on  the appellants by agreeing to take them into its service. It  is submitted that 380 the Corporation had its own terms and conditions of  service for  its  employees  and could not change  those  terms  and conditions of service for the benefit of those few employees whose  services had been taken over as an act of  commisera- tion.  It would be unfair on the part of the Corporation  to give the appellants benefit of their earlier service in  the Government and made them senior to. other employees who  had been serving in the Corporation right from the beginning. It is, therefore, submitted that the two chapters of service of the  appellants, one with the Government and the other  with the  Corporation are two separate and independent  chapters. The  first  chapter has come to a close  because  the  State Government was not able to continue to operate the tubewells

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by  itself. The second chapter has commenced with a  totally independent  offer by the Corporation to the erstwhile  Gov- ernment  servants of an employment in the Corporation.  This is a fresh employment subject to the normal rules and  regu- lations of the Corporation. The appellants have no right  to claim any continuity of service in the circumstances.     Shri  Gujral,  learned counsel for  the  appellants  has contended  ’before  us  that the approach  which  the  State Government  wants this Court to adopt is an unrealistic  and purely technical approach. According to him, the Corporation is realty nothing but a department of the Government. It  is no  doubt an independent entity in the sense that it  has  a separate legal existence with its own employees and its  own finances  to be looked after according to certain rules  and regulations  but, says Sri Gujral, in circumstances such  as these,  the  "corporate veil" of the Corporation has  to  be torn as under and the basic identity of the Corporation as a department of the Government should be recognised and  given effect to.     Alternatively, Shri Gujral argues, even if the  Corpora- tion be taken to be a separate legal entity, it is clearly a "successor" to the Government department. He points out that the  very  memorandum of the  Corporation  contemplates  the taking over by it of the tubewells belonging to the  Govern- ment  together  with all the rights and liabilities  of  the Government  so  far as they relate to  such  tubewells.  The assets  taken  over are to be treated  as  contributions  of capital  by  the Government to the Corporation. It  is  also common  ground  that in this case,  while  transferring  the tubewells to the Corporation, the Government has assured the Corporation  that,  if it suffers any loses because  of  the transfer,  the losses would be made good by the  Government. The true and real essence of the transaction put through  is that the tubewells, along with all appurtenances, rights and liabilities, including the liabi- 381 lity to continue the services of the tubewell operators have been  taken  over by the Corporation. Having regard  to  the virtual identity of the Corporation and the Government, this is  really  a case of the Corporation having  taken  over  a department of the Government though, in form, the Government has purported to retrench, and the Corporation to re-employ, the appellants. Shri Gujral submitted that both the  irriga- tion branch of the State Government as well as the  Corpora- tion admittedly constitute an "industry" within the  meaning of the Industrial Disputes Act. Indeed, retrenchment compen- sation  has been offered to the appellants under the  Indus- trial  Disputes  Act. In these  circumstances,  Shri  Gujral vehemently contends, the problem before us should be  looked at from the. point of view of industrial law. One should ask oneself the question: if a similar transaction had been  put through  in the private sector by two  industrial  organisa- tions,  how would the Court could have tackled the  problem? This,  according  to Shri Gujral, is the proper test  to  be applied  and, if that is done, he submits, there can be  put one answer to the question in this case.     There is no dispute before us that the running of  tube- wells constitutes an ’industry’ whether in the hands of  the Government  or in the hands of the Corporation.  As  pointed out by this Court in State of Bihar v. Industrial Tribunal,, [1977]  51 F.J.R. 371, there is also no  incompatibility  in applying  some of the provisions of the Industrial  Disputes Act  to  persons in the service of the Government.  We  may, therefore,  first  examine  what position would  be  if  the principles of industrial law were to be applied to a  situa-

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tion  where  one person succeeds to the  business  which  is being carried on by another. Shri Gujral contends that there is preponderant authority for holding that, if those princi- ples  were to apply, the tubewell operators should have,  in the  Corporation, the same terms and conditions  of  service which  they  enjoyed when they were in  the  Government.  In support  of  this proposition, Shri Gujral relies  upon  the decision  of  the Bombay High Court in  New  Gujarat  Cotton Mills Ltd. v. Labour Appellate Tribunal, [1957] II LLJ  194. In that case, the business and undertaking of a cotton  mill was  taken over as a going concern by another  company.  The successor  company,  however, declined to  continue  in  its employment some of the employees of the predecessor company. Thereupon,  the applications were filed by them  before  the labour court for an order against the successor company  for reinstatement or reemployment. This application was rejected by  the  labour court but, on appeal  the  Labour  Appellate Tribunal held that the new company could not refuse tO  take them  in.  It observed (vide Ramjilal Nathulal  v.  Himabhai Mills Co. Ltd., [1956] II LLJ 244: 382 "12.  Under the civil law, a person who is a successor to  a business  is not bound merely because of such succession  by the debts or liabilities of the old business. and even if he has  agreed with his transferor to be so liable, third  par- ties,  in  the absence of a tripartite  arrangement,  cannot enforce  such debt or liability against the  transferor  who alone continues to remain liable for such debts and liabili- ties to third parties  ...... 13.  Unlike the civil law, however, the industrial  law  has naturally  taken a different view with regard to the  duties of  a successor in business who has decided to run the  same and  in  the  case of employees of the old  concern  it  has regarded  the rights and obligations of the old  concern  as continuing and to be enforceable as against the new  manage- ment  and not to be affected by the substitution of the  new management  for the old, whenever justice of the case  would require  such enforcement  ......  The same principles  have also been recognised as of general application by the Madras High Court in the case of Odeon Cinema, [1954] II LLJ 314 as shown by the observations of their Lordships at p.319  where they remark :’The industrial tribunal has cited a number  of decisions  of other industrial tribunals, in the  course  of which  it  has been held that where there is a  transfer  of business of one management to another, the rights and  obli- gations  which  existed as between the  old  management  and their  workers continue to exist vis-a-vis the  new  manage- ment,  after the date of the transfer. The  learned  counsel for  the petitioners does not challenge the  correctness  of these  decisions,  which really are in  application  of  the principle  embodied in s. 18(c) of the  Industrial  Disputes Act  ...... (underlining ours) This  view was approved by the Bombay High  Court.  Speaking for the Court, Shah, J. observed: "In  our view, in industrial matters, the Court is  entitled and is indeed bound to modify contractual rights and obliga- tions  on considerations of equity and in the larger  inter- ests of the community, such as promotion of industrial peace and security of employment of workmen. Merely because  under the law of contracts, a claim may not lie at 383 the instance of the applicants to be reemployed or reinstat- ed  by  the new company, the claim made  by  the  applicants cannot be regarded as inadmissible. It appears to have  been

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settled by a large number of decisions of the industrial and labour courts that the industrial law takes a different view about the duties and obligations of a  successor-inbusiness, and  if a successor decides to run the same  business  which was carried on by his predecessor, the employees of the  old concern  are entitled to submit a dispute before the  indus- trial tribunal regarding their rights and obligations in the business  of the old concern, and those rights  and  obliga- tions must be regarded as continuing and enforceable against the  new management and not affected by the substitution  of the  new management for the old. In Odeon Cinema v.  Workers of Sagar Talkies, [1954] II LEJ 3 14, it was observed by the Madras High Court (p. 319):           ".  ....  where there is a transfer of a  business of  one  management to another, the rights  and  obligations which existed as between the old management and their  work- ers  continue to exist vis-a-vis the new  management,  after the date of the transfer." It is also implicit is Ss. 114 and 1 15 of the Bombay Indus- trial  Relations  Act that the rights and obligations  of  a management  of an industrial undertaking are enforceable  in proper  cases  against its successor. It  appears  from  the terms  of  S. 18(c) of the Industrial Disputes  Act  that  a successor  to an old undertaking is liable to  meet  certain obligations of its predecessors. In our view, therefore, the absence of a direct contractual relation between the  appli- cants  and  the new company is by itself not  a  ground  for rejecting the claim made by the applicants. " (underlining ours) Shri Nayar submits that the Bombay case was one in which the employees of the old concern had only sought ’re-employment" in the successor concern, a concept quite different from the concept  of  continuity  in service on the  same  terms  and conditions  and invited our attention to S. 25H of  the  Act and  to the decision in Indian Hume Pipe Co. Ltd. v.  Bhima- rao,  [1965] 2 L.L.J. 402. It is true that the claim in  the Bombay  case appears to have been one for re-employment  but the  principle  laid  down in these decisions  is  in  wider terms, as the passages 384 underlined  in  the above excerpts will show.  We  may  also refer in this context to the brief decision of this Court in Ban  Nigam  Karamchari  Kalyan Sangh &  Anr.  v.  Divisional Logging  Manager & Ors., JT 1988 2 SC 22. In this case,  the petitioners  were in the employment of U.P. Forest  Corpora- tion which was appointed agent for collecting tendu  leaves. The  Ban  Nigam was appointed in place of  the  Corporation. Thereupon,  the Corporation terminated the services  of  the workmen.  This Court passed a brief order to  the  following effect: "In the proceeding before the High Court, as also here,  the State  and the Nigam have not been impleaded as parties  but learned counsel for the Corporation tells us that it was the understanding that the Nigam would takeover these 149  work- men on the same terms and conditions as were applicable when they  were  working under the Corporation.  Since  both  the Corporation and the Nigam are Government concerns as learned counsel for the Corporation tell us that this was the under- standing, we direct the Nigam to continue the 149 workmen in employment on the same terms and conditions as were applica- ble  to them when the Corporation was the agent for  collec- tion of tendu leaves. The list of the 149 workmen is not  on record. Learned counsel for the applicants has undertaken to provide the list within 24 hours." There  was no doubt an understanding in this case  but  even

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without this, counsel says, the position would be the  same. It  appears  that the broad issue as to the rights  of  such workmen  against a successor-inbusiness was raised  but  not decided  in  Workmen v. Dahingeapara Tea Estate,  [1958]  II L.L.J.  498, a case which came up before a five judge  Bench of this Court. The High Court has, however, referred to decision  of this Court in Anakapala Coop. Agricultural  and Industrial  Society  Ltd.  v. Its Workmen,  [1963]  Supp.  1 S.C.R. 730 and taken the view that the principle  enunciated in  the  judgments  quoted earlier is not  valid  after  the enactment of S. 25FF of the Act. This section provides  that where there is a transfer of an undertaking by agreement  or operation  of law, an employee who loses his job because  of such  transfer  will have a right to compensation  from  the predecessor,  except where he gets the benefit  of  uninter- rupted  service with the new employer on no  less  favorable terms  than before and will be entitled to  compensation  in case  he should be retrenched later by the new employer.  It has  been  construed in the Anakapalla Society case  to  say that  in  such a situation the employee can  at  best  claim retrenchment compensation from the predecessor on the  basis of a notional 385 retrenchment but will have no right to claim  re-employment, much less on the same conditions as before, from the succes- sor.  It is necessary to extract here  certain  observations from  judgment in the Anakapalla case (supra) which,  if  we may  say so with respect, clinch the issue.  Gajendragadkar, J.,  speaking for a five-Judge Bench of the Court summed  up the earlier legal position thus: "That  takes  us  to the question as to what  would  be  the nature of the appellant’s liability to the employees of  the Company. Before S. 25-FF was introduced in the Act in  1956, this  question was considered by industrial adjudication  on general  considerations of fair play and social justice.  In all  cases,  where the employees of the  transferor  concern claimed  re-employment at the hands of the  transferee  con- cern, industrial adjudication first enquired into the  ques- tion  as to whether the transferee concern could be said  to be a successor-in-interest of the transferor concern. If the answer  was that the transferee was a  successor-in-interest in  business,  then industrial adjudication  considered  the question of re-employment in the light of broad  principles. It  enquired  whether the refusal of the successor  to  give re-employment to the employees of his predecessor was capri- cious  and  unjustified,  or whether it was  based  on  some reasonable and bona fide grounds. In some cases, it appeared that  there  was not enough amount of work  to  justify  the absorption  of  all the previous  employees;  sometimes  the purchaser concern needed bona fide the assistance of  better qualified  and  different type of workers;  conceivably,  in some cases, the purchaser has previous commitments for which he is answerable in the matter of employment of labour;  and so, the claim of re-employment made by the employees of  the vendor  concern had to be weighed against the pleas made  by the  purchaser concern for not employing the said  employees and  the  problem had to be resolved on general  grounds  of fairplay and social justice. In such a case, it was obvious- ly  impossible to lay down any hard and fast rules.  Indeed, experience of industrial adjudication shows that in  resolv- ing  industrial disputes from case to case and from time  to time,   industrial  adjudication  generally  avoids--as   it should--to  lay down inflexible rules because it is  of  the essence  of industrial adjudication that the problem  should be resolved by reference to the facts in each case so as  to

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do justice to both the parties. 386 It  was  in  this spirit that  industrial  adjudication  ap- proached  this problem until 1956 when S. 25-FF  was  intro- duced in the Act. Sometimes, the claim for re-employment was allowed, or sometimes the claim for compensation was consid- ered. But it is significant that no industrial decision  has been cited before us prior to 1956 under which the employees were  held entitled to compensation against the  vendor  em- ployer as well as re-employment at the hands of the purchas- er  on the ground that it was a successor-ininterest of  the vendor." The  Court  then referred to the insertion of  S.  25-FF  in 1956,  the inadequacy of its language in view of  Hariprasad v. Divikar, [1957] SCR 121, the effect of its  retrospective amendment in 1957 and then concluded:           .....   and, therefore, in all cases to  which  S. 25FF  applies;  the only claim which the  employees  of  the transferred  concern  can legitimately make is a  claim  for compensation  against their employers. No claim can be  made against the transferee of the said concern.           .....   By amending S. 25FF, the  legislature  has made  it  clear that if industrial undertakings  are  trans- ferred,  the  employees  of  such  transferred  undertakings should  be entitled to compensation, unless, of course,  the continuity  of their service or employment is not  disturbed and  that  can happen if the transfer  satisfies  the  three requirements of the proviso." The Supreme Court was dealing with a case of genuine  trans- fer  between two parties--a predecessor and a  successor--at arms’  length where the principles of the law  of  contracts clearly held the field. The employees of the predecessor had no privity of contract with the successor and could make  no claims against him. The industrial law, however, safeguarded his interests by inserting S. 25FF and giving him a right to compensation  against his former employer on the basis of  a notional  retrenchment except in cases where the  successor, under the contract of transfer itself, adequately safeguard- ed  them by assuring them of continuity of service.  and  of employment  terms and conditions. In the result. he can  get compensation  or continuity but not both. The  present  case before  us  raises an allied, but sometimes  more  important issues.  as to whether there cannot be situations  in  which the court or 387 industrial adjudicator, should, in the interests of justice, fairplay and industrial peace, hold the employee entitled to continuity with the successor without being compelled to  be satisfied  with compensation from the predecessor.  The  Su- preme  Court itself has visualised such a case and  made  it clear that if a transfer is fictitious or benami S. 25FF has no application at all. Of course, in such a case, "there has been  no  change of ownership or management and  despite  an apparent  transfer, the transferor employer continues to  be the real employer and there has to be continuity of  service under the same terms and conditions of service as before and there can be no question of compensation". A second type  of cases which comes to mind is one in which there is form, and perhaps also in law, a succession but the management contin- ues to be in the hands of the same set of persons  organised differently  such  as in Bombay Garage  Ltd.  v.  Industrial Tribunal,  [1953] 1 L.L.J. 14 and Artisan Press  v.  L.A.T., [1954]  II  L.L,.J. 424. In such cases, the  transferee  and transferor are virtually the same and the over-riding  prin- ciple should be that no one should be able to frustrate  the

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intent  and purpose of the law by drawing a  corporate  veil across  the  eyes of the court. (see, Palmer,  Company  Law, 23rd Edn., pages 200-201, paras 8 and 10 and the decision in Kapur v. Shields, [1976] 1 W.L.R. 131, cited therein). These exceptions  to  the above rules, we think, would  still  be- operative.  But it is not necessary here to  decide  whether this principle will help us to identify the corporation with the  State  Government in the present case for  the  present purposes,  particularly as there is a catena of cases  which do  not approve of such identification (see  Accountant  and Secretarial  Services P. Lid: v. Union, [1988] 4 S.C.C.  324 and  the cases cited therein.). Leaving this out of  account then,  we  may turn to a third category of cases,  which  we think  would  also  fail as an exception  to  the  principle behind  S.  25FF.  This is where, as  here,  the  transferor and/or  transferee  is a State or a  State  instrumentality, which is required to act fairly and not arbitrarily (see the recent  pronouncement in Mahabir Auto Stores v.  Indian  Oil Corporation, [1990] 3 S.C.C. 752 and the Court has a say  as to whether the terms and conditions on which it proposes  to hand over or take over an industrial undertaking embody  the requisite  of  "fairness inaction" and could be  upheld.  We think that, certainly, in such circumstances it will be open to  this Court to review the arrangement between  the  State Government and the Corporation and issue appropriate  direc- tions.  Indeed, such directions could be issued even if  the elements of the transfer in the present case fall short of a complete  succession to the business or undertaking  of  the State  by  the Corporation, as the principle  sought  to  be applied  is  a  constitutional principle  flowing  from  the contours  of article 14 of the Constitution which the  State and Corpora- 388 tion  are obliged to adhere to. We are making this  observa- tion because it was attempted to be argued on behalf of  the State  and the Corporation that only certain assets  of  the State ’industry’, viz. the tubewells, were taken over by the latter  and  nothing more. We do not quite agree  with  this contention but, in view of the approach we propose to adopt, this  aspect  is not very material and need not  be  further discussed.     Looking at the facts of this case in the above  perspec- tive,  it appears to us that the State Government has  acted arbitrarily  towards  the appellants. It is  true  that  the State Government was incurring losses and decided to  trans- fer  the tubewells to the Corporation. This  decision  would have been the most unexceptionable, prudent and perhaps  the only  decision that the Government could have taken,  if  it had decided to completely cut itself off thereafter from any responsibility or liability arising out of the operation  of the tubewells. But that the Government did not do. As point- ed out earlier, the State Government, although  transferring the  tubewells,  undertook  to recoup any  losses  that  the Corporation  might  incur as a result of the  transfer.  The result,  therefore, was that, despite the transfer of  tube- wells  to the Corporation the Government continues  to  bear the losses arising from this activity. But, while doing  so, it  has abridged the rights of the appellants by  purporting to transfer only the tubewells and retrenched the appellants from  service as a consequences. A grievance has  been  made that, while several other members of staff belonging to  the irrigation  department such as engineers, clerks, etc.  have been  sent on deputation to the Corporation, the  State  has only chosen to retrench the service of as many as 498  tube- well  operators. This differential treatment may not  amount

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to  discrimination  as contended by the  appellants  because those  others  belonged to categories  of  Government  staff which could come back to Government service in the event  of the  Corporation  finding their services  unnecessary  at  a future date, for one reason or another as they were  persons with  general  qualifications who could be fitted  into  the other work of the irrigation branch. The tubewell operators, however,  could  not have been sent  on  deputation  because there  was no possibility at all of their being fitted  into the  irrigation branch later, in case the Corporation  could find  no use for them because, once the tubewells  had  been transferred  for  good to the  Corporation,  the  Government could  find  no  openings for them in  the  service.  While, therefore, we do not agree with the appellant that the State Government discriminated against the appellants as  compared with  the  other  members of the staff by  sending  them  on deputation but not the appellants, we think that this treat- ment meted but to the other staff shows that the  Government did not hesitate to burden the Corpo- 389 ration with the liability of their salary etc. while serving on  deputation which would only augment the losses, if  any, that the Corporation would incur by operating the tubewells. But when it came to the case of the appellants, the  Govern- ment  has  considered  it fit to  retrench  their  services, simultaneously  making  some  arrangement  or  issuing  some directions  enabling  the Corporation to absorb them  as  if they  were fresh recruits. The assurance that they would  be paid according to their original scales of pay and at  their original  leaves  of pay came as a  later  development  only because  of the pending litigation. It was very fair on  the part  of the State Government to decide that, as  the  tube- wells  would  be operated by the Corporation,  it  would  be prudent  to run them with the help of the appellants  rather than  recruit  new staff therefore and that  the  Government should bear the burden of any losses which the.  Corporation might incur as a result of running the tubewells But  having gone  thus  far,  we are unable to see  why  the  Government stopped short of giving the appellants the benefit of  their past services with the Government when thus absorbed by  the Corporation. Such a step would have preserved to the  appel- lants  their  rightful  dues and  retirement  benefits.  The conduct  of  the Government in depriving the  appellants  of substantial benefits which have accrued to them as a  result of  their  long service with the  Government,  although  the tubewells  continue to be run at its cost by  a  Corporation wholly owned by it, is something which is grossly unfair and inequitable.  This  type  of attitude  designed  to  achieve nothing more than to deprive the employees of some  benefits which  they had earned, can be understood in the case  of  a private  employer but comes ill from a State Government  and smacks  of arbitrariness. Acting as a model employer,  which the State ought to be, and having regard to the long  length of  service  of most of the appellants, the  state,  in  our opinion, should have agreed to bear the burden of giving the appellants  credit for their past service with  the  Govern- ment.  That would not have affected the Corporation  or  its employees  in any way--except to a limited extent  indicated below--and, at the same time, it would have done justice  to the appellants. We think, therefore, that this is  something which the State ought to be directed to do.     We would, however, like to clarify that the sole purpose and  object  of our above direction is that  the  appellants should  be  entitled to count their past  service  with  the Government  for the purpose of computation of their  salary,

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length of service and retirement benefits with the  Corpora- tion.  This, however, should not result in  the  appellants’ claiming any seniority over the staff which the  Corporation has otherwise engage right from its commencement in 1970. To permit 390 such  a claim would result in injustice to  those  employees whose  seniority is based on their terms and  conditions  of service  with the Corporation which had been entered into  a long  time before the present transfer proposal came  to  be implemented. Though, as we have mentioned earlier, seniority in  service is not of much importance in this case as  there is  no avenue of promotion to tubewell operators, the  ques- tion of seniority still becomes crucial in case the Corpora- tion should close down any of the tubewells or decide on the retrenchment  of its staff by reorganising the operation  of tubewells  in such a way that some of the staff  may  become surplus.  In such an event, if the appellants are given  the benefit  of their length of service with the Government  for all purposes, some of the present employees of the  Corpora- tion may become liable to be retrenched as junior in  length of  service to some of the appellants. Clearly, this  should not  be allowed to happen and the Corporation  staff  should not  suffer  merely because the appellants,  who  have  been subsequently  inducted into the Corporation, are  given  all the benefits of the length of their service with the Govern- ment.  There  can be no question of any  of  the  appellants being  considered senior to such operators on  the  Corpora- tion’s  establishment. In fact we cannot give such a  direc- tion  without giving such operators an opportunity of  being heard.  We  would, therefore, like to make  it  clear  that, while the appellants will have, for purposes of  computation of  their salary, length of service and retirement  benefits the  advantage of counting the period of their service  with the  Government,  this  will not enable them  to  claim  any seniority over the former employees of the Corporation.     At the same time there is the apprehension of the appel- lants that if they are treated as juniors to all the  Corpo- ration’s employees, they may be sent out first in case there is any retrenchment. It is prayed that it should be  ensured that such an eventuality does not affect the present  appel- lants  as a result of their being treated as juniors to  the former  employees of the Corporation. We are told that  this eventuality  is not merely hypothetical but real. This is  a situation  that  cannot be helped, being one  in  which  the equities in favour of the appellants will be counter weighed by  those in favour of the Corporation’s  direct  employees, The only solution to this difficulty which we can see in for the  Corporation not to retrench the services of any of  the appellants as far as possible whether due to the closure  of some  of the tubewells or otherwise. We are informed that  a circular  was  issued  by the  Corporation  on  13.7.87  and 19.8.87,  directing, inter alia, that no fresh  appointments of  tubewell  operators  will be  made  in  the  Corporation against vacancies caused due to retrenchment, resignation or death of an exist- 391 ing  incumbent.  Such a direction became  necessary  because many of the tubewells of the Corporation had been  installed in  the fifties and they had out-lived their  optimum  lives and  it  became  necessary to cut down. on  the  staff.  The continued  adoption of this policy for some more  time  will help the appellants tide over the crisis envisaged above. We have  already pointed out that most of the  appellants,  who have now joined the Corporation, have rendered long years of

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service with the Government and will be retiring from  serv- ice  in  the  next few years. The  Corporation  can  perhaps manage  to continue them i. service without retrenching  any of them on the ground that some of the tubewells have to  be closed  down or that some of these operators for some  other reason  have become surplus for its needs. If this could  be done,  it  will  be most equitable as it  will  achieve  the following ends: (1)  it  will enable the present appellants to  continue  in service till they retire in normal course; (2) it will protect the interests of the erstwhile operators of the Corporation who have been serving in the  Corporation from the beginning; (3) it will not cause any financial prejudice to the  Corpo- ration  because  of  the assurance already  given  that  any losses  incurred by running the tubewells would be borne  by the Government itself; and        it  will ensure that the Government acts  fairly  and equitably  fulfilling  the legitimate  expectations  of  its employees.     For  the  reasons discussed above, we declare  that  the appellants  will  be entitled to add their  service  in  the Government to their length of service in the Corporation for purposes  of computation of their salary, length of  service and retirement benefits. The Corporation is also directed to ensure, as far as possible, that none of the appellants  are retrenched as surplus on account of any closure of tubewells or other like reason until they retire or leave the  service of the Corporation voluntarily for any reason.     To  sum up, even before the insertion of S. 25FF in  the Act,  the employees of a predecessor had no right  to  claim re-employment  by the successor in business save  in  excep- tional  circumstances. Even where available, that claim  was not  a  matter of absolute right but of  discretion,  to  be judicially exercised, having regard to all the 392 circumstances.  An industrial tribunal, while  investigating such  a claim, had to carefully consider all the aspects  of the  matter. It had to examine whether the refusal  to  give re-employment was capricious and industrially unjustified on the  part of successor in business or whether he could  show cause  for such refusal on reasonable and bona fide  grounds such  as want of work, inability of the applicant  to  carry out  the  available work efficiently, late  receipt  of  the application  for re-employment in view of prior  commitments or any other cause which in the opinion of the tribunal made it  unreasonable to force the successor-in-interest to  give re-employment  to  all or any of the employees  of  the  old concern.  This discretion given to industrial courts  is  no longer  generally  available  because of  the  insertion  of section  25-FF. But in a case where one or both of the  par- ties  is a State instrumentality, having  obligations  under the  Constitution, the Court has a right of judicial  review over all aspects of transfer of the undertaking. It is  open to a court, in such a situation, to give appropriate  direc- tions  to ensure that no injustice results from the  change- over. In the present case, the parties to the transfer are a State on the one hand and a fully owned State Corporation on the other. That is why we have examined the terms and condi- tions  of the transfer and given appropriate  directions  to meet  the needs of the situation. We, therefore, direct  the State Government and the Corporation--which is but a  wholly owned  State instrumentality bound to act at the  behest  of the  State--to carry out our directions above, the  Corpora- tion being at liberty to amend its rules and regulations, if

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necessary, to give effect to the same.     We have been given to understand that none of the appel- lants  has  taken the compensation amounts tendered  by  the State and that the monies are now in deposit with the Corpo- ration. We have already pointed out that the appellants  can claim  either compensation or continuity of service but  not both.  We should, therefore, like to make it clear  that  in case any of the appellants have been paid any  compensation, that  amount  will have to be refunded by them  before  this order can be given effect to qua them.     The appeals stand disposed of accordingly. There will be no order regarding costs. R.S.S.                                 Appeals disposed of. 393