http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

CASE NO.: Appeal (civil)  302 of 2004

PETITIONER: Rajinder Singh Chauhan & Ors.                            

RESPONDENT: State of Haryana and Ors.                                

DATE OF JUDGMENT: 21/11/2005

BENCH: ARIJIT PASAYAT & R.V. RAVEENDRAN

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

                                Appellants call in question legality of the judgment  rendered by a Division Bench of the Punjab and Haryana High  Court holding that the appellants’ stand about applicability  of Section 25-N of the Industrial Disputes Act, 1947 (in  short the ’Act’) was not correct.   

       Controversy lies within a narrow compass.

       Appellants were employees of the Haryana State  Federation of Consumers Co-operative Wholesales Stores  Limited (in short the ’CONFED’), fourth respondent herein.   The service conditions of its employees are covered by  CONFED Staff Service Rules, 1975 (in short the ’Rules’). On  account of continued financial losses, a restructuring plan  for gainful employment for employees was prepared.  It was  noted that Retail Outlets (in short the ’ROL’) were causing  huge loss to the organization.  Therefore, it was decided  that all ROL should be closed being financially non-viable.  Retrenchment compensation in terms of Section 25-F of the  Act was paid.  In the retrenchment order it was specifically  stated as follows:

       "It is made clear that employees of CONFED  from where the retrenchment is being effected  are not covered by Chapter V-B of the  Industrial Dispute Act, 1947, necessitating  any permission under Section 25-N of the said  Act.  Therefore the retrenchment is being  effected in accordance with Chapter V-A by  employing with Section 25-F and other  provisions of the said Chapter."  

       Questioning the retrenchment, writ petitions were filed  before the High Court taking the stand that provisions of  Section 25-N and not Section 25-F were applicable and in any  event the appellants were entitled to the benefit in terms  of Rule 35(b) of the Rules. High Court did not find any  substance in the stand and dismissed the Writ Petitions  holding that there was compliance with the requirements of  Section 25-F(b) of the Act.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

       According to the learned counsel for the appellants the  High Court has erroneously held that Section 25-N has no  application.  Even otherwise, it was contended that the  appellants were entitled to the benefits available under  Rule 35(b).

       It was in this context submitted by the learned counsel  for the appellants that after completion of the probation  period, the appellants had become permanent employees and,  therefore, they were governed by the Rules and the benefits  under Rule 35(b) were clearly applicable.

       In response, learned counsel for the respondents  submitted that the High Court’s view is in order.

       In order to appreciate rival submissions the relevant  provisions need to be noted.  Section 25-F, 25-K, 25-L and  25-N of the Act read as follows:

"25-F: Conditions precedent to retrenchment  of workmen:     No workman employed in any  industry who has been in continuous service  for not less than one year under an employer  shall be retrenched by that employer until \026

(a) the workman has been given one  month’s notice in writing indicating the  reasons for retrenchment and the period  of notice has expired, or the workman  has been paid in lieu of such notice,  wages for the period of the notice;

(b) the workman has been paid, at the  time of retrenchment, compensation which  shall be equivalent to fifteen days’  average pay (for every completed year of  continuous service) or any part thereof  in excess of six months; and

(c)     notice in the prescribed manner  is served on the appropriate  Government (or such authority as may  be specified by the appropriate  Government by notification in the  Official Gazette).

25-K: Application of Chapter V-B: (1) The  provisions of this Chapter shall apply to an  industrial establishment (not being an  establishment of a seasonal character or in  which work is performed only intermittently)  in which not less than one hundred workmen  were employed on an average per working day  for the preceding twelve months.

       (2) If a question arises whether an  industrial establishment is of a seasonal  character or whether work is performed  therein only intermittently, the decision of  the appropriate Government thereon shall be  final.

25-L: For the purpose of this chapter, - (a)  ’Industrial Establishment" means:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

(i) a factory as defined in clause (m) of  Section 2 of the Factories Act, 1948(63 of  1948);

(ii) a mine as defined in clause (j) of sub- section(1) of Section 2 of the Mines Act,  1952 (35 of 1952); or

(iii) a plantation as defined in clause (f)  of Section 2 of the Plantations Labour Act,  1951 (69 of 1951);

(b)     notwithstanding anything contained in  sub-clause(ii) of clause (a) of Section 2 ;

               (i) in relation to any company in which  not less than fifty-one percent of the paid  up share capital is held by the Central  Government, or

               (ii) in relation to any corporation (not  being a corporation referred to in sub-clause  (i) of clause (a) of Section 2) established  by or under any law made by Parliament,

               the Central Government shall be the  appropriate Government.

25-N: CONDITIONS PRECEDENT TO RETRENCHMENT OF  WORKMEN:

(1) No workman employed in any industrial  establishment to which this Chapter applies,  who has been in continuous service for not  less than one year under an employer shall be  retrenched by that employer until, -

       (a) the workman has been given three  months’ notice in writing indicating the  reasons for retrenchment and the period of  notice has expired, or the workman has been  paid in lieu of such notice, wages for the  period of the notice; and  

       (b) the prior permission of the  appropriate Government or such authority as  may be specified by that Government by  notification in the Official Gazette  (hereafter in this section referred to as the  specified authority) has been obtained on an  application made in this behalf.

(2).    An application for permission under sub- section (1) shall be made by the employer in  the prescribed manner stating clearly the  reasons for the intended retrenchment and a  copy of such application shall also be served  simultaneously on the workmen concerned in  the prescribed manner.

(3) Where an application for permission under  sub-section (1) has been made, the  appropriate Government or the specified

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

authority, after making such enquiry as it  thinks fit and after giving a reasonable  opportunity of being heard to the employer,  the workmen concerned and the persons  interested in such retrenchment, may, having  regard to the genuineness and adequacy of the  reasons stated by the employer, the interests  of the workmen and all other relevant  factors, by order and for reasons to be  recorded in writing, grant or refuse to grant  such permission and a copy of such order  shall be communicated to the employer and the  workmen.  (4) Where an application for permission has  been made under sub-section (1) and the  appropriate Government or the specified  authority does not communicate the order  granting or refusing to grant permission to  the employer within a period of sixty days  from the date on which such application is  made, the permission applied for shall be  deemed to have been granted on the expiration  of the said period of sixty days.          Xxx                     xxx                     xxx

(7).    Where no application for permission  under sub-section (1) is made, or where the  permission for any retrenchment has been  refused, such retrenchment shall be deemed to  be illegal from the date on which the notice  of retrenchment was given to the workman and  the workman shall be entitled to all the  benefits under any law for the time being in  force as if no notice had been given to him.

       Xxx                     xxx                     xxx

(9).    Where permission for retrenchment has  been granted under sub-section (3) or where  permission for retrenchment is deemed to be  granted under sub-section (4), every workman  who is employed in that establishment  immediately before the date of application  for permission under this section shall be  entitled to receive, at the time of  retrenchment, compensation which shall be  equivalent to fifteen days’ average pay for  every completed year of continuous service or  any part thereof in excess of six months."

        Section 25-F appears in Chapter V-A of the Act which  relates to lay-off and retrenchment. Section 25-K, L and N  appear in Chapter V-B which relates to special provisions  relating to lay-off, retrenchment and closure in certain  establishments. In other words Chapter V-A deals with the  general provisions relating to lay-off and retrenchment,  while special provisions have been made for certain  establishments covered by Chapter V-B.  Section 25-N refers  to workman in an industrial establishment. The expression  "Industrial Establishment" is defined in Section 25-L,  which means a factory or a mine or a plantation.   Admittedly, the employer is not covered by the definition of  the "Industrial Establishment". Therefore, the High Court

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

was right in holding that Section 25-N has no application.  

There is no dispute that the requirements of Section  25-F have been complied with by the employer.   

The residual question is whether any benefit was to be  extended under Rule 35.  Rule 4, 10(5&6) and 35(b) of the  Rules read as follows:

"Rule 4 (a) "Permanent" employee means an  employee who has been continued on vacant  permanent post.  The staff of the federation  shall be classified into the following:

1. Class-I Managing Director, Addl.  Managing Director 2. Class-II Business Manager, Accounts  officers, general Manager,  establishment officer and  Assistant Manager. 3. Class-III Accountants, Assistants,  purchase and Sale Assistant  Accounts Assistant,  Storekeepers, Cashiers, Clerks,  Stenographers/Steno-typists and  Salesmen. 4. Class-IV Driver, Peons, Daftri,  Chowkidar and Sweepers.

        4(b). "Probationer" means an employee who  is provisionally employed to fill a permanent  vacancy of post and has not been made  permanent or confirmed in services.  The  probation period will be 12 months for all  the posts of Class I, II, III which may  further be extended by such time as deemed  fit, but in no case it will exceed 24 months,  in all.  The probation period for Class-IV  shall be 6 months which may further be  extended by such time as may be deemed fit  but in no case total period of probation  shall exceed 12 months.

4(c). "Temporary" employee means an  employee who has been appointed for a limited  period for work which is of an essentially  temporary nature.

4(d). An "Apprentice" means a learner who  is given a nominal stipend during the period  which will ordinarily be of 6 months before  he is taken up as a temporary employee.

4(e). Every employee shall be given a written

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

order regarding his appointment,  confirmation, promotion, transfer and ending  of service as the case may be.

Rule 10 (5): If the work and conduct of an  employee during the period of probation is  found satisfactory, he will be confirmed from  the date of completion of the probation  period.

10(6). No employee will be deemed to have  been confirmed in the federation service  unless specific orders in this regard are  issued.  The appointing authority shall have  to take a decision regarding confirmation or  reversion or removal of a probationer within  the prescribed period of probation.

35(b). Confirmed employee shall be entitled  to one month’s pay and allowance for every  completed year of service.  In addition to  this, they will also be entitled to such pay  and allowance as may be due to them on  account of accumulated earned leave upto the  maximum of one month.

    Rule 35(b) inter-alia provides that confirmed employees  shall be entitled to one month’s pay and allowance for every  completed year of service on retrenchment of service.  In  addition they are entitled to pay and allowance as may be  admissible to them on account of accumulative earned leave  upto the maximum of one month.  

     The stand of the respondents was that the appellants  were not confirmed employees.  The appointment order of each  of the appellants contains the stipulations which are as  follows:

"1. Your appointment as Sales man is purely  temporary.

2. During the period of probation, your  services are liable to be terminated  without giving any notice or assigning any  reason.

3. You shall be governed by the terms and  conditions contained in the Staff Service  Rules of the Federation, amended from time  to time."                        

    This is a case where the period of probation is fixed  having regard to Rule 4(b) read with Rule 10 as quoted above.   Rule 10(6) no doubt provides that no employee shall be deemed  to have been confirmed in the service unless specific order  in this regard is issued.  Relying on this provision, learned  counsel for the fourth respondent submitted that there was no  specific orders of confirmation and, therefore, the  appellants should be deemed to have continued as probationers  till the date of termination of their services. A similar  stand was considered in Om Prakash Maurya v. U.P. Co- operative Sugar Factories Federation, Lucknow and Ors. (AIR  1986 SC 1844).  A Constitution Bench of this Court in The  State of Punjab v. Dharam Singh (AIR 1968 SC 1210) noted as  follows:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

"Where as in the present case, the service  rules fix a certain period of time beyond  which the probationary period cannot be  extended and an employee appointed or  promoted to a post on probation is allowed to  continue in the post after completion of the  maximum period of probation without an  express order of confirmation, he cannot be  deemed to continue in that post as a  probationer by implication.  The reason is  that such an implication is negatived by the  service rule forbidding extension of the  probationary period beyond the maximum period  fixed by it.  In such a case, it is  permissible to draw the inference that the  employee allowed to continue in the post on  completion of the maximum period of probation  has been confirmed in the post by  implication."

                In High Court of M.P. through Registrar and Ors. v.  Satya Narayan Jhavar (2001 (7) SCC 161), this Court  categorised the provisions for probation as follows: "The question of deemed confirmation in  service jurisprudence, which is dependent  upon the language of the relevant service  rules, has been the subject-matter of  consideration before this Court, times  without number in various decisions and there  are three lines of cases on this point. One  line of cases is where in the service rules  or in the letter of appointment a period of  probation is specified and power to extend  the same is also conferred upon the authority  without prescribing any maximum period of  probation and if the officer is continued  beyond the prescribed or extended period, he  cannot be deemed to be confirmed. In such  cases there is no bar against termination at  any point of time after expiry of the period  of probation. The other line of cases is that  where while there is a provision in the rules  for initial probation and extension thereof,  a maximum period for such extension is also  provided beyond which it is not permissible  to extend probation. The inference in such  cases is that the officer concerned is deemed  to have been confirmed upon expiry of the  maximum period of probation in case before  its expiry the order of termination has not  been passed. The last line of cases is where,  though under the rules maximum period of  probation is prescribed, but the same  requires a specific act on the part of the  employer by issuing an order of confirmation  and of passing a test for the purposes of  confirmation. In such cases, even if the  maximum period of probation has expired and  neither any order of confirmation has been  passed nor has the person concerned passed  the requisite test, he cannot be deemed to  have been confirmed merely because the said

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

period has expired."  

       In above view of the matter, the stand of the  appellants that they were deemed to have been confirmed at  the end of 24 months and they were permanent employees is in  terra firma. ’Salesmen’ belong to Class III of the category  of permanent employees. The definition of "Probationer"  given in Rule 4(b) fully supports the appellants’ stand that  the probation period shall not exceed 24 months in all.   Therefore as was held in Om Prakash’s case,  Satya Narayan  Jhavar’s case and Dharam Singh’s case (supra) the appellants  inferentially have to be treated as permanent employees, and  consequently the benefits under Rule 35(b) were available to  them.  But the same shall not be in addition to what is  payable under Section 25-F.  The amount which is higher of  the two i.e. of Section 25-F or Rule 35(b) shall be paid to  the appellants.  If any amount has already been paid in  terms of Section 25-F the same shall be adjusted while  making the payment under Rule 35(L), which shall be made  within three months. The appeal is allowed to the aforesaid  extent. No costs.