Holding

The Supreme Court held that the workmen were project employees, not employees of the company, and their retrenchment was lawful, entitling them only to notice and compensation under Sections 25‑F and 25‑FFF.

Summary

The petitioners were workmen appointed on an ad‑hoc basis for the Anpara‑Rihand Nagar railway construction project of Indian Railway Construction Co. Ltd. (IRCON). After the project was completed in early 1998, they were served with retrenchment notices and offered compensation under Section 25‑F of the Industrial Disputes Act, 1947. They challenged the termination, claiming they were employees of IRCON and entitled to regularisation and that the closure required compliance with Section 25‑N and violated Articles 14, 16 and 21 of the Constitution. The Supreme Court held that the workmen were employees of the project, not of the company, and that the project’s completion lawfully terminated their services; therefore, retrenchment was not illegal. Accordingly, they are not entitled to regularisation but only to notice and compensation as provided under Sections 25‑F and 25‑FFF. The Court dismissed the appeals, affirming the High Court’s decision.

Issues considered

The workmen were employees of IRCON or merely of the specific project.
Whether the retrenchment of the workmen violated Section 25‑N of the Industrial Disputes Act, 1947.
Whether Section 25‑0 and Section 25‑FFF apply to the closure of a construction project.
Whether the termination infringed Articles 14, 16 and 21 of the Constitution of India.
Whether IRCON, as a wholly‑owned Government undertaking, is a "State" within the meaning of Article 12.

Legislation cited

Constitution of Indias. Article 12, s. Article 14, s. Article 16, s. Article 21
Factories Act, 1948s. 2(m)
Industrial Disputes Act, 1947s. 25-0, s. 25-F, s. 25-FFF, s. 25-N

Subjects

labour lawretrenchmentregularisationindustrial disputes actproject employeesclosure of undertakingcompensationconstitutional law

Judgment

A LAL MOHAMMAD AND ORS.
v.
INDIAN RAILWAY CONSTRUCTION CO. LTD. & ORS.

JANUARY 11, 2007

B (A.K. MATHUR AND ALTAMAS KABIR, JJ.]

Labour Laws:

Industrial Disputes Act, 1947-Sections 25-F, 25-FFF and 25-0-
C Regularization of service-Claim of-Project of Government Company
closed on its completion-Termination of workmen thereafter-Correctness
of-Held: Workmen were appointed for completion of the project-They
are not employees of company but of the project-On completion of the
project they have no vested right to claim regularization of their services
with regular pay scales in the company-When the project comes to an
D end, services of the employees also comes to an end and have to be
terminated-Also it is not necessary for the company to necessarily employ
these persons at other project-However, they are entitled to notice and
compensation-Appointment ofthe workmen was ad hoc, only for a particular
project and not in terms of the Rules of the Company-Thus retrenchment
E on completion of the project not illegal-Constitution of India, 1950-
Articles 12, 14, 16 and 21-lRCON Recruitment Rules, 1979.

The question which arose for consideration in these appeals was
whether retrenchment of the workers was illegal in view of the fact that
F they were employees of the company-respondent no. 1 and not merely
project employees whose services would come to an end upon termination
of the project.

Respondent Company, wholly owned by the Government oflndia is
engaged in various construction projects throughout the country and
G abroad. Respondent Company took up the project of construction of railway
line. Workmen were employed in the project and assigned different nature
of jo~s. l»i!iaUy these workmen were required to undertake training and
thereafter were treated as appointed on ad hoc basis. They were to be given
pay scale after successful completion of the training. Workmen could be
H transferred to any other project of the Company in India but on undertaking
784
LALMOHAMMADv. INDIANRAILWAYCONSTRUCTIONCO.LTD. 785

-- any other job or business they had to seek permission of the competent A
authority. The project was completed and the workmen were served with the
notices of retrenchment. The retrenchment benefits were given under
section 25-F(b) of the Industrial Disputes Act, 1947. Writ petitioners
challenged the retrenchment. Workmen filed writ petitions against
respondent no. 1-company. The Full Bench of High Court dismissed the
petitions holding that the petitioners were not entitled to the benefit of
B
regularization as the project stood closed; that project stood completed in
all respect; and that the petitioners did not apply for recruitment in service
of the Company as per the Service Rules and those who appeared and were
found suitable were selected and appointed under the service rules of the
Company but others who could not appear, their services were terminated C
in accordance with law. Hence the present appeals.

Dismissing the matters, the Court

· -HELD: 1.1. Once the project is completed then it is not incumbent on
the company to necessarily employ these persons at other projects in any D
other part of the country. Employees working under a scheme/pro;ect have
no vested right so as to claim regularisation of their services with regular
pay scales. When the scheme/project comes to an end, the services of the
employees working in the project also come to an end. The workmen are
' not entitled to regularise their services in the Company and they are not E
employees of Company. [Paras 24, 25 and 28) [814-E-G, 815-B]

1.2. With regard to the question whether factually the closure was
effected in February/March 1998 or not, the Full Bench of High Court
answered with reference to various communications that the closure was
effected in 1998 and an intimation was sent to all the respective contracting F
parties and concluded that the closure was effected much before the
issuance of the notices of 1998. The finding given by the Full Bench that
the work stood completed in 1998 is satisfactory and a perusal of all these
certificates leaves no manner of doubt that work was completed much
before the notices were issued in March, 1998. G
[Para 11] (795-C, 796-A-B)

1.3. It cannot be said that the appellants were the employees of the
Company and not of Project. In the appointment orders it was mentioned
that appointment was adhoc and they were directed to join the Project.
Therefore, from these conditions, it cannot be inferred that incumbents H
\'
786 SUPREME COURT REPORTS [2007] 1 S.C.R.

A were employees of the company. Employmentto the company is regulated
by the service rules and none of the posts which has been mentioned against
..:
these persons is in the list annexed to the Schedule appended to the Rules.
That apart an opportunity was given to the petitioners to appear for regular
selection in .the company and they failed to avail that opportunity. Therefore,
from these facts, it is more th&n apparent that the petitioners were not
B employees of the company but they were employees of the Project. It is a
public sector company and it is governed by its own rules and those rules
clearly contemplate a method for recruitment into service and that
/
opportunity was given to the incumbents for being regularly recruited in
the company but they failed to avail the same. Simply because the company
c had said that these persons will not be permitted to take any other
employmentor business without prior permission, their group insurance
was made and were placed in the pay scale of the company that does not
mean that they will be deemed to ,be employees of the Company. Simply
because they adopted the basis for giving them the benefit of the Company
as was being given to other employees who have been duly recruited in
D
accordance with the rules, by such conferment of benefit will not be
deemed to be employees of the Company. The regular recruitment Rules
t'"'
have been framed with the approval of the Government, as the company is
a public sector undertaking. These rules may not be given a status of
statutory rules but those rules are binding on the company and company
E cannot make departure from acting under the rules, for all purposes, they
are almost analogous to the statutory rules. These rules have a legal
sanctity as they have been framed in terms of memorandum and articles of
association with the approval of the Government. Therefore, they have a
binding force for the company and company cannot make a departure for
F recruitment except than following these rules. As per the provisions there
is methodology provided under the rules and that was not followed in the
-t
•
instant case. [Para 15) [806-B-H, 807-A]

1.4. The petitioners were appointed being the local hand as workmen
were required for completion of the project and therefore they were
G appointed for the project and as soon as the project was over they cannot
claim as a matter of right to be permanent employees or to be regularized
in the company. A distinction has to be borne in mind who is employee of
the company and who is employee of the Project. The services of project ...
employees come to.an end as soon as the project is over and they cannot
-4,
H .be given permanent status. Since they wer;e employees of the project their
/
·~

LALMOHAMMADv. INDIANRAILWAYCONSTRUCTIONCO.LTD. 787

services have to be terminated after completion of the project. The Full A
'\
.A Bench rightly came to the conclusion that they are employees of the project
and they are not the employees of the company. There is no viQlation
of Articles 14, 16 and 21 of the Constitution of India in the matter as
they were employees of the project and at the end of the project they have
taken their benefits as are admissible in accordance with the Industrial
Disputes Act. [Para 15) [807-B-D]
B

1.5. Section 25-0 lays down procedure for closing down an undertaking
t and proviso to sub-section (1) of Section 25-0 clearly lays down that
nothing in this sub-section shall apply to an undertaking set up for
construction of buildings, bridges, roads, canals, dams, or for other c
construction work. [Para 16) [807-F-G]

1.6. Since the project was for construction of some railway lines,
therefore, the rigour of sub-section (1) for seeking a permission of
Government is not required in the instant case. Once the project is
completed the service of the incumbent comes to an end. But the legislature
D
--~#--
in its wisdom has provided relief for such class of workmen on completion
of project under section 25-FFF. Sub-section (2) of Section 25-FFF provi<Jes
compensation for such class of workmen. According to sub-section (2)
when such construction work is closed down and on completion of work
within two years from the date on which the undertaking had been set up, E
the workman employed therein shall not be entitled to compensation under
clause (b) of Section 25F, but if the construction work is not completed
within two years he shall be entitled to notice and compensation under that
section for every completed year of continuous service or any part thereof
in excess of six months. [Paras 17 and 18) [809-G-H, 810-D] F
).

~ 1. 7 The legislature in its wisdom has especially provided on closure
of such projects because of completion of the project or on account of
transfer. A special benefit to such workers urider sub-section (2) of Section
25-FFF is provided in the event the company has completed construction
after more than two years. This is the legislative mandate and the intention G
of the legislature is more than apparent. Since this is legislative mandate
and it cannot be decided that whether the position of the company, which
"' } closed down the undertaking with the permission and company which is
dosed down because of the completion of the project should not be worse.
Since it is a legislative mandate the company has to comply with those H
I

-t·
788 SUPREME COURT REPORTS [2007] 1 S.C.R.

A provisions. Therefore, these incumbents have already been given notice and
ifthe compensation has not been determined in terms of Section 25-F then J..
that should be calculated and paid to the workers if not paid so far. They
have been directed to collect their dues from the office. If that amount
has not been collected by them then it will be open to them to collect
the same or any shortfall that will be made good by the company. So far
B as the termination of the incumbents is concerned after completion of
the project they have no right to continue. They are only entitled to
notice and compensation has to be determined under Section 25-F. Shortfall
~
of period of notice or compensation will n'ot render termination bad on
that count. [Para 19) [810-G-H, 811-A-D]
c
Mahendra L.Jain and Ors. v. Indore Development Authority and Ors.
[2005] l sec 639. distinguished.

Hindustan Steel Works Construction Ltd and Ors. v. Hindustan Steel
Works Construction Ltd. Employees' Union, Hyderabad and Anr., [1995)
D 3 SCC 474; Umarani v. Registrar, Cooperative Societies and Ors., [2004]
7 SCC 112 and MD. UP. Land Development Corporation and Anr. v. Amar ~'-
Singh & Ors., [2003] 5 SCC 388, relied on.

Punjab Land Development and Reclamation Corporation Ltd.,
E Chandigarh v. Presiding Officer, Labour Court, Chandigarh and Ors.,
[1990) 3 SCC 682; S. M Nilajkar and Ors. v. Te/com District Manager,
Karn ataka, [2003] 4 SCC 27 and Mohammad v. Indian Railway
Construction Co. Ltd., [1999) 1 SCC 599, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6195-6198 of
F .(
2004
-;- ~

From the final Judgment and Order dated 21.5.2004 of the High Court
of Judicature at Allahabad in Civil Misc. writ Petition Nos. 32651, 32500, .,.,
18561 and44416/1993.
G
Sudhir Chandra, P.P. Rao, Sr. Advs., Bharat Sangal, R.R. Kumar, S.
Chatterji; Ms. Suchitra Sharma, Bhagabati Prasad, Ms. Manjula Gupta, Anil
..,
Kumar Jha, Ms. Mukti Singh, Sunil Singh, Sumani Bhardwaj, S. Shekhar,
N.A. Siddiqui, S. Dutta, Ms. Mridula Ray Bhardwaj, Mahesh Pandey, ~
H S. Mishra, Purushottam S.T., D.S. Chadha, Abhishek Kumar, Anshuman
LAL MOHAMMAD 1•. INDIAN RAILWAY CONSTRUCTION CO. LTD. (A.K. MATHUR, J.) 789

,,,.' Ashok and D.N. Mishra, for the appearing parties. A
The Judgment of the Court was delivered by

A.K. MATHUR, J. : These appeals are directed against the order
passed by the Allahabad High Court dated May 21, 2004 whereby the Full
Bench of the High Court has disposed of all the writ petitions filed by the B
workmen against Indian Railway Construction Co. Ltd.(hereinafter referred
-f to as Company) and the Regional Manager, IRCON, Rihand Nagar,
.• Sonbhadra. The Full Bench held that the petitioners are not entitled to
""
benefit of continuation of service or regularization as the project stood
closed on 6.2.1998. It was held that project stood completed in all respect c
__. except necessary electric or other odd works left over. It was also held that
--j
petitioners did not apply for recruitment in service of the Company as per
the Service Rules and those who appeared and were found suitable were
selected and appointed under the service mies of the Company but others
who could not appear, their services were terminated in accordance with law.
Hence, in total analysis, it was held that sentiments must yield to the cold
D
.q
-~ logic of law, however, hard the case may be. Hence all writ petitions were
dismissed.

2. It would be necessary to recapitulate the facts giving rise to these
appeals because this is second and third innings of the matter, which has E
come up before this Court. Earlier the matter came up before this Court
wherein the question arose was whether Section 25-N of the Industrial
Disputes Act, 1947 (hereinafter referred to as the Act) was complied with or
not, this Court held that Section 25-N was not complied with. Hence, this
Court disposed of the petitions holding that Section 25-N was not complied,
> F
therefore, termination of all workmen was bad and remitted the matter
~
[Mohammadv. Indian Railway Construction Co. Ltd. reported in [1999) 1
-1
SCC 599] back to the High Court with following directions:-

"28. In view of the aforesaid discussion and in the light of our
finding that Chapter V-B applies to the respondents' Anpara- G
Rihand Project, in the remanded proceedings in the restored writ
petitions of the present 25 appellants, the following questions
)_
would squarely arise for consideration of the High Court:-

(i) Whether the Anpara-Rihand Nagar Project is subjected to H
~
790 SUPREME COURT REPORTS [2007] l S.C.R.

A a factual closure as mentioned in the impugned notices of
March 1998 or whether the Project is not still completed;

(ii) in the light of the answer to the aforesaid question, a
further question would arise whether the impugned notices of
March 1998 were in fact and in law closure notices as per
B Section 25-0 read with Section 25-FFF of the Act or whether
they still remain retrenchment notices and hence would be
violative of Section 25-N of the Act;

(iii) even if it is held that Anpara-Rihand Nagar Project is in
c fact closed down, whether the 25 appellants were employed
in the Project or they were employees of the respondent-
Company entitling them to be absorbed in any other project
of the Company and consequently whether the impugned
notices have not effected any snapping of the employer-
employee relationship between the appellants on the one
D -hand and the respondent-Company on the other;

(iv) even apart from the aforesaid questions, whether the
impugned notices were violative of the guarantee of Articles
14, 16 and 21 of the Constitution of India on the ground that
E the termination of services of the 25 appellants was arbitrary
and discriminatory, the respondent-Company being a "State"
within the meaning of Article 12 of the Constitution oflndia."

Salient facts, which are necessary for disposal of these appeals are :-
F
3. Twenty five petitioners filed writ petition against the respondent
Company, which is a construction company wholly owned by the Government
of India. It carries out various construction projects throughout the country
and abroad. These writ petitioner workmen were employed by respondent
Company and respondent No. 2 is its Regional Manager who was monitoring
G project of construction of a railway line of 54 Kms known as Rihand Nagar
Project in State of Uttar Pradesh (hereinafter referred to as the Project).
These 25 petitioners were employed in this project on different dates during
the period spread over from 26.12.1983 up to 24.12.1985. They were assigned
different jobs of work at the Rihand Nagar Project. Some were appointed as
H clerks, account-clerks, store clerks, store cashiers, non-technical supervisors,
LAL MOHAMMAD"· INDIAN RAILWAY CONSTRUCTION CO. LID. (A.K. MATHUR, J.] 791

~ site supervisors, etc. Initially these workmen were required to undertake A
training and were, therefore, treated as appointed on ad hoc basis. They
were not appointed on regular basis. They were supposed to be given pay
scale after successful completion of the training. They were placed in regular
timescale. They were subject to be transferred to any other project of the
Company in India. They were not required to undertake any other job or
business without permission of competent authority. After completion of B
project they were served with the notices of retrenchment in August/
September, 1993. They were rendered surplus and hence retrenchment
benefit under Section 25-F(b) of the Act was offered and they were advised
to collect their other dues, namely; provident fund, gratuity, leave salary etc.
in accordance with the rules of the Company in force at the time of the c
Project. These retrenchment notices were challenged by the writ petitioners
by filing number of writ petitions under Article 226 of the Constitution of
India, against respondent Company. In those writ petitions among other
arguments, which were sought to be raised; like retrenchment is bad as they
are recruiting fresh people and their retrenchments were illegal and also
D
violative of Articles 14, 16 & 21 of the Constitution of India, an additional
ground was taken that the respondents had illegally invoked the provisions
of Chapter V-A of the Industrial Disputes Act, 1947 but in fact Chapter
V-8 of the said Act applies as more than hundred workmen were being
employed by the respondent Company and therefore, retrenchment of
the petitioners was required to be complied with the provisions of Section E
25-N of the Act, which were not followed ?.nd termination is illegal and void
on that ground.

4. The petition was opposed by the respondent Company. It was
submitted that the writ petitioners were only ad hoc employees. They were F
not regularly appointed after following due procedure of recruitment rules
and were employed only at the Rihand Nagar Project. It was submitted that
no regular recruitment can be made without following procedure of the
recruitment rules and it was also contended that the project has come to an
end, therefore petitioners were liable to be retrenched. It was also alleged
that the procedure for closure of the project has been complied with as G
envisaged under Section 25-F of the Act. It was contended that Section
25-N does not apply to the facts of the present case. It was also contended
that the Project fs not an industrial establishment as defined by Section
25-L of the Act read with Section 2(m) of the Factories Act, 1948 as it is not
a factory. It was submitted that they were not employees of the Company H
~
7gi SUPREME COURT REPORTS [2007] 1 S.C.R.

A but they were recruited solely for the purpose of Rihand Nagar Project and .,:
their services were tenninated after the said Project was closed and they
have no right to be absorbed in any other project. It was submitted that the
retrenchment orders were not arbitrary or illegal or violative of Articles 14,
16 & 2 I of the Constitution of India.

B 5. The matter was heard by the learned Single Judge. The learned
Single Judge held that the petitioners have put in long service nearly of 9
years and in some cases even more than that and they are pennanent ,.
employees and they should have been engaged in any other project as their
services were transferable throughout the country. It was also held that
c tennination of workmen is amenable to writ jurisdiction under Article 226 of "',
the Constitution oflndia as it is a State within the meaning of Article 12 of
the Constitution of India. Learned Single Judge further held that Section 25-
N of the Act was not complied with as it was a Factory within the meaning
of Section 2(m) of the Factories Act read with Section 25-L of the Act. Hence
the retrenchment notices are illegal and void being in violation of Section
D
25-N of the Act and accordingly the learned Single Judge allowed the writ
petitions, quashed retrenchment notices and directed to allow workmen to -t--.
continue in service and pay them their dues.

6. Against this order passed by the learned Single Judge dated
E 7.12.1993 special appeals were filed before the Division Bench of the·
Allahabad High Court. The Division Bench, however, allowed the appeals
of the Company holding that Section 25-N of the Act does not apply on two
grounds (i) that for a construction company like the respondent Company,
the procedure of Section 25-0 of the Act is not required to be followed,
F service of incumbent comes to end ipso facto after completion of project, ..
there is also no question of following the procedure of Section 25-N even ~
on the basis that the workmen at the Project were more than hundred in
number. (ii) It was also held that in any case, Section 25-N of the Act would
not apply as respondent Company was. not a Factory as it was not an
industrial establishment as contemplated by Section 25-L of the Act read
G with Section 2(m) of the Factories Act and accordingly it was held that the
petitioners are not the workmen and therefore, they are not entitled to any
protection under the Industrial Disputes Act. It was also held that since they
were employees of the Project and the project has come to an end, therefore, -{
their services were validly terminated and they have no right to be absorbed
H after completion of the Project. The writ petitions were dismissed and order
LAL MOHAMMAD v. INDIAN RAILWAY CONSTRUCTION CO. LTD. (A.K. MATHUR, J.] 793

',..,.,
of learned Single Judge was set aside. All the 25 petitioners approached this A
Court by filing the Special Leave Petitions. The leave was granted and
appeals were heard. This Court after reviewing all case laws on the subject
held that Section 25-N of the Act is attracted in the present case.

It was observed,
B
"However, as we have seen above, the establishment of the
respondent-Company squarely falls within the definition of the
term "factory" for the purpose of applicability of Section 25-N of
the Act. The first point for consideration, therefore, has to be
decided in the affirmative in favour of the appellants and against c
the respondent."

7. As a result of aforesaid finding there was non-compliance of Section
25-N, this Court took the view that the retrenchment notices were null and
void and the relationship between employer and employee was not snapped.
D
It was further held that at the time notices were issued the Project had not
been completed. However, the question with regard to whether the petitioners
were employees of the Project or of the Company was left open. It was also
brought to the notice of this Court subsequent development that the
respondent Company served on the appellants with fresh notices on 24
March, 1998 of termination by way of Office Order No.3/1/98 and in those E
notices it was mentioned that on completion of the project, the services of
the employees were dispensed with w.e.f. 4 September, 1993 on tendering
of salary in lieu of notice and retrenchment compensation as admissible
under the provisions of the Industrial Disputes Act. These notices were
served during pendency of the special leave petitions. Therefore, they were
F
not challenged by the appellants before the High Court. However, it was
clearly mentioned in the notices that Rihand Project was finally closed down
w.e.f. 6.2.1998 and accordingly the services of the workmen stood dispensed
with from the date of issue of notice i.e. 24 March, 1998. It was also pointed
out before this Court that work of all railway lines is over and only small
maintenance work pursuant to the agreement with the Railway Authorities G
is being undertaken. But in substance the whole work is complete. This
Court observed that since provisions of Chapter V-B of the Act are
applicable and the procedure of Section 25-0 would get attracted subject
to th~ imwiso to Section 25-0(1 ), therefore, the Court left all these factual
questions open i.e. whether the project is completed or not, whether the H
794 SUPREME COURT REPORTS (2007] 1 S.C.R.

A employees are of the Project or of the company. This Court observed that
whether the Company is a State within the meaning of Article 12 of the
.'>:
Constitution of India, whether termination of these employees is arbitrary
and discriminatory and violative of Articles I4, I 6 & 21 of the Constitution
of India are all questions of fact, they cannot be answered in the present
proceedings and the fact that fresh notices were issued on 24 March, 1998
B which has a fresh cause of action to the employees and were not subject
matter of the writ petition and the appellants had no opportunity to put
forward their contentions for challenging these notices. Similarly, the
respondents also did not get an opportunity to put forward their contentions
in defence. Therefore, this Court left all the questions open and gave an
c opportunity to the petitioners as well as the respondents to amend their ~-
pleadings and to file fresh reply and produce relevant supporting material
before the High Court and accordingly the four questions were framed by
this Court and the matter was remitted back to the High Court for
consideration. In the result this Court allowed the appeals of the appellants
and set aside order of the Division Bench and affirmed the order of the
D
learned Single Judge and remitted the matter back to the High Court for
being disposed of by a Division Bench in the light of the observations made
by this Court.

8. Hence the matter came up before the Division Bench of the High
E Court of Allahabad and in the Division Bench there was .difference of
opinion between two learned Judges. One of Hon'ble Judges constituting
the Division Bench allowed the writ petition and quashed the notices vide
order dated 17 May, 2002. The other Hon'ble Judge of the Division Bench
dismissed the writ petition. Therefore, the matter was referred to a third
F Judge. Since both the learned Judges have passed the judgment constituting
Division Bench, therefore, the reference to third Judge was not found to be
proper and this was challenged by the employer before this Court and this
Court vide its order dated 17.10.2003 directed , that the matter be heard
and disposed of on. merits in accordance with Jaw by the Full Bench of
the High Court and remitted this matter to the Full Bench. Accordingly,
G the Hon'ble Chief Justice of the High Court constituted the Full Bench
by order dated 12.11.2003 and referred the matter to the Full Bench. The
·Full Bench after considering the matter came to the conclusion that the
petitioners are not entitled to any benefit as aforesaid. Hence the present
Special Leave Petitions against the order passed by the Full Bench dated
H May 21, 2004.
LAL MOHAMMAD"· INDIAN RAILWAY CONSTRUCTION CO. LTD. [A.K. MAIBUR, J.] 795

9. The pleadings were amended by the parties and they exchanged A
affidavits. So far as the first legal question as to whether Section 25-N of
the Act is applicable to dispute of such nature is concerned that no more
remains to be res integra as it has been conclusively held by this Court in
aforesaid judgment that Section 25-N is applicable that means Chapter V-B
of the Act is applicable to this dispute.
B
IO. Now, the question before us at present is whether the findings
given by the Full Bench on the questions framed by this Court were
correctly answered or not? The first question as framed by this Court was
whether factually the closure was effected in February/March 1998 or not?
So far this question is concerned the Full Bench answered with reference C
to various communications that the closure was effected in 1998 and an
intimation was sent to all the respective contracting parties i.e. NTPC, NCL,
PCL and UPSEB. In this connection reference has been made to the
completion certificate issued by the National Thennal Power Corporation
Ltd. on 29 March, 2000 certifying that the projects referred to had been D
completed prior to March 1998 and handed over to N1_'PC. Another certificate
'"- was issued by the National thennal Power Corporation Ltd. dated 30.3.2000
certifying that .the work stands completed. The said Corporation issued
certificate on 13 January, 1999 that the projects stood completed much
before the date of issue of the notice in question. Another certificate was
issued by the Superintending Engineer, U.P. State Electricity Board on 29 E
March, 2000 and 2.9 .1999 about the completion of the work. Similar certificate
was issued by the Northern Coal Field Ltd. Jayant Project on 29 March, 2000
certifying the same thing. The entire project conglomeration as a whole was
closed down w.e.f. 6.2.1998 after issuance of the notification through
newspaper and notice board. The concerned Labour Commissioner and F
Regional Labour Commissioner were duly informed about the closure. They
1
were infonned vide communication dated 4.2.1998. A notice of the closure
was also published in the daily newspapers Dainik Jagran and Rashtriya
Sahara. It is also pointed out that a small fraction of work remained to be
completed, as it was abandoned due to non-availability of site on account
of encroachments by members of public which was certified by the UPSEB G
that it was beyond their control and for that work some 20 Head of Telecom
Engineering and Supervisory Staff was retained and they were agreed to
reimburse the cost towards supervisory staff of Telecom and Engineering
).
discipline, that the work was undertaken after 14 months of the date of
closure of Rihand Nagar Project as separate work and this work was H
\
·~

796 SUPREME COURT REPORTS (2007] 1 S.C.R.

A completed on September 2, 1999 and a certificate to this effect was also
produced. It is also made clear that for completion of this left over work only
people from the Telecom and Engineering discipline were engaged and the
petitioners do not fall in any of that category. Therefore, on this question
the Full Bench concluded that the closure was effected much before the
issuance of the notices of 1998. We are satisfied on the basis of finding
B given by the Full Bench that the work stood completed in 1998 and a perusal
of all these certificates leaves no manner of doubt that work was completed
much before the notices were issued in March, 1998.

11. So far as the second and third questions are concerned, the crucial
c question to be decided is whether they were employees of the Project or of
the Company. In this connection the finding was given by the Full Bench
that they were employees of the Project and not of the Company. Learned
counsel for .appellants laid much stress on appointment orders of appellants
that they are employees of the Company and not of the Project. He has taken
us through various appointment orders issued from time to time and some
D of the samples, are reproduced as under:-

"INDIAN RAILWAY CONSTRUCTION COMPANY LIMITED
(A Government of India Undertaking)

GRAM : RAILCONST RATTAN JYOTI
E 18, RAJENDRA PLACE
NEWDELHI-l 10008(INDIA)

No. IRCON/ESTT./35 DATED: 25/8/84

ShriLalmoharnmad
F S/o Ajimuddin
Vill:Dallumandaltola,
Dt.Malda.

You are hereby offered appointment in Anpara Project, Project on
a Casual adhoc basis on a consolidated monthly emoluments of
G Rs.400/- (Rupees four hundred). You are directed to report to
Project Manager IRCON at Anpara.

In this connection, the following instructions are issued.
1. ·Your training period will be for a period of 12 months after you
report for duty.
H
LAL MOHAMMAD r. INDIAN RAJLWAY CONSTRUCTION CO. LTD. [A.K. MATHUR. J.) 797

2. On satisfactory completion of the training you will be required A
',.,. to pass a written and oral examination.

3. On passing your above examination, you will be brought in
grade Rs. 260-400.

4. During your training period you will be entitled to an additional B
monthly emolument of Rs. 50 if you are posted in Delhi,
.. Bombay or Calcutta .

·ri- 5. The above appointment is subject to verification of your age,
qualifications for which you should produce original
documents while reporting.
c
Sd/-
(N.SWAMINA THAN)
COMPANY SECRETARY, IRCON"

"INDIAN RAILWAY CONSTRUCTION COMP ANY LIMITED D
(A Government of India Undertaking)
--~

GRAM: RAILCONST RATTAN JYOTI
18, RAJENDRA PLACE
NEW DELHI- I I 0008 (INDIA)
E
No.IRCON/PP/35A DATED: 22-10-83

Md.Intas Hussain
S/o Md.Yahim Ali,
Village , Chandigachil,
' >
P.O.Singhia, F
,_ Dt.Malda.

You are hereby offered appointment in Anpara Project. Project
on a Casual adhoc basis on a consolidated monthly emoluments of
Rs.400/- (Rupees four hundred). You are directed to report to
Project Manager V.S.T.V.P. IRCON at Anpara. G
In this connection, the following instructions are issued.

1. Your training period will be for a period of 12 months after you
report for duty.
H
798 SUPREME COURT REPORTS [2007] l S.C.R

A 2. On satisfactory completion of the training you will be required
~
"·-·- to pass a written and oral examination.

3. On passing your above examination, you will be brought in
grade Rs.260-400/-. You will also be eligible for payment of all
allowances as per the rules of the company;
B 4. Your regular appointment in the Company will be governed by
the Recruitment Rules of the Company, 4

;,
5. You are liable to be posted any where in India.

6. During your training period you will be entitled to an additional
c monthly emolument of Rs.50/- if you are posted in Delhi,
Bombay or Calcutta.

Sd/-
(N.SWAMINATHAN)
COMPANY SECRETARY, IRCON''
D
"INDIAN RAILWAY CONSTRUCTION COMPANY LIMITED -r---
(A GOVERNMENT OF INDIA UNDERTAKING)

Office of the Regional Manager
E P.O.Anpara,
District Mirzapur (UP)
Dated: I9.5.1988

No.IRCON/ANP/ESTT/15/AL

To
F .\
.

Sh~i Meghu Seikh -t
Artisun,
IRCON, Baijpur.

Dear Sir,
G
1. On completion of your training you are hereby brought on
scale of pay in the grade ofRs.260-600 (Rs.) in the initial pay
of Rs. 260 p.m. with effect from I I. I 0. I 984.

You have been brought on the scale of pay in the grade of
J,-
Rs. In the initial pay of Rs. Pm with effect from.
H -:;
LAL MOHAMMAD,._ INDIAN RAILWAY CONSTRUCTION CO. LTD. [A.K. MATIIUR, J.) 799

2. You will be eligible for all the allowances and benefits as per A
Rules/Orders issued by the Company from time to time.

3. You should produce the following documents at your own
expense.

(a) A medical certificate of health and physical fitness of B
prescribed proforma from a qualified Registered Medical
Practitioner.

(b) Original certificates in support of your educational and
other professional qualification, documentary proof, in
respect of date of birth etc. together two copies thereof. C
(c) Attestation form in triplicate (enclosed) after filling.

(d) In case you belong to Schedule Caste/Schedule Tribe,
one of the following certificates in original should be
produced.
D
Matriculation or School Leaving Certificates or birth
certificate giving your caste/community and place or
residence.

Or
E
A ce1tificate in the prescribed form issued by the
Competent Authority.

4. You should take an Oath of allegiance to the Constitution of
India in the appropriate form.

>
F
5. You will be liable for transfer to any of the Office Project site
under the control of the company in India.

6. You will not save with the prior permission of the Competent
Authority, apply for any appointment outside the company.
You will have to withdraw your application for appointment G
elsewhere made prior to the date of issue of these orders and
will not appear for interview or accept any employment it
offered.

7. You will not save with the express permission from the
company, engage in any trade or business or undertake any H
800 SUPREME COURT REPORTS [2007] l S.C.R.

A other work or any employment elsewhere full time or part time
while in the service of the company. :..:
8. In regard to any matters not specifically covered in the
foregoing paragraphs, you will be governed by the rules and
orders applicable to the employees of the company.
B 9. If any declaration given or information furnished by you
proves to be false, or it is- found that you have willfully .,
suppressed any material information you will be liable to -'<--
removal from services forthwith without any notice and without
assigning any reason therefore, notwithstanding any action
c taken against you as the Company may deem necessary.

For & on behalf of
Indian Railway Construction Co.Ltd.

-sd/-
"
D Regional Manager
IRCON-ANPARA
~-'---

Copy of information & necessary action to:

l. Group General Manager(T), IRCON, New Delhi."
E
12. Other appointment letters are on the same pattern. Therefore, no
useful purpose will be served by reproducing all of them. On the basis of
these letters learned counsel submitted that a perusal of these appointment
orders clearly shows that appointments were made by the Company and
they were directed to report to the Project Officer of the Company. It was
F submitted that after the necessary training and passing required examination
the incumbents were entitled to regular pay scale of Rs.260-400/- along with ~-
.... .
all allowances as per the rules of the company, that incumbent can be posted
at any where in India on any project, no employment could be taken up by
incumbent without prior permission of the company, that incumbent is not
required to engage in a trade or business, that they will be governed by the
G rules of the company, that group insurance was also taken out by the
company, that they were required to take oath of allegiance to the constitution.
On the basis of these salient features the learned counsel submitted that it
leads to only and only inference that the petitioners were employees of the '
Company and not of the Project. It was submitted that since each incumbent 1_-

H has to work on the Project and that they were directed to report to the
LAL MOHAMMAD 1·. INDIAN RAILWAY CONSTRUCTION CO. LTD. [A.K. MATHUR, J.] 801

project officer, that does not mean that they were employees of the project A
and not of the Company.

13. As against this, learned counsel Mr.Rao submitted that the
petitioners were never employed by the Company and they were employees
of the Project and they were only serving in the project and after completion
of the project they could not be regularized in the company. They were B
essentially employees of the Project and after completion of the Project, their
services automatically came to end and they were accordingly given notice
and compensation as per the Act. It was also submitted that Company's
regular appointment is governed by the rules known as IRCON Recruitment
Rules, 1979 (hereinafter referred to as the Rules of 1979). Learned counsel
submitted that as per the provisions of the Rules of 1979 regular recruitment c
in the company takes place as per these rules and in this connection learned
counsel especially invited our attention to Rules 4.1, 6.4, 6.4.1, 6.2.1, 7 .1, 8.1,
8.5, 8.7 12.1 and 12.2. which read as under:

"Rule 4.1 - These Rules shall apply to appointments by Direct
recruitment or deputation from Government or Public Sector
D
Companies or by departmental promotion to all posts in the Company
except those which are to be filled in by the Central Government.
These rules do not apply to daily rates staff.

Rule 6.2.1- Direct recruitment should ordinarily be resorted to in
E
cases where it is not possible to obtain the staff from Government
Department/Bodies and Public Sector on usual deputation terms. A
list of categories in which direct recruitment can be made is placed
at Annexure 'A'. For this purpose, the staff employed against
short term vacancies or specific projects on daily rated basis may
also be considered. F
Rule 6.4 - Short term appointment.

- Rule 6.4.1 -For short term requirements, viz. requirements not
covered by regular posts, if these cannot be managed by the
regular staff employed by the Company, or by staff on deputation G
from Government Departmental/Bodies and public sectors, daily
rated staff may be engaged at the rates and conditions to be
decided by the Managing Director, keeping in view the directives
issued by the Government from time to time, unless the powers are
delegated.
H
802 SUPREME COURT REPORTS [2007] I S.C.R

A Rule 7.1 - Pay scale qualifications, experience, age limit for each ~
category of post shall be as indicated in Annexure 'B', forming part
of these Rules.

Rule 8.1 - Appointment on direct basis shall be made though the
Employment Exchange or in the manner as permitted by provisions
B of the Employment Exchange (Comptilsory Notification of Vacancies) .
Act, 1959.
\"-

Rule 8.5 - All applications received against a specific notification/
advertisement will be subjected to a careful scrutiny by the
c Department concerned in the Corporate Office for the specific
purpose ofchecking the eligibility of each candidate. In the case
of Scheduled Castes/Tribes, ex-servicemen, etc. applications must
be accompanied by a certificate to that effect from the competent
authority.
Q _, ___
Rule 8.7 - Selection will be subject to written test and interview
or written test or interview only depending. upon the demands of
the post. Decision on this aspect shall be taken by the competent
authority conforming to the general practice in vogue with suitable
modification wherever called for, before the notification is issued
E for the recruitment to the posts.

Rule 12.1- Absorption of Deputationists:

Rule 12.1.1- Deputationists working in the Company shall have the
option to seek pennanent absorption in the services of the company
F ~

in accordance with the instructions issued by the BPE from time to ~

time. For absorption of such personnel, suitable selection Committee
will be constituted on each occasion and their recommendations are
to be considered by the Managing Director or Board of Directors,
as the case may be.
G
Rule 12.2- Confirmation/Absorption of others.
......
Rule 12.2.1- Staff directly recruited or working at present on daily !-

rates basis may also be considered for confirmation/absorption "'
H against regular posts subject to their being screened by the
LAL MOHAMMAD v. INDIAN RAILWAY CONSTRUCTION CO. LTD. [A.K. MATHUR, J.] 803

Selection Committee set up for this purpose, keeping in view such A
instructions of the Company as may have been issued from time to
time, and subject to vacancies being available."

122. l.(i)- Regularisation of persons appointed on short term
basis.
B
the Selection shall comprise of written examination and/or interview.
In case the selection is held on the basis of written examination and
-1 interview, the following norms shall be followed:

Written Interview Aggregate
Exam. (PASR) c
Professional
Ability
Service 15 10
Record
Max. Marks 57 25 100 D
Qualifying Gen.40% 40% 500/o
Marks 30marks lOmarks
SC/ST30% 30% 40%
22.5 Marks 7.5 Marks
(ii)-Generally the regularization of persons appointed in any grade E
on short term or contract basis may be considered after the
incumbent has put in a minimum period of satisfactory service
specified from time to time for each category depending on vacancies
subject to minimum eligibility criteria, indicated in the table below:

> Eligibility Criteria for Regularization
F
f

Category Grade Qualification
l.JE/JFO 1400- Diploma
2300/CDA (3 years Course)
1400-2300/IDA of relevant discipline or equivalent G
2.Site Engineer 1600- Degree in Engineering

.... 1900-3040/IDA
2660/CDA
Equivalent, ~
of relevant discipline

Diploma (3 years course) of relevant discipline with 9 years
experience. H
-t
804 SUPREME COURT REPORTS [2007] I S.C.R.

A 3.Section Officer 1640- B.Com.& /
_I.e.
2900/CDA Intermediate /CA/ICWA ,4---
1900-3050/IDA or equivalent or Appendix-II Examination
4.Asstt. 2000- B.Com. and
Manager/A/C or 3500/CDAor CA/ICWA(Final)
equivalent IDA equivalent
B
scale
5.Asstt. Manager/ 2000-3500/
Pers. & Admn., CDA
i) Graduate.
,_
ii) PG Diploma in Personnel/
or. equivalent Business Management
IDA scale r'
c equivalent from
recognized institution or
a
~

Post Graduate degree in
Social Sciences from ~
recognized universities '
institutions . )
D
iii) In other cases, if any,
+~-
the Managing Director may
decide the grade to which
contract, short term
E employee may be
considered for
regularization, subject to
vacancies being available.
Such regulations, if any,
may be considered after
F two years of contract short ...
_,
term service if requirement
continues.
)
iv) 50% of the service put
G in on short term basis/
contract basis before the
date actual regularization
will be reckoned for
weightage for the purpose
of seniority. However, the
. '•

H
LAL MOHAMMAD r. INDIAN RAILWAY CONSTRUCTION CO. LTD. [A.K. MATHUR, J.] 805

Committee may recommend A
less than 50% service, for
reasons to be recorded.
Under no circumstances,
the weightage for the
seniority will be more than
50% or maximum of3 years.
B
This will be reckoned on
the basis of half year for
each completed year of
service, fraction of an year
being ignored. c
In the case of persons who are not found fit for regularization
in the grade of initial appointment but are found fit for regularization
in the lower grade, the seniority may be assigned in the lower grade
by giving 50% credit for the service in the initial grade of
appointment subject to maximum of 3 years. This would be subject D
to his acceptance of regularization in lower grade in writing.

12.2.2- If the posts, against which deputationists and other
staff are working are still being operated on temporary basis
but are evidently justified to be retained on permanent basis, E
their conversion in permanent posts may first be decided
before the question of absorption of staff working is considered
against them."

14. Learned counsel further submitted that in fact the company has
> made short term advertisement and asked these project employees to apply F
for their regular recruitment under these rules and in pursuance of that large
number of people applied. Some of the adhoc employees of the Projects
were absorbed on their successful selection. In this connection learned
counsel made a reference of Shri Prabir Basak who was one of the persons
like the appellants and who after going through the process of selection as G
per the rules was selected and appointed but the appellants did not appear
in any of the recruitment test. Therefore, they could not be appointed or
regularized on that basis. Learned counsel also submitted that in the writ
petition one of the prayers was to treat these petitioners as pennanent
employees. ln this connection learned counsel has read out clause 7 in the
H
~-

806 SUPREME COURT REPORTS (2007] I S.C.R.

,
t
A writ petition. Learned counsel submitted that since the recruitment under the ...._ ...
>
Company is governed by the Rules of 1979 and these persons were given
an opportunity to appear in the test and on their selection they could have
been appointed as some of them were appointed. This factual aspect has not
been disputed by the learned counsel for the appellants.

B 15. We have bestowed our best of consideration to the rival contentions
of the parties. We regret to say that we have failed to be persuaded by the '1
submissions of the learned counsel for the appellants to infer that the -\- .,_
appellants were the employees of the Company and not of Project. In the
appointment orders it was mentioned that appointment was adhoc and they
c were directed to join the Project. Therefore, these conditions, which have
~
been stressed by the learned counsel does not lead us to the inference that
incumbents were employees of the company. Employment to the company ~
is regulated by the service mies and none of the posts which has been I
mentioned against these persons is in the list annexed to the Schedule
appended to the Rules. That apart an opportunity was given to the
D
petitioners to appear for regular selection in the company and they failed to
avail that opportunity. Therefore, from these facts, it is more than apparent +--
that the petitioners were not employees of the company but they were
employees of the Project. Since it is a public sector company and it is
,.,
"r
,
governed by its own rules and those rules clearly contemplate a method for (

E recruitment into service and that opportunity was given to the incumbents
for being regularly recruited in the company but they failed to avail the same.
Simply because the company had said that these persons will not be
permitted to take any other employment or business without prior permission,
their group insurance was made and were placed in the pay scale of the t

F company that does not mean that they will be deemed to be employees of ""-
the Company. Simply because they adopted the basis for giving them the -t
benefit of the Company as was being given to other employees who have
been duly recruited in accordance with the rules, by such conferment of
benefit will not be deemed to be employees of the Company. The regular
f-
recruitment Rules have been framed with the approval of the Government,
G as the company is a public sector undertaking. These rules may not be
given ~ status of statutory rules but those rules are binding on the company
and company cannot take departure from acting under the rules, for all
purposes, they are almost analogous to the statutory rules. These rules have
a legal sanctity as they have been framed in terms of memorandum and
-t !
H articles of association with the approval of the Government. Therefore, they ,_
I-=
LAL MOHAMMAD 1·. INDIAN RAILWAY CONSTRUCTION CO. l TD. [A.K. MATHUR, J.] 807

have a binding force for the company and company cannot make a departure A
for recruitment except than following these rules. As per the provisions
pointed out above, there is methodology provided under the rules and that
was not followed in the present case. They were appointed being the local
hand as workmen were required for completion of the project and therefore
they were appointed for the project and as soon as the project was over
they cannot claim as a matter of right to be permanent employees or to be
B
regularized in the company. A distinction has to be borne in mind who is
employee of the company and who is employee of the Project. The services
of project employees come to an end as soon as the project is over and
they cannot be given permanent status. Since they were employees of the
project their services have to be terminated after completion of the project. C
In this connection the Full Bench has considered the necessary provisions
of the rules and after a detailed discussion on the matter has rightly come
, to the conclusion that they are employees of the project and they are not
the employees of the company. There is no question of violation of Articles
I 4, I 6 & 2 l of the Constitution of India in the matter as they were employees D
of the project and at the end of the project they have taken their benefits
as are admissible in accordance with the Industrial Disputes Act. Therefore,
there is no violation of Articles I 4, I 6 & 2 I of the Constitution of India. So
far as question with regard to Article 12 is concerned, the same is not
relevant in this matter because the whole service conditions of the employees
are governed by the Industrial Disputes Act. Therefore, it is purely an E
academic question whether company is a State within the meaning of Article
12 or not.

16. Now question arises what benefit could be given to the petitioners,
in this connection reference may be made to Section 25-0 read with Section p
25-FFF of the Act as it has been held by this Court that Chapter V-B is
applicable to these proceedings. Section 25-0 lays down procedure for
closing down an undertaking and proviso to sub-section (I) of Section
25-0 clearly lays down that nothing in this sub-section shall apply to an
undertaking set up for construction of buildings, bridges, roads, canals,
dams, or for other construction work. Section 25-0 is reproduced as under:- G

"25-0. Procedure for closing down an undertaking:-

( l) An employer who intends to close down an undertaking
of an industrial establishment to which this Chapter applies H
808 SUPREME COURT REPORTS [2007] l S.C.R.

A shall, in the prescribed manner, apply, for prior permission at
least ninety days before the date on which the intended
closure is to become effective, to the appropriate government,
stating clearly the reasons for the intended closure of the
undertaking and copy of such application shall also be served
simultaneously on the representatives of the workmen in the
B prescribed manner;

PROVIDED that nothing in this sub-section shall apply to an
undertaking set up for the construction of buildings, bridges,
roads, canals, dams, or for other construction work.
c }

(2) Where an application for permission has been made under
sub-section (1 ), the appropriate government, after making
sud, enquiry as it thinks fit and after giving a reasonable
opportunity of being heard to the employer, the work.men and
the persons interested in such closure may, having regards to
D the genuineness and adequacy of the reasons stated by the
employer, the interests of the general public and all other
relevant factors, by order and for reasons to be recorded in
writing, grant or refused to grant such permission and a copy
of such order shall be communicated to the employer and the
E workmen.

(3) Where an application has been made under sub-section (1)
and the appropriate government does not communicate the
order granting or refusing to grant permission to the employer
within a period of sixty days from the date on which such
F -;·
application is made, the permission applied for shall be deemed
to have been granted on the expiration of the said period of
sixty days.

(4) An order of the appropriate government granting or
G refusing to grant permission shall, subject to the provisions
of sub-section (5), be final and binding on all the parties and
shall remain in force for one year from the date of such order.

(5) The appropriate government may, either on its own motion
H or on the application made by the employer or any workman,
LAL MOHAMMAD v. INDIAN RAILWAY CONSTRUCTION CO.LTD. [A.K. MATHUR, J.) 809

review its order granting or refusing to grant permission under A
sub-section (2) or refer the matter to a Tribunal for adjudication:

PROVIDED that where a reference has been made to a
Tribunal under this sub-section, it shall pass an award within
a period of thirty days from the date of such reference.
B
(6) Where no application for permission under sub-section (I)
is made within the period specified therein, or where the
permission for closure has been refused, the closure of the
undertaking shall be deemed to be illegal from the date of
closure and the workmen shall be entitled to all the benefits C
under any law for the time being in force as if the up.dertaking
had not been closed down.

(7) Notwithstanding anything contained in the foregoing
provisions of this section, the appropriate government may, D
if it is satisfied that owing to such exceptional circumstances
as accident in the undertaking or death of the employer or the
like it is necessary so to do, by order, direct that the provisions
of sub-section ( 1) shall not apply in relation to such undertaking
for such period as may be specified in the order.
E
(8) Where an undertaking is permitted to be closed
down under sub-section (2) or where permission for
closure is deemed to be granted under sub-section (3) every
workman who is employed in that undertaking immediately
before the date of application for permission under this F
section, shall be entitled to receive compensation which shall
be eq~ivalent to fifteen days' average pay for every completed
year of continuous service or any part thereof in excess of six
months."

17. Since this was a project for construction of some railway lines, G
therefore, the rigour of sub-section ( 1) for seeking a permission of Government
is not required in the present case. Once the project is completed the service
of the incumbent comes to an end. But the legislature in its wisdom has
provided relief for such class of workmen on completion of project under
section 25-FFF. Sub-section (2) of Section 25-FFF provides compensation H
810 SUPREME COURT REPORTS [2007] I S.C.R.

A for such class of workmen. Sub-section (2) of Section 25-FFF reads as
under:-

"(2) Where any undertaking set up for the construction of buildings,
bridges, roads, canals, dams, or other construction .work is closed
down oh account of the completion of the work within two years
B from the date on which the undertaking had been set up, no
workman employed therein shall be entitled to any compensation
under clause (b) of Section 25F, but if the construction work is not
so completed within two years, he shall be entitled to notice and
compensation under that section for every completed year of
c continuous service or any part thereof in excess of six months."

18. According to sub-section (2) when such construction work is
closed down and on completion of work within two years from the date on
which the undertaking had been set up, the workman employed therein shall
not be entitled to compensation under clause (b) of Section 25F, but if the
D construction work is not completed within two years he shall be entitled to
notice and compensation under that section for every completed year of
continuous service or any part thereof in excess of six months.

19. Mr. Rao learned counsel for the Company submitted that the
E position of the company vis-a-vis these workmen should not be worse when
their undertaking is closed with the permission. He submitted that in fact
sub-section (8) of Section 25-0 clearly lays down that if the :permission had
been granted for closure then every workman employed therein shall be
entitled to receive compensation, which will be equivalent to 15 days'
p average pay for every completed year of continuous service or any part
thereof in excess of six months. Learned counsel submitted that position of ,.__
the company where the project is completed cannot be said to be worse than 4

the unde1iaking, which is closed with the permission where the compensation
is only awarded as mentioned in sub-section (8) of Section 25-0. We regret
to say that we cannot agree with the submission of the learned counsel for
G the respondent company. The legislature in its wisdom has especially
provided on closure of such projects, a special benefit to such workers
under sub-section (2) of Section 25-FFF in the event the company has
completed construction after more than two years, the workman will be
entitled to notice and compensation under that section 25-F for every '
--\ -
H completed year of continuous service or any part thereof in excess of six
LAL MOHAMMAD r. INDIAN RAILWAY CONSTRUCTION CO. LTD. [A.K. MATHUR. l] 811

.. '
..).
months. This is the legislative mandate and the intention of the legislature
is more than apparent. Since this is legislative mandate and we cannot sit
A

over the matter to decide that whether the position of the company, which
closed down the undertaking with the permission and company which
is closed down because of the completion of the project should not
be worse. Since it is a legislative mandate the company has to comply
with those provisions. Therefore, these incumbents have already been
B
given notice and if the compensation has not been determined in terms
of Section 25-F then that should be calculated and paid to the workers if
not paid so far. They have been directed to collect their dues from the
office. If that amount has not been collected by them then it will be ope1~
to them to collect same or any shortfall that will be made good by the C
company. So far as the termination of the incumbents is concerned after
completion of the project they have no right to continue. They are only
entitled to notice and compensation to be determined under Section 25-F.
Shortfall of _period of notice or compensation will not render termination bad
on that count.
D
- -+ 20. In this connection learned counsel has also invited our attention

- to a decision of this Court in Punjab Land Development & Reclamation
Corporation Ltd., Chandigarh v. Presiding Officer, Labour Co:1rt.
Chandigarh & Ors. reported in [ 1990] 3 SCC 682 where the similar question
was considered by the Constitution Bench of this Court and it was E
observed,

"Thus, by this Amendment Act the Parliament clearly provided that
though such termination may not have been retrenchment
technically so-called, as decided by this Court, nevertheless the F
employees in question whose services were terminated by the
transfer or closure of the undertaking would be entitled to
compensation, as if the said termination was retrenchment. As
it has been observed, the words "as if' brought out the
legal distinction between retrenchment defined by Section 2(00) as
it was interpreted by this Court and termination of services G
consequent upon transfer of the undertaking. In other words, the
provision was that though termination of services on transfer or
closure of the undertaking may not be retrenchment, the workmen
concerned were entitled to compensation as if the said tennination
was retrenchment." H
812 SUPREME COURT REPORTS [2007) l S.C.R.

A 21. This view has been further reaffirmed by this Court in S.MNilajkar
& Ors. v. Telcom District Manager, Karnataka reported in [2003) 4 SCC 27.
It was observed,

'!It is pertinent to note that in Hariprasad Shivshanker Shukla v.
A.D. Divelkar, AIR 1957 SC 121 the Supreme Court held that
B "retrenchment" as defined in Section 2(oo) and as used in Section
25-F has no wider meaning than the ordinary accepted connotation
of the word, that is, discharge of surplus labour or staff by the
employer for any reason whatsoever otherwise than by way of
punishment inflicted in disciplinary action. Retrenchment was held
c to have no application where the services of all workmen were
terminated by the employer on a real and bona fide closure of
business or on the business or undertaking being taken over by
another employer. The abovesaid view of the law taken by the
Supreme Court resulted in promulgation of the Industrial Disputes
(Amendment) Ordinance, 1957 with effect from 27-4-1957, later on
D
replaced by an Act of Parliament (Act 18of1957) with effect from
6-6-1957 whereby Section 25-FF and Section 25-FFF were introduced
in the body of the Industrial Disputes Act, 1957. Section 25-FF
deals with the case of transfer of undertakings. The term
"undertaking" is not defined in the Act. The relevant provisions
E use the term "industry". Undertaking is a concept narrower than
industry. An undertaking may be a part of the whole, that is, the
industry. It carries a restricted meaning. (See Bangalore Water
Supply & Sewerage Board v. A. Rajappa, [1978) 2 SCC 213 and
Hindustan Steel Ltd v. Workmen, [1973) 3 SCC 564) With this
F amendment it is clear that closure of a project or scheme by the
State Government would be covered by closing down of an
-+
undertaking within the meaning of Section 25-FFF. The workman
would therefore be entitled to notice and compensation in accordance
with the provisions of Section 25-F though the right of the employer
to close the undertaking for any reason whatsoever cannot be
G question. Compliance with Section 25-F shall be subject to such
relaxations as are provided by Section 25-FFF. The undertaking
having been closed on account of unavoidable circumstances
beyond the control of the employer i.e. by its own force as it was J.
--\
designed and destined to have a limited life only, the compensation
H payable to the workman under clause (b) of Section 25-F shall not
LAL MOHAMMAD 1•. INDIAN RAILWAY CONSTRUCTION CO. LTD. [A.K. MATHUR, J.) 813

..
. ..).
exceed his average pay for three months. This is so because of A
failure on the part of the respondent employer to allege and prove
that the termination of employment fell within sub-clause (bb) of
clause (oo) of Section 2 of the Act."

22. Therefore, in view of the legislative history as mentioned above, it
clearly stipulates that Section 25-FFF was in fact incorporated in order to
B
give benefit to the workers, where an undertaking is closed because of
completion of the project or on account of transfer. Therefore, the contention
of Mr.Rao learned counsel cannot be accepted. In this connection our
attention was also invited to a decision of this Court in A. Umarani v.
Registrar, Cooperative Societies & Ors. reporti;:d in [2004] 7 SCC 112 C
wherein it was held that illegal appointment cannot be regularized.

23. Learned counsel has invited our attention to a decision of this
Court in Hindustan Steel Works Construction Ltd. & Ors. v. Hindustan
Steel Works Construction Ltd. Employees' Union, Hyderabad & Anr. D
reported in [1995] 3 sec 474 wherein when one of the unit of the Hindustan
Steel Works Construction Ltd. was closed down and similar relief was
sought by the employees of the Hindustan undertaking and in that context
this Court observed that on closure of unit at Hyderabad the workmen were
not entitled as a matter of right to be absorbed, and it was held:
E
"The question whether the units at Hyderabad are independent
establishments or parts of a larger establishment is not a pure
question of fact. The tests laid down in this behalf in the decisions
of the Supreme Court need not all be satisfied in every case. One
has also to look to the nature and character of the undertaking F
.>
while deciding the question. The tests evolved are merely to serve
as guidelines. The appellant is a government company wholly
owned and controlled by the Government of India. Its job is to
undertake construction works both in India and abroad. The
construction works are not permanent works in the sense that as
soon as the construction work is over, the establishment comes to G
an end at that place. In such a case, functional integrality assumes

- significance. The nature of the construction work may also differ
from work to work or place to place, as the case may be. It is not
even suggested by the respondent-Union that there is any functional
integrality between the several units or several construction works H
814 SUPREME COURT REPORTS (2007] l S.C.R.

A undertaken by the appellant. It is not suggested that closure of one
leads to the closure of others. There is no proximity between the
several units/works undertaken by the appellant; they are spread
all over India, indeed all over the world. It would thus appear that
each of the works or construction projects undertaken by the
appellant represent distinct establishments and did not constitute
B units of a single establishment. The mere fact that Management
reserved to itself the liberty of transferring the employees from one
place to another did not mean that all the units of the appellant
constituted one single establishment. In the case of a construction
company like the appellant which undertakes construction works
c wherever awarded, does that work and winds up its establishment
there and particularly where a number of local persons have to be
and are appointed for the purpose of a particular work, mere unity
of ownership, management and con~rol are not of much significance.
Having regard to the facts and circumstances of this case and the
material on record, the conclusion is inevitable that the units at
D
Hyderabad were distinct establishments. Once this is so, workmen
of the said units had no right to demand absorption in other units
on the Hyderabad units completing their job."

24. Therefore, this case is nearer to our case in hand that once this
E project is completed then it is not incumbent on the company to necessarily
employ these persons at other projects in any other part of the country.

25. Our attention was also invited to a decision of this Court in MD.
U.P Land Development Corporation & Anr. v. Amar Singh & Ors. reported
F in (2003] 5 sec 388 wherein it has been held that employees working
under a scheme/project have no vested right so as to claim regularisation
of their services with regular pay scales. It was observed that when the
scheme/project comes to an end, the services of the employees working the
project also come to an end.

G 26. Learned counsel has invited our attention to a decision of this
Court in Malzendra L. Jain and Ors. v. Indore Development Authority &
Ors. reported in [2005] 1 SCC 639. This was a case ofregularization of illegal
appointments. This has no relevance so far as our case in hand is concerned

H 27. Before parting with the case, we may clarif)' that if any compensation
LAL MOHAMMAD'" INDIAN RAILWAY CONSTRUCTION CO. LTD. [A.K. MATH1JR. J] 815

amount has not been paid to the workers then that should be determined A
and be paid to them forthwith, if not paid so far.

28. Therefore, in the light of discussion made above, we are of the
opinion that the view taken by the Full Bench is correct. The petitioners are
1.ot entitled to be regularise their services in the Company and they are not
employees of Company. They are only entitled to compensation as indicated B
above. The above appeals and writ petitions f:led by workers are dismissed.
No order as to cost.

N.J. Appeals dismissed.

.. ;.

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