Companies Act Case Law Hindustan Aeronautics Ltd Vs Dan Bahadur Singh & Ors

Appeal (civil) 2195 of 2007

Hindustan Aeronautics Ltd

Dan Bahadur Singh & Ors

DATE OF JUDGMENT: 27/04/2007

G.P. Mathur & A.K. Mathur


CIVIL APPEAL NOs. 2195 OF 2007
(@ Special Leave Petition (Civil) Nos.10478-10479 of 2005)
1. Leave granted.

2. These appeals, by special leave, have been preferred against the
judgment and order dated 7.3.2005 of Allahabad High Court
(Lucknow Bench), by which the special appeals preferred by the
appellant herein were dismissed and the judgment and order dated
31.8.1999 passed by a learned Single Judge by which two writ
petitions were disposed of was affirmed.

3. Hindustan Aeronautics Ltd. Muster Roll Trade Union Congress,
Korwa, Sultanpur, filed Writ Petition No.10513 of 1990 against the
appellant Hindustan Aeronautics Ltd., Korwa Division, Sultanpur
(hereinafter referred to as ‘the Company’) & Ors., wherein the main
relief claimed was as under :-
“Issue a writ, order or direction in the nature of
mandamus commanding the opposite parties to regularize
the services of the members of the petitioner union fully
described in Annexure No.1 and place them in the pay
scale of the post of Mali and allow them and treat them
as continuing in service with all benefits without any
It was averred in the writ petition that the petitioner union is a
registered trade union under the provisions of the Trade Unions Act,
1926 with the Registrar, Trade Unions U.P., Kanpur, of daily rated
Malies i.e. Muster Roll employees (workmen within the meaning of
the Industrial Disputes Act) working in the establishment of the
appellant herein. The petitioner union was seeking regularization of
services of its members and their continuance in service without any
break as well as equal pay for equal work. The members of the
petitioner union whose names figure at serial nos.1 to 77 in Annexure
1, are land losers as their land was acquired for establishment of
appellant and the remaining persons are non land losers. The members
of the petitioner union were continuing as daily rated Malies for the
last about 5 to 7 years with 2-3 days break on 2 or 3 occasions in each
month although the work and post continue to be available. There
was a policy of the State Government to provide employment to at
least one member of the family whose land had been acquired and
several Government orders had been issued in this regard. The daily
rated Malies were getting much less amount as wages than those
Malies who were in a regular scale of pay though there was no
difference in work. In spite of work and posts being available,
artificial break in service was created with a view to deprive them of
their continuity in service. The members of the petitioner union had
put in more than 240 days of continuous service in each calendar year,
yet their services had not been regularized. They were entitled to not
only regularization of their services but also the pay scale of the post
of Mali as there was no difference in the nature of work and duties
being performed by them from those who were in the regular pay

4. The appellant herein filed a counter affidavit on the ground,
inter alia, that the list of members contained in Annexure 1 to the writ
petition was not within the knowledge of the appellant company. The
writ petitioners were being engaged as casual labourers in the
appellant Company as per the settlement arrived at on 6.3.1989
between the writ petitioners and the management of the Company
with the intervention of Deputy Labour Commissioner, Faizabad. It
was further averred that after acquisition of land by the State
Government for the purpose of setting up of Korwa Division of the
Hindustan Aeronautics Ltd., factory premises were established in
1983. Since a new area had to be developed and the work had to be
started from scratch, initially a large number of workmen including
Malies were engaged for horticulture and land scape development
work. However, at the present juncture, the horticulture work was
limited for maintenance of land and garden and thus the requirement
of the labourers for this work had considerably decreased and there
was no continuous and full time work. The land losers whose land
had been acquired were given preference for this type of work. In the
settlement arrived at on 6.3.1989 it was agreed that the land losers
would be engaged for 20 days in a month and non land losers would
be engaged for 15 days in a month on daily basis as casual unskilled
labourers. The writ petitioners were paid daily wages which was
much higher than the minimum wages prescribed under the Minimum
Wages Act but they could not be paid wages like Malies employed in
regular pay scale. The writ petitioners cannot be given appointment
on regular post as there is no continuous and full time work of that
nature in the company. It was further averred that the company is
already having surplus labour and, therefore, a ban has been imposed
on recruitment. The writ petitioners were being engaged essentially to
fulfil the terms of the settlement arrived at on 6.3.1989. Lastly, it
was submitted that the basic object of the company was to produce
state of art avionics equipment for aircrafts which was being
manufactured for use by the Indian Air Force. The horticulture
activities are in no way connected with the production activities of the
company. It was purely seasonal and intermittent in nature and there
was not enough continuous and full time workload to justify the
employment of a large work force on permanent basis. A
supplementary counter affidavit was also filed wherein it was averred
that at the initial stage manpower was required for levelling of the
land for gardening purposes and for purposes related to horticulture
development in factory premises as well as in residential area of the
establishment. In the establishment there was no post for gardeners
(Malies) and the sanction for horticulture work is being given by the
General Manager of the establishment on the basis of man days
required for work every month. After assessing the requirement of the
establishment 2106 man days had been sanctioned in the
establishment for different categories of casual workmen. The
sanction given for the month of December 1998 would show that
there are 78 man days for skilled grade and 2024 man days for
unskilled casual workmen. The number of man days of individual
workman differ in every month. The excess (balance) number of man
days from land losers/skilled category was distributed every month
amongst the unskilled casual workmen. A settlement in this regard
was arrived at on 26.7.1995 before the Assistant Labour
Commissioner, Faizabad. After the settlement, a cogent scheme had
been framed by the establishment based on reasonable classification
for engagement of the casual labour for the purpose of meeting the
requirement of horticulture work in the establishment. It was further
averred in the counter affidavit that a policy decision had been taken
by the Board of Directors on 19.5.1987 by which the induction of
manpower in the establishment has been frozen as on 30.5.1987.
Therefore, in view of the policy decision and absence of any post, the
writ petitioners could not be engaged on regular basis nor could they
be regularized on any post in the establishment. The said policy
decision had been taken at the apex level looking to the financial
stringency and surplus manpower and also lean supply of orders and
the fact that the activity for which the writ petitioners are being
engaged is only incidental.

5. Writ Petition No.10524 of 1990 was filed by few individuals
claiming the same relief as in Writ Petition No.10513 of 1990 and was
based on same grounds.

6. The learned Single Judge, relying upon some decisions of this
Court and also of the High Court, disposed of both the writ petitions
by a common order and the operative part of the order is being
reproduced below :-
“Admittedly, petitioners are engaged as daily rated
workers in the factory and the factory is giving them
work for 18-20 days and is taking work for these days
from the petitioners. Therefore, it cannot be believed
that there is not work and the respondents are only
engaging the petitioners in order to provide them
livelihood. If there is no work, the respondents company
could request the Labour Commissioner to stop the
engagement. No employer can pay his workmen without
work. It shows that the work is there.

In this background the contention of the petitioners
that the artificial break in service is being created by the
respondents in order to deny the regularization of
petitioners who having completed 240 days and having
rendered more than 8 years of services satisfactorily are
entitled for their regularization, and the artificial break is
liable to be ignored.

In view of the aforesaid facts these petitions are
disposed of with a direction to the respondents to absorb
the petitioners as regular employees or such of them as
may be required to do the quantum of work which may
be available on perennial basis may be absorbed if they
are otherwise found fit and they will be paid wages of
regular employees. This shall be done within three
months from the production of certified copy of this

However, the rest of the petitioners shall not be
disengaged and shall be allowed to continue as per
settlement dated 26.7.1995 and shall be regularized as
and when the perennial work is available. The question
as to whether the work of perennial nature is available or
not shall be decided by the Deputy Labour Commissioner
who shall decide the same every year in order to facilitate
the absorption of the petitioners. No order as to costs.”
7. Feeling aggrieved by the directions issued by the learned Single
Judge, the appellant herein preferred special appeals but the same
were dismissed by the impugned order dated 7.3.2005 on the finding
that there was no illegality or infirmity in the judgment and order of
the learned Single Judge by which the writ petitions were disposed of.

8. Before considering the contentions raised by learned counsel
for the parties, it is necessary to set out the terms of the settlement
which was entered into by the parties before the Deputy Labour
Commissioner, Faizabad. Paras 1 to 3 of the settlement dated
6.3.1989 which are relevant for the controversy in hand are being
reproduced below :-
“1. The land losers shall be given preference in
engaging for the work in Horticulture Department
and they will be given the job for 20 days a month
as required.

2. Other casual workers (other than land losers) who
have completed 240 days in a calendar year, shall
be given the job for 15 days a month as required.

3. Case of other casual labourers of Horticulture
Department who are not covered under above
paras (1) or (2), efforts will be made to engage
them through other departments. As regards their
work and condition of duty, H.A.L. Management
will have no responsibility.”
Para 2 of the settlement dated 26.7.1995 which was arrived at
by the parties before the Assistant Labour Commissioner, Faizabad,
which is relevant, is being reproduced below :-
“2. Demand No.9 which is related to distribution of
working days, both parties agreed that Employer
will distribute all the available and approved man
days among all the labourers. 67 land losers and
two skilled labourers will be given work every
month from available working days. In this way
remaining man days after utilization form 2106
man days will be equally distributed among the
other 20 non land loser labourers. Balance part or
fraction of the day will not be taken into account
for this purpose.”

9. Shri R.N. Trivedi, learned counsel for the appellant, has
submitted that Hindustan Aeronautics Ltd. is a Government Company
within the meaning of Section 617 of the Companies Act and the
persons employed in the factory of the appellant Company at Korwa
are not government servants but are mainly governed by the
provisions of Industrial Disputes Act and other allied enactments. A
government servant enjoys a status on account of constitutional
provisions and rules framed under Article 309 of the Constitution,
which is not the case with the members of the respondent union.
Learned counsel has submitted that the respondent union having
entered into settlements with the appellant on 6.3.1989 and 26.7.1995
can claim rights only on the basis of the said settlements and no claim
for regularization or permanency in service or grant of pay scale at par
with those who are in the regular establishment of the appellant is
maintainable. Learned counsel for the respondents has, on the other
hand, submitted that the members of the respondent union had worked
for more than 240 days in a year for more than 6-7 years before the
filing of the writ petition. An artificial break of 2-3 days was
deliberately created twice or thrice in a month in their service just to
deprive them of continuity in service. He has further submitted that
the concerned workmen having worked for a very long period and
work being available, they should be given permanent status and also
the same pay scale which is being given to those who are in the
regular establishment of the appellant.

10. We have considered the submissions made by learned counsel
for the parties. The position of a government servant is entirely
different from that of a workman who is working in an industrial
establishment like the appellant Company. A government servant
enjoys a status and a security of tenure on account of certain
constitutional provisions. In Union Public Service Commission v.
Girish Jayanti Lal Veghela & Ors. (2006) 2 SCC 482 it was held as
under :-
“In the case of a regular government
servant there is undoubtedly a relationship of
master and servant but on account of constitutional
provisions like Articles 16, 309 and 311 his
position is quite different from a private employee.
Thus, employment under the Government is a
matter of status and not a contract even though the
acquisition of such a status may be preceded by a
contract, namely, an offer of appointment is
accepted by the employee. The rights and
obligations are not determined by the contract of
the two parties but by statutory rules framed by the
Government in exercise of power conferred by
Article 309 of the Constitution and the service
rules can be unilaterally altered by it.”
11. An appointment in government may be on probation or in
temporary capacity or permanent in nature. A permanent government
servant has a right to hold the post and he cannot be dismissed or
removed or reduced in rank unless the requirements of Article 311 of
the Constitution or the Rules governing his service are complied with.

12. The appellant, Hindustan Aeronautics Ltd., is a government
company within the meaning of Section 617 of the Companies Act.
What will be the legal position of a Government Company and
whether its employees can be treated to be government servants was
examined in Heavy Engineering Mazdoor Union v. State of Bihar and
Ors. (1969) 1 SCC 765 and it was held as under in para 4 of the
“…..It is an undisputed fact that the company was
incorporated under the Companies Act and it is the
company so incorporated which carries on the
undertaking. The undertaking, therefore, is not one
carried on directly by the Central Government or by any
one of its departments as in the case of posts and
telegraphs or the railways…..”

In A.K. Bindal v. Union of India (2003) 5 SCC 163 the
difference between an employee of a government and an employee of
a Government Company was pointed out and it was held :
“17. The legal position is that identity of the Government
Company remains distinct from the government. The
Government Company is not identified with the Union
but has been placed under a special system of control and
conferred certain privileges by virtue of the provisions
contained in Sections 619 and 620 of the Companies Act.
Merely because the entire share holding is owned by the
Central Government will not make the incorporated
company as Central Government. It is also equally well
settled that the employees of the Government Company
are not civil servants and so are not entitled to the
protection afforded by Article 311 of the Constitution
(See Pyare Lal Sharma v. Managing Director (1989) 3
SCC 448).”
An employee working in an industrial establishment enjoys a
limited kind of protection. He may lose his employment in various
contingencies which are provided under the Industrial Disputes Act
such as lay off as provided in Section 25-C, retrenchment as provided
in Section 25-F, transfer of industrial establishment or management of
an undertaking as provided in Section 25-FF, closure of undertaking
as provided in Section 25-FFF. He may be entitled to notice or wages
in lieu of notice and monetary compensation depending upon the
length of service put in by him. But the type of tenure of service
normally enjoyed by a permanent employee in Government Service,
namely, to continue in service till the age of superannuation, may not
be available to an employee or workman working in an industrial
establishment on account of various provisions in the Industrial
Disputes Act where his tenure may be cut short not on account of any
disciplinary action taken against him, but on account of a unilateral
act of the employer. Therefore, the claim for permanency in an
industrial establishment has to be judged from a different angle and
would have different meaning.

13. In B.N. Nagarajan & Ors. v. State of Karnataka & Ors. (1979) 4
SCC 507, it was held that the words “regular” or “regularization” do
not connote permanence and cannot be construed so as to convey an
idea of the nature of tenure of appointments. They are terms
calculated to condone any procedural irregularities and are meant to
cure only such defects as are attributable to methodology followed in
making the appointments. Further, when rules framed under Article
309 of the Constitution of India are in force, no regularization is
permissible in exercise of the executive powers of the Government
under Article 162 thereof in contravention of the rules. This view has
been approved by a Constitution Bench in Secretary, State of
Karnataka v. Uma Devi (2006) 4 SCC 1 (para 16). It was emphasized
here that only something that is irregular for want of compliance with
one of the elements in the process of selection which does not go to
the root of the process, can be regularized and that it alone can be
regularized and granting permanence of employment is a totally
different concept and cannot be equated with regularization.

14. The next question which requires consideration is whether
completion of 240 days in a year confers any right on an employee or
workman to claim regularization in service. In Madhyamik Shiksha
Parishad v. Anil Kumar Mishra & Ors. (2005) 5 SCC 122 it was held
that the completion of 240 days’ work does not confer the right to
regularization under the Industrial Disputes Act. It merely imposes
certain obligations on the employer at the time of termination of the
services. In M.P. Housing Board & Anr. v. Manoj Shrivastava
(2006) 2 SCC 702 (paragraph 17) after referring to several earlier
decisions it has been reiterated that it is well settled that only because
a person had been working for more than 240 days, he does not derive
any legal right to be regularized in service. This view has been
reiterated in Gangadhar Pillai v. Siemens Ltd. (2007) 1 SCC 533. The
same question has been examined in considerable detail with
reference to an employee working in a Government Company in
Indian Drugs and Pharmaceuticals Ltd. v. Workman, Indian Drugs &
Pharmaceuticals Ltd. 2007(1) SCC 408 and paragraphs 34 and 35 of
the reports are being reproduced below:-
34. Thus, it is well settled that there is no right vested in
any daily wager to seek regularization. Regularization
can only be done in accordance with the rules and not de
hors the rules. In the case of E. Ramakrishnan and Ors.
v. State of Kerala and Ors. (1996) 10 SCC 565 this
Court held that there can be no regularization de hors the
rules. The same view was taken in Dr. Kishore v. State
of Maharashtra (1997) 3 SCC 209 and Union of India
and Ors. v. Bishambar Dutt (1996) 11 SCC 341. The
direction issued by the Services Tribunal for regularizing
the services of persons who had not been appointed on
regular basis in accordance with the rules was set aside
although the petitioner had been working regularly for a
long time.
35. In Dr. Surinder Singh Jamwal and Anr. v. State of
Jammu & Kashmir and Ors. AIR 1996 SC 2775, it was
held that ad hoc appointment does not give any right for
regularization as regularization is governed by the
statutory rules.

15. In the judgment under challenge the High Court has issued a
direction to absorb the members of the respondent union as regular
employees or such of them as may be required to do the quantum of
work which may be available on perennial basis and has issued a
further direction that they will be paid the wages of regular
employees. It has also been directed that such of the members of the
respondent union who are not absorbed as regular employees shall not
be disengaged and shall be allowed to continue as per settlement dated
26.7.1995 and shall be regularized as and when the perennial work is
available. The direction issued by the High Court in effect has two
components i.e. creation of posts and also payment of regular salary
as in absence of a post being available a daily wager cannot be
absorbed as a regular employee of the establishment. This very
question has been considered in Indian Drugs & Pharmaceuticals Ltd.
(supra) and, therefore, we do not consider it necessary to refer to the
various reasons given and decisions cited therein. Paras 37, 38 and 47
of the reports, wherein the Bench recorded its conclusions read as
under :-
“37. Creation and abolition of posts and regularization
are a purely executive function vide P.U. Joshi v.
Accountant General, Ahmedabad and Ors. (2003) 2 SCC
632. Hence, the court cannot create a post where none
exists. Also, we cannot issue any direction to absorb the
respondents or continue them in service, or pay them
salaries of regular employees, as these are purely
executive functions. This Court cannot arrogate to itself
the powers of the executive or legislature. There is broad
separation of powers under the Constitution, and the
judiciary, too, must know its limits.
38. The respondents have not been able to point out
any statutory rule on the basis of which their claim of
continuation in service or payment of regular salary can
be granted. It is well settled that unless there exists some
rule no direction can be issued by the court for
continuation in service or payment of regular salary to a
casual, ad hoc, or daily rate employee. Such directions
are executive functions, and it is not appropriate for the
court to encroach into the functions of another organ of
the State. The courts must exercise judicial restraint in
this connection. The tendency in some courts/tribunals to
legislate or perform executive functions cannot be
appreciated. Judicial activism in some extreme and
exceptional situation can be justified, but resorting to it
readily and frequently, as has lately been happening, is
not only unconstitutional, it is also fraught with grave
peril for the judiciary.
47. We are of the opinion that if the court/tribunal
directs that a daily rate or ad hoc or casual employee
should be continued in service till the date of
superannuation, it is impliedly regularizing such an
employee, which cannot be done as held by this Court in
Secretary, State of Karnataka v. Umadevi (2006) 4
SCC 1, and other decisions of this Court.”

16. In view of the discussion made above, the impugned judgment
of the learned Single Judge which was affirmed in appeal by the
Division Bench cannot be sustained and has to be set aside. The
respondents are not entitled to the relief claimed by them.

17. The appeals are accordingly allowed. The judgment and order
dated 31.8.1999 of the learned Single Judge and judgment and order
dated 7.3.2005 of the Division Bench are set aside and the writ
petitions filed by the respondents herein are dismissed. It is,
however, made clear that in case there is any violation of the terms of
the settlements on the part of the appellant herein, the respondents will
be entitled to enforce their rights in accordance with law. No order as
to costs.

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