State of Tamil Nadu and Ors. v. V.S. Balakrishnan and Ors. Etc.

G KULDIP SINGH, J. The Tamil Nadu Government decided in March 1972 to form a government company with a view to take over the entire business activity of the Diary Development Department of the State Government. As a consequence the Tamil Nadu Dairy Development Cor­ poration Limited (the Corporation) was incorporated on May 4, 1972. The objects of the Corporation were to carry on the business of production, H collection and distribution of milk throughout the State of Tamil Nadu. The STATEOFT.N. v. BALAKRISHNAN [KULDIPSINGH,J.] 743 Tamil Nadu Government by the Order dated June 29, 1972 directed the A transfer of 431 posts in various cadres of the Dairy Development Depart­ ment to the Corporation with effect from July 1, 1972. 296 posts were transferred along with the incumbents of the said posts and the remaining transferred posts were vacant. Subsequently, by another Order 331 posts - 217. with incumbents . were further transferred to the Corporation with effect from July 1, 1974. The incumbents of the posts were to be treated on deputation/foreign service to the Corporation. While the question of absorbing about 500 employees on deputa­ tion/foreign service serving the Corporation was under consideration, the Tamil Nadu Government came to be seized of another similar situation C pertaining to the deputationist with the Small Scale Industries Develop­ ment Corporation Limited (the Industries Corporation). The Government issued Government Order (GO) No. 731 dated May 21, 1973 wherein the terminal benefits to be given to the employees who opted to join the service of the Industries corporation were provided. The benefits included the payment of pension/gratuity earned by the employees for the period they D remained in government service. They were also allowed to have the full pension commuted or to draw the same simultaneously along with the salary they were to get from the Industries Corporation. The Tamil Nadu Government by GO 378 dated april 18, 1975 E decided to extend the benefits of GO 731 · meant for industries Corpora- tion employees - to all government servants who were permanently ab­ sorbed in any of the public sector undertaking. The government servants. working in the Corporation were. asked • presumable with reference to GO 378 · to exercise their options either for F permanent absorption in the Corporation or for reversion back to the State Government. It is, however, the case of the Government that in the meanwhile a decision was taken to keep GO 378 in abeyance. It is further stated by the Government that Since the Corporation was likely to be ·replaced by a cooperative federation, the action in respect of the options G obtained from the employees of the Corporation was dropped. It would be useful to mention here that GO 731 and the GO 378 were amended by GO 284 dated March 31, 1980 and the employees to whom the aforesaid GO's were applicable were disallowed simultaneous withdrawal of pension and it was provided that they would be entitled to H 744 SUPREME COURT REPORTS (1994] SUPP.1 S.C.R. A pension for the period they served the government only after their retire­ ment from the government undertakings. The benefit of commutation of pension, if not availed earlier, was to be available only on retirement from the public sector undertaking. The employees of the Industries Corporation filed writ petitions Nos. 1917 & 1928 of 1980 S. Ananda & Ors. v. State of Tamil Nadu & Ors., decided on January 18, 1993, before the Madras High Court wherein it was stated that the petitioners therein were given certain terminal benefits by GO 731 and they became entitled to the said benefits on their per­ manent absorption in the Industries Corporation. It was further contended that the withdrawal of those benefits by GO 284, after their options had been accepted, was wholly arbitrary and in violation of the docirine of promissory estoppel. The High Court came to the conclusion that accept­ ing the terminal benefits offered in GO 731, the employees had exercised their options which were accepted and the terminal benefits were granted to them by the Government. The High Court further came to the con- D clusion that the options of the employees were linked with GO 731 and as such could not be unilaterally withdrawn. The High Court, therefore, allowed the writ petitions and directed that the petitioners therein were entitled to the benefits which were offered to them under GO 731. Coming back to the employees of the Corporation with whom we are concerned, the Government issued another order dated March 21, 1980 by which the Corporation was replaced by the Tamil Nadu Cooperative Milk Producers Federation (the Federation) with effect from February 1, 1981. All the employees of the Corporation including those who were on deputa­ tion/foreign service were transferred to the Federation. The Tamil Nadu Government finally issued GO 1921 dated Novem­ ber 8, 1983 providing for the terminal benefits to be given to the Govern­ ment - employees who were working with the Corporation and thereafter with the Federation on deputation/foreign service. It was stated in the G Government Order that the employees, opting for permanent absorption in the Federation, would be given the following terminal benefits :- 1. Transfer of General Provident Fund accumulation to the Provident Fund account under the Federation. H 2. Immediate cash payment of gratuity. STATEOFT.N. v. BALAKRISHNAN[KULDIPSINGH,J.] 745 3. The pension in respect of the period spent in government service A to be calculated at the time of transfer but payable by State Government only on retirement of the employee from the Federation. The employee on retirement from the Federation would be entitled to commute up to 1J3rd value of pension like government employees who retire from government service. 4(A). In the case of industrial workers who do not opt for service in the federation would be reverted to their parent department if there is no post to· accommodation them in the parent department, they would be paid retrenchment compensation according to the labour laws. 4(B). In the case of non-industrial workers who do not opt to serve the Federation, they would be revered to their parent department. If there is no post in their parent department to accommodate them they would be given compensation - pension as provided for in the Tamil Nadu Pension Rules. 5. Family Pensions. Since the optee for permanent absorption in the Federation would cease to be a government servant, the government's liability for family pension would cease. 6. Earned Leave. The employee would be paid by Government cash equivalent of 50 percent of the quantum of earne.d leave at his credit as on E the date of absorption. The balance of credit will be transferred to the accounts of the individual under the Federation "'.i,th full leave liability thereof being paid to the undertaking by government to meet the leave salary payable to the. employees absorbed in the undertaking. 7. Other kmds of leave on absorption of the employee in the Federa­ tion the Government's liability towards leave on medical certificate and leave on private affairs will cease. 8. Any further liberalisation of pension rules decided by the Govern­ ment for government employees after the permanent absorption of a G government servant in the Federation would not be extended to them . 9. In cases where an employee at the time of absorption has less than ten years service in government and is not eligible to pension, he will be eligible only to proportionate service gratuity in lieu of pension and death- cum-retirement gratuity based on the length of service. H 746 SUPREME COURT REPORTS (1994) SUPP.1 S.C.R. A The GO 1921 further provided that the crucial date for calculating the terminal benefits in respect of the employees opting to join the Federation would be from the date of formation of the Federation (February 1, 1981) or from the date of continuous service of the deputationist in the Federa­ tion whichever is later. The above quoted GO 1921 was challenge before the Tamil Nadu High Court by way of three writ petitions by the employees working on deputation/foreign service with the Federation. These writ petitions were later on transferred to the Tamil Nadu. Administrative Tribunal (the Tribunal). Some original applications were also filed before the Tribunal challenging the same Goverrunent Order. All the matters were heard together by tho Tribunal. The Tribunal by its lengthy judgment dated June 26, 1992 allowed the applications and held as under :- "(1). the orders issued in GOMs No. 1921, Agriculture dated. 8.11.1983 requires to be : re-considered in the light of the obser­ vation in this order and accordingly we quash that order. (2) Persons who have retired on reaching the age of superan­ nuation or otherwise before specific orders are issued for their absorption in the Tamil Nadu Cooperative Milk Producers Federa­ tion after considering the option of the individuals in each case, will be retiring as Government servants and will be entitled to all the benefits on that basis. This will apply not only to the applicants before us but also to all persons retiring before they are absorbed in the Federation on the basis of their option, by specific orders in each case. Since the delay in cases of persons who have retired already had arisen due to pendency of these proceedings, for a decision regarding their status, no intereot will be payable except under the Goverrunent orders regarding gratuity." Mr. P. Chidambaram, learned senior counsel appearing for the employees has contended that all the employees are continuing to be on deputation/foreign service with the Federation and, as such,. are govern­ ment servants. According to him, their status as civil servants cannot be H terminated unless they are given options to be absorbed as permanent STATEOFT.N. v. BALAKRISHNAN(KULDIPSINGH,J.] 747 employees of the Federation. He has further argued that the options given A by the employees in the year 1975 were linked with GO 378 and, as such, the terminal benefits offered in the said Government Order have to be given to the respondents. Mr. Kapil Sibal, Learned senior counsel, on the other hand, has contended that 762 posts - included 513 with incumbents - were transferred to the Corporation by the State Government in the year B 1972/74. According to him the Government department was converted into a corporation for the purpose of achieving better results in the field concerned. It was fully known to all the employees that they were going to be absorbed permanently in the service of the Corporation. Mr. V.R. Reddy, Learned Additional Solicitor General, appearing for the State of Tamil Nadu has vehemently contended that the respondents left the C government service as back as 1972/74 and have, in fact, been serving the Corporation and thereafter the Federation. According to him, the Govern­ ment could not issue formal order absorbing the respondents permanently in the service of the Federation because stay orders by the courts have been operation throughout. The operation of the GO 1921 ·remain stayed D throughout the proceedings. We agree with Mr. Chidarnbaram that government servant cannot be deprived of his status as a "civil servant" without his consent. This proposi- tion of law is unexceptionable. But at the same time the facts and cir­ cumstances of this case leave no manner of doubt that the only course left E for the respondents - employees is to accept the service under the Federa- tion as permanent employees. The Corporation was created in the year 1972 and 762 posts were transferred to the Corporation by the State Government. Obviously, all these posts constituted the Dairy Development Department of the Government. There may not be as many posts left in F the Diary Development Department to accommodate those employees who decline to opt for permanent absorption in the service of the Federation. Therefore, the only practical way to solve the problem at this point of time and in the special facts and circumstances of this case, would be to hold that all the employees shall be deemed to have opted to join the service of the Federation. We are, however, inclined to examine the question as to G whether the terminal benefits offered in GO 1921 are reasonable or are arbitrary in any respect. We have given our thoughtful consideration to the contention raised by Mr. Chidambaram that the employees are entitled to the terminal H A benefits as provided in GO 378. We are not inclined to agree with him. It is no doubt correct that some sort of options were given to the employees in the years 1975 but the same were not acted upon for the reason that the operation of GO 378 was put in abeyance and later on it was substituted by GO 284. Apart from that a decisions was taken to wind up the Corpora· B tion and in its place constitute a Cooperative Federation. In this view of the matter, we find no fault with the stand of the State Government that the action in respect of the options was dropped. We, therefore, see no force in the contention that the respondents are entitled to the terminal benefits as provided in the GO 378. C The judgment of the Madras High Court in S. Ananda's case (supra) is of no assistance to the respondents. In that case the options given to the employees of.the Industries Corporation were directly linked with GO 731. They were specifically asked to give their options on the basis of the terminal benefits detailed in GO 731. They accepted the terminal benefits D and opted to join the service of the Industries Corporation. The Govern­ ment also accepted the offers given by the employees. The whole circle, based on the terminal ben~fits contained in GO 731 was completed. The High Court, under the circumstances, came to the conclusion that the Government was bound by the principle of equitable estoppel and could not back out from its commitments under GO 731. We may now examine the terminal benefits offered in GO 1921. We have already enumerated in detail the said benefits in earlier part of the judgment. We are of the view that except the provisions regarding family pension and application of Future Liberalised Pension Rules (item 3(c) F and 3(1) of GO 1921] all other provisions of the said GO are reasonable and no fault can be found therewith. We are of the view that once an optee for permane,nt absorption in the Federation is entitled to prorata pension in respect of the period of service rendered by him under the Government, he is elso entitled to the benefit of the family pension. We, therefore, strike down para 3(c) of the GO and direct that the respondents shall be entitled G to the benefit of family pension on the basis of prorata pension given to them. Similarly, we see no justification why the employees, after their permanent absorption in the service of the Federation, be not given the benefit of further liberalisation of pension rules, if any, in respect of the pension which they are already drawing from the Government. This H provision is also on the face of it arbitrary. We, therefore, strike down para STATE OF T.N. v. BALAKRISHNAN [KULDIP SINGH, J.] 749 3(f) of the said GO and hold that the employees after their permanent A absorption with the Federation shall be e:ititled to the benefit of the liberalised pension rules, if any, in future. All other provisions of the GO 1921 are reasonable and as such we upheld the same. We make it clear that all those employees who have retired after February 1, 1983 they shall be deemed to have opted to join the service of B the Federation permanently and, as such, they would be entitled to the terminal benefits in terms of GO 1921. We allow the appeals in the above terms, set aside the judgment of the Tribunal and dismiss the transfer applications and original applications filed by the respondents before the Tribunal. No costs. C G.N. Appeals allowed.