2018 (9) TMI 941 - HC - Companies Law

Termination of employee on termination of project - whether the closure was bona fide act with a drying up of funding by the Ministry of Human Resources Development, Government of India? - Held that - In the written statement, it has been explained that services of the petitioners have not been dispensed with on account of the allegations of not performing their duties to the satisfaction of the Project implementors, rather the entire project has been closed down on the directions of the Central Social Welfare Board, New Delhi. The question whether the services rendered by the petitioners were satisfactory or not, the fact still remains and stares at the face that the Project in which they worked was closed down rendering the petitioners surplus. If the petitioners insist in the amended petition that they were workmen within the meaning of term in the Industrial Disputes Act, 1947, then law requires only closure compensation to be paid to them. Right to reinstatement would not exist. It is also not that the posts have been abolished, rather the Project has been closed down and they cannot claim an alternative job on closure of the Project as a matter of right. Closure of an industry would not attract the provisions of Section 25-F of the Industrial Disputes Act. See MANAGING DIRECTOR, HARYANA SEEDS DEVELOPMENT CORPN., LTD. VERSUS PRESIDING OFFICER AND ORS. 1997 (7) TMI 689 - SUPREME COURT and more specifically in the case of Amar Singh 2003 (4) TMI 591 - SUPREME COURT on the issue of Project employees and their rights. No justification in accepting this petition. The writ petition is dismissed. However a direction is issued to the respondents, that in case any amount is found due or owing to the petitioners as far as CPF, leave encashment and gratuity are concerned, the same be paid to them since it is the admitted position in para.10 of the reply on merits. If unpaid, these amounts be calculated and disbursed to the petitioners with 6% interest per annum within a period of three months from the date of accrual.

Summary

Issues:
Termination of employees in a Demonstration Project upon closure and claim for absorption in a main stream department of the Government.

Analysis:
1. The petitioners, former Bal Sevikas in a Demonstration Project, challenged their termination upon closure and sought absorption in a government department. The Project received financial aid from the Ministry of Human Resources Development, Government of India, and was directed to close down by the Central Social Welfare Board. The termination orders were issued after the Project's closure, leading to the dispute.

2. The Respondent argued that the Project, Central Board, and State unit were not "State" entities under Article 12 of the Constitution. The closure decision was based on the Ministry's funding withdrawal, and the termination was in compliance with appointment letter terms. The Respondent admitted entitlement to certain benefits but denied pension and absorption claims, stating the petitioners were not government employees and had no right to claim absorption in other departments.

3. The Court considered the closure's bona fide nature, citing reasons like duplicity of activities and funding issues. It was established that employees in a closing Project do not have a vested right to continue. The termination was deemed valid, and the petitioners' services were linked to the Project only. The Court relied on legal precedents to support the decision that closure of a Project leads to the automatic end of employees' services.

4. The Respondent highlighted an audit report indicating non-productive expenditure on the Project, justifying its closure. The Court noted that some petitioners were beyond employable age and emphasized that the closure decision was based on valid reasons, not mere pretense. The termination orders were found to be in line with the appointment terms, and the closure was deemed genuine, leading to the automatic end of employment.

5. The petitioners argued that termination orders contained stigmatic words without due process. However, the Respondent clarified that the closure was not due to individual performance issues but the Project's overall shutdown. The Court rejected the petitioners' claims for reinstatement or alternative jobs, citing closure compensation as the legal requirement for Project employees.

6. Legal precedents cited by both parties were examined, with the Court distinguishing the cases presented by the petitioners. Ultimately, the Court dismissed the writ petition but directed the Respondents to pay any outstanding amounts due to the petitioners for CPF, leave encashment, and gratuity with interest, if applicable, within a specified timeframe.