IMPORTANT POINTS
1. 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 re-employment or to hold the same post.
2. 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.

Headnote:SERVICE LAW—Societies Registration Act, 1860—Decision to liquidate Avas Vikas Sansthan—Claim of employees for re-employment or absorption—Avas Vikas Sansthan was registered Society brought into existence to achieve certain objectives—AVS was set up as a result of the Scheme formulated by the Housing and Urban Development Corporation, to set up chain of building centres in the State of Rajasthan—AVS was to raise its own resources—It started functioning in year 1989, but in year 1997, it began to incur heavy losses and could not pay its employees their salaries after 1.12.1998—Rajasthan Government decided to dissolve AVS—Directions made that employees of the AVS would be adjusted on priority on vacant posts of Municipal Boards, Municipal Councils and other local bodies whenever posts fell vacant on retirement of employees of such local bodies—Respondents, employees, feeling that their services might be terminated, filed writ petition—AVS terminated all its 46 daily wage employees—State Government issued an order which contained directions regarding the manner in which employees of AVS would be given first appointment in the local self-Government institutions in Rajasthan without benefit of past service—High Court allowed respondents writ petition—Whether directions made for grant of pay protection, benefit of past service and 5th Pay Commission etc. are justified—(No).
       Held : 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. (Para 47)
       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.(Para 48)
       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. (Paras 50 & 51)
       Since the employees of the AVS are not treated as government servants, they are not entitled to claim the benefit of the 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.(Para 54)
       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.(Para 58)
       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.(Para 61)
       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.(Para 62)
       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 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.(Para 64)
       (ii) SERVICE LAW—Abolition of Post—Power to abolish civil posts is inherent in every sovereign government—Such abolition will not entail any right on the person holding the abolished post the right to re-employment or to hold the same post. (Para 49)
       (iii) SERVICE LAW—Daily Wagers —Nature of appointment—Daily wage employees cannot be put on par with regular employees under any law prevalent as of date—Government may sympathetically consider absorption of these employees in the vacancy available if any in future by giving them preference to other new applicants subject to conditions. (Para 56)
       (iv) SERVICE LAW—Power to abolish posts as a measure of economy—Scope of Judicial Review—In such an event, the Court cannot, by a writ of mandamus, direct the employer to continue employing such employees as have been dislodged.
       Held : 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.(Para 58)

JUDGMENT

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.

2. 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 :

3. 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.

4. 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.

5. Appellant No. 2 — 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.

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

7. 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.

8. AVS terminated the services of all its 46 daily wage employees on 31.03.1999.

9. 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.

10. The Rajasthan Housing Board and the State Government

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2006 Supreme(SC) 285

Cases Referred (14)