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CASE NO.: Appeal (civil)  5302 of 2004

PETITIONER: Avas Vikas Sansthan & Anr.                       

RESPONDENT: Avas Vikas Sansthan Engineers Assn. & Ors.

DATE OF JUDGMENT: 28/03/2006

BENCH: H.K. Sema & Dr. AR. Lakshmanan

JUDGMENT: J U D G M E N T WITH

C.A. Nos. 5303, 5305-5308, 5309-5311, 5312-5316,  5317-5322, 5323-5327, 5328-5330, 5331-5336,  5337, 5339, 5342-5348, 5349-5351, 5352-5354,  5356, 5357-5359, 5360-5365, 5366-5370, 5371-5376,  5377-5381, 5382-5385, 5386-5392 of 2004

Dr. AR. Lakshmanan, J.

This batch of appeals arise from the common final  judgment and order dated 03.05.2002, passed by the High Court  of Judicature for Rajasthan at Jaipur in D.B. Civil Special  Appeal No. 315/2002 etc. etc. in S.B.C.W.P. No. 1750/99 etc.  etc. whereby the High Court partly allowed the appeal of the  appellants-herein by holding that the employees (respondents)  are entitled to reemployment and the various reliefs claimed by  them.    

Since all the appeals involve common question of law, they  have been heard together with the consent of concerned parties  and are being disposed of by this judgment.

Facts in brief: Avas Vikas Sansthan (in short ’the AVS’) was registered as  a Society under the Societies Registration Act, 1860 on  17.11.1988.  The AVS was brought into existence to achieve  certain objectives.  The objects of the society were to collect  information regarding low cost technology for construction of  houses, undertake field studies for development of appropriate  low cost building materials, undertake construction works,  imparting practical training etc. in the State of Rajasthan.

The AVS was brought into existence as a result of the  Scheme formulated by the Housing and Urban Development  Corporation, New Delhi, to set up chain of building centres in  the State of Rajasthan.

Appellant No.2 \026 the Rajasthan Housing Board sanctioned  a sum of Rs. 1-5 lakhs per building centre and provided land  free of cost for setting up of 9 such centres in Rajasthan. The  AVS was to raise its own resources; the State Government or the  Rajasthan Housing Board did not have any control over the AVS.   The AVS had employed the respondents.

The AVS started functioning in the year 1989, but in the

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year 1997, it began to incur heavy losses and could not pay its  employees their salaries after 01.12.1998.  The Rajasthan  Government decided that, in view of the financial and  administrative conditions of the AVS, it should be dissolved and  the State Government directed the appellant-the Rajasthan  Housing Board to take immediate steps to liquidate the AVS.   The State Government also directed that the employees of the  AVS would be adjusted on priority on the vacant posts of  Municipal Boards, Municipal Councils, Jaipur Development  Authority and other local bodies whenever posts fell vacant on  the retirement of the employees of such local bodies.  By the  resolution of the AVS dated 26.03.1999, the AVS was dissolved.

The respondents (employees), feeling that their services  might be terminated, filed a writ petition in the High Court on  26.03.1999, made the following averments:  ?       AVS is only an agent of the State Government of Rajasthan  and of the Rajasthan Housing Board. ?       The services of the respondents, who were employees of the  State Government/Rajasthan Housing Board, could not be  terminated by the Rajasthan Housing Board or the State  Government or the AVS and ?       Also if any termination order be passed it be quashed and  they might be retained in service with benefit of their past  services in all respects. ?       The Government order dated 15.03.1999 was challenged by  which the respondents were to be taken in service by local  bodies viz. Panchayat, J.D.A. etc at the lowest grade of  services without any benefit of past services. AVS terminated the services of all its 46 daily wage  employees on 31.03.1999.  

On 01.06.1999, State Government issued an order which  contained directions regarding the manner in which the  employees of the AVS would be given first appointment in the  local self-Government institutions in Rajasthan without benefit  of past service. The condition, which was put by the Government  was that, they would be given employment on the lowest post of  pay drawn in AVS of direct recruitment and on the minimum of  the grade and no benefit of past service would be given to them.  An option was also given to the employees to retire under  Voluntary Retirement Scheme, if they so desired.

The Rajasthan Housing Board and the State Government of  Rajasthan contested the writ petitions by filing replies. ?       It was averred, inter alia, in the reply by the Rajasthan  Housing Board that AVS was a registered Society under the  Societies Registration Act, 1860.  ?       And it was neither financially nor administratively  controlled by the State Government or the Housing Board  and hence the said AVS could not be said to be a ’State’  within the meaning of Article 12 of the Constitution of India  and the employees were not employees of the State  Government or Rajasthan Housing Board, they had no  remedy against the State Government or the petitioner-  Housing Board.

During the pendency of the writ petitions, an offer was  made to the employees of the AVS to agree to be given new  appointment in local self Government institutions on the  condition mentioned in order dated 01.06.1999 of the State  Government and the employees were asked to submit  undertaking in the form of affidavits that they were willing to  take employment in the Municipal Boards, Municipal Councils,  J.D.A etc. on the conditions set out in the order and that on

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such affidavits being filed, they would be given employment in  such local Government institutions.

The respondents and all the other permanent employees of  the AVS submitted their affidavits and were given employment in  the Municipal Boards, Municipal Councils, and J.D.A.         Learned Single Judge of the High Court allowed the writ  petition and held as under:-

a)      employees will be entitled to salary for the period worked by  them; b)      Rajasthan Housing Board to create a new cell in the name  of the Low Cost Housing Centre or any other name and the  employees would be employed in the said centre; c)      The policy of the State Government to give alternate  employment was quashed. However, the employees were  given option to continue in the said employment if they so  choose.

Feeling aggrieved, the Rajasthan Housing Board, the AVS  and the State Government preferred appeals before the Division  Bench of the High Court.

The Division Bench disposed of all the appeals by the  impugned order. The Division Bench maintained the direction to  pay unpaid salary. The direction to constitute a Low Cost  Housing Centre and the quashing of State Government decision  to provide alternate employment was set aside. However, the  Division Bench on the appeal filed by the employees directed  grant of following benefits: i)      pay protection; ii)     service to be counted for the purpose of pension and  other retirement benefits; iii)    benefit of fixed period higher pay sacle available to  Government employees under Government Order dated  25.01. 1992; iv)     benefit of 5th  Pay Commission to be available on  notional basis;  v)      one Narendra Kumar Sharma and few other daily wagers  to be treated as regular appointees as they were selected  but not appointed on regular basis till date of  dissolution; vi)  certain employees including Brijesh Kumar Goel and  R.K.Saini who were working at Latur Project in  Maharashtra were also entitled to alternative  employment in local bodies.

PARTICULARS OF APPEALS  

The appeals in the present batch of cases may be divided in  the following three categories: A.      The following 12 appeals have been filed by the RHB and AVS: Civil Appeal Nos. 5302/04, 5317-5322/04, 5312-5316/04,  5309-5311/04, 5323-5327/04, 5328-5330/04, 5331- 5336/04, 5342-5348/04, 5305-5308/04, 5337/04,  5303/04. B.      The following 11 appeals have been filed by the State of  Rajasthan: Civil Appeal Nos. 5339/04, 5371-5376/04, 5366-5370/04,  5309-5352-5354/04, 5377-5381/04, 5357-5359/04, 5360- 5365/04, 5386-5392/04, 5382-5385/04, 5356/04. C.      The following appeal have been filed by the Employees:      Civil Appeal Nos. 5349-5351/04 Against the decision of the Division Bench of the High  Court, the appellants preferred the above appeals to this Court.

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We heard Mr. Vijay Hansaria, learned senior counsel  appearing for the appellant and Dr. Rajeev Dhawan, learned  senior counsel, Mr. Aruneshwar Gupta and Ms. Shobha, learned  counsel appearing for the respective respondents.

Mr. Vijay Hansaria, learned senior counsel for the  appellants made the following submissions: a) That after the dissolution of the AVS, in the writ petition  preferred by the respondents no ground was taken saying that  the liquidation was mala fide nor was it prayed that the decision  to liquidate be quashed. b) That on 18.05.1999 Cabinet decision was taken to  absorb the employees of the AVS ’in principle’ as decided on  09.03.1999 by prescribing certain terms and conditions after  considering the opinion of the Finance Department. c) That there is no conflict between the Cabinet decisions  dated 09.03.1999 and 18.05.1999, neither is there any change  in policy of the State Government nor the State Government has  gone back on any promise made earlier. In the cabinet decisions  dated 09.03.1999 only an ’in principle’ decision was taken to  adjust the employees of the AVS in other local bodies and  ’modalities’ of adjustment was worked out in the Cabinet  decision dated 18.05.1999.  d) Thereafter the State Government wrote to all local bodies  for appointment of employees of the AVS in their departments  along with affidavits filed by the employees of the AVS showing  their willingness to take employment in other local bodies. In  2000, all the employees of the AVS were given alternate  employment as fresh employment on certain terms and  conditions.  All the employees have submitted affidavits inter- alia stating that their appointment with local bodies will be  treated as fresh appointment and will not claim continuity of  service, seniority, pay protection etc and that they will withdraw  writ petition. Several employees have even filed application for  the withdrawal of the writ petition in terms of their  undertakings. e) the writ petition was not amended challenging the terms  of undertaking filed by the employees of Sansthan for securing  employment with the local bodies. There is no allegation in the  writ petition that the employees were coerced/forced/unduly  influenced to submit the undertaking.

Submissions on Merit It was submitted by Mr. Hansaria that abolition of posts is a  matter of policy and is an inherent right of the employer  particularly on the closure of a project due to lack of funds and  heavy loss.  The natural consequence of abolition of posts in any  organization is the termination of services of the employees  engaged in such organization. It was further urged that the  employees whose services have been terminated as a  consequence of abolition of posts have no right to seek  reemployment or absorption in other departments.  Learned  senior counsel relied on the view taken by this Court way back  in 1973 in the case of M. Ramanathan Pillai v. State of  Kerala, (1973) 2 SCC 650 that ’the discharge of the civil servant  on account of abolition of post held by him is not an action  which is proposed to be taken as a personal penalty but it is an  action concerning the policy of the State whether a permanent  post should continue or not. The power to abolish any civil post  is inherent in every sovereign government. And such abolition  will not entail any right on the person holding the abolished post  the right to reemployment or to hold the same post.

Learned senior counsel relied on the decision in                

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K. Rajendran v. State of Tamil Nadu, (1982) 2 SCC 273 on the  same issue in which this Court has held that, ’the question  whether a person who ceases to be Government servant  according to law should be rehabilitated by giving an alternative  employment is, as the law stands today, a matter of policy on  which the Court has no voice.’  

Citing the decision of this Court in the case of Rajendra v.  State of Rajasthan (1999) 2 SCC 317 and S.M.Nilajkar v.  Telecom District Manager (2003) 4 SCC 27 learned senior  counsel submitted that when a project has been shut down due  to want of funds the employer cannot by a writ of mandamus be  directed to continue employing such employees as have been  dislodged because such a direction would amount to requisition  for creation of posts though not required by the employer and  funding such posts though the employer did not have the funds  available for the purpose. And also that the same will act as a  disincentive to the state to float such schemes in future.

With regard to the employment of 604 employees of the  AVS, it was argued that the State of Rajasthan had no legal  obligation to offer alternative employment to the erstwhile  employees of the Sansthan. But the State of Rajasthan did frame  a scheme and offered employment in other local bodies of the  government. Therefore the terms and conditions of such  alternative employment cannot be challenged.  

It was also submitted that additional financial burden will  fall upon the various local bodies which have absorbed the  employees of the AVS, if the directions of the Division Bench of  the Rajasthan High Court are enforced.  It was further argued  that the employees of the AVS did accept the alternative  employment with the terms and conditions set out initially by  way of an affidavit and therefore they are now estopped from  claiming benefit and challenging the terms and conditions of the  fresh employment by citing the decision in the case of Bank of  India v. O.P.Swarnakar (2003) 2 SCC 721 which laid down  that, "the scheme is contractual in nature. The contractual right  derived by the employees concerned, therefore, could be waived.  The employees concerned having accepted a part of the benefit  could not be permitted to approbate and reprobate nor can they  be permitted to resile from their earlier stand."  

Placing reliance on a very recent decision of this Court in  the State of Uttaranchal vs. Jagpal Singh Tyagi, (2005) 8  SCC 49, learned senior counsel submitted that, "the employees  did not, at any point of time, claim that the terms of settlement  were not fair, therefore after obtaining some benefit, it was not  open to the employees to later turn away without justifiable  cause and contend that the settlement was not fair."  

On the question of Pay Protection and for counting services  rendered in the AVS for pension and other retiral benefits  claimed by the respondents, the arguments put forward by the  appellant was that on facts the Cabinet decision of 18-05-1999  specifically states that "no pay protection should be granted to  the employees", the same was conveyed by the Rajasthan  Housing Board letter dated 01-06-1999. This decision was taken  after considering the views of the Finance Department. So also  the undertaking by the employees when they were absorbed into  other local bodies had the same stipulation, therefore at this  later stage such pay protection and counting of services for  pension and other retiral benefits cannot be claimed for.  

Coming to the claim of the respondents for the benefit of

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the Government order date 25.01.1992, it was argued by the  appellants that the Government Order in question is applicable  only to ’government servants’ and as such the employees of AVS  are not entitled to the benefit of the said government order. And  also the employees would be governed by the terms and  conditions of the local bodies where they have been reemployed.  So also the benefit of the 5th Pay Commission is applicable only  to government employees. Since the employees of the AVS are  not govt employees they are not entitled to the benefit of the 5th  Pay Commission.

With regard to appointment of 46 daily wage employees, it  was argued that after the dissolution of the Society, there is no  right on the part of any employee to be reemployed. Therefore, it  was argued that the daily wagers have no right seeking regular  appointment.  The decision of this Court in the case of Punjab  State Electricity Board v. Malkiat Singh, (2005) 9 SCC 22  was relied on.  It was held that, "it is settled law that mere  inclusion of name of a candidate in the select list does not confer  on such candidate any vested right to get an order of  appointment". Thus it was argued that the Writ issued by the  Division Bench of the High Court to treat the daily wagers at par  with the regular appointees of Avas Vikas Sansthan is wrong.

Further it was argued by the appellant that the decision in  the case of Central Inland Waters Transport corporation  limited & Anr. Vs. Brojo Nath Ganguly & Anr., (1986) 3 SCC  156 and Delhi Transport Corporation vs. D.T.C. Mazdoor  Congree & Ors., (1991) Supp 1 SCC 600 have no application  here because those cases relate to a term in the employment  that even services of a permanent employee can be terminated  on 3 months notice without assigning any reason and such  condition was specifically assailed therein. The present matter  relates to providing alternative employment to the employees of  an organization that is liquidated and posts have been  abolished. In such circumstances the employees of an  organization that is liquidated has no right to seek  reemployment.

It was argued that the reliance placed by the respondents  on the provisions of Rajasthan Civil Services Rules, 1969 is  wholly misconceived as the Rules mentioned apply only to  government servants. Therefore, these rules will not apply to  employees of the AVS. Dr. Rajeev Dhawan, learned senior counsel for the  respondent submitted as follows:-

According to learned senior counsel, the judgment of the  Division Bench of the Rajasthan High Court is correct in so far  as it gave:         a) Pay protection (including benefit of higher scales for  completing of 9,18 and 27 years)         b) Counting of service for retiral benefits for long standing  employees of the AVS. Submissions on Law The State is expected to act as a model employer exhibiting  ’fairness of action’ towards long standing employees.  Learned  senior counsel relied on the decision of this Court in Gurmail  Singh v. State of Punjab, (1991) 1 SCC 748.  It was laid down  by this Court that even though according to the provisions of  Section 25-FF of the Industrial Disputes Act, 1947,  retrenchment compensation has been paid and accepted, the  State was under a duty to treat employees who were on  deputation and those who were dismissed equally because the  state was a "model employer" exhibiting "fairness in action".

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It was argued that the above case is an authority for the  proposition that where a state body is shut down, it is part of the  obligations of the state as a model employer dedicated to fairness  in action that subject to adjustments, employees who were on  deputation and those who are dismissed should be absorbed  subject to similar equities:-

There should necessarily be: - ?       Pay protection where appointments are made on a  lower scale. ?       Counting of Service for retiral benefits ?       Placing the employees on par in the receiving  departments including salary

Gurmail Singh (supra) has also laid down that it would not  be fair to allow absorbed employees to steal a march over the  employees in the department into which they are absorbed.  However the regular appointees of such local bodies should not  be put at a disadvantageous position by the loss of seniority due  to the absorption of the employees of the AVS.

Following the decision in the case of Central Inland  Waters Transport corporation limited (supra), it can be  observed that: 1.      Unfair labour contracts shock the conscience and are  opposed to public policy. 2.      Such unconscionability could be caused by economic  duress 3.      Inequality of bargaining powers vitiates contracts, such  contracts also violate Article 14 of the Constitution 4.      This Court in the present case applied Section 23 of the  Contract Act and held the contract to be unconscionable  and void. "The principle deducible from the above discussions on this part  of the case is in consonance with right and reason, intended to  secure social and economic justice and conforms to the mandate  of the great equality clause in Article 14. This principle is that  the courts will not enforce and will when called upon to do so,  strike down an unfair and unreasonable contract or an unfair or  unreasonable clause in the contract, entered into by two parties  who are not equal in bargaining power. It is difficult to give an  exhaustive list of all bargains of this type. No court can visualize  the different situations which can arise in the affairs of men; one  can only attempt to give some illustrations."

Further, learned senior counsel submitted that this Court  in Delhi Transport Corporation v. DTC Mazdoor Congress,  (supra) approved the Central Inland decision (supra) and  struck down the unconscionable ’hire & fire’ clause.  

Our attention was invited to certain observations made by  Ramaswamy, J. and B.C. Ray, J; which are as under:- 1.      The State cannot impose unconscionable conditions and  stated that such contracts were contrary to Article 14. 2.      Public policy in contract be construed accordingly and be  drawn from the constitution. B.C. Ray, J. observed that there should not be any limitation on  the freedom of contract and specifically approved Central  Inland decision (supra) in respect of such contracts being  contrary to Article 14 guaranteed under the Constitution. This  Court further observed that, "The court has, therefore the  jurisdiction and power to strike or set aside the unfavourable  terms in contract of employment which purports to give effect to  unconscionable bargain violating Article 14 of the constitution."

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It was further observed in the case of Prakash  Ramachandra v. Maruthi, 1995 Supp (2) SCC 539 that any  undertaking to the court and contractual arrangement resultant  thereto does not oust the jurisdiction or the power of the court to  hear cases or grant relief.

Learned counsel for the respondents while citing the  decision in National Building Construction Corporation v.  Raghunathan, (1998) 7 SCC 66 argued that a legitimate  expectation is created where employees have been assured  absorption on one basis, which is there altered to their detriment  under coercive circumstances where they have not been paid  and acted on the previous promise that they have tried to  enforce in court. It was further argued that the decisions cited  by the appellant on Article 311 and abolishing civil posts are  exceptional and irrelevant to the present controversy.

Therefore, according to learned senior counsel, the law  clearly establishes that, (a) The State must be a model employer and show fairness in  action (b) Even where all statutory requirements (such as Section 25  FF) and technicalities have been complied with, the State must  be fair enough to absorb employees on a minimal fairness basis  which includes:         i)      protection to pay scale         ii)     counting of past service for pensionary benefits         iii)    no seniority over new employees in the new  organization         iv)     equal treatment in future with all employees (c) Unconscionable contracts and undertakings are contrary to  section 23 of the Indian Contract Act, public policy, Article 14 of  the Constitution and Directive Principles of state policies. (d) Undertakings not accepted by the lower court (and even if  accepted) do not inhibit this Court’s jurisdiction to hear a matter  and grant relief.

With regard to the argument of the appellant’s counsel that: (a) the employees should not be given pensions;         (b) the Division Bench should not have ordered increments  at 7,13 & 27 years as are available to other employees the  learned counsel argued that, if this was made practicable, the  employees after joining the new department cannot be meted out  discriminatory treatment. They will lose seniority, but they  cannot be denied benefits available to others. The respondent’s  counsel also stated that a situation cannot be created where, a  former AVS worker has no pension or Provident Fund and also  not to discriminate by not to extending 9,18 & 27 years of  service which would be available to others.  

Mr. Aruneshwar Gupta, learned counsel for the respondent  made the following submissions:-

That AVS falls within the definition of ’other authorities’  under Article 12 of the Constitution and was managed,  controlled and owned by the State of Rajasthan and was dealing  with the affairs of the State by referring to the decisions of this  Court in Federal Bank Ltd v. Sagar Thomas, (2003) 10 SCC  733 and Pradeep Kumar Biswas v. Indian Institution of  Chemical Biology, (2002) 5 SCC 111.

It was further argued that the learned Single Judge clearly  held that the entitlement of the employees was not on any  humanitarian ground but because the employees had a right to

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be absorbed and to be treated in a reasonable, just and proper  manner. According to Mr. Aruneshwar Gupta, the employees, who  have been absorbed in the other authorities, were entitled to the  following reliefs: - 1.      Fitment in the stage of the pay scale, which they were  already drawing in the Avas Vikas Sansthan and  consequent increments. 2.      Arrears of pay on the basis of the above statement 3.      Seniority of the AVS vis-‘-vis employees in the authorities  in which they were absorbed. They are entitled to seniority  in the other undertakings etc on the basis of date of their  substantive appointment. Therefore inter se seniority of the  employees of Avas Vikas Sansthan who were absorbed in  other authorities. 4.      Corresponding designation of post in the authorities in  which they were absorbed.

Ms. Shobha, learned counsel appearing for the daily wagers  submitted that some of the daily wagers were declared qualified  but kept in the waiting list for non-availability of sanctioned  vacant posts.  According to her, the High Court has rightly  appreciated the facts and circumstances of the present  controversy issued appropriate directions for absorption and  that the balance of equity lies in their favour in view of the fact  that the respondents have successfully cleared the exemption for  regular appointment and had to remain in the waiting list on the  pretext that no vacant sanctioned post is available.  It was also  submitted that the appellants have absorbed/adjusted  numerous employees of the AVS but few of them including the  respondents have been left on the pretext that they were not the  regular appointed employees.  Concluding her arguments, she  submitted that they are also entitled for similar treatment being  duly selected employees of the AVS.  It is also relevant to  mention that the employees were not appointed against any  project and the termination order was passed due to financial  inviability of the AVS and not because of some fault of  respondent No.1.

We have carefully considered the lengthy submissions  made by learned counsel appearing for both the parties. We have  also perused all the pleadings, annexures as well as the  judgments of both the Single Judge and the Division Bench of  the Rajasthan High Court

In our opinion, the submissions made by learned senior  counsel for the AVS merit acceptance and stand to reason in the  peculiar facts and circumstances of the case.  Though the  arguments of Dr. Rajeev Dhawan and Mr. Aruneshwar Gupta,  learned counsel appearing for the employees are attractive on  the first blush, yet on a careful reconsideration of the same, it  has no merits.  

In our view, after the liquidation of the AVS due to any  reason unless such liquidation was malafide, there exists no  right on the employees of such liquidated society for  reemployment. In the present case, the Rajasthan Government  did formulate a scheme to absorb the employees of the society  into various other organizations with various terms and  conditions to which the respondent employees agreed. There is  no allegation in the writ petition that the employees were  coerced/forced/unduly influenced to submit the undertaking.  Therefore, at a later stage it is unfair to take claims of service  conditions other than the ones that are stipulated and accepted  earlier.

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In the case of Rajendra v. State of Rajasthan, (1999) 2  SCC 317 and S.M. Nilajkar v. Telecom District Manager,  (2003) 4 SCC 27 where a project has been shut down due to  want of funds the employer cannot by a writ of mandamus be  directed to continue employing such employees as have been  dislodged because such a direction would amount to requisition  for creation of posts though not required by the employer and  funding such posts though the employer did not have the funds  available for the purpose. This finding is applicable in the  present matter and therefore the finding of the High Court is not  fair to common conscience and also that the same will act as a  disincentive to the state to float such schemes in future thereby  reducing the employment opportunities of many.

POWER TO ABOLISH CIVIL POSTS It is settled law that the power to abolish any civil post is  inherent in every sovereign government and such abolition will  not entail any right on the person holding the abolished post the  right to reemployment or to hold the same post. In the present  case, the State Government was benevolent enough to float a  scheme to absorb such employees whose posts were abolished.  Therefore, in our opinion, the arguments advanced by counsel  for the respondents with regard to unfairness meted out to the  employees of Avas Vikas Sansthan hold no water.

With regard to 604 employees of the AVS, it was argued  that the State of Rajasthan had no legal obligation to offer  alternative employment to the erstwhile employees of the AVS.  But the State of Rajasthan in all fairness did frame a scheme  and offered employment in other local bodies of the government.  Thus, the terms and conditions of such alternative employment  cannot be challenged.  We are of the opinion, that the decision of  the High Court granting relief of reemployment with pay  protection, seniority and pension is erroneous. We, therefore,  direct the State of Rajasthan to strictly adhere to and implement  its decision to offer employment in other local bodies in letter  and spirit.

We further make it clear that all the erstwhile employees, if  not already employed, should be employed in the local bodies as  per the scheme formulated by the Government of Rajasthan in a  war footing.

PAY PROTECTION On the question of Pay Protection claimed by the  respondents, it is seen from the Cabinet decision of 18.05.1999  that "no pay protection should be granted to the employees". The  same was conveyed by the Rajasthan Housing Board vide letter  dated 01.06.1999.  This decision was taken after considering the  views of the Finance Department. So the undertaking by the  employees when they were absorbed into other local bodies had  the same stipulation. This being so, such claim for pay  protection, at this late stage, cannot be made. Thus, considering  the categorical condition that the employees will not be given  any pay protection, and moreover due to the absence of any legal  right for pay protection to the employees of the AVS, such  claims, in our opinion, cannot be sought for.  

With regard to the claim of the respondents for counting  services rendered in the AVS, the Cabinet decision of 18.05.1999  specifically states that "the benefit of past service is not to be  counted for any purpose". The same was conveyed by the  Rajasthan Housing Board letter dated 01.06.1999. Therefore the

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undertaking by the employees when they were absorbed into  other local bodies had the same stipulation; therefore at this late  stage such claim for counting services rendered in the AVS for  the pension and other retiral benefits, in our opinion, cannot be  made.

Since the employees of the AVS are not treated as  government servants, they are not entitled to claim the benefit of  Government Order dated 25.01.1995, which is specifically  applicable only to government employees and the benefit of the  5th Pay Commission Report also stands inapplicable as this was  not a claim that was sought by the respondents at any stage in  any court that had entertained this matter. Also the Rajasthan  Civil Services (Absorption of Surplus Personnel) Rules, 1969 will  not apply as such to these employees of the AVS as they clearly  do not fall within the definition of Surplus Personnel as defined  in the Rajasthan Civil Services (Absorption of Surplus Personnel)  Rules, 1969.

As regards the question of whether Rajasthan Housing  Board can be considered ’State’ under Article 12 of the  Constitution, no serious arguments were made by either counsel  for the parties and, therefore, we are not expressing any opinion  on the same and decide the other issues on the basis of the  arguments advanced.  

RIGHTS OF DAILY WAGERS With regard to the appointment of 46 daily wage employees  after the dissolution of the Society, we hold that, in the facts and  circumstances of this case there is no right on the part of any  employee to be reemployed. Also daily wage employees cannot,  by any stretch of imagination, be put on par with regular  employees under any law prevalent as of date.  The finding of the  Division Bench that they can be treated on par with regular  employees and be given various reliefs is wrong and erroneous  under law. Therefore, we are not granting any relief to the daily  wage employees as their claim is not justified under law.   However, the Government of Rajasthan may sympathetically  consider absorption of these employees in the vacancy available  if any in future by giving them preference to other new  applicants in any of their local bodies etc. subject to the  following conditions: 1.      The employees will be entitled to salary/wages from  the date of their re-employment and shall not claim  for any past period; 2.      The employees will not be entitled to pay  protection, benefit of GO dated 25.01.1992, 5th Pay  Commission and the service rendered by the  employees will not be considered for pension  and/or other retrial benefits; 3.      The appointment of Degree holder/Diploma holder  Engineers shall be on the post of Junior Engineer  on the minimum scale of pay; 4.      The appointment of employees of Administrative  Department would be on the post of Junior Clerk  on the minimum scale of pay; 5.      The appointment would be subject to suitability  and physical fitness; 6.      The alternative employment would be granted  subject to availability of vacancy preferably within  a period of 3 months.     If they are absorbed in future the same will be treated as  a fresh employment and employees/appointees will be  governed by the rules and regulations of the absorbing  Department if they are found suitable.  

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POWER TO ABOLISH POSTS AS A MEASURE OF ECONOMY: It is well settled that the power to abolish a post which may  result in the holder thereof ceasing to be a Government Servant  has got to be recognized.  The measure of economy and the need  for streamlining the administration to make it more efficient may  induce any State Government to make alterations in the staffing  pattern of the civil services necessitating either the increase or  the decrease in the number of posts or abolish the post.  In such  an event, a Department which was abolished or abandoned  wholly or partially for want of funds, the Court cannot, by a writ  of mandamus, direct the employer to continue employing such  employees as have been dislodged.  In the instant case, the State  of Rajasthan has framed a scheme and offered alternative  employment in the other local bodies as a Welfare State on  humanitarian grounds.  As already noticed, the employees of the  AVS have accepted alternative employment on terms and  conditions of the local bodies and having filed a solemn  statement by way of affidavit that they will not claim continuity  of service by protection of seniority etc. nor will they challenge  the terms of such employment and shall also withdraw the writ  petition filed by them.  They cannot now go around and say that  the judgment of the Division Bench should be given effect to.  In  our view, they are estopped from claiming the benefits and  challenging the terms and conditions of the fresh employment.   The employees have no right to resile from the affidavits filed  before the High Court.  We have searched in vain in order to see  as to whether there is any material to show that the settlement  was intended to frustrate the order passed by the High Court.   At no point of time, the employees raised any dispute as regards  the fairness of the settlement.  Having obtained the benefit, it  was not open to them to turn down without justifiable reasons to  contend that the settlement was not fair and they should be  given pay protection, counting of service for retiral benefits and  placing the employees on par in the receiving Department.  The  cabinet decision of not granting pay protection was taken after  taking into consideration the views of the Finance Department  as it has huge financial burden on the local bodies offering re- employment after relaxing their own recruitment rules.  In our  view, the aforesaid categorical condition that the employees  would not be entitled to pay protection and in the absence of any  legal right of pay protection and fresh employment consequent  upon on fresh appointment on humanitarian grounds, the  decision of the High Court to grant protection of pay is  unsustainable and liable to be interfered with.  

Dr. Rajeev Dhawan, learned senior counsel for the  respondents, cited many decisions.  Those cases, in our view, is  distinguishable on facts and on law.  In those cases, the High  Court has directed protection of pay on the facts and  circumstances as can be seen from a perusal of the same.                

The cabinet decision dated 18.05.1999 specifically decided  that their period of earlier service shall not be valid for any  purpose.  This was specifically conveyed by the State  Government to the Rajasthan Housing Board vide letter dated  01.06.1999 and also the letter of the State Government dated  26.02.2000 to the various local bodies.  It is stated that one of  the terms of re-employment would be that earlier service tenure  shall not be considered for any purpose.  Furthermore, under  the provisions of the AVS Employees Service Regulation, 1993,  the employees of the AVS were entitled to provident fund.  Rule  14 provide as under:- "An employee of Sansthan shall be required to  subscribe to the Contributory Provident Fund in

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accordance with such Rules as may be prescribed  by the Board of Management."

The employees of the AVS were having the benefit of  contributing provident fund and were not entitled to any other  pensionary/retiral benefits.  The employees have withdrawn  provident fund including the employer’s contribution after  termination of service from the AVS.  It is thus crystal clear that  the services rendered by the employees with AVS cannot be  counted for the purpose of pension and other retiral benefits  since such benefits were not available to them even in their  parent organization and it was a specific condition of fresh  employment that their past services with AVS will not be  considered for any purpose.  

Even in A.I. Railway Parcel & Goods Porters Union vs.  Union of India & Ors, (2003) 11 SCC 590 at 603 page 34 one of  us was a member (Dr. AR. Lakshmanan, J} while giving various  directions in the matter of regularisation of contract labour, this  Court did not direct that the services rendered by the contract  labourers with the contractor would be counted for the purpose  of grant of retiral benefits by the principal employer.  The  recommendations of the 5th Pay Commission is applicable only  to Government Servants and as such the employees of AVS who  are not government employees are not entitled to 5th Pay  Commission even in the writ petition filed by the organisation  there was no prayer for grant of benefit of 5th Pay Commission.   Thus, the High Court has erred in directing that the benefit of  recommendations of 5th Pay Commission shall be given to the  employees of the AVS on notional basis.  We make it clear that  the employees would be governed by the terms and conditions of  the local bodies where they have been re-employed.  

At the time of hearing, a submission under the heading  doubts of financial bona fides was made.  It is submitted that  the said plea is without any pleading in the writ petition.  There  is no pleading either on facts or in the grounds in the writ  petition that the averments contained in the note dated  09.03.1999 and 18.05.1999 to the effect that the AVS has no  capital base or reserve capital and has huge financial  outstanding is incorrect.  It is also not in dispute that the  employees of the AVS could not be paid salaries of December,  1998 that amounted to about more than Rs.2 crores nor the writ  petitioners/respondent employees have argued either before the  Single Judge or before the Division Bench of the High Court that  the liquidation of the AVS was mala fide and or extraneous  consideration.  So also there is no averment in the writ petition  as regards the constitution of the AVS or the work of the AVS  being transferred to the AVS.  As a matter of fact, the AVS was  incorporated under the Companies Act in the year 1996 and the  AVS has majority share holding in AVS in the absence of any  other pleading and contention raised before the High Court such  submission on facts cannot at all be countenanced before this  Court in the present proceedings.  Likewise, the submission  made by learned counsel appearing for the employees that the  State has gone back on its decision and they have coerced the  employees to agree to certain conditions cannot at all be  countenanced.  

FAIRNESS IN ACTION: In our opinion, the State of Rajasthan has acted fairly and  benevolently though the State has no constitutional and legal  obligation to offer alternative employment to the employees of  the AVS upon abolition of posts.  Consequent to the liquidation  of the AVS itself, it had framed a scheme to adjust the employees

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in other local bodies by relaxing the rules of such bodies and  terms and conditions were fixed without financial economic  compulsions of the State.  The present case is one of liquidation  of an organisation and consequent abolition of post in the said  organisation.  There is also no pleading that the conditions  contained in the undertaking are contrary to Section 23 of the  Contract Act or violative of Article 14 of the Constitution or  inconsistent with the directive principles of state policy.  The  Central Inland Waterways case (supra) and Delhi Transport  Corpn. Case (supra) relied on by these employees, in our view,  have no application of the present case and is distinguishable on  facts and law.  Those cases relate to a term in the employment  that even services of a permanent employee can be terminated  on 3 months’ notice without assigning any reason and such  condition was specifically assailed therein.  However, the present  case relates to providing alternative employment to the  employees of an organisation that is liquidated and posts have  been abolished.  In such circumstances, this Court has held in a  number of cases that the employees have no right to seek re- employment in any other organisation.  So also, there has been  no challenge in any of the case decided by the High Court to the  terms and conditions of undertaking that they were unfair,  arbitrary and are contrary to public policy and as such violative  of Section 23 of the Contract Act or Article 14 of the Constitution  of India or any directive principles of state policy.            

The question of legitimate expectation has also not been  raised at any stage and as such cannot be agitated before us in  this court

The reliance on the provisions of Rajasthan Civil Services  (Absorption of Surplus Personnel) Rules, 1969 is wholly  misconceived in as much as the said rule apply only to "surplus  personnel" who were "appointed to various services or posts in  connection with the affairs of the state" in terms of Rule 2 of the  said Rules. Surplus personnel have been defined in Rule 3(1) as  follows:       "Surplus Personnel" or "Surplus Employee"  means the Government servant to whom the  Rajasthan Services Rules, 1951 apply and who are  declared surplus by the government or by the  appointing authority, under directions of the  government, on their being rendered surplus to the  requirements of a particular department of the  government due to the reduction of posts or  abolition of offices therein as measures of economy  or on administrative grounds but in whose case  the Government decides not to terminate their  services but to retain them in service by  absorption on other posts."

A bare perusal of the aforesaid Rule clearly demonstrates that  the rules are applicable only to the Government servants to  whom Rajasthan Service Rules, 1951 apply. The employees of  Avas Vikas Sansthan are not government servants nor  Rajasthan Service Rules, 1951 were applicable to them and as  such the provisions of Rajasthan Civil Services (Absorption of  Surplus Personnel) Rules, 1969 are not applicable in the  present case.

Further submissions of the learned counsel that the  employees must be posted on the posts earlier held by them is  without any merit since these employees had no right to claim  adjustments to other local bodies. The Cabinet decision dated

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18.05. 1999 have categorically stated as under: "All these appointments should be made to the  lowest posts and engineers should be appointed  only on the post of Junior Engineers and  Employees of Administrative Departments should  be appointed only on the post of Junior Clerk."

So also all these employees have given undertaking not to  raise any dispute in the matter. Thus this contention is  untenable and is liable to be rejected.

       For the foregoing reasons, the impugned judgments of the  High Court are set aside and we hold that all the civil appeals  filed by the Rajasthan Housing Board, the AVS and the State of  Rajasthan are allowed.  The Civil Appeals filed by the employees  stand dismissed.  No costs.  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5338 OF 2004

State of Rajasthan                                      .\005.  Appellant  (s)

               Versus

Radha Krishan Karwashra & Ors.          \005..   Respondent (s)

WITH   

CIVIL APPEAL NOS. 5340-41/2004

ORDER         It was submitted by Mr. Badridas Sharma, learned counsel  for the appellants, that the above appeals are of an entirely  different type in which the respondent had challenged the order  dated 25.04.1998 of the Avas Vikas Sansthan and by that  letter/order, it was pointed out that 10 employees including Mr.  Radha Krishan Karwashra had not accepted to join and do the  alternative work offered to them and, therefore, those persons  were treated as no more in the service of the Avas Vikas  Sansthan.  That the order of 25.04.1998 was not at all related to  dismissal of service of employees as a result of dissolution of the  Society.  It was submitted that the writ petitions challenging the  said order dated 25.04.1998 are still pending in the High Court  at Jaipur in writ petition Nos. 5370/1998 and 5383/1998.   Since this fact was pointed out by Mr. Badridas Sharma during  the time of hearing of these appeals, we do not consider the  merits of the claim made in this appeal.  In view of this, the  above appeals are delinked from the batch of appeals in Civil  Appeal Nos. 5302/2004 etc. etc. and disposed of accordingly.   Both parties are at liberty to pursue the pending writ petitions  before the High Court in accordance with law.  No costs.