2006 Supreme(SC) 885

2006(7) Supreme 664
SUPREME COURT OF INDIA
(From Patna High Court)
B.P. Singh and R.V. Raveendran, JJ.
Ram Pravesh Singh & Ors.—Appellants
versus
State of Bihar & Ors.—Respondents
Civil Appeal No. 4191 of 2004
Decided on 22-9-2006
Counsel for the Parties :
For the Appellants : P.S. Mishra, Sr. Advocate, Gaurav Agrawal, Upendra Mishra, Dhruv Kr. Jha and Prashant Kumar, Advocates.
For the Respondents : Kailash Vasdev, Sr. Advocate, Navin Prakash, Nishakant Pandey, Gopal Singh and Chander Shekhar Ashri, Advocates.

IMPORTANT POINT
The State Electricity Board has no obligation towards the employees of the previous owner of the undertaking.

Headnote:Indian Electricity Act, 1910—Section 3—Revocation of licence granted by the State Government—Contractual obligations—Statutory obligations of State Electricity Board—Claim of employees of Cooperative Society to absorb them into its service—Maintainability—Prior to 1976, Bihar State Electricity Board was supplying electricity to rural areas—In year 1976, State Government granted a licence to a Cooperative Society to supply electricity to some Blocks for a period of 20 years, with options to licencee to extend period of licence—However, by a notification dated 25-4-1995, State Government revoked the licence granted to the Society—State Government took a decision that assets and liabilities of the society should be transferred to the Board, but not the services of the employees of the Society—Rejection of proposal for absorption of services of employees of the Society by the Board—Number of employees was 225 ranging from Engineers to Class IV employees—Writ petitions filed seeking a direction to absorb them in equivalent posts with continuity of service claiming, a right, both in law and in equity, as also a ‘legitimate expectation’ to be absorbed into services of the Board—Whether there was any contractual obligation or statutory obligation on part of the Board to absorb services of appellants—(No)—Whether claim of employees on equitable considerations is permissible—(No).

       Held : The licence granted to the society under section 3 of the Indian Electricity Act, 1910 was revoked by the State Government on 25.4.1995. It is no doubt true that on such revocation, the Board took over the entire activities of the society relating to distribution of power to the licensed areas. The Board also gave its concurrence to purchase the undertaking of the society. But the Board neither entered into any contract with the society, nor gave any assurance to the Society or its employees to absorb the employees of the society into its service. Therefore, obviously, there is no contractual obligation on the part of the Board to absorb the services of the appellants.(Para 10)

       Section 3 of the Act dealt with grant of licence by the State Government to any person to supply energy in any specified area. Section 4 dealt with revocation of such licences. The provisions that would have effect when a licence was revoked, were listed in section 5. Section 6 gave the option to the Electricity Board and the State Government to purchase the undertaking of a licensee, in the circumstances mentioned therein. Section 7 provided for vesting of the undertaking of the licensee sold to a purchaser under section 5 or 6. Section 7A provided for determination of the purchase price. None of these provisions of the Act required the purchaser of the undertaking to take over the services of the employees of the Society. The appellants have not been able to show any other statutory provision which entitles them to seek absorption by the Board. Hence, there is no statutory obligation to absorb them into Boards service.(Para 11)

       Let us now examine whether the principles of legitimate expectation can have any application in this case. What transpired several decades ago when the Board commenced its operations and when its finances were sound, cannot have any bearing on its action in the year 1995. The position of the Board vis-a-vis the Society in 1995 was completely different from the position of the Board vis-a-vis the several ex-licensees when the Board took over their undertakings several decades back. Further, the assumption that whenever an undertaking is taken over, transferred or purchased, the transferee or purchaser should continue the services of the employees of the erstwhile owner of the undertaking, is not sound. In fact, statutory provisions seem to indicate otherwise. Section 25-FF of the Industrial Disputes Act, 1947 provides that where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of Section 25-F, as if the workman had been retrenched, except in the cases mentioned in the proviso thereto. Therefore, the natural consequence of a transfer of an undertaking, unless there is a specific provision for continuation of the service of the workmen, is termination of employment of its employees, and the employers liability to pay compensation in accordance with Section 25F.(Para 18)

       The Board had never agreed nor decided to take services of any of the employees of the Society. In fact, it is not even the case of the appellants that the Board had at any point of time held out any promise or assurance to absorb their services. When the licence of the Society was revoked, the State Government appointed a Committee to examine the question whether the Board can take over the services of the employees of the Society. The Committee no doubt recommended that the services of eligible and qualified employees should be taken over. But thereafter the State Government considered the recommendation and rejected the same, apparently due to the precarious condition of the Board which itself was in dire financial straits, and was contemplating retrenchment of its own employees. At all events, any decision by the State Government either to recommend or direct the absorption of the Societys employees was not binding on the Board, as it was a matter where it could independently take a decision. It is also not in dispute that for more than two decades or more, before 1995, the Board had not taken over the employees of any private licencee. There was no occasion for consideration of such a course. Hence, it cannot be said that there was any regularity or predictability or certainty in action which can lead to a legitimate expectation. (Para 19)

       (ii) ADMINISTRATIVE LAW—Principle of Legitimate Expectation—Applicability—Circumstances in which doctrine of legitimate expectation can be invoked—It is not a legal right, therefore, not enforceable as such.

       Held : What is legitimate expectation? Obviously, it is not a legal right. It is an expectation of a benefit, relief or remedy, that may ordinarily flow from a promise or established practice. The term established practice refers to a regular, consistent predictable and certain conduct, process or activity of the decision-making authority. The expectation should be legitimate, that is, reasonable, logical and valid. Any expectation which is based on sporadic or casual or random acts, or which is unreasonable, illogical or invalid cannot be a legitimate expectation. Not being a right, it is not enforceable as such. It is a concept fashioned by courts, for judicial review of administrative action. It is procedural in character based on the requirement of a higher degree of fairness in administrative action, as a consequence of the promise made, or practice established. In short, a person can be said to have a legitimate expectation of a particular treatment, if any representation or promise is made by an authority, either expressly or impliedly, or if the regular and consistent past practice of the authority gives room for such expectation in the normal course. As a ground for relief, the efficacy of the doctrine is rather weak as its slot is just above fairness in action but far below promissory estoppel. It may only entitle an expectant : (a) to an opportunity to show cause before the expectation is dashed; or (b) to an explanation as to the cause for denial. In appropriate cases, courts may grant a direction requiring the Authority to follow the promised procedure or established practice. A legitimate expectation, even when made out, does not always entitle the expectant to a relief. Public interest, change in policy, conduct of the expectant or any other valid or bonafide reason given by the decision-maker, may be sufficient to negative the legitimate expectation.(Para 14)

       The doctrine of legitimate expectation based on established practice (as contrasted from legitimate expectation based on a promise), can be invoked only by someone who has dealings or transactions or negotiations with an authority, on which such established practice has a bearing, or by someone who has a recognized legal relationship with the authority. A total stranger unconnected with the authority or a person who had no previous dealings with the authority and who has not entered into any transaction or negotiations with the authority, cannot invoke the doctrine of legitimate expectation, merely on the ground that the authority has a general obligation to act fairly.(Para 14)