TaxTMI 
TaxTMI 
2006 (9) TMI 557
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....sharif Gramya Vidyut Sahakari Samiti Ltd. (for short 'the Society') to implement a REC Scheme for better distribution of electricity to rural areas. The state government granted a licence dated 24.8.1976 to the society, under section 3 of the Indian Electricity Act, 1910 ('Act' for short) to supply electricity to the Futwah and Phulwari Sharif Blocks, for a period of 20 years, with options to the licencee to extend the period of licence. 3. By letter dated 23.4.1993, the Board recommended to the State Government, to revoke the licence granted to the Society and merge the Society with the Board, assigning three reasons : (i) The purpose for which the Society was created no longer existed. (ii) The Society was drawing electricity from multiple points in the Board's distribution network, making it difficult to ascertain the actual quantity of electricity drawn by the Society. (iii) The financial position and management of the Society was in a very bad shape and huge arrears were due from the Society to the Board, in spite of Board supplying it to the Society at 7 paise per unit (as against the Board's cost price of 90 to 115 paise per unit). 4. The State ....
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....cretary, Cooperative Department and the Board, by letter dated 24.2.1997. 6. In view of the rejection of the proposal for absorption of services of employees of the Society by the Board, several representations were sent by the Administrator of the Society to the State government to absorb the services of the employees of the society. The Administrator of the Society also furnished a list of employees of the Society with particulars of designations and educational and technical qualifications to the State Government. The number of employees is 225 ranging from Engineers to Class IV employees. The said list was forwarded by the State Government to the Board on 14.7.1999 with a request to ascertain the existing vacancies in the Board. There were some more correspondence relating to the suggestions from various quarters, for absorption of the suitable and fit employees of the Society by the Board. 7. But the Board did not absorb the services of the employees of the Society. Therefore, the employees of the society (appellants) filed CWJC Nos.1503 of 2000 and 14394 of 2001 seeking a direction to the Board to absorb them in equivalent posts with continuity of service and also pay t....
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....) All the employees of the society have crossed the maximum age limit for seeking fresh employment and if they were not absorbed by the Board, they will be deprived of their livelihood. e) The society was an instrumentality of the State Government and the Board, and answered the definition of 'State' within the meaning of that expression in Article 12 of the Constitution of India. When the undertakings of such instrumentality of the state was taken over by another instrumentality of the State, 'fairness in action' which is one of the hallmarks of a 'State' require that the rights of the employees are protected by providing for their absorption in an appropriate manner. The State Government, in its counter, while denying the claim of the writ petitioners, however, admitted that in August, 2001, it had taken a decision that when the prohibition against recruitment in the Board is lifted and appointments are made in future, preference should be given to the eligible employees of the society if necessary by granting relaxation of the age limit. 8. A learned single Judge of the High Court rejected the said contentions and consequently, dismissed th....
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....right in the appellants. (iv) It could not direct absorption on equitable grounds. Any equitable consideration of the claim of the appellants cannot ignore the financial position of the Board, howsoever sympathetically the court may view the plight of the appellants. The state government, being interested in the welfare of the employees of the society had considered several alternatives to rehabilitate the employees of the Society. In the course of exploring the various alternatives, information was sought by the Government, views were expressed and assurances were made on the floor of the House, to explore the possibility of the Board absorbing the services of the employees of the society. But that did not create any right in the employees of the society to seek employment from the Board. In the absence of any specific decision by the Board or assurance by the Board to absorb the services of the appellants, the principle of 'legitimate expectation' was not attracted. (v) Having regard to Section 7 and 7A of the Act, when the undertaking of a licensee was purchased by the Board, there was no obligation on the part of the Board to absorb the emp....
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....tory right, learned counsel for the appellants sought to derive support for the claim on equitable considerations, by placing reliance on an amalgam of the principles relating to legitimate expectation, fairness in action and natural justice, reiterating the contentions urged before the High Court. 13. It may be true that when the Board took over the undertakings of the erstwhile private licencees several decades ago, it also took over the services of the employees of such private licensees. It is also possible that this Court in exercise of its jurisdiction under Article 142, on the facts of a given case, might have directed that the persons, whose services had been terminated on account of closure of an instrumentality of the State, be continued in the service of Government Departments or other Government Corporations. It may also be true that certain enactments providing for transfer of undertakings in pursuance of nationalization or otherwise, had also provided for continuation/transfer of the services of the employees of the undertakings to the transferee. But these do not attract the principle of 'legitimate expectation'. 14. What is legitimate expectation? Obvi....
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....o 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. 15. In Union of India v. Hindustan Development Corporation [1993 (3) SCC 499], this Court explained the nature and scope of the doctrine of 'legitimate expectation' thus : "For legal purposes, the expectation cannot be the same as anticipation. It is different from a wish, a desire or a hope nor can it amount to a claim or demand on the ground of a right. However earnest and sincere a wish, a desire or a hope may be and however confidently one may look to them to be fulfilled, they by themselves cannot amount to an assertable expectation and a mere disappointment does not attract legal consequences. A pious hope even leading to a moral obligation cannot amount to a legitimate expectation. The legitimacy of an expectation can be inferred only if it is founded on the sanction of law or custom or an established procedure followed in regular and natural sequence. Again it is distinguishable from a genuine expectation. Such expectation should be justifiably legitimate and protectabl....
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....t then the next question would be whether failure to give an opportunity of hearing before the decision affecting such legitimate expectation is taken, has resulted in failure of justice and whether on that ground the decision should be quashed. If that be so then what should be the relief is again a matter which depends on several factors." (emphasis supplied). 16. In Punjab Communication Ltd. v. Union of India - 1999 (4) SCC 727, this Court observed : "The principle of legitimate expectation is still at a stage of evolution. The principle is at the root of the rule of law and requires regularity, predictability and certainty in the Governments dealings with the public The procedural part of it relates to a representation that a hearing or other appropriate procedure will be afforded before the decision is made." "However, the more important aspect is whether the decision maker can sustain the change in policy by resort to Wednesbury principles of rationality or whether the court can go into the question whether the decision-maker has properly balanced the legitimate expectation as against the need for a change.. In sum, this means that the judgment whether pu....
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....ll insist it to act fairly. The doctrine is based on the principle that good administration demands observance of reasonableness and where it has adopted a particular practice for a long time even in absence of a provision of law, it should adhere to such practice without depriving its citizens of the benefit enjoyed or privilege exercised." 18. 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-`-vis the Society in 1995 was completely different from the position of the Board vis-`-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 owner....
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....rvices 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 Society's 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. 20. The appellant next submitted that this Court, in some cases, has directed absorption in similar circumstances. Reliance is placed on the decision in G. Govinda Rajulu v. Andhra Pradesh State Construction Corporation Ltd. -- 1986....
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....he Corporation and issue appropriate directions. Indeed, such directions could be issued even if the elements of the transfer in the present case fall short of a complete succession to the business or undertaking of the State by the Corporation, as the principle sought to be applied is a constitutional principle flowing from the contours of Article 14 of the Constitution which the State and Corporation are obliged to adhere to." "It was very fair on the part of the State Government to decide that, as the tubewells would be operated by the Corporation, it would be prudent to run them with the help of the appellants rather than recruit new staff therefore and that the government should bear the burden of any losses which the Corporation might incur as a result of running the tubewells. But having gone thus far, we are unable to see why the government stopped short of giving the appellants the benefit of their past services with the government when thus absorbed by the Corporation. Such a step would have preserved to the appellants their rightful dues and retirement benefits. The conduct of the government in depriving the appellants of substantial benefits which have accrued ....
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....the High Court was challenged before this Court. During the pendency of the long drawn litigation, the newly formed Corporation decided to take over their services by extending them the same scale of Pay, which they were getting when they were in the employ of the State Government. Therefore, the only grievance that survived for consideration before this Court related to appellants therein being treated as fresh appointees on the dates of their respective appointment by the corporation, thereby denying them the benefit of their past service and seniority. It is in the context of examining the said grievance, this Court made the aforesaid observations. As noticed above, retrenchment under Section 25-FF was found to be valid. The Corporation had voluntarily taken over the services of the retrenched employees. The question whether the transferee or the purchaser of the undertaking should absorb the services of the employees of the previous employer was not in issue and therefore, the said decision is of no assistance. On the other hand, what may be relevant are the following observations of the Constitution Bench in Uma Devi (supra) : "Obviously, the State is also controlled ....
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....ability towards the debtors of the company may be confined to the shares held by it but having regard to the deep and pervasive control it exercises over the government companies; in the matter of enforcement of human rights and/or rights of the citizen to life and liberty, the State has also an additional duty to see that the rights of employees of such corporations are not infringed. The right to exercise deep and pervasive control would in its turn make the Government of Bihar liable to see that the life and liberty clause in respect of the employees is fully safeguarded. The Government of the State of Bihar, thus, had a constitutional obligation to protect the life and liberty of the employees of the government-owned companies/ corporations who are the citizens of India. It had an additional liability having regard to its right of extensive supervision over the affairs of the company." The said observations made in an interim order with reference to the State's obligations will not be of any avail to seek employment under the Board. We are not concerned in these appeals about the rights of the employees of the Society vis-a-vis the Society or the State Governmen....