Holding

Company paid staff are a separate class not entitled to automatic absorption or equal pay, the 1999 Scheme is constitutionally valid for up to 50% of Group C vacancies, and the Government must frame a similar scheme for Group D while the High Court directions for super‑numerary posts are set aside.

Summary

The case concerned employees engaged by Official Liquidators under Rule 308 of the Companies (Court) Rules, 1959 who were paid from the liquidated company's fund ("company paid staff"). They sought regularisation, absorption into the regular cadre of the Department of Company Affairs and parity in pay with Central Government employees. The Supreme Court held that these employees form a distinct class, not appointed under the constitutional recruitment rules, and therefore have no automatic right to be absorbed against sanctioned Group C or D posts or to receive equal pay. The Court affirmed the validity of the 1999 Scheme, which permits absorption of up to 50% of vacancies in the direct‑recruitment quota of Group C posts, but found it silent on Group D and directed the Government to frame a similar scheme for Group D. The doctrine of legitimate expectation was rejected, and the High Court directions for creating super‑numerary posts were set aside. The appeals were allowed, the earlier orders were vacated, and the Government was ordered to devise a Group D absorption scheme and consider increasing the emoluments of the company paid staff.

Issues considered

The entitlement of company paid staff to regularisation/absorption against sanctioned Group C and Group D posts of the Department of Company Affairs.
Whether the principle of equal pay for equal work obliges the Government to grant parity in salary and allowances to company paid staff.
The constitutional validity of the 1999 Scheme and its compatibility with Articles 14, 16 and 309 of the Constitution.
The applicability of the doctrine of legitimate expectation to the claimants.
The legality of the High Courts' directions to create super‑numerary posts for absorption of all company paid staff.

Legislation cited

Companies Act, 1956s. Section 643
Companies (Court) Rules, 1959s. Rule 308, s. Rule 309
Constitution of Indias. Article 14, s. Article 141, s. Article 16, s. Article 309

Subjects

regularisationabsorptionequal pay for equal worklegitimate expectationjudicial disciplineadministrative lawCompanies (Court) Rulespublic serviceconstitutional law

Judgment

[2008] 15 S.C.R. 331

OFFICIAL LIQUIDATOR A
~
v.
DAYANAND AND OTHERS
(Civil Appeal No. 2985 of 2007)

NOVEMBER 4, 2008
B
[8.N. AGRAWAL, HARJIT SINGH BEDI AND
G.S. SINGHVI, JJ.]
..
,_ 'r
Service Law:
c
Companies (Court) Rules, 1959:

rr. 308 and 309 - Persons engaged by Official
Liquidators and paid from company fund - Claiming
regularization, and parity in salary and allowances as paid to
employees appointed by Government of India against D
sanctioned posts - Scheme framed by Government of India
in 1999 on the model of the 1978 Scheme for absorption of
suitable and eligible company paid staff against 50% of
vacancies in direct recruitment quota of Group 'C' posts -

.. Challenged, and absorption of all the company paid staff E
sought - HELD: Company paid staff constitute a separate and
distinct class - In view of nature of their employment, they are
entitled neither to absorption against sanctioned posts, as of
.,.. right, nor to parity in pay scales and allowances admissible
to regular employees - The 1999 Scheme does not suffer F
from any infirmity - However, failure on the part of the
Government of India to frame. a similar scheme for absorption
of company paid staff in Group 0 posts has resulted in
unintended discrimination qua one section of company paid
employees - Therefore, Government of India directed to G
frame a Scheme for absorption of eligible and suitable
company paid employees in Group 0 posts on the model of
.i
the 1999 Scheme - Keeping in view the huge escalation of
living cost, Official Liquidators are directed to mdve the Courts
331 H
332 SUPREME COURT REPORTS [2008] 15 S.C.R.

A concerned for increasing the emoluments of the Company
paid staff - Such requests would be sympathetically
considered subject to availability of funds - Principle of equal
pay for equal work - Constitution of India, 1950 - Articles 14
and 16.
B
Regularization - HELD: In Uma Devi's 1 case the
Constitution Bench of Supreme Court has laid down that there
is no fundamental right in those who have been employed on
daily wages, temporarily or on contractual basis, to claim
C absorption in service -:- The law laid down in Uma Devi's case
is binding on all courts including Supreme Court till the same
is overruled by a larger Bench - The observation of a two-
Judge Bench of Supreme Court in Pooran Chand Pandey's 2
case that the decision in Uma Devi's case cannot be applied
to a case where regularization has been sought for on the
-D ground of Article 14 of the Constitution was not called for and
the same should be read as obiter and not binding -
Precedent - Constitution of India, 1950 - Article 141.

JUDICIAL DISCIPLINE - Held: Is sine qua non for
E ef+ective and efficient functioning ·of judicial system as also
for sustaining the system - Benches of High Courts and
Supreme Court ignoring decisions area-ordinate Benches or
larger Benches and High Courts bypassing law laid down by
Supreme Court illustrate non-adherence to rule of judicial
F discipline - Disrespect to constitutional ethos and breach of
discipline have grave impact on credibility ofjudicial institution
and encourages chance litigation - Predictability and certainty
is the hallmark of judicial jurisprudence - Stare decisis.

ADMINISTRATIVE LAW:
G
..judicial Review - Policy decision by Government to -·
create/abolish posts or cadres - HELD: Power of judicial

1. State of Kamataka v. Uma Devi, [2006] 3 SCR.
H 2. UP. SEB. v. Pooran Chand Pandey, [2007] 10 SCR 920.
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 333

_,-1 review can be exercised in such matters only if it is shown that A
the action of the employer is contrary to any constitutional or
statutory provisions or is patently arbitrary or vitiated by ma/a
fides - In the instant case, directions given by High Courts
for creation of supernumerary posts to facilitate absorption of
company paid staff are unsustainable and are set aside. B
Legitimate Expectation - Held: At the root of legitimate
expectation is the constitutional principle of rule of law, which '
~

'r requires regularity, predictability and certainty in government
dealings with public - In the instant case, there is nothing to ,
show that any competent authority had ever given any c
assurance to company paid staff that they wo 11ld get absorbed ,
against sanctioned posts or that there would be no abolition
of posts meant to be filled by direct recruitment- On the other
hand, they knew that their employment would come to an end
on expiry of the tenure specified in the Jetter of appointment D
or on cessation of liquidation proceedings - Therefore,
doctrine of legitimate expectation cannot be invoked.

In the offices of Official Liquidators attached to
·different High Courts there were two categories of E
emplo}1ees: (i) those recruited in terms of rules framed
under the proviso to Article 309 of the Constitution of
India, against the posts sanctioned by the Department of
Company Affairs, Government of India,\ and paid salary
r· and allowances from the Consolidated Fu'nd of India; and F
(2) the persons engaged by the Official Liquidators
pursuant to sanction accorded by the Court concerned
under Rule 308 of the Companies (Court) Rules, 1~9 and
paid from the company fund. In the year 1978, Ministry
of Law, Justice and Company Affairs, Government of
G
India framed a Scheme providing for absorption of
suitable and eligible company paid staff to lhe extent of
~
..... 50% of vacancies in direct recruitment quota of Group C
posts.

Writ petitions were filed by the Company paid staff H
334 SUPREME COURT REPORTS [2008] 15 S.C.R.

A before the Calcutta High Court and the Kerala High Court
claiming, inter alia, status of and parity in salary and
allowances with permanent Central Government
employees appointed in the office of Official Liquidators.
Both the High Courts held in favour of the writ petitioners.
B Appeals were filed before the Supreme Court by the
Government of India and the Official Liquidators. A writ
petition, numbered as W.P.(C) No. 473/88, filed by the
Company paid staff engaged by the Official Liquidator
attached to the Delhi High Court was also transferred to
c the Supreme Court and heard alongwith the appeals. The
Court 3 while dismissing the appeals filed by the
Government of India and allowing the writ petition of the
company paid staff, stayed operation of the judgments of
the High Courts and the order in the writ petition, and
gave opportunity to the Central Government to absorb
0
the company paid staff by framing a Scheme modeled on
the line of the 1978 Scheme within six months. The
Government of India framed and notified the new scheme
called the '1999 Scheme' for absorption of the company
E paid staff against 50% of vacancies in direct recruitment
quota. The authorities concerned undertook the exercise
of absorption of the company paid staff. Meanwhile writ
petitions were filed in the Calcutta High Court claiming
absorption of all the company paid staff in the regular
cadres and to treat them at par with Central Government
F employees. A similar writ petition was filed before the
Delhi High Court wherein a further prayer was made for
absorption of company paid staff in Group D posts also.
The High Courts held in favour of the writ petitioners
observing that the Supreme Court in the earlier decision
G had given directions to absorb all the company paid staff.
Aggrieved, the Official Liquidators filed the instant
appeals.

3. Govt. of India and Ors. v. Court Liquidator's Employees Association and
H Others. (1999) 2 Suppl. SCR 62 = [1999) 8 SCC 560.
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 335

""....-t Allowing the appeals, the Court A
......,,,,

HELD: 1.1. This Court in the earlier case of Court
Liquidator's Employees Association* not only gave an
opportunity to the Government of India to frame and
implement a new scheme modeled on the 1978 Scheme ,
B
but also stayed the operation of the orders impugned in
the appeals and the one passed in the writ petition. It ·
•\-- would not be correct to say that this Court endorsed the
directions given by the Calcutta High Court and the '
Kerala High Court for absorption of company paid staff
without any rider. [Para 32] [379-C, D, E]
c
*Govt. of India and Ors. v. Court Liquidator's Employees
Association and Others, [1999] 2 Suppl. SCR 62 = [1999] ,
8 sec 560, referred to
D
1.2. The use of the words "failing which the
... judgments under appeal and the order in WP (C) No.4731
88 will stand confirmed" in paragraph 25 of the judgment
in Court Liquidators' Employees Association case, leaves no
manner of doubt that the orders passed by the High
E
Courts and the one passed by this Court in the writ
... petition were to become effective only if the Government
of India had not framed new scheme modeled on the
1978 Scheme. Government of India not only framed and
..,. notified the 1999 Scheme within the time given by the
Court, but also issued guidelines for implementation of F
·- the same. Therefore, the orders passed by the Calcutta
High Court and the Kerala High Court and the direction
given by this Court in the writ petition will be deemed to
have become ineffective and inoperative and the
respondents cannot derive any benefit from those orders G
and directions. [Para 32] [379-F, G, H; 380-A]

2.1. The respondents are not entitled to absorption
against the sanctioned posts in Group C of the
Department of Company Affairs, Government of India, as H
336 SUPREME COURT REPORTS [2008] 15 S.C.R.

A of right. It is not in dispute that the respondents were
engaged by the Official Liquidators pursuant to the
sanction accorded by the Courts concerned under Rule
308 of the Companies (Court) Rules 1959 and, from the
inception of their employment, they are being paid from
B the fund created by disposal of the assets of the
companies in liquidation. They were neither selected in
accordance with the procedure prescribed by the rules
framed under the proviso to Article 309 of the
Constitution nor were they appointed against the posts
c sanctioned by the Government of India. It is thus clear that
the company paid staff constitute a separate and distinct
class. Therefore, they cannot be heard to complain
violation ofArticles 14 and 16 of the Constitution on the ·
ground that even after having worked for more than one
decade, they have not been absorbed in the regular
0
cadre, under the Government. [Para 34, 35 and 92] [381-
C;-382-A-D; 425-F, G] + .
2.2. In Secretary, State of Karnataka v. Uma Devi* the
Constitution Bench of this Court has held that there is no
E fundamental right in those who have been employed on
daily wages or temporarily or on contractual basis, to J
claim absorption in service. The Constitution Bench
clarified that the earlier decisions which run counter to
the principlesI settled by it stood denuded of their status
F as precedents. [Paras 52 and 54] [396-D; 398-C]

*State of Karnataka v. Uma Devi, [2006] 3 SCR 953 =
[2006] 4 SCC 1; A. Umarani v. Registrar, Cooperative
Societies, [2004] 7 SCC 112; Jawaharlal Nehru
G Technological University v. T. Sumalatha (Smt.) and Others,
[2003] 10 SCC 405; Director, Institute of Management
Development, U.P. v. Pushpa Srivastava, [1992] 3 SCR
=
712 [1992] 4 SCC 33; Dr. M.A. Haque and Others v. Union ~ ,
of India and Others, [1993] 2 SCR 1 = [1993] 2 sec 213; J
& K Public Service Commission v. Dr. ·Narinder Mohan,
H [1993) 3 Suppl. SCR 900 = [1994] 2 sec 630; Dr.
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 337

Arundhati Ajit Pargaonkar v. State of Maharashtra, [1994] A
Suppl. 3 SCC 380; Union of India v. Kishan Gopa/ Vya$,
(1996] 7 SCC 134; Union of India v. Moti Lal, [1996] 2 SCR
727 = [1996] 7 SCC 481; Hindustan Shipyard Ltd. v. Dr. P.
Sambasiva Rao, [1996] 7 SCC 499; State of H.P. v. Sures/1
Kumar Verma, [1996] 1 SCR 972 = [1996] 7 SCC 562; Dr. B
Surinder Singh Jamwal v. State of J&K, [1996] 3 Suppl. SCR
663 = [1996] 9 SCC 619; E. Ramakrishnan v. State of Kera/a,
[1996] 5 Suppl. SCR 533 = [1996] 10 SCC 565; Union of
India and Others v. Bishambar Dutt, [1996] 7 Suppl. SCR
650 =[1996] 11SCC341; Union oflndia v. MahenderSingh, c
[1996] 9 Suppl. SCR 199 = [1997] 1 sec 247; P.
Ravindran and Others v. Union Territory of Pondicherry anti
Others, [1996] 7 Suppl. SCR 1S8 = [1997] 1 SCC 350;
Ashwani Kumar and Others v. State of Bihar and Others,
[1997] 2 SCC 1; Santosh Kumar Verma and Others v. State D
of Bihar and Others, [1997] 2 sec 713; State of U.P. and
Others v. Ajay, (1997] 4 SCC 88; Patna University v. Dr. Arnita
Tiwari, [1997] 7 SCC 198; Madhyamik Shiksha Parishad v.
Anil Kumar Mishra, [2005] 5 SCC 122; Delhi Deve/opme:nt
Horticulture Employees' Union v. Delhi Administration, Delhi,
[1992] 1 SCR 565 = [1992] 4 sec 99, relied on.
E .

Narender Chadha v. Union of India, [1986] 1 SCR:
=
211 [1986] 2 SCC 157; Dhirendra Chamoli v. State of U.P.l
[1986) 1 SCC 637; Surinder Singh and Another v. Engineer-
in-Chief, CPWD and Others, [1986) 1 SCC 639; H. C. F
Puttaswamy v. Hon'ble Chief Justice of Karnataka High Court,
Bangalore, [1990) 2 Suppl. SCR 552 = [1991) 2 .Supp.
SCC 421; Bhagwati Prasad v. Delhi State Mineral
Development Corporation, [1990] 1 SCC .361; Jacob M.
Puthuparambil v. Kera/a Water Authority, [1991] 1 SCC 28; G
State of Haryana v. Piara Singh, [1992) 4 SCC 118; Randhir
Singh v. Union of India, (1982) 3 SCR 298 = [1982] 1 SCC
618; R.N. Nanjundappa v. T. Thimmiah, [1972]-tSCC 409l
Daily Rate Casual Labour v. Union of India, (1988] 1 SCR !

598 = [198~] 1 SCC 122; Bhagwati Prasad v. DeJhi State H
338 SUPREME COURT REPORTS [2008] 15 S.C.R.

A Mineral Development Corporaiion, [1990] 1 SCC 361;
Dharvvad District P. W.D. Literate Daily Wage Employees
Association and others v. State of Karnataka and others,
(1990] 1 SCR 544 = (1990] 2 sec 396 and State of
Haryana v.· Piara Singh, [1992] 4 SCC 118, held
B inapplicable.

2.3. By virtue of Article 141 of the Constitution, the
judgment in Uma Devi's case is binding on all the courts
including this Court till the same is overruled by a larger
Bench. However, a two-Judges Bench of this Court in
C Pooran Chand Pandey's case has attempted to dilute the
Constitution Bench judgment by suggesting that the said
decision cannot be applied to a case where regularization
has been sought for in pursuance of Article 14 of the
Constitution and that the same is in conflict with the ·
D judgment of the seven-Judges Bench in Maneka Gandhi's
case. 4 This was not called for. In view of the facts in
Pooran Chande Pandey's case, the two-Judges Bench -.,
had no occasion to make any adverse comment on the
binding character of the Constitution Bench judgment in
E Uma Devi's case. Therefore, the comments and
observations made in Pooran Chandra Pandey's case
should be read as obiter and the same should neither be
treated as binding by the High Courts, Tribunals and
other judicial fora nor should they be relied upon or made
F basis for bypassing the principles laid down by the -"f
Constitution Bench in Uma Devi's case. (Paras 57, 59
and 71] (400-H; 401-A-D; 403-B, 0, E; 411-E]

UP. SEB v. Pooran Chand Pandey, [2007] 10 SCR 920
G = [2007] 11 sec 92, overruled.

Indian Drugs and Pharamaceuticals Ltd. v. Workmen
(2007] 1 SCC 408; Gangadhar Pillai v. Siemens Ltd., [2007]
1 SCC 533; Kendriya Vidya/aya Sangathan v. L. V.

H 4. Maneka Gandhi v. Union of India, [1978] 2 SCR 621 [1978] 1 SCC 248.
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 339

Subramanyeswara, [2007] 5 SCC 326; Hindustan A
Aeronautics Ltd. v. Dan Bahadur Singh, [2007] 6 SCC 207,
referred to.

State of Orissa v. Sudhanshu Sekhar Misra, AIR (1968)
SC 647; State of Gujarat v. Ambica Quarry Works, [1987] 1
8
SCC 213; Bhavnagar University v. Palitana Sugar Mill Pvt.
Ltd., [2003] 2 SCC 111 and Bharat Petroleum Ltd. v. N.R.
Viramani, [2004] 8 SCC 579, cited.

2.4.There have been several instances of different
1

Benches of the High Courts not following the judgments/ C
orders of coordinate and even larger Benches. In some
cases, the High Courts have gone to the extent of
ignoring the law laid down by this Court without any
tangible reason. Likewise, there have been instances in
which smaller Benches of this Court have either ignored D
or bypassed the ratio of the judgments of the larger
Benches including the Constitution Benches. These
cases are illustrative of non-adherence to the rule of
judicial discipline. Discipline is sine qua non for effective
and efficient functioning of the judicial system as also for E
sustaining the system. Therefore, it has become
necessary to reiterate that disrespect to constitutional
ethos and breach of discipline have grave impact on the
credibility of judicial institution and encourages chance
litigation. Predictability and certainty is an important ! F
hallmark of judicial jurisprudence and increase in the
frequency of conflicting judgments of the superior
judiciary will do incalculable harm to the system
inasmuch as the courts at the grass root will not be able
to decide as to which of the judgments lays down the G
correct law and which one should be followed. [Para 60
and 70] [403-F, G; 410-D, E, F]

Mahadeolal Kanodia v. Administrator General of W.B.
1960 (3) SCR 578; Lala Shri Bhagwan v. Ram Chandra AIR
1965 SC 1767; Union of India v. Raghubir Singh 1989 (2) H
340 SUPREME COURT REPORTS [2008] 15 S.C.R.
;·

I
A SCC 754; Sundarjas Kanya/al Bhatija and others v. Collector, )-
Thane 1989 (3) SCC 396; Dr. Vijay Laxmi Sadho v. Jagdish
2001 (2) SCC 247; Pradip Chandra Parija and others v.
Pramod Chandra Patnaik and others 2002 (1) SCC 1; Bharat
Petroleum Corpn. Ltd. v. Mumbai Shramik Sangha 2001 (4) :..
B SCC 448; State of Bihar v. Kalika Kuer and others 2003 (5) ~
r
SCC 448; State of Punjab v. Devans Modern Breweries Ltd.
, I

2004 (11) SCC 26; Central Board of Dwaoodi Bohra
Community v. State of Maharashtra 2005 (2) SCC 673; State I
of UP. and others v. Jeet S. Bisht and another 2007 (6) SCC ~
>'~

c 586; UP. Gram Panchayat Adhikari Sangh v. Daya Ram
Saroj 2007 (2) SCC 138; Gair Board, Ernaku/am v. Indira
Devi P.S. 1998 (3) SCC 259 and Coir Board, Ernakulam,
Kera/a State v. Indira Devai P.S. 2000 (1) SCC 224, relied
on. ~

D 3.1. The 1999 Scheme does not suffer from any legal
or constitutional infirmity insofar as it provides for
lb
absorption of the company paid staff only to the extent ~

of 50% vacancies in direct recruitment quota of Group C
posts. Since the 1999 Scheme was framed by the
E Government of India in furtherance of the opportunity
given by this Court and no deviation is shown to have
been made from 1978 Scheme insofar as Group 'C' posts
are concerned, the same cannot be dubbed as arbitrary,
irrational or unreasonable, simply because all the
F company paid staff who were in position as on 27 .8.1999 ~

may not get absorbed in the regular cadre. [Para 38 and ; .
92] [384-E, F; 425-G, H]

3.2. However, it appears that from 1985 onwards
employees were also appointed who could be eligible for
G
absorption in Group D posts. The Government of India
should have, while framing the 1999 Scheme, taken
cognizance of the presence of such staff and made
>-.
appropriate provision for their absorption. Its failure to do
so has certainly resulted in unintended discrimi.nation
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 341

··qua one section of the company paid staff. The A
--~
,.,.
Government of India is, therefore, directed to frame a
scheme, modeled on the 1999 Scheme, also for
absorption of eligible and suitable employees against
Group D posts. [Para 93) [426-F, G; 427-A, BJ
8
4.1. The decision taken by the Government of India
to reduce the number of posts in direct recruitment quota
; and consequential abolition of posts in the Department
).· of Company Affairs is not vitiated by arbitrariness or
violation of the doctrine of equality or malafides. The plea
of the respondents that the Government of India has in c
the garb of implementing the policy decision taken in 2001
abolished a large number of posts in the direct
recruitment quota thus making the 1999 Scheme
redundant, cannot be accepted. The respondents have
neither assailed the decision of the Government to D
abolish the posts on the ground of malafides nor could
they show that the exercise undertaken by the Screening
Committee to reduce the number of posts in regular
cadre of Department of Company Affairs is vitiated by
arbitrariness or non-application of mind or the same is E
influenced by extraneous reasons. [Para 29,40 and 92]
[376-G, H; 377-A; 387-E, F; 426-A, B]

4.2. Creation and abolition of posts, formation and
~ structuring/ restructuring of cadres, prescribing the F
source and mode of recruitment and qualifications and
criteria of selecUon etc. are matters which fall within the
exclusive domain of the employer. Although the decision
of the employer to create or abolish posts or cadres or
to prescribe the source or mode of recruitment and lay
G
down the qualification etc. is not immune from judicial
review, the Court will always be extremely cautious and
..l. circumspect in tinkering with the exercise of discretion
by the employer. The Court cannot sit in appeal over the
judgment of the employer and ordain that a particular post
or number of posts be created or filled by a particular H
342 SUPREME COURT REPORTS [2008] 15 S.C.R

A mode of recruitment. The power of judicial review can be
exercised in such matters only if it is shown that the
action of the employer is contrary to any constitutional
or statutory provisions or is patently arbitrary or vitiated
by malafides. In the instant case, the directions given by
B the High Courts for creation of supernumerary posts to
facilitate absorption of the company paid staff are
unsustainable and are set aside. [Para 41 and 46] [387-
G, H; 388-A, B; 390-B] \
·"'{ I

Secretary, State of Karnataka v. Uma Devi 2006(3) SCR
C 953=2006 (4) SCC 1; State of Haryana v. Navneet Verma
2007 (11) SCR 762 = 2008 (2) SCC 65; M. Ramanatha Pillai
v. State of Kera/a 1974 (1) SCR 515 = 1973 (2) SCC 650;
Kedar Nath Bahi v. Stat~ of Punjab 1974 (3) SCC 21; State
of Haryana v. Des Raj Sangar 1976 (2) SCR 1034 = 1976
D (2) SCC 844; Dr. N. C. Singhal v. Union of India 1980 (3) SCR
44 = 1980 (3) SCC 29; Avas Vikas Sanghathan v. Engineers
Association 2006 (3) SCR 516 = 2006 (4) SCC 132;
Divisional Manager, Aravali Golf Club and another v.
Chander Hass and another 2007 (12) SCR 1084 =(2008) 1
E SCC 683 and Delhi Development Horticulture Employees
Union v. Delhi Administration, Delhi and others 1992 (4) SCC
99, relied on.

5.1. The doctrine of legitimate expectation cannot be
F invoked for sustaining the directions given by the High
Courts of Calcutta and Delhi for creation of
supernumerary posts to facilitate absorption of all
company paid staff in the regular cadres. At the roof of
the principle of legitimate expectation is the constitutional
principle of rule of law, which requires regularity,
G predictability and certainty in government's dealings with
the public. There is nothing on record to show that any
•'
competent authority of the Government of India had ever
given any assurance much less made a promise to the
respondents that they would get absorbed against the
H sanctioned posts or that there would be no abolition of

., .,
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 343

posts meant to be filled by direct recruitment. As a matter A
••"''"""' of fact, the respondents joined as company paid staff
knowing fully well that they were being employed as
additional staff in connection with the liquidation
proceedings and on the basis of sanction accorded by
the Court concerned and further that they will have no B
right to seek absorption. They also knew that their
employment will come to an end on the expiry of the
I tenure specified in the letter/order of appointment or on
r
cessation of the liquidation proceedings. Further, there
is nothing in the language of Rule 308 of the 1959 Rules c
from which it can be inferred that those employed as
additional staff in connection with the liquidation
proceedings will, in future, be absorbed in the regular
cadres. [Para 77, 78 and 90] [415-D, E, F; 416-C; 424-G;
426-C]
D
State of Karnataka v. Uma Devi 2006 (3) SCR 953;
Navjyoti Coop. Group Housing Society v. Union of India 1992
(4) SCC 477; Food Corporation of India v. Kamdhenu Cattle
Feed Industries 1993(1) SCC 71; Union of India and Ors. v.
Hindustan Development Corporation and Ors. 1993(3) SCC E
499; Punjab Communications Ltd. v. Union of India 1999(4)
SCC 727; J.P. Bansal v. State of Rajasthan 2003(5) SCC 134;
Dr. Chancha/ Goyal (Mrs.) v. State of Rajasthan 2003(3) SCC
485; Ku/deep Singh v. Govt. of NCT of Delhi 2006(5) SCC
)r-
702 and Ram Pravesh Singh v. State of Bihar 2006(8) SCC
I F
381, referred to.
The Authority of Law by J. Raz, (1979) Ch. 11, referred
to.
Council of Civil Services Union v. Minister of the Civil
Service 1985 AC 374 (HL), referred to. G
5.2. The 1978 Scheme as also the 1999 Scheme are
merely illustrative of compassionate approach adopted
by the Government of India to facilitate absorption of the
company paid staff against the sanctioned posts to the
H
344 SUPREME COURT REPORTS [2008] 15 S.C.R.

iA extent of 50% of vacancies in the direct recruitment >-
~
quota. These schemes cannot be read as a charter of
legitimating the claim of the company paid staff for
absorption in the Government service de hors the
availability of vacancies, more so, when the Government
B has taken a rational policy decision to reduce direct
recruitment to various services in a phased manner.
[Para 90] .[424-H; 425-A, B]
6.1. The respondents are not entitled to have their \
~
pay fixed in the regular scales and other monetary
c benefits at par with regular employees working under the
Official Liquidators. The approach of the High Courts that
similarity in the nature of work of the company paid staff
on the one hand and regular employees on the other, is
by itself sufficient for invoking the principle of equal pay
D for equal work, is clearly erroneous. The respondents
were employed/engaged by the Official Liquidators ·
pursuant to the sanction accorded by the Court under """'(
Rule 308 of the 1959 Rules and they are paid salaries and
allowances from the company fund. They were neither
E appointed against sanctioned posts nor they were paid
out from the Consolidated Fund of India. Therefore, the
mere fact that they were doing work similar to the regular
employees of the office of the Official Liquidators cannot
be treated as sufficient for applying the principle of equal
pay for equal work. The directions given by the High -<(
F
Courts for bringing about parity between the company
paid staff and regular employees· in the matter of pay,
allowances etc. are set aside. [Para 72, 76, 92 and 95]
[414-C-G; 426-D; 427-G]

G Kishori Mohan/al Bakshi v. Union .of India AIR 1962 SC
1139; Jaipa/ v. State of Haryana 1988 (3) SCC 354;
Federation of All India Customs and Central Excise
Stenographers (Recognized) Union v. Union of India 1988 (3) )..

SCC 91; Mewa Ram Kanojia v. A.1.1.M.S. 1989 (2) SCC 235;
V. Markandeya v. State of A.P. 1989 (3) SCC 191; Harbans
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 345

Lal and others v. State of Himachal Pradesh and others 1989 A
(4) SCC 459; State of UP. and others v.J.P. Chaurasia and
others 1989 (1) SCC 121; Griha Kalyan Workers' Union v.
Union of India 1991 (1) SCC 619; Ghaziabad Development
Authority v. Vikram Chaudhary 1995 (5) SCC 210; State of
Haryana and others v. Jasmer Singh and others 1996 (11) B
SCC 77; State of Haryana v. Surinder Kumar 1997 (3) SCC
633; Union of India v. K. V. Baby 1998 (9) SCC 252; State of
Orissa v. Bairam Sahu 2003 (1) SCC 250; Utkal University
v. Jyotirmayee Nayak 2003 (4) SCC 760; State of Haryana
and another v. Tilak Raj and others 2003 (6) sec 123; Union c
of India v. Tarit Ranjan Oas 2003 (11) SCC 658; Apangshu
Mohan Lodh v. State of Tripura 2004 (1) SCC 119; State of
Haryana v. Charanjit Singh 2006 (9) SCC 321; Canteen
Mazdoor Sabha v. Metallurgical & Engineering Consultants
(India) Ltd. 2007 (7) sec 71 o, relied on. D
Randhir Singh v. Union of India 1982 (3) SCR
298 =1982 (1) SCC 618; Dhirendra Chamoli v. State of UP.
1986 (1) SCC 637; Surinder Singh and Another v. Engineer-
in-Chief, CPWO and Others 1986 (1) SCC 639; Daily Rate
Casual Labour v. Union of India 1988 (1) SCR 598 = 1988 E
(1) SCC 122; Oharwad District P. WO. Literate Daily Wage
Employees Association and others v. State of Karnataka and
others 1990 (1) SCR 544 = 1990 (2) SCC 396 and Jaipal v.
State of Haryana 1988 (3) SCC 354, cited.
fi
6.2. However, the salaries and allowances payable to
.the ·company paid staff should be suitably increased in
the wake of huge escalation of living cost. The Official
Liquidators attached to various High Courts are directed
to move the Courts concerned for increasing the G
emoluments of the company paid staff. Such a request
should be sympathetically considered and the
emoluments of the company paid staff be suitably
enhanced and paid subject to availability of funds.
[Para 94] [427-D, E, F]
H
346 SUPREME COURT REPORTS [2008] 15 S.C.R.
..,._,
.,,,
A Case Law Reference:
1986 (1) SCR 211 ·held inapplicable para 6
1986 (1) sec 637 held inapplicable para 6
1986 (1) sec 639 held inapplicable para 6
B
1990 (2) Suppl. SCR 552
1990 (1) sec 361
held Inapplicable
held inapplicable
para 6
para 6 'f'
.. ,

1991 (1) sec 28 held inapplicable para 6
c 1992 (4) sec 99 held inapplicable para 6
1992 (4) sec 118 held inapplicable para 6 I
...
1999 (2) Suppl. SCR 62 referred to para 9
D 2006 (3) SCR 953 relied on para 29
1982 (3) SCR 298 held inapplicable para 29
1986 (1) sec 637 held inapplicable para 29
2007 (10) SCR 920 overruled para 29
E
2007 (11) SCR 762 relied on para 42
1974 (1) SCR 515 relied on para 42
<
1976 (2) SCR 1034 relied on para 42
F
1980 (3) SCR 44 relied on para 42
2006 (3) SCR 516 relied on para 42
2007 (12) SCR 1084 relied on para 44
G 1992 (4) sec 99 relied on para 49

1988 (1) SCR 598 held inapplicable para 49

1990 (1) SCR 544 held inapplicable para 49

H 1992 (1) SCR 565 held inapplicable para 49
. -'(
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS.

1992 (3) SCR 712
, 1993 (2) SCR 1
relied on
relied on
347

para 51
para 51
A

1993 (3) Suppl. SCR 900 relied on para 51

1994 Suppl. (3) sec 380 relied on para 51
6
1996 (7) sec 134 relied on para 51
•r 1996 (2) SCR 727 relied on para 51
1996 (7) sec 499 relied on para 51
c
1996 (1) SCR 972 relied on para 51
1996 (3) Suppl. SCR 663 relied on para 51
1996 (5) Suppl. SCR 533 relied on para 51
1996 (7) Suppl. SCR 650 relied on para 51 D
t r 1996 (9) Suppl. SCR 199 relied on para 51
1996 (7) Suppl. SCR 158 relied on para 51
1997 (2) sec 1 relied on para 51 E
1997 (2) sec 113 relied on para 51
1997 (4) sec 88 relied on para 51
.)>-
----" ( 1997 (7) sec 198 relied on para 51
• 2005 (5) sec 122 relied on para 51
F

2004 (7) sec 112 relied on para 52
1912 (1) sec 409 relied on para 52
G
1992(4) sec 118 held inapplicable para 52
2003 (1 o) sec 405 relied on para 55
2001 (1) sec 408 referred to para 57
2001 (1) sec 533 referred to para 57 H
348 SUPREME COURT REPORTS [2008] 15 S.C.R.

A 2001 (5) sec 326 referred to para 57 .~ ~.
2001 (6) sec 201 re{erred to para 57
AIR 1968 SC 647 cited para 58
,.
1987 (1) sec 213 cited para 58
B
2003 (2) sec 111 cited para 58
2004 (8) sec 579 cited para 58
"'(-' •
1960 (3) SCR 578 relied on para 60
c AIR 1965 SC 1767 relied on para 61
1989 (2) sec 754 relied on para 62
1989 (3) sec 396 relied on para 63
D 2001 (2) sec 247 relied on para 64 .
2002 (1) sec 1 relied on para 65 --(

2001 (4) sec 448 relied on para 65

E 2003 (5) sec 448 relied on para 66
2004 (11) sec 26 relied on para 66
2005 (2) sec 673 relied on para 66
2001 (6) sec 586 relied on para 67
F -f)-'
2001 (2) sec 138
1998 (3) sec 259
relied on
relied on
para 68
para 69
•
2000 (1) sec 224 relied on para 69
G
AIR 1962 SC 1139 relied on para 73
1988 (3) sec 354 relied on para 73
,}...
1988 (3) sec 91 relied on para 73

H 1989 (2) sec 235 relied on para 73
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 349

,_J ~ 1989 (3) sec 191 relied on para 73 A

1989 (4) sec 459 relied on para 73

1989 (1) sec 121 relied on para 73

1991 (1) sec 619 relied on para 73
B
1995 (5) sec 210 relied on para 73

~ 1996 (11) sec 11 relied on para 73
-,.-
1997 (3) sec 633 relied on para 73
c
1998 (9) sec 252 relied on para 73
2003 (1) sec 250 relied on para 73
I
2003 (4) sec 760 relied on para 73
2003 (6) sec 123 relied on para 73 o·
..J 2003 (11) sec ssa relied on para 73
r
~
2004 (1) sec 119 relied on para 73
2006 (9) sec 321 relied on para 73 E
2001 (7) sec 11 o relied on para 73

. ( t
--;
~
1985 AC 374 (HL)
1992 (4) sec 477

1993(1) sec 11
referred to
referred to

referred to
para 80
para 81

para 82
F

1993(3) sec 499 referred to para 83
1999(4) sec 121 referred to para 727
<S
2003(5) sec 134 referred to para 134
2003(3) sec 485 referred to para 86
~

2006(5) sec 102 referred to para 88
2006(8) sec 381 referred to para 89 H
350 SUPREME COURT REPORTS [2008] 15 S.C.R..

A CIVIL APPELLATE JURISDICTION : Civil Appeal No. __ >-
2985 of 2007.

From the final Judgment and Order dated 19.9.2005 of the
High Court of Delhi at New Delhi in LP.A. No. 808 of 2003.
B WITH
Civil Appeal Nos. 2986, 2987, 2988, 2989, 2990 of 2007,
6455 and 6456 of 2008. 1
~

P.P. Malhotra, A.S.G., Brijender Chahar, Bhaskar P. Gupta,
C R. Venkataramani, Colin Gonsalves, Ravindra Kumar, Rekha
Pandey, Jyoti Chahar, Shivalok Yashobardhan, Jagbir Singh
Malik, B.K. Prasad, P. Parmeswaran, D.S. Mahra, Naveen R.
Nath, Subhash Chandra Birla, Subrat Birla, Pijush K. Roy, G.
Ramakrishna Prasad, Sudarshan Rajan, P. Narasimhan, Aljo
D K. Joseph, Sanjoy Kumar Ghosh, D.P. Mukherjee,
Pukhrambam Ramesh Kumar, David A., Jai Singh, Jyoti
Mendiratta, Aparna Bhat, Jyoti Singh, Ankur Chhiber and -1

Sudarshan Rajan for the appearing parties. ,_

The Judgment of the Court was delivered by
E
G.S. SINGHVI, J. 1. Leave granted in S.L.P. (C)
Nos.12798/2005 and 13838/2006.

2. These appeals are directed against the orders of
f Calcutta and Delhi High Courts, whereby directions have been ~.
j I

issued to the appellants herein to absorb the persons employed
by the Official Liquidators attached to those High Courts under
Rule 308 of the Companies (Court) Rules, 1959 (for short 'the
1959 Rules') against the posts sanctioned by the Government
G of India, Department of Company Affairs.

FACTS

3. For the sake of convenience, we have culled out the
facts from the pleadings of Writ Petition No.1387 of 2001 filed
H by Tapas Chakraborty and 109 others in Calcutta High Court,
OFFICIAL LIQUIDATOR v. DAY ANAND AND ORS. 351
[G.S. SINGHVI, J.]

.. Writ Petition No.2728 of 2001 filed by Smt. Daya Dua and A-
·• --( others in Delhi High Court, the record of these appeals and
documents filed/produced by the learned counsel for the parties
during the pendency of the appeals. These are:

(i) There are two categories of employees in the
B
offices of the Official Liquidators attached to
different High Courts. The first category comprises
of the employees who are appointed against the:
• ...,... posts sanctioned by the Government of India,·
Department of Company Affairs. They are recruited
in accordance with the procedure prescribed in the
c
rules framed under proviso to Article 309 of the
Constitution and the doctrine of equality enshrined
in Articles 14 and 16 and are paid salaries and
allowances from the Consolidated Fund of India.
The second category comprises of the;Persons D
employed/engaged by the Official Liquidators
pursuant to the sanction accorded by the concerned
Court under Rule 308 of the 1959 Rules. The
employees falling in this category are described as
company paid staff. They are paid salaries and E
allowances from the fund created by disposal of the
assets of the companies in liquidation.

(ii) For Calcutta High Court, the Central Government
.,,... had appointed a Court Liquidator under Section F
I ~ 38A of the Banking Regulation Act, 1949, as
amended in 1953. He used to employ staff under
Rule 308 of the 1959 Rules in connection with
liquidation of banking companies. The salaries of
such staff were paid from the assets of the banking:
G
companies under liquidation.

(iii) In the year 1978, the Government of India, Ministry
of Law, Justice and Company Affairs vide its letter
dated 27.11.1978 circulateG a scheme (hereinafter 1

described as 'the 1978 Scheme') for absorption of H
352 SUPREME COURT REPORTS [2008] 15 S.C.R.

company paid staff against Group C posts in the
subordinate offices of the Department of Company
Affairs. That scheme envisaged consideration of
the cases of company paid staff, who were in
position on 31.3.1978 and who possessed the
B educational qualifications prescribed for the post
against which they were to be absorbed. It was also
provided that absorption of the company paid staff
will be limited to 50% vacancies in direct
recruitment quota of Group C posts.
c ."
4. Sixty-three employees working under the Court
Liquidator attached to Calcutta High Court filed writ petition for
grant of the status of permanent Central Governrnent employee
with effect from the date of completion of 360 days of service
besides regular pay scales with avenues for promotion apart
D from pension, provident fund and other service benefits on the
basis of their length of service.

5. The learned Single Judge of Calcutta High Court
-~( .
allowed the writ petition in terms of the prayer made. The appeal
E preferred by the appellants herein was dismissed by the
Division Bench, which noted that even though the writ
petitioners had been working for last 20 to 25 years, neither
their services were regularized nor they were paid at par with
similar employees of other departments/offices and they were
F retired at the age of 58 years without any financial benefit. The
Division Bench held that the appellants have failed to l \
substantiate their plea that the employees appointed by the
Court Liquidator were not engaged for doing work of perennial
nature and that there was no reasonable basis for
G. discriminating the Court Liquidator's staff vis-a-vis the regular
employees of the office of Official Liquidator.

6. The company paid staff (Estate Clerks) engaged by the
Official Liquidator attached to the High Court of Kera la also filed
writ petition claiming parity with the government employees
H appointed in the office of the Official Liquidator. The Division
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 353
[G.S. SINGHVI, J.]

Bench of that High Court took cognizance of the fact that there A
.~
' were two sets of employees under the Official Liquidator - (1)
employees appointed by the Central Government, and (2)
employees (14 in number) appointed by the Official Liquidator
between 1980 and 1989 under Rule 308 of the 1959 Rules;
that all the employees were doing the same work but were B
being paid different salaries and held that there was no rational
basis for according unequal treatment to similarly situated
employees. The Division Bench then referred to the 1978
r -,,..
Scheme, judgments of this Court in Narender Chadha v. Union
of India [1986 (2) SCC 157], Dhirendra Chamoli v. State of c
U.P. [1986 (1) SCC 637], Surinder Singh and Another v.
Engineer-in-Chief, CPWD and Others [1986 (1) SCC 639],
H.C. Puttaswamy v. Hon'ble Chief Justice of Karnataka High
Court, Bangalore [1991 (2) Supp. SCC 421], Bhagwati Prasad
v. Delhi State Mineral Development Corporation [1990 ( 1)
D
SCC 361], Jacob M. Puthuparambil v. Kera/a Water Authority
[1991 (1) SCC 28], Delhi Development Horticulture
Employees' Union v. Delhi Administration, Delhi [1992 (4)
SCC 99], State of Haryana v. Piara Singh [1992 (4) SCC 118]
and held that the petitioners are entitled to be absorbed as
regular Lower Division Clerks in the office of the Official E
Liquidator from the date of their initial appointment. Accordingly,
a direction was issued to the respondents in the writ petition
to absorb the Estate Clerks against the regular posts of Lower
Division Clerks and pay them salary in the regular pay scale
~
with consequential benefits. F

7. The Government of India and Official Liquidators
I
I appealed against the orders of Calcutta and Kerala High Courts
by filing petitions for special leave to appeal, which were
admitted and converted into Civil Appeal Nos.5642 of 1994 G
(Government of India and others v. The Court Liquidator's
Employees Association and others) and Civil Appeal No.5677
of 1994 (Union of India and others v. P.P. Bridget and others).
During the pendency of those appeals, Writ Petition No.473 of
1998 filed by the company paid staff employed/engaged by the H
354 SUPREME COURT REPORTS [2008] 15 S.C.R.

t-
A Official Liquidator of Delhi High Court claiming parity with the '
regular employees was also transferred to this Court. After >- 4 r
hearing the arguments, the Court passed an interim order on
14.1.1998, which reads as under:

"In all these cases, the common question that arises for
B
consideration is whether the persons appointed by the
Official Liquidator/Court Liquidator under the orders of
respective High Courts under Rules 308/309 of the
I
Companies (Court) Rules, 1959 are entitled to equal pay ir ~
and regularisation as the employees appointed by the ~
c Ce11tral Government in the office of the Official Liquidator. "
Learned Senior Counsel appearing for the appointees
brought to our notice the findings of the High Coui:_ts
rendered on the bas.is of the materials placed before them.
They are broadly stated that the appointees were
D discharging identical duties and functions as that of regular
employees in the office of the Official Liquidator; that they
have been continuously without break working for a period
ranging from 10 to 25 years; that they have been paid only
a fixed salary without any benefit of pension, gratuity; that
E such employees appointed up to 1-7-1978 had been
regularised by the Government; that though the Central
Government appreciated the human problem involved in
these matters and came forward before the Kerala High
Court to amicably settle the issue ultimately has shown an
F unsympathetic attitude and that in the light of the several
~
judgments of the Supreme Court, the appointees are
entitled to regularisation and salaries as paid to the
regular employees in the office of the Official Liquidator
at least from three years prior to the date of the judgment t
G of the Single Judge of the Calcutta High Court and in the
Kerala cases from the date of appointmoot.

On the other hand, Mr. Malhotra, learned Senior
Counsel appearing for the Union of India submitted that
the appointees were not appointed by the Government and
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 355
[G.S. SINGHVI, J.]
\

~-( they were not paid salaries from the consolidated fund. On A
the other hand, they were paid salaries from the companies
concerned under liquidation. In certain High Courts, there
are Official Liquidators and Court Liquidators appointed
under Section 38-A of Banking (Regulation) Act. The
banking companies under liquidation originally were 75, 8
now only there are 32 b~nking companies under
liquidation. The appointment under court orders are not for
"
r-~ a permanent department like Official Liquidator's office
and, therefore, the appointees cannot demand
regularization and payment of equal salary as that of c
salaries paid to regular employees in the office of the I

Official Liquidator.

The hard reality is that the appointees are continued
on the basis of fixed salary without any retiral benefits such
as pension and gratuity for more than 25 years and the D
)""
functions they are discharging are similar to those
discharged by the employees in the Office of the Official
Liquidator without getting equal treatment. In the
circumstances, before rendering a decision on merits by
the Court, Mr Malhotra, learned Senior Counsel desired E
that the Government be given an opportunity to consider
the matter in the light of the findings rendered by the High
Courts and to come forward with an acceptable solution.
,..,..

~
The matters are adjourned by four weeks." F
I

8. In furtherance of the aforementioned order, the
Government of India considered various proposals. Thereafter
an additional affidavit was filed incorporating therein the
following three options:
G
(i) one option that was discussed was to repeat
~
scheme for absorption of company-paid staff as
was done through the 1978 Scheme of Department
of Company Affairs. There are certain practical
problems in following this course of action. As per H
356 SUPREME COURT REPORTS [2008] 15 S.C.R.

A the 1978 Scheme such absorption is possible to >-- •
the extent of 50% only under the direct recruitment
quota in the appropriate grade. As the position
obtains in the Department of Company Affairs,
there is lack of adequate number of vacancies in
B the aforesaid category (direct recruitment) for the
purpose of facilitating absorption of all these
company-paid staff in the Department of Company
Affairs; '-('

(ii) the second alternative that was discussed was to
c continue the present arrangement without
absorption of these company-paid staff. In such a
situation, their salaries and service conditions could
suitably be revised by the Hon'ble Company
Judges with reference to funds available with the
D Ols in the various High Courts. According to
information gathered, most of the Ols attached to
various High Courts have annual surpluses. The
balances in the funds maintained by many Ols are
substantial; and
E
(iii) the third option that was discussed was to grant
them age relaxation and ask them to sit in the open
competitive examination as a one-time measure.
This would give them a general opening not ~·

restricted to jobs in these two departments.
F
9. Although, the Government of India indicated its
preference for option Nos.2 and 3, this Court did not approve
either of them and dismissed the appeals. The transferred writ
petition was allowed in similar terms - Govt. of India and others
G v. Courl Liquidator's Employees Association and others [1999
(8) SCC 560]. Paragraphs 21 to 24 of the judgment which have
bearing on these cases read as under:

21. In view of the peculiar facts of these cases and the
H positive findings of the High Courts with which we concur,
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 357
[G.S. SINGHVI, J.]
--(
,..- A
I we are unable to agree with the contention of the learned
Senior Counsel for the appellants that the company-paid
staff cannot be absorbed/regularised as they were not
employed by the Government in accordance with the rules;
that they knew their appointments were only temporary and
that their pay was not from the consolidated fund. B
22. Undoubtedly, counsel on both sides cited numerous
>--.,.- authorities of this Court on earlier occasions sustaining the
orders of absorption and setting aside the orders of
absorption. We do not consider it necessary to refer to
those decisions inasmuch as the facts presented before
c
us and the findings rendered by the High Courts speak for
themselves. As a matter of fact, the Government had
considered as one of the options to absorb the company-
paid staff as was done through the 1978 Scheme of
Department of Company Affairs. D

23. In the circumstances, we are satisfied that the orders
of the High Court challenged in these appeals do not call
for any interference having regard to the facts presented
before the High Courts. Accordingly, we dismiss the E
appeals with no orders as to costs.

24. In view of the above, the writ petition is allowed as the
,... relief prayed for is similar to the one claimed by the
contesting respondents/company-paid staff in the
connected civil appeals, without costs.
F

10. Notwithstanding its approval of the reasons and
conclusions of Calcutta and Kerala High Courts, this Court gave
an opportunity to the appellants to absorb the company paid
staff working under the Court Liquidator in the Calcutta High G
..
~ Court and Official Liquidators in other High Courts by framing
-4. a scheme modeled on the 1978 Scheme within six months. The
Court also stayed the operation of the orders appealed against
and the order passed in WrH Petition (Civil) No.473 of 1998
for a period of six months to enable the appellants to frame new H
358 SUPREME COURT REPORTS [2008] 15 S.C.R.

>- /'
A scheme and implement the same. This is evident from '
paragraph 25 of the judgment which is reproduced below :

25. However, we want to give an opportunity to the
appellants in the interest of justice and to balance the
equities between the parties to come forward to accept and
8
act on the first option given in the additional affidavit, as
extracted above, and absorb the company-paid staff 1
working both under the Court Liquidator in the Calcutta ~'

High Court and the Official Liquidator in other High Courts
by framing a scheme modelled on the 1978 Scheme within
c six months. In other words, we stay the operation of the
judgment of the High Courts under appeal and the order
in WP (C) No. 473 of 1988 for a period of six months to
enable the appellants to frame the Scheme as suggested
above and to give effect to it, failing which the judgments
D under appeal and the order in WP (C) No. 473of1988 will
stand confirmed." ' --.(

11. Within thE? time limit of six months fixed by the Court,
the Government of India framed and notified new Scheme
E (hereinafter referred to as 'the 1999 Scheme') for absorption '
'
of the company paid staff against 50% vacancies in direct
recruitment quota and also issued letter dated 1.10.1999
containing guidelines for implementation of the same. That letter
reads as under :-"To ..-
F 'To
The Regional Director
Department of Company Affairs
Mumbai/Calcutta/Chennai/Kanpur.
G Sub: Absorption of company paid staff of the offices of
,~

Official Liquidators against Group C posts in the ~

subordinate offices of the Department of >-
Company Affairs on the lines of scheme devised
in 1978 - Supreme Court's judgment - regarding.
H
"
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 359
[G.S. SINGHVI, J.]

I am directed to refer to the Hon'ble Supreme Court's A
___., Judgment dated 27.08.99 (copy enclosed) on the subject
mentioned above and to say that further action in the matter of
absorption of the Company Paid Staff in regular Government
service may please be taken on the following lines :-
B
(i) Only such Company Paid Staff of the offices of the
Official Liquidators shall be eligible for regular
absorption:

(a) Who were in position as on 27.08.99 and
c
(b) Who possess the requisite educational
qualification laid down in the recruitment rules
for the post against which they are to be
absorbed.
D
The Regional Directors, in their capacity as Heads of
Departments, may consider the relaxation of age limits in
deserving cases in accordance with the general
instructions existing in this regard.
(ii) The Company Paid Staff can be absorbed against E
only 50% of the existing and future vacancies in your
region in Group 'C' posts which, a~ per recruitment
rules fall under direct recruitment quota. For
instance, there is hundred per cent direct
recruitment to the posts of Lower Division Clerks; F
'"?- accordingly, 50% of the existing and future
~ vacancies of Lower Division Clerks in your region
can be utilized for absorbing Company Paid Staff.
Further, the posts of Upper Division Clerks, as per
recruitment rules, are to be filled up entirely by
G
promotion; therefore, there can be no possibility of
absorbing Company Paid Staff in the grade of
Upper Division Clerks. In the case of Junior
Technical Assistants 50% of the vacancies,

-
--4.
according to the recruitment rules are to be filled
H
360 SUPREME COURT REPORTS [2008] 15 S.C.R.

A up by promotion and the remaining 50% by direct
recruitment. In this case, therefore 25% of the >-
vacancies in the grade of Junior Technical
Assistants can be utilized for absorbing Company
Paid Staff. The proportion of vacancies in other
B Group 'C' grades may similarly be worked out.

(Iii) The Company Paid Staff, who were in position on
27.08.99, will be screened by a Selection
Committee consisting of the following:-
'~

c (1) Regional Director - Chairman

2) Representative of the Staff Selection
Commission -Member

(3) Official Liquidator of the office the company
D paid staff of which is to be screened -
Member

The Staff Selection Commission is also being requested
to nominate different representatives for the different
regions. The place, date and time of holding meeting(s)
E of the Selection Committee may be finalized in consultation
with them.

(iv) As in the scheme of 1978, there will be no test or
examination for the purpose of assessing the
suitability of the Company Paid Staff. The Selection
F ..-
Committee will make its recommendations on the
basis of the qualification, experience etc. and
personal interview of the candidates.

2. Immediate steps may please be taken for selection of
G eligible members of Company Paid Staff for absorption
against the existing vacancies in different grades and also
the anticipated vacancies upto 31.12.2000 next.
. Applications may be invited indicating separately the ~;

existing vacancies and the vacancies which may occur by ...
H 31.12.2000 and making it clear that the question of
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 361
[G.S. SINGHVI, J.]
I

absorbing be persons recommended for the anticipated A
---""' vacancies will arise only if the vacancies actually occur by
31.12.2000 and that mere recommendation of the
Selection Committee will not confer any right on any
Company Paid Staff for being appointed in Government
service. B
3. A quarterly report beginning with the quarter ended
31.12.99 may be sent to the Headquarters indicating the
extent to which the Company Paid Staff has been
-.,,.,
~ absorbed in regular Government service."
c
12. Thereafter, the concerned authorities undertook
exercise for absorption of the company paid staff in the regular
cadres of the Department of Company Affairs. As a result of
this, 295 out of 399 company paid staff who were in position
on 27.8.1999 were adjudged suitable. Of them 130 have been D
absorbed and 141 are awaiting orders. 104 were not
recommended for absorption. 23 of the company paid staff
either refused absorption or resigned or retired from service.

13. In the meanwhile, the company paid staff working under
E
the Official Liquidators of Calcutta and Delhi High Courts filed
writ petitions and prayed for issue of mandamus to the Union
of India and others to absorb them in the regular cadres and to
treat them at par with Central Government employees working
in ·the office of the Official Liquidators.
.,,.. F
~ Pleadings of the parties before the High Courts

Calcutta High Court

14. Tapas Chakraborty and others filed Writ Petition (Civil)
No.1387 of 2001 in Calcutta High Court for issue of a direction G
to Government of India and Official Liquidator to absorb them

. ~
in· regular cadres with effect from the date of completion of 240
days' service and also for grant of benefits like pension,
provident fund, gratuity, etc. calculated on the basis of total
length of service. In the writ affidavit it was pleaded by the H
362 SUPREME COURT REPORTS [2008] 15 S.C.R.
\
'..
A petitioners that before appointing 'hem, the Official Liquidator
use to take leave from the Hon'ble Judge hearing the company
matter in the High Court; that they were appointed as a
company paid staff with a stipulation that their services may be
terminated at any time without assigning any reason; that all of
B them have worked for more than 240 days in each and every
year of their service; that although they are entitled to
regularization of service, the respondents have not taken any
acti~n in that direction; that their pay has not been fixed in the
regular scale and they are required to retire at the age of 58
c year without any financial benefit; that on or around 30th
November, 1999, the respondents asked them to appear in an '
i-
interview for absorption against the post of Lower Division
Clerk or Junior Technical Assistant in terms of letter dated
1.10.1999; that they were not party to the proceedings before
the Supreme Court; that the scheme, if any, prepared by the
0
~espondents is arbitrary and implementation thereof is afflicted
by favoritism and that the respondents cannot take recourse
to the order passed by the Supreme Court on 27 .8.1999 and
deprive them of their legal right to get absorption on completion
of 240 days of continuous service. For better appreciation of
E the case projected by the writ petitioners, paragraphs 5, 6, 7,
18 and 26 and Clauses a(ii) and (iii) of the prayer clause are
reproduced below:

"5. The very common thing amongst the petitioners herein
F is that all of them are continuing their service in the office
of the Official Liquidator for more than 240 days in each
and every year of their service in the office of the Official
Liquidator.

6. Although your petitioners are entitled to regularization
G
of their service in terms of the Central Government
employees, but the respondents and each of them
neglected to give the petitioners all the service benefits as
compared to a Central Government employee.

H 7. Although your petitioners have all requisite
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 363
[G.S. SINGHVI, J.]

qualifications, experience, your petitioners were denied A
~
their right to work with utmost dignity and compelled to work
in the office of respondent No.3 with a temporary status,
without any service benefits as admissible to a Central
Government employee in similarly situated conditions. In
a society, where unemployment is curse, your petitioners B
have had no other alternative but to accept the terms of
service, as dictated by the respondents from time to time
for running their office through your petitioners.
,Y
18. Your petitioners state that they were not a party in the c
said proceedings, before the Hon'ble Supreme Court of
India, hence the aforesaid order of the Hon'ble Supreme
Court of India, is not applicable to your petitioners. Your
petitioners further state that the words 'other High Courts'
as referred by the Hon'ble Apex Court is not meant for all
the High Courts all over India, but it referred to those two
o
High Courts, the staffs of the Official Liquidator of the
Kerala High Court and/or of the Delhi High Court only.

26. Your petitioners state that purported scheme, if any,
prepared by the respondent authorities is bad and E
arbitrary and without publishing the scheme for
appointment and/or regularization, the respondent
authorities indulged in the favouritism at the time of
choosing the candidates for absorption in regular post.
-.,. In absence of any scheme or modes of regularization, the F
respondents are taking recourse to pick and choose policy
and doing gross discrimination among the temporary
workers in the office of the respondent no.3.

[Emphasis added]
.G
Prayer Clause

r (a)(ii) absorb the writ petitioners in regular service under
the Central Government 1.A.1ith an effective date i.e.
soon after expiry of 240 days in their respective H
364 SUPREME COURT REPORTS [2008] 15 S.C.R.

A services in each continuous period of service;
>-
(iii) Furnish all the service benefits like pension,
provident funds and gratuity and pay differences to
the petitioners, calculating the service period of the
petitioners with an effective date i.e. soon after
B
expiry of 240 days in their respective services, in
each continuous period of service.

15. During the pend ency of the writ petition, an application
was filed on behalf of the petitioners for deleting the names of .....,, ;
c some of them and for adding additional grounds to challenge
the 1999 Scheme. The respondents in the writ petition objected
to the amendment to the writ petition, but the learned Single
Judge overruled their objection and granted the prayer of the
writ petitioners.
D
Delhi High Court

16. Smt. Daya Dua and others, who belong to the category
of company paid staff employed/engaged by the Official
Liquidator of Delhi High Court filed Writ Petition No.2728 of
E 200·1 for issue of a mandamus to the respondents (appellants
herein) to regularize their services against Group 'C' post from
the date of initial appointment. An alternative prayer made by
the writ petitioners was to direct the respondents to frame a
scheme for. absorption of all of them against Group 'C' posts
F and give them other benefits like pay and allowances at par -~

with regular Group 'C' employees working in the office of the '(

Official Liquidator. They pleaded that their work is of perennial
nature and their duties and functions are identical to those of
regular employees, but they are not being paid salary in the
G regular pay scale. They further pleaded that the direction given
by the Supreme Court was not limited to the absorption of any
particular category of company paid staff, but the 1999 Scheme
is confined to Group 'C' posts and the employees who are
eligible for absorptioh against Group 'D' posts are being -~-

H discriminated. Anoth~r plea taken by the petitioners was that
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 365
[G.S. SINGHVI, J.]

_....,_
only 11 of company paid staff have been absorbed/regularized A
against Group 'C' posts and others have been left out in lurch.
Clauses (a), (b) and (c) of the prayer clause of Writ Petition
No.2728 of 2001 read as under:-

"(a) regularize the service of the petitioners in Group 'C' B
Central Government posts from the date of their
initial appointment;

(b) without prejudice to prayer (a) above, in the
...,..
.
alternate, frame Scheme as directed by the Hon'ble
Supreme Court for absorption of all the petitioners c
in Group 'C' Central government posts giving
therein due regard to their seniority as Group 'C'
company paid staff and providing therein time
bound regularization of all the petitioners which is
the letter and spirit of the directions of the Hon'ble D
Supreme Court dated 27.8.1999 in W.P. (C)
No.473/1988;
...,,..
(c) pay the petitioners salary and allowances at par with
the Central Government appointed regular group
E
'C' staff in the office of the Official Liquidator
attached to the Hon'ble High Court of Delhi from the
date of their initial appointment."

17. The claim of the writ petitioners (respondents herein)
--,.. was controverted by the Union of India and Official Liquidators F
~ ·of the two High Courts. The salient features of the counter
affidavits filed on their behalf were:

(i) Regular appointments against the posts sanctioned
by the Government of India, Department of G
Company Affairs are made after following the
procedure prescribed in the statutory rules. As
against this, the company paid staff is engaged/ '
-"-- employed by the Official Liquidators for fixed period
after obtaining sanction from the Court under Rule
H
366 SUPREME COURT REPORTS (2008] 15 S.C.R.

A 308 of the 1959 Rules.
>- ,
(ii) The company paid staff are neither the government
servants nor their conditions of employment are
regulated by statutory rules like the Central Civil
B Services (Conduct) Rules, which are applicable to
the holders of civil posts under the Central
Government.

(iii) The company paid staff cannot be equated with
regular employees because the source and mode
c of recruitment of the two categor,ies and their status
are entirely different. Moreover, while the regular
employees are paid from the budget sanctioned by
the Government of India, the salaries and
allowances of the company paid staff are drawn )

D from the company fund in terms of the order passed
by the Court under Rule 308 read with Rule 309 of
1959 .Rules.
~·
(iv) The 1999 Scheme was framed strictly in
E accordance with the judgment of the Supreme
Court in Govt. of India and others v. Court
Liquidator's Employees Association and others
(supra). The same was modeled on the 1978 ..
Scheme and 50% of direct recruitment quota posts
have been filled by absorbing the company. paid
F
staff. f
1
18. In the counter filed in Delhi High Court, it was also
pleaded that members of the company paid staff cannot claim
absorption in Group 'D' post because the 1978 and 1999
G Schemes do not provide for such absorption.

Findings of the High Courts

W.P. No.13871/2001 (Calcutta High Court) _;.._

H 19. The learned Single Judge briefly referred to the
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 367
[G.S. SINGHVI, J.]

pleadings of the parties and held that relief deserves to be A
granted to the petitioners because the findings and conclusions
recorded by Calcutta and Kerala High Courts in the earlier round
of litigation were approved by the Supreme Court. in Govt. of
India and others v. Court Liquidator's Employees Association
and others (supra), the learned Single Judge then prepared a B
comparative table of the two schemes and held that the 1999
Scheme is illusory because all the company paid staff cannot
be absorbed against 50% vacancies of the direct recruitment
quota. On the issue of absorption of the company paid staff
against Group 'D' posts, the learned Single Judge observed d
that there is no rational reason to confine the benefit of the 1999
Scheme qua Group 'C' posts. He also delved into the legality
of the absorption of respondent Nos.5 to 26 and held that the
recommendations made by the Selection Committee de hors
the seniority of the company paid staff has the effect of vitiating
0
the selection. He, however, declined to nullify the absorption of
the private respondents on the ground of delay and laches and
proceeded to direct the respondents to prepare fresh merit list
strictly in the order of seniority. The learned Single Judge also
directed respondents to consider the desirability of increasing
EE
the quota of 50% by creating supernumerary posts. The
operative part of the order passed by the learned Single Judge
reads thus:

"The State respondents shall consider their scheme 1999
after ascertaining whether all company paid staff in the F
office of the Official Liquidator, Calcutta High Court can be
absorbed as Group-C staff within three years reckoned
from the date of coming into force of the said Scheme of
1999.

The aforesaid exercise shall be completed within a
period of three months from date hereof. If all the company
9
paid staff cannot be absorbed as Group-C staff within the
said period stipulated above, State respondents shall
consider the increase in the quota of 50% or by creating
H
368 SUPREME COURT REPORTS [2008] 15 S.C.R.

:>-- /
A supernumerary posts so that, subject to the reservation
policy of the State, all the eligible company paid staff could
be absorbed as Central Government staff in Group-C.

The State respondents shall consider de novo the
impugned panel with respect to eligible company paid staff
B
in Group-C strictly in the order of seniority and upon
absorption of such company paid staff on the basis of such
list which shall be prepared within a period of three months ...,.,..
from date hereof, the seniority in the cadre of Group-C
....
shall be maintained ever with respect to the company paid
c staff respondents 5 to 26 who have already been
absorbed.

As regards Group-D staff, State respondents shall
take steps for regularizing such of the petitioners as may
D be eligible and qualified according to the rules to be
absorbed as Group D staff within a period of three months ..,.
from date hereof. Such regularization shall be made strictly
in the order of seniority (length of service in the
organization). Upon absorption/regularization such ~

E company paid staff shall be placed immediately below the
last regularly appointed employees in that category, class
and service, as the case may be.
,...
Until the above directions as carried out there shall ..,.,,,.
be a direction upon the respondents not to fill up any post
F by direct recruitment.
i

It is clarified that such of the petitioners who did not
participate in the interview conducted by the selection
committee for the purpose of absorption, their cases shall
G not be considered."

20. The Division Bench dismissed the appeal preferred
by the appellants herein by recording the following
observations:
H "Since the matter regarding the right of the company paid
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 369
[G.S. SINGHVI, J.]
-...(
staff of the office of the official liquidators has been A
decided and confirmed upto the Hon'ble Supreme Court,
all that needs to be worked out is that manner in which
such employees are to be absorbed in the offices of the
different Official Liquidators of the different High Courts.
-i' B
We are in agreement with the sentiments expressed by
the learned Single Judge that no a section but all the
-..,. company paid staff working in the office of the Official
Liquidator upto the cut off date as provided in the 1999
Scheme are to be absorbed in the office of the Official
Liquidator, High Court at Calcutta, even if it means by
c
creation of supernumerary post as observed by the learned
Single Judge. Needless to say, such posts will be personal
to those appointed and will cease to be in existence upon
the incumbent attaining the age of superannuation."
D
W.P. No.272812001 (Delhi High Court}

21. The learned Single Judge referred to the judgment in
Govt. of India and Other<> v. Court Liquidator's Employees
Association and Others (supra) and negatived the plea of the
E
appellants herein that the company paid staff can be absorbed
in the regular cadre only against Group 'C' posts to the extent
of 50% of direct recruitment quota and held that the writ
petitioners are entitled to be absorbed against Group 'C and
-.......
'D' posts and their entire service upto the date of absorption
l
has to be counted for the purpose of fixation of seniority and F
grant of other benefits including promotion. The relevant portions
of the order of the learned Single Judge are reproduced below:

"I do not find any force in the argument of the respondent
that 1978 scheme was only with regard to Group 'C' G
employees. The fact of the matter is that Group 'D'
employees were appointed only in the year 1985.
Therefore, there was no question of the respondent
making a scheme in 1978 for Group 'D' employees. I do
not find any force in the arguments of counsel for the H
370 SUPREME COURT REPORTS [2008] 15 S.C.R.

;...- ~

-.. A respondents that the direction of the Supreme Court was
limited with regard to the absorption of Group 'C'
employees. The Supreme Court has used the words
'company paid employees', the words 'Group 'C' and
Group 'D' have not been used in the judgment of Supreme
B Court. As discussed earlier Group 'D' employees were
also petitioners before Supreme Court.

I do not find any substance in the arguments of counsel for ~
the respondents that the .Supreme Court has not given a ~

direction for giving seniority to the petitioners after their
c absorption. If I agree with. the interpretation of the
respondent that would mean a person who has worked for
twenty or more years in the office of Official Liquidator and
now he gets absorption his past services of twenty years
or more will not be counted. The very proposition of the
~
D respondent is preposter9us. The Supreme Court in its
judgment has not used the words 'new appointment' but ,.
has used the word 'absorption'. The Supreme Court had
categorically given a mandate to absorb all the company
paid employees and not to give fresh appointment. ...
E Therefore, the incident of seniority by implication is implicit I

in the judgment of the Supreme Court and respondents
have to absorb the petitioners giving them fitment in the
~
their appropriate scales as well as other promotions, if anY.,
which has to be given as per law. ...,..
F 1
I issue a writ of mandamus to the respondents to absorb
the petitioners in their appropriate scales with all b.enefits
./

such as fitment and promotions, if any, even if posts have
to be created for the peti8oners. Illegality and
discrimination cannot be allowed to perpetuate indefinitely.
G
They will also be entitled to pension, provident fund, gratuity
and all benefits which are to be computed on the basis of
their length of service. The petitioners shall be entitled to
arrears of three years which shall be paid by the
respondents to the petitioners within a period of six
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 371
[G.S. SINGHVI, J.]

...... months." A

[Emphasis supplied]

22. Letters Patent Appeals preferred by the appellants
were dismissed by the different Division Benches of the High
Court. While deciding LPA No.808 & 809/2003, the Division B
Bench took cognizance of the fact that during the pendency of
contempt case filed in Calcutta High Court with the complaint
~ .,. that order dated 26.3.2001 passed by the Single Judge of that
.. High Court in W.P. No.211/2001 has not been complied with,
the Central Government created 51 posts of Group 'B', 'C' and c
'D' and absorbed the staff working in the office of the Court
Liquidator with effect from the date of expiry of 360 days of their
joining service and held that the direction given by the learned
Single Judge for absorption of all Group 'C' and 'D' company
paid staff does not call for interference. D

" r
Particulars of the additional documents filed/produced
during the course of hearing

23. Learned senior counsel appearing for Tapas
Chakraborty and others filed I.A. No.10/2008 in S.LP (C) E
No.12798/2008 for placing on record the following documents:

(i) Letter No.OL-CAL/24/Staff/G-Part V/2600/G dated
13th June, 2005 sent by the Official Liquidator of
...,... Calcutta High Court to the Secretary, Government F
t of India, Ministry of Company Affairs highlighting the
factum of increase in the work load and necessity
of providing additional manpower.

(ii) Letter No.12011 /3/2003-Admn. II dated 2nd
September, 2005 issued by the Government of G
India in the matter of "Optimization of Direct
Recruitment to Civilian Posts" of Group 'C' and 'D'
-'- for the years 2001-2002, 2002-2003 and 2003-
2004 and abolition of some such posts.
H
372 SUPREME COURT REPORTS [2008] 15 S.C.R. I
t-
l
~ r•
A (iii) Copy of order dated 28.2.2008 passed by the
Division Bench of Kerala High Court in Writ Petition
(C) No.22810/2004 and 16471/2007.

(iv) Copy of letter No.RD/CLN1/717/1135 dated 3rd ""-'-

June, 2008, sent by Assistant Director (Inspection),
B
Government of India, Ministry of Corporate Affairs
to the Official Liquidators of Calcutta, Cuttack,
,_
Guwahati, Patna and Ranchi asking them to send ""1" ,
comprehensive proposal for requirement of staff ~.

along with justification for the same.
c
(v) Letter No.OL/24/Staff/Part Vll/1875/G dated 30th
June, 2008 sent by the Official Liquidator of
Calcutta High Court to the Regional Director,
Eastern Region, Kolkata reiterating the need for
D additional staff to meet with the increased workload.

24. Learned senior counsel also produced two charts ~-

containing the details of Group 'C' and Group 'D' posts lying
vacant in four regions as on 1.1.2008 and the number of Group
'C' posts abolished during 2001-2002, 2003-2004. He
E
produced two more charts containing the details of the
company paid staff as on 31.3.2008 in all the regions and
particulars of 119 company paid staff employed/engaged by the
Official Liquidator of Calcutta High Court.
--"(

F 25. Ms. Jyoti Mendiratta, learned counsel appearing for the ~
respondents in the appeals arising out of the orders passed
by Delhi High Court filed I.A. (unnumbered) in S.L.P. (C)
I,
No.12798/2005 for placing on record the following documents:-

G (i) Copy of the details of posts with office of Official
Liquidator of High Court of Bombay filed on t·
18.7.2008 along with tables consisting of names of
_;,.__
the company paid staff and the date of absorption
and table containing names of the 26 company paid
staff from Group 'C' and Group 'D'.
H ~
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 373
[G.S. SINGHVI, J.]
-41
(ii) Letter No.12011/3/2003-Admn.ll dated 2nd A
September, 2005 sent by Under Secretary to the
--i Government of India, Ministry of Company Affairs
to the Regional Directors of Ministry of Company
.. Affairs of Neida, Kolkata, Mumbai and Chennai in
the matter of optimization of direct recruitment to s
civilian posts of Group 'C' and 'D' posts in the
Ministry for the years 2001-2002, 2002-2003 and
r-< y 2003-2004 and abolition/filling up of some such
~
posts.

(iii) Letter No.OL/24/Staff/Part Vll/1875/G dated 30th
c.
June, 2008 sent by the Official Liquidator of
Calcutta High C.ourt to the Regional Director,
Eastern Region, Kolkata reiterating the need for
increase of manpower.
D
(iv) Copy of order dated 19.9.2005 passed by the
Division Bench of Delhi High Court in LPA Nos.808/
2003 and 809/2003.

(v) Copy of order dated 5.5.2003 passed by learned
E
Single Judge of Delhi High Court in CW No.2728/
2001 and CM No.4774/2001.

(vi) Copy of judgment dated 26.3.2001 passed by the
...,..
learned Single Judge of Calcutta High Court in W.P .
t No.211 /2001. F

(vii) Letter No.A-12013/1 /99-Ad.ll dated 27.12.1999
sent by Shri D.P. Saini, Under Secretary to the
Govt. of India to all the Regional Directors of
Department of Company Affairs of Kanpur, Kolkata, G
Mumbai and Chennai regarding clarifications/
-..i..
suggestions to facilitate the implementation of this
.J
Court's judgment dated 27.8.1999 for absorption
~

of company paid staff of the offices of Official
Liquidators against Group 'C' posts.
H
374 SUPREME COURT REPORTS [2008] 15 S.C.R.

A 26. Shri P.P. Malhotra, Additional Solicitor General filed
reply to I.A No.10/2008 in S.L.P. (C) No.12798/2005 along with
following documents:-

(i) Copy of O.M. No.2/8/2001-PIC dated 16.5.2001
containing policy decision taken by the Government
B
of India on the issue of Optimization of Direct
Recruitment to Civilian Posts and. lapsing of two-
third of vacancies every year.

(ii) Copy of O.M. No.2/8/2001-PIC dated 30th August,
c 2006, whereby the Government decided to continue
the scheme of Optimization of Direct Recruitment ~····

to Civilian Posts upto 31.3.2009. ;
·~

(iii) Copy of O.M. No.A-12011/3/2002-Ad.ll dated
D 14.3.2005 for convening meeting of the Screening
Committee to consider the issue of reducing direct
recruitment to civilian posts in the Ministry of
Company Affairs along with background note.

27. During the course of arguments, Shri Malhotra placed
E before the Court xerox copy QLV\(rit Petition No.138712001
filed in Calcutta High Court along with annexed papers and
the following documents:-

(i) ·Letter No. dated 22nd August, 2008 sent by Official.
F Liquidator, High Court of Bombay to the Regional
f .
Director, Western Region, Mumbai on the issue of
additional requirement of posts, and

(ii) Copy of additional affidavit of Shri D.P. Saini, Under
Secretary to the Government of India, Ministry of
G Finance, Department of Company Affairs filed in
C.A. No.5677/1994.\

Arguments

H 28. Shri P.P. Malhotra, learned Addi. Solicitor General
~

---i

OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 375
[G.S. SINGHVI, J.]

~
placed reliance on paragraph 25 of the judgment in Govt. of A
'""'
India· and others v. Court Liquidator's Employees Association
and others (supra) and submitted that even though this Court
approved the reasoning and conclusions of Calcutta and Kerala
High Courts, orders passed by those Courts were rendered
ineffective because operation and implementation thereof was B
stayed for.six months and in terms of opportunity given to it,
the Government of India not only framed the 1999 Scheme for
• y
absorption of the company paid staff, but also implemented the
same. Shri Malhotra argued that High Court committed serious
error by issuing direction for absorption of all the company paid
I
c
staff in the regular cadres ignoring the fact that the 1999
Scheme was confined to Group C posts and that too upto 50%
vacancies in the direct recruitment quota. Learned counsel
emphasized that the 1999 Scheme was modeled on the 1978
Scheme and argued that the same cannot be faulted on the
D
ground that due to abolition of posts in the Department of
Company Affairs, large number of company paid staff may not
get absorbed in the regular cadres till their retirement. Shri
Malhotra pointed out that as early as in 2001, the Government
of India had taken a policy decision to substantially reduce
direct recruitment to all the cadres and recommendations made
E
by the Screening Committee for abolition of posts in various
cadres were accepted by the Government. Learned counsel
emphasized that the policy decision taken by the Government
~ of India on the issue of Optimization of Direct Recruitment to
"" A
Civilian Posts was not challenged by the writ petitioners and F
argued that in the absence of such challenge, the High Courts
were not justified in mandating creation of supernumerary posts
for absorption of the company paid staff and for grant of
monetary benefits to them by applying the principle of equal pay
for equal work with retrospective effect. In the end, he argued G
that the directions given by High Courts for wholesale absorption
of the company paid staff are legally unsustainable because
that would result in abrogation of the rules framed under proviso
to Article 309 of the Constitution of India in terms of which the
appointing authority is obliged to make direct recruitment to H
376 SUPREME COURT REPORTS [2008] 15 S.C.R.

A various cadres. .,...
29. Shri Bhaskar P. Gupta, learned counsel appearing for
the respondents in the appeal arising out of S.L.P. No.12798
of 2005 argued that the judgment of this Court in Government
of India and others v. Court Liquidator's Employees
B
Association & Ors. (supra) is conclusive· on the issue of
absorption to the company paid staff and the 1999 Scheme is
liable to be quashed because the same is not only contrary to
the judgment of this Court but is wholly unrealistic and ...,.
impractical inasmuch as it does not provide for absorption of
c the company paid staff who have completed more than 10 to
20 years of service. Learned counsel pointed out that after the
promulgation of 1978 Scheme, there has been multifold ·
increase in the petitions instituted for liquidatinn of the
companies and submitted that in order to meet the imperatives
D of the work relating to the companies in liquidation, the Official
Liquidator was compelled to engage/employ additional staff
and continue them after obtaining sanction from the Court under '"'(
Rule 308 of the 1959 Rules. He then submitted that the
respondents joined service as company paid staff with the fond
E hope that their services will be regularized and they may get
opportunity of career advancement and retrial benefits but on
account of unsympathetic attitude of the Government of India,
their legal and constitutional rights have been violated. Learned
counsel referred to letters dated 13.6.2005, 3.6.2008
F (Annexures A-D) and 30.6.2008 written by the Official ~
Liquidator and Assistant Director (Inspection), Kolkata as also ,,,..
.,
letter dated 2.9.2005 written by the Under Secretary to the
Government of India, Ministry of Company Affairs to the
Regional Directors, NOIDA/Kolkata/Mumbai/Chennai on the
G supject of Optimization of Direct Recruitment to Civilian Posts
in Group C and D and submitted that even though in the
assessment of officers at the ground level, there is a dire need
for increasing the strength of different cadres, the Government
o{ India has in the garb of implementing the policy decision
H
taken in 2001, abolished large number of posts ir the direct
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 377
[G.S. SINGHVI, J.]

recruitment quota, which became available in 2001-02 to 2003- A
• ~
04 and, in this manner, the 1999 Scheme has been made
redundant. Shri Gupta invited our attention to the charts and
details produced by him to show that even after being
recommended by the Selection Committee as many as 141
of the company paid staff, who were in position on 27.8.1999, B
have not been absorbed till this day. He submitted that the
Government of India cannot sit tight over the matter and frustrate
the right of the company paid staff to be absorbed in the regular
..... cadres despite the fact that they were appointed after
advertisement and as on date they have continuously worked c
for 10 to 20 years and fulfill the conditions of eligibility
prescribed for direct recruitment. Shri Gupta invoked the
doctrine of legitimate expectation and argued that the High
Courts did not commit any illegality by recognizing the validity
of the claim made by the company paid staff and issuing
D
direction for their absorption in regular cadres with
consequential monetary benefits by creation of supernumerary
posts. Learned senior counsel lamented that the manner in
which the Government of India has acted in last nine years leave
no room for doubt that majority of company paid staff, who
were in position on 27.8.1999 may never get absorbed and E
may have to retire without any monetary benefits like pension,
gratuity, etc. Lastly, Shri Gupta submitted that the ratio of the
Constitution Bench judgment in Secretary, State of Karnataka
v. Uma Devi [2006 (4) SCC 1] should not be applied to these
.,. cases because the respondents had been employed/engaged F
/
' after advertisement and due selection. He also relied on
Randhir Singh v. Union of India [1982 (1) SCC 618],
Dhirendra Chamoli v. State of UP. [1986 (1) SCC 637],
Surinder$_ingh v. Engineer-in-Chief, C.P.WD. [1986 (1) SCC
639 and UP State Electricity Board v. Pooran Chandra G
Pandey [2007 (11) SCC 92] and argued that the respondents
cannot be deprived of their constitutional right to equality in the
..._.\ matter of regularization of service and payment of salary in the
regular pay scales on the pretext of non-availability of posts.
H
378 SUPREME COURT REPORTS [2008] .:15 S.C.R

;.-
A 30. Ms. Jyoti Mendiratta referred to the pleadings of Writ 4
~
Petition No.2728/2001 filed in Delhi High Court to show that
as per the appellants' own case, the 1999 Scheme was a
replica of the 1978 Scheme and argued that the same is liable
to be quashed because while framing the new scheme, the
B Central Government altogether ignored the factum of
employment of a number of persons by the Official Liquidator
from 1985 who are eligible for absorption against Group D
posts. She further argued that the lackadaisical manner in which "'(
the Central Government implemented the 1999 Scheme
shattered the hopes of majority of the company paid staff and,
c therefore, the High Court did not commit any error by removing
the discrimination practiced by the Central Government against
the company paid staff who.have not been absorbed even after
20 years service. She pointed out that the Official Liquidator
of Delhi High Court employed/engaged company paid staff afte~
D due advertisement and selection and argued that non-
availability of sanctioned posts cannot justify wholesale denial -., 1.-
I
of the right to equality guaranteed to the respondents under ,-
I
Articles 14 and 16 of the Constitution. Learned counsel heavily
relied on the observations made by the Division Bench of
E Kera la High Court in O.P. No.9732 of 1990 decided on
27.8.1993 and vehemently argued that in view unequivocal
approval of that order in Government of India and others v.
Court Liquidator's Employees Association & Ors. (supra), the
learned Single Judge of the Delhi High Court had no choice #
F but to issue mandamus for regularization of the services of the /

~
respondents herein with consequential benefits. Learned
counsel invited the Court's attention to order dated 26.3.2001
passed by the Calcutta High Court in Writ Petition No.211 of
~
2001 and submitted that after having sanctioned 51 posts for
G absorption of the staff working under the Court Liquidator of ~

Calcutta High Court, it is not opeh to the Central Government
to challenge the direction given by Calcutta and Delhi High )._.
,.. '
Courts for regularization of company paid staff employed/
engaged by the Official Liquidators on the spacious ground of
H abolition of posts meant to be filled by direct recruitment.
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 379
[G.S. SINGHVI, J.]

31. Shri Colin Gonsalves, and Shri Ramesh Kumar, learned A
counsel for the intervenors, adopted the theme of the arguments
of Shri Bhaskar P. Gupta and Ms. Jyoti Mendiratta and
submitted that in view of abolition of post meant to be filled by
direct recruitment, the 1999 Scheme should be declared as
unworkable and redundant and a direction be issued to the 8
appellants to regularize the services of company paid staff
having regard to their length of services .
...,...
Consideration by the Court

32. At the outset, we consider it necessary to remove the c
misgivings entertained by the respondents and the High Courts .
that while dismissing the appeals filed by the appellants in the
earlier round of litigation, this Court had endorsed the directions
given by Calcutta and Kerala High Courts for absorption of
company paid staff without any rider. A careful reading of D
paragraphs 20 to 25 of the judgment in Govt. of India and Others
v. Court Liquidator's Employees Association and Others
'
' "' (supra) makes it crystal clear that while approving the re::tsons
and conclusions recorded by the High Courts and dismissing
the appeals, this Court not only gave an opportunity to the E
appellants to frame a new scheme modeled on the 1978
Scheme within six months and implement the same but also
stayed the operation of the orders impugned in the appeals and
<
• ~
the one passed in Writ Petition (C) No.473 of 1988. The use
of the words "failing which the judgments under appeal and the F
-:' order in WP (C) No.473 of 1988 will stand confirmed" in
' paragraph 25 leaves no manner of doubt that the orders passed
by the High Court and the one passed by this Court in WP (C)
No.4 73 of 1988 were to become effective only if the
Government of India had not framed new scheme modeled on
G
the 1978 Scheme. However, the fact of the matter is that
• ___. Government of India not only framed and notified the 1999
Scheme within six months from the date of judgment, but also
issued guidelines for implementation of the same. Therefore,
the orders passed by Calcutta and Kerala High Courts and the
H
380 SUPREME COURT REPORTS [2008] 15 S.C.R. l

A direction given by this Court in Writ Petition (C) No.473of1988
will be deemed to have become ineffective and inoperative
and the respondents cannot derive any benefit from those
,•
orders and direction.

33. Now on merits. Rules 308 and 309 of 1959 Rules,
B
which were framed by this Court under Section 643 of the
Companies Act, 1956 to facilitate employment of special or
additional staff in any liquidation and payment of salaries and
allowances to such staff read as under:- "(

c 308. Employment of additional or special staff -
1--

Where the Official Liquidator is of opinion that the
employment of any special or additional staff is necessary r
in any liquidation, he shall apply to the Court for sanction,
and the Court may sanction such staff as it thinks fit on '
~

I-
D such salaries and allowances as to the Court may seem
appropriate. ~·

309. Apportionment of expenses of common staff -
Where any staff is employed to attend to the work of more
"(
t
than one liquidation, or any establishment or other charges
E
are incurred for more than one liquidation, the expenses
incurred on such staff and the common establishment and t=
other charges, shall be apportioned oy the Official
Liquidator between the several liquidations concerned in
such proportions as he may think fit, subject to the
F directions of the Judge, if any.
~·
•
r---

The above reproduced rules were framed with a view to
ensure that the proceedings of liquidation are not hampered
on account of shortage of staff. It was felt that if additional
G manpower is required for effectively dealing with liquidation
cases, the Official Liquidator may apply to the Court and employ
such staff after receipt of the sanction. The additional staff is
paid from the company fund. If the staff employed under Rule >---
308 is required to attend the work of more than one liquidation
H or any establishment or other charges are incurred for more
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 381,
[G.S. SINGHVI, J.]

~han one liquidation, then the Official Liquidator is required to A
.....
apportion the expenses subject to the direction, if any, of the
Judge concerned.

34. It is not in dispute that the respondents were engaged/
employed by the Official Liquidators pursuant to the sanction B
accorded by the Court under Rule 308 of the 1959 Rules and
from the inception of their employment, they are being paid from
the fund created by disposal of the assets of the companies in
~
liquidation. They were neither selected in accordance with the
procedure prescribed under the rules framed under proviso to
Article 309 of the Constitution nor they were appointed against
c
the posts sanctioned by the Government of India. It is thus clear
that the company paid staff constitute a separate and distinct
class. While deciding the appeals in the earlier round of
litigation, this Court must have been alive to the aforementioned
facts and this appears to be the reason why the directions given D
by Calcutta and Kerala High Courts for absorption of all
y company paid staff were stayed for six months and an
opportunity was given to the Central Government to frame a new
scheme within that period.
E
35. Although neither of the parties to the appeals nor the
intervenors have placed before the Court advertisements
issued by the Official Liquidators of Bombay, Calcutta, Delhi
and Madhya Pradesh or any other High Court for employment
... of special or additional staff in accordance with the sanction F
'
accorded by the concerned Court and we have not been
,,
... apprised of the specific terms and conditions, subject to which
~ the respondents were employed/engaged by the Official
Liquidators but from the tenor of the pleadings and other
records, it can be safely inferred that the respondents were
G
appointed on purely temporary basis for fixed period with a
stipulation that they shall not be entitled to seek regularization
or absorption in the regular cadre against the sanctioned post.
-...-.\
Those who applied in response to the advertisements issued
by the Official Liquidators must have been aware of the fact that
H
...
382 SUPREME COURT REPORTS [2008] 15 S.C.R.

A they were being engaged/employed pursuant to the sanction .....
accorded by the Court under Rule 308 of the 1959 Rules in
connection with liquidation proceedings; that their appointments
will not be against the posts sanctioned by the Government; that
they will have no right to claim absorption in the regular cadre
B and that they will be paid salaries and allowances which may
be fixed by the Court. They must have accepted the
appointment/engagement knowing fully well that they will have
fixed tenure without any right to continue in service or to seek ~
absorption against the sanctioned posts. It was neither the
c pleaded case of the respondents before the High Courts nor
Shri Bhaskar P. Gupta and other learned counsel appearing on
their behalf argued before this .court that their clients viiere lured .
into accepting employment as company paid staff by the Official )
Liquidators by promising absorption in future against the
sanctioned posts or that they were coerced by some authority
D
to accept such employment. Therefore, they cannot be heard
to complain of the violation of Articles 14 and 16 of the ....
Constitution on the ground that even after having worked for
more than one decade, they have not been absorbed in the
regular cadres under the Government. In our opinion, after
E having applied for and accepted employment/engagement as
company paid staff with fixed tenure superimposed by a
stipulation that they will have no right to continue in service or
to be absorbed in the regular cadres, the respondents are
estopped from seeking a direction for their absorption against -+ '
F the posts sanctioned by the Government of India and the High
Courts committed a serious error in granting their prayer. l:
(
36. The argument of Shri Bhaskar P. Gupta and other
learned counsel appearing for the reSP'iJfl.der;its and intervenors
G that the 1999 Scheme is arbitrary and unreasonable and the
same should be treated as having become redundant on
account of abolition of posts meant for direct recruitment, which
},__
found favour with the High Courts, proceeds on the hypothesis
that in the earlier round of litigation this Court, while endorsing
H the reasons and conclusions recorded by Calcutta and Kerala
J

OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 383
[G.S. SINGHVI, J.]

.... High Courts issued direction for absorption of all members of A
the company paid staff and the Government of India was bound
to frame a scheme for that purpose. However, the very premise,
on which this argument is based is incorrect. Admittedly,
appointment to the service comprising sanctioned posts is,
regulated by the rules framed under proviso to Article 309 of, B
the Constitution of India. The mode of recruitment and
methodology of selection are prescribed under the rules. The'
; ...,.
absorption of the company paid staff employed under Rule 308 ,
of the 1959 Rules is not one of the prescribed modes of
recruitment. Therefore, it is extremely doubtful whether the · c
Government of India could, without amending the statutory rules, .
frame the 1978 Scheme for absorption of the company paid
staff in the regular cadres. However, as this Court has not only
indirectly approved the 1978 Scheme, but also directed the
Government of India to frame new scheme, we do not consider
D
it necessary to dilate further on the subject.
)'
37. As mentioned above, while approving the reasons and
conclusions recorded by the two High Courts and dismissing
the appeals, this Court not only permitted the Government of
India to frame a scheme modeled on the 1978 Scheme but E
?.lso stayed implementation of the orders impugned in the
appeal and the one passed by itself in the transferred writ
petition. If the Court intended that all members of the company
paid staff working on the date of judgment i.e. 27.8.1999 should
be absorbed in the regular cadres against Group 'C' and 'D' F
posts, then a simple direction to that effect would have been
sufficient and there was no occasion to stay the implementation
of the orders of the High Courts for six months with liberty to
the Government of India to frame a new scheme within the
same period. The absence of such a direction shows that the .G
Court was very much conscious of the fact that recruitment to
the regular cadres is governed by the rules framed under Article
'----4 • 309 of the Constitution and it would be highly detrimental to
public interest to issue direction for wholesale absorption/
regularization of the company paid staff and thereby abrogate/ H
384 SUPREME COURT REPORTS [2008] 15 S.C.R.

~
A stultify opportunity of competition to younger generation
~
comprising more. meritorious persons who may be waiting for
a chance to apply for direct recruitment. Obviously, the Court
did not want to sacrifice the merit by showing undue sympathy
with members of the company paid staff who joined service
B with full knowledge about their status, terms and conditions of
their employment and the fact that they were to be paid from
the company fund and not Consolidated Fund of India. In this
context, we may also mention that though the Official Liquidators ''1
appear to have issued advertisements for appointing the
c company paid staff and made some sort of selection, more
qualified and meritorious persons must have shunned from I

applying because they knew that the employment will be for a I-

fixed term on fixed salary and their engagement will come to I

an end with the conclusion of liquidation proceedings. As a
result of this, only mediocres must have responded to the
D
advertisements and jointed as company paid staff. In this
scenario, a direction for absorption of all the company paid staff
"
has to be treated as violative of the doctrine of equality
enshrined in Articles 14 and 16 of the Constitution.

E 38. Since the 1999 Scheme was framed by the
Government of India in furtherance of the opportunity given by
this Court and no deviation is shown to have been made from
the 1978 Scheme insofar as Group 'C' posts are concerned,
the same cannot be dubbed as arbitrary, irrational and
F unreasonable, simply because all the company paid staff who
were in position as on 27 .8.1999 may not get absorbed in the
regular cadres. Here, it is worth noticing that as per the details
of 119 company paid staff furnished by the senior counsel
appearing for Tapas Chakraborty and others, only 54 had
G completed tenure of 10 years on 27.8.1999 i.e. the date
specified in the 1999 Scheme. Of them, 21 were Lower
Division Clerks, 1.6 were Upper Division Slerks (there is no
>-.-'
provision for appointment to the post of Upper Division Clerk
by direct recruitment), 1 was Assistant, 1 was Superintendent,
1 was Assistant Commander, 1 was Commander, 2 were
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 385
[G.S. SINGHVI, J.]

Technical Assistants and the rest were Record Arrangers, A
Peons and Security Guards. Of the remaining 65 employees,
3 were appointed in the year 2000 and others had worked for
per~ods ranging from 13 m~nths to 8 years 31/2 months as on
27.8.1999. This means that not even 50% of the writ petitioners
had completed 10 years tenure which was considered by the B
Courts as benchmark for issuing direction for regularization of·
the services of temporary/ad hoc/daily wagers employed in ·.
Government departments. The position of the company paid ·
staff of Delhi High Court is different. The details furnished by
Ms. Jyoti Mendiratta show that 27 of the company paid staff c
have been absorbed under the 1999 Scheme. Of the remaining
26 company paid staff, all except 1 had worked for more than
10 years as on 27.8.1999. 9 of the company paid staff had
worked for 20 years or more. However, they could not be
absorbed due to abolition of posts in furtherance of the policy D
decision taken by the Government of India.

39. The additional documents produced by Shri Malhotra
show that in the year 2001, the Government of India had taken
a policy decision to reduce the strength of civilian staff in all
the cadres. This was reflected in the speech made by the E
Finance Minister, Government of India, while presenting the
budget for 2001-02. He stated that all requirements of
recruitment will be scrutinized to ensure that fresh recruitment
is limited to 1% of total civilian staff strength and there will be
reduction in manpower by 2% per annum, achieving a reduction F
of 10% in 5 years. Thereafter, OM No.2/8/2001-PIC dated
16.5.2001 was issued by the Government of India. Paragraphs
2.1 and 2.2 of that OM read as under :

"2.1 All Ministries/Departmef)ts are accordingly G
requested to prepare Annual Direct Recruitment Plans
covering the requirements of all cadres, whether managed
by that Ministry/Department itself, or managed by the
Department of Personnel and .Training, etc. The task of
preparing the Annual Recruitment Plan will be undertaken H
386 SUPREME COURT REPORTS [2008] 15 S.C.R.

A in each Ministry/Department by a Screening Committee )--

headed by the Secretary of that Ministry/Department with
the Financial Advisor as a Member and JS (Admn.) of the L
Department as Member Secretary. The Committee would J
also have one senior representative each of the
B Department of Personnel and Training and the Department
of Expenditure. While the Annual Recruitment Plans for
vacancies in Groups 'B', 'C' and 'D' could be cleared by
this Committee itself, in the case of Group 'A' Services,
the Annual Recruitment Plan would be cleared by a '1'

c Committee headed by Cabinet Secretary with secretary
of the Department concerned, Secretary (DoPT) and
Secretary (Expenditure) as Members.

2.2 While preparing the Annual Recruitment Plans, the
concerned Screening Committees would ensure that direct
D recruitment does not in any case exceed 1% of the total
sanctioned strength of the Department. Since about 3%
of staff retire every years, this wouid translate into only 1/
3rd of the direct recruitment vacancies occurring in each
year being filled up . Accordingly, direct recruitment would
E be limited to 1/3rd of the direct recruitment vacancies
arising in the year subject to a further ceiling that this does
not exceed 1% of the total sanctioned strength of the
Department. While examining the vacancies to be filled up,
~
the functional needs of the organization would be critically
~
F examined so that there is flexibility in filling up vacancies
in various cadres depending upon their relative functional
"
need. To amplify, in case an organization needs certain
posts to be filled up for safety/security/operational
considerations, a corresponding reduction in direct
G recruitment in other cadres of the organization may be
done with a view to restricting the overall direct recruitment
to one-third of vacancies meant for direct recruitment
subject to the condition that the total vacancies proposed >-- .,,.
for filling up should be within the 1% ceiling. The remaining /-

H vacancies meant for direct recruitment which are not
~
~·
-
...."_'
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 387
[G.S. SINGHVI, J.]

~ cleared by the Screening Committee will not be filled up A
by promotion or otherwise and these posts wil: stand
abolished."

40. For implementation of the aforementioned decision,
the Screening Committee met sometime in March, 2005 and
B
decided to reduce the number of posts in the regular cadres
of the Department of Company Affairs. The background note
circulated to the members of the Screening Committee vide
'y Office Memo No.A.12011/3/2003-Ad.ll dated 14.3.2005 made
a clear mention of the orders passed by the Calcutta and Delhi
High Courts in favour of the company paid staff, dismissal of
c
the appeal by the Division Bench of Calcutta High Court,
pendency of similar appeals before the Division Bench of Delhi
High Court and the Government's decision to process the
matter for filing SLP against the orders of Calcutta High Court.
The Screening Committee which met on 16.3.2005 considered D
and approved abolition of the direct recruitment quota posts for
r the years 2001-2002, 2002-2003 and 2003-2004. The decision
of the Screening Committee was circulated to various offices
of the Ministry of Company Affairs vide letter No.A.12011/3/
2003-Admn.ll dated 2.9.2005. This exercise was in consonance E
with the policy decision taken by the Government of India. The
respondents have neither assailed the decision of the
Government to abolish the posts on the ground of malafides
nor the learned counsel could show that the exercise undertaken
)...
by the Screening Committee is vitiated by arbitrariness or non- F
/
application of mind or the same is influenced by extraneous
reasons. Therefore, the view expressed by the Calcutta and
Delhi High Courts that the 1999 Scheme is unworkable or
impractical or has become redundant, cannot be approved.
G
41. The creation and abolition of posts, formation and
structuring/ restructuring of cadres, prescribing the source and
mode of recruitment and qualifications and criteria of selection
etc. are matters which fall within the exclusive domain of the
employer. Although the decision of the employer to create or
H
"~
),
388 SUPREME COURT REPORTS [2008] 15 S.C.R.
~

~
A abolish posts or cadres or to prescribe the source or mode of
recruitment and lay down the qualification etc. is not immune
from judicial review, the Court will always be extremely cautious
and circumspect in tinkering with the exercise of discretion by
the employer. The Court cannot sit in appeal over the judgment
B of the employer and ordain that a particular post or number of
posts be created or filled by a particular mode of recruitment.
The power of judicial review can be exercised in such matters
only if it is shown that the action of the employer is contrary to ---('

any constitutional or statutory provisions or is patently arbitrary "
c or vitiated by malafides.
42. In State of Haryana v. Navneet Verma [2008 (2) SCC
65], a Division Bench of two-Judges referred to M. Ramanatha
Pillai v. State of Kera/a [1973 (2) SCC 650], Kedar Nath Bahi
v. State of Punjab (1974 (3) SCC 21], State of Haryana v. Des
D Raj Sangar[1976 (2) SCC 844], Dr. N.C. Singha/ v. Union of
India [1980 (3) SCC 29) and A vas Vik as Sanghathan v.
'1
Engineers Association [2006 (4) SCC 132) and culled out the
following principles :

E "(a) the power to create or abolish a post rests with the
Government;

(b) whether a particular post is necessary is a matter
depending upon the exigencies of the situation and
administrative necessity; A
F
(c) creation and abolition of posts is a matter of
government policy and every sovereign government has
this power in the interest and necessity of internal
administration;
G
(d) creation, continuance and abolition of posts are all
decided by the Government in the interest ofadministration
.>.--~
and general public;

(e) the court would be the least competent in the face of
H scanty material to decide whether the Government acted
OFFICIAL LIQUIDATOR v. DA YANAND AND ORS. 389
[G.S. SINGHVI, J.]
_,\
honestly in creating a post or refusing to create a post or A
""'
its decision suffers from mala tides, legal or factual;

(f) as long as the decision to abolish the post is taken in
good faith in the absence of material, interference by the
court is not warranted." B
43. In Secretary, State of Kamataka v. Uma Devi (supra),
the Constitution Bench adverted its attention to financial
',-
implications of creation of extra posts and held that the Courts
should not pass orders which impose unwarranted burden on
the State and its instrumentalities by directing creation of c
particular number of posts for absorption of employees
appointed on ad hoc or temporary basis or as daily wagers.

44. In Divisional Manager, Aravali Golf Club and another
v. Chander Hass and another [(2008) 1 SCC 683] also, a two- D
Judges Bench considered the issue relating to creation of post
l' and held :-

"15. The court cannot direct the creation of posts. Creation
and sanction of posts is a prerogative of the executive or
legislative authorities and the court cannot arrogate to itself E
this purely executive or legislative function, and direct
creation of posts in any organisation. This Court has time
and again pointed out that the creation of a post is an
). executive or legislative function and it involves economic

- factors. Hence the courts cannot take upon themselves the
power of creation of a post. Therefore, the directions given
F

by the High Court and the first appellate court to create the
posts of tractor driver and regularise the services of the
respondents against the said posts cannot be sustained
and are hereby set aside." G
45. Although in paras 20, 26, 27, 28 and 33 of the last
........
mentioned judgment some sweeping observations have been
made suggesting that the orders passed by the High Courts
and this Court in some of the cases amount to an encroachment
·H
390 SUPREME COURT REPORTS [2008] 15 S.C.R.

A on the domain of the executive and legislature, we do not
propose to deal with the same and decide whether those
obser\tations were at all called for in the backdrop of factual
~
•
matrix of that case and leave the same to be decided in an
appropriate case.
B
46. In view of the above stated legal position, we hold hat
1•
the directions given by the High Courts for creation of
supernumerary posts to facilitate absorption of the company
"T
paid staff are legally unsustainable and are liable to be set
aside.
c
47. The next issue which needs to be address is whether
the impugned orders can be sustained on the ground that by
having worked continuously for 10 years or more as company
paid staff as on 27.8.1999, some of the respondents acquired
D a right to be absorbed in the regular cadre or regularized in
service and they are entitled to the benefit of the principle of
equal pay for equal work and have their pay fixed in the regular ¥

pay scales prescribed for the particular posts.

48. The questions whether in exercise of the power vested
E
in it under Article 226 of the Constitution of India, the High Court
can issue a mandamus and compel the State and its
instrumentalities/agencies to regularize the services of
temporary/ad-hoc/daily wager/casual/contract employees and
whether direction can be issued to the public employer to Al
F prescribe or give similar pay scales to employees appointed '-
through different modes, with different condition of service and
different sources of payment have become subject matter of
debate and adjudication .in several cases.

G 49. The judgments of 1980s and early 1990s - Dhirendra
Chamoli v. State of UP. [1986 (1) SCC 637], Surinder Singh
pnd Another v. Engineer-in-Chief, CPWD and Others [1986
}-...
(i) SCC 639], Daily Rated Casual Labour v. Union of India
[1988 (1) SCC 122], Dharwad District P.W.D. Literate Daily
H Wage Employees' Association v. State of Karnataka [1990 (2)
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 391
[G.S. SINGHVI, J.]

___. .... SCC 396], Bhagwati Prasad v. Delhi State Mineral A
Development Corporation (supra), State of Haryana v. Piara
Singh (supra) are representative of an era when this Court
enthusiastically endeavored to expand the meaning of equality
clause enshrined in the Constitution and ordained that
employees appointed on temporary/ad hoc/daily wage basis 8
should be treated at par with regular employees in the matter
of payment of salaries and allowances and that their services
be regularized. In several cases, the schemes framed by the
\ ')" governments and public employer for regularization of
temporary/ad-hoc/daily wag/casual employees irrespective of c
the source and mode of their appointment/ engagement were
also approved. In some cases, the courts also directed the
State and its instrumentalities/agencies to frame schemes for
regularization of the services of such employees. In State of
Haryana v. Piara Singh (supra), this Court while reiterating that
D
appointment to the public posts should ordinarily be made by
regular recruitment through the prescribed agency and that even
.., where ad-hoc or temporary employment is necessitated on
account of the exigencies of administration, the candidate
should be drawn from the employment exchange and that if no
E
candidate is available or sponsored with the employment
exchange, some method consistent with the requirements of
Article 14 of the Constitution should be followed by publishing
notice in appropriate manner for calling for applications and all
those who apply in response thereto should be considered
>-- fairly, proceeded to observe that if an ad-hoc or temporary F
,,, employee is continued for a fairly long spell, the authorities are
duty bound to consider his case for regularization subject to his
fulfilling the conditions of eligibility and the requirement of
satisfactory service. The propositions laid down in Piara
Singh's case were followed by almost all High Courts for G
directing the concerned State Governments and public
authorities to regularize the services of ad-hoc/temporary/daily
wage employees only on the ground that they have continued
for a particular length of time. In some cases, the schemes
framed for regularization of the services of the backdoor H
392 SUPREME COURT REPORTS [2008] 15 S.C.R.

A entrants were also approved.

50. The above noted judgments and orders encouraged
the political set up and bureaucracy to violate the soul of Article
14 and 16 as also the provisions contained in the Employment
~xchanges (Compulsory Notification of Vacancies) Act, 1959
8
with impun_ity and the spoil system which prevailed in the United
Stats of America in sixteenth and seventeenth century got firm
foothold in this country. Thousands of persons were employed/
engaged throughout the length and breadth of the country by
backdoor methods. Those who could pull strings in the power
C corridors at the higher and lower levels managed to get the
cake of public employment by trampling over the rights of other
eligible and more meritorious persons registered with the
employment exchanges. A huge illegal employment market
developed in different parts of the country and rampant
D corruption afflicted the whole system. This was recognized by
the Court in Delhi Development Horticulture Employees
Union V. Delhi Administration, Delhi and others [1992 (4) sec
99] in the following words:

E "23. Apart from the fact that the petitioners cannot be
directed to be regularised for the reasons given above, we
may take note of the pernicious consequences to which
the direction for regularisation of workmen on the only
ground that they have put in work for 240 or more days,
has been leading. Although there is an Employment
F
Exchange Act which requires recruitment on the basis of
registration in the Employment Exchange, it has become
a common practice to ignore the Employment Exchange
and the persons registered in the Emp!oyment Exchanges,
and to employ and get employed directly those who are
G
either not registered with the Employment Exchange or
who though registered are lower in the long waiting list in
the Employment Register. The courts can take judicial
notice of the fact that such employment is sought and given
directly for various illegal considerations including money.
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 393
[G.S. SINGHVI, J.]
I The employment is given first for temporary periods with A
... technical breaks to circumvent the relevant rules, and is
continued for 240 or more days with a view to give the
benefit of regularization knowing the judicial trend that
those who have completed 240 or more days are directed
to be automatically regularized. A good deal of illegal B
employment market has developed resulting in a new
source of corruption and frustration of those who are
waiting at the Employment Exchanges for years. Not all
those who gain such backdoor entry in the employment are
in need of the particular jobs. Though already employed c
elsewhere, they join the jobs for better and secured
prospects. That is why most of the cases which come to
the courts are of employment in government departments,
public undertakings or agencies. Ultimately it is the people
who bear thE?heavy burden of the surplus labour. The other
D
equally injurious effect of indiscriminate regularization has
been that many of the agencies have stopped undertaking
casual or temporary works though they are urgent and
essential for fear that if those who are employed on such
works are required to be continued for 240 or more days
E
they have to be absorbed as regular employees although
the works are time-bound and there is no need of the
workmen beyond the completion of the works undertaken.
The public interests are thus jeopardised on both counts."

51. The menace of illegal and backdoor appointments F
compelled the Courts to have rethinking and in large number
of subsequent judgments this Court declined to entertain the
claims of ad-hoc and temporary employees for regularization
of services and even reversed the orders passed by the High
Courts and Administrati¥_e Tribunals - Director, Institute of G
Management Development, UP. v. Pushpa Sriva,stava [1992
(4) SCC 33], Dr. M.A. Haque,and Others v. Union of
India and
.__. Others [1993 (2) SCC 213], J & K Public Service Commission
v. Dr. Narinder Mohan [1994 (2) SCC 630], Dr. Arundhati Ajit
Pargaonkar v. State of Maharashtra [1994 Suppl. (3) SCC
H
394 SUPREME COURT REPORTS [2008] 15 S.C.R.
·.r;-
A 380], Union of India v. Kishan-Gopa/ Vyas (1996 (7) SCC 134], ,._ 1
Union of India v. Moti Lal [1996 (7) SCC 481], Hindustan
Shipyard Ltd. v. · Dr. P. Sambasiva Rao [1996 (7) SC_C 499],
State of H.P. v. _Suresh Kumar Verma [1996 (7) SCC 562}, Dr.
Surinder Singh Jamwal v. State of J&K [1996 (9) SCC 619],
B E. Ramakrishnan v. State of Kera/a [1996 (10) SCC 565],
Union of India and Others v. Bishambar Dutt [1996 (11) SCC
341], Union oflndia v. Mahender Singh [1997 (1) SCC 247],
P. Ravindran and Others v. Union Territory of Pondicherry
and Others [1997 ( 1) SCC 350], Ashwani Kumar and Others 'f
c v. State of Bihar and Others [1997 (2) SCC 1], Santosh Kumar
Verma and Others v. State of Bihar and Others [1997 (2) SCC
713], State of U.P. and Others v. Ajay [1997 (4) SCC 88],
Patna University v. Dr. Arnita Tiwari [1997 (7) SCC 198] and
Madhyamik Shiksha Parishad v. Anil Kumar Mishra [2005 (5)
0
sec 122].

52. The shift in the Court's approach became more
prominent in A. Umarani v. Registrar, Cooperative Societies
[2004 (7) SCC 112], decided by a three-Judges Bench,
wherein it was held that the State cannot invoke Article 162 of
E the Constitution for regularization of the appointments made in
violation of the mandatory statutory provisions. In Secretary,
State of Karnataka v. Uma Devi (supra), the Constitution Bench
again considered the .question whether the State can frame
scheme for regularization of the services of ad-hoc/temporary/
F daily wager appointed in violation of the doctrine of equality or ..... ·
the one appointed with a· clear stipulation that such
appointment will not confer any right on the appointee to seek
regularization or absorption in the regular cadre and whether
the Court can issue mandamus for regularization or absorption
G of such appointee and .answered the same in negative. The
Court adverted to the theme of constitutionalism in a system
established· in rule of law, expanded meaning given to the
doctrine of equality in general and equality in the matter of )..._
employment in particular, multi-facet problem.s including the one
H .reiating to unwarranted fiscal burden on the public exchequer
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 395
[G.S. SINGHVI, J.]

created on account of the directions given by the High Courts A
and this Court for regularization of the services of persons
appointed on purely temporary or ad hoc basis or engaged on
daily wages or as casual labourers, referred to about three .
dozen judgments including R.N. Nanjundappa v. T. Thimmiah
[1972 (1) S-CC 409], Daily Rate Casual Labour v. Union of · B
India [1988 (1) SCC 122], Bhagwati Prasad v. Delhi State
Mineral Development Corporation [1990 (1) SCC 361],
Dharwad District P. W.D. Literate Daily Wage Employees
Association and others v. State of Karnataka and others [1990
(2) sec 396], State of Haryana v. Piara Singh [1992 (4) sec c I

118] and State of Punjab v. Surinder Kumar [1992 (1) SCC
489] and held:

"47. When a person enters a temporary employment or
gets engagement as a contractual or casual worker and
the engagement is not based on a proper selection as ,D
recognised by the relevant rules or procedure, he is aware
of the consequences of the appointment being temporary,
casual or contractual in nature. Such a person cannot
invoke the theory of legitimate expectation for being
confirmed in the post when an appointment to the post E
could be made only by following a proper procedure for
selection and in cases concerned, in consultation with the
Public Service Commission. Therefore, the theory of
legitimate expectation cannot be successfully advanced by
temporary, contractual or casual employees. It cannot also F
be held that the State has held out any promise while
engaging these persons either to continue them where
they are or to make them permanent. The State cannot
constitutionally make such a promise. It is also obvious that
the theory cannot be invoked· to seek a po~itive relief of G
being m~de permanent in the post.

48. It was then contended that the rights of the employees
thus appointed, under Articles 14 and 16 of the
Co~stitution, are violated. It is stated that the State has
hi
396 SUPREME COURT REPORTS [2008] 15 S.C.R.

A treated the employees unfairly by employing them on less
than minimum wages and extracting work from them for a
pretty long period in comparison with those directly
recruited who are getting more wages or salaries for·doing
similar work. The employees before us were engaged on
B ;a
· daily wages in the department concerned on wage that
was made known to them. There is no case that the wage
agreed upon was not being paid. Those who are working
on daily wages formed a class by themselves, they cannot
claim that they are discriminated as against those who
c hav·e been regularly recruited on the basis of the relevant
rules. No right can be founded on an employment on daily
wages tq claim that such employee should be treated on
a par with a regularly recruited candidate, and made
permanent in employment, even assuming that the
principle could be invoked for claiming equal wages for
D
equal work. There is no fundamental right in those who
have been employed on daily wages or temporarily or on
contractual basis, to claim that they have a right to be
absorbed in service. As has been held by this Court, they
cannot be said to be holders of a post, since, a regular
E appointment could be made only by making appointments
consistent with the requirements of Articles 14 and 16 of
the Constitution. The right to be treated equally with the
other employees employed on daily wages, cannot be
extended to a claim for equa:I treatment with those who
F were regularly empioyed. That would be treating unequals
as equals. It cannot also be relied on to claim a right to
be absorbed in service even though they have never been
selected in terms of the relevant recruitment rules. The
arguments based on Articles 14 and 16 of the Constitution
G are therefore overruled.

49. It is contended that the State action in not regularising
the employees was not fair within the framework of the rule
of law. The rule of law compels the State to make
·appointments as envisaged by the Constitution and in the
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 397

. -4
[G.S. SINGHVI, J.]

manner we have indicated earlier. In most of these cases,
no doubt, the employees had worked for some length of
A

time but this has also been brought about by the pendency
of proceedings in tribunals and courts initiated at the
instance of the employees. Moreover, accepting ii)n
argument of this nature would mean that the State would 8
be permitted to perpetuate an illegality in the matter of
public employment and that would be a negation of the
constitutional scheme adopted by us, the people of India.
It is therefore not possible to accept the argument thf!t
there must be a direction to make permanent all the c
persons employed on daily wages. When the court is
approached for relief by way of a writ, the court h9s
necessarily to ask itself whether the person before it ha,d
any legal right to be enforced. Considered in the light cpf
the very clear constitutional scheme, it cannot be said that D
the employees have been able to establish a legal right
to be made permanent even though they have never been
appointed in terms of the relevant rules or in adherence
of Articles 14 and 16 of the Constitution."

53. In paragraph 25, the Constitution Bench specifically E
referred to the conclusions recorded in paragraphs 45 to 50
of the judgment in State of Haryana v. Piara Singh (supra) and
observed:

)'-
"26. With respect, why should the State be allowed tQ F

. depart from the normal rule and indulge in temporary
employment in permanent posts? This Court, in our view~
is bound to insist on the State making regular and proper
recruitments and is bound not to encourage or shut its
eyes to the persistent transgression of the rules of regular
G
recruitment. The direction to make permanent-the
distinction between regularisation and making permanent,
was not emphasized here-can only encourage the State,
..... ....-4
the model employer, to flout its own rules and would confer
undue benefits on a few at the cost of many waiting to
H
398 SUPREME COURT REPORTS [2008] 15 S.C.R.

A compete. With respect, the direction made in para 50 (of J..-
.
SCC) of Piara Singh is to some extent inconsistent with
. the conclusion in para 45 (of SCC) therein. With great
respect, it appears to us that the last of the directions
clearly ru.ns counter to the constitution.al scheme of
B employment recognised in the earlier part of the decision.
Really, it canno.t be said that this decision
.
has
. laid down
the law that all ad hoc, temporary or casual employees
engaged without following the regular recruitment
procedure should be made permanent." -r
c 54. In paragraph 54, the Constitution Bench clarified that
the earlier decisions which run counter to the principles settled
by it will stand denuded of their status as precedents.

55. In Jawaharlal Nehru Technological University v. T.
D Sumalatha (Smt.) and others [2003. (10) SCC 405], a two-
Judges Bench considered an issue somewhat similar to the
one being considered in these appeals. The facts of that case
show that the respondents, who were graduates, were
appointed as investigators on consolidated pay between 1985
E and 1991 in the Nodal Centre set up in the University under the
scheme known as the National Technical Manpower Information
System sponsored by the then Ministry of Education and
Culture, Government of India. The Nodal Centre was financed
entirely by the Ministry of Education and Culture, Government
F of India. Initially, the term of the Nodal Centre was 1 year and 9 ·-1
months, but it was continued thereafter. The respondents were
appointed for 89 days but their services were extended from
time to time on similar terms. Their consolidated pay was also
revised twice. They filed writ petition claiming regularization of
service in the University. Some directions were issued by the
G
~ig_h Co~rt for con_sideration of the cases of the respondents
for absorption. The University declined their prayer. In the
second round of .litigation, the Hig.h Col!rt directed the ~ .........
University to absorb the respondents by applying GO No.212
dated 22.4.1994 issued by the State Government for
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 399
[G.S. SINGHVI, J.]

regularization of the services of temporary/ad hoc/daily wage A
employees of the Government departments. While reversing
the order of the High Court, this Court referred to GO No.212
and held:

"7. Can it be said that by virtue of this provision, the State
8
Government assumes the responsibility of absorbing the
staff employed in the organizations or establishments with
which it has no administrative or financial nexus, merely
I )-
because an instrumentality of the State is involved in
managing it, that too, in a limited sense? The answer could
only be in the negative. When the State Government or its q
instrumentalities have not created the posts on their own
and do not bear any part of the financial burden, the
question of getting the clearance from the Finance and
Planning Department of the Government for the purpose
of regularization or absorption does not arise. Viewed 9
from any angle, GO No. 212 would be wholly out of place
for those working in the nodal centre which is created and
nurtured by the Central Government. It is not within the
domain of the State Government or even the University to
regulate the staff pattern or the monetary benefits of the F
staff working therein, without the approval of the Central
Government. Therefore, no directions should have been
issued to the State Government or to the University to
regularize the services of Respondents 1 to 5, if necessary,
by creating additional posts." ,F

56. After rejecting the plea of the respondents for
regularization of service, this Court adverted to the issue of
increase in their salary and held :

"9. Though the plea of regularization in respect of any of ~
the fifth re~pondents cannot be countenanced, the
respo.ndent employees should have a fair deal consistent
with the guarantee enshrined in Articles 21 and 14 of the '
Constitution. They should not be made to work on a
meager salary for years together. It would be unfair and H
A
400 SUPREME COURT REPORTS [2008] 15 S.C.R.

unreasonable to extract work from the employees who
I

.
..
.

have been associated with the nodal centre almost from
its inception by paying them remuneration which, by any
objective standards, is grossly low. The Central
Government itself has rightly realized the need to revise
B the consolidated salary and accordingly enhanced the
grant on that account on two occasions. That revision was
made more than six years back. It is high time that another
revision is made. It is therefore imperative that the -'(

Ministry concerned of the Union of India should take
expeditious steps to increase the salary of the
c investigators viz. Respondents 1 to 4 working in the nodal
centre in Hyderabad. In the absence of details regarding
the nature of work done by the said respondents and the
equivalence of the job done by them to the other posts
prevailing in the University or the Central Government
D institutions, we are not in a position to give any direction ,)_

based on the principle of "equal pay for equal work". y
However, we consider it just and expedient to direct
Respondent 7 or 8, as the case may be, to take an
expeditious decision to increase the consolidated salary
E that is being paid to Respondents 1 to 4 to a reasonable
level commensurate with the work done by them and
keeping in view the minimum salary that is being paid
to the personnel doing a more or less similar job. As far
as the fifth respondent is concerned, though we refrain
F from giving similar directions in view of the fact that the post
is not specifically sanctioned under the Scheme, we would
like to observe that the Central Government may consider
increasing the quantum of office expenditure suitably so
that the University will be able to disburse higher salary to
G the fifth respondent."

[Emphasis supplied] A

~ ... •.

57. By virtue of Article 141 of the Constitution, the judgment
of the Constitution Bench in Secretary, State of Karnataka v.
H -·
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 401
[G.S. SINGHVI, J.]

Uma Devi (supra) is binding on all the courts including this A
Court till the same is overruled by a larger Bench. The ratio of
the Constitution Bench judgment has been followed by different
two-Judges Benches for declining to entertain the claim of
regularization of service made by ad hoc/temporary/ daily
wage/casual employees or for reversing the orders of the High B
Court granting relief to such employees - Indian Drugs and
Pharamaceuticals Ltd. v. Workmen [2007 (1) SCC 408J,
Gangadhar Pillai v. Siemens Ltd. [2007 ( 1) SCC 533],
Kendriya Vidyalaya Sangathan v. L. V. Subramanyeswara
[2007 (5) SCC 326], Hindustan Aeronautics Ltd. v. Dan c
Bahadur Singh [2007 (6) SCC 207]. However, in U.P. SEB v.
Pooran Chand Pandey [2007 (11) SCC 92] on which reliance
has been placed by Shri Gupta, a· two-Judges Bench-has
attempted to dilute the Constitution Bench judgment by
suggesting that the said decision cannot be applied to a case D
where regularization has been sought for in pursuance of Article
14 of the Constitution and that the same is in conflict with the
. judgment of the seven-Judges Bench in Maneka Gandhi v.
.. Union of India [1978 (1) SCC 248].

58. The facts of UP. SEB v. Pooran Chand Pandey E
(supra) were that the respondents (34 in number) were
employed as daily wage employees by the Cooperative
Electricity Supply Society in 1985. The Society was taken over
by Uttar Pradesh Electricity Supply Board in 1997 along with
daily wage employees. Earlier to this, the Electricity Board had F
taken a policy decision on 28.11.1996 to regularize the services
of its employees working on daily wages from before 4.5.1990,
subject to their passing the examination. The respondents
moved the High Court claiming benefit of the policy decision
dated 28.11.1996. The learned Single Judge of the High Court G,
held that once the employees of the society became employees
of the Electricity Board, there was no valid ground to
discriminate them in the matter of regularization of service. The
Division Bench approved the order of the Single Bench. A two-
J udges Bench of this Court dismissed the appeal of the H
402 SUPREME COURT REPORTS [2008] 15 S.C.R.
\
A Electricity Board. In para 11 of its judgment, the two-Judges
Bench distinguished Secretary, State of Karnataka v. Uma
Devi (supra) by observing that the ratio of that judgment cannot
be applied to a case where regularization has been sought for
in pursuance of Article 14 of the Constitution. The two-Judges
B Bench then referred to State of Orissa v. Sudhanshu Sekhar
Misra [AIR 1968 SC 647], State of Gujarat v. Ambica Quarry
Works [1987 (1) SCC 213], Bhavnagar University v. Palitana
Sugar Milt Pvt. Ltd. [2003 (2) SCC 111 ], Bharat Petroleum Ltd.
v. N.R. Viramani [2004 (8) SCC 579] and observed:
c ·"We are. constrained to refer to the above decisions and
principles contained therein because we find that often
Umadevi (3) case is being applied by courts mechanically
as if it were a Euclid's formula without seeing the facts of
a particular case. As observed by this Court in Bhavnagar
D University and Bharat Petroleum Corpn. Ltd. a little
difference in facts or even one additional fact may make
a lot of difference in the precedential value of a decision. r
Hence, in our opinion, Umadevi (3) case cannot be applied
mechanically without seeing the facts of a particular case,
E as a little difference in facts can make Umadevi (3) case
inapplicable to the facts of that case."

"We may further point out that a seven-Judge Bench
decision of this Court in Maneka Gandhi v. Union of India
F has held that reasonableness and non-arbitrariness is part
of Article 14 of the Constitution. It follows that the
Government must act in a reasonable and non-arbitrary
manner otherwise Article 14 of the Constitution would be
violated. Maneka Gandhi case is a decision ·of a seven-
Judge Bench, whereas Umadevi (3) case is a decision
G
of a five-Judge Bench of this Court. It is well settled that
a smaller Bench decision cannot override a larger Bench
decision of the Court. No doubt, Maneka Gandhi case
does not specifically deal with the question of
. _

regularisation of government employees, but the principle
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 403
'· [G.S. SINGHVI, J.]
~ of reasonableness in executive action and the law which A
it has laid down, in our opinion, is of general application."

[Emphasis supplied]

59. We have carefully analyzed the judgment of the two-
Judges Bench and are of the considered view that the above B
'

reproduced observations were not called for. The only issue

.. )·
which fell for consideration by two-Judges Bench was whether
the daily wage employees of the society, the establishment of
which was taken over by the Electricity Board along with the
c
employees, were entitled to be regularized in terms of the policy
decision taken by the Board and whether the High Court
committed an error by invoking Article 14 of the Constitution
for granting relief to the writ petitioners. The question whether
the Electricity Board could frame such a policy was neither
raised nor considered by the High Court and this Court. The D
High Court simply adverted to the facts of the case and held
that once the daily wage employees of the society became
employees of the Electricity Board, they could not be
discriminated in the matter of implementation of the policy of
regularization. Therefore, the two-Judges Bench had no E
occasion to make any adverse comment on the binding
character of the Constitution Bench judgment in Secretary,
State of Karnataka v. Uma Devi (supra).

~
60. There have been several instances of different
...,,,, Benches of the High Courts not following the judgments/orders
F
of coordinate and even larger Benches. In some cases, the
High Courts have gone to the extent of ignoring the law laid
down by this Court without any tangible reason. Likewise, there
have been instances in which smaller Benches of this Court
have either ignored or bypassed the ratio of the judgments of G
the larger Benches including the Constitution Benches. These
~- ..+
cases are illustrative of non-adherence to the rule of judicial
discipline which is sine qua non for sustaining the system. In
Mahadeolal Kanodia v. Administrator General of W.B. [1960
(3) SCR 578), this Court observed: H
404 SUPREME COURT REPORTS [2008] 15 S.C.R.
I
"1'
1

A "If one thing is more necessary in law than any other thing, fl.-
· it is the quality of certainty. That quality would totally
disappear if Judges of coordinate jurisdiction in a High
Court start overruling one another's decisions. If one
Division Bench of a High Court is unable to distinguish
B a previous decision of ·another Division Bench, and
holding the view that the earlier decision is wrong, itself
gives effect to that view the result would be utter

c
confusion. The position would be equally bad where a
Judge sitting singly in the High Court is of opinion that
the previous decision of another Single Judge on a
question of law is wrong and gives effect to that view
"'f

- 'T

instead of referring the matter to a larger Bench. In such
a case lawyers would not know how to advise their clients ~~
and all courts subordinate to the High Court would find
themselves in an embarrassing position of having to
D
choose between dissentient judgments of their own High
Court.
.,...
[Emphasis added]
p
E 61. In Lala Shri Bhagwan v. Ram Chandra [AIR 1965 SC
1767], Gajendragadkar, C.J. observed :

"It is hardly necessary to emphasize that considerations of
judicial propriety and decorum require that if a learned
Single Judge hearing a matter is inclined to take the view
~
F that the earlier decisions of the High Court, whether of a
Division Bench or of a Single Judge, need to be
reconsidered, he should not embark upon that enquiry
' 1-

sitting as a Single Judge, but should refer the matter to a
Division Bench or, in a proper case, place the relevant
G papers before the Chief Justice to enable him to constitute
a larger bench to examine the question. That is the proper
and traditional way to deal with such mattes and it is
~- ,l-
founded on healthy principles of judicial decorum and '°',
propriety. It is to be regretted that the learned Single Judge
H departed from this traditional way in the present case and
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 405
... [G.S. SINGHVI, J.]
-1
chose to examine the question himself." A

62. In Union of India v. Raghubir Singh [1989 (2) SCC
754], R.S. Pathak, C.J. while recognizing need for constant
development of law and jurisprudence emphasized the
necessity of abiding by the earlier precedents in following
8
words:

"The doctrine of binding precedent has the merit of
. 'r promoting a certainty and consistency in judicial decisions,
and enables an organic development of law, besides
providing assurance to the individual as to the c
consequence of transaction forming part of his daily affairs.
And, therefore, the need for a clear and consistent
enunciation of legal principle in the decisions of a court."

63. In Sundarjas Kanya/al Bhatija and others v. Collector, D
Thane [1989 (3) SCC 396], a two-Judges Bench observed as
under:

"In our system of judicial review which is a part of our
constitutional scheme, we hold it to be the duty of judges
of superior courts and tribunals to make the law more E
predictable. The question of law directly arising in the case
should not be dealt with apologetic approaches. The law
must be made more effective as a guide to behaviour. It
~ must be determined with reasons which carry convictions
~· within the courts, profession and public. Otherwise, the F
' lawyers would be in a predicament and would not know
how to advise their clients. Sub-ordinate courts would find
themselves in an embarrassing position to choose
between the conflicting opinion. The general public would
be in dilemma to obey or not to obey such law and it G
ultimately falls into disrepute."
j
64. In Dr. Vijay Laxmi Sadho v. Jagdish (2001 (2) SCC
247], this Court considered whether the learned Single Judge
of Madhya Pradesh High Court could ignore the judgment of a
H
406 SUPREME COURT REPORTS (2008] 15 S.C.R.

'
~;---
(
A coordinate Bench on the same issue and held :
;--
"33. As the learned Single Judge was not in agreement
with the view expressed in Devilal case it would have been
proper, to maintain judicial discipline, to refer the matter ~
.
to a larger Bench rather-than to take a different view. We
B
note it with regret and distress that the said course was
not followed. It is well-settl~d that if a Bench of coordinate
jurisdiction disagrees with another Bench of coordinate
jurisdiction whether on the basis of "different arguments"
-r :.
or otherwise, on a question of law. it is appropriate that
c the matter be referred to a larger Bench for resolution of
the issue rather than to leave two conflicting judgments to
operate, creating confusion. It is not proper to sacrifice
certainty of law. Judicial decorum, no less than legal
propriety forms the basis of judicial procedure and it must
D be respected at all costs."

65. In Pradip Chandra Parija and others v. Pramod
Chandra Patnaik and others [2002 ( 1) SCC 1], the
Constitution Bench noted that the two learned Judges denuded
E the correctness of an earlier Constitution Bench judgment in
Bharat Petroleum Corpn. Ltd. v. Mumbai Shramik Sangha [2001
(4) sec448] and reiterated the same despite the fact that the
second Constitution Bench refused to reconsider the earlier
verdict and observed :
F "3. We_ may point out, at the outset, that in Bharat -...i
Petroleum Corpn. Ltd. v. Mumbai Shramik Sangha (2001 Ai..

(4) SCC 448) a Bench of five Judges considered a
somewhat similar question. Two learned Judges in that
case doubted the correctness of the scope attributed to a
G certain provision in an eanlier Constitution Bench judgment
and, accordingly, referred the matter before them directly
to a Co~stitution Bench. The Constitution Bench that then
heard the matter took the view that the decision of a ~
Constitution Bench binds a Bench of two learned Judges
H and that judicial discipline obliges them to follow it,
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 407
[G.S. SINGHVI, J.]
~

regardless of their doubts about its correctness. At the A
most, the Bench of two learned Judges could have ordered
that the matter be heard by a Bench of three learned
Judges.

5. The learned Attorney-General submitted that a
B
Constitution Bench judgment of this Court was binding on
smaller Benches and a judgment of three learned Judges
y was binding on Benches of two learned Judges - a
proposition that learned counsel for the appellants did not
dispute. The learned Attorney-General drew our attention
. to the judgment of a Constitution Bench in Sub-Committee
c
of Judicial Accountability v. Union of India (1992 (4) SCC
97) where it has been said that "no coordinate Bench of
this Court can even comment upon, let alone sit in
judgment over, the discretion exercised or judgment
rendered in a cause or matter before another coordinate D
Bench" (SCC p. 98, para 5). The learned Attorney-General
submitted that the appropriate course for the Bench of two
learned Judges to have adopted, if it felt so strongly that
the judgment in Nityananda Kar (1991 Supp. (2) SCC 506)
was incorrect, was to make a reference to a Bench of three E
learned Judges. That Bench of three learned Judges, if it
also took the same view of Nityananda Kar, could have
referred the case to a Bench of five learned Judges.
~
,,. 6. In the present case the Bench of two learned Judges F
has, in terms, doubted the correctness of a decision of a
Bench of three learned Judges. They have, therefore,
referred the matter directly to a Bench of five Judges. In
our view, judicial discipline and propriety demands that
a Bench of two learned Judges should follow a decision
G
of a Bench of three learned Judges. But if a Bench of two
..+
learned Judges concludes that an earlier judgment of
three learned Judges is so very incorrect that in no
circumstances can it be followed, the proper course for it
to adopt is to refer the matter before it to a Bench of three
H
408 SUPREME COURT REPORTS [2008) 15 S.C.R.

A learned Judges setting out, as has been done here, the >--
reasons why it could not agree with the earlier judgment.
If, tl1en, the Bench of three learned Judges also comes
to the conclusion that the earlier judgment of a Bench of t

three learned Judges is incorrect, reference to a Bench
B of five learned Judges is justified.

[Emphasis supplied]

66. In State of Bihar v. Ka/ika Kuer and others [2003 (5) ...,
SCC 448], the Court elaborately considered the principle of per
c incuriam and held that the earlier judgment by a larger Bench
cannot be ignored by invoking the principle of per incuriam and
the only course open to the coordinate or smaller Bench is to
make a request for reference to the larger Bench. In State of
Punjab v. Devans Modern Breweries Ltd. [2004 (11) SCC 26],
D the Court reiterated that if a coordinate Bench does not agree
with the principles of law enunciated by another Bench, the
matter has to be referred to a larger Bench. In Central Board
of Dwaoodi Bohra Community v. State of Maharashtra [2005
(2) SCC 673], the Constitution Bench interpreted Article 141,
E referred to various earlier judgments including Bharat
Petroleum Corpn. Ltd. v. Mumbai Shramik Sangha (supra),
Pradip Chandra Parija and others v. Pramod Chandra Patnaik
and others (supra) and held that "the law laid down in a
decision delivered by a Bench of larger strength is binding on
F any subsequent Bench of lesser or co-equal strength and it ~
would be inappropriate if a Division Bench of two Judges starts 411

overruling the decisions of Division Benches of three Judges.
The Court further held that such a practice would be detrimental
not only to the rule of discipline and the doctrine of binding
pre.cedents but it will also lead to inconsistency in decisions on
G
the point of law; consistency and certainty in the development
of law and its contemporary status - both would be immediate
casualty."
~-
'
67. hi State of UP. and others v. Jeet S. Bisht and another
H [2007 (6) SCC 586], when one of the Hon'ble Judges (Katju,
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 409
[G.S. SINGHVI, J.]

J.) constituting the Bench criticized the orders passed by A
various Benches in the same case, the other Hon'ble Judge
(Sinha, J.) expressed himself in the following words:

"100. For the views been taken herein, I regret to express
my inability to agree with Brother Katju, J. in regard to the B
criticisms of various orders passed in this case itself by
other Benches. I am of the opinion that it is wholly
inappropriate to do so. One Bench of this Court, it is trite,
does not sit in appeal over the other Bench particularly
when it is a coordinate Bench. It is equally inappropriate C
for us to express total disagreement in the same matter
as also in similar matterB with the directions and
observations made by the larger Bench. Doctrine of
judicial restraint, in my opinion, applies even in this realm.
We should not forget other doctrines which are equally
developed viz. Judicial Discipline and respect for the D
Brother Judges."

68. In U.P. Gram Panchayat Adhikari Sangh v. Daya Ram
Saroj [2007 (2) SCC 138], the Court noted that by ignoring the
earlier decision of a coordinate Bench, a Division Bench of the E
High Court directed that part-time tube-well operators should
be treated as permanent employees with same service
conditions as far as possible and observed:

"26. Judicial discipline is self-discipline. It is an inbuilt
F
mechanism in the system itself. Judicial discipline
demands that when the decision of a coordinate Bench of
the same High Court is brought to the notice of the Bench,
it is to be respected and is binding, subject of course, to
the right to take a different view or to doubt the correctness
of the decision and the permissible course then open is G
to refer the question or the case to a larger Bench. This is
the minimum discipline and decorum to be maintained by
judicial fraternity."

69. It is interesting to note that in Gair Board, Ernakulam H
410 SUPREME COURT REPORTS' [2008] 15 S.C.R

....
A v. Indira Devi P.S. [1998 (3) SCC 259], a two~Judges Bench >--
doubted the correctness of the seven.:Judges Bench judgment
in Bangalore Water Supply & Sewerage Board v. A. Rajappa
[1978 (2) sec 213]and directed the matter to be placed ~
.
before Hon'ble the Chief Justice of India for constituting a larger
B Bench. However, a three-Judges Bench headed by Dr. A.S;
Anand, C.J., refused to entertain the reference and observed
that the two-Judges Bench is bound by the judgment of the
larger Bench - Coir Board, Ernakulam, Kera/a State v. Indira -(
Devai P.S. [2000 (1) SCC 224].
c 70. We are distressed to note that despite several
pronouncements on the subject, there is substantial increase
in the number of cases involving violation of the basics of
judicial discipline. The learned Single Judges and Benches of
the High Courts refuse to follow and accept the verdict and law
D laid down by coordinate and even larger Benches by citing
minor difference in the facts as the ground for doing so.
Therefore, it has become necessary to reiterate that disrespect
to constitutional ethos and breach of discipline have grave
impact on the credibility of judicial institution and encourages
E chance litigation. It must be remembered that predictability and
certainty is an important hallmark of judicial jurisprudence ,_
developed in this country in last six decades and increase in
the frequency of conflicting judgments of the superior judiciary
will do incalculable harm t_o the system inasmuch as the courts
~
F at the grass root will not be able to decide as to which of the
4
judgment lay down the correct law and which one should be
followed. We may add that in our constitutional set up every
citizen is under a duty to abide by the Constitution and respect
its ideals and institutions. Those who have been entrusted with
G the task of administering the system and operating various
constituents of the State and who take oath to act in accordance
with the Constitution and uphold the same, have to set an
example by exhibiting total commitment to the Constitutional ~

ideals. This principle is required to be observed with greater
H rigour by the members of judicial fraternity who have been
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 411
[G.S. SINGHVI, J.]

bestowed with the power to adjudicate upon important A
constitutional and legal issues and protect and preserve rights
of the individuals and society as a whole. Discipline is sine qua
non for effective and efficient functioning of the judicial system.
If the Courts command others to act in accordance with the
provisions of the Constitution and rule of law, it is not possib~le 8
to countenance violation of the constitutional principle by those
who are required to lay down the law.

71. In the light of what has been stated above, we deem, it
proper to clarify that the comments and observations made by
the two-judges Bench in UP State Electricity Board v. Pooran
c
Chandra Pandey (supra) should be read as obiter and the
same should neither be treated as binding by the High Courts,
Tribunals and other judicial foras nor they should be relied upQn
or made basis for bypassing the principles laid down by the
Constitution Bench. 0

-1 Equal Pay for Equal Work

72. The respondents' claim for fixation of pay in the regul~r
scale and grant of other monetary benefits at par with those
E
appointed against the sanctioned posts has been accepted by
the High Courts on the premise that their duties and functions
are similar to those performed by regular employees. In t~e
opinion of the High Courts, similarity in the nature of work of
the company paid staff on the one hand and regular employees
F
on the other hand, is by itself sufficient for invoking the principle
of equal pay for equal work, In our view, the approach adopt~d
by the High Courts is clearly erroneous and directions given for
bringing about parity between the company paid staff and
regular employees in the matter of pay, allowances etc. are
liable to be upset. G

73. The principle of equal pay for equal work for men and
women embodied in Article 39(d) was first considered in
Kishori.Mohanlal Bakshi v. Union of India [AIR 1962 SC 11391
and it was held that the said principle is not capable of being H
412 SUPREME COURT REPORTS [2008] 15 S.C.R.

A enforced in a Court of law. After 36 years, the issue was again
considered in Randhir Singh v. Union of India (supra), and it
was unequivocally ruled that the principle of equal pay for equal
work is not an abstract doctrine and can be enforce_d by
reading it into the doctrine of equality enshrined in Articles 14
B and 16 of the Constitution of India. The ratio of Randhir Singh
V; Union of India (supra) Was reiterated and a·pplied in several
-cases - Dhirendra Chamoli v. State of U.P. (supra), Surinder
Singh and Another v. Engineer-in-Chief, CPWO and Others 1
(supra), Daily Rated Casual Labour v. Union of India (supra),
c Dharwad District P. WO. Literate Daily Wage Employees'
Association v. State of Karnataka (supra) and Jaipal v. State
of Haryana [1988 (3) sec 354] and it was held that even a
daily wage employee who is performing duties similar to
regular employees is entitled to the same pay. However, in
Federation of All India Customs and Central Excise
0
Stenographers (Recognized) Union v. Union of India [1988
(3) SCC 91], Mewa Ram Kanojia v. A.1.1.M.S. [1989 (2) sec ~
235], V. Markandeya v. State of A.P. [1989 (3) sec 191],
Harbans Lal and others v. State of Himachal Pradesh and
E others [1989 (4) SCC 459], State of U.P. and others v. JP.
Chaurasia and others [1989 (1) SCC 121], Griha Kalyan
Workers' Union v. Union of India [1991 (1) SCC 619],
Ghaziabad Development Authority v. Vikram Chaudhary
[1995 (5) SCC 21 OJ, State of Haryana and others v. Jasmer
Singh and others [1996 (11) SCC 77], State of Haryana v. --4
F Surinder Kumar [1997 (3) SCC 633], Union of India v. K.V.
Baby [1998 (9) SCC 252], State of Orissa v. Bairam Sahu
[2003 (1) SCC 250], Utkal University v. Jyotirmayee Na yak
[2003 (4) sec 760], State of Haryana and another v. Tilak
Raj and others [2003 (6) SCC 123], Union of India v. Tarit
G Ranjan Das [2003 (11) SCC 658], Apangshu Mohan Lodh v.
State of Tripura [2004 (1) SCC 119]. State of Haryana v.
Charanjit Singh [2006' (9) SCC 321], Hindustan Aeronautics k
Ltd. v. Dan Bahadur Singh (supra), Kendriya Vidyalaya
Sangathan v. L. V. Subramanyeswara (supra) and Canteen
H Mazdoor Sabha v. Metallurgical & Engineering Consultants
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 413
[G.S. SINGHVI, J.]

_.. (India) Ltd. [2007 (7) sec 71 O], the Court consciously and A
repeatedly deviated from the ruling of Randhir Singh v. Union
of India (supra) and held that similarity in the designation or
quantum of work are not determinative of equality in the matter
of pay scales and that before entertaining and accepting the
claim based on the principle of equal pay for equal work, the B
Court must consider the factors like the source and mode of
recruitment/appointment, the qualifications, the nature of work,
the value judgment, responsibilities, reliability, experience,
confidentiality, functional need etc. In State of Haryana and
others v. Jasmer Singh and others (supra), the two-Judges ,c
Bench laid down the following principle :

"8. It is, therefore, clear that the quality of work performed '
by different sets of persons holding different jobs will have
to be evaluated. There may be differences in educational 1

or technical qualifications which may have a bearing on D
the skills which the holders bring to their job although the
t:i,esjgnation of the job may be the same. There may also
be other considerations which have relevance to efficiency
in service which may justify differences in pay scales on
the basis of criteria such as experience and seniority, or E
a need to prevent stagnation in the cadre, so that good
performance can be elicited from persons who have
reached the top of the pay scale. There may be various
other similar considerations which may have a bearing on
efficient performance in a job. This Court has repeatedly F
observed that evaluation ofsuch jobs for the purposes of
pay scale must be left to expert bodies and, unless there
are any mala tides, its evaluation should be accepted."

74. In Harbans Lal and others v. State of Himachal G
Pradesh and others (supra), the Court held that the claim of
carpenters employed by an incorporated company for party in
wages payable to their counterparts in Government service is
unsustainable. In Jawaharlal Nehru Technological University
v. T. Sumalatha (Smt.) and others (supra), it was held that the
H
414 SUPREME COURT REPORTS [2008] 15 S.C.R.

A respondents who were employed under a scheme known as
National Technical Manpower Information System, which was
sponsored by the then Ministry of Education and Culture, cannot
claim parity with the regular. Government employees in the
matter of pay-scale.
B
75. In Canteen Mazdoor Sabha v. Metallurgical &
Engineering Consultants (India) Ltd. (supra), another two-
JudgesBench held that simply because some employees of a
contractor of the alleged head employer are performing the task
C or duties similar to the employees of the head employer, it will
not entitle such employees to claim parity.

76. As mentioned earlier, the respondents were employed/
engaged by the Official Liquidators pursuant to the sanction
accorded by the Court under Rule 308 of the 1959 Rules and
D they are paid salaries and allowances from the company fund.
They were neither appointed against sanctioned posts nor they
were paid out from the Consolidated Fund of India. Therefore,
the mere fact that they were doing work similar to the regular
employees of the office of the Official Liquidators cannot be
E treated as sufficient for applying the principle of equal pay for
equal work. Any such direction will compel the Government to
sanction additional posts in the offices of the Official Liquidators
so as to facilitate payment of salaries and allowances to the
company paid staff in the regular pay scale from the
F Consolidate Fund of India and in view of our finding that the
policy decision taken by°the Government of India to reduce the
number of posts meaot for direct recruitment does not suffer
from any legal or constitutional infirmity, it is not possible to
entertain the plea of the respondents for payment of salaries
G and allowances in the regular pay scales and other monetary
benefits at par with regular employees by applying the principle
of equal pay for equal work.

Legitimate Expectation

H 77. We shall now advert to the question whether the
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 415
[G.S. SINGHVI, J.]

respondents can invoke the doctrine of legitimate expectation A
~ for supporting the impugned orders. This part of the
respondent's claim is founded on their assertion that
notwithstanding the contrary stipulation contained in the orders
of appointment, they had expected that in view of the 1978
Scheme the Government will absorb them in the regular cadres B
on some future date and give benefit of the principle of equal
pay for equal work. The argument of Shri Bhaskar P. Gupta and
Ms. Jyoti Mendiratta is that the respondents had joined as
company paid staff with the hope that they will be absorbed in
' the Government service, but their hopes have been totally belied c
because instead "Of creating adequate number of posts for
absorption of company paid staff in accordance with the 1999
Scheme, the Government has arbitrarily abolished large
number of posts in direct recruitment quota and on that account,
even those who have been adjudged suitable will never get D
absorbed in the regular cadres. In our opinion, there is no merit
in this argument. The pleadings of the parties and records
produced before the High Courts and this Court do not show
that any competent authority of the Government of India had ever
.. given any assurance much less made a promise to the
respondents that they will get absorbed against the sanctioned
E
posts or that there will be no abolition of posts meant to be filled
by direct recruitment. As a matter of fact, the respondents
joined as company paid staff knowing fully well that they were
being employed as additional staff in connection with the
liquidation proceedings and on the basis of sanction accorded F
by the concerned Court and further that they will have no right
to seek absorption. They also knew that their employment will
come to an end on the expiry of the tenure specified in the
letter/order of appointment or on cessation of the liquidation
proceedings. In this scenario, the doctrine of legitimate G
expectation cannot be invoked for sustaining the directions
given by the High Courts for absorption of all company paid
' _._ staff with consequential benefits or for nullifying the policy
decision taken by the Government to gradually reduce the
direct recruitment quota. H
416 SUPREME COURT REPORTS [2008] 15 S.C.R.

A 78. The concept of "due process of law" has played a major '"-
role in the development of administrative law. It ensures fairness
in public administration. The administrative authorities who are
entrusted with the task of deciding lis between the parties or ~'

adjudicating upon the rights of the individuals are duty bound
B to comply with the rules of natural justice, which are
multifaceted. The absence of bias in the decision making
process a'nd compliance of audi 21lteram partem are two of
these facets. The doctrine of legitimate expectation is a nacent y
addition to the rules of natural justice. It goes beyond statutory
c rights by serving as another device for rendering justice. At the
root of the principle of legitimate expectation is the
constitutional principle of rule of law, which requires regularity,
predictability and certainty in government's dealings with the
public- J. Raz, The Authority of Law [(1979) Ch. 11]. The 'legal
certainty' is also a basic principle of European Community.
D
European law is based upon the concept of "vertrauensschutz"
(the honouring of a trust or confidence). It is for these reasons
that the existence of a legitimate expectation may even in the
absence of a right of private law, justify its recognition in public
law.
E
79. In Halsbury's laws of England (Fourth Edition), the
doctrine of legitimate expectation has been described in the
following words :

F "A person may have a legitimate expectation of being
treated in a certain way by an administrative authority even
though he has no legal right in private law to receive such
treatment. The expectation may arise either .from a
representation or promise made by the authority, including
an implied representation, or from consistent past
G
practice."

80. A formal statement on the doctrine of legitimate + .
expectation can be found in the judgment of House of Lords in
Council of Civil Services Union v. Minister of the Civil Service
H [1985 AC 374 (HL]. In that case the Government tried to forbid
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 417
[G.S. SINGHVI, J.]

• ~
trade unionism among civil service. For this, Civil Service
Order-in-1982 Council was issued. The Court of appefl
declared that the Minister had acted unlawfully in abridging the
A

F
. fundamental right of a citizen to become a member of the trade
union. The House of Lords approved the judgment of the Court
\
of appeal and held that such a right could not be taken away B
without consulting the concerned civil seNant.
I

81. In India, the Courts have gradually recognized that while
administering the affairs of the State, the Government and its
.... 'r departments are expected to honour the policy statements an~
treat the citizens without any discrimination. The theory o
c
legitimate expectation first found its mention in Navjyoti Coop.
Group Housing Society v. Union of India [1992 (4) SCC 477],
In that case the right of a housing society for right to priority in
the matter of registration was recognized in the following words:
D
" ... In the aforesaid facts, the Group Housing Societies
were entitled to 'legitimate expectation' of following
~
consistent past practice in the matter of allotment, even
though they may not have any legal right in private law to
receive such treatment. The existence of 'legitimate E
expectation' may have a number of different consequences
and one of such consequences is that the authority ought
not to act to defeat the 'legitimate expectation' without
some overriding reason of public policy to justify its doing
... so. In a case of 'legitimate expectation' if the authority F
proposes to defeat a person's 'legitimate expectation' it
should afford him an opportunity to make representations
in the matter. In this connection reference may be made
to the discussions on 'legitimate expectation' at page 151
of Volume 1(1) of Halsbury's Laws of England - Fourth
G
~
Edition (re-issue). We may also refer to a decision of the
House of Lords in Council of Civil Service Unions v.
Minister for the Civil Service. It has been f:ield in the said
+ decision that an aggrieved person was entitled to judicial
review if he could show that a decision of the public
H
418 SUPREME COURT REPORTS [2008] 15 S.C.R.
Po

,.__
A authority affected him of some benefit or advantage which i,_

in the past he had been permitted to enjoy and which he
legitimately expected to be permitted to continue to
enjoy either until he was given reasons for withdrawal and j,__
the opportunity to comment on such reasons. ,,,'
8
It may be indicated here that the doctrine of 'legitimate
expectation' imposes in essence a duty on public
authority to act fairly by taking into consideration all
relevant factors relating to such 'legitimate expectation'. y
;
Within the conspectus of fair dealing in case of 'legitimate
c expectation', the reasonable opportunities to make
representation by the parties likely to be affected by any
change of consistent past policy, come in. We have not
been shown any compelling reasons taken into
consideration by the Central Government to make a
D departure from the existing policy of allotment with
reference 'to seniority in Registration by introducing a new
guideline." ~-

(emphasis supplied)
E
82. In Food Corporation of India v. Kamdhenu Cattle
Feed Industries [1993 (1) SCC 71], this Court considered
whether rejection of the tender of the respondent was vitiated
by arbitrariness. The claim of the respondents was negated in
the following words : ....
F
"In the contractual sphere as in all other State actions, the
State and all its instrumentalities have to conform to article
14 of the Constitution of which non-arbitrariness is a
significant facet. There is no unfettered discretic;m in public
G law: A public authority possesses powers only to use them
for public good. This imposes the duty to act fairly and to
adopt a procedure which is 'fairplay in action'. Due ~--

observance of this obligation as a part of good -+-
I._
administration raises a reasonable or legitimate
H expectation in every citizen to be treated fairly in his
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 419
[G.S. SINGHVI, J.]

interaction with the State and its instrumentalities, with this A
. element forming a necessary component of the decision
making process in all State actions. To satisfy this
· requirement of non-arbitrariness in a State action, .it is,
therefore, nec~ssary to consider and give due weight to
the reasonable or legitimate expectations of the persons . B
likely to be affected by the decision or else that unfairness .
in the exercise of the power may amount to an abuse or
excess of power apart from affecting the bona tides. of the
decision in a given case. The decision so made would be
exposed to challenge on the ground of arbitrariness. The c
rule of law does not completely eliminate discretion jn the
exercise of power, as it is unrealistic, but provides for
control of its exercise of by judicial review.

The mere reasonable or legitimate expectation of
a citizen, in such a situation, may not by itself be a distinct D
enforceable right, but failure to consider and give due
1 weight to it may render the decision arbitrary, and this is
how the requirement of due consideration of a legitimate
expectation forms part of the principle of non-
arbitrariness, a necessary concomitant of the rule of law. E
Every legitimate expectation is a relevant factor requiring
due consideration in a fair decision-making process.
Whether the expectation of the claimant is reasonable or
legitimate in the context is a question of fact in each
case. Whenever the question arises, it is to be F
• determined not according to the claimant's perception but
in larger public interest wherein other more important
considerations may outweigh what would otherwise have
been the legitimate expectation of the claimant. A bona
fide decision of the public authority reached in this G
manner would satisfy the requirement of non-arbitrariness
and withstand judicial scrutiny. The doctrine of legitimate
expectation gets assimilated in the rule of law and
operates in our legal system in this manner and to this
H

•
420 SUPREME COURT REPORTS [20081 15 S.C.R.

A context."

[Emphasis supplied]

83. In Union of India and others v. Hindustan
Development Corporation and others [1993 (3) SCC 499] this
B · Court considered the doctrine of legitimate expectation and
held:

"For legal purposes, the expectation cannot be the same
as anticipation. It is different from a wish, a desire or a
c hope nor can it amount to a claim or demand on the ground
of a right. However earnest and sincere a wish, a desire
or a hope may be and however confidently one may look
to them to be fulfilled, they by themselves cannot amount
to an assertable expectation and a mere disappointment
D does not attract legal consequences. A pious hope even
leading to a moral obligation cannot amount to a legitimate
expectation. The legitimacy of an expectation can be
inferred only if it is founded on the sanction of law or
custom or an established procedure followed in regular
and natural sequence. Again it is distinguishable from a
E
genuine expectation. Such expectation should be
justifiably legitimate and protectable. Every such
legitimate expectation does not by itself fructify into a
right and therefore it does not amount to a right in the
conventional sense. 'r [Emphasis supplied]
F
84. In Punjab Communications Ltd. v. Union of India
[1999 (4) SCC 727], the Court observed as under :
'
"The principle of 'legitimate expectation' is still at a stage.
G · of evolution. The principle is at the root of the rule of law
and requires regularity, predictability and certainty in the
Government's dealings with the public. The procedural part
of it relates to a representation that a hearing or other
appropriate procedure will be afforded before the decision
is made ....
H
,'"'....
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 421
[G.S. SINGHVI, J.]

.-1 However, the more important aspect is whether the . A
decision-maker can sustain the change in policy by resort
to Wednesbury principles of rationc;ility or whether the court
can go into the question whether the decision-maker has
properly balanced the legitimate expectation as against
the need for a change .... In sum, this means that the B
judgment whether public interest overrides the substantive
legitimate expectation of individuals wiH be for. the
decision-maker who has made the change in the policy.
"' The choice of the policy is for the decision-maker and not
for the court. The legitimate substantive expectation merely c
permits the court to find out if the change in policy which
is the cause for defeating the legitimate expectation is
irrational or perverse or one which no reasonable person
could have made." (emphasis in original)

85. In J.P. Bansal v. State of Rajasthan [2003 (5) SCC D
134], this Court refused to invoke the doctrine of legitimate
-~ expectation in favour of the appellant who claimed
compensation of pre-mature termination of the contractual
appointment as Judicial Member of the Rajasthan Taxation
Appellate Tribunal. E

86. In Or. Chanchal Goyal (Mrs.) v. State of Rajasthan
llllllf [2003 (3) sec 485], the appellants claim for absorption in the
regular cadre/regularization of service was rejected by the High
>- Court. While approving the orders of the Single and Division F
Benches of the High Court, this Court observed :

"23. On the facts of the case delineated above, the
principle of legitimate expectation has no application. It has
not been shown as to how any act was done by the
authorities which created an impression that the conditions G
attached in the original appointment order were waived.
Mere continuance does not imply such waiver. No
legitimate expectation can be founded on such unfounded
impressions. It was not even indicated as to who, if any,
H
"'. and with what authority created such impression. No waiver
422 SUPREME COURT REPORTS [2008] 15 S.C.R.

A which would be against requisite compliances can be
countenanced. Whether an expectation exists is, self-
evidently, a question offact. Clearstatutory words override
any expectation, however founded."

87. In Secretary, State of Karnataka v. Uma Devi (supra),
8
the Constitution Bench referred to the claim of the employees
based on the doctrine of legitimate expectation and observed
as under: · · ·( ..
"The doctrine can be invoked if the decisions of the
c administrative authority affect the person by depriving him
of some benefit or advantage which either (i) he had in the
past been permitted by the decision-maker to enjoy and
which he can legitimately expect to be permitted to
continue to do until there have been communicated to him
D some rational grounds for withdrawing it on which he has
been given an opportunity to comment; or (ii) he has
received assurance from the decision-maker that they will
..
not be withdrawn without giving him first an opportunity of
advancing reasons for contending that they should not be
E withdrawn."

88. In Ku/deep Singh v. Govt of NCT of Delhi [2006 (5)
SCC 702], the Court refused to invoke the doctrine of legitimate
expectation to nullify the revised policy decision taken by the
F Government not to grant fresh liquor licenses.

89. In Ram Pravesh Singh v. State of Bihar [2006 (8) SCC
381], a two-Judges Bench considered the question whether the I
employees of Futwah Phulwarisharif Gramya Vidyut Sahakari C-
Samiti Ltd., which was a cooperative society, could claim J
G absorption in the services of Bihar State Electricity Board by
invoking the doctrine of legitimate expectation. The facts of that
case show that the society was brought into existence by the J.
\.---
State Government, the Electricity Board and the Rural
Electrification Corporation for effective implementation of Rural l~
H Electrification Scheme meant for better distribution of electricity Ji
~

),
OFFICIAL LIQUIDATOR v. DA YANAND AND ORS. 423
[G.S. SINGHVI, J.]

to rural areas, but the license of the society was revok~d in the A
year 1995 and the Board refused to absorb the employees of
the society. The learned Single Judge and Division Bench of
the High Court declined. to interfere with the decision of the
Board. This Court dismissed the appeal of the employees and
observed: B

"What is legitimate expectation? Obviously, it is not a legal
right. It is an expectation of a benefit, relief or remedy, that
may ordinarily flow from a promise or established practice.
The term "established practice" refers to a regular,
consistent, predictable and certain conduct, process or
c
activity of the decision-making authority. The expectation
should be legitimate, that is, reasonable, logical and valid.
Any expectation which is based on sporadic or casual or
random acts, or which is unreasonable, illogical or invalid
cannot be a legitimate expectation. Not being a right, it is D
not enforceable as such. It is a concept fashioned by the
courts, for judicial revie:.w of administrative action. It is
procedural in character based on the requirement of a
higher degree of fairness in administrative action, as d
consequence of the promise made, or practice 8
established. In short, a person can be said to have a
"legitimate expectation" of a particular treatment, if any
representation or promise is made by an authority, either
expressly or impliedly, or if the regular and consistent past
practice of the authority gives room for such expectation F
in the normal course. As a ground for relief, the efficacy
of the doctrine is rather weak as its slot is just above
·"fairness in action" but far below "promissory estoppel". It
may only entitle an expectant: (a) to an opportunity to show
cause before the expectation is dashed; or (b) to an G
explanation as to the cause for denial. In appropriate
cases, the courts may grant a direction requiring the
authority to follow the promised procedure or established
practice. A legitimate expectation, even when made out,
does not always entitle the expectant to a relief. Public H
424 SUPREME COURT REPORTS [2008] 15 S.C.R.

A interest, change in policy, conduct of the expectant or any ~

other valid or bona fide reason given by the decision-
maker, may be sufficient to negative the "legitimate
expectation". The doctrine of legitimate expectation based
on established practice (as contrasted from legitimate
B expectation based on a promise), can be invoked only by
someone who has dealings or transactions or negotiations
with an authority, on which such established practice has
a bearing, or by someone who has a recognised legal
'(
relationship with the authority."
c AJter noticing the judicial precedents on the subject, the L
I
Court held that employees of the erstwhile society cannot ~

invoke the theory of legitimate expectation for compelling the I-
Board to absorb them despite its precarious financial condition.

D 90. By applying the ratio of the aforementioned judgment
to the facts of this case, we reiterate that the respondents
cannot invoke the doctrine of legitimate expectation. At the cost
of repetition, it needs to be emphasized that the respondents " ." ;

were employed by the Official Liquidators as additional staff
E pursuant to the sanction accorded by the concerned Courts. The
conditions of their appointment clearly envisaged cessation of
(
employment at the end of fixed tenure or on completion of ,,
liquidation proceedings. Of course, as it later turned out, the

~l
respondents were made to work in relation to different
F liquidation proceedings and for that purpose, the term of their
employmenUengagement was extended from time to time and
they continued in service for many years in the same capacity. ,..-
However, no material has been placed before this Court to show l
that any promise was made or any assurance was held out to
the respondents by any competent authority of the Government
G
of India for their absorption in the regular cadres. There is
nothing in the language of Rule 308 of the 1959 Rules from
which it can be inferred that those employed as additional staff
in connection with the liquidation proceedings will, in future, be
absorbed in the regular cadres. The 1978 as also the 1999
H
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 425
[G.S. SINGHVI, J.]

Schemes are merely illustrative of compassionate approach A
adopted by the Government of India for facilitating absorption
of the company paid staff against the sanctioned posts to the
extent of 50% vacancies in the direct recruitment quota. These
schemes cannot be read as a charter for legitimating the claim
of company paid staff to be absorbed in the Government B
service de hors availability of vacancies, more so when the
Government has taken a rational policy decision to reduce
'y direct recruitment to various services in a phased manner. In
our opinion, any direction by the Court for absorption of all
company paid staff would be detrimental to public interest in c
more than one ways. Firstly, it will compel the Government to
abandon the policy decision of reducing the direct recruitment
to various services. Secondly, this will be virtual abrogation of
the statutory rules which envisages appointment to different
cadres by direct recruitment. D
91. Before parting, we consider it necessary to take
~
cognizance of the fact that in compliance of order passed by
Calcutta High Court in Writ Petition No.211 of 2001, the
Government of India created 51 posts for absorption of staff
employed by the Court Liquidator. However, that cannot be E
made basis for granting relief to the respondents because
creation of those posts was clouded by the threat of contempt,
..,. for which proceedings had been initiated by the aggrieved
employees.
>-
F
..... 92. On the basis of above discussion, we hold that -

(i) the respondents are not entitled to aosorption
against the sanctioned posts in Group C of the
Department of Company Affairs, Government of
India, as of right. G

' (ii) The 1999 Scheme does not suffer from any legal
l
or constitutional infirmity insofar as it provides for
absorption of the company paid staff only to the
extent of 50% vacancies in direct recruitment quota H
426· SUPREME COURT REPORTS.· [2008] 15 S.C.R

A of Group C posts.

(iii) The decision taken by the Government of India t6
reduce the number of posts in direct recruitment
quotq c;lnd consequential abolition of posts in the
Department of Company Affairs is not vitiated by
B
arbitrariness or violation of the doctrine of equality
or malafides.

(iv) The doctrine of legitimate expectation cannot be
invoked for sustaining the directions given by the
c High Collrts ·of Calcutta and Delhi for creation of
supernumerary posts to facilitate absorption of all
compa~y paid staff in the regular cadres.

(v) The respondents .are not entitled to have their pay
D fixed in the regular scales and other monetary
benefits at par with regular employees working
under the Official Liquidators.

93. Notwithstanding our conclusion that the directions ·given
by the Calcutta and Delhi High Courts for absorption of
E company paid staff against Group C posts and grant of
monetary benefits to them at par with regular employees of the \
Department of Company Affairs are legally unsustainable, we
are inclined to accept the contention of the respondents that
failure of the Government of India to frame scheme for
F abso.rption of Group D posts has resulted in invidious
discrimination qua one section of the company paid staff. The
appellants have not placed any material before this Court to
. show that the finding recorded by the learned Single Judge of
Delhi High Court that a number of persons were employed by
G_ the Official Liquidator in 1985 and thereafter who could be
considered for absorption against Group D posts. This means
that at the time· of framing of the 1978 Scheme the existing
company paid staff did not include the employees who could
be absorbed on Group D posts and this appears to be the
H reason why: the said scheme was confined to absorption of
OFFICIAL LIQUIDATOR v. DAYANAND AND ORS. 427
[G.S. SINGHVI, J.]

company paid staff against Group C posts. Since the A
employees who could be eligible for absorption on Group D
posts were appointed in 1985 and thereafter, the Government
of India should have, while framing the 1999 Scheme, taken
cognizance of their presence and made appropriate provision
for their absorption. Its failure to do so has certainly resulted in B
unintended discrimination qua one section of the company paid
staff. It is, therefore, appropriate to direct that the Government
of India should frame a scheme for absorption of eligible and
suitable employees against Group D posts. The scheme should
be modeled on the 1999 Scheme. The needful be done within c
six moths. Thereafter, eligible and suitable members of the
company paid staff should be absorbed against Group D posts. .

94. We also feel that the salaries and allowances payable
to the company paid staff should be suitably increased in the .
wake of huge escalation of living cost. In Jawaharlal Nehru D
Technological University v. T. Sumalatha (Smt.) and others
-• (supra), a two-Judges Bench, after taking note of the fact that
emoluments payable to the Investigators appointed in the Nodal
Centre at Hyderabad had not been revised for six years ,
directed the Union of India to take expeditious steps in that E
direction. Keeping that judgment in mind, we direct the Official
Liquidators attached to various High Courts to move the ,
concerned Court for increasing the emoluments of the company
paid staff. Such a request should be sympathetically considered
by the concerned Courts and the emoluments of the company ' F
paid staff be suitably enhanced and paid subject to availability
of funds.

95. In the result, the appeals are allowed. The impugned
judgments and orders are set aside subject to the direction for , G
framing of scheme for absorption of eligible and suitable
employees against Group D posts and implementation thereof
J. and increase in the salaries and emoluments payable to the :
company paid staff.

RP. Appeals allowed. H