Holding

The appointment was void and the termination illegal; compensation of Rs 10,000 was awarded in lieu of reinstatement.

Summary

The respondent, S.C. Pandey, was appointed as a daily‑wage typist by the Branch Manager of M.P. State Agro Industries Development Corporation, contrary to Regulation 16 of the corporation’s 1976 Service Recruitment and Selection Regulations which reserves appointment authority to the Managing Director. His services were terminated without compliance with Section 25F of the Industrial Disputes Act, 1947. Pandey obtained an interim order from the Labour Court allowing him to continue in service, and the Labour Court held the termination illegal and ordered his regularisation and back wages. The corporation appealed; the High Court and a Letters Patent appeal dismissed the corporation’s contentions. The Supreme Court held that the appointment was void, estoppel and waiver could not apply, and the termination was illegal, but, in the interest of justice, awarded compensation of Rs 10,000 instead of reinstatement. The appeal was allowed and the lower orders set aside.

Issues considered

Whether an appointment made by the Branch Manager in violation of Regulation 16 of the corporation’s service regulations is valid.
Whether principles of estoppel or waiver can be invoked to validate a void appointment.
Whether termination of a daily‑wage employee without compliance with Section 25F of the Industrial Disputes Act, 1947 is illegal.
Whether a worker who has completed 240 days of service is entitled to regularisation despite a void appointment.
Appropriate remedy: reinstatement versus monetary compensation.

Legislation cited

Industrial Disputes Act, 1947s. 25B, s. 25F

Subjects

appointmentvoid appointmentestoppelindustrial disputes actterminationcompensationlabour lawservice regulationsregularisationdaily wager

Judgment

A BRANCH MANAGER, M.P. STATE AGRO INDUSTRIES DEVELOPMENT
CORPN. LTD. AND ANR.
v.
SHRJ S.C. PANDEY

FEBRUARY 24, 2006
B
[S.B. SINHA AND P.K. BALASUBRAMANY AN, JJ.]

Labour Law:

c M.P. State Agro Industries Development Corporations Service
Recruitment, Selection Regulations 1976:

Regulation I 6-Daily wager-Appointed by Branch Manager-
Termination of-Held, only Managing Director could issue an offer of
D appointment-Appointment not being in terms of the service regulations,
principles of estoppel and waiver not applicable -Though termination without
complying with the provisions of s.25-F of Industrial Disputes Act was illegal,
employee had been unjustly directed to continue in service-Instead of
reinstating the employee, employer directed to pay compensation to him-
Industrial Disputes Act, 1947--Section 25-F--Estoppel.
E
Respondent was appointed as typist on daily wages by the Branch Manager
of the appellant-Corporation. His services were terminated. He challenged the
order before the Labour Court. Though the termination order had been given
effect to, by virtue of the interim order of the Labour Court, he was allowed to
continue in service. It was pleaded before the Labour Court that the respondent
F had been illegally appointed by the Branch Manager as the appointing authority
was the Managing Director, and as such he did not derive any legal right to
continue in service, but the Labour Court held the termination order to be bad in r
law. The appeal, the writ petition and the Letters Patent appeal filed by the
Corporation were dismissed. Aggrieved, the Corporation ftled the present appeal
G Allowing the appeal, the Court

HELD: 1. The Industrial Court as also the High Court applied the principles
of estoppel on the finding that the respondent was transferred from one branch to ,r ..
another. If his appointment was void, being contrary to regulations, the procedural
H 648
I
~

BRANCH MANAGER, M.P. STATE AGRO INDUS. DEVE. CORPN. LTD. v. SHR! S.C. PANDEY 649

provisions like estoppel or waiver were not applicable. The stand of the appellant A
~· ·- had been that in terms of Regulation 16 of the M.P. State Agro Industries
Development Corporations Service Recruitment, Selection, Regulations 1976 only
the Managing Director of the Corporation could issue an offer of appointment
The appointment of the respondent, thus, must be held to have been made only to
meet the exigencies of services and not in terms of the service regulations.
[654-E-G] B

M.P. Housing Board & Anr.. v. Mano) Srivastava,[2006) 2 SCR 537;
Mahendra Lal Jain & Ors. v. Indore Development Authority & Ors., [2005] I
y SCC 639 and Dhampur Sugar Mills Ltd v. Bhola Singh, [2005] 2 SCC 470, relied
on.
c
State ofPunjab v. Jagdip Singh & Ors., [1964) 4 SCR 964, referred to.

M.P.S.R.T.C. v. Narayan Singh Rathor and Ors., [1994) MPI..1959 and
Dwarika Prasad Tiwari v. M. P. State Road Transport Corporation & Anr., [2001)
8 sec 322, cited.
D
2. However, it has not been contended that the services of the respondent
were not governed by the provisions of the Industrial Disputes Act He worked
·1 from 16.9.1985to19.5.1987. He must have, thus, completed 240 days of service.
The termination of his services without complying with the provisions of Section
25-F of the Industrial Disputes Act, 1947 was, thus, illegal. He, however, had
E
unjustly been directed to continue in service by reasons of an interim order. The
appellant cannot be made to suffer owing to a mistake on the part of the court
The respondent also cannot take advantage of a wrong order. [654-H; 655-A-B]

3. In the peculiar facts and circumstances of the case, the interest of justice
would be sub-served if, in place of directing reinstatement of the services of the F
respondent, the appellant is directed to pay a sum of Rs.10,000/- by way of
compensation to him. [655-C]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1270 of2006.

From the Final Judgment and Order dated 16.1.2004 of the Madhya
G
Pradesh High Court in LP.A. No. 182 of2002.

Ms. Hetu Arora for the Appellants.
,,. ;t
"-.,
Ashok Mathur for the Respondent.

The Judgment of the Court was delivered by H
650 SUPREME COURT REPORTS [2006] 2 S.C.R.

A S.B. SINHA, J. Leave granted.

The appellant herein is a statutory corporation and, thus, a 'State'
within the meaning of Article 12 of the Constitution of India.

The respondent herein was temporarily appointed as a Typist. He was
B appointed by the Branch Manager, Morena Branch of the appellant whereafter
intimation thereto was given to the Regional Manager, stating:

"Shri Vinod Bharga has left the services from this Office and now Shri
S.C. Pandey has been temporarily appointed as a Typist w.e.f. 16th
September, 1985.
c The original application of Shri Pandey is enclosed herewith. Please
issue necessary orders."

He appears to have been appointed an daily wages. His services were
tenninated by an order dated 18. 7.1987 with immediate effect by the Regional
D Manager on the ground that his services were no longer required.

On or about 23.8.1987, assailing the said order oftennination, he filed
an application before the Presiding Officer, Labour Court No. 2, Gwalior
wherein an interim order was passed not to remove him from services. Although,
the order had been given effect to, but in view of the said interim order, he
E was allowed to continue in service.

Before the Labour Court the appellant inter alia raised a contention that
the respondent had been illegally appointed by the then Branch Manager
and, thus, he derived no legal right to continue in service. It was categorically
stated that the employees of the said undertaking are governed by the Rules
F and Regulations framed by the Corporation known as Service Recruitment
Selections Regulations, 1976 (hereinafter referred to as' 1976 Regulations') in
tenns whereof only the Managing Director was designated as the appointing
authority.

The issues which inter alia arose for consideration before the Labour
G Court were:

"(4) Whether the petitioner was appointed on contingency and due
to which he is not entitled to be regularized? t ...

(6) Whether the order of tennination of petitioner is legal and valid,
H
65}
.
BRANCH MANAGER, M.P. STATE AGRO INDUS. DEVE. CORPN. LTD."· SHRl S.C. PANDEY[SINHA,l.]

because his appointment itself was illegal?" A
)-
The Labour Court held that the M.P. Industrial Employment (Standing
Orders) Rules, 1963 framed under M.P. Industrial Employment (Standing Order)
Act, 1961 are applicable to the Corporation. On a finding that the respondent
was appointed against a vacant post, it was held that he had acquired a right
to be appointed as a regular/permanent employee in the post of typist purported B
to be in terms of the proviso appended to Rule 2 (4) of the Standing Orders.
The order of termination was also held to be bad in law, although, no reason
therefor was assigned. The Labour Court without considering the contentions
raised by the appellant - Corporation held:

"Since the petitioner is in continuous service of the respondents in c
compliance of the interim orders of this Court and it has already been
decided that the petitioner is entitled to be regularized on the post of
Typist, therefore, the·respondents are hereby directed to regularize/
classify the petitioner on the post of typist within a period of 30 days
of this order with effect from 6 months after 16.9.1985 and will also pay D
to the petitioner the difference between regular pay scale of permanent
post and pay scale given to him, from the date of his regularization
-....~--t

~
along with other consequential benefits."

An appeal preferred by the appellant herein against the said order
before the Tribunal was dismissed inter alia on the ground that the respondent E
was accepted as a working staff in the Morena Office and he had been
transferred to Gwalior by an order of the Regional Manager himself.

Before the Tribunal reliance was placed on behalf of the appellant-
Corporation upon a decision of a Full Bench of the Madhya Pradesh High
Court in MP.S.R. T.C v. Narayan Singh Rathor and Ors., (1994) MPLJ 959. F
,... The said decision was distinguished by the Tribunal stating that as therein
/ the employee was claiming the benefit of the Standard Standing Order in the
promotional post, it had no application to the fact of the case.

Despite the fact that before the Labour Court the respondent made a
prayer that his services may not be terminated, although it stood terminated, G
the Tribunal opined that the law of pleadings should not be strictly applied
to the labour cases on the purported ground that the services of the respondent
~ were not terminated legally or properly.

The writ petition filed by the appellant-Corporation herein before the
H
652 SUPREME COURT REPORTS [2006] 2 S.C.R.

A High Court of Madhya Pradesh at Gwalior was also dismissed. The High
Court applied the principles contained in Section 258 of the Industrial Disputes 1
Act and opined that the tennination of services of the respondent was illegal.

A Letters Patent Appeal thereagainst was summarily dismissed by a
Division Bench of the High Court.
B
Ms. Hetu Arora, the learned counsel appearing on behalf of the appellant-
Corporation in assailing the judgment of the High Court, would contend that
as the respondent herein had not been able to establish that he was appointed
in the services of the appellant-Corporation in tenns of the provisions of the
C regulations governing selection and appointment, the impugned order cannot
be sustained. Reliance, in this behalf, has been placed on Mahendra Lal Jain
& Ors. v. Indore Development Authority & Ors., [2005) 1 SCC 639.

Mr. Ashok Mathur, the learned counsel appearing on behalf of the
respondent, on the other hand, submitted that as a finding of fact has been
D arrived at that there was a clear vacancy, and as he has satisfactorily worked
for a period of more than six months, he was rightly held entitled to be
classified as a pennanent employee in tenns of the provisions of the Standing
Orders. It was furthennore contended that in view of the fact that the provisions t •

of the Standing Orders relating to classification were rightly invoked at the >
entry point being a case of appointment and not promotion. Strong reliance
E has been placed on Dwarika Prasad Tiwari v. M.P. State Road Transport
Corporation & Anr., [2001] 8 SCC 322.

The Industrial Courts and High Court inter alia proceeded on the basis
that the respondent having completed 240 days of service during the preceding
12 months, he should have been regularized in service. Section 25-B of the
F Industrial Disputes Act was also invoked on that premise. The Labour Court,
however, wrongly equated classification with regularization. The term
'regularization' does not connote pennanence.

The question raised in this appeal is now covered by a decision of this
G Court in M.P. Housing Board & Anr. v. Manoj Srivastava [ Civil Appeal
arising out of SLP (Civil) No. 27360/04 disposed of this date] wherein this
Court clearly opined that: (I) when the conditions of service are governed by
two statutes; one relating to selection and appointment and the other relating
to the tenns and conditions of service, an endeavour should be made to give
effect to both of the statutes; (2) A daily wager does not hold a post as he
H is not appointed in tenns of the provisions of the Act and Rules framed
J

.!' BRANCH MANAGER. M.P. STATE AGRO INDUS. DEVE. CORPN. LID.•. SHRI S.C. PANDEY (SU..'HA,l] 65 J
thereunder and in that view of the matter he does not derive any legal right; A
(3) Only because ·an employee had been working for more than 240 days that
by itself would not 'confer any legal right upon him to be regularized in
service; (4) If an appointment has been made contrary to the provisions of
the statute the same would be void and the effect thereof would be that no
legal right was derived by the employee by reason thereof.
B
The said decision applies on all fours to the facts of this case. In
Mahendra Lal Jain (supra) this Court has categorically held that the Standing
Orders governing the terms and conditions of service must be read subject
to. the constitutional and statutory limitations for purpose of appointment
both as a permanent employee or as a temporary employee. An appointment C
to the post of a temporary employee can be made where the work is essentially
of temporary nature. In a case where there existed a vacancy, the same was
required to be filled up by resorting to the procedures known to law i.e. upon
fulfilling the constitutional requirements as also the provisions contained in
the 1976 Regulations. No finding of fact has been arrived at that before the
· respondent was appointed, the constitutional and statutory requirements D
were complied with. ·

A Constitution Bench of this Court in State of Punjab v. Jagdip Singh
& Ors., (1964] 4 SCR 964 has categorically held that if an order of confirmation
is passed when no post was available and that too by a person who was not
authorized therefor, the appointment would be void. We have noticed E
hereinbefore that the Branch Manager in his letter dated 27.9.1985 addressed
to the Regional Manager stated that the respondent had already been appointed
w.e.f. 16.9.1985. Before the Labour Court, the offer of appointment had not
been produced. It had not, therefore, been disclosed as to on what terms and
conditions he was appointed. F
A. Full Bench of the Madhya Pradesh High Court in Narayan Singh
Rathor (supra) held:

"Service conditions are essentially matters of agreement between
employer and the employee. Where the employer frames regulations G
or rules relating to conditions of service, they are treated as part of
the conditions of service of the employee. M.P: Industrial Employment
(Standing Orders) Act, 1961 was enacted to provide for rules defining
with sufficient precision in certain matters the conditions of service
of employees in certain undertakings in the State. It contemplates
statutory interventions in service conditions of employees in certain H
654 SUPREME COURT REPORTS [2006) 2 S.C.R.

A undertakings. Rules have been framed under the Act. There is no
doubt that the intention is to improve the service conditions of the
employees and ensure that they are not adversely affected by unilateral
action of the employers. But the contours of intervention cannot be
extended beyond the statutory frame work."

B In Dwarika Prasad Tiwari (supra), whereupon Mr. Mathur placed
reliance, a Division Bench of this Court accepted the views of the Full Bench
in Narayan Singh Rathor (supra). However, it was held that the Standing
Order categorizes the nature of employment and it does not classify individual
employees in different posts according to the hierarchy created in a department
C arid thus the proviso to Rule 2 does not apply to promotions or regularizations
in higher grade. '

Such appointments, in our opinion, having regarding to the decisions
in Mahendra Lal Jain (supra) and Manoj Srivastava (supra) must be made
in accordance with extant rules and regulations. It is also a well settled legal
D position that only because a temporary employee has completed 240 days of
work, he would not be entitled to be regularized in service. Otherwise also the
!!gal position in this behalf is clear as would appear from the decision of this
Court in Dhampur Sugar Mills Ltd v. Bhola Singh [2005] 2 SCC 470 apart
from Mahendra Lal Jain (supra).

E The Industrial Court as also the High Court applied the principles of
estoppel on the finding that the respondent was transferred from Morena to
Gwalior. If his appointment was void, being contrary.to regulations, in our
opinion, the procedural provisions like estoppel or waiver were not applicable.
If an appointment made by the Branch Manager was wholly without
F jurisdiction, the order of appointment itself was void. Furthermore, the
contention of the appellant had been that in terms of Regulation 16 of 1976
Regulations only the Managing Director of the Corporation could issue an
offer of appointment. It has not been found by the Industrial Courts or the
High Court that the Branch Manager and the Regional Manager were authorized
to make such appointments. The appointment of the respondent, thus, must
G be held to have been made only to meet the exigencies of services and not
in terms of the service regulations. The appointment of the Respondent, thus,
could not have been made for filling up a regular vacancy for the purpose
of invoking Rule 2 of the Standing Orders. ,
However, it has not been contended that the ·services of the respondent
H
BRANCH MANAGER, M.P. STATE AGRO INDUS. DEVE. CORPN. LTD.''· SHRI S.C. PANDEY [SINHA, l] 655
r were not governed by the provisions of the Industrial Disputes Act. He A
worked from 16.9.1985 to 19.5.1987. He must have, thus, completed 240 days
of service. The termination of his services without complying with the
provisions of Section 25F of the Industrial Disputes Act was, thus, illegal. He,
however, had unjustly been directed to continue in service by reason of an
interim order. He has been continuing in service pursuant thereto.
B
The appellant, in our opinion, cannot be made to suffer owing to a
mistake on the part of the court. The respondent also cannot take advantage
of a wrong order.

In the peculiar facts and circumstances of the case, we, therefore, of the
opinion that interest of justice would be sub-served if, in place of directing C
reinstatement of the services of the respondent, the appellant is directed to
pay a sum of Rs. 10,0001- by way of compensation to him. It is directed
accordingly. The orders under challenge are set aside. The appeal is allowed
with the aforementioned directions and observations.

There shall be no order as to costs.

R.P. Appeal allowed.

-