2006 (9) TMI 557 - SC - Indian Laws

Seeking direction to the Board to absorb the services of the employees of the Society in equivalent posts with continuity of service and also pay their arrears of salaries, allowances and other dues - Co-operative society under liquidation - absorb the services of the employees of the Society - legitimate expectation - HELD THAT - 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 When the licence of the Society was revoked, the State Government appointed a Committee to examine the question whether the Board can take over the services of the employees of the Society.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 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. We may in this behalf refer to the decision of this Court in Bhola Nath Mukherjee v. Government of West Bengal 1996 (11) TMI 488 - SUPREME COURT relating to transfer of a licensee's undertaking to a State Electricity Board, as a consequence of revocation of the licence. In that case the Board initially allowed the employees of the erstwhile licensee to continue in its service but subsequently introduced terms which rendered them fresh appointees from the date of take over of the undertaking. The question that arose for consideration was whether the employees were entitled to compensation u/s 25FF of the Act; and whether the liability for payment of such compensation u/s 25FF of the Act was on the transferor or the Board. This Court held that employees had no right to claim any retrenchment compensation from the Board, nor did they have any right to claim to be in continuous employment on the same terms and conditions, after the purchase of the undertaking by the Board. The said decision clearly recognises that the Board has no obligation towards the employees of the previous owner of the undertaking. We therefore find no reason to interfere with the order of the High Court. The appeal is dismissed.

Summary

Issues Involved:

1. Contractual Obligation to Absorb Employees
2. Statutory Obligation to Absorb Employees
3. Equitable Considerations and Legitimate Expectation

Detailed Analysis:

1. Contractual Obligation to Absorb Employees:

The appellants, employees of a co-operative society under liquidation, argued that the Board had a contractual obligation to absorb them. However, the court found no contractual obligation as the Board neither entered into any contract with the society nor gave any assurance to absorb its employees. The court stated, "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."

2. Statutory Obligation to Absorb Employees:

The appellants claimed a statutory right to be absorbed by the Board. The court examined the relevant provisions of the Indian Electricity Act, 1910, and found no statutory requirement for the Board to absorb the employees of the society. The judgment noted, "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 failed to show any statutory provision entitling them to seek absorption by the Board.

3. Equitable Considerations and Legitimate Expectation:

The appellants argued that equitable considerations and the principle of legitimate expectation entitled them to absorption by the Board. The court explained that legitimate expectation is not a legal right but an expectation of a benefit that may flow from a promise or established practice. The court stated, "It is an expectation of a benefit, relief or remedy, that may ordinarily flow from a promise or established practice." The court found no established practice or promise by the Board to absorb the employees. The court also noted that the financial condition of the Board was precarious, and it was contemplating retrenchment of its own employees, making it unreasonable to expect the Board to absorb additional employees from the society.

The court referred to several precedents, including Union of India v. Hindustan Development Corporation and Secretary, State of Karnataka v. Umadevi, to elucidate the doctrine of legitimate expectation. The court concluded that the principle of legitimate expectation did not apply in this case as there was no consistent past practice or promise by the Board to absorb the employees.

Conclusion:

The court dismissed the appeal, finding no contractual, statutory, or equitable obligation on the part of the Board to absorb the employees of the society. The judgment emphasized that legitimate expectation could not be invoked in the absence of a promise or established practice by the Board. The appeal was dismissed with the court stating, "We therefore find no reason to interfere with the order of the High Court. The appeal is dismissed."