Holding

Employees of unit‑run canteens are government employees, giving the CAT jurisdiction, but they are not automatically entitled to all benefits of regular government servants; benefits must be based on the applicable service rules and administrative instructions.

Summary

The employees of defence unit‑run canteens filed applications before the Central Administrative Tribunal (CAT) seeking benefits available to regular defence personnel, arguing that the canteens are part of the Canteen Stores Department (CSD) and thus under the Ministry of Defence. The Union of India contended that the canteens are funded from their own profits, not the Consolidated Fund, and therefore the staff are not government servants, rendering the CAT without jurisdiction. The CAT held it had jurisdiction and granted the employees full retiral benefits and subsistence allowance under the Fundamental Rules. On appeal, the Supreme Court held that, because the provision of canteen facilities is an obligatory government function, the CSD funds the unit‑run canteens and the defence officers exercise pervasive control, the staff are government employees and the CAT has jurisdiction. However, being government employees does not automatically confer all benefits of regular civil servants; entitlement depends on the specific service rules and administrative instructions. Consequently, the Court set aside the CAT’s directions granting full retiral and subsistence benefits, ordered that the employees receive at least the minimum pay scale of their CSD counterparts, and directed the Ministry of Defence to frame appropriate service conditions within six months.

Issues considered

Whether employees of unit‑run canteens are government servants for the purpose of jurisdiction under the Central Administrative Tribunals Act, 1985.
Whether such employees are entitled to retiral benefits and subsistence allowance under the Fundamental Rules.
Whether the Central Administrative Tribunal can direct payment of such benefits in the absence of a specific employer rule.

Legislation cited

Fundamental Rules

Subjects

Central Administrative Tribunalgovernment employeeunit‑run canteenjurisdictionservice benefitsFundamental RulesMinistry of Defencemaster‑servant relationship

Judgment

A UNION OF INDIA AND ORS.
v.
M. ASLAM AND ORS.

JANUARY 4, 2001

B [G.B. PATTANAIK AND B.N. AGRAWAL, JJ.]

Ce/1/ral Administrative Tribunals Act, 1985:
c Section 14-Administrative Tribunal-Jurisdiction-Unit-run
canteens--Employees of-Whether Government employees-Held:
Government is obliged to provide canteen facilities to troops at unit level-
Ojficers of Defence Services have all pervasive control over Unit-run -~
canteens-Regular set of Rules is fi"amed and funding of articles is provided
D by Canteen Stores Department-Hence, employees of Unit-run canteens are
Government employees-Therefore, Administrative Tribunals have jurisdiction
to entertain and decide their applications and grievances-However, that
does not entitle them to get all service benefits available to regular
Government employees-It depends upon the nature of duties, Rules,
E regulations and Administralive lnstructions--Fundamental Rules do not
apply to them unless the employer adopts !he same or frames separate
conditions of service-Hence, the Tribunal erred in holding that these
employees are entitled to retrial benefits and subsistence allowance-labour
law.

F The respondents were the employees of Unit-run canteens, which
provided canteen facilities to the troops at the unit leave. The respondents
filed an application before Central Administrative Tribunal claiming benefits
as regular defence personnel employees or at least as civilian employees
serving under the Ministry of Defence on the allegation that the Unit run
canteens were part of the Canteen Stores Department (CSD); and that since
G the CSD formed a part of the government in the Ministry of Defence there
was no reason as to why the Unit-run canteens should not be held to be a +
part of the Ministry of Defence. The appellant contended before the Tribunal
that the respondents could not be held to be Government servants and,
therefore, the Tribunal did not have the jurisdiction to entertain the
H application.
62
U.0.1. v. M. ASLAM 63
· The Tribunal found that Officers of the Defence Services had all A
pervasive control over the respondents and, therefore, held that the Tribunal
-_\
' had jurisdiction to entertain the application. The Tribunal also held that the
....-~
respondents were entitled to retiral benefits and subsistence allowance in
accordance with the Fundamental Rules. Hence this appeal.

Disposing of the appeal, the Court B

/ ..
HELD : I. It is difficult to conceive as to how the employees working
in the Unit-run canteens can be held to b~ not Government servants, when
it has emerged that providing canteen facilities to the Defence service
--<
personnel is obligatory on the part of the Government and in fact these Unit-
run canteens discharge the duty of retail outlets after getting their provisions c
from the wholesale outlets or depot of the Canteen Stores Department (CSD).
168 G-H; 69-AI
~
Parimal Chandra Raha v. l/C, 119951 Supp. 2 SCC 611, relied on.

Union of India v. Chotelal, 119991 I sec 554, held inapplicable. D
2. The Officers of the defence Services have all pervasive control over
the Unit-run canteens as well as the employees serving therein. Regular set
of Rules has been framed determining the service conditions of the employees
in Unit-run canteens. The funding of articles is provided by CSD which itself
is a part of the Ministry of Defence. Therefore, the status of the employees E
in the Unit-run canteens must be held to be that of Government employees
and consequently the Central Administrative Tribunal Would have the
jurisdiction to entertain applications by such employees under the provisions
of the Central Administrative Tribunals Act, 1985. (69-D-GI

3.1. Although the statues of the employees serving in Unit-run canteens F
is that of Government servants, but that by itself ipso facto would not entitle
them to get all the service benefits as is available to the regular Government
,. servants or even their counterparts serving in the CSD canteens. It would
' necessarily depend upon the nature of duty discharged by them as well as
'i
on the Rules and Regulations and Administrative Instructions issued by the G
employer. (70-C-D) ·
t
3.2. There is a set of Administrative Instructions issued by the Competent
Authority governing the service conditions of the employees of such Unit-
run canteens. Therefore, the direction of the Tribunal that the employees of
the Unit-run canteens should be given all the benefits including the retiral H
64 SUPREME COURT REPORTS (200 l) l S.C.R.

A benefits of regular Government servants cannot be sustained and accordingly
that part of the direction is set aside. However, the employees of the Unit-
run canteens will draw at the minimum of the regular scale of pay available
to their counterparts in the CSD. (70-D-EJ
......
3.3. Notwithstanding the fact that the employees serving under
B Unit-run canteens could be treated as Government servants, yet it does
not necessarily mean that the service conditions of such employees are
governed by the Fundamental Rules. It would be open for the employer
to frame separate conditions of service of the employees or to adopt the
Fundamentals Rules. There is no decision of the employer that Fundamental
C Rules would be applicable to such employees and in the absence of such a
decision, the tribunal was not justified to direct that the question of payment
of subsistence allowance should be reviewed in accordance with the provisions
contained in the Fundamental Rules. 170-G-H; 71-A-BJ

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1039-
0 1040 of 1999 Etc.

From the Judgment and Order dated 20/21.9.95 of the Central
Administrative Tribunal, Jodhpur in 0.A. No. 86 of 1995.

With
E
C.A. Nos. 1041/1999 and 1042-43/1999.

N.N. Goswami, V.A. Mohta, P.N. Mishra, S.W.A. Qadri, Bipul Kumar,
Kiran Bhardwaj, M. Vijaya Bhaskar, Anil Katiyar, R. Nedumaran, J. Buther,
M.A. Chinaswamy, J.K. Kaushik, Dr. Suman! Bhardwaj, Praveen Chaturvedi,
Ratnesh Kumar, Mridula Ray Bharadwaj, Smt. Subhadra Chaturvedi and K.N.
Rai for the appearing parties.

The Judgment of the Court was delivered by
·.
G PATTANAIK, J. Union of India is the appellant in all these appeals and
these appeals are directed against the orders of different Central Administrative
Tribunals. The respondents are the employees of the Unit- Run-Canteens -t
which provide canteen facilities to the troops at the unit level. Applications
before the Central Administrative Tribunals were filed by these employees
claiming benefits as regular defence personnel employees or at least as
H civilian employees serving under the Ministry of Defence on the allegation
U.0.1. v. M. ASLAM [PATTANAIK, J.) 65

- that the Unit-Run-Canteens are part of the Canteen Stores Department and A
since the Canteen Stores Department forms a part of the Government in the
Ministry of Defence there is no reason as to why the Unit-Run-Canteens
should not be held to be a part of Ministry of Defence. On behalf of Union
of India the jurisdiction of the Tribunal was assailed on the ground that these
employees cannot be held to be the Government employees and consequently
the Tribunal did not have the jurisdiction to entertain the applications and B
decide the grievances of the employees. According to the Union of India the
Unit-Run-Canteens are operated by the non-public funds and the expenditure
required to run the Unit Canteens is made out of the profits earned by the
canteens itself and, therefore, so far as the personnel serving in such canteens,
there is no relationship of master and servant between the Government of C
India and the employees, and consequently the applications before the Tribunal
should be rejected. The Central Administrative Tribunals, however, at Jodhpur
' and Bombay took the view that the Unit-Run-Canteens are the part of Defence
establishment and consequently the holder of a post in the management of
such canteen must be held to be connected with the Defence Services. The
Tribunals examined the relevant provisions made by different personnel D
providing all pervasive control with the Ministry of Defence and thus held
that there subsist master and servant relationship between the employees
serving in Unit-Run- Canteens and the Ministry of Defence and, therefore, the
Tribunal retains the jurisdiction to entertain applications and decide those
applications in accordance with law. Mr. Goswami, learned senior counsel E
appearing for the Union of India vehemently contended before us, that these
Unit-Run- Canteens are different from the Canteen Stores Department and the
salary of the employees serving in the Unit-Run- Canteens are not paid out
of the Consolidated Fund of India but a fund created at the unit level and
profit out of sales in Unit and Canteens are utilised for the payment of salary
as well as for creating assets of the canteens, and consequently it is not F
possible to hold that there exist relationship of master and servant between
the employees serving in these canteens and the Union of India in the
Ministry of. Defence. According to Mr.Goswami, no doubt, some amount of
control is vested with the local defence personnel, be it Army, Air Force or
Navy, over the employees serving in Unit-Run-Canteens, but conferment of G
such disciplinary control alone will not clothe the employees with the status
of Government servant or servants under the Ministry of Defence and the
Tribunal, therefore, committed serious error in declaring the status of these
employees as Government servants. Mr. Goswami also strongly relied upon
the judgment of th is Court in the case of Union of India and Another v.
Chotelal and others, [I 999) I Supreme Court Cases 554, in which case this H
66 SUPREME COURT REPORTS [2001) I S.C.R.

A Court has held that the Dhobis in the National Defence Academy, Khadakwasla
are not Government servants, particularly because their salary is not paid out j.
-
.of the Consolidated Fund of India. According to Mr. Goswami, the
Administrative Tribunals at Allahabad and Punjab and Haryana High Court
at Chandigarh have taken contrary view so far as the statut of these Unit-
Run-Canteens employees are concerned, and according to the learned counsel
B that constitutes a correct view.

)or.
Mr. Mohta, Mr. P.N. Mishra, senior advocates and several other learned
counsel appearing for the respondents, on the other hand contended, that the
Central Administrative Tribunals at Jodhpur and Bombay have taken the
c correct view with regard to the status of such employees. According to them
the decision of this Court and the test indicated in the Life Insurance
Corporation case would fully apply to the facts and circumstances of the
present case and, as such, there will be no reason to hold that the employees ...... l"'
in the Unit-Run-Canteens are not the Government servants.

D In order to decide whether the employees serving in the Unit-Run-
Canteens can be held to be Government servants, it is necessary to find out
the mode of appointment of such employees, Rules and Regulations
governing the conditions of service of such employees, fund from which
such salary is paid, and other factors which really determine the existence
E of relationship of master and servant between the Government and the
employees. In the Defence Services there are two types of canteens; (I)
Canteen Stores Department, and (2) Unit-Run-Canteens. The Canteen Stores
Department was in existence in this country even during pre- independence
days and it has its Head Office and Base Depot in Bombay with 33 Area
Depots all over the country. These Area Depots are the wholesale outlets,
F which serve Unit-Run Canteens in their respective zones. The Canteen Stores
Department after the independence from 1948 onwards function as a
Department under the Ministry of Defence initially for 3 years on an
experimental basis and later from 1950 has been working on permanent
basis. We are concerned in the present case with the Unit-Run Cant.eens and
G the status of the employees serving therein. As has been stated earlier, these
Unit-Run Canteens under their respective Commanding Officers in the three
services - Army, Navy and Air Force get their articles from the wholesale
outlets in Area Depot of the Canteen Stores Department and at present there
exist 3400 Unit-Run Canteens. Prior to the World War II the retail trade in the
Defence Sen•ices was in the hands of the contractors. During World War II
H a regular cadre called Indian Canteen Code came to be formed under the
U.0.1. v. M. ASLAM [PATT AN~IK. J .J 67
Canteen Services (ln'dia) to handle retail trade in operational areas where A
\ contractors were not expected to go. After 1947, the organisation split into
two : Canteen Stores Department (India) and Canteen Stores Department
(Pakistan). The retail trade, however, was reverted to the contractors. But by
the early fifties it was realised that the margin of profit between the wholesale
price and the retail rate could be a welcome source of funds available to B
commanding officers for welfare purposes. Thus, the concept of unit-run
canteens was born, and contractors were driven .out. When Major Gen. K.S.
Thimaya took over as Quarter Master General, he gave detailed thought to
providing canteen facilities to the troops at the unit level. He found that retail
outlets being in the hands of the unit canteen contractors. the margin between
the wholesale price and retail price of goods went to the contractors whereas C
the amount in the hands of individual commanding officers of units in the
Army, Navy and Air Force could be utilised for the welfare of the troops. The
case was therefore, made out jointly for taking over of contractor-run canteens
by units or formations, as the case may be, so that the profits from the sale
of canteen stores could be retained within the unit. Contractors, no doubt,
put up considerable objection to the aforesaid proposal but the Government D
agreed to the proposal of General Thimaya and orders were issued. The
concept of Uriit-Run Canteens, therefore, became an accepted doctrine though
it took considerable period for implementing change over. It goes without
saying that from 1948 onwards the Canteen( for short CSD) functioned as a
department under the Ministry of Defence, initially for three years on an E
experimental basis, and later from 1950 on a permanent basis and yet right
upto 1977 the legal status of the same remained .1ebulous. For functional
purposes, it was a commercial undertaking, but for actual practice it was
treated as a Department of the Ministry of Defence. The result was that the
terms and conditions of employees presented various problems which quite
often became a source of discontent and unpleasant employer- employee F
relations. As has been stated earlier, for effective functioning of the defence
services it is absolutely necessary to provide canteen facilities through out
the country and while the Canteen Stores Department serve as whole sale
outlet it is the Unit-Run Canteens which serve as retail outlet. A set of Rules
regulating the terms and conditions of service of the employees of Unit-Run G
~ canteens have been framed which confers all pervasive control over the
employees with the authorities of Defence services. Though the funding of 1 •
the Unit-Run Canteens is not made o.ut oft'he Consolidated Fund of India but
it is made by the Canteen Stores Department and this Department in its turn
has formed a part of the Ministry of Defence, admittedly. In Parimal Chandra
Raha and others v. life Insurance Corporation of India and others, (1995] H
68 SUPREME COURT REPORTS [2001] 1 S.C.R.

A Supp. (2) Supreme Court Cases 611, the employees of different canteen·s in
different offices of the Life Insurance Corporation whether were employees
of the Corporation itself was under consideration by this Court. This Court
evolved four principles which are quoted hereunder :-

"(i) Canteens maintained under obligatory provisions of the Factories
B Act for the use of the employees became a part of the
establishment and the workers employed in such canteens are
employees of the management.

(ii) Even ifthere is a non-statutory obligation to provide a canteen,
the position is the same as in the case of statutory canteens.
c However, ifthere is a mere obligation to provide facilities to run
a canteen, the canteen does not become part of the establishment.

(iii) The obligation to provide canteen may be explicit or implicit.
Whether the provision for canteen services has become a part
D of the service conditions or not, is a question of fact to be
determined on the facts and circumstances in each case.

(iv) Whether a particular facility or service has become implicitly a
part of the service conditions of the employees or not, will _...._ __
depend, among others, on the nature of the service/facility, the
E contribution the service in question makes to the efficiency of
the employees and the establishment, whether the service is
available as a matter of right to all the employees in their capacity
as employees and nothing more, the employees who avail of the
service, the length of time for which the service has been
continuously available, the hours during which it is available,
F the nature and character of management, the interest taken by
the employer in providing, maintaining, supervising and
controlling the service, the contribution made by the management
in the form of infrastructure and funds for making the service
available etc."
G
Applying the aforesaid principle to the facts in the present case, it is
difficult to conceive as to how the employees working in the Unit-Run Canteens
can be held to be not Government servants, when it has emerged that providing
canteen facilities to the Defence service personnel is obligatory on the part
of the Government and in fact these Unit-Run Canteens discharge the duty
H of retail outlets after getting their provision from the wholesale outlet or depot
U.0.1. v. M. ASLAM [PA TT ANAIK, J.] 69
of ihe Canteen Stores Depai1ment. Mr. Goswami, the learned senior counsel A
appearing for the Union of India strongly relied upon the judgment of this
Court in Union of India and another v. Chore/al& Others. (l999) 1 Supreme
Court Cases 554, wherein the question for consideration was whether Dhobis
appointed to wash the clothes of cadets at NOA at Khadakwasla who are
being paid from the regimental fund could be treated as holders of civil post
within the Ministry of Defence. This Court answered in the negative because B
the regimental fund was held not to be a public fund as defined in paragraph
802 of Defence Services Regulation. Payment to such dhobis out of the
regimental fund and the character of that regimental fund was the detenn inative
factor. But in the case in hand if the Canteen Stores Department forms a part
of the Ministry of Defence and if their funds form a part of the Consolidated C
Fund of India and it is the said Canteen Stores Department which provides
fund as well as different article through the retail outlets of Unit-Run Canteens
then the employees who discharge the duties of salesmen in such retail
outlets must be held to be employees under the Government. The officers of
the Defence Services have all pervasive control over the Unit-Run Canteens
as well as the employees serving therein. Regular set of Rules have been D
framed determining the service conditions of the employees in Unit-Run
Canteens. The funding of articles are provided by Canteen Stores Department
which itself is a part of the Ministry of Defence. The report of a Committee
of Subordinate Legislation went into detail the working conditions of the
employees engaged in the Unit-Run Canteens and categorically came to the E
conclusion that these employees are recruited, controlled and supervised by
the Rules and Regulations made by the Defence Services although these have
been given the name of Executive Instructions. The said Committee came to
the conclusion that for all intent and purposes the employees in the Unit-Run
Canteens are Government employees and should be treated as such. In the
aforesaid premises, we are of the considered opinion that the status of the F
employees in the Unit-Run Canteens must be held to be that of a government
employee and consequently the Central Administrative Tribunal would have
the jurisdiction to entertain applications by such employees under the
provisions of Administrative Tribunal Act. Civil Appeal Nos. I039-1040 of
1999 by the Union of India against the order of the Central Administrative G
Tribunal, Jodhpur Branch in 0.A. No. 86 of 1995 accordingly stand dismissed.

Civil Appeal No. I041 of 1999 is Unions appeal against the decision
of Central Administrative Tribunal, Jodhpur Branch in O.A. No. 157 of 1993
and OA No. 333 of 1994. By the impugned orders the Tribunal came to hold
that it had the jurisdiction to entertain the applications tiled by the employees H
70 SUPREME COURT REPORTS [200 I) I S.C.R.

A of the Unit-Run Canteens and further directed that" those employees are
entitled to pay and other benefits similar to the pay and other benefits
available to the canteen employees in the CSDI. The Tribunal also further .J-
directed that the applicants should get the minimum of the salary presently
being paid to their counter-parts in the CSDI and all the benefits of the other
B service conditions· available to the regular Government employees in the
CSDI. It also further directed that they should be treated as Government
employees from the date of the filing of the applications before the Tribunal.
It also directed that they would be entitled to retiral benefits. As already
stated, we have come to the conclusion about the status of the employees
serving in Unit-Run Canteens to be that of Government servants, but that by
C itself ipso facto would not entitle them to get all the service benefits as is
available to the regular government servant or even their counter parts serving
in the CSD Canteens. It would necessarily depend upon the nature of duty
discharged by them as well as on the Rules and Regulations and Administrative
Instructions issued by the employer. We have come across a set of
Administrative Instructions issued by he Competent Authority governing thL
D service conditions of the employees of such Unit-Run Canteens. In this .view
of the matter, the direction of the Tribunal that the employees of the Unit-Run
Canteens should be given all the benefits including the retiral benefits of
regular government servants cannot be sustained and we accordingly, set
aside that part of the direction. We, however, hold that these employees of
E the Unit-Run Canteens will draw at the minimum of the regular scale of pay
available to their counter parts in the CSDI and, we further direct the Ministry
of Defence, Union of India to detennine the service conditions of the employees
in the Unit-Run Canteens at an early date, preferably within six months from
the date of this judgment. This appeal is accordingly disposed of with the
aforesaid direction and observation.
F
Civil Appeal Nos. 1042-43 of 1999. These appeals by the Union of India
are directed against the order of the Central Administrative Tribunal, Jodhpur
Bench in OA No. 231 of 1994, whereunder the Tribunal has directed the Union
Government to review the payment of subsistance allowance payable to the
G employees in the light of the E.F.R. 53 of the Fundamental Rules.
Notwithstanding the fact that we have recorded the conclusion that the
employees serving under Unit-Run Canteens could be treated as Government
servants, but that does not necessarily mean that the service conditions of
such employees are governed by the Fundamental Rules. It would be open
for the employer to frame separate conditions of service of the employees or
H to adopt the Fundamental Rules. There is no decision of the employer that
U.0.1. v. M. ASLAM [PATTANAIK. J.] 71
Fundamental Rules would be applicable to such employees and in the absence A
of such decision the Tribunal was not justified to direct that the question of
payment of subsistance allowance should be reviewed in accordance with the
provisions contained in the Fundamental Rules. In this view of the matter,
though we uphold the jurisdiction of the Tribunal to entertain applications
filed by employees serving in Unit-Run Canteens but the impugned direction
for reviewing the payment of subsistance allowance in terms of Fundamental B
Rules cannot be sustained and that part of the direction accordingly stands
set aside and Un ions appeal to that extent stands allowed.

These appeals are disposed of with aforesaid directions and observations.
c
v.s.s. Appeals disposed of.

-_k,