IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2985 OF 2007

Official Liquidator … Appellants

Vs.

Dayanand and Others … Respondents

WITH  

Civil Appeal Nos.2986 to 2990 of 2007 Civil Appeal No.6455/2008 @ S.L.P.(C) No.12798 of 2005 and Civil Appeal No.6456/2008 @ S.L.P. No.13838 of 2006  

J U D G M E N T

G.S. Singhvi, J.

1. Leave granted in S.L.P. (C) Nos.12798/2005 and 13838/2006.

2. These appeals are directed against the orders of Calcutta and Delhi High Courts, whereby

directions have been issued to the appellants herein to absorb the persons employed by the Official

Liquidators attached to those High Courts under Rule 308 of the Companies (Court) Rules, 1959

(for short ‘the 1959 Rules’) against the posts sanctioned by the Government of India, Department of

Company Affairs.

FACTS  

3. For the sake of convenience, we have culled out the facts from the pleadings of Writ Petition

No.1387 of 2001 filed by Tapas Chakraborty and 109 others in Calcutta High Court, Writ Petition

No.2728 of 2001 filed by Smt. Daya Dua and others in Delhi High Court,  the record of these appeals

and documents filed/produced by the learned counsel for the parties during the pendency of the

appeals.  These are:

(i) There are two categories of employees in the offices of the Official Liquidators attached to

different High Courts.   The first  category comprises of the employees who are appointed

against the posts sanctioned by the Government of India, Department of Company Affairs.

They are recruited in accordance with the procedure prescribed in the rules framed under

proviso to Article 309 of the Constitution and the doctrine of equality enshrined in Articles

14 and 16 and are paid salaries and allowances from the Consolidated Fund of India. The

second  category  comprises  of  the  persons  employed/engaged  by  the  Official  Liquidators

pursuant to the sanction accorded by the concerned Court under Rule 308 of the 1959 Rules.

The employees falling in this category are described as company paid staff.  They are paid

salaries and allowances from the fund created by disposal of the assets of the companies in

liquidation.   

(ii) For Calcutta High Court, the Central Government had appointed a Court Liquidator under

Section 38A of the Banking Regulation Act, 1949, as amended in 1953.  He used to employ

staff under Rule 308 of the 1959 Rules in connection with liquidation of banking companies.

The  salaries  of  such  staff  were  paid  from  the  assets  of  the  banking  companies  under

liquidation.   

(iii) In the year 1978, the Government of India, Ministry of Law, Justice and Company Affairs

vide  its  letter  dated  27.11.1978  circulated  a  scheme  (hereinafter  described  as  ‘the  1978

Scheme’) for absorption of company paid staff  against Group C posts in the subordinate

offices of the Department of Company Affairs. That scheme envisaged consideration of the

cases  of  company  paid  staff,  who  were  in  position  on  31.3.1978  and  who  possessed  the

educational qualifications prescribed for the post against which they were to be absorbed.  It

was also provided that absorption of the company paid staff will be limited to 50% vacancies

in direct recruitment quota of Group C posts.   

4. Sixty-three employees working under the Court Liquidator attached to Calcutta High Court

filed writ petition for grant of the status of permanent Central Government employee with effect

from the date of  completion of  360 days of  service besides regular pay scales with avenues for

promotion apart from pension, provident fund and other service benefits on the basis of their length

of service.   

5. The learned Single Judge of Calcutta High Court allowed the writ petition in terms of the

prayer made.   The appeal preferred by the appellants herein was dismissed by the Division Bench,

which noted that even though the writ petitioners had been working for last 20 to 25 years, neither

their  services  were  regularized  nor  they  were  paid  at  par  with  similar  employees  of  other

departments/offices and they were retired at the age of 58 years without any financial benefit. The

Division Bench held that the appellants have failed to substantiate their plea that the employees

appointed by the Court Liquidator were not engaged for doing work of perennial nature and that

there was no reasonable basis for discriminating the Court Liquidator’s staff vis-à-vis the regular

employees of the office of Official Liquidator.  

6. The company paid staff (Estate Clerks) engaged by the Official Liquidator attached to the

High  Court  of  Kerala  also  filed  writ  petition  claiming  parity  with  the  government  employees

appointed in the office of the Official  Liquidator.  The Division Bench of that High Court took

cognizance of the fact that there were two sets of employees under the Official  Liquidator – (1)

employees appointed by the Central Government, and (2) employees (14 in number) appointed by

the Official  Liquidator between  1980 and 1989 under Rule  308 of  the 1959 Rules;  that  all  the

employees were doing the same work but were being paid different salaries and held that there was

no rational basis for according unequal treatment to similarly situated employees.  The Division

Bench then referred to the 1978 Scheme, judgments of this Court in Narender Chadha vs. Union of

India [1986 (2) SCC 157], Dhirendra Chamoli vs. State of U.P. [1986 (1) SCC 637], Surinder Singh

and Another vs. Engineer-in-Chief, CPWD and Others [1986 (1) SCC 639], H.C. Puttaswamy vs.

Hon’ble Chief Justice of Karnataka High Court, Bangalore [1991 (2) Supp. SCC 421], Bhagwati

Prasad  vs.  Delhi  State  Mineral  Development  Corporation  [1990  (1)  SCC  361],  Jacob  M.

Puthuparambil  vs.  Kerala Water Authority [1991 (1) SCC 28],  Delhi  Development Horticulture

Employees’ Union vs. Delhi Administration, Delhi [1992 (4) SCC 99], State of Haryana vs. Piara

Singh [1992 (4) SCC 118] and held that the petitioners are entitled to be absorbed as regular Lower

Division Clerks in the office of the Official Liquidator from the date of their initial appointment.

Accordingly,  a direction was issued to the respondents in the writ  petition to absorb the Estate

Clerks against the regular posts of Lower Division Clerks and pay them salary in the regular pay

scale with consequential benefits.   

7. The Government of India and Official Liquidators appealed against the orders of Calcutta

and Kerala High Courts by filing petitions for special leave to appeal, which were admitted and

converted into  Civil  Appeal  Nos.5642 of  1994 (Government  of  India  and others  vs.  The  Court

Liquidator’s Employees Association and others) and Civil Appeal No.5677 of 1994 (Union of India

and others vs.  P.P. Bridget  and others).    During the pendency of  those appeals,  Writ  Petition

No.473 of 1998 filed by the company paid staff  employed/engaged by the Official  Liquidator of

Delhi High Court claiming parity with the regular employees was also transferred to this Court.

After  hearing the  arguments,  the  Court  passed  an interim order  on 14.1.1998,  which  reads  as

under:

“In all these cases, the common question that arises for consideration is whether the

persons appointed by the Official Liquidator/Court Liquidator under the orders of

respective High Courts under Rules 308/309 of the Companies (Court) Rules, 1959

are  entitled  to  equal  pay  and  regularisation  as  the  employees  appointed  by  the

Central Government in the office of the Official Liquidator. Learned Senior Counsel

appearing for the appointees brought to our notice the findings of the High Courts

rendered on the basis of the materials placed before them. They are broadly stated

that the appointees were discharging identical duties and functions as that of regular

employees in the office of the Official Liquidator; that they have been continuously

without break working for a period ranging from 10 to 25 years; that they have been

paid only a fixed salary without any benefit of pension, gratuity; that such employees

appointed up to 1-7-1978 had been regularised by the Government; that though the

Central Government appreciated the human problem involved in these matters and

came forward before the Kerala High Court to amicably settle the issue ultimately has

shown an unsympathetic attitude and that in the light of the several judgments of the

Supreme Court, the appointees are entitled to regularisation and salaries as paid to

the regular employees in the office of the Official Liquidator at least from three years

prior to the date of the judgment of the Single Judge of the Calcutta High Court and

in the Kerala cases from the date of appointment.

 On the other hand, Mr. Malhotra, learned Senior Counsel  appearing for the

Union of India submitted that the appointees were not appointed by the Government

and they were not paid salaries from the consolidated fund. On the other hand, they

were paid salaries from the companies concerned under liquidation. In certain High

Courts,  there  are  Official  Liquidators  and  Court  Liquidators  appointed  under

Section 38-A of Banking (Regulation) Act. The banking companies under liquidation

originally were 75, now only there are 32 banking companies under liquidation. The

appointment under court orders are not for a permanent department like Official

Liquidator’s office and, therefore, the appointees cannot demand regularization and

payment of equal salary as that of salaries paid to regular employees in the office of

the Official Liquidator.

The hard reality  is  that  the appointees  are continued on the basis  of  fixed

salary without  any retiral benefits  such as pension and gratuity for more than 25

years and the functions they are discharging are similar to those discharged by the

employees in the Office of the Official Liquidator without getting equal treatment. In

the circumstances, before rendering a decision on merits by the Court, Mr Malhotra,

learned  Senior  Counsel  desired  that  the  Government  be  given  an  opportunity  to

consider the matter in the light of the findings rendered by the High Courts and to

come forward with an acceptable solution.

The matters are adjourned by four weeks.”

8. In furtherance of the aforementioned order, the Government of India considered various

proposals. Thereafter an additional  affidavit  was  filed incorporating therein the following three

options:

(i) one  option  that  was  discussed  was  to  repeat  scheme  for  absorption  of

company-paid staff as was done through the 1978 Scheme of Department of

Company  Affairs.  There  are  certain  practical  problems  in  following  this

course of action. As per the 1978 Scheme such absorption is possible to the

extent  of  50% only  under  the  direct  recruitment  quota  in  the  appropriate

grade. As the position obtains in the Department of Company Affairs, there is

lack  of  adequate  number  of  vacancies  in  the  aforesaid  category  (direct

recruitment) for the purpose of facilitating absorption of all these company-

paid staff in the Department of Company Affairs;

(ii) the  second  alternative  that  was  discussed  was  to  continue  the  present

arrangement  without  absorption  of  these  company-paid  staff.  In  such  a

situation, their salaries and service conditions could suitably be revised by the

Hon’ble Company Judges with reference to funds available with the OLs in

the various High Courts. According to information gathered, most of the OLs

attached to various High Courts have annual surpluses. The balances in the

funds maintained by many OLs are substantial; and

(iii) the third option that was discussed was to grant them age relaxation and ask

them to sit in the open competitive examination as a one-time measure. This

would  give  them  a  general  opening  not  restricted  to  jobs  in  these  two

departments.

9. Although,  the Government of  India  indicated its  preference for  option Nos.2  and 3,  this

Court did not approve either of them and dismissed the appeals.  The transferred writ petition was

allowed in similar terms – Govt. of India and others vs. Court Liquidator’s Employees Association

and others [1999 (8) SCC 560].  Paragraphs 21 to 24 of the judgment which have bearing on these

cases read as under:

21. In view of the peculiar facts of these cases and the positive findings of the High

Courts  with  which  we concur,  we  are  unable  to agree  with  the  contention of  the

learned  Senior  Counsel  for  the  appellants  that  the  company-paid  staff  cannot  be

absorbed/regularised as they were not employed by the Government in accordance

with the rules; that they knew their appointments were only temporary and that their

pay was not from the consolidated fund.

22. Undoubtedly, counsel on both sides cited numerous authorities of this Court on

earlier occasions sustaining the orders of absorption and setting aside the orders of

absorption. We do not consider it necessary to refer to those decisions inasmuch as

the facts presented before us and the findings rendered by the High Courts speak for

themselves. As a matter of fact, the Government had considered as one of the options

to  absorb  the  company-paid  staff  as  was  done  through  the  1978  Scheme  of

Department of Company Affairs.

23. In the circumstances, we are satisfied that the orders of the High Court challenged

in these appeals do not call for any interference having regard to the facts presented

before the High Courts.  Accordingly,  we dismiss the appeals with no orders as to

costs.  

24. In view of the above, the writ petition is allowed as the relief prayed for is similar

to the one claimed by the contesting respondents/company-paid staff in the connected

civil appeals, without costs.  

10.    Notwithstanding its approval  of the reasons and conclusions  of  Calcutta and Kerala High

Courts, this Court gave an opportunity to the appellants to absorb the company paid staff working

under the Court Liquidator in the Calcutta High Court and Official Liquidators in other High

Courts by framing a scheme modeled on the 1978 Scheme within six months.  The Court also stayed

the operation of the orders appealed against and the order passed in Writ Petition (Civil) No.473 of

1998 for a period of six months to enable the appellants to frame new scheme and implement the

same. This is evident from paragraph 25 of the judgment which is reproduced below :

25. However, we want to give an opportunity to the appellants in the interest of

justice and to balance the equities between the parties to come forward to accept and

act on the first option given in the additional affidavit, as extracted above, and absorb

the company-paid staff  working both under  the Court  Liquidator in the  Calcutta

High Court and the Official Liquidator in other High Courts by framing a scheme

modelled  on  the  1978  Scheme  within  six  months.  In  other  words,  we  stay  the

operation of the judgment of the High Courts under appeal and the order in WP (C)

No.  473 of  1988 for a period of six  months  to enable the appellants  to  frame the

Scheme as suggested above and to give effect to it, failing which the judgments under

appeal and the order in WP (C) No. 473 of 1988 will stand confirmed.”

11. Within the time limit of six months fixed by the Court, the Government of India framed and

notified new Scheme (hereinafter referred to as ‘the 1999 Scheme’) for absorption of the company

paid staff against 50% vacancies in direct recruitment quota and also issued letter dated 1.10.1999

containing guidelines for implementation of the same.  That letter reads as under :-

“To

The Regional Director Department of Company Affairs Mumbai/Calcutta/Chennai/Kanpur.

Sub: Absorption of company paid staff of the offices of Official Liquidators against Group  C  posts  in  the  subordinate  offices  of  the  Department  of  Company Affairs on the lines of scheme devised in 1978 – Supreme Court’s judgment – regarding.    

I  am  directed  to  refer  to  the  Hon’ble  Supreme  Court’s  Judgment  dated

27.08.99  (copy  enclosed)  on  the  subject  mentioned  above  and  to  say  that  further

action in the matter of absorption of the Company Paid Staff in regular Government

service may please be taken on the following lines :-

(i) Only such Company Paid Staff of the offices of the Official Liquidators shall

be eligible for regular absorption:

(a) Who were in position as on 27.08.99 and  

(b) Who possess  the  requisite educational  qualification laid down in the

recruitment rules for the post against which they are to be absorbed.

The Regional Directors, in their capacity as Heads of Departments, may consider the

relaxation of age limits in deserving cases in accordance with the general instructions

existing in this regard.  

(ii) The Company Paid Staff can be absorbed against only 50% of the existing and

future vacancies in your region in Group ‘C’ posts which, as per recruitment

rules fall under direct recruitment quota.  For instance, there is hundred per

cent direct  recruitment to the  posts  of  Lower Division  Clerks;  accordingly,

50% of  the existing and future vacancies of Lower Division Clerks in your

region can be utilized for absorbing Company Paid Staff.  Further, the posts of

Upper Division Clerks, as per recruitment rules, are to be filled up entirely by

promotion; therefore, there can be no possibility of absorbing Company Paid

Staff in the grade of Upper Division Clerks.  In the case of Junior Technical

Assistants 50% of the vacancies, according to the recruitment rules are to be

filled up by promotion and the remaining 50% by direct recruitment.  In this

case,  therefore  25%  of  the  vacancies  in  the  grade  of  Junior  Technical

Assistants can be utilized for absorbing Company Paid Staff.  The proportion

of vacancies in other Group ‘C’ grades may similarly be worked out.

(iii) The Company Paid Staff, who were in position on 27.08.99, will be screened by

a Selection Committee consisting of the following:-

1) Regional Director – Chairman

2) Representative of the Staff Selection Commission -Member

3) Official Liquidator of the office the company paid staff of which is to be screened –

Member

The Staff Selection Commission is also being requested to nominate different

representatives for the different regions.  The place, date and time of holding

meeting(s) of the Selection Committee may be finalized in consultation with

them.

(iv) As in the scheme of 1978, there will be no test or examination for the purpose

of  assessing  the  suitability  of  the  Company  Paid  Staff.   The  Selection

Committee will  make its recommendations on the basis of the qualification,

experience etc. and personal interview of the candidates.

2. Immediate  steps  may  please  be  taken  for  selection  of  eligible  members  of

Company Paid Staff for absorption against the existing vacancies in different grades

and also the anticipated vacancies upto 31.12.2000 next. Applications may be invited

indicating separately the existing vacancies and the vacancies which may occur by

31.12.2000  and  making  it  clear  that  the  question  of  absorbing  be  persons

recommended for the anticipated vacancies will  arise only if  the vacancies actually

occur by 31.12.2000 and that mere recommendation of the Selection Committee will

not confer any right on any Company Paid Staff for being appointed in Government

service.

3. A quarterly report beginning with the quarter ended 31.12.99 may be sent to

the Headquarters indicating the extent to which the Company Paid Staff has been

absorbed in regular Government service.”

12. Thereafter, the concerned authorities undertook exercise for absorption of the company paid

staff in the regular cadres of the Department of Company Affairs.  As a result of this, 295 out of 399

company paid staff who were in position  on 27.8.1999 were adjudged suitable.   Of them 130 have

been absorbed and 141 are awaiting orders. 104 were not recommended for absorption.  23 of the

company paid staff either refused absorption or resigned or retired from service.    

13. In the meanwhile, the company paid staff working under the Official Liquidators of Calcutta

and Delhi High Courts filed writ petitions and prayed for issue of mandamus to the Union of India

and others to absorb them in the regular cadres and to treat them at par with Central Government

employees working in the office of the Official Liquidators.   

Pleadings of the parties before the High Courts

Calcutta High Court

14. Tapas Chakraborty and others filed Writ Petition (Civil) No.1387 of 2001 in Calcutta High

Court for issue of a direction to Government of India and Official Liquidator to absorb them in

regular cadres with effect from the date of completion of 240 days’ service and also for grant of

benefits like pension, provident fund, gratuity, etc. calculated on the basis of total length of service.

In the writ affidavit  it was pleaded by the petitioners that before appointing them, the Official

Liquidator  use  to take leave from the Hon’ble  Judge hearing the company matter in  the  High

Court; that they were appointed as a company paid staff with a stipulation that their services may

be terminated at any time without assigning any reason; that all of them have worked for more than

240 days in each and every year of their service; that although they are entitled to regularization of

service, the respondents have not taken any action in that direction; that their pay has not been

fixed in the regular scale and they are required to retire at the age of 58 year without any financial

benefit;  that  on  or  around  30th November,  1999,  the  respondents  asked  them to  appear  in  an

interview for absorption against the post of Lower Division Clerk or Junior Technical Assistant in

terms of letter dated 1.10.1999; that they were not party to the proceedings before the Supreme

Court;  that  the  scheme,  if  any,  prepared  by  the  respondents  is  arbitrary  and  implementation

thereof is afflicted by favoritism and that the respondents cannot take recourse to the order passed

by the Supreme Court on 27.8.1999 and deprive them of  their  legal  right to get  absorption on

completion of 240 days of continuous service.  For better appreciation of the case projected by the

writ petitioners, paragraphs 5, 6, 7, 18 and 26 and Clauses a(ii) and (iii) of the prayer clause are

reproduced below:   

“5. The very common thing amongst the petitioners herein is that all of them are

continuing their service in the office of the Official Liquidator for more than 240 days

in each and every year of their service in the office of the Official Liquidator.   

6. Although  your  petitioners  are  entitled  to  regularization  of  their  service  in

terms of the Central Government employees, but the respondents and each of them

neglected to give  the petitioners  all  the service  benefits  as  compared to a Central

Government employee.

7. Although your petitioners have all  requisite  qualifications,  experience,  your

petitioners  were denied  their  right  to  work with  utmost  dignity  and compelled to

work in the office of respondent No.3 with a temporary status, without any service

benefits  as  admissible  to  a  Central  Government  employee  in  similarly  situated

conditions.  In a society, where unemployment is curse, your petitioners have had no

other alternative but to accept the terms of service, as dictated by the respondents

from time to time for running their office through your petitioners.  

18. Your  petitioners  state  that  they  were  not  a  party  in  the  said  proceedings,

before the Hon’ble Supreme Court of India, hence the aforesaid order of the Hon’ble

Supreme Court  of  India,  is  not  applicable  to  your  petitioners.   Your  petitioners

further state that the words ‘other High Courts’ as referred by the Hon’ble Apex

Court is not meant for all the High Courts all over India, but it referred to those two

High Courts, the staffs of the Official Liquidator of the Kerala High Court and/or of

the Delhi High Court only.

26. Your  petitioners  state  that  purported  scheme,  if  any,  prepared  by  the

respondent authorities is bad and arbitrary and without publishing the scheme for

appointment  and/or  regularization,  the  respondent  authorities  indulged  in  the

favouritism at the time of choosing the candidates for absorption in regular post.  In

absence  of  any  scheme  or  modes  of  regularization,  the  respondents  are  taking

recourse  to  pick  and  choose  policy  and  doing  gross  discrimination  among  the

temporary workers in the office of the respondent no.3.

[Emphasis added]

Prayer Clause

(a)(ii) absorb the writ petitioners in regular service under the Central Government

with  an effective date  i.e.  soon after  expiry  of  240 days  in their  respective

services in each continuous period of service;

(iii) Furnish all the service benefits like pension, provident funds and gratuity and

pay  differences  to  the  petitioners,  calculating  the  service  period  of  the

petitioners with an effective date i.e.  soon after expiry of  240 days in their

respective services, in each continuous period of service.

15. During the pendency of the writ petition, an application was filed on behalf of the petitioners

for deleting the names of some of them and for adding additional grounds to challenge the 1999

Scheme.  The respondents in the writ petition objected to the amendment to the writ petition, but

the learned Single Judge overruled their objection and granted the prayer of the writ petitioners.  

Delhi High Court

16. Smt.  Daya  Dua  and  others,  who  belong  to  the  category  of  company  paid  staff

employed/engaged by the Official Liquidator of Delhi High Court filed Writ Petition No.2728 of

2001 for issue of a mandamus to the respondents (appellants herein) to regularize their services

against Group ‘C’ post from the date of initial appointment.  An alternative prayer made by the

writ  petitioners was  to direct  the respondents  to  frame a scheme for absorption of  all  of  them

against Group ‘C’ posts and give them other benefits like pay and allowances at par with regular

Group ‘C’ employees working in the office of the Official Liquidator. They pleaded that their work

is of perennial nature and their duties and functions are identical to those of regular employees, but

they are not being paid salary in the regular pay scale.  They further pleaded that the direction

given  by  the  Supreme  Court  was  not  limited  to  the  absorption  of  any  particular  category  of

company paid staff, but the 1999 Scheme is confined to Group ‘C’ posts and the employees who are

eligible for absorption against Group ‘D’ posts are being discriminated. Another plea taken by the

petitioners was that only 11 of  company paid staff have been absorbed/regularized against Group

‘C’ posts and others have been left out in lurch.  Clauses (a), (b) and (c) of the prayer clause of Writ

Petition No.2728 of 2001 read as under:-

“a) regularize  the  service  of  the  petitioners  in  Group ‘C’  Central  Government

posts from the date of their initial appointment;

b) without  prejudice  to  prayer  (a)  above,  in  the  alternate,  frame  Scheme  as

directed by the Hon’ble Supreme Court for absorption of all the petitioners in

Group  ‘C’  Central  government  posts  giving  therein  due  regard  to  their

seniority as Group ‘C’ company paid staff and providing therein time bound

regularization  of  all  the  petitioners  which  is  the  letter  and  spirit  of  the

directions  of  the  Hon’ble  Supreme  Court  dated  27.8.1999  in  W.P.  (C)

No.473/1988;

c) pay the petitioners salary and allowances at par with the Central Government

appointed  regular  group  ‘C’  staff  in  the  office  of  the  Official  Liquidator

attached  to the  Hon’ble  High  Court  of  Delhi  from the  date of  their  initial

appointment.”

17. The claim of the writ  petitioners (respondents  herein) was controverted by the Union of

India and Official Liquidators of the two High Courts. The salient features of the counter affidavits

filed on their behalf were:

(i) Regular appointments against the posts sanctioned by the Government of India, Department

of Company Affairs are made after following the procedure prescribed in the statutory rules.

As against this, the company paid staff is engaged/employed by the Official Liquidators for

fixed period after obtaining sanction from the Court under Rule 308 of the 1959 Rules.

(ii) The  company  paid  staff  are  neither  the  government  servants  nor  their  conditions  of

employment are regulated by statutory rules like the Central Civil Services (Conduct) Rules,

which are applicable to the holders of civil posts under the Central Government.   

(iii) The company paid staff cannot be equated with regular employees because the source and

mode of recruitment of the two categories and their status are entirely different. Moreover,

while  the regular employees are paid  from the budget  sanctioned by the  Government of

India, the salaries and allowances of the company paid staff are drawn from the company

fund in terms of the order passed by the Court under Rule 308 read with Rule 309 of 1959

Rules.  

(iv) The 1999 Scheme was framed strictly in accordance with the judgment of the Supreme Court

in  Govt.  of  India  and  others  vs.  Court  Liquidator’s  Employees  Association  and  others

(supra).  The same was modeled on the 1978 Scheme and 50% of direct recruitment quota

posts have been filled by absorbing the company paid staff.   

18. In the counter filed in Delhi High Court, it was also pleaded that members of the company

paid staff cannot claim absorption in Group ‘D’ post because the 1978 and 1999 Schemes do not

provide for such absorption.

Findings of the High Courts

W.P. No.13871/2001 (Calcutta High Court)

19. The learned Single Judge briefly referred to the pleadings of the parties and held that relief

deserves to be granted to the petitioners because the findings and conclusions recorded by Calcutta

and Kerala High Courts in the earlier round of litigation were approved by the Supreme Court. in

Govt. of India and others vs. Court Liquidator’s Employees Association and others (supra), the

learned Single Judge then prepared a comparative table of the two schemes and held that the 1999

Scheme is illusory because all the company paid staff cannot be absorbed against 50% vacancies of

the direct recruitment quota.  On the issue of absorption of the company paid staff against Group

‘D’ posts, the learned Single Judge observed that there is no rational reason to confine the benefit of

the  1999  Scheme qua  Group  ‘C’  posts.   He  also  delved  into  the  legality  of  the  absorption  of

respondent Nos.5 to 26 and held that the recommendations made by the Selection Committee de

hors the seniority of the company paid staff has the effect of vitiating the selection.  He, however,

declined to nullify the absorption of the private respondents on the ground of delay and laches and

proceeded to direct the respondents to prepare fresh merit list strictly in the order of seniority.  The

learned Single Judge also directed respondents to consider the desirability of increasing the quota of

50% by creating supernumerary posts.   The operative part of  the order passed by the learned

Single Judge reads thus:  

“The State respondents shall consider their scheme 1999 after ascertaining whether

all company paid staff in the office of the Official Liquidator, Calcutta High Court

can  be  absorbed  as  Group-C staff  within  three  years  reckoned  from the  date  of

coming into force of the said Scheme of 1999.

The aforesaid exercise shall be completed within a period of three months from

date hereof.  If all the company paid staff cannot be absorbed as Group-C staff within

the said period stipulated above, State respondents shall consider the increase in the

quota of 50% or by creating supernumerary posts so that, subject to the reservation

policy of the State, all the eligible company paid staff could be absorbed as Central

Government staff in Group-C.

The State respondents shall consider de novo the impugned panel with respect

to eligible company paid staff in Group-C strictly in the order of seniority and upon

absorption  of  such  company  paid  staff  on  the  basis  of  such  list  which  shall  be

prepared within a period of three months from date hereof, the seniority in the cadre

of  Group-C  shall  be  maintained  ever  with  respect  to  the  company  paid  staff

respondents 5 to 26 who have already been absorbed.

As regards Group-D staff, State respondents shall take steps for regularizing

such of the petitioners as may be eligible and qualified according to the rules to be

absorbed  as Group D staff within a period of three months from date hereof.   Such

regularization shall be made strictly in the order of seniority (length of service in the

organization).  Upon  absorption/regularization  such  company  paid  staff  shall  be

placed immediately below the last  regularly appointed employees in that category,

class and service, as the case may be.

Until the above directions as carried out there shall be a direction upon the

respondents not to fill up any post by direct recruitment.

It  is  clarified  that  such  of  the  petitioners  who  did  not  participate  in  the

interview conducted by the selection committee for the purpose of absorption, their

cases shall not be considered.”

20. The Division Bench dismissed the appeal preferred by the appellants herein by recording the

following observations:

“Since the matter regarding the right of the company paid staff of the office of the

official liquidators has been decided and confirmed upto the Hon’ble Supreme Court,

all  that needs to be worked out is that manner in which such employees are to be

absorbed in  the  offices  of  the  different  Official  Liquidators  of  the different  High

Courts.

We are in agreement with the sentiments expressed by the learned Single Judge that

no  a  section  but  all  the  company  paid  staff  working  in  the  office  of  the  Official

Liquidator upto the cut off date as provided in the 1999 Scheme are to be absorbed in

the office  of  the  Official  Liquidator,  High Court  at  Calcutta,  even if  it  means by

creation of supernumerary post as observed by the learned Single Judge.  Needless to

say, such posts will be personal to those appointed and will cease to be in existence

upon the incumbent attaining the age of superannuation.”

W.P. No.2728/2001 (Delhi High Court)

21. The learned Single Judge referred to the judgment in Govt. of India and Others vs. Court

Liquidator’s Employees Association and Others (supra) and negatived the plea of the appellants

herein that the company paid staff can be absorbed in the regular cadre only against Group ‘C’

posts to the extent of 50% of direct recruitment quota and held that the writ petitioners are entitled

to be absorbed against Group ‘C and ‘D’ posts and their entire service upto the date of absorption

has to be counted for the purpose of  fixation of  seniority and grant of other benefits including

promotion. The relevant portions of the order of the learned Single Judge are reproduced below:

“I do not find any force in the argument of the respondent that 1978 scheme was only

with  regard  to  Group  ‘C’  employees.   The  fact  of  the  matter  is  that  Group  ‘D’

employees were appointed only in the year 1985.  Therefore, there was no question of

the respondent making a scheme in 1978 for Group ‘D’ employees.  I do not find any

force  in  the  arguments  of  counsel  for  the  respondents  that  the  direction  of  the

Supreme Court was limited with regard to the absorption of Group ‘C’ employees.

The Supreme Court has used the words ‘company paid employees’, the words ‘Group

‘C’  and  Group ‘D’  have  not  been  used  in  the  judgment  of  Supreme Court.   As

discussed earlier Group ‘D’ employees were also petitioners before Supreme Court.

I do not find any substance in the arguments of counsel for the respondents that the

Supreme Court has not given a direction for giving seniority to the petitioners after

their absorption.  If I agree with the interpretation of the respondent that would mean

a person who has worked for twenty or more years in the office of Official Liquidator

and now he gets absorption his  past  services of  twenty years or more will  not be

counted. The very proposition of the respondent is preposterous.  The Supreme Court

in its judgment has not used the words ‘new appointment’ but has used the word

‘absorption’.  The Supreme Court had categorically given a mandate to absorb all the

company paid employees and not to give fresh appointment.  Therefore, the incident

of  seniority by implication is  implicit  in  the judgment of  the Supreme Court  and

respondents  have  to  absorb  the  petitioners  giving  them  fitment  in  the  their

appropriate scales as well as other promotions, if any, which has to be given as per

law.  

I  issue  a  writ  of  mandamus to  the  respondents  to  absorb  the  petitioners  in  their

appropriate scales with all benefits such as fitment and promotions, if any, even if

posts have to be created for the petitioners. Illegality and discrimination cannot be

allowed to perpetuate indefinitely.  They will also be entitled to pension, provident

fund, gratuity and all benefits which are to be computed on the basis of their length of

service.   The petitioners shall be entitled to arrears of three years which shall be paid

by the respondents to the petitioners within a period of six months.”

[Emphasis supplied]

22. Letters Patent Appeals preferred by the appellants were dismissed by the different Division

Benches of  the High Court.   While  deciding LPA No.808 & 809/2003,  the Division Bench took

cognizance of the fact that during the pendency of contempt case filed in Calcutta High Court with

the complaint that order dated 26.3.2001 passed by the Single Judge of that High Court in W.P.

No.211/2001 has not been complied with, the Central Government created 51 posts of Group ‘B’,

‘C’ and ‘D’ and absorbed the staff working in the office of the Court Liquidator with effect from

the date of  expiry of  360 days of  their  joining service and held that the direction given by the

learned Single Judge for absorption of all Group ‘C’ and ‘D’ company paid staff does not call for

interference.

Particulars of the additional documents filed/produced during the course of hearing

23. Learned senior counsel appearing for Tapas Chakraborty and others filed I.A. No.10/2008 in

S.L.P (C) No.12798/2008 for placing on record the following documents:

(i) Letter  No.OL-CAL/24/Staff/G-Part  V/2600/G  dated  13th June,  2005  sent  by  the  Official

Liquidator  of  Calcutta  High  Court  to  the  Secretary,  Government  of  India,  Ministry  of

Company Affairs  highlighting  the  factum of  increase  in  the  work  load  and  necessity  of

providing additional manpower.

(ii) Letter No.12011/3/2003-Admn.II  dated 2nd September,  2005 issued by the Government of

India in the matter of “Optimization of Direct Recruitment to Civilian Posts” of Group ‘C’

and ‘D’ for the years 2001-2002, 2002-2003 and 2003-2004 and abolition of some such posts.

(iii) Copy of order dated 28.2.2008 passed by the Division Bench of Kerala High Court in Writ

Petition (C) No.22810/2004 and 16471/2007.

(iv) Copy  of  letter  No.RD/CLA/1/717/1135  dated  3rd June,  2008,  sent  by  Assistant  Director

(Inspection), Government of India, Ministry of Corporate Affairs to the Official Liquidators

of  Calcutta,  Cuttack,  Guwahati,  Patna  and  Ranchi  asking  them to  send  comprehensive

proposal for requirement of staff along with justification for the same.

(v) Letter No.OL/24/Staff/Part VII/1875/G dated 30th June, 2008 sent by the Official Liquidator

of Calcutta High Court to the Regional Director, Eastern Region, Kolkata reiterating the

need for additional staff to meet with the increased workload.

24. Learned senior counsel also produced two charts containing the details of Group ‘C’ and

Group ‘D’ posts lying vacant in four regions as on 1.1.2008 and the number of Group ‘C’ posts

abolished during 2001-2002, 2003-2004.  He produced two more charts containing the details of the

company paid staff as on 31.3.2008 in all the regions and particulars of 119 company paid staff

employed/engaged by the Official Liquidator of Calcutta High Court.   

25. Ms. Jyoti Mendiratta, learned counsel appearing for the respondents in the appeals arising

out of the orders passed by Delhi High Court filed I.A. (unnumbered) in S.L.P. (C) No.12798/2005

for placing on record the following documents:-

(i) Copy of the details of posts with office of Official Liquidator of High Court of Bombay filed

on 18.7.2008 along with tables consisting of names of the company paid staff and the date of

absorption and table containing names of the 26 company paid staff from Group ‘C’ and

Group ‘D’.

(ii) Letter No.12011/3/2003-Admn.II dated 2nd September, 2005 sent by Under Secretary to the

Government of India, Ministry of Company Affairs to the Regional Directors of Ministry of

Company Affairs of Noida, Kolkata, Mumbai and Chennai in the matter of optimization of

direct recruitment to civilian posts of Group ‘C’ and ‘D’ posts in the Ministry for the years

2001-2002, 2002-2003 and 2003-2004 and abolition/filling up of some such posts.

(iii) Letter No.OL/24/Staff/Part VII/1875/G dated 30th June, 2008 sent by the Official Liquidator

of Calcutta High Court to the Regional Director, Eastern Region, Kolkata reiterating the

need for increase of manpower.

(iv) Copy of order dated 19.9.2005 passed by the Division Bench of Delhi High Court in LPA

Nos.808/2003 and 809/2003.

(v) Copy of order dated 5.5.2003 passed by learned Single Judge of Delhi High Court in CW

No.2728/2001 and CM No.4774/2001.

(vi) Copy of  judgment dated 26.3.2001 passed by the  learned Single  Judge of  Calcutta High

Court in W.P. No.211/2001.

(vii) Letter No.A-12013/1/99-Ad.II dated 27.12.1999 sent by Shri D.P. Saini, Under Secretary to

the  Govt.  of  India  to  all  the  Regional  Directors  of  Department  of  Company  Affairs  of

Kanpur, Kolkata, Mumbai and Chennai regarding clarifications/suggestions to facilitate the

implementation of this Court’s judgment dated 27.8.1999 for absorption of company paid

staff of the offices of Official Liquidators against Group ‘C’ posts.

26. Shri P.P. Malhotra, Additional Solicitor General filed reply to I.A. No.10/2008 in S.L.P. (C)

No.12798/2005 along with following documents:-

(i) Copy  of  O.M.  No.2/8/2001-PIC  dated  16.5.2001  containing  policy  decision  taken  by  the

Government of India on the issue of Optimization of Direct Recruitment to Civilian Posts

and lapsing of two-third of vacancies every year.  

(ii) Copy of O.M. No.2/8/2001-PIC dated 30th August, 2006, whereby the Government decided to

continue the scheme of Optimization of Direct Recruitment to Civilian Posts upto 31.3.2009.  

(iii) Copy  of  O.M.  No.A-12011/3/2002-Ad.II  dated  14.3.2005  for  convening  meeting  of  the

Screening Committee to consider the issue of reducing direct recruitment to civilian posts in

the Ministry of Company Affairs along with background note.  

27. During the course of arguments, Shri Malhotra placed before the Court xerox copy of Writ

Petition No.1387/2001 filed in Calcutta High Court along with annexed papers and the following

documents:-

(i) Letter No. dated 22nd August, 2008 sent by Official Liquidator, High Court of Bombay to the

Regional Director, Western Region, Mumbai on the issue of additional requirement of posts,

and  

(ii) Copy of additional affidavit of Shri D.P. Saini, Under Secretary to the Government of India,

Ministry of Finance, Department of Company Affairs filed in C.A. No.5677/1994.

Arguments

28. Shri P.P. Malhotra, learned Addl. Solicitor General placed reliance on paragraph 25 of the

judgment in Govt. of India and others vs. Court Liquidator’s Employees Association and others

(supra)  and  submitted that  even though  this  Court  approved  the  reasoning  and conclusions  of

Calcutta and Kerala High Courts, orders passed by those Courts were rendered ineffective because

operation and implementation thereof was stayed for six months and in terms of opportunity given

to it, the Government of India not only framed the 1999 Scheme for absorption of the company paid

staff, but also implemented the same.  Shri Malhotra argued that High Court committed serious

error by issuing direction for absorption of all the company paid staff in the regular cadres ignoring

the fact that the 1999 Scheme was confined to Group C posts and that too upto 50% vacancies in the

direct recruitment quota.  Learned counsel emphasized that the 1999 Scheme was modeled on the

1978 Scheme and argued that the same cannot be faulted on the ground that due to abolition of

posts  in the Department of  Company Affairs, large number of  company paid staff  may not get

absorbed in the regular cadres till their retirement. Shri Malhotra pointed out that as early as in

2001,  the  Government  of  India  had  taken  a  policy  decision  to  substantially  reduce  direct

recruitment to all the cadres and recommendations made by the Screening Committee for abolition

of posts in various cadres were accepted by the Government. Learned counsel emphasized that the

policy  decision  taken  by  the  Government  of  India  on  the  issue  of  Optimization  of  Direct

Recruitment to Civilian Posts was not challenged by the writ petitioners and argued that in the

absence  of  such  challenge,  the  High  Courts  were  not  justified  in  mandating  creation  of

supernumerary posts for absorption of the company paid staff and for grant of monetary benefits to

them by applying the principle of equal pay for equal work with retrospective effect.  In the end, he

argued that the directions given by High Courts for wholesale absorption of the company paid staff

are legally unsustainable because that would result in abrogation of the rules framed under proviso

to Article 309 of the Constitution of India in terms of which the appointing authority is obliged to

make direct recruitment to various cadres.   

29. Shri Bhaskar P. Gupta, learned counsel appearing for the respondents in the appeal arising

out of S.L.P. No.12798 of 2005 argued that the judgment of this Court in Government of India and

others vs. Court Liquidator’s Employees Association & Ors. (supra) is conclusive on the issue of

absorption to the company paid staff and the 1999 Scheme is liable to be quashed because the same

is  not  only  contrary  to  the  judgment  of  this  Court  but  is  wholly  unrealistic  and  impractical

inasmuch as it does not provide for absorption of the company paid staff who have completed more

than 10 to 20 years of service.  Learned counsel pointed out that after the promulgation of 1978

Scheme, there has been multifold increase in the petitions instituted for liquidation of the companies

and  submitted  that  in  order  to  meet  the  imperatives  of  the  work  relating  to  the  companies  in

liquidation, the Official Liquidator was compelled to engage/employ additional staff and continue

them after obtaining sanction from the Court under Rule 308 of the 1959 Rules.  He then submitted

that the respondents joined service as company paid staff with the fond hope that their services will

be regularized and they may get opportunity of career advancement and retrial benefits but on

account of unsympathetic attitude of the Government of India, their legal and constitutional rights

have been violated. Learned counsel referred to letters dated 13.6.2005, 3.6.2008 (Annexures A-D)

and 30.6.2008 written by the Official  Liquidator and Assistant Director (Inspection), Kolkata as

also letter dated 2.9.2005 written by the Under Secretary to the Government of India, Ministry of

Company Affairs to the Regional Directors, NOIDA/Kolkata/Mumbai/Chennai  on the subject of

Optimization of Direct Recruitment to Civilian Posts in Group C and D and submitted that even

though in the assessment of  officers at the ground level,  there is  a dire need for increasing the

strength of different cadres, the Government of India has in the garb of implementing the policy

decision taken in 2001, abolished large number of  posts in the direct recruitment quota,  which

became available  in  2001-02 to  2003-04  and,  in  this  manner,  the  1999 Scheme has  been  made

redundant.  Shri Gupta invited our attention to the charts and details produced by him to show that

even after being recommended by the Selection Committee as many as 141 of the company paid

staff, who were in position on 27.8.1999, have not been absorbed till this day.  He submitted that the

Government of India cannot sit tight over the matter and frustrate the right of the company paid

staff  to  be  absorbed  in  the  regular  cadres  despite  the  fact  that  they  were  appointed  after

advertisement and as on date they have continuously  worked for 10 to 20 years and fulfill  the

conditions  of  eligibility  prescribed  for  direct  recruitment.  Shri  Gupta  invoked  the  doctrine  of

legitimate expectation and argued that the High Courts did not commit any illegality by recognizing

the validity of the claim  made by the company paid staff and issuing direction for their absorption

in  regular  cadres  with  consequential  monetary  benefits  by  creation  of  supernumerary  posts.

Learned senior counsel lamented that the manner in which the Government of India has acted in

last nine years leave no room for doubt that majority of company paid staff, who were in position

on 27.8.1999 may never get absorbed and may have to retire without any monetary benefits like

pension,  gratuity,  etc.  Lastly,  Shri  Gupta  submitted  that  the  ratio  of  the  Constitution  Bench

judgment in Secretary, State of Karnataka vs. Uma Devi [2006 (4) SCC 1] should not be applied to

these  cases  because  the  respondents  had  been  employed/engaged  after  advertisement  and  due

selection.   He also  relied on Randhir  Singh  vs.  Union  of  India  [1982 (1) SCC 618],  Dhirendra

Chamoli vs. State of U.P. [1986 (1) SCC 637], Surinder Singh vs. Engineer-in-Chief, C.P.W.D. [1986

(1) SCC 639 and UP State Electricity Board vs. Pooran Chandra Pandey [2007 (11) SCC 92] and

argued that  the respondents  cannot  be  deprived of  their  constitutional  right  to  equality  in  the

matter of regularization of service and payment of salary in the regular pay scales on the pretext of

non-availability of posts.   

30. Ms. Jyoti Mendiratta referred to the pleadings of Writ Petition No.2728/2001 filed in Delhi

High Court to show that as per the appellants’ own case, the 1999 Scheme was a replica of the 1978

Scheme and argued that the same is liable to be quashed because while framing the new scheme, the

Central Government altogether ignored the factum of employment of a number of persons by the

Official Liquidator from 1985 who are eligible for absorption against Group D posts.   She further

argued that  the  lackadaisical  manner in  which  the  Central  Government  implemented the  1999

Scheme shattered the hopes of majority of the company paid staff and, therefore, the High Court

did not commit any error by removing the discrimination practiced by the Central Government

against the company paid staff who have not been absorbed even after 20 years service.  She pointed

out that the Official Liquidator of Delhi High Court employed/engaged company paid staff after

due advertisement and selection and argued that non-availability of sanctioned posts cannot justify

wholesale denial of the right to equality guaranteed to the respondents under Articles 14 and 16 of

the Constitution.    Learned counsel heavily relied on the observations made by the Division Bench

of Kerala High Court in O.P. No.9732 of 1990 decided on 27.8.1993 and vehemently argued that in

view unequivocal approval of that order in Government of India and others vs. Court Liquidator’s

Employees Association & Ors. (supra), the learned Single Judge of the Delhi High Court had no

choice but to issue mandamus for regularization  of  the services of  the respondents  herein with

consequential  benefits.   Learned counsel  invited the  Court’s  attention  to  order  dated  26.3.2001

passed by the Calcutta High Court in Writ Petition No.211 of 2001 and submitted that after having

sanctioned 51 posts for absorption of the staff  working under the Court Liquidator of Calcutta

High Court, it is not open to the Central Government to challenge the direction given by Calcutta

and Delhi High Courts for regularization of company paid staff employed/engaged by the Official

Liquidators on the spacious ground of abolition of posts meant to be filled by direct recruitment.   

31. Shri Colin Gonsalves, and Shri Ramesh Kumar, learned counsel for the intervenors, adopted

the theme of the arguments of Shri Bhaskar P. Gupta and Ms. Jyoti Mendiratta and submitted that

in view of abolition of post meant to be filled by direct recruitment, the 1999 Scheme should be

declared as unworkable and redundant and a direction be issued to the appellants to regularize the

services of company paid staff having regard to their length of services.   

Consideration by the Court

32. At  the  outset,  we  consider  it  necessary  to  remove  the  misgivings  entertained  by  the

respondents and the High Courts that while dismissing the appeals filed by the appellants in the

earlier round of litigation, this Court had endorsed the directions given by Calcutta and Kerala

High  Courts  for  absorption  of  company  paid  staff  without  any  rider.   A  careful  reading  of

paragraphs 20 to 25 of the judgment in Govt. of India and Others vs. Court Liquidator’s Employees

Association  and  Others  (supra)  makes  it  crystal  clear  that  while  approving  the  reasons  and

conclusions recorded by the High Courts and dismissing the appeals, this Court not only gave an

opportunity to the appellants to frame a new scheme modeled on the 1978 Scheme within six months

and implement the same but also stayed the operation of the orders impugned in the appeals and

the  one passed  in  Writ  Petition (C)  No.473 of  1988.   The  use  of  the  words  “failing  which  the

judgments  under  appeal  and  the  order  in  WP  (C)  No.473  of  1988  will  stand  confirmed”  in

paragraph 25 leaves no manner of doubt that the orders passed by the High Court and the one

passed by this Court in WP (C) No.473 of 1988 were to become effective only if the Government of

India had not framed new scheme modeled on the 1978 Scheme.  However, the fact of the matter is

that Government of India not only framed and notified the 1999 Scheme within six months from the

date of judgment, but also issued guidelines for implementation of the same.  Therefore, the orders

passed by Calcutta and Kerala High Courts and the direction given by this Court in Writ Petition

(C) No.473 of 1988 will be deemed to have become ineffective and inoperative and the respondents

cannot derive any benefit from those orders and direction.   

33. Now on merits.  Rules 308 and 309 of 1959 Rules, which were framed by this Court under

Section 643 of the Companies Act, 1956 to facilitate employment of special or additional staff in any

liquidation and payment of salaries and allowances to such staff read as under:-

308.  Employment of additional or special staff – Where the Official Liquidator is

of opinion that the employment of any special or additional staff is necessary in any

liquidation, he shall apply to the Court for sanction, and the Court may sanction such

staff  as  it  thinks  fit  on  such  salaries  and  allowances  as  to  the  Court  may  seem

appropriate.  

309. Apportionment of expenses of common staff – Where any staff is employed to

attend  to  the  work  of  more  than  one  liquidation,  or  any  establishment  or  other

charges are incurred for more than one liquidation, the expenses incurred on such

staff and the common establishment and other charges, shall be apportioned by the

Official Liquidator between the several liquidations concerned in such proportions as

he may think fit, subject to the directions of the Judge, if any.

The above reproduced rules  were  framed with  a view to ensure that  the proceedings  of

liquidation  are  not  hampered  on  account  of  shortage  of  staff.   It  was  felt  that  if  additional

manpower is required for effectively dealing with liquidation cases, the Official  Liquidator may

apply to the Court and employ such staff after receipt of the sanction.  The additional staff is paid

from the company fund.  If the staff employed under Rule 308 is required to attend the work of

more than one liquidation or any establishment or other charges are incurred for more than one

liquidation,  then  the  Official  Liquidator  is  required  to  apportion  the  expenses  subject  to  the

direction, if any, of the Judge concerned.  

34. It is not in dispute that the respondents were engaged/employed by the Official Liquidators

pursuant to the sanction accorded by the Court under Rule 308 of the 1959 Rules and from the

inception of their employment, they are being paid from the fund created by disposal of the assets of

the  companies  in  liquidation.   They  were  neither  selected  in  accordance  with  the  procedure

prescribed under the rules framed under proviso to Article 309 of the Constitution nor they were

appointed  against  the  posts  sanctioned  by  the  Government  of  India.  It  is  thus  clear  that  the

company paid  staff  constitute a  separate  and distinct  class.   While  deciding  the  appeals  in  the

earlier round of litigation, this Court must have been alive to the aforementioned facts and this

appears  to  be  the  reason  why  the  directions  given  by  Calcutta  and  Kerala  High  Courts  for

absorption of all company paid staff were stayed for six months and an opportunity was given to the

Central Government to frame a new scheme within that period.  

35. Although neither of the parties to the appeals nor the intervenors have placed before the

Court advertisements issued by the Official Liquidators of Bombay, Calcutta, Delhi and Madhya

Pradesh or any other High Court for employment of special or additional staff in accordance with

the sanction accorded by the concerned Court and we have not been apprised of the specific terms

and  conditions,  subject  to  which  the  respondents  were  employed/engaged  by  the  Official

Liquidators but from the tenor of the pleadings and other records, it can be safely inferred that the

respondents were appointed on purely temporary basis for fixed period with a stipulation that they

shall not be entitled to seek regularization or absorption in the regular cadre against the sanctioned

post.  Those who applied in response to the advertisements issued by the Official Liquidators must

have  been  aware  of  the  fact  that  they  were  being  engaged/employed  pursuant  to  the  sanction

accorded by the Court under Rule 308 of the 1959 Rules in connection with liquidation proceedings;

that their appointments will not be against the posts sanctioned by the Government; that they will

have no right  to claim absorption in the regular cadre and that they will  be paid  salaries  and

allowances  which  may  be  fixed  by  the  Court.   They  must  have  accepted  the

appointment/engagement knowing fully well that they will have fixed tenure without any right to

continue in service or to seek absorption against the sanctioned posts.  It was neither the pleaded

case of  the respondents  before the High Courts  nor Shri  Bhaskar  P.  Gupta and other  learned

counsel  appearing  on  their  behalf  argued  before  this  Court  that  their  clients  were  lured  into

accepting employment as company paid staff by the Official Liquidators by promising absorption in

future against  the sanctioned posts or that they were coerced by some authority to accept such

employment.  Therefore, they cannot be heard to complain of the violation of Articles 14 and 16 of

the Constitution on the ground that even after having worked for more than one decade, they have

not  been  absorbed  in  the  regular  cadres  under  the  Government.  In  our opinion,  after  having

applied  for  and  accepted  employment/engagement  as  company  paid  staff  with  fixed  tenure

superimposed by a stipulation that they will have no right to continue in service or to be absorbed in

the  regular  cadres,  the  respondents  are  estopped from seeking  a direction for  their  absorption

against the posts sanctioned by the Government of India and the High Courts committed a serious

error in granting their prayer.  

36.    The  argument  of  Shri  Bhaskar  P.  Gupta  and  other  learned  counsel  appearing  for  the

respondents  and intervenors that the 1999 Scheme is  arbitrary and unreasonable and the same

should be treated as having become redundant on account of abolition of posts meant for direct

recruitment,  which  found favour with  the  High Courts,  proceeds on the hypothesis  that  in the

earlier round of  litigation this  Court,  while  endorsing the reasons and conclusions  recorded by

Calcutta and Kerala High Courts issued direction for absorption of all members of the company

paid staff and the Government of India was bound to frame a scheme for that purpose.  However,

the very premise on which this  argument is  based is  incorrect.  Admittedly,  appointment to the

service comprising sanctioned posts is regulated by the rules framed under proviso to Article 309 of

the Constitution of India. The mode of recruitment and methodology of selection are prescribed

under the rules.  The absorption of the company paid staff employed under Rule 308 of the 1959

Rules  is  not  one  of  the  prescribed  modes of  recruitment.    Therefore,  it  is  extremely  doubtful

whether the Government of  India could,  without  amending the statutory rules,  frame the 1978

Scheme for absorption of the company paid staff in the regular cadres.   However, as this Court has

not only indirectly approved the 1978 Scheme, but also directed the Government of India to frame

new scheme, we do not consider it necessary to dilate further on the subject.   

37. As mentioned above, while approving the reasons and conclusions recorded by the two High

Courts and dismissing the appeals, this Court not only permitted the Government of India to frame

a scheme modeled on the 1978 Scheme but also stayed implementation of the orders impugned in

the appeal and the one passed by itself in the transferred writ petition. If the Court intended that all

members of  the  company paid  staff  working  on  the  date  of  judgment  i.e.  27.8.1999 should  be

absorbed in the regular cadres against Group ‘C’ and ‘D’ posts, then a simple direction to that

effect would have been sufficient and there was no occasion to stay the implementation of the orders

of the High Courts for six months with liberty to the Government of India to frame a new scheme

within the same period.   The absence of such a direction shows that the Court was very much

conscious of the fact that recruitment to the regular cadres is governed by the rules framed under

Article  309  of  the  Constitution  and  it  would  be  highly  detrimental  to  public  interest  to  issue

direction  for  wholesale  absorption/regularization  of  the  company  paid  staff  and  thereby

abrogate/stultify opportunity of competition to younger generation comprising more meritorious

persons who may be waiting for a chance to apply for direct recruitment.  Obviously, the Court did

not want to sacrifice the merit by showing undue sympathy with members of the company paid staff

who joined service with full knowledge about their status, terms and conditions of their employment

and the fact that they were to be paid from the company fund and not Consolidated Fund of India.

In this context, we may also mention that though the Official Liquidators appear to have issued

advertisements  for  appointing  the  company  paid  staff  and  made  some sort  of  selection,  more

qualified and meritorious persons must have shunned from applying because they knew that the

employment will be for a fixed term on fixed salary and their engagement will come to an end with

the conclusion of liquidation proceedings.  As a result of this, only mediocres must have responded

to the advertisements and jointed as company paid staff.  In this scenario, a direction for absorption

of all the company paid staff has to be treated as violative of the doctrine of equality enshrined in

Articles 14 and 16 of the Constitution.     

38. Since  the  1999  Scheme  was  framed  by  the  Government  of  India  in  furtherance  of  the

opportunity given by this Court and no deviation is shown to have been made from the 1978 Scheme

insofar as Group ‘C’ posts are concerned, the same cannot be dubbed as arbitrary, irrational and

unreasonable, simply because all the company paid staff who were in position as on 27.8.1999 may

not get absorbed in the regular cadres.  Here, it is worth noticing that as per the details of 119

company paid staff furnished by the senior counsel appearing for Tapas Chakraborty and others,

only 54 had completed tenure of 10 years on 27.8.1999 i.e. the date specified in the 1999 Scheme.  Of

them, 21 were Lower Division Clerks,  16 were Upper Division Clerks (there is no provision for

appointment to the post of Upper Division Clerk by direct recruitment), 1 was Assistant, 1 was

Superintendent, 1 was Assistant Commander, 1 was Commander, 2 were Technical Assistants and

the rest were Record Arrangers, Peons and Security Guards. Of the remaining 65 employees, 3 were

appointed in the year 2000 and others had worked for periods ranging from 13 months to 8 years

3½ months as on 27.8.1999.  This means that not even 50% of the writ petitioners had completed 10

years  tenure  which  was  considered  by  the  Courts  as  benchmark  for  issuing  direction  for

regularization  of  the  services  of  temporary/ad  hoc/daily  wagers  employed  in  Government

departments.   The position of the company paid staff of Delhi High Court is different.  The details

furnished by Ms. Jyoti  Mendiratta show that 27 of the company paid staff  have been absorbed

under the 1999 Scheme.   Of the remaining 26 company paid staff, all except 1 had worked for more

than 10 years as on 27.8.1999.  9 of the company paid staff  had worked for 20 years or more.

However, they could not be absorbed due to abolition of posts in furtherance of the policy decision

taken by the Government of India.  

39. The  additional  documents  produced  by  Shri  Malhotra  show  that  in  the  year  2001,  the

Government of India had taken a policy decision to reduce the strength of civilian staff in all the

cadres. This was reflected in the speech made by the Finance Minister, Government of India, while

presenting the budget for 2001-02. He stated that all requirements of recruitment will be scrutinized

to ensure that fresh recruitment is limited to 1% of total civilian staff strength and there will be

reduction in manpower by 2% per annum, achieving a reduction of 10% in 5 years.  Thereafter,

OM No.2/8/2001-PIC dated 16.5.2001 was issued by the Government of India.  Paragraphs 2.1 and

2.2 of that OM read as under :

“2.1 All  Ministries/Departments  are  accordingly  requested  to  prepare  Annual

Direct Recruitment Plans covering the requirements of all cadres, whether managed

by that Ministry/Department itself, or managed by the Department of Personnel and

Training, etc. The task of preparing the Annual Recruitment Plan will be undertaken

in each Ministry/Department by a Screening Committee headed by the Secretary of

that Ministry/Department with the Financial Advisor as a Member and JS (Admn.) of

the Department as Member Secretary.  The Committee would also have one senior

representative each of the Department of Personnel and Training and the Department

of Expenditure.   While the Annual Recruitment Plans for vacancies in Groups ‘B’,

‘C’  and  ‘D’  could  be  cleared  by  this  Committee  itself,  in  the  case  of  Group  ‘A’

Services, the Annual Recruitment Plan would be cleared by a Committee headed by

Cabinet Secretary with secretary of the Department concerned, Secretary (DoPT) and

Secretary (Expenditure) as Members.   

2.2 While  preparing  the  Annual  Recruitment  Plans,  the  concerned  Screening

Committees would ensure that direct recruitment does not in any case exceed 1% of

the total sanctioned strength of the Department.   Since about 3% of staff retire every

years,  this  would  translate  into  only  1/3rd of  the  direct  recruitment  vacancies

occurring in each year being filled up.   Accordingly,  direct recruitment would be

limited to 1/3rd of  the direct recruitment vacancies arising in the year subject to a

further ceiling that this does not exceed 1% of the total sanctioned strength of the

Department.  While examining the vacancies to be filled up, the functional needs of

the organization would be critically examined so that there is flexibility in filling up

vacancies  in  various  cadres  depending  upon  their  relative  functional  need.   To

amplify,  in  case  an  organization  needs  certain  posts  to  be  filled  up  for

safety/security/operational  considerations,  a  corresponding  reduction  in  direct

recruitment in other cadres of the organization may be done with a view to restricting

the overall direct recruitment to one-third of vacancies meant for direct recruitment

subject to the condition that the total  vacancies proposed for filling up should be

within the 1% ceiling. The remaining vacancies meant for direct recruitment which

are not cleared by the Screening Committee will  not be filled up by promotion or

otherwise and these posts will stand abolished.”

40. For implementation of the aforementioned decision, the Screening Committee met sometime

in March, 2005 and decided to reduce the number of posts in the regular cadres of the Department

of Company Affairs.   The background note circulated to the members of the Screening Committee

vide Office  Memo No.A.12011/3/2003-Ad.II  dated 14.3.2005 made a clear mention of the orders

passed by the Calcutta and Delhi High Courts in favour of the company paid staff, dismissal of the

appeal  by  the  Division  Bench  of  Calcutta  High  Court,  pendency  of  similar  appeals  before  the

Division Bench of Delhi High Court and the Government’s decision to process the matter for filing

SLP against the orders of Calcutta High Court.  The Screening Committee which met on 16.3.2005

considered and approved abolition of the direct recruitment quota posts for the years 2001-2002,

2002-2003 and  2003-2004.   The  decision  of  the  Screening  Committee was  circulated to  various

offices of the Ministry of Company Affairs vide letter No.A.12011/3/2003-Admn.II dated 2.9.2005.

This exercise was in consonance with the policy decision taken by the Government of India.  The

respondents have neither assailed the decision of the Government to abolish the posts on the ground

of malafides nor the learned counsel  could show that the exercise undertaken by the Screening

Committee is  vitiated by arbitrariness or non-application of  mind or the same is  influenced by

extraneous reasons.  Therefore, the view expressed by the Calcutta and Delhi High Courts that the

1999 Scheme is unworkable or impractical or has become redundant, cannot be approved.   

41. The  creation  and  abolition  of  posts,  formation  and  structuring/  restructuring  of  cadres,

prescribing the source and mode of recruitment and qualifications and criteria of selection etc. are

matters  which  fall  within  the  exclusive  domain  of  the  employer.  Although  the  decision  of  the

employer to create or abolish posts or cadres or to prescribe the source or mode of recruitment and

lay  down  the  qualification  etc.  is  not  immune  from judicial  review,  the  Court  will  always  be

extremely cautious and circumspect in tinkering with the exercise of discretion by the employer.

The Court cannot sit in appeal over the judgment of the employer and ordain that a particular post

or number of posts be created or filled by a particular mode of recruitment.  The power of judicial

review can be exercised  in  such  matters  only  if  it  is  shown that  the  action  of  the  employer  is

contrary  to  any  constitutional  or  statutory  provisions  or  is  patently  arbitrary  or  vitiated  by

malafides.   

42. In State of Haryana vs. Navneet Verma [2008 (2) SCC 65],  a Division Bench of two-Judges

referred to M. Ramanatha Pillai vs. State of Kerala [1973 (2) SCC 650], Kedar Nath Bahi vs. State

of Punjab [1974 (3) SCC 21],  State of Haryana vs. Des Raj Sangar [1976 (2) SCC 844], Dr. N.C.

Singhal vs. Union of India [1980 (3) SCC 29) and Avas Vikas Sanghathan vs. Engineers Association

[2006 (4) SCC 132) and culled out the following principles :

“(a) the power to create or abolish a post rests with the Government;

(b) whether a particular post is necessary is a matter depending upon the exigencies of

the situation and administrative necessity;

(c)  creation  and  abolition  of  posts  is  a  matter  of  government  policy  and  every

sovereign  government  has  this  power  in  the  interest  and  necessity  of  internal

administration;

(d) creation, continuance and abolition of posts are all decided by the Government in

the interest of administration and general public;

(e) the court would be the least competent in the face of scanty material to decide

whether the Government acted honestly in creating a post or refusing to create a post

or its decision suffers from mala fides, legal or factual;

(f) as long as the decision to abolish the post is taken in good faith in the absence of

material, interference by the court is not warranted.”

43. In Secretary, State of Karnataka vs. Uma Devi (supra), the Constitution Bench adverted its

attention to financial implications of creation of extra posts and held that the Courts should not pass

orders  which  impose  unwarranted  burden  on  the  State  and  its  instrumentalities  by  directing

creation  of  particular  number  of  posts  for  absorption  of  employees  appointed  on  ad  hoc  or

temporary basis or as daily wagers.   

44. In  Divisional  Manager,  Aravali  Golf  Club  and  another  vs.  Chander  Hass  and  another

[(2008) 1 SCC 683] also, a two-Judges Bench considered the issue relating to creation of post and

held :-

“15. The court cannot direct the creation of posts. Creation and sanction of posts is a

prerogative of the executive or legislative authorities and the court cannot arrogate to

itself this purely executive or legislative function, and direct creation of posts in any

organisation. This Court has time and again pointed out that the creation of a post is

an executive or legislative function and it involves economic factors. Hence the courts

cannot take upon themselves the power of creation of a post. Therefore, the directions

given by the High Court and the first appellate court to create the posts of tractor

driver and regularise the services of the respondents against the said posts cannot be

sustained and are hereby set aside.”

45. Although in  paras  20,  26,  27,  28 and 33 of  the last  mentioned judgment some sweeping

observations have been made suggesting that the orders passed by the High Courts and this Court

in some of the cases amount to an encroachment on the domain of the executive and legislature, we

do not propose to deal with the same and decide whether those observations were at all called for in

the backdrop of factual matrix of that case and leave the same to be decided in an appropriate case.

46. In view of  the above stated legal  position,  we hold  hat the directions given by the High

Courts for creation of supernumerary posts to facilitate absorption of the company paid staff are

legally unsustainable and are liable to be set aside.  

47. The next issue which needs to be address is whether the impugned orders can be sustained

on the ground that by having worked continuously for 10 years or more as company paid staff as on

27.8.1999,  some  of  the  respondents  acquired  a  right  to  be  absorbed  in  the  regular  cadre  or

regularized in service and they are entitled to the benefit of the principle of equal pay for equal

work and have their pay fixed in the regular pay scales prescribed for the particular posts.     

48. The  questions  whether  in  exercise  of  the  power  vested  in  it  under  Article  226  of  the

Constitution  of  India,  the  High  Court  can  issue  a  mandamus  and  compel  the  State  and  its

instrumentalities/agencies  to  regularize  the  services  of  temporary/ad-hoc/daily

wager/casual/contract employees and whether direction can be issued to the public  employer to

prescribe or give similar pay scales to employees appointed through different modes, with different

condition of service and different sources of payment have become subject matter of debate and

adjudication in several cases.    

49. The judgments of 1980s and early 1990s – Dhirendra Chamoli vs. State of U.P. [1986 (1) SCC

637], Surinder Singh and Another vs. Engineer-in-Chief, CPWD and Others [1986 (1) SCC 639],

Daily  Rated  Casual  Labour  vs.  Union  of  India  [1988  (1)  SCC 122],  Dharwad  District  P.W.D.

Literate Daily Wage Employees’ Association vs. State of Karnataka [1990 (2) SCC 396], Bhagwati

Prasad vs. Delhi State Mineral Development Corporation  (supra), State of Haryana vs. Piara Singh

(supra) are representative of an era when this Court enthusiastically  endeavored to expand the

meaning of equality clause enshrined in the Constitution and ordained that employees appointed on

temporary/ad hoc/daily wage basis should be treated at par with regular employees in the matter of

payment of salaries and allowances and that their services be regularized.  In several cases, the

schemes  framed  by  the  governments  and  public  employer  for  regularization  of  temporary/ad-

hoc/daily  wag/casual  employees  irrespective  of  the  source  and  mode  of  their  appointment/

engagement  were  also  approved.   In  some  cases,  the  courts  also  directed  the  State  and  its

instrumentalities/agencies to frame schemes for regularization of the services of such employees.  In

State of  Haryana vs.  Piara Singh (supra),  this  Court  while  reiterating  that  appointment to the

public posts should ordinarily be made by regular recruitment through the prescribed agency and

that even where ad-hoc or temporary employment is necessitated on account of the exigencies of

administration,  the  candidate  should  be  drawn  from the  employment  exchange  and  that  if  no

candidate is available or sponsored with the employment exchange, some method consistent with the

requirements  of  Article  14  of  the  Constitution  should  be  followed  by  publishing  notice  in

appropriate manner for calling for applications and all those who apply in response thereto should

be considered fairly, proceeded to observe that if an ad-hoc or temporary employee is continued for

a fairly long spell, the authorities are duty bound to consider his case for regularization subject to

his  fulfilling  the  conditions  of  eligibility  and  the  requirement  of  satisfactory  service.   The

propositions laid down in Piara Singh’s case were followed by almost all High Courts for directing

the  concerned  State  Governments  and  public  authorities  to  regularize  the  services  of  ad-

hoc/temporary/daily wage employees only on the ground that they have continued for a particular

length of time.  In some cases, the schemes framed for regularization of the services of the backdoor

entrants were also approved.  

50. The above noted judgments and orders encouraged the political set up and bureaucracy to

violate the soul of Article 14 and 16 as also the provisions contained in the Employment Exchanges

(Compulsory  Notification  of  Vacancies)  Act,  1959  with  impunity  and  the  spoil  system  which

prevailed in the United Stats of America in sixteenth and seventeenth century got firm foothold in

this country. Thousands of persons were employed/engaged throughout the length and breadth of

the country by backdoor methods.   Those who could pull  strings in the power corridors at the

higher and lower levels managed to get the cake of public employment by trampling over the rights

of other eligible and more meritorious persons registered with the employment exchanges.  A huge

illegal  employment market developed in  different  parts  of the country and rampant corruption

afflicted the whole system.  This was recognized by the Court in Delhi Development Horticulture

Employees Union vs. Delhi Administration, Delhi and others [1992 (4) SCC 99] in the following

words:

“23. Apart from the fact that the petitioners cannot be directed to be regularised for

the reasons given above, we may take note of the pernicious consequences to which

the direction for regularisation of workmen on the only ground that they have put in

work  for  240 or  more days,  has  been leading.  Although  there  is  an  Employment

Exchange  Act  which  requires  recruitment  on  the  basis  of  registration  in  the

Employment Exchange, it has become a common practice to ignore the Employment

Exchange and the persons registered in the Employment Exchanges, and to employ

and get employed directly those who are either not registered with the Employment

Exchange  or  who  though  registered  are  lower  in  the  long  waiting  list  in  the

Employment  Register.  The  courts  can  take  judicial  notice  of  the  fact  that  such

employment is sought and given directly for various illegal considerations including

money. The employment is given first for temporary periods with technical breaks to

circumvent the relevant rules, and is continued for 240 or more days with a view to

give  the  benefit  of  regularization knowing  the  judicial  trend that  those who  have

completed 240 or more days are directed to be automatically regularized. A good deal

of illegal employment market has developed resulting in a new source of corruption

and frustration of those who are waiting at the Employment Exchanges for years. Not

all  those  who  gain  such  backdoor  entry  in  the  employment  are  in  need  of  the

particular jobs. Though already employed elsewhere, they join the jobs for better and

secured prospects.  That is  why most of  the cases which come to the courts are of

employment in government departments, public undertakings or agencies. Ultimately

it is the people who bear the heavy burden of the surplus labour. The other equally

injurious effect of indiscriminate regularization has been that many of the agencies

have stopped undertaking casual or temporary works though they are urgent and

essential for fear that if those who are employed on such works are required to be

continued  for  240  or  more  days  they  have  to  be  absorbed  as  regular  employees

although the works are time-bound and there is no need of the workmen beyond the

completion of  the works  undertaken.  The public  interests  are thus  jeopardised on

both counts.”

51. The menace of illegal and backdoor appointments compelled the Courts to have rethinking

and in large number of subsequent judgments this Court declined to entertain the claims of ad-hoc

and temporary employees for regularization of services and even reversed the orders passed by the

High Courts and Administrative Tribunals – Director, Institute of Management Development, U.P.

vs. Pushpa Srivastava [1992 (4) SCC 33],   Dr.  M.A. Haque and Others vs.  Union of  India and

Others [1993 (2) SCC 213], J & K Public Service Commission vs. Dr. Narinder Mohan [1994 (2)

SCC 630], Dr. Arundhati Ajit Pargaonkar vs. State of Maharashtra [1994 Suppl.  (3) SCC 380],

Union of India vs. Kishan Gopal Vyas [1996 (7) SCC 134], Union of India vs. Moti Lal [1996 (7)

SCC 481], Hindustan Shipyard Ltd. vs. Dr. P. Sambasiva Rao [1996 (7) SCC 499], State of H.P. vs.

Suresh Kumar Verma [1996 (7) SCC 562], Dr. Surinder Singh Jamwal vs. State of J&K [1996 (9)

SCC 619], E. Ramakrishnan vs. State of Kerala [1996 (10) SCC 565], Union of India and Others vs.

Bishambar Dutt [1996 (11) SCC 341], Union of India vs. Mahender Singh [1997 (1) SCC 247], P.

Ravindran and Others vs. Union Territory of Pondicherry and Others [1997 (1) SCC 350], Ashwani

Kumar and Others vs. State of Bihar and Others [1997 (2) SCC 1], Santosh Kumar Verma and

Others vs. State of Bihar and Others [1997 (2) SCC 713], State of U.P. and Others vs. Ajay [1997 (4)

SCC 88],  Patna University  vs.  Dr.  Amita Tiwari  [1997 (7)  SCC 198]  and Madhyamik  Shiksha

Parishad vs. Anil Kumar Mishra [2005 (5) SCC 122].  

52. The shift  in the Court’s approach became more prominent in A. Umarani vs. Registrar,

Cooperative Societies [2004 (7) SCC 112],  decided by a three-Judges Bench, wherein it was held

that the State cannot invoke Article 162 of the Constitution for regularization of the appointments

made in violation of the mandatory statutory provisions.  In Secretary, State of Karnataka vs. Uma

Devi (supra), the Constitution Bench again considered the question whether the State can frame

scheme for regularization of the services of ad-hoc/temporary/daily wager appointed in violation of

the doctrine of equality or the one appointed with a clear stipulation that such appointment will not

confer any right on the appointee to seek regularization or absorption in the regular cadre and

whether the Court can issue mandamus for regularization or absorption of such appointee and

answered the same in negative.  The Court adverted to the theme of constitutionalism in a system

established  in  rule  of  law,  expanded  meaning  given  to  the  doctrine  of  equality  in  general  and

equality in the matter of employment in particular, multi-facet problems including the one relating

to unwarranted fiscal burden on the public exchequer created on account of the directions given by

the High Courts and this Court for regularization of  the services of persons appointed on purely

temporary or ad hoc basis or engaged on daily wages or as casual labourers, referred to about three

dozen judgments including R.N. Nanjundappa vs. T. Thimmiah [1972 (1) SCC 409], Daily Rate

Casual Labour vs. Union of India [1988 (1) SCC 122], Bhagwati Prasad vs. Delhi State Mineral

Development  Corporation  [1990  (1)  SCC  361],  Dharwad  District  P.W.D.  Literate  Daily  Wage

Employees Association and others vs. State of Karnataka and others [1990 (2) SCC 396], State of

Haryana vs. Piara Singh [1992 (4) SCC 118] and State of Punjab vs. Surinder Kumar [1992 (1) SCC

489] and held:

“47.  When  a  person  enters  a  temporary  employment  or  gets  engagement  as  a

contractual or casual worker and the engagement is not based on a proper selection as

recognised by the relevant rules or procedure, he is aware of the consequences of the

appointment being temporary, casual or contractual in nature. Such a person cannot

invoke the theory of legitimate expectation for being confirmed in the post when an

appointment to the post could  be made only by following a proper procedure for

selection and in cases concerned, in consultation with the Public Service Commission.

Therefore, the theory of legitimate expectation cannot be successfully advanced by

temporary, contractual or casual employees. It cannot also be held that the State has

held out any promise while engaging these persons either to continue them where they

are  or  to  make  them permanent.  The  State  cannot  constitutionally  make  such  a

promise. It is also obvious that the theory cannot be invoked to seek a positive relief of

being made permanent in the post.

48.  It  was then contended that the rights  of the employees  thus  appointed,  under

Articles 14 and 16 of the Constitution,  are violated.  It  is stated that the State has

treated the employees unfairly by employing them on less than minimum wages and

extracting work from them for a pretty long period in comparison with those directly

recruited  who  are  getting  more  wages  or  salaries  for  doing  similar  work.  The

employees before us were engaged on daily wages in the department concerned on a

wage that was made known to them. There is no case that the wage agreed upon was

not being paid. Those who are working on daily wages formed a class by themselves,

they  cannot  claim  that  they  are  discriminated  as  against  those  who  have  been

regularly recruited on the basis of the relevant rules. No right can be founded on an

employment on daily wages to claim that such employee should be treated on a par

with  a  regularly  recruited  candidate,  and  made  permanent  in  employment,  even

assuming  that  the  principle  could  be invoked  for  claiming  equal  wages  for  equal

work. There is no fundamental right in those who have been employed on daily wages

or temporarily or on contractual basis, to claim that they have a right to be absorbed

in service. As has been held by this Court, they cannot be said to be holders of a post,

since, a regular appointment could be made only by making appointments consistent

with  the  requirements  of  Articles  14  and  16  of  the  Constitution.  The  right  to  be

treated  equally  with  the  other  employees  employed  on  daily  wages,  cannot  be

extended to a claim for equal  treatment with those who were regularly employed.

That would be treating unequals as equals. It cannot also be relied on to claim a right

to be absorbed in service even though they have never been selected in terms of the

relevant  recruitment  rules.  The  arguments  based  on  Articles  14  and  16  of  the

Constitution are therefore overruled.

49. It is contended that the State action in not regularising the employees was not fair

within the framework of the rule of law. The rule of law compels the State to make

appointments as envisaged by the Constitution and in the manner we have indicated

earlier. In most of these cases, no doubt, the employees had worked for some length of

time but this has also been brought about by the pendency of proceedings in tribunals

and  courts  initiated  at  the  instance  of  the  employees.  Moreover,  accepting  an

argument of this nature would mean that the State would be permitted to perpetuate

an illegality in the matter of public employment and that would be a negation of the

constitutional scheme adopted by us, the people of India. It is therefore not possible to

accept the argument that there must be a direction to make permanent all the persons

employed on daily wages. When the court is approached for relief by way of a writ,

the court has necessarily to ask itself whether the person before it had any legal right

to be enforced.  Considered in  the light  of  the  very  clear constitutional  scheme,  it

cannot be said that the employees have been able to establish a legal right to be made

permanent even though they have never been appointed in terms of the relevant rules

or in adherence of Articles 14 and 16 of the Constitution.”

53. In paragraph 25, the Constitution Bench specifically referred to the conclusions recorded in

paragraphs 45 to 50 of the judgment in State of Haryana vs. Piara Singh (supra) and observed:

“26.  With respect, why should the State be allowed to depart from the normal rule and

indulge  in  temporary employment in  permanent  posts?  This  Court,  in  our view,  is

bound to insist on the State making regular and proper recruitments and is bound not

to encourage or shut  its  eyes to  the persistent  transgression  of  the rules of  regular

recruitment. The direction to make permanent—the distinction between regularisation

and making permanent, was not emphasized here—can only encourage the State, the

model employer, to flout its own rules and would confer undue benefits on a few at the

cost of many waiting to compete. With respect, the direction made in para 50 (of SCC)

of  Piara Singh is to some extent inconsistent with the conclusion in para 45 (of SCC)

therein. With great respect, it appears to us that the last of the directions clearly runs

counter to the constitutional scheme of employment recognised in the earlier part of the

decision. Really, it cannot be said that this decision has laid down the law that all ad

hoc, temporary or casual employees engaged without following the regular recruitment

procedure should be made permanent.”

54. In  paragraph  54,  the  Constitution  Bench  clarified  that  the  earlier  decisions  which  run

counter to the principles settled by it will stand denuded of their status as precedents.   

55. In Jawaharlal Nehru Technological University vs. T. Sumalatha (Smt.) and others [2003 (10)

SCC 405], a two-Judges Bench considered an issue somewhat similar to the one being considered in

these appeals. The facts of that case show that the respondents, who were graduates, were appointed

as investigators on consolidated pay between 1985 and 1991 in  the Nodal  Centre set up  in the

University  under  the  scheme known as  the  National  Technical  Manpower  Information  System

sponsored by the then Ministry of Education and Culture, Government of India.  The Nodal Centre

was financed entirely by the Ministry of Education and Culture, Government of India.  Initially, the

term  of  the  Nodal  Centre  was  1  year  and  9  months,  but  it  was  continued  thereafter.   The

respondents  were appointed for 89 days but  their  services were extended from time to time on

similar terms.  Their consolidated pay was also revised twice.   They filed writ petition claiming

regularization of  service in the University.   Some directions were issued by the High Court for

consideration of the cases of the respondents for absorption. The University declined their prayer.

In the second round of litigation, the High Court directed the University to absorb the respondents

by applying GO No.212 dated 22.4.1994 issued by the State Government for regularization of the

services  of  temporary/ad  hoc/daily  wage  employees  of  the  Government  departments.   While

reversing the order of the High Court, this Court referred to GO No.212 and held :

“7. Can it be said that by virtue of this provision, the State Government assumes the

responsibility of absorbing the staff employed in the organizations or establishments

with  which  it  has  no  administrative  or  financial  nexus,  merely  because  an

instrumentality of the State is involved in managing it, that too, in a limited sense?

The  answer  could  only  be  in  the  negative.  When  the  State  Government  or  its

instrumentalities have not created the posts on their own and do not bear any part of

the  financial  burden,  the  question  of  getting  the  clearance  from the  Finance  and

Planning  Department  of  the  Government  for  the  purpose  of  regularization  or

absorption does not arise. Viewed from any angle, GO No. 212 would be wholly out of

place for those working in the nodal centre which is created and nurtured by the

Central Government. It is not within the domain of the State Government or even the

University to regulate the staff pattern or the monetary benefits of the staff working

therein, without the approval of the Central Government. Therefore, no directions

should have been issued to the State Government or to the University to regularize the

services of Respondents 1 to 5, if necessary, by creating additional posts.”

56. After rejecting the plea of the respondents for regularization of service, this Court adverted

to the issue of increase in their salary and held :

“9. Though the plea of regularization in respect of any of the fifth respondents cannot

be countenanced, the respondent employees should have a fair deal consistent with

the guarantee enshrined in Articles 21 and 14 of the Constitution. They should not be

made  to  work  on  a  meager  salary  for  years  together.  It  would  be  unfair  and

unreasonable to extract work from the employees who have been associated with the

nodal centre almost from its inception by paying them remuneration which, by any

objective standards, is grossly low. The Central Government itself has rightly realized

the need to revise the consolidated salary and accordingly enhanced the grant on that

account on two occasions. That revision was made more than six years back. It is high

time  that  another  revision  is  made.  It  is  therefore  imperative  that  the  Ministry

concerned of the Union of India should take expeditious steps to increase the salary of

the investigators viz. Respondents 1 to 4 working in the nodal centre in Hyderabad. In

the absence of details regarding the nature of work done by the said respondents and

the equivalence of the job done by them to the other posts prevailing in the University

or the Central Government institutions, we are not in a position to give any direction

based on the principle of “equal pay for equal work”. However, we consider it just

and expedient to direct Respondent 7 or 8, as the case may be, to take an expeditious

decision to increase the consolidated salary that is being paid to Respondents 1 to 4 to

a reasonable level commensurate with the work done by them and keeping in view the

minimum salary that is being paid to the personnel doing a more or less similar job.

As far as the fifth respondent is concerned, though we refrain from giving similar

directions in view of the fact that the post is  not specifically sanctioned under the

Scheme,  we  would  like  to  observe  that  the  Central  Government  may  consider

increasing the quantum of office expenditure suitably so that the University will  be

able to disburse higher salary to the fifth respondent.”

[Emphasis supplied]

57. By virtue  of  Article  141 of  the  Constitution,  the  judgment of  the  Constitution  Bench in

Secretary, State of Karnataka vs. Uma Devi (supra) is binding on all the courts including this Court

till the same is overruled by a larger Bench. The ratio of the Constitution Bench judgment has been

followed by different two-Judges Benches for declining to entertain the claim of regularization of

service made by ad hoc/temporary/ daily wage/casual employees or for reversing the orders of the

High  Court  granting  relief  to  such  employees  -  Indian  Drugs  and  Pharamaceuticals  Ltd.  vs.

Workmen [2007 (1) SCC 408], Gangadhar Pillai vs. Siemens Ltd. [2007 (1) SCC 533], Kendriya

Vidyalaya Sangathan vs. L.V. Subramanyeswara [2007 (5) SCC 326], Hindustan Aeronautics Ltd.

vs. Dan Bahadur Singh [2007 (6) SCC 207].  However, in U.P. SEB vs. Pooran Chand Pandey [2007

(11) SCC 92] on which reliance has been placed by Shri Gupta, a two-Judges Bench has attempted

to dilute the Constitution Bench judgment by suggesting that the said decision cannot be applied to

a case where regularization has been sought for in pursuance of Article 14 of the Constitution and

that the same is in conflict with the judgment of the seven-Judges Bench in Maneka Gandhi vs.

Union of India [1978 (1) SCC 248].

58. The facts of U.P. SEB vs. Pooran Chand Pandey (supra) were that the respondents (34 in

number) were employed as daily wage employees by the Cooperative Electricity Supply Society in

1985.  The Society was taken over by Uttar Pradesh Electricity Supply Board in 1997 along with

daily  wage  employees.    Earlier  to  this,  the  Electricity  Board  had  taken  a  policy  decision  on

28.11.1996 to regularize the services of its employees working on daily wages from before 4.5.1990,

subject to their passing the examination.  The respondents moved the High Court claiming benefit

of the policy decision dated 28.11.1996.  The learned Single Judge of the High Court held that once

the employees of the society became employees of the Electricity Board, there was no valid ground

to discriminate them in the matter of regularization of service. The Division Bench approved the

order of the Single Bench. A two-Judges Bench of this Court dismissed the appeal of the Electricity

Board.  In  para  11  of  its  judgment,  the  two-Judges  Bench  distinguished  Secretary,  State  of

Karnataka vs. Uma Devi (supra) by observing that the ratio of that judgment cannot be applied to a

case where regularization has been sought for in pursuance of Article 14 of the Constitution.  The

two-Judges Bench then referred to State of Orissa vs. Sudhanshu Sekhar Misra [AIR 1968 SC 647],

State of Gujarat vs. Ambica Quarry Works [1987 (1) SCC 213], Bhavnagar University vs. Palitana

Sugar Mill Pvt. Ltd. [2003 (2) SCC 111], Bharat Petroleum Ltd. vs. N.R. Viramani [2004 (8) SCC

579] and observed:

“We are constrained to refer to the above decisions and principles contained therein

because we find that often Umadevi (3) case is being applied by courts mechanically as

if it were a Euclid’s formula without seeing the facts of a particular case. As observed

by  this  Court  in  Bhavnagar  University and  Bharat  Petroleum  Corpn.  Ltd. a  little

difference in facts or even one additional fact may make a lot of difference in the

precedential value of a decision. Hence, in our opinion,  Umadevi (3) case cannot be

applied mechanically without seeing the facts of a particular case, as a little difference

in facts can make   Umadevi (3) case   inapplicable to the facts of that case  .”

“We  may  further  point  out  that  a  seven-Judge  Bench  decision  of  this  Court  in

Maneka Gandhi vs. Union of India has held that reasonableness and non-arbitrariness

is part of Article 14 of the Constitution. It follows that the Government must act in a

reasonable and non-arbitrary manner otherwise Article 14 of the Constitution would

be  violated.  Maneka  Gandhi  case   is  a  decision  of  a  seven-Judge  Bench,  whereas   

Umadevi (3) case   is a decision of a five-Judge Bench of this Court. It is well settled   

that a smaller Bench decision cannot override a larger Bench decision of the Court.

No  doubt,  Maneka  Gandhi  case does  not  specifically  deal  with  the  question  of

regularisation  of  government  employees,  but  the  principle  of  reasonableness  in

executive action and the law which it  has laid down, in our opinion,  is of general

application.”

[ Emphasis supplied]

59. We have carefully analyzed the judgment of the two-Judges Bench and are of the considered

view that the above reproduced observations were not called for.  The only issue which fell for

consideration  by  two-Judges  Bench  was  whether  the  daily  wage  employees  of  the  society,  the

establishment of which was taken over by the Electricity Board along with the employees, were

entitled to be regularized in terms of the policy decision taken by the Board and whether the High

Court committed an error by invoking Article 14 of the Constitution for granting relief to the writ

petitioners.   The question whether the Electricity Board could frame such a policy was neither

raised nor considered by the High Court and this Court.  The High Court simply adverted to the

facts of the case and held that once the daily wage employees of the society became employees of the

Electricity Board, they could not be discriminated in the matter of implementation of the policy of

regularization.  Therefore, the two-Judges Bench had no occasion to make any adverse comment on

the binding character of the Constitution Bench judgment in Secretary, State of Karnataka vs. Uma

Devi (supra).  

60. There have been several instances of different Benches of the High Courts not following the

judgments/orders of coordinate and even larger Benches.   In some cases, the High Courts have

gone  to  the  extent  of  ignoring  the  law  laid  down  by  this  Court  without  any  tangible  reason.

Likewise, there have been instances in which smaller Benches of this Court have either ignored or

bypassed the  ratio  of  the  judgments  of  the  larger  Benches  including  the Constitution Benches.

These cases are illustrative of non-adherence to the rule of judicial discipline which is sine qua non

for sustaining the system.  In Mahadeolal Kanodia vs. Administrator General of W.B. [1960 (3)

SCR 578], this Court observed:

“If  one  thing  is  more necessary  in  law than  any  other  thing,  it  is  the  quality  of

certainty. That quality would totally disappear if Judges of coordinate jurisdiction in

a High Court start overruling one another’s decisions. If one Division Bench of a High

Court is  unable  to distinguish a previous decision of  another Division Bench,  and

holding the view that the earlier decision is wrong, itself gives effect to that view the

result would be utter confusion. The position would be equally bad where a Judge

sitting singly in the High Court is of opinion that the previous decision of another

Single Judge on a question of law is wrong and gives effect to that view instead of

referring the matter to a larger Bench. In such a case lawyers would not know how to

advise  their  clients  and  all  courts  subordinate  to  the  High  Court  would  find

themselves  in  an  embarrassing  position  of  having  to  choose  between  dissentient

judgments of their own High Court.”

   [Emphasis added]

61. In  Lala  Shri  Bhagwan  vs.  Ram  Chandra  [AIR  1965  SC  1767],  Gajendragadkar,  C.J.

observed :

“It  is  hardly  necessary to emphasize that  considerations  of  judicial  propriety and

decorum require that if a learned Single Judge hearing a matter is inclined to take the

view that the earlier decisions of the High Court, whether of a Division Bench or of a

Single  Judge,  need  to  be  reconsidered,  he  should  not  embark  upon  that  enquiry

sitting as a Single Judge, but should refer the matter to a Division Bench or, in a

proper  case,  place  the  relevant  papers  before  the  Chief  Justice  to  enable  him to

constitute a larger bench to examine the question.  That is the proper and traditional

way  to  deal  with  such  mattes  and  it  is  founded  on healthy  principles  of  judicial

decorum and propriety.  It is to be regretted that the learned Single Judge departed

from this  traditional  way  in  the  present  case  and  chose  to  examine  the  question

himself.”

62. In  Union  of  India  vs.  Raghubir  Singh  [1989  (2)  SCC  754],  R.S.  Pathak,  C.J.  while

recognizing need for constant development of law and jurisprudence emphasized the necessity of

abiding by the earlier precedents in following words :

“The  doctrine  of  binding  precedent  has  the  merit  of  promoting  a  certainty  and

consistency in judicial decisions, and enables an organic development of law, besides

providing assurance to the individual as to the consequence of transaction forming

part  of  his  daily  affairs.    And,  therefore,  the  need  for  a  clear  and  consistent

enunciation of legal principle in the decisions of a court.”

63. In Sundarjas Kanyalal Bhatija and others vs. Collector, Thane [1989 (3) SCC 396], a two-

Judges Bench observed as under :

“In our system of judicial review which is a part of our constitutional scheme, we hold

it to be the duty of judges of superior courts and tribunals  to make the law more

predictable.  The question of law directly arising in the case should not be dealt with

apologetic approaches.  The law must be made more effective as a guide to behaviour.

It  must  be  determined  with  reasons  which  carry  convictions  within  the  courts,

profession and public.  Otherwise, the lawyers would be in a predicament and would

not know how to advise their clients.   Sub-ordinate courts would find themselves in

an embarrassing position  to  choose between the  conflicting  opinion.   The general

public would be in dilemma to obey or not to obey such law and it ultimately falls into

disrepute.”

64. In Dr. Vijay Laxmi Sadho vs. Jagdish [2001 (2) SCC 247], this Court considered whether the

learned Single Judge of Madhya Pradesh High Court could ignore the judgment of a coordinate

Bench on the same issue and held :

“33. As the learned Single Judge was not in agreement with the view expressed in

Devilal case it would have been proper, to maintain judicial discipline, to refer the

matter to a larger Bench rather than to take a different view. We note it with regret

and distress that the said course was not followed. It is well-settled that if a Bench of

coordinate  jurisdiction  disagrees  with  another  Bench  of  coordinate  jurisdiction

whether on the basis of “different arguments” or otherwise, on a question of law, it is

appropriate that the matter be referred to a larger Bench for resolution of the issue

rather than to leave two conflicting judgments to operate, creating confusion. It is not

proper to sacrifice certainty of law. Judicial  decorum, no less than legal propriety

forms the basis of judicial procedure and it must be respected at all costs.”

65. In Pradip Chandra Parija and others vs. Pramod Chandra Patnaik and others [2002 (1) SCC

1], the Constitution Bench noted that the two learned Judges denuded the correctness of an earlier

Constitution Bench judgment in Bharat Petroleum Corpn. Ltd. vs. Mumbai Shramik Sangha  [2001

(4) SCC 448] and reiterated the same despite the fact that the second Constitution Bench refused to

reconsider the earlier verdict and observed :  

“3. We may point out, at the outset, that in Bharat Petroleum Corpn. Ltd. v. Mumbai

Shramik Sangha(2001 (4) SCC 448) a Bench of five Judges considered a somewhat

similar question. Two learned Judges in that case doubted the correctness of the scope

attributed  to  a  certain  provision  in  an  earlier  Constitution  Bench  judgment  and,

accordingly, referred the matter before them directly to a Constitution Bench. The

Constitution Bench that then heard the matter took the view that the decision of a

Constitution Bench binds a Bench of two learned Judges and that judicial discipline

obliges them to follow it, regardless of their doubts about its correctness. At the most,

the Bench of two learned Judges could have ordered that the matter be heard by a

Bench of three learned Judges.

5. The learned Attorney-General submitted that a Constitution Bench judgment of

this Court was binding on smaller Benches and a judgment of three learned Judges

was binding on Benches of two learned Judges — a proposition that learned counsel

for the appellants did not dispute. The learned Attorney-General drew our attention

to the judgment of a Constitution Bench in Sub-Committee of Judicial Accountability

v. Union of India (1992 (4) SCC 97) where it has been said that “no coordinate Bench

of this Court can even comment upon, let alone sit in judgment over, the discretion

exercised  or  judgment  rendered  in  a  cause  or  matter  before  another  coordinate

Bench” (SCC  p.  98,  para  5).  The  learned  Attorney-General  submitted  that  the

appropriate course for the Bench of two learned Judges to have adopted, if it felt so

strongly that the judgment in Nityananda Kar (1991 Supp. (2) SCC 506) was incorrect,

was to make a reference to a Bench of three learned Judges.  That Bench of three

learned Judges, if it also took the same view of Nityananda Kar, could have referred

the case to a Bench of five learned Judges.

6. In the present case the Bench of two learned Judges has, in terms, doubted the

correctness of a decision of a Bench of three learned Judges. They have, therefore,

referred the matter directly to a Bench of five Judges. In our view, judicial discipline

and propriety demands that a Bench of two learned Judges should follow a decision

of a Bench of three learned Judges. But if a Bench of two learned Judges concludes

that  an  earlier  judgment  of  three  learned  Judges  is  so  very  incorrect  that  in  no

circumstances can it  be followed,  the proper course for it  to adopt is  to refer the

matter before it to a Bench of three learned Judges setting out, as has been done here,

the reasons why it could not agree with the earlier judgment. If, then, the Bench of

three  learned Judges  also  comes to  the  conclusion  that  the  earlier  judgment  of  a

Bench  of  three  learned  Judges  is  incorrect,  reference  to  a  Bench  of  five  learned

Judges is justified.

[Emphasis supplied]

66. In State of  Bihar vs.  Kalika Kuer and others  [2003 (5) SCC 448],  the Court elaborately

considered the principle  of  per incuriam and held that the earlier judgment by a larger Bench

cannot  be  ignored  by  invoking  the  principle  of  per  incuriam and  the  only  course  open  to  the

coordinate or smaller Bench is to make a request for reference to the larger Bench.   In State of

Punjab  vs.  Devans  Modern  Breweries  Ltd.  [2004  (11)  SCC 26],  the  Court  reiterated  that  if  a

coordinate Bench does not agree with the principles of law enunciated by another Bench, the matter

has to be referred to a larger Bench. In Central Board of Dwaoodi Bohra Community vs. State of

Maharashtra  [2005  (2)  SCC 673],  the  Constitution  Bench  interpreted  Article  141,  referred  to

various earlier judgments including  Bharat Petroleum Corpn. Ltd. vs.  Mumbai Shramik Sangha

(supra),  Pradip Chandra Parija and others vs. Pramod Chandra Patnaik and others (supra) and

held that “the law laid down in a decision delivered by a Bench of larger strength is binding on any

subsequent Bench of lesser  or co-equal strength and it would be inappropriate if a Division Bench

of two Judges starts overruling the decisions of Division Benches of three Judges. The Court further

held that such a practice would be detrimental not only to the rule of discipline and the doctrine of

binding precedents but it will also lead to inconsistency in decisions on the point of law; consistency

and certainty in the development of law and its contemporary status – both would be immediate

casualty”

67. In State of U.P. and others vs. Jeet S. Bisht and another [2007 (6) SCC 586], when one of the

Hon’ble Judges (Katju, J.) constituting the Bench criticized the orders passed by various Benches in

the same case, the other Hon’ble Judge (Sinha, J.) expressed himself in the following words :

“100.    For the views been taken herein, I regret to express my inability to agree with

Brother Katju, J. in regard to the criticisms of various orders passed in this case itself

by other Benches. I am of the opinion that it is wholly inappropriate to do so. One

Bench of this Court, it is trite, does not sit in appeal over the other Bench particularly

when  it  is  a  coordinate  Bench.  It  is  equally  inappropriate  for  us  to  express  total

disagreement in the same matter as also in similar matters with the directions and

observations made by the larger Bench. Doctrine of judicial restraint, in my opinion,

applies even in this realm. We should not forget other doctrines which are equally

developed viz. Judicial Discipline and respect for the Brother Judges.”

68. In U.P. Gram Panchayat Adhikari Sangh vs. Daya Ram Saroj [2007 (2) SCC 138], the Court

noted that by ignoring the earlier decision of a coordinate Bench, a Division Bench of the High

Court directed that part-time tube-well operators should be treated as permanent employees with

same service conditions as far as possible and observed :

“26. Judicial discipline is self-discipline.  It is an inbuilt mechanism in the system

itself.  Judicial discipline demands that when the decision of a coordinate Bench of the

same High Court is brought to the notice of the Bench, it is to be respected and is

binding,  subject  of  course,  to  the  right  to  take  a  different  view  or  to  doubt  the

correctness  of  the  decision  and  the  permissible  course  then  open  is  to  refer  the

question or the case to a larger Bench.  This is the minimum discipline and decorum

to be maintained by judicial fraternity.”

69. It is interesting to note that in Coir Board, Ernakulam vs. Indira Devi P.S. [1998 (3) SCC

259],  a  two-Judges  Bench  doubted  the  correctness  of  the  seven-Judges  Bench  judgment  in

Bangalore Water Supply & Sewerage Board vs. A. Rajappa [1978 (2) SCC 213] and directed the

matter to  be  placed  before  Hon’ble  the  Chief  Justice  of  India  for  constituting a  larger  Bench.

However, a three-Judges Bench headed by Dr. A.S. Anand, C.J., refused to entertain the reference

and observed that the two-Judges Bench is  bound by the judgment of  the larger Bench – Coir

Board, Ernakulam, Kerala State vs. Indira Devai P.S. [2000 (1) SCC 224].

70. We  are  distressed  to  note  that  despite  several  pronouncements  on  the  subject,  there  is

substantial increase in the number of cases involving violation of the basics of judicial discipline.

The learned Single Judges and Benches of the High Courts refuse to follow and accept the verdict

and law laid down by coordinate and even larger Benches by citing minor difference in the facts as

the  ground  for  doing  so.   Therefore,  it  has  become  necessary  to  reiterate  that  disrespect  to

constitutional  ethos  and  breach  of  discipline  have  grave  impact  on  the  credibility  of  judicial

institution  and  encourages  chance  litigation.    It  must  be  remembered  that  predictability  and

certainty is an important hallmark of judicial jurisprudence developed in this country in last six

decades and increase in the frequency of conflicting judgments of the superior judiciary will  do

incalculable harm to the system inasmuch as the courts at the grass root will not be able to decide as

to which of the judgment lay down the correct law and which one should be followed.  We may add

that in our constitutional  set up every citizen is  under a duty to abide by the Constitution and

respect its ideals and institutions.   Those who have been entrusted with the task of administering

the system and operating various constituents of the State and who take oath to act in accordance

with the Constitution and uphold the same, have to set an  example by exhibiting total commitment

to the Constitutional ideals.  This principle is required to be observed with greater rigour by the

members  of  judicial  fraternity  who  have  been  bestowed  with  the  power  to  adjudicate  upon

important constitutional  and legal issues and protect and preserve rights of the individuals  and

society as a whole.  Discipline is sine qua non for effective and efficient functioning of the judicial

system. If the Courts command others to act in accordance with the provisions of the Constitution

and rule of law, it is not possible to countenance violation of the constitutional principle by those

who are required to lay down the law.  

71. In the light of what has been stated above, we deem it proper to clarify that the comments

and observations made by the two-Judges Bench in UP State Electricity Board vs. Pooran Chandra

Pandey (supra) should be read as obiter and the same should neither be treated as binding by the

High Courts, Tribunals and other judicial foras nor they should be relied upon or made basis for

bypassing the principles laid down by the Constitution Bench.   

Equal Pay for Equal Work

72. The respondents’ claim for fixation of pay in the regular scale and grant of other monetary

benefits at par with those appointed against the sanctioned posts has been accepted by the High

Courts on the premise that their duties and functions are similar to those performed by regular

employees.  In the opinion of the High Courts, similarity in the nature of work of the company paid

staff on the one hand and regular employees on the other hand, is by itself sufficient for invoking

the principle of equal pay for equal work,   In our view, the approach adopted by the High Courts is

clearly erroneous and directions given for bringing about parity between the company paid staff

and regular employees in the matter of pay, allowances etc. are liable to be upset.   

73. The principle of equal pay for equal work for men and women embodied in Article 39(d) was

first considered in Kishori Mohanlal Bakshi vs. Union of India [AIR 1962 SC 1139] and it was held

that the said principle is  not capable of being enforced in a Court of law.   After 36 years, the issue

was again considered in Randhir Singh Vs. Union of India (supra), and it was unequivocally ruled

that the principle of equal pay for equal work is not an abstract doctrine and can be enforced by

reading it into the doctrine of equality enshrined in Articles 14 and 16 of the Constitution of India.

The ratio of Randhir Singh Vs. Union of India (supra) was reiterated and applied in several cases -

Dhirendra Chamoli vs. State of U.P. (supra), Surinder Singh and Another vs. Engineer-in-Chief,

CPWD and  Others  (supra),  Daily  Rated  Casual  Labour  vs.  Union  of  India  (supra),  Dharwad

District P.W.D. Literate Daily Wage Employees’ Association vs. State of Karnataka (supra) and

Jaipal vs. State of Haryana [1988 (3) SCC 354] and it was held that even a daily wage employee who

is  performing  duties  similar  to  regular  employees  is  entitled  to  the  same  pay.   However,  in

Federation of All India Customs and Central Excise Stenographers (Recognized) Union vs. Union of

India [1988 (3) SCC 91], Mewa Ram Kanojia vs. A.I.I.M.S. [1989 (2) SCC 235], V. Markandeya vs.

State of A.P. [1989 (3) SCC 191], Harbans Lal and others vs. State of Himachal Pradesh and others

[1989 (4) SCC 459], State of U.P. and others vs. J.P. Chaurasia and others [1989 (1) SCC 121],

Griha Kalyan Workers’ Union vs. Union of India  [1991 (1) SCC 619],  Ghaziabad Development

Authority vs. Vikram Chaudhary [1995 (5) SCC 210], State of Haryana and others vs. Jasmer Singh

and others [1996 (11) SCC 77], State of Haryana vs. Surinder Kumar [1997 (3) SCC 633], Union of

India vs. K.V. Baby [1998 (9) SCC 252], State of Orissa vs. Balram Sahu [2003 (1) SCC 250], Utkal

University vs. Jyotirmayee Nayak [2003 (4) SCC 760], State of Haryana and another vs. Tilak Raj

and others [2003 (6) SCC 123], Union of India vs. Tarit Ranjan Das [2003 (11) SCC 658], Apangshu

Mohan Lodh vs. State of Tripura [2004 (1) SCC 119], State of Haryana vs. Charanjit Singh [2006

(9) SCC 321], Hindustan Aeronautics Ltd. vs. Dan Bahadur Singh (supra),  Kendriya Vidyalaya

Sangathan vs. L.V. Subramanyeswara (supra) and Canteen Mazdoor Sabha vs. Metallurgical &

Engineering Consultants  (India)  Ltd.  [2007 (7) SCC 710],  the Court  consciously  and repeatedly

deviated from the ruling of Randhir Singh Vs. Union of India (supra) and held that similarity in the

designation or quantum of work are not determinative of equality in the matter of pay scales and

that before entertaining and accepting the claim based on the principle of equal pay for equal work,

the  Court  must  consider  the  factors  like  the  source  and mode of  recruitment/appointment,  the

qualifications,  the  nature  of  work,  the  value  judgment,  responsibilities,  reliability,  experience,

confidentiality, functional need etc. In State of Haryana and others vs. Jasmer Singh and others

(supra), the two-Judges Bench laid down the following principle :

“8.  It  is,  therefore,  clear  that  the  quality  of  work  performed by  different  sets  of

persons holding different jobs will have to be evaluated. There may be differences in

educational or technical qualifications which may have a bearing on the skills which

the holders bring to their job although the designation of the job may be the same.

There may also be other considerations which have relevance to efficiency in service

which may justify differences in pay scales on the basis of criteria such as experience

and seniority, or a need to prevent stagnation in the cadre, so that good performance

can be elicited from persons who have reached the top of the pay scale. There may be

various  other  similar  considerations  which  may  have  a  bearing  on  efficient

performance in a job. This Court has repeatedly observed that evaluation of such jobs

for the purposes of pay scale must be left to expert bodies and, unless there are any

mala fides, its evaluation should be accepted.”

74. In Harbans Lal and others vs. State of Himachal Pradesh and others (supra), the Court held

that the claim of carpenters employed by an incorporated company for party in wages payable to

their counterparts in Government service is unsustainable.  In  Jawaharlal  Nehru Technological

University vs. T. Sumalatha (Smt.) and others (supra), it was held that the respondents who were

employed under a scheme known as National Technical Manpower Information System, which was

sponsored by the then Ministry of Education and Culture, cannot claim parity with the regular

Government employees in the matter of pay scale.   

75. In  Canteen  Mazdoor  Sabha  vs.  Metallurgical  &  Engineering  Consultants  (India)  Ltd.

(supra), another two-Judges Bench held that simply because some employees of a contractor of the

alleged head employer  are  performing the  task  or  duties  similar  to the  employees  of  the  head

employer, it will not entitle such employees to claim parity.   

76. As mentioned earlier, the respondents were employed/engaged by the Official  Liquidators

pursuant to the sanction accorded by the Court under Rule 308 of the 1959 Rules and they are paid

salaries and allowances from the company fund.  They were neither appointed against sanctioned

posts nor they were paid out from the Consolidated Fund of India. Therefore, the mere fact that

they were doing work similar to the regular employees of the office  of  the Official  Liquidators

cannot be treated as sufficient for applying the principle of equal pay for equal work.   Any such

direction will  compel  the Government to sanction additional  posts  in  the offices  of  the  Official

Liquidators so as to facilitate payment of salaries and allowances to the company paid staff in the

regular pay scale from the Consolidate Fund of India and in view of our finding that the policy

decision  taken  by  the  Government  of  India  to  reduce  the  number  of  posts  meant  for  direct

recruitment does not suffer from any legal or constitutional infirmity, it is not possible to entertain

the plea of the respondents for payment of salaries and allowances in the regular pay scales and

other monetary benefits at par with regular employees by applying the principle of equal pay for

equal work.    

Legitimate Expectation

77. We shall  now advert to the question whether the respondents can invoke the doctrine of

legitimate expectation for supporting the impugned orders.  This part of the respondent’s claim is

founded on their assertion that notwithstanding the contrary stipulation contained in the orders of

appointment, they had expected that in view of the 1978 Scheme the Government will absorb them

in the regular cadres on some future date and give benefit of the principle of equal pay for equal

work.  The argument of Shri Bhaskar P. Gupta and Ms. Jyoti Mendiratta is that the respondents

had joined as  company paid staff  with the hope that  they will  be absorbed in the Government

service, but their hopes have been totally belied because instead of creating adequate number of

posts for absorption of company paid staff in accordance with the 1999 Scheme, the Government

has arbitrarily abolished large number of posts in direct recruitment quota and on that account,

even those who have been adjudged suitable will never get absorbed in the regular cadres.  In our

opinion, there is no merit in this argument.  The  pleadings of the parties and records produced

before the High Courts and this Court do not show that any competent authority of the Government

of India had ever given any assurance much less made a promise to the respondents that they will

get absorbed against the sanctioned posts or that there will  be no abolition of posts meant to be

filled by direct recruitment.  As a matter of fact, the respondents joined as company paid staff

knowing  fully  well  that  they  were  being  employed  as  additional  staff  in  connection  with  the

liquidation proceedings and on the basis of sanction accorded by the concerned Court and further

that they will have no right to seek absorption.   They also knew that their employment will come to

an end on the expiry of the tenure specified in the letter/order of appointment or on cessation of the

liquidation proceedings. In this scenario, the doctrine of legitimate expectation cannot be invoked

for sustaining the directions given by the High Courts for absorption of all company paid staff with

consequential benefits or for nullifying the policy decision taken by the Government to gradually

reduce the direct recruitment quota.    

78. The  concept  of  “due  process  of  law”  has  played  a  major  role  in  the  development  of

administrative law.  It ensures fairness in public administration. The administrative authorities who

are entrusted with the task of deciding lis between the parties or adjudicating upon the rights of the

individuals are duty bound to comply with the rules of natural justice, which are multifaceted.   The

absence of bias in the decision making process and compliance of audi alteram partem are two of

these facets.   The doctrine of legitimate expectation is a nacent addition to the rules of natural

justice. It goes beyond statutory rights by serving as another device for rendering justice. At the

root of the principle of legitimate expectation is the constitutional principle of rule of law, which

requires regularity, predictability and certainty in government’s dealings with the public – J. Raz,

The Authority of Law [(1979) Ch. 11].  The ‘legal certainty’ is also a basic principle of European

Community.  European law is based upon the concept of “vertrauensschutz” (the honouring of a

trust or confidence).  It is for these reasons that the existence of a legitimate expectation may even in

the absence of a right of private law, justify its recognition in public law.    

79. In Halsbury’s laws of England (Fourth Edition), the doctrine of legitimate expectation has

been described in the following words :

“A person may have a legitimate expectation of being treated in a certain way by an

administrative authority even though he has no legal right in private law to receive

such treatment.   The expectation may arise either from a representation or promise

made by the authority, including an implied representation, or from consistent past

practice.”

80. A formal statement on the doctrine of legitimate expectation can be found in the judgment of

House of Lords in Council of Civil Services Union vs. Minister of the Civil Service [1985 AC 374

(HL].  In that case the Government tried to forbid trade unionism among civil service.   For this,

Civil Service Order-in-1982 Council was issued.   The Court of appeal declared that the Minister

had acted unlawfully in abridging the fundamental right of a citizen to become a member of the

trade union.  The House of Lords approved the judgment of the Court of appeal and held that such

a right could not be taken away without consulting the concerned civil servant.

81. In India, the Courts have gradually recognized that while administering the affairs of the

State, the Government and its departments are expected to honour the policy statements and treat

the citizens without any discrimination. The theory of legitimate expectation first found its mention

in Navjyoti Coop. Group Housing Society vs. Union of India [1992 (4) SCC 477].  In that case the

right of a housing society for right to priority in the matter of registration was recognized in the

following words :

“...  In the aforesaid facts, the Group Housing Societies were entitled to ‘legitimate

expectation’  of  following  consistent  past  practice  in  the  matter of  allotment,  even

though they may not have any legal right in private law to receive such treatment.

The  existence  of  ‘legitimate  expectation’  may  have  a  number  of  different

consequences and one of such consequences is that the authority ought not to act to

defeat the ‘legitimate expectation’ without some overriding reason of public policy to

justify its doing so. In a case of ‘legitimate expectation’ if the authority proposes to

defeat a person’s ‘legitimate expectation’ it should afford him an opportunity to make

representations  in  the  matter.  In  this  connection  reference  may  be  made  to  the

discussions on ‘legitimate expectation’ at page 151 of Volume 1(1) of Halsbury’s Laws

of England — Fourth Edition (re-issue). We may also refer to a decision of the House

of Lords in  Council of Civil Service Unions v.  Minister for the Civil Service. It has

been held in the said decision that an aggrieved person was entitled to judicial review

if he could show that a decision of the public authority affected him of some benefit or

advantage which in the past he had been permitted to enjoy and which he legitimately

expected to be permitted to continue to enjoy either until he was given reasons for

withdrawal and the opportunity to comment on such reasons  .   

It  may be  indicated  here  that  the  doctrine  of  ‘legitimate  expectation’  imposes  in

essence  a  duty  on  public  authority  to  act  fairly  by  taking  into  consideration  all

relevant factors relating to such ‘legitimate expectation’. Within the conspectus of fair

dealing  in  case  of  ‘legitimate  expectation’,  the  reasonable  opportunities  to  make

representation by the parties likely to be affected by any change of consistent past

policy,  come  in.  We  have  not  been  shown  any  compelling  reasons  taken  into

consideration  by  the  Central  Government to  make a  departure  from the  existing

policy of allotment with reference to seniority in Registration by introducing a new

guideline.”

(emphasis supplied)

82. In Food Corporation of India vs. Kamdhenu Cattle Feed Industries [1993 (1) SCC 71], this

Court considered whether rejection of the tender of the respondent was vitiated by arbitrariness.

The claim of the respondents was negated in the following words :

“In  the  contractual  sphere  as  in  all  other  State  actions,  the  State  and  all  its

instrumentalities  have  to  conform to  article  14  of  the  Constitution  of  which  non-

arbitrariness is a significant facet.   There is no unfettered discretion in public law : A

public authority possesses powers only to use them for public good.  This imposes the

duty  to  act  fairly  and  to  adopt  a  procedure  which  is  ‘fairplay  in  action’.    Due

observance of this obligation as a part of good administration raises a reasonable or

legitimate expectation in every citizen  to be treated fairly in his interaction with the

State and its instrumentalities, with this element forming a necessary component of

the decision making process in all State actions.  To satisfy this requirement of non-

arbitrariness in a State action,  it  is,  therefore,  necessary to consider and give due

weight to the reasonable or legitimate expectations of the persons likely to be affected

by the decision or else that unfairness in the exercise of the power may amount to an

abuse or excess of power apart from affecting the bona fides of the decision in a given

case.   The  decision  so  made  would  be  exposed  to  challenge  on  the  ground  of

arbitrariness.   The rule of law does not completely eliminate discretion in the exercise

of power, as it is unrealistic, but provides for control of its exercise of by judicial

review.   

The mere reasonable or legitimate expectation of a citizen, in such a situation,

may not by itself be a distinct enforceable right, but failure to consider and give due

weight to it may render the decision arbitrary, and this is how the requirement of due

consideration  of  a  legitimate  expectation  forms  part  of  the  principle  of  non-

arbitrariness,  a  necessary  concomitant  of  the  rule  of  law.   Every  legitimate

expectation is a relevant factor requiring due consideration in a fair decision-making

process.  Whether the expectation of the claimant is reasonable or legitimate in the

context is a question of fact in each case.  Whenever  the question arises, it is to be

determined not according to the claimant’s perception but in larger public interest

wherein other more important considerations may outweigh what would otherwise

have been the legitimate expectation of  the claimant.   A bona fide decision of the

public  authority  reached  in  this  manner  would  satisfy  the  requirement  of  non-

arbitrariness and withstand judicial scrutiny.  The doctrine of legitimate expectation

gets assimilated in  the rule of law and operates in our legal system  in this manner

and to this context.”

[Emphasis supplied]

83. In Union of India and others vs. Hindustan Development Corporation and others [1993 (3)

SCC 499] this Court considered the doctrine of legitimate expectation and held :

“For legal purposes, the expectation cannot be the same as anticipation. It is different

from a wish, a desire or a hope nor can it amount to a claim or demand on the ground

of  a  right.  However  earnest  and  sincere  a  wish,  a  desire  or  a  hope  may be  and

however confidently one may look to them to be fulfilled, they by themselves cannot

amount to an assertable expectation and a mere disappointment does not attract legal

consequences. A pious hope even leading to a moral obligation cannot amount to a

legitimate expectation.  The legitimacy of an expectation can be inferred only if it is

founded on the sanction of law or custom or an established procedure followed in

regular and natural sequence. Again it is distinguishable from a genuine expectation.

Such  expectation  should  be  justifiably  legitimate  and  protectable.  Every  such

legitimate expectation does not by itself fructify into a right and therefore it does not

amount to a right in the conventional sense  .”`  [Emphasis supplied]

84. In Punjab Communications Ltd. vs. Union of India [1999 (4) SCC 727], the Court

observed as under :

“The principle of ‘legitimate expectation’ is still at a stage of evolution. The principle

is at the root of the rule of law and requires regularity, predictability and certainty in

the Government’s dealings with the public.  The  procedural part  of  it  relates  to  a

representation that a hearing or other appropriate procedure will be afforded before

the decision is made. …

However, the more important aspect is whether the decision-maker can sustain

the change in policy by resort to Wednesbury principles of rationality or whether the

court can go into the question whether the decision-maker has properly balanced the

legitimate expectation as against the need for a change. ... In sum, this means that the

judgment whether public interest overrides the substantive legitimate expectation of

individuals will be for the decision-maker who has made the change in the policy. The

choice of the policy is for the decision-maker and not for the court. The legitimate

substantive expectation merely permits the court to find out if the change in policy

which is the cause for defeating the legitimate expectation is irrational or perverse or

one which no reasonable person could have made.”

  (emphasis in original)

85. In J.P. Bansal Vs. State of Rajasthan [2003 (5) SCC 134], this Court refused to invoke the

doctrine of  legitimate expectation in favour of  the appellant  who claimed compensation of  pre-

mature termination of the contractual appointment as Judicial Member of the Rajasthan Taxation

Appellate Tribunal.

86. In Dr. Chanchal Goyal (Mrs.) vs. State of Rajasthan  [2003 (3) SCC 485], the appellants

claim for absorption in the regular cadre/regularization of service was rejected by the High Court.

While  approving  the  orders  of  the  Single  and  Division  Benches  of  the  High  Court,  this  Court

observed :  

“23.   On the facts of the case delineated above, the principle of legitimate expectation

has  no  application.  It  has  not  been  shown  as  to  how  any  act  was  done  by  the

authorities which created an impression that the conditions attached in the original

appointment order were waived. Mere continuance does not imply such waiver. No

legitimate expectation can be  founded on such unfounded impressions.  It  was not

even indicated as to who, if any, and with what authority created such impression. No

waiver which would be against requisite compliances can be countenanced. Whether

an  expectation  exists  is,  self-evidently,  a  question  of  fact.  Clear  statutory  words

override any expectation, however founded.”  

87. In Secretary, State of Karnataka vs. Uma Devi (supra), the Constitution Bench referred to

the claim of the employees based on the doctrine of legitimate expectation and observed as under :

“The doctrine can be invoked if the decisions of the administrative authority affect

the person by depriving him of some benefit or advantage which either (i) he had in

the past been permitted by the decision-maker to enjoy and which he can legitimately

expect to be permitted to continue to do until there have been communicated to him

some rational grounds for withdrawing it on which he has been given an opportunity

to comment; or (ii) he has received assurance from the decision-maker that they will

not be withdrawn without giving him first an opportunity of advancing reasons for

contending that they should not be withdrawn.”

88. In Kuldeep Singh vs. Govt. of NCT of Delhi [2006 (5) SCC 702], the Court refused to invoke

the doctrine of legitimate expectation to nullify the revised policy decision taken by the Government

not to grant fresh liquor licenses.    

89. In Ram Pravesh Singh vs. State of Bihar [2006 (8) SCC 381], a two-Judges Bench considered

the question whether the employees of Futwah Phulwarisharif  Gramya Vidyut  Sahakari  Samiti

Ltd.,  which  was  a  cooperative  society,  could  claim  absorption  in  the  services  of  Bihar  State

Electricity Board by invoking the doctrine of legitimate expectation.  The facts of that case show

that the society was brought into existence by the State Government, the Electricity Board and the

Rural  Electrification  Corporation  for  effective  implementation  of  Rural  Electrification  Scheme

meant for better distribution of electricity to rural areas, but the license of the society was revoked

in the year 1995 and the Board refused to absorb the employees of the society.  The learned Single

Judge and Division Bench of the High Court declined to interfere with the decision of the Board.

This Court dismissed the appeal of the employees and observed :

“What is legitimate expectation? Obviously, it is not a legal right. It is an expectation

of a benefit, relief or remedy, that may ordinarily flow from a promise or established

practice. The term “established practice” refers to a regular, consistent, predictable

and  certain  conduct,  process  or  activity  of  the  decision-making  authority.  The

expectation  should  be  legitimate,  that  is,  reasonable,  logical  and  valid.  Any

expectation  which  is  based  on  sporadic  or  casual  or  random  acts,  or  which  is

unreasonable, illogical or invalid cannot be a legitimate expectation. Not being a right,

it is not enforceable as such. It is a concept fashioned by the courts, for judicial review

of administrative action. It is procedural in character based on the requirement of a

higher degree of fairness in administrative action, as a consequence of the promise

made, or practice established.  In short,  a person can be said to have a “legitimate

expectation” of a particular treatment, if any representation or promise is made by an

authority, either expressly or impliedly, or if the regular and consistent past practice

of the authority gives room for such expectation in the normal course. As a ground for

relief, the efficacy of the doctrine is rather weak as its slot is just above “fairness in

action” but far below “promissory estoppel”. It may only entitle an expectant: (a) to

an  opportunity  to  show  cause  before  the  expectation  is  dashed;  or  (b)  to  an

explanation as to the cause for denial. In appropriate cases, the courts may grant a

direction  requiring  the  authority  to follow the  promised  procedure or  established

practice. A legitimate expectation, even when made out, does not always entitle the

expectant to a relief. Public interest, change in policy, conduct of the expectant or any

other valid or bona fide  reason given by the decision-maker,  may be sufficient  to

negative the “legitimate expectation”. The doctrine of legitimate expectation based on

established practice (as contrasted from legitimate expectation based on a promise),

can be invoked only by someone who has dealings or transactions or negotiations with

an authority, on which such established practice has a bearing, or by someone who

has a recognised legal relationship with the authority.”

After noticing the judicial precedents on the subject, the Court held that employees of the

erstwhile  society cannot invoke the theory of legitimate expectation for compelling the Board to

absorb them despite its precarious financial condition.   

90. By applying the ratio of the aforementioned judgment to the facts of this case, we reiterate

that the respondents cannot invoke the doctrine of legitimate expectation.  At the cost of repetition,

it  needs  to  be  emphasized  that  the  respondents  were  employed  by  the  Official  Liquidators  as

additional staff pursuant to the sanction accorded by the concerned Courts. The conditions of their

appointment clearly envisaged cessation of employment at the end of fixed tenure or on completion

of liquidation proceedings.  Of course, as it later turned out, the respondents were made to work in

relation  to  different  liquidation  proceedings  and  for  that  purpose,  the  term  of  their

employment/engagement was extended from time to time and they continued in service for many

years in the same capacity. However, no material has been placed before this Court to show that

any  promise  was  made  or  any  assurance  was  held  out  to  the  respondents  by  any  competent

authori9ty of the Government of India for their absorption in the regular cadres. There is nothing

in the language of Rule 308 of the 1959 Rules from which it can be inferred that those employed as

additional staff in connection with the liquidation proceedings will,  in future, be absorbed in the

regular  cadres.  The  1978  as  also  the  1999  Schemes  are  merely  illustrative  of  compassionate

approach adopted by the Government of India for facilitating absorption of the company paid staff

against the sanctioned posts to the extent of 50% vacancies in the direct recruitment quota. These

schemes cannot be read as a charter for legitimating the claim of company paid staff to be absorbed

in the Government service de hors availability of vacancies, more so when the Government has

taken a rational policy decision to reduce direct recruitment to various services in a phased manner.

In our opinion,  any direction by  the Court for absorption of  all  company paid  staff  would  be

detrimental to public interest in more than one ways.  Firstly, it will compel the Government to

abandon the policy decision of reducing the direct recruitment to various services.   Secondly, this

will be virtual abrogation of the statutory rules which envisages appointment to different cadres by

direct recruitment.   

91. Before parting, we consider it necessary to take cognizance of the fact that in compliance of

order passed by Calcutta High Court in Writ Petition No.211 of 2001, the Government of India

created 51 posts for absorption of staff employed by the Court Liquidator.   However, that cannot

be made basis for granting relief to the respondents because creation of those posts was clouded by

the threat of contempt, for which proceedings had been initiated by the aggrieved employees.    

92. On the basis of above discussion, we hold that -

(i) the respondents are not entitled to absorption against the sanctioned posts in Group C of

the Department of Company Affairs, Government of India, as of right.    

(ii) The 1999 Scheme does not suffer from any legal or constitutional infirmity insofar as it

provides for absorption of the company paid staff only to the extent of 50% vacancies in

direct recruitment quota of Group C posts.   

(iii) The decision taken by the Government of India to reduce the number of posts in direct

recruitment quota and consequential abolition of posts in the Department of Company

Affairs  is  not  vitiated  by  arbitrariness  or  violation  of  the  doctrine  of  equality  or

malafides.   

(iv) The doctrine of legitimate expectation cannot be invoked for sustaining the directions

given by the High Courts of Calcutta and Delhi for creation of supernumerary posts to

facilitate absorption of all company paid staff in the regular cadres.    

(v) The respondents are not entitled to have their pay fixed in the regular scales and other

monetary benefits at par with regular employees working under the Official Liquidators.

93. Notwithstanding our conclusion that the directions given by the Calcutta and Delhi High

Courts for absorption of company paid staff against Group C posts and grant of monetary benefits

to  them  at  par  with  regular  employees  of  the  Department  of  Company  Affairs  are  legally

unsustainable,  we  are  inclined  to  accept  the  contention  of  the  respondents  that  failure  of  the

Government of India to frame scheme for absorption of Group D posts has resulted in invidious

discrimination qua one section of the company paid staff.   The appellants have not placed any

material before this Court to show that the finding recorded by the learned Single Judge of Delhi

High  Curt  that  a  number  of  persons  were  employed  by  the  Official  Liquidator  in  1985  and

thereafter who could be considered for absorption against Group D posts.  This means that at the

time of framing of the 1978 Scheme the existing company paid staff did not include the employees

who could be absorbed on Group D posts and this appears to be the reason why the said scheme

was confined to absorption of company paid staff against Group C posts.  Since the employees who

could be eligible  for  absorption on Group D posts  were  appointed  in  1985 and thereafter,  the

Government  of  India  should  have,  while  framing  the  1999  Scheme,  taken  cognizance  of  their

presence and  made appropriate provision for their absorption.   Its failure to do so has certainly

resulted in unintended discrimination qua one section of the company paid staff.  It is, therefore,

appropriate to direct that the Government of India should frame a scheme for absorption of eligible

and  suitable  employees  against  Group D posts.    The  scheme should  be  modeled  on  the  1999

Scheme.  The needful be done within six moths.  Thereafter, eligible and suitable members of the

company paid staff should be absorbed against Group D posts.   

94. We also feel that the salaries and allowances payable to the company paid staff should be

suitably increased in the wake of huge escalation of living cost. In Jawaharlal Nehru Technological

University vs. T. Sumalatha (Smt.) and others (supra), a two-Judges Bench, after taking note of the

fact that emoluments payable to the Investigators appointed in the Nodal Centre at Hyderabad had

not been revised for six years directed the Union of India to take expeditious steps in that direction.

Keeping that judgment in mind, we direct the Official Liquidators attached to various High Courts

to move the concerned Court  for increasing the emoluments of the company paid  staff.  Such a

request should be sympathetically considered by the concerned Courts and the emoluments of the

company paid staff be suitably enhanced and paid subject to availability of funds.  

95. In the result, the appeals are allowed.  The impugned judgments and orders are set aside

subject to the direction for framing of scheme for absorption of eligible and suitable employees

against Group D posts and implementation thereof and increase in the salaries and emoluments

payable to the company paid staff.

……………………….J. [ B.N. Agrawal ]

……………………….J. [ Harjit Singh Bedi ]

……………………….J. [ G.S. Singhvi ]

New Delhi November 4, 2008.