# GURMAIL SINGH AND ORS. ETC. ETC v. STATE OF PUNJAB AND ORS

- **Citation:** [1990] Supp. 2 S.C.R. 367
- **Court:** Supreme Court of India
- **Decided:** 1990-10-25
- **Case number:** Civil Appeal No. 10519 of 1983
- **Bench:** S. Ranganathan, P.B. Sawant, N.M. Kasliwal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gurmail-singh-and-ors-etc-etc-v-state-of-punjab-and-ors-11035
- **Pages:** 26

## Headnote

Industrial Disputes Act, 1947: Section 25F and 25FF and Punjab
Government Notification dared November 30, 1982-Tubewells transferred to Punjab Stare Tubewell Corporation-Permanent posts
abolished-Temporary posts disconu·nued-Rights of affected employees.
The appellants were in service as tubewell operators in the Irrigation Branch of the Public Works Department of the Punjab Government. The State took a decision to transfer all the tubewells in this
branch to the Punjab State Tubewell Corporation, a company wholly
owned and managed by the State of Punjab. Consequent on this decision, a notification was issued on 30th November, 1982 abolishing all
the posts of tubewell operators in the Irrigation Branch, and accordingly notices terminating the services of the appellants were issued.
The appellants challenged the termination notices before the High
Court contending (i) that the notification by which the tubewells were
transferred was ma/a fide, the only object being to frustrate certain
claims of the petitioners which had been judicially recognised; (ii) that
the impugned notices did not fulfill the requirements of clauses (b) and
( c) of section 25F of the Industrial Disputes Act in so far as the compensation amount of each individual was not delivered at his door, and the
notices under clause (c) were not sent by registered post; and (iii) that,
in case the action of the State was. upheld, the respondent Corporation
should be held to be under an obligation to employ the appellants with
continuity of service and under the same terms and conditions which
they were enjoying prior to their retrenchment from the service of the
State.
The High Court rejected the petitions filed by the appellants. The
High Court inter alia found that the appellants had been given all the
benefits which they had obtained from the court. It was also found that
the respondent corporation had made an offer of re-employment to all
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the· appellants effective from the date of expiry of the notices of their
retren~hment by the State Government. According to the learned
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SUPREME COURT REPORTS
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Judges, the sole object of the issuance of the notification was to get rid
of the tubewells which were the cause of constant and ever-increasing
loss to the State exchequer lll!ld not ;my ma/a fide or extraneous reasons.
The services of the appellants have since been taken over by the
Corporation. Though at one stage the Corporation had taken the stand
that the appellants would be taken as fresh appointees in the Corporation, it had subsequently fixed them up at the same level of pay at which
the) were in Government service immediately before retrenchment,
and they were also being granted increments on that scale.
There remained two grounds of dissatisfaction: (1) that the appellants would be juuior in service to the tubewell operators who had been
engaged by the Corporation on its own account before the appellants
joined the service of the Corporation, giving the appellants the
apprehension that their down-gradation in seniority would affect them
in case the Corporation started closing down some of the tubewells and
discharging -its staff, and (2) if treated as retrenched Govermnent
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servant, they would be able to get terminal benefits and pension only on
the basis of their present lengths of service in the Government.
Before this Court, the contention of the appellants in this regard
was that the Corporation was really nothing but a Department of the
Government, and that in such circumstances, its "corporate veil" had
to be torn as under and its basic identity as department of the Government recognised and given effect to. Alternatively it was argued that
even ifthe Corporation be taken to be a separate entity, it was clearly a
"successor" to the Govermnent Department as the Government had
assured the Corporation that, if it suffered any losses because of the
transfer, the losses would be inade good by the

## Text

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GURMAIL SINGH AND ORS. ETC. ETC.
v.
STATE OF PUNJAB AND ORS.
OCTOBER 25, 1990
[S. RANGANATHAN, .P.B. SAWANT AND
N.M. KASLIWAL, JJ.]
Industrial Disputes Act, 1947: Section 25F and 25FF and Punjab
Government Notification dared November 30, 1982-Tubewells transferred to Punjab Stare Tubewell Corporation-Permanent posts
abolished-Temporary posts disconu·nued-Rights of affected employees.
The appellants were in service as tubewell operators in the Irrigation Branch of the Public Works Department of the Punjab Government. The State took a decision to transfer all the tubewells in this
branch to the Punjab State Tubewell Corporation, a company wholly
owned and managed by the State of Punjab. Consequent on this decision, a notification was issued on 30th November, 1982 abolishing all
the posts of tubewell operators in the Irrigation Branch, and accordingly notices terminating the services of the appellants were issued.
The appellants challenged the termination notices before the High
Court contending (i) that the notification by which the tubewells were
transferred was ma/a fide, the only object being to frustrate certain
claims of the petitioners which had been judicially recognised; (ii) that
the impugned notices did not fulfill the requirements of clauses (b) and
( c) of section 25F of the Industrial Disputes Act in so far as the compensation amount of each individual was not delivered at his door, and the
notices under clause (c) were not sent by registered post; and (iii) that,
in case the action of the State was. upheld, the respondent Corporation
should be held to be under an obligation to employ the appellants with
continuity of service and under the same terms and conditions which
they were enjoying prior to their retrenchment from the service of the
State.
The High Court rejected the petitions filed by the appellants. The
High Court inter alia found that the appellants had been given all the
benefits which they had obtained from the court. It was also found that
the respondent corporation had made an offer of re-employment to all
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the· appellants effective from the date of expiry of the notices of their
retren~hment by the State Government. According to the learned
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SUPREME COURT REPORTS
[1990] Supp. 2 S.C.R.
Judges, the sole object of the issuance of the notification was to get rid
of the tubewells which were the cause of constant and ever-increasing
loss to the State exchequer lll!ld not ;my ma/a fide or extraneous reasons.
The services of the appellants have since been taken over by the
Corporation. Though at one stage the Corporation had taken the stand
that the appellants would be taken as fresh appointees in the Corporation, it had subsequently fixed them up at the same level of pay at which
the) were in Government service immediately before retrenchment,
and they were also being granted increments on that scale.
There remained two grounds of dissatisfaction: (1) that the appellants would be juuior in service to the tubewell operators who had been
engaged by the Corporation on its own account before the appellants
joined the service of the Corporation, giving the appellants the
apprehension that their down-gradation in seniority would affect them
in case the Corporation started closing down some of the tubewells and
discharging -its staff, and (2) if treated as retrenched Govermnent
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servant, they would be able to get terminal benefits and pension only on
the basis of their present lengths of service in the Government.
Before this Court, the contention of the appellants in this regard
was that the Corporation was really nothing but a Department of the
Government, and that in such circumstances, its "corporate veil" had
to be torn as under and its basic identity as department of the Government recognised and given effect to. Alternatively it was argued that
even ifthe Corporation be taken to be a separate entity, it was clearly a
"successor" to the Govermnent Department as the Government had
assured the Corporation that, if it suffered any losses because of the
transfer, the losses would be inade good by the Govermnent, that having regard to the virtual identity of the Corporation and the Government, this was really a case of the Corporation having taken over a
department of the Government, and that both the Irrigation Branch of
the State Government as well as the Corporation admittedly constituted
an ·'industry" within the meaning of the Industrial Disputes Act, and
the problem should be looked at from the point of view of industrial
law.
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The respondent's case was that the State's obligation came to an
end with the payment of retrenchment compensation, that the Corpor;ition went out of its way to confer a favour on the appellants by agreeing
to take them into .its service; that it would be nnfair on the part of the
Corporation to give the appellants benefit of their earlier service in the
GURMAIL SINGH v. STATE OF PUNJAB
369
Government and make them senior to other employees who had been
serving in the Corporation right from the l!eginning: and that this was a
fresh employment subject to the normal rules and regulations of the
Corporation and the appellants had no right to claim any continuity of
service in the circumstances.
Disposing of the appeal, this Court,
HELD: (1) The fact appears to be that the tubeweUs were not
being operated profitably by the GOvemment and the GOvemment
seems to have taken a decision that it.would be more efficient, economical and prudent to have these tubewells run by the Corporation. There
is no reason to doubt the bona fides or the genuineness of this
arrangement. [378B-C]
•·
(2) When individual drafts for the amounts of compensation due
to the various tubewell operators were forwarded to the divisional sub.
divisional offices, sufficiently in time to be available to be taken by them
by 31st August, 1983 there was sufficient compliance with the provisions of clause (a) of section 25-F. [379C·D]
(3) The running of tubewells constitutes an "industry" whether
in the hands ofthe government or in the hands of the Corporation. [381D]
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( 4) There is no incompatibility in applying some of the provisions
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of the Industrial Disputes Act to persons in · the service of the
Government. [381D I
State of Bihar v. Jndustrial Tribunal, [1977] 51F.J.R.371.
(5) Notices under clause (c) of section 25-F were sent to the
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Labour Department as well as to the employment exchange through the
poen book. The High Court is right in pointing out that such a requirement can be treated erroneous to hold that unless sent by registered
post, the notices cannot be treated as complying with the statute. [379E]
( 6) Where the transferor and transferee is a State or a State
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instrumentality, which is required to act fairly and not arbitrarily_, the
Court has a say as to whether the terms and conditions on which it
proposes to hand over or take over an industrial undertaking embody
the requisite of "fairness in action". In such circumstances it will be
open to this Court to review the arrangement between the State «;ovemment and the corporation and issue appropriate directions. The princiH
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SUPREME COURT REPORTS
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pie sought to be applied is a constitutional principle flowing from the
contours of article 14 of Constitution which the State and Corporation
are obliged to adhere to. [387F -H; 388A]
New Gujarat Cotton Mills Ltd. v. Labour Appellate Tribunal,
[1957] II L.L.J. 194; Ramjilal Nathulal v. Himabai Mills Co. Ltd.,
[1956) II L.L.J. 244; Indian Hume Pipe Co. 'Ltd. v. Bhimarao, [1965] 2
L.L.J. 402; Ban Nigam Karamchari Kalyan Sangh v. Divisional Logging Manager & Ors., J.T. 1988 2 S.C. 22; Workmen v. Dahingeapara
Tea Estate, '[1958] II L.L.J. 498; Anakapalla Co-op. Agricultural &
lndustrial Society Ltd. v. Its Workmen, [1963] Supp. 1 S.C.R. 730;
Hariprasad v. Divikar, [1957] S.C.R. 121; Bombay Garage Ltd. v.
Industrial Tribunal, [1953) I L.L.J. 14; Artisan Press v. L.A. T., [1954]
II L.L.J. 14; Kapur v. Shields, [1976) 1 W.L.R. 131; Accountant and .
Secretarial Serilices P. Ltd. v. Union, [1988) 4 S.C.C. 324 and Mahabir
Auto Stores v. Indian Oil Corporation, [1990) 3 S.C.C. 752, referred to.
( 7) Looking at the facts of this case in the above perspective, it
appears that the State Government has acted arbitrarily towards the
appellants. The conduct of the Government in depriving the appellants
of substantial benefits which have accrued to them as a· result of their
long service with the Government, although the tubewells continue to
be run at its cost by a Corporation wholly owned by it, is something
which is grossly unfair and inequitable. This type of attitude designed to
achieve nothing more than to deprive the employees of some benefits
which they had earned, can be understood in the case of a private
employer but seems ill from a State Government and smacks of
arbitrariness. [388B; 3890-E]
(8) The appellants will be entitled to add _their service in the
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Government to their length of service in the Corporation for purposes
of computation of their salary, length of service and retirement
benefits. The Corporation is also directed to ensure, as far as possible,
that none of the appellants are retrenched as surplus on account of any
closure of tubewells or other like reason until they retire or leave the
service of the Corporation voluntarily for any reason. The advantage of
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counting the period of their past service with the Government will,
however, not enable them 10 claim any seniority over the former employees of the Corporation. [391G-H; 390E) .
(9) Even before the insertion of section 2SFF in the Act,,the employees of a predecessor had no right to _claim re-employment by the
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successor in business save in exceptional circumstances. Even where
GURMA!L SINGH v. STATE OF PUNJAB [RANGANATHAN, J.)
371
available, that claim was not a matter of absolute right but one of
discretion, to be judicially exercised, having regard to all the cirA
cumstances. [391G-H]
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
10519 of 1983.
From the Judgment and Order dated 12.9.1983 of the Punjab
and Haryana High Court in W.P. No. 3798 of 1983.
M.S. Gujral, S.K. Bagga, Ms. Bagga, S.D. Sharma, B.S. Gupta.
P.C Kapur, R.N. Mittal, S.D. Gupta, S.M. Ashri and K.K. Mohan for
the Appellants.
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R.S. Sodhi and C.M. Nayyar for the Respondents.
The Judgment of the Court was delivered by
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RANGANATHAN, J. The appellants were in service as tubewell
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operators in the irrigation branch of the Publk Works ·Department of
the Punjab State. The State took a. decisiori to transfer all the
tubewells in this branch to the Punjab· State Tubewell Corporation
(hereinafter referred to as 'the Corporation'), a company '}'holly
owned and managed by the State of Punjab. Consequent on this decision, a notification was issued on 30th November, 1982 to the effect
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that "the posts sanctioned for the Tubewell Circle; Irrigation Branch.
Punjab, are no longer needed in the public interest." It was, therefore.
ordered that all the permanent ppsts sanctioned for the above circle be·
abolished with effect from 1.3.1983 and that all temporary posts be
discontinued with effect from the same date. A little earlier, on 3 Ist
August, 1982, the petitioners were served with notices in terms of
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section 25,F of the Industrial Disputes Act (hereinafter referred to as
'S. 25F') terminating their services with effect from 30th November.
·1982. These notices were, however, set aside as not being in consonance with clause (c) of section 25-F. The State Government. therefore, issued fresh notices terminating the services of the petitioners
with effect from March 1, 1983. These notices were also set aside by
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the High Court on the ground that they did not conform to the provisions of clause (b) of section 25(F). Thereupon the State served fresh
notices on the petitioners terminating their services in terms of section
25-F with effect from August 31, 1983. The appellants once again
approached the High Court contendinE that the decision of the State
Government transferring the tubewells to the Corporation and terH
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SUPREME COURT REPORTS
[1990] Supp. 2 S.C.R.
minating their services was invalid. It was contended: (a) that the
impugned notices did not fulfil the requirements of clauses (b)'and (cl
of section 25-F; {b) that the notification by which the tubewells were
transferred was ma/a fide, the only object of the transfer being to
frustrate certain claims of the petitioners which had been judicially
recognised; and (c) that, in case the action of the State is upheld, the
respondent Corporation should be held to be under an obligation to
employ the petitioners with continutiy of service and under the same
terms and conditions which they were enjoying prior to their retrenchment from the service of the State.
These contentions were rejected by the High Court. It held that
the notices did· not suffer from any defect. It was pointed out that the
writ petitions had been filed before the expiry of tire date from which
the retrenchment notice was to be effective, namely, 31st August,
1983. The retrenchment notice itself specifically mentioned that the
retrenchment compensation, as admissible under the rules, will be
paid before the notice of retrenchment took effect and that it could be
collected personally from the respondent's Sub-Divisional/Divisional
Officers. At the instance of the Court, the State had filed an additional
affidavit in which it was averred that drafts in respect of the amounts of
compensation had been despatched to the divisional offices in the
manner followingE
Tubewell Division Malerkotla
Between 25 to 27 August, 1983
Tubewell Division Hoshiarpur
Between 19 to 24 August, 1983
Tubewell Division Jullundur
Between 19 to 24 August, 1983
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The relevant records showing the despatch of these drafts were also
produced in the court. The High Court was satisfied that the State had
despatched individual bank drafts in respect of each of the employees
well in advance of the date of expiry of the notice period and that the
despatch of these drafts to the divisional offices constituted a good and
valid tencl.er of the compensation amount to the appellants. The court
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held that this was sufficient compliance with the provisions of clause
(b) of section 25-F. So far as the provisions of clause (c) of section 25-F
were concerned. the High (~ourt was satisfied that the requisite notice
in the prescribed form 'P' was sent to the Secretary to Government,
Labour Department and the Employment Exchange concerned by
personal delivery duly acknowledged in the peon book of the DepartH men!. Pointing out that the requirements of clause (c) of section 25-F
GURMAIL SINGH v. STATE OF PUNJAB [RANGANATHAN, J.[
373
were only directory and not mandatory, the High Court was of the
opinion that the notices were not vitiated due to non-compliance with
clause (c) of section 25-F.
Turning to the allegation regarding ma/a /ides, the contention of
the appellants was this. They submitted that the tubewell operators in
the Irrigation Branch of the PWD had filed a writ petition, being
C. W.P. 3340 of 1972, in the Punjab High \=ourt claiming parity of pay
with the tubewell operators employed in the Public Health Department of the State Government. That petition was allowed on February
5, 1981. But the respondent authorities failed to implement the directions contained in that judgment, thus forcing the petitioners to move
a contempt application (No. 221 of 1981). Thereafter, the State
authorities gave effect to the judgment and paid arrears to the
petitioners in the writ petition but did not extend the benefit thereof to
the tubewell operators other than the actual petitioners in the writ
petition. The other tubewell operators, thus denied the benefits of the
judgment, were constrained to file three more writ petitions seeking
the extension of same relief to them. These writ petitions were allowed
on 7.8.1981 in terms of the earlier decision dated 5.2.1981. The
respondent authorities chose to file S.L.P. Nos. 9195 to 9197 of 1981 in
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the Supreme Court but these were dismissed on 19.2.1982. Still, the
respondent authorities showed their reluctance to implement the judgments of the High Court compelling-the petitioners to file three contempt petitions (Nos. 294 to 296 of 1981) against the defaulting . E
authorities. However., before the disposal of these writ petitions, the
State filed a letters patent appeal against the judgment in C.W.P. No.
3340 of 1972 and obtained an order staying the operation of the said
judgment. Consequent on this, the contempt applications had to be
withdrawn and were dismissed as such on 8.4.1982. We are told that
the letters patent appeals have been dismissed recently on 7.8.1990.
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Accordingly to the appellants, the authorities took a decision to
transfer the tubewells of the irrigation branch to the Corporation only
with a view to deprive the appellants of the benefit they had gained as
a result of the above litigation. It was pointed out that the Corporation
had come into existence as early as 1970. Its main objects, as set out in
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the Corporation's memorandum of association, were, inter a/ia:
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(2) To take over from the Government of Punjab the existing system of State owned irrigation. and augmentation
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tubewells along with connected buildings, assets, works
and any of their projects connected with the installation,
maintenance and operation of the State owned tubewells,
with the rights and liabilities of the Government of Punjab
so far as they relate to such tubewells, buildings, assets,
works or projects.
These assets shall be taken over by the Punjab State
Tubewell Corporation Limited as contribution by the
Punjab Government towards share capital.
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( 19) To enter into any arrangement with the Government
of India, Government of· Punjab, or any other Government
or State or local authority for the purpose of carrying out
the objects of the company for the furthering its interests
and to obtain from such Government or Authority or
person any charters, _subsidies, loalls, indemnities, grants,
contracts, licences, rights, concessions, 'privileges or
immunities which the company may think desirable to
obtain and exercise and comply with any such arrangements, rights, privileges and concessions."
Though the Corporation had been formed so long ago with the express
object of taking over the tubewells of the irrigation branch and though
it was operating a large number of tube wells on its own account since
then, no efforts had been made by the Government to transfer the
tubewells belonging to the State to the Corporation till 1982. Even
under the impugned notification only tubewells belonging to the irrigation branch were transferred but not those which were being operated
by the Public Health Department of the same State. The appellnats
vehemently contended that all these facts clearly showed· that the
sudden decision in 1982 to transfer the tubewells to the Corporation
was intended as a measure of victimisation of the appellants who were
only fighting for their rights of equal pay with other tubewell operators
in the State.
The High Court did not find any substance in this contention. It
pointed out that the idea that eventually the tubewells belonging to the
State should be transferred to the Corporation had germinated as early
as in 1970. Though this was not implemented immediately, a decision
to transfer the tubewells to the Corporation had been taken in the light
GURMAIL SINGH v. STATE OF PUNJAB [RANGANATHAN, J.J
375
of th·e recommendaiions of the Estimates Committee of the Punjab
Vidhan Sabha made in the year 1977-78, that is, abou.t three years
earlier to the decision of the High Court dated 5 .2 .198 I in C. W .P. No.
3340 of 1972. The authorities had placed before the Court the minutes
of a meeting held under the chairmanship of the Chief Minister of
Punjab on October 18, 1979, wherein it had been decided that, since
irrigation from the State tubewells had not developed as expected and
the State Government was running into a financial loss on account of
the operation of these tubewells, the same be transferred to thd
Corporation. It had also been decided at the meeting that the Government would meet the loss that may be suffered by the Corporation on
account of the operation and maintenance of these tubewells. In the
light of these facts, the High Court held that there was no basis for the
allegation of the petitioners that the impugned notification had been
issued ma/a fide solely with a view to deprive the appellants of the
benefits they had obtained from the courts. It was pointed out by the
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High Court that the appellants had subsequently been given all the
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benefits which they had derived as a result of the writ petitions. That
apart, it was also found that the Corporation had made an offer of D
re-employment to all the appellants effeciive from· the date of expiry of
the notice of their retrenchment by the State Government. All this
showed, according to the learned Jullges, that the sole object of the
issuance of the notification was to get rid ·of the tubewells which were
the cause of a constant and ever-increasing loss to the State exchequer
and not any ma/a fide or extraneous reasons.
On contention ( c), the High Court observed as follows:
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"So far as the a.lternative relief of re-employment with continuity of service and pensionary benefits in terms of the
Punjab Civil Service Rules is concerned, the petitioners
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cannot be granted the same in view of the provisions of
section 25-FF (of the Industrial Disputes Act) as introduced on September 4, 1956. In this regard the petitioners
have based their whole claim on certain observations made
in two Division Bench judgments of the Bombay High
Court, reported as New Cotton Mills Lid. v. Labour AppelG
late Tribunal and Others, A.LR. 1957 Bombay 111 and
N.J. Chavan and Others v. P. D. Sawarkar and Others,
A.LR. 1958 Bombay 133. Besides there. being dissimilarity
of facts in those cas~s and the instant case, the same relate
to .a period prior to the insertion of section 25-FF. In
Anakapalle Cooperative Agricultural and Industrial Society
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SUPREME COURT REPORTS
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Ltd. v. Workmen and Others, AIR 1963 SC 1489, their
Lordships of the Supreme Court after noticing the first
judgment of the Bombay High Court referred to above,
have held in categorical terms that such employees can
make no claim against the transferee concern. Otherwise
also we are of the view that the claim of the petitioners is
not covered by section 25-FF of the Act as it has nowhere
been pleaded or established by them that the ownership or
management of the tubewells has been transferred by the
State Government to the corporation either 'by agreement
or by operation of law'. As already pointed out, the transfer of the tubewells in the instant case has taken place as a
result of the unilateral decision by the State Government.
Even if it is to be accepted to be a case of transfer of the
undertaking by agreement as is suggested by the learned
counsel for the petitioners, still the wording of the proviso
and more particularly of clause (b) to section 25-FF clearly
indicate that the transferee concern of the management can
change the terms and conditions of the workman. Further
on the facts of the case, we do not see how the petitioners
can claim the benefits or rights of a civil servant while in the
service of the corporation and thereby force the corporation to say good bye to its rules and regulations ...
In the result, the various writ petitions were dismisse.d and hence the
present appeals.
Before us, practically the same arguments have been addressed
as were addressed before the High Court but with slight variations. It
might appear at first sight that the appellants have reaUy no cause of
grievance inasmuch as, though retrenched by the State Government,
their services have been taken over by the Corporation. We have also
been informed that the scale of pay of the tubewell operators in the
Corporation is identical with that of those employed by the State
Government. Though at one stage the Corporation had taken the
stand that the appellants will be taken as fresh appointees in the
Corporation, it is now common ground that the Corporation has fixed
them up at tke same level of pay at which they were in Government
service immediately before retrenchment and they are also being
granted increments on that scale. Though these concessions were
made during the pendency of the proceedings on interim applications
made by the appellants, the learned counsel for the State and Corporation have stated before us that these benefits would be continued'
GURMAIL SINGH v. STATE OF PUNJAB IRANGANATHAN, J.l
377
irrespective of the decision in these matters. Thus, in the result, so far
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as pay is concerned, the petitioners have suffered no detriment whatsoever as a result of the action taken by the Government. There are,
however, two grounds of dissatisfaction which are consequent on the
appellants being treated as fresh appointees who have entered the
service of the Corporation only on the dates of their respective
appointments thereto \Vith the result that all the appellants will be
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junior in service to the tubewell operators who had been engaged by
the Corporation, on its own account. between 1970 and the dates on
which the appellants joined the service of the Corporation. This by itself may also not be much of a disadvantage to the appellants since
many of them are senior in age the other tubewell operators and may
well retire earlier and we are also told that there are no avenues of
promotion from the post of tubewell operators, with the result that the C
question of seniority may not be very material. The apprehension of
the petitioners, however, is that their down-gradation in seniority will
affect them in case the Corporation starts closing down some of the
tubewells and discharging its staff, an apprehension which is stated. tc,
be not purely hypothetical but quite real. The second disadvantage is D
that many of the appellants have put in a large number of years in the
service of the Government. By being treated as retrenched Government servants, they will be able to get terminal benefits and pension
only on the basis of their present lengths of their service in the Government. On the other hand, if they were to continue with the Corporation under the same terms and conditions which they were enjoying
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under the Government, they would get the advantage of.continuity of
service and thus be entitled to substantially higher amounts of pension
and other terminal benefits. On a rought calculation, it is stated that
some of the appellants might stand to lose about Rs.600 to Rs. 700 per
month as a result of being deprived of the benefit of their long service
in Government and by being treated as new recruits in the corporation.
We have heard the learned counsel for the appellants as well as
the counsel for the State and the counsel for the Corporation. We
entirely agree with the reasoning of the High Court on contentions (a)
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and (b) earlier set out. We are also of the opinion that no ulterior
motives on the part of the Government have been established. It is no
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doubt true that there was some litigation between the appellants and
the Government but this related to their pay scales and it is not common ground before us eventually the petitioners have had the benefit
of the higher pay scales which were in vogue in the Public Health
Department. It is no· doubt true that the increased wage bill consequent on these decisions of the High Court must have made the
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tubewells in the irrigation branch more unremunerative than before
and may thus have precipitated the decision to transfer the tubewells
to the Corporation. However, as pointed out by the High Court, the
decision that there should be a Tubewell Corporation, that the Corporation should, in course of time, acquire the tubewells belonging to the
Government and that the tubewells of the irrigation branch should be
made over to the Corporation had been taken quite a long time back.
The fact appears to be that the tubewells were not being operated
profitably by the Government and the Government seems to have
taken a decision that it would be more efficient, economical and
prudent to have these tubewells run by the Corporation. There is no
reason to doubt the bona /ides or the genuineness of this arrangeiaent.
It is true that the tubewells in the Public Health Department do not
appear to have been transferred to the Corporation. But we have no
details before us regarding the magnitude of the State's problem vis-avis those tubewells and it is difficult to draw an inference, merely
becuase the tubewells of the Public Health Department were not transferred to the Corporation, that the transfer of the tubewells in the
D irrigation branch was actuated by a desire to victimise the appellants.
We, therefore, see no substance in this contention of the appellants.
We do not also see any force in the contentions regarding noncompliance with the provisions of section 25-F of the Industrial Disputes Act. It is urged on behalf of the appellants that the State has not
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furnished the details of the amounts of compensation determined in
the case of each employee and that the State had also taken no steps to
deliver the payment in respect of each employee at his door by the
relevant date. It is submitted that the tender of compensation under
section 25-F, in order to be valid, should be of the precise amount and
should be made simultaneously with termination of the service. This,
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of course, is correct but the High Court has satisfied itself by looking
into the original records, that drafts in respect of individual employees
were despatched in time so as to reach divisional/sub-divisional offices
by 3 lst of August, 1983. An attempt was made before us to suggest
that there was some discrepancy between two affidavits filed by the
State Government in this behalf. We have perused the said averments
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and we find no inconsistency as alleged. It is true that the amounts
were not actually paid or tendered to the workers by the Corporation
directly but the Corporation had evolved a method of disbursement of
compensation in the interest of the workers' convenience. Instead of
making the appellants, spread out all over the State, to come to the
head office to collect the compensation and to avoid the inconvenience
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and difficulty of the Corporation making available the comepensation
GURMA!L SINGH v. STATE OF PUNJAB [RANGANATHAN, J.l
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at the doorstep of each employee, the Corporation made arrangements whereby the tubewell operators could go to the nearest divisional1sub-divisional office and collect the amount of compensation
due to them. It appears that the appellants were not interested in
taking the compensation amount. None of them appears to have
ascertained whether these amounts had reached the sub-divisional
office and whether they were for the correct amounts. No instance has
been pointed out to us to show that they were not for the correct
amounts. We do not think we need elaborate further on this. aspect
since the relevant records were brought before the High Couit and the
High Court was satisfied that the individual compensation drafts were
sent to the various subordinate offices ready for distribution to the
concerned workers on or before the relevant date. In the circumstances of this case, we agree with the High Court that when individual
drafts for the amounts of compensation due to the various tubeweH
operators were forwarded to the divisional/sub-divisional offices, sufficiently in time to be available to be taken by them by 31st August,
1983, there was sufficient compliance with the provisions of clause (b)
of section 25-F.
The contention based on clause (c) of section 25-F is equally
baseless. It has been verified that notices were sent to the Labour
department as well as to the employment exchange through the peon
book. There is no reason to doubt the entries in these books. The
suggestion is that they should have beeen sent by registered post. As
rightly pointed out by the High Court, such a requirement can be
treated only as directory and not mandatory and it would be erroneous
to hold that, unless sent by registered post, the notices cannot be
treated as complying with the statute. We, therefore, reject this contention as well.
This leaves for consideri'tion the principal qustion in this case as
. to whether in circumstances such as these, the State is under an obligaA
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tion to protect the terms and conditions of service of the tubewell
operators. The State's case is that"it had transferred its tubewells to the
Corporation. The operators, therefore-, became surplus and they were
retrenched. Retrenchment compensation was duly paid to them. It is
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suggested that the State's obligation came to ,an end with this. It was
under no obligation to find any fresh or alternative employment to the
workers. However, being a welfare State, it did arrange for such
alternative employment. It was obviously under the State's directions
that the Corporation went out of its way to confer a favour on the
appellants by agreeing to take them into its service. It is submitted that
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the Corporation had its own terms and conditions of service for its
employees and could not change those terms and conditions of service
for the benefit of those few employees whose services had been taken
over as an act of commisseration. It would be unfair on the part of the
Corporation to give the appellants benefit of their earlier service in the
Government and made them senior to other employees who had been
serving in the Corporation right from the beginning. It is, therefore,
submitted that the two chapters of service of the appellants, one with
the Government and the other with the Corporation are two separate '-
and independent chapters. The first chapter has come to a close
because the State Government was not able to continue to operate the
tubewells by itself. The second chapter has commenced with a totally
independent offer by the Corporation to the erstwhile Governrr.ent
servants of an employment in the Corporation. This is a fresh employment subject to the normal rules and regulations of the Corporation.
The appellants have no right to claim any continuity of service in the
circumstances.
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Shri Gujral, learned counsel for the appellants bas contended
before us that the approach which the State Government wants this
Court to adopt is an unrealistic and purely technical approach.
According to him, the Corporation is really nothing but a department
of the Government. It is no doubt an independent entity in the sense
that it has a separate legal existence with its own employees and its
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own finances to be looked after according to certain rules and regulations but, says Sri Gujral, in circumstances such as these, the "corporate veil" of the Corporation has to be torn as under and the basic
identity of the Corporation as a department of the Government should
be recognised and given effect to.
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Alternatively, Shri Gujral argues, even if the Corporation be
taken to be a separate legal entity, it is clearly a "successor" to the
: Government department. He points out that the very memorandum of
the Corporation contemplates the taking over by it of the tubewells
belonging to the Government together with all the rights and liabilities
of the Government so far as they relate to such tubewells. The assets
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taken over are to be treated as contributions of capital by the GovernPlent to the Corporation. It is also common ground that in this case,
while transferring the tubewells to the Corporation, the Government
has assured the Corporation that, if it suffers any loses because of the
transfer, the losses would be made good by the Government. The true
and real essence of the transaction put through is that the tubewells,
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along with all appurtenances, rights and liabilities, including the liabi-
GURMAIL SINGH v. STATE OF PUNJAB [R/\.NGANATHAN, J.l
381
lity to continue the services oj the tubewell operators have been taken
over by the Corporation. Having regard to the virtual identity of the
Corporation. and the Government, this .is really a case of the Corporation having taken over a department of the Government though, in
form, the Government has purported to retrench, and the Corporation
to re-employ, the appellants. Shri Gujral submitted that both the irrigation branch of the State Government as well as the Corporation
admittedly constitute an "industry" within the meaning of the Industrial Disputes Act. Indeed, retrenchment compensation has been
offered to the appellants under the Industrial Disputes Act. In these
circumstances, Shri Gujral vehemently contends, the problem before
· us should be looked at from the point of view of industrial law. One
should ask oneself the question : if a similar transaction had been put
through in the private sector by two industrial organisations, how
would the Court could have tackled the problem? This, according to
Shri Gujral, is the proper test to be applied and, if that is done, he
submits, there can be put one answer to the question in this case.
There is no dispute before us that the.running of tube\)'ells constitutes an 'industry' whether in the hands of the Government or in the
hands of the Corporation. As pointed out by this Court. in State of
Bihar v. Industrial Tribunal, [1977] 51 F.J.R. 371, there is also no
incompatibility in. applying some of the provisions of the Industrial
Disputes Act to persons in the service of the Government. We may,
therefore, first examine what position would be if the principles of
industrial law were to be applied to a situation where one person
succeeds to the business which is being carried on by another. Shri
Gujral contends that there is preponderant authority for holding that,
if those principles were to apply, the tubewell operators should have,
in the Corporation, the same terms and conditions of service which
they enjoyed when they were in the Government. In support of this
proposition, Shri Gujral relies upon the decision of the Bombay High
Court in New Gujarat Cotton Mills Ltd. v. Labour Appellate Tribunal,
[ 1957] II LLJ 194. In that case, the business and undertaking of a
cotton mill was taken over as a going concern by another company.
The successor company, however, declined to continue in its employment some of the employees of the predecessor company. Thereupon,
the applications were filed by them before the labottr court for an
order against the successor company for reinstatement or reemployment. This application was rejected by the labour court but, on appeal
the Labour Appellate Tribunal held that the new company could not
refuse to take them in. It observed (vide Ramjilal Nathulal v.
Himabhai Mills Co. Ltd., [1956] II LLJ 244:
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"12. Underthe civil law, a person who is a successor to a
business is not bound merely because of such succession by
the debts or liabilities of the old business. and even if he
has agreeC with his transferor to be so liable, third parties,
in the absence of a tripartite arrangement, cannot enforce
such debt or liability against the transferor who alone continues to remain liable for such debts and liabilities to third
parties ..... .
13.