Judgment

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 Dairy Development Department of the State Government. As a consequence the Tamil Nadu Dairy Development Corporation Limited (the Corporation) was incorporated on 4-5-1972. The objects of the Corporation were to carry on the business of production, collection and distribution of milk throughout the State of Tamil Nadu. The Tamil Nadu Government by the order dated 29-6-1972 directed the transfer of 431 posts in various cadres of the Dairy Development Department to the Corporation with effect from 1-7-1972. 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 1-7-1974. The incumbents of the posts were to be treated on deputation/foreign service to the Corporation.

2. While the question of absorbing about 500 employees on deputation/foreign service serving the Corporation was under consideration, the Tamil Nadu Government came to be seized of another similar situation pertaining to the deputationists with the Small-Scale Industries Development Corporation Limited (the Industries Corporation). The Government issued Government Order (GO) No. 731 dated 21-5-1973 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 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.

3. The Tamil Nadu Government by GO No. 378 dated 18-4-1975 decided to extend the benefits of GO No. 731 - meant for Industries Corporation employees - to all government servants who were permanently absorbed in any of the public sector undertakings.

4. The government servants working in the Corporation were asked - presumably with reference to GO No. 378 - to exercise their options either for 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 No. 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 obtained from the employees of the Corporation was dropped.

5. It would be useful to mention here that GO No. 731 and GO No. 378 were amended by GO No. 284 dated 31-3-1980 and the employees to whom the aforesaid GOs were applicable were disallowed simultaneous withdrawal of pension and it was provided that they would be entitled to pension for the period they served the Government only after their retirement 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.

6. The employees of the Industries Corporation filed Writ Petition Nos. 1917 and 1928 of 1980 (S. Ananda v. State of T.N. {W.P. Nos. 1917 & 1928 of 1980, decided on 18-1-1993 (Mad HC)} decided on 18-1-1993) before the Madras High Court wherein it was stated that the petitioners therein were given certain terminal benefits by GO No. 731 and they became entitled to the said benefits on their permanent absorption in the Industries Corporation. It was further contended that the withdrawal of those benefits by GO No. 284, after their options had been accepted, was wholly arbitrary and in violation of the doctrine of promissory estoppel. The High Court came to the conclusion that accepting the terminal benefits offered in GO No. 731, the employees had exercised their options which were accepted and t