Holding

The appellant is deemed to have been absorbed in the service of the respondent from the date his deputation allowance was stopped, pursuant to Rule 16(3) of the Nigam’s Service Rules, 1980 and Rules 4 and 5 of the U.P. Absorption of Government Servants in Public Undertakings Rules, 1984.

Summary

The appellant, a civil engineer appointed in U.P. Small Industries Corporation, was deputed to U.P. Rajkiya Nirman Nigam Ltd. (the Nigam) in 1985 and completed five years of deputation in November 1990. He exercised his option for permanent absorption in 1987, but the Nigam neither repatriated him nor issued an absorption order, merely stopping his deputation allowance on completion of the five‑year period. The appellant claimed that, under Rule 16(3) of the Nigam’s Service Rules, 1980 and Rules 4 and 5 of the U.P. Absorption of Government Servants in Public Undertakings Rules, 1984, the cessation of the allowance amounted to his absorption. The respondents argued that a deputationist has no inherent right to be absorbed and that the decision rested on policy discretion. The Supreme Court held that where the statutory rules expressly provide for absorption of deputationists, the employee acquires a right to be considered for absorption, and the Nigam’s failure to act was arbitrary; consequently, the appellant was deemed absorbed from the date his deputation allowance stopped. The Court set aside the High Court orders and directed the Nigam to pass an absorption order.

Issues considered

Whether an employee on deputation has a legal right to be absorbed in the borrowing organization under the applicable service rules.
Whether the stoppage of deputation allowance signifies automatic absorption.
Whether the borrowing organization’s failure to repatriate or issue an absorption order is arbitrary and violative of statutory provisions.
Whether the discretion to absorb deputationists can be exercised arbitrarily or capriciously.

Subjects

deputationabsorptionservice rulesdiscretionarbitrarinesspublic undertakinggovernment servantrepatriationstatutory rules

Judgment

RAMESHWAR PRASAD A
v.
MANAGING DIRECTOR U.P. RAJKIYA NIRMAN
NIGAM LTD. AND ORS.

SEPTEMBER 16, 1999
B
[K. VENKATASWAMI AND M.B. SHAH, JJ.]

Service Law :

Deputation-Absorption-Denial of-Deputationist completing 5 years C
continuous service in the Borrowing Organisation-Option for absorption
exercised within stipulated period-stoppage of payment of deputation
allowance on completing maximum period of deputation-Relevant statutory
rules providing absorption of deputationists-Borrowing organisation neither
repatriating nor absorbing in service-Legality of-Held, in view of relevant D
statutory Rules, deputationist stands absorbed from the date of stoppage of
deputation allowance-Borrowing organisation's inaction in passing
appropriate order would not affect the deputationist's right to be considered
for absorption-Uttar Pradesh Rajkiya Nirman Nigam Ltd (Engineers and
Architects) Service Rules, 1980---S.16(1)&(3)-UP. Absorption ofGovernment
Servants in Public Under~aking Rules, 1984-Rules 4 & 5. E

Absorption-Deputationist-Discretion-Held, power of discretion
cannot be exercised arbitrarily or capriciously.

Appellant initially appointed as Civil Engineer with U.P. Small Scale F
Industries Corporation (Respondent No. 2) went on deputation as Project
Manager with U.P. Rajkiya Nirman Nigam (Respondent No. 1). He opted for
continuation and permanent absorption, within the stipulated period. Without
repatriating him to his parent department, he was continued in the deputation
post without any break. However, on completion of his 5 years service on
deputation, .his deputation allowance was stopped. His represe':ltations for G
absorption were rejected on the ground that an employee working on
deputation has no legal right to be absorbed. In the meantime, respondent No.
2 decided to repatriate all deputationists who had completed five years on
deputation. The appellant challenged both the orders. High Court while
rejecting his claim for absorption passed an order for continuing his lien H
593
594 SUPREME COURT REPORTS [1999] SUPP. 2 S.C.R.

A in his parent department. Hence the present appeal.
On behalf of the ap,Pellant it was contended that in view of Rule 4 of
Absorption Rules, 1984, he was deemed to have been absorbed in the services .
of respondent No. 1 from the date his deputation allowance was stopped'.

B On behalf of respondent No. 2 it was contended that an employee who
was on deputation has no right to be absorbed.

Allowing the appeals and setting aside the orders of High Court, the
Court

C HELD: 1.1. In view of Rule 16(3) of the Uttar Pradesh Rajkiya Nirman
Nigam Ltd. (Engineers and Architects) Services Rules, 1980 and Rules 4 &
5 ofU.P. Absorption of Government Servants in Public Undertaking Rules,
1984, appellant stands absorbed in the services of respondent No. 1 from the
date his deputation allowance was discontinued. (601-G]

D 1.2. An employee who is on deputation has no right to be absorbed in
the service where he is working on deputation. However, ifthe rules provide ...
for absorption of employees on deputation then such employee has a right
to be considered for absorption in accordance with the sai~ rules. In the
instant case, Rule 16(3) of the Recruitment Rules of the Nigam and Rule
E 5 of the Absorption Rules provide for absorption of employees who are on
deputation. (600-B-C]

2. The inaction of respondent No. 1 in not passing the order either for
repatriation or absorption qua the appellant was unjustified and arbitrary.
Rule 4 of the Absorption Rules provides that no government servant shall
F ordinarily be permitted to remain on deputation for a period exceeding 5
years. Hthe appellant was not to be absorbed, he ought to have been repatriated
in the year 1990 when he completed 5 years of service on deputation. By not
doing so, the appellant is seriously prejudiced. The delay or inadvertent
inaction on the part of the officers of respondent No. 1 in not passing
G appropriate order would not affect the appellant's right to be considered for
absorption in the service of respondent No. 1 as provided in Rule 16(3) of
Recruitment Rules. (600-D-G-H)

3. The power of absorption, no doubt, is discretionary but is coupled
with the duty not to act arbitrarily or at whim or caprice of any individual.
H Thus, respondent No. l, cannot act arbitrarily by picking and choosing the
RAMESHWAR PRASAD1·. M.D. U.P. RAJKIYANIRMAN NIGAM LTD. [SHAH, J] 595

deputationists for absorption. (601-D) A
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5319-20 of
1999.

From the Judgment and Order dated 9.4.97 of the Allahabad High Court
in W.P. No. 19892/95 and 7640of1995. B
Sunil Gupta, Ms. Meenakshi Arora and Ms. Priya Rao for the Appellant.

Ramji Srinivasan, Kaviraj Singh, R. Sasiprabhu and Shrish Kr. Misra for
the Respondents.
c
The Judgment of the Court was delivered by

SHAH, J. Leave granted.

These appeals by special leave are filed against the judgment and order
dated 9th April, 1997 passed by the High Court of Judicature at Allahabad D
in Civil Miscellaneous Writ Petition No. 19892 of 1995 and Writ Petition No.
- 7640 of 1995 rejecting the prayer for absorption of appellant in employment
of Respondent No. 1 Nigam and holding that the order dated 21st July, 1995
passed by Respondent No. 2 terminating his lien could not be sustained and
that the appellant continues his lien with his parent department. E
In these appeals, it has been pointed out that the appellant was appointed
in the U.P. Small Industries Corporation Limited, Kanpur, Respondent No. 2
(for short "U.P. S.I.C.") as Civil Engineer (Re-designated as Executive Engineer)
on l.5.1973. In response to an advertisement dated 19th March, 1981 issued
by Respondent No. I, U.P. Rajkiya Nirman Nigam Ltd., Lucknow ("Nigam" for F
short) for the post of Chief Project Manager, appellant applied through U.P.
S.I.C. Respondent No. l Nigam wro,te l~tter to U.P. S.I.C. for No Objection
Certificate along with confidential record of the appellant for ten years. After
obtaining the requisite information, N igam by letter dated 31 May, 1985
request U.P. S.I.C. to relieve the appellant for joining Nigam on deputation on G
usual terms and conditions as applicable to U.P. Government employees. On
18.l l.1985, the appellant was relieved by U.P. S.l.C. and on 19.11.1985 he
joined respondent No.I, Nigam. On 29th November, 1985, Nigam issued Office
Order stating that the appellant had joined with effect from 19. 11.1985 and is
designated as Project Manager and will be given the same pay-scale as in the
parent department with 20% deputation allowance. H
596 SUPREME COURT REPORTS [1999] SUPP. 2 S.C.R.

A On 22nd December, 1987, the General Manager (H.Q.) wrote to the
appellant that if he was willing for permanent absorption in the Nigam, then
he should send his option letter in the prescribed format to Deputy Manager
(Personnel) through proper channel on or before 3 lst December, 1987. It was
also stated in the said letter that merely by giving applications for permanent
B absorption by any employee, the Nigam was not bound in any way to absorb
him. On 30th December, 1987, the General Manager (North East Zone) wrote
letter to the appellant asking for necessary information by written post. On
that basis on 31st December, I 987, the appellant submitted his willingness
along with the option letter to be absorbed in the employment of Nigam.
Thereafter by fetter dated 17th September, 1988, the General Manager (N.E.Z.),
C North District wrote to General Manager (H.Q.), Nigam that the appellant had
already sent his option for being absorbed and that he has completed three
years as a Project Manager; his work during this period was excellent and his
merger in the Nigam will be in the interest of the Nigam and therefore, merger
of the appellant in the Nigam be expedited so as to send the intimation to his
parent department U.P. Small Industries Corporation Ltd. for obtaining no
D objection certificate. On 19 .11.1990, the appellant completed statutory period
of five years on deputation with Nigam. Nigam did not repatriate him to his
parent organization and retained him in service without demur. It has been
pointed out that on completion of five years' service, the appellant's deputation
-
allowance was also stopped with effect from 19.11.1990.
E
It has been contended by the learned counsel for the appellant that
several engineers working with Nigam approached the High Court by filing
Writ Petition No. 3947/91 contending that respondent No. l be restrained from
absorbing deputationists as their promotional chances were jeopardised on
account of such absorption. It is stated that by order dated 17. 7 .1991, court
F granted interim relief. Further fact has come on the record that on 10.1.1994,
parent organization of the petitioner (U.P. S.I.C.) granted notional promotion
to the appellant as Superintending Engineer (Select Grade) with effect from
1.1.1990 and as Chief Engineer (Grade II) with effect from 1.1.1994. The said
notional promotions were granted with no actual benefits flowing to the
G appellant as he was on deputation with respondent No. 1. On 31.3.1994, U.P.
S.I.C., parent organization declared that lien of the appellant would stand
terminated on expiry of one month, i.e. 30th April, 1994 on account of his
/
having been- on deputation for more than five years.

Thereafter on 6th May, 1994, appellant sent representation to respondent
H No. 1 for the benefits of absorption as well as for corresponding promotional
- RAMESHWARPRASADv. M.D. U.P. RAJKIYANIRMANNIGAMLTD. [SHAH,J.) 597

benefits equivalent in the parent organization. In response to that letter, on A
28th October, 1994, respondent no. 1 issued a letter intimating that absorption
of the appellant was not possible. The appellant sent representation dated
- 14.11.1994 and 23.11.1994 without any avail. Hence on 9th December, 1994, he
filed Writ Petition No. 39594of1994 challenging the order dated 28th October,
1994. The High Court disposed of the said writ petition by order dated 9th· B
December, 1994 directing the Nigam to decide the representations filed by the
appellant within two months from the date of the production of the certified
copy of the order.

On 4th March, 1995, Nigam passed an order, in pursuance of the
directions given by the High Court, rejecting the representations by stating C
inter alia that the employee working on deputation has no legal right to be
absorbed in the concerned institution as it depends on policy decision and
circumstances regarding the concerned institution. Secondly, the option to be
absorbed as ·Project Manager given by some engineers could not be accepted
in view of the interim order dated 7th July, 1991 passed in Writ Petition No.
3947of1991. Regarding the prayer of further promotion, Nigam rejected by D
order dated 4.3.1995 stating that there is no provision for promotion of the
officers working on deputation in the Corporation. The Managing Director of
respondent No. 1 further stated that the Corporation is not responsible for
the order passed by the parent department terminating appellant's lien with
• effect from 30th April, 1994. It was for the appellant to take steps to go back E
from deputation. That order was challenged before the High Court by filing
C.M. Writ Petition No. 7640of1995.

Thereafter by order dated 5th July, 1995, Corporation decided to repatriate
all deputationists who had completed five years on deputation. That order
was challenged by the appellant by filing Civil Miscellaneous Writ Petition F
No. 19892of1995. As the appellant was sought to be removed, he approached
the High Court for interim relief and the1Court granted the same. Thereafter,
the High Court has passed the impugned order rejecting both the petitions.

In these appeals, learned counsel for the appellant submitted that the G
impugned order passed by respondent No. 1 repatriating the appellant's
service is, on the face of it, illegal and erroneous. The appellant is deemed
to have been absorbed with effect from 19 .11.1990, that is, the date when
respondent No. 1 stopped paying deputation allowance. This was done on
the basis of option exercised by the appellant by letter dated 31st December,
1987 and on the basis of recommendation made by the General Manager H
598 SUPREME COURT REPORTS [1999] SUPP. 2 S.C.R.

A (N.E.Z.) on 17.9.1988. He, therefore, submitted that the impugned order passed
by the Lucknow Bench of the Allahabad High Court in Writ Petition No. 3947/
91 filed by some of the Engineers working with respondent No. I would not
be applicable in the case of the appellant. He further pointed out that even
the High Court in Writ Petition No. 4314 of 1992 filed by similarly situated
deputationist, Shri R.K. Goel has directed respondent No. l to absorb him by
B an interim order. It is further pointed out that the Government of U.P. had
made the U.P. Absorption of Government Servants in Public Undertakings
Rules, 1984 and Rule 4 of the said Rules provides that deputation in Public
Undertakings shall not be allowed to exceed five years. Rule 5 further provides
for absorption of deputationists in Public Undertaking if an application is
C made by him within three years and the Government agrees to such absorption
in public interest. The aforesaid rules are binding on respondent No. I. On the
basis of the said rules. Appellant was asked to · exercise option of being
absorbed in December I987. Learned counsel has further pointed out that
even the Board of respondent No. I has re-affirmed the said policy by
.resolution dated 25th October, 1994 which is as under:-
D
"After considering the proposal the Board of Directors approved the
following principles regarding absorption of employees working on
deputation:-

I. The employees working on deputation should be considered for
E absorption against the vacant post in the direct recruitment
source.

2. The absorption should be done as per the provisions of Rules
of 1984 as issued by the government and the absorption of
those officers and staff who have come on deputation from
F sources other than the Government should also be done on the
basis of fundamental policies laid down under these Rules."

As against this, the learned counsel for Nigam submitted that the
employee who is on deputation has no right to be absorbed and, therefore,
G the High Court has rightly dismissed the petitions. He further submitted that
even in 1994, the parent department of the appellant has given him promotions.
Therefore, it cannot be stated that the appellant is deemed to have been
absorbed in November 1990 when Corporation stopped paying him deputation
aIJowance and the rights of appellant are in any way, not prejudiced.

H For deciding the controversy, we would first refer to the Uttar Pradesh
RAMESHWAR PRASAD v M.D. U.P. RAJKIY A NIRMAN NIGAM LTD. [SHAH, J) 599

Rajkiya Ninnan Nigam Limited (Engineers and Architects) Service Rules, 1980, A
Rule 16(1) of the Rules empowers respondent No. I to recruit to the various
categories of posts in the service inter alia by appointment on deputation
or transfer, Sub-Rule (3) of Rule 16 reads as under:

"Notwithstanding anything contained in sub-rules (I) & (2) or any
other rules or orders, the persons on deputation or transfer may be B
abosrbed in the service of the Nigam on such ten11S and conditions
as may be agreed upon between the Board, the person working on
deputation or transfer and his present employer and no employee of
the Nigam shall be entitled to claim any right under these rules
against the absorption of such persons or terms and conditions of C
absorption."

Further, for absorption of employee on deputation, other relevant
statutory rules are the U.P. Absorption of Government Servants in Public
Undertakings Rules, 1984. Relevant part of Rules 4 and 5 is as under:
D
"4. Time limit for deputation: No Government servant shall ordinarily
be permitted to remain on deputation for a period exceeding five
years.

5. Absorption in Undertaking: (I) A Government servant may be

--.
j
(i)
permitted to be absorbed in the service of the undertaking in
which he is on deputation, if-

he applies to the Government for his absorption in the Undertaking
E

before the expiry of three years from the date of commencement
of his deputation or before the date on which he attains the age
of 53 years, whichever be earlier, and the Undertaking concerned F
also moved the Government for his absorption within such
period, and

(ii) the Government agrees to such absorption in public interest."

Before the High Court, it was not disputed that it was accepted as a G
matter of policy that the aforesaid Rules were applicable to the employee who
was on deputation from other Public Undertaking. It has been, therefore,
pointed out by the learned counsel for the appellant that as deputation period
of five years was over, appellant was deemed to be absorbed in the service
of respondent No. 1. He has exercised his option for that purpose in December
1987, as suggested by the General Manager ofrespondent No. I. He, therefore, H
600 SUPREME COURT REPORTS [1999] SUPP. 2 S.C.R .

.A contended that on the basis of option being exercised and as he stood
absorbed, respondent No. I stopped paying deputation allowance from
19 .11.1990, that is, exactly after five years period of deputation.

We agree with the learned Counsel for the Respondent No. 1 and made
B it clear that an employee who is on deputation has no right to be absorbed
in the service where he is working on deputation. However, in some cases it
may depend upon statutory rules to the contrary. If rules provide for absorption
0
of employees on deputation then such employee has a right to be considered
for absorption in accordance with the said rules. As quoted above, Rule 16(3)
of the Recruitment Rules of the Nigam and Rule 5 of the U.P. Absorption of
C Government Servants in Public Undertakings Rules, 1984 provide for absorption
of employees who are on deputation.

In the present case, considering the facts, it is apparent that inaction
of respondent No. 1 of not passing the order either for repatriation or absorption
qua the appellant was unjustified and arbitrary. On the basis of Rule 16 of the
D Recruitment Rules, appellant was appointed on deputation in May 1985. He
was relieved from his parent department on 18th November, 1985 and joined
Nigam on 19th November, 1985. Under Rule 5 of the U.P. Absorption of
Government Servants in Public Undertakings Rules, 1984, he was required to
--
file an application for his absorption in employment ofNigam. Thereafter on
E the basis of letter dated 22.12.1987 written by the G.M. (HQ) and the letter
dated 30.12.1987 written by the G.M. (NEZ), he opted for continuation and
absorption in service of Nigam by letter dated 31st December 1987. The
General Manager (N.E.Z.) by letter dated 17th September, 1988 wrote to the
G.M. (HQ) that appellant's service record was excellent; he was useful in
service and as he was about to complete 3 years on deputation, appropriate
F order of absorption be passed. Nothing was heard from the General-Manager.
Further on 19-11-1990, as soon as the appellant completed 5 years of deputation,
his deputation allowance was stopped with effect from that date. The appellant
continued in service without any break. Rule 4 of the U.P. Absorption of
Government Servants in Public Undertakings Rules, 1984 which was admittedly
G applicable, provides that no government servant shall ordinarily be permitted
to remain on deputation, for a period exceeding 5 years. Nothing has been
stated by the Nigam as to why he was not repatriated. If the appellant was
not to be absorbed, he ought to have been repatriated in the year 1990 when
he had completed 5 years of service on deputation. By not doing so, the
appellant is seriously prejudiced. The delay or inadvertent inaction on the
H part of the Officers of the Nigam in not passing appropriate order would not
RAMESHWARPRASADv. M.D. U.P. RAJKIYANIRMANNIGAMLTD. [SHAH,J.] 601

affect the appellant's right to be considered for absorption in service ofNigam A
as provided in Rule 16(3) of Recruitment Rules.

Further, from the record it appears that the appellant was to be absorbed
in service but in-service employees filed Writ Petition and obtained an interim
order restraining Nigam from absQrbing deputationist, Nigam failed to pass
any order absorbing him. Subsequently, when appellant approached the High B
Court and High Court directed Nigam to consider his representations, the
impugned order rejecting the appellant's representations was passed. In the
said order, it is stated that:-

(a) it was a policy decision;
(b) some engineers who were in service objected to absorption; and
c
(c) the High Court has passed Interim Order on 17-7-91.

In our view, it is true that whether the deputationists should be absorbed
in service or not is a policy matter, but at the same time, once the policy is D
accepted and rules are framed for such absorption, before rejecting the
application, there must be justifiable reasons. Respondent No. 1 cannot act
arbitrarily by picking and choosing the deputationists for absorption. The
power of absorption, no doubt, is discretionary but is coupled with the duty
not to act arbitrarily, or at whim or caprice of any individual. In the present
case, as stated earlier, the General Manager (N.E.Z.) specifically pointed out E
as early as in the year 1988 that appellant's service record was excellent; he
has useful in service and appropriate order of his absorption may be passed.
His application for absorption was within three years as provided in Rule 5.
There is nothing on record to indicate that for any reason whatsoever, he was
not required or fit to be absorbed or the power under Rule 5(1) of the U.P.
Absorption of Government Servants in Public Undertakings Rules, 1984 was F
not required to be exercised in his favour. Interim order dated 17.7.1991 passed
by the High Court would not be applicable in case of appellant because his
case was considered for absorption in the year 1988. Further on completion
of five years on 19.11.1990 he could not have ordinarily been continued on
deputation in the service of Nigam. It is apparent that he was absorbed from G
19. l l.90 because from that date his deputation allowance was also
discontinued. If he was to be continued on deputation, there was no reason
for non-payment of deputation allowance. So on the basis of statutory rules
as well as the policy, appellant stand absorbed in the service of Nigam.

In this view of the matter, these appeals are allowed, the impugned order H
602 SUPREME COURT REPORTS [1999) SUPP. 2 S.C.R.

A dated 9.4.1997 passed by the High Court in Civil Miscellaneous Writ Petition
No. 19892 of 1995 and Writ Petition No. 7640 of 1995 is quashed and set aside.
The impugned order dated 11th July, 1995 relieving the appellant from the
post which he was holding in the U.P. Rajkiya Nirman Nigam Ltd., Lucknow
is quashed and set aside. Respondent No. 1-Nigam is directed to pass order
B on or before 31st December, 1999 absorbing the appellant at appropriate place
and from appropriate date in accordance with the Rules. There will be no order
as to costs.
J
·•
S.V.K. Appeals allowed.

)-

·•