Holding

The appellants remained government servants; the High Court’s reliance on Article 207 was erroneous and the 1980 orders denying parity were unconstitutional and quashed.

Summary

The appellants were appointed as permanent civil servants of the Jammu & Kashmir State before 1963 and were posted in industrial units. After the incorporation of Jammu & Kashmir Industries Ltd., the Governor issued an instruction entrusting those units to the company, but the appellants continued to work in the same posts and received the same emoluments, leave and pension as other government employees. In 1980 the company issued orders altering cost‑of‑living allowance, wages and leave rules, thereby denying the appellants parity with government servants; they challenged these orders before the Supreme Court. The High Court had held that the appellants had surrendered their status under Article 207 of the Jammu & Kashmir Civil Service Regulations and dismissed the petition on grounds of delay and laches. The Supreme Court held that Article 207 deals only with pension matters and does not determine service status, that no statutory instrument abolished the government posts, and that the appellants remained state government servants entitled to equality under Articles 14 and 16 of the Constitution. Consequently, the Court set aside the High Court’s decision, quashed the orders denying parity, and allowed the appeal.

Issues considered

Whether the appellants ceased to be government servants after the 1963 entrustment of industrial units to Jammu & Kashmir Industries Ltd.
Whether Article 207 of the Jammu & Kashmir Civil Service Regulations determines the service status of the appellants.
Whether the orders of 1980 denying parity of service conditions are constitutionally valid.
Whether the appellants' claim is barred by delay or laches.

Legislation cited

Constitution of Indias. Article 14, s. Article 16, s. Article 226, s. Article 32
Factories Act

Subjects

service lawgovernment employee statusparity of serviceArticle 207Jammu & Kashmir Civil Service Regulationspublic sector corporationdelay and lachesconstitutional equalityArticle 14Article 16dearness allowanceleavepension

Judgment

A JA WAHAR LAL SAZA WAL AND ORS.
v.
STATE OF J AND KAND ORS.

FEBRUARY 27, 2002

B [S. RAJENDRA BABU AND RUMA PAL, JJ.]

Service Law :

Jammu and Kashmir Civil Service Regulations, 1956:
c
Article 207-Scope and interpretation of

State Government-Employees-His status, rights and obligations-
Determination and modification of

D State ofJ and K-Government servants-Permanent appointment before
1963 in industrial units ofState-Incorporation ofa private limited company-
Entrustment ofState Industrial Units to company-Employees given benefit of
revision ofgrades and D.A. as paid to Government servants despite regulations
framed by company-Order passed by Governor-Pursuant thereto orders
E passed by company-Denial to appellant-employees of parity of service
conditions with Government employees-Held not legal-Posts of Government
employees could not be abolished on the basis of instructions issued by
Governor-Held appellant-employees continue to be servants of State
Government-On facts appellants held not guilty of /aches.

F The appellants, appointed prior to 1963 as permanent Government
servants, were serving in industrial units run by the Department of Commerce
and Industries of the State of Jammu and Kashmir. Subsequent to the
incorporation of Jammu and Kashmir Industries Ltd. the Governor issued
an order dated 8th October, 1963 whereby these Undertakings were entrusted
to this company. Even after this "entrustment" the appellants continued
G working in the industrial undertakings in which they were initially appointed
and continued to enjoy the same benefit of service with regard to emoluments,
leave and pension as other Government employees. Further despite enactment
of the Jam mu and Kashmir Civil Service Regulation, 1956 by the Company
the appellants were given benefits of revision of grades and dearness allowance
as were paid to the other Government servants of the State.
.H 66
JL. SAZAWALv. STATE 67
Thereafter on the basis of the report of the Rajan Committee, which A
examined the wage structure of the employees of the Public Sector
Corporations, the Governor issued an order on 26th April, 1980 and pursuant
to this the Company issued two orders both dated 8th May, 1980 one relating
to the cost of living allowance and the second relating to fixation of wages. A
third order dated 10th November, 1980 laid down that the leave of regular B
employees of the company would be allowed as per the Factories Act and not
as per Leave Rules of the Corporation which were applicable to them in the
past. As these three orders had in effect denied the appellants parity of service
conditions with Government employees they filed a writ petition before this
.J( Court challenging these orders. This Court directed that they should first
approach the High Court. Before High Court they sought directions that they C
should be deemed to be governed by Service Rules and Regulations which
are applicable to the State employees and be held entitled to the same salary,
emoluments, D.A. leave etc., as would be available to the Government servants
under the State Government. The High Court rejected the appellants' claim
on the ground that they had voluntarily surrendered their status as
Government servants in 1963 under Article 207 of the Jammu and Kashmir D
Civil Service Regulations, 1956 and that in any event their claim was barred
· by delay and !aches.

Allowing the appeal preferred by employees and setting aside the
decision of the High Court. the Court.
E
HELD: 1. The impugned orders of the High Court cannot be
constitutionally sustained.

2. The conclusion of the High Court that the appellant's status had been
determined under Article 207 of the Regulations is based on an erroneous
interpretation· of the Article. The High Court ignored Article l(a) of the F
~egulations. Article 207 deals with the conditions of grant of pension. It does
not purport to determine status at all. Article 207 does not itself provide for
the procedure for abolition of a permanent post not the mode of appointment
to another post nor for the manner in which the employee has to exercise the
option. It only provides for the consequences of a permanent post being G
abolished, the'·consequence being that the employee shall have the option of
accepting another appointment in which event he can count his previous
service for the purpose of calculating the qualifying period for pension. Since
there was in fact no abolition of the Government posts under Article 207, there
was no question of the appellants exercising any option or surrendering their
status under that Article at all. The reliance by the High Court on Article H
68 SUPREME COURT REPORTS [2002] 2 S.C.R.

A 207 to decide the appellants' status was, in the circumstances wholly misplaced•..
[74-D-E; 75-B-C]

3. No statute or statutory rules have been brought to notice of this Court
by which the permanent posts held by the appellants were abol~hed. The High
Court proceeded on the erroneous assumption, namely, that as a consequence
B of the Governor's order dated 8th October, 1963 all the <;overnment industrial
undertakings stood abolished with the formation of the Company. The said
order was not an 'order' at all but an 'instruction' under Article 89 of the
Articles of Association of the company. It had no statutory force. Neither the
Government Industrial -Undertakings nor the posts of its employees could be )..._
C abolished by such an instruction. The Governor could not in exercise of powers
under the Articles of Association of the Company abolish industrial units
belonging to the State Government and then transfer the undertakings to the
Company. It would amount to an unilateral taking over of the industrial units
by the Company without any instrument of transfer being executed by the
State Government either in the form of an agreement or Statute. In fact and
D in law there was no abolition of the posts held by the appellants and none
was intended. [75-D-F)

4. Had the appellants been appointed as employees of the Company they
should have been issued letters of appointment by the Company. No
appointment letter was issued to any of the appellants by the Company. The
E irresistible conclusion is that the appellants were and continue to be servants
of the State Government and as permanent residents of the State of Jammu
& Kashmir are entitled under Section 10 of the State Constitution to be treated
on par with other Government servants in keeping with Articles 14and·16
of the Constitution of India. By the impugned orders, the State Government
F has sought to deny the appellants such equality. These orders cannot,
therefore, be constitutionally sustained and are consequently quashed.
[75-G-H; 76-A)
Roshan Lal Tandon v. Union of India, AIR (1967) SC 1889, reaffirmed.

G Sheik Ghulam Quadir and Ors. v. State of Jammu & Kashmir and Ors.,
AIR (1970) J & K 94, approved.

Waryam Chand v. State ofJ & K, (SWP No. 549/83) decided by H.C. of
J & K on 29.6.1998, disapproved.

Ghulam Mohamad and Ors. v. State ofJ & Kand Ors., (W.P. 107/1967)
H decided by H.C. of J & Kon 24th July, 1972, referred to.
J.L.SAZAWALv. STATE[RUMAPAL,J.] 69
5. The narration of facts clearly show that there was in fact no delay or A
!aches on the part of the appellants. The appellants were in fact treated on
par with other Government employees till the impugned orders were issued
on the basis of the 1980 Wage Committee Report These were challenged in
1981 before this Court and in 1982 before the High Court by the appellants.
The fact that the High Court took 16 years to dispose of the matter cannot
operate against. the appellants. The dismissal of the writ petitions on the B
ground of delay and !aches is, in the circumstances, unsustainable. [76-B-D)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3079 of
2000.

From the Judgment and Order dated 2.5.98 of the Jammu & Kashmir
c
High Court in Service Writ Petition no. 236 of 1982.

M.N. Krishnamani, A.K. Raina, A.K. Kaul, S. Pani and R.D. Upadhyay
for the Appellants.
D
Anis Suhrawardy for the Respondents.

The Judgment of the Court was delivered by

RUMA PAL, J. The appellants in this appeal have sought to assert
their status as employees of the State Government of Jamrnu and Kashmir E
with the same rights, privileges and benefits available to other State employees.
The High Court has denied the appellants' claims on the ground that they had
voluntarily surrendered their status as Government servants in 1963 under
Article 207 of the Jammu and Kashmir Civil Service Regulations, 1956
(referred to hereafter as the Regulations) and that in. any event their claim
was barred by delay and laches. F

It is not in dispute that each of the appellants had been appointed prior
to _l 963 as permanent Government servants under the Jammu and Kashmir
Civil Services (Classification, Control and Appeal) Rules, l 956 (hereafter
referred to as 'the Rules') and were serving in different capacities in industrial G
units which were being run by the Department of Commerce and Industries
of the State Government.

In l 963, the State Government formed a Board of Directors for the
administration of these industrial units by its order No. 189/C of 1963 dated
I 0th August l 963. The Board of Directors was constituted by- H
70 SUPREME COURT REPORTS [2002) 2 S.C.R:

A (i) Prime Minister - Chairman
(ii) Sh. Kamai! Singh, - Vice-Chairman
Hon. Advisory to
Govt. for Planning
and Industries
B
(iii) Sh. S.M. Agha, IAS - Managing Director

(iv) Sh. Amar Singh, IAS - Member (Ex-officio)
Director of Industries

c (v) Sh. S.A.S. Qadir, IAS ·do-
Registrar Cooperatives

(vi) Sh. Ghulam Ahmad - do-
Financial Controller
D The order also provided for the re-designation of the officers Incharge
of the industrial concerns as Managers in the respective concerns. All Managers
were placed under the overall control of the Managing Director and the
Board of Directors.

On 3rd October 1963, the Jammu and Kashmir Industries Ltd., the
E respondent No. 2 herein (hereinafter referred to as the company) was
incorporated as a private limited company under the . provisions of the
Companies Act, 1977. The main object of the company as mentioned in
Clause III (a) of its Memorandum of Association was :

"To run, manage, administer the State Industrial Undertakings as may
F be notified by the Governor in a manner as would ensure their
economic working" .
On 8th October 1963, the Governor issued instructions by which some
industrial undertakings of the State Government including the th.-ee .in which
G the appellants had been appointed were "notified to be entrusted to the
company in pursuance of clause III (a) of the Memorandum of Association
of the Company". The effect of this 'entrustment' of the Industrial undertakings
to the Company will be discussed after completing the narration of facts~ It
only needs to be noted at this stage that even after this "entrustment" the
appellants continued working in the industrial undertakings in' which they
H were initially appointed and continued to enjoy the same benefits of service
J.L. SAZAWALv. STATE [RUMAPAL,J.] 71

with regard to emoluments, leave and pension as other Government employees. A
~

In 1966, a notification was issued by the Governor introducing Note 6
which amended Rule 52 of the Rules and sought to provide that thenceforward
· the employees of the erstwhile Sericulture Department who were entitled to
pensionary and other benefits as government servants were to be treated as
employees of the Company. B

This was challenged in 1968 by some of the employees of the Sericulture
Department who had, like the appellants herein, been permanently appointed
to industrial units under the State Government before formation of the
_,.. Company. The main submission of the petitioners in that case was that their
services had only been entrusted to the Company and that they continued to c
enjoy the same status as other Government servants. The challenge was upheld
by a Division Bench of the High Court of Jammu and Kashmir in Sheik
Ghu/am Quadir and Ors. v. State of Jammu and Kashmir and Ors. It was
held that "the conditions of service of a Government servant could not be
terminated altogether except under and in accordance with Article 126 of the D
Jammu and Kashmir Constitution nor could the nature of his service be
converted from one form to another resulting in a complete transformation of
-<I
the character of the service. It was said:

" In the instant case if the petitioners are to be treated as employees
of the company the character and nature of their service is completely E
changed and they would cease to enjoy the immunity and-protection
given to them by S.126 of the State Constitution; and ifa Government
servant who is entitled to protection under section 126 is suddenly
~ deprived of this protection without any notice then such an action
-' cannot but be held to be either as a termination of his service or a
reduction in rank."
F

The Court also rejectecf the arguments of the respondents based on
Article 207 of the Regulations that consequent upon the formation of the
Company the Sericulture Department was abolished and that the services of
the Government employees had been transferred to the Company. The Court
4 G
found that there was nothing on record to show that the petitioners had in fact
.. been discharged from Government service nor was any notice given to them
in this regard nor were they given any option to take compensation or to opt
to be appointed under the Company. The procedure under Article 207 of the
Regulations not having been followed, the impugned notification could not
be sustained. The amending note was accordingly struck down and a writ of H
72 SUPREME COURT REPORTS [2002) 2 S.C.R.

A mandamus was issued directing the respondents to place the petitioners in the 1
same position as they were before the impugned amendment was made. The 1

decision of the High Court was rendered in 196?.

On 24th July 1972, a second writ petition filed by some other employees
of the Government Silk Weaving Factory: Ghulam Mohamad and Ors. v.
B State ofJ & K & Ors., (W.P 107/1967) seeking a declaration that the petitioners
continued as Government servants was disposed of without any reference to
the earlier decision in Ghulam Quadir's case in the following terms:

" It is now we_ll settled that a writ for a mere declaration does not lie.
It is also well established that unless there is a demand and refusal a
c petition for issue of a writ is not maintainable.

In the present case there is no allegation that any demand for
grant of a right which is available to the petitioner has been denied
by the State.

D The petitioner not having retired and the occasion for State refusing
to treat the petitioner as a Government employee not having arisen,
the pres_ent petition is, in our opinion premature. It is accordingly
·dismissed.

This will not, however, preclude the petitioner from seeking
E appropriate remedy in case the right claimed by him is denied by the
Government at a later stage."

In the meaQwhile the Company framed its own service rules which
were entitled ' J&K Industries Service Regulations' (hereinafter referred to
as the Industries Regulations). Nevertheless the appellants along with other
F similarly situated employees continued to be. given benefits of revision of
grades and dearness allowance which were paid to the other Government
servants of the State. Thus, when the revision Of pay scales of Government
employees was made ·on the basis ~f the 1973 Chatterjee Wage Committee
_Report, the appellant's salaries were also revised. An attempt to deny the
G appelJants dearness allowance on par with the civil servants was aborted
when instructions were issued in 1974 granting them the dearness allowance
at the same rates as other Government servants. This state of affairs continued
till 1979.

In· 1979 the St.ate Government sei up another Committee to examine the
H wage structure of employees of Public Sector Corporations. The Committee
.>
J.L. SAZAWALv. STATE[RUMAPAL,J.) 73
which came to be known as the Rajan Committee, submitted its final report A
in 1980. The report was accepted by a decision of the Cabinet on 22nd April,
1980. On the basis of this Cabinet decision the Governor issued an order on
26th April, 1980 pursuant to which the Company issued two orders both
dated 8th May, 1980 one relating to the cost of living allowance and the
second relating to fixation of wages. A third order was issued by the company
on I 0th November, 1980 seeking to lay down that the leave of regular B
employees of the Company would be allowed "as per the Factories Act and
not as per Leave Rules of the Corporation which were applicable to them in
. the past". All three orders in effect denied the employees like the appellants
parity of service conditions with Government employees.
~

In 1981 the appellants challenged the orders dated 8th May, 1980 and
c
toth November, 1980 under Article 32 of the Constitution before this Court.
According to the appellants when the matter was heard on 22nd March,
1982, this Court was of the view that the appellants should approach the High
Court first. As such the .appellants withdrew the writ petition under Article
32 and immediately filed a writ petition under Article 226 before the High D
Court (SWP 236/82) challenging the order of the Governor dated 26.4.1980
as well as the orders dated 8.5.SO and I 0.11.80 and asking for a direction on
... the respondents:
" ....to treat the petitioners as Government employees and deem the
petitioners and their co-employees governed by Service Rules and E
Regulations which are applicable to the State employees and the
petitioners be held entitled to the same salary, emoluments D.As,
leave etc. as would be available to the government servants under the
State Government" .

• . ~

Some other employees, who are not appellants before us, filed a similar F
writ petition before the High Court (SWP No. 287/82). Yet a third group of
•
employees filed a writ petition: Waryam Chand v. State ofJ & K, (SWP No.
549183) raising the same issues.

Waryam Chand's (SWP 549/83) case came to be listed separately and
was dismissed by a Single Judge on 29.6.88. The other two writ petitions G
(SWP 236/82 and SWP 287/82) were placed before another Learned Judge
who referred the issue for consideration by a larger bench. In 1998, the
Division Bench dismissed both the writ petitions by the order impugned
before us.

The impugned decision directly conflicts with the earlier dedsion of H
74 SUPREME COURT REPOlffS [2002] 2 S.C.R.

A the same High Court in Ghulam Quadir's case (supra) on the issue as to the
status of Government employees like the appellants. The decision in Ghulam
Quadir has remained unchallenged by the State respondents till today and
was binding on the Court. In the absence of some distinguishing feature it
should have been followed. It was not even referred to. We could have
B allowed the appeal before us on this short ground, but since the issue raised
affects a large number of employees, it is necessary to decide the issue on
merits.

On the merits we may start by reaffirming the statement of the law laid
down by this Court in Roshan Lal Tandon v. Union of India that:
c "once appointed to his post or office the Government servant acquires
a status and his rights and obligations are no longer determined by
consent of both parties, but by statute or statutory rules which may
be framed and altered unilaterally by the Government."

D No statute or statutory rules have been drawn to our attention by
which the permanent posts held by the appellants were abolished. The High
Court held that the appellant's status had been determined under Article 207 "
of the Regulations.. The conclusion is based on an erroneous interpretation
of the Article. To start with the High Court ignored Article 1-(a) of the
Regulations which clarifies that these
E
"Regulations are intended to define the conditions under which
Salaries, Leave, Pension, Travelling or other allowances are earned
by Service in the Civil Departments and in what manner they are
calculated. They do not deal otherwise than indirectly and incidentally
0
with matters relating to recruitment, promotion, official duties,
F discipline or the like. " (Emphasis supplied)

Article 207 is contained in Chapter XVII of the Regulations which
deals with the conditions of grant of pension. It was, in this context that the
Article had been framed. It deals with pension and its computation. It does
G not purport to determine status at all. It reads:

"207. If an officer is selected for discharge owing to the abolition of
his permanent post he shall, unless he is appointed to another post the
conditions of which are deemed to be at least equal to those of his
own, have the option -

H (a) of taking any compensation pension or gratuity to which he may
J.L. SAZAWALv. STATE[RUMAPAL,J.] 75
be entitled for the service he has rendered; or A
(b) of accepting another appointment on such pay as may be offered
and continuing to count his previous service for pension."

It is clear that the Article does not itself provide for the procedure for
abolition of a permanent post nor the mode of appointment to another post B
nor for the manner in which the employee has to exercise the option. It only
' provides for the consequ·onces of a permanent post being abolished, the
consequence being that the employee shall have the option of accepting
another appointment in which event he can count his previous service for the
purpose of calculating the qualifying period for pension. Since there was in
fact no abolition of the Government posts under Article 207, there was no C
question of the appellants exercising any option or surrendering their status
under that Article at all. The reliance by the High Court on Article 207 to
decide the appellants status was, in the circumstances wholly misplaced.

The High Court also proceeded on the erroneous assumption, namely,
that as a consequence of the "order dated 8th October 1963 all the Government 1
industrial undertakings stood abolished with the formation of the Company".
Firstly what is referred to as an 'order' by the High Court was not an "order"
at all but an "instruction" under Article 89 of the Articles of Association of
the Company. It had no statutory force. Neither the Government Industrial
Undertakings nor the posts of its employees could be abolished by such an E
instruction. The Governor could not in exercise of powers under the Articles
of Association of the Company abolish industrial units belonging to the State
Government and then transfer the undertakings to the Company. It would
amount to an unilateral taking over of the industrial units by the Company
without any instrument of transfer being executed by the State Government
either in the form of an agreement or Statute. In fact and in law there was F
no abolition of the posts held by the appellants and none was intended.

There is nothing in the instructions which could remotely be construed
as an order abolishing the posts held by the appellants. Had the appellants
been appointed as employees of the Company they should have been issued G
letters of appointment by the Company. No appointment letter was issued to
any of the appellants by the Company. The irresistible conclusion is that the
appellants were and continue to be servants of the State Government and as
permanent residents of the State of Jammu and Kashmir are entitled under
Section 10 of the State Constitution to be treated on par with other Government
servants in keeping with Article 14 and 16 of the Constitution of India. By H
76 SUPREME COURT REPORTS [2002) 2 S.C.R.

A the impugned orders, the State Government has sought to deny the appellants
such equality. The impugned orders cannot, therefore, be constitutionally
sustained and must consequently be quashed.
0
But should th_e appellants be denied their right to relief because of the
finding of delay and laches by the High Court? We think not. The narration
B of facts clearly show that there was in fact no delay or laches on the part of
the appellants. Till 1972 at least, the High Court in Ghulam Mohamad's case
(supra) found the State had not denied parity of status and the employees
were granted the right to '.::hallenge any denial of status if and when it took
place. The appellants were in fact treated on par with other Government
C employees till the impugned orders were issued on the basis of the 1980
Wage Committee Report. These were challenged in 1981 before this Court
and in 1982 before the High Court by the appellants. The fact that the High
Court took 16 years to dispose of the matter cannot operate aga~nst the
appellants. The dismissal of the writ petitions on the ground of delay and
laches is, in the circumstances, unsustainable.
D
The decision of the High Court is accordingly set aside and the appeal
is allowed by granting relief to the appellants as prayed for in their writ
petition. Costs to be paid by the respondent-State to the appellants jointly >- ·
assessed at Rs. 15000 (Rupees fifteen thousand only).

E T.N.A. Appeal allowed.

~--