Holding

A State circular scheme for regularisation cannot be extended to employees of a statutory corporation whose service conditions are governed by its own statute, and therefore a contract employee is not entitled to regularisation under that scheme.

Summary

The Punjab State Warehousing Corporation, a statutory body governed by the Punjab Warehousing Corporation Act, 1957, issued a circular on 23 January 2001 purporting to regularise state employees. Respondent No.1, Manmohan Singh, was appointed on a contract basis, his contract was later not renewed and his services were terminated. He filed writ petitions seeking regularisation under the scheme; the High Court directed the corporation to consider his claim and eventually allowed it, despite a clarification from the State that the scheme did not apply to contract employees. The Supreme Court held that the scheme, being a mere circular and not issued under Article 162 of the Constitution, could not be extended to a statutory corporation whose service conditions are governed by its own statute and rules, and therefore the contract employee was not entitled to regularisation. The appeal was allowed and the High Court’s order set aside.

Issues considered

Whether a State policy issued by circular can bind a statutory corporation governed by its own enactment.
Whether contract employees of such a corporation fall within the ambit of the State's regularisation scheme.
Whether a scheme not promulgated under Article 162 can alter recruitment rules made under the Punjab Warehousing Corporation Act, 1957.
Whether the High Court erred in granting regularisation to a contract employee whose appointment did not comply with Articles 14, 16 and 309 of the Constitution.

Legislation cited

Constitution of Indias. Article 14, s. Article 16, s. Article 162, s. Article 309

Subjects

regularisationstatutory corporationcontract employeeArticle 162Punjab Warehousing Corporation Actservice lawemployment terminationconstitutional law

Judgment

t- PUNJAB STATE WAREHOUSING CORPN., CHANDIGARH A
v.
MANMOHAN SINGH AND ANR.

FEBRUARY 20, 2007

(S.B. SINHA AND MARKANDEY KA TJU, JJ.] B

----,( Service Law-Regularization-scheme for regularization by State
Government-Contract employee of statutory Authority Termination of
services-Challenged-Direction by High Court to employer to consider the c
case of employee in the backdrop of the Scheme-Employee denying
-:. regularization on the ground that Scheme not applicable to the contract
employee-Denial of regularization set aside by High Court-On appeal,
held: Employee not entitled to regularization under the Scheme-The terms
and conditions of the employees of the employer was governed by statutory
rules-Scheme of the State could not have been extended to the Statutory D
Corporation-Constitution of India, 1950-Article 309 and 162-Policy
'1'
decision.
j

State Government formulated a Scheme for regularization of services
of its employees. Respondent No. 1 was appointed with the appellant on contract E
basis pursuant to interim order passed by this Court. His services were
extended from time to time. Subsequently the contract was not renewed, and
the services were terminated. The termination order was questioned in Writ
Petition. The Writ Petition was disposed of directing the appellant to consider
the case of respondent No. 1 in the backdrop of the Scheme of the State
--1 Government. Appellant rejected the claim of regularization in view of the F
;
clarification issued by the State Government that the Scheme was not
applicable to the case of contract employees. Thereagainst respondent filed
another Writ Petition and the same was allowed by High Court. Hence the
present appeal.
G
,. Allowing the appeal, the Court

f ..;_. HELD: 1. The scheme for regularization of the State was not made in
terms of Article 162 of the Constitution oflndia. It was by way ofa Circular
letter dated 23.01.2001. The State, without issuing any notification or without
even exercising its statutory power governing the constitution and functioning H
933
+
934 SUPREME COURT REPORTS [2007] 2 S.C.R.
,.
A of the ~tatutory authorities like the appellant, sought to extend the same to _,
-
Public Sector Undertakings, corporations, boards, local authorities and other
autonomous bodies which it could not do in law. IPara 8] 1936-E-FI

2. It is not the case of the parties hereto that Respondent No. 1 was
appointed upon compliance of the constitutional scheme as adumbrated in
B Articles 14 and 16 of the Constitution of India. It is also not the ca~e of the
respondent that prior to his appointment either any advertisement was issued
or even the Employment Exchange was notified in regard to the then existing
vacancies. It is also not known whether there existed a sanctioned post. It is
furthermore neither in doubt nor in dispute that the terms and conditions of r- .......
c the services of the employees of the appellant - Corporation which is a body
constituted and governed under the Punjab Warehousing Corporation Act,
1957 are governed by the provisions thereof and the rules framed thereunder.
,....
[Para 10] 1937-B-D]

3. The terms and conditions of employees of the appellant - Corporation
D being governed by a statute and statutory rules could have been altered only
by reason of amendment of the rules only. The State had no say in that behalf.
A policy made by a State would ordinarily apply only in respect of the employees r
working under it. The policy decision of a State cannot be extended to a
statutory Corporation unless it is permitted to do so by the statute. jPara 11]
'.
E
Pawc:.n Alloys and Casting Pvt. Ltd., Meerut v. U.P. State Electricity
Board and Ors., 11997] 7 SCC 251, referred to.

4. When the terms and conditions of the services of an employee are
govenied by the rules made under a statute or the proviso appended to Article
F 309 of the Constitution of India, laying down the mode and manner in which
the recruitment would be given effect to, even no order under Article 162 of t·
the Constitution of India can be made by way of alterations or amendments of
the said rules. A'fortiori if the recruitment rules could not be amended even
by issuing a notification under Article 162 of the Constitution of India; the
G same cannot be done by way of a Circular letter. (Para 12] [937-G-HI
Secretary, State ofKarnataka & Ors. v. Umadevi and Ors., 120061 4 SCC
1, followed.
)._
'
~

. A. Umarani v. Registrar, Cooperative Societies and Ors., [2004] 7 SCC
H 112, relied on.
PUNJAB ST ATE WAREHOUSING CORPN., CHANDIGARH ''· MANMOHAN SINGll [S.B. SINHA, l.J 93 5
; .J
5. Having regard to the fact that the policy decision was made as a one A
t- time measure, the scheme in question would come within the protective
umbrella of paragraph 53 of Umadevi's case. Firstly, because the High Court
r: did not proceed on that basis; secondly, ifthe scheme itself was not applicable
in case of Respondent No. 1, even in terms of the said policy decision, as has
been clarified by it, the question of invoking the said paragraph in the instant
case would not arise. Such a Scheme could be made out only in respect of
B
such employees whose appointments were irregular and not illegal. (Para 15]
(938-C-E[
----..,
Punjab Water Supply and Sewerage Board v. Ranjodh Singh and Ors.,
(2006) 13 SCALE 426, relied on.
c
Municipal Corporation, Jabalpur v. Om Prakash Dubey, (2006) 13
-·- SCALE 266 [2007] 1 SCC 373, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 857 of2007.

From the final Judgment and Order dated 25.4.2005 of the High Court D
of Punjab and Haryana at Chandigarh in C.W.P. No. 10307/2004.
>;

Gurminder Singh, A.P. Dhamija, Ram Niwas, B.K. Sharma and Pratibha
Jain for the Appellant

Nidesh Gupta, Vinod Shukla, J. Goel and S. Janani for the Respondents. E
The Judgment of the Court was delivered by

S.B. SINHA, J. 1. Leave granted.

-~ 2. The State of Punjab formulated a scheme on 23.01.2001 for F
, regularisation of its employees.

3. The question which arises for consideration in this appeal arising out
of a judgment and order dated 25.04.2005 passed by a Division Bench of the
Punjab and Haryana High Court in Civil Writ Petition No. 10307 of2004 is as
to whether the appellant herein was bound to invoke the said scheme in G
respect of its own employees .
.I I
4. The validity or otherwise of the said Scheme came to be questioned
before this Court. This Court passed an interim order. Pursuant thereto or in
furtherance thereof, Respondent No. I herein was appointed on contract
basis as Restorer on a consolidated monthly salary. His services indisputably H
+--
'

936 SUPREME COURT REPORTS [2007) 2 S.C.R.

..
A were extended from time to time.
-+
5. The contention of the appellant is that the contract of the respondent's
service was not renewed as the services of Respondent No. 1 were not _-,~

required any further and, thus, by an order dated 24.12.2001 his services were
terminated. Questioning the validity of the said order, a writ petition was filed
B by the Respondent before the High Court. The said writ petition was disposed
of directing the appellant herein to consider the case of Respondent No. 1
in the backdrop of the said Scheme dated 23.01.2001. Inter alia on the premise
that in view of a clarification issued by the State Government that the said ~
scheme was not applicable to the case of contract employees, the respondent's
claim for regularisation was rejected by an order dated 17.06.2004. A fresh
c Writ Petition was filed which by reason of the impugned judgment has been
allowed.·
-·
#

6. The High Court, however, in its judgment opined that the case of
Respondent No. I was covered by the said policy decision and as such he
D was entitled to the benefit thereof. The appellant is, thus, before us.

7. One of the questions which was raised for its consideration before f'
the High Court was as to whether the workmen engaged on contract basis
were covered by the Scheme dated 23.01.2001.

E 8. The said purported scheme of the State was not made in terms of
Article 162 of the Constitution oflndia. It was by way of a circular letter dated
23.01.2001. The State, without issuing any notification or without even
exercising its statutory power governing the constitution and functioning of
the statutory authorities like the appellant, sought to extend the same to
public sector undertakings, corporations, boards, local authorities and other
F autonomous bodies which it could not do in law. Therein, it was stated: -r
, "iv. For accommodating work charged/ daily wage/ other category
' workers as per the above policy against the existing vacancies the
existing instructions requiring permission of the DOP and FD for
filling up the vacancies would not apply. Wherever for the absorption/
G . regularization of workers as per the above policy any Department's
own Recruitment Rules come in the way, such provisions of the
Recruitment Rules will stand relaxed."
\_ ...
9. However, a clarification was sought for from the State Government by
the Man.aging Director of the appellant by a letter dated 29.03.2001 as to
H
PUNJAB STATE WAREHOUSING CORPN .• CHANDIGARH ,.. MANMOHAN SINGH [S.B. SINHA. J.] 93 7
t.
whether the staff not being charged against any project or work is to be A
t- regularized or not; in response whereto, it was clarified:

(
" It is clarified that those employees who are working in Corporation
I for the last more than three years continuously apart from work
charge/daily wages, are to be regularized because these categories of
workers are covered under the policy instructions No. 11/34/2000-4 P. B
p.31301dated23.01.01. issued by the Government of Punjab."

__. Hl. It is not the case of the parties hereto that Respondent No. I was
appointed upon compliance of the constitutional scheme as adumbrated in
Articles 14 and 16 of the Constitution of India. It is also not the case of the
respondent that prior to his appointment either any advertisement was issued c
or even the Employment Exchange was notified in regard to the then existing
vacancies. It is also not known whether there existed a sanctioned post. It
is furthermore neither in doubt nor in dispute that the terms and conditions
of the services of the employees of the appellant - Corporation which is a
body constituted and governed under the Punjab Warehousing Corporation D
Act, 1957 are governed by the provisions thereof and the rules framed
)I thereunder.
• 11. The terms and conditions of employees of the appellant - Corporation
being governed by a statute and statutory rules could have been altered only
by reason of amendment of the rules only. The State as is well known had E
no say in that behalf. We fail to understand as to under what circumstances
the State had issued the aforementioned circular letter dated 23.01.2001. A
policy made by a State would ordinarily apply only in respect of the employees
·~
working under it. The policy decision of a State cannot be extended to a
statutory Corporation unless it is permitted to do so by the statute. See
Pawan Alloys & Casting Pvt. Ltd., Meerut v. U.P. State Electricity Board F
,.>
'"' and Ors. [1997] 7 SCC 251.

12. Furthermore, when the terms and conditions of the services of an
employee are governed by the rules made under a statute or the proviso
appended to Article 309 of the Constitution of India, laying down the mode
G
and manner in which the recruitment would be given effect to, even no order
.1 J under Article 162 of the Constitution oflndia can be made by way of alterations
or amendments of the said rules. A'fortiori ifthe recruitment rules could not
be amended even by issuing a notification under Article 162 of the Constitution
of India; the same cannot be done by way of a circu Jar letter.
H
938 SUPREME COURT REPORTS (2007) 2 S.C.R.
. ....
A 13. This aspect of the matter is covered by a decision of this Court in
A. Umarani v. Registrar, Cooperative Societies & Ors. (2004] 7 SCC 112,
-t'
wherein the law was stated in the following tenns:

"No regularisation is, thus, permissible in exercise of the statutory
power conferred under Article 162 of the Constitution if the
B appointments have been made in contravention of the statutory rules."

14. A Constitution Bench of this Court in Secretary, State of Karnataka
& Ors. v. 'Umadevi & Ors. [2006) 4 SCC 1, categorically held that any
apppintment made in violation of the Constitutional scheme would be a
nullity.
c
15. Submission of Mr. Nidhesh Gupta, learned counsel appearing on
behalf of the respondent that having regard to the fact that the policy
decision was made as a one time measure, the scheme in question would come
within the protective umbrella of paragraph 53 of Umadevi (supra) could be
D accepted for more than one reason. Firstly, because the High Court did not
proceed on that basis; secondly, if the scheme itself was not applicable in
case of Respondent No. I, even in tenns of the said policy decision, as has
been clarified by it, the question of invoking the said paragraph in the instant
case would not arise. Moreover, in view of series of decisions of this Court •
explaining paragraph 53 Umadevi (supra), such a Scheme could be made out
E only in respect of such employees whose appointments were irregular and not
iliegal.

16. This aspect of the matter has recently been considered in Punjab
Water Supply & Sewerage Board v. Ranjodh Singh & Ors. [2006) 13 SCALE
426, in the following tenns:
F
"A combined reading of the aforementioned paragraphs would clearly
indicate that what the Constitution Bench had in mind in directing
regularisation was in relation to such appointments, which were
irregular in nature and not illegal ones."

G (See also Municipal Corporation, Jabalpur v. Om Prakash Dubey
(2006) 13 SCALE266: (2007) 1sec373.)

17. For the reasons aforementioned, the impugned judgment cannot be
sustained which is set aside accordingly. The appeal is allowed. No costs.

H K.K.T. Appeal allowed.