M.D.,M/S T.Nadu Magnesite Ltd vs S.Manickam & Ors

M.D., M/s. T. Nadu Magnesite Ltd. ...Appellant

VERSUS

S. Manickam & Ors. ...Respondents

WITH

CIVIL APPEAL NO..............OF 2010 [Arising out of SLP(C) No.7835/2007]

AND

CIVIL APPEAL NO............. OF 2010 [Arising out of SLP(C) No.7952/2007]

JUDGMENT

SURINDER SINGH NIJJAR,J.

1. Leave granted.

2. By this judgment, we shall dispose of the above three appeals as

the facts and the legal issues involved in all the appeals are common.

The writ petitioners before the High Court have been impleaded as

respondent No.1 before this Court.

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3. The appellant herein, TANMAG, is a company fully owned by the

Government of Tamil Nadu. By G.O.Ms.No.41 Industries Department,

dated 10.1.1979, it was decided to implement the policy decision taken

by the Government of Tamil Nadu to reserve the mineral prone areas of

magnesite for State exploitation. TANMAG was accordingly formed for

implementing the policy. It is the common case of the parties that the

respondents were duly selected and appointed, on the respective posts,

in the aforesaid company. They were appointed as Assistant Project

Engineer (Mechanical), Junior Foreman (Mechanical) and Deputy

Manager (Mechanical) respectively by orders dated 12.9.1983,

23.11.1988 and 18.8.1989. At the time of joining, the respondents

executed bonds to serve in TANMAG for a minimum period of three

years. The TANMAG confirmed the services of the respondents through

its proceedings dated 25.10.1985, 30.4.1991 and 24.8.1989 respectively.

The respondents were paid the revised pay by the TANMAG as per the

Pay Commission's recommendations made by the Government of Tamil

Nadu.

4. In the year 1990, through G.O.Ms.No.855 Industries (MME.II)

Department, dated 16.8.1990 the Government of Tamil Nadu decided to

implement the Chemical Beneficiation Project in joint venture with M/s.

Kaitan Supermag Limited. The share holding pattern of the joint venture

was as follows:

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TANMAG: 26%

M/s. Kaitan Supermag Ltd.: 25%

General public: 49%

Therefore, TANMAG had control over JVC.

5. The appellant through letter dated 18.3.1991 conveyed to the

respondents that they are in excess of the cadre strength in TANMAG

and called upon them to express their willingness to work in the Joint

Venture Company with the then existing pay and other facilities without

any disadvantage. It was also mentioned in the said communication that

if no option is given, the appellant will have no option but to terminate

their services under Clause 2.14 of the Service Rules of the Tamil Nadu

Magnesite Limited (hereinafter referred to as the Service Rules). The

respondents were reluctant to leave the service of TANMAG. However,

after prolonged correspondence, the appellant transferred the

respondents to the JVC, without any monetary loss and alteration of

service conditions with seniority and other benefits; by orders dated

20.06.1991 and 31.07.1991 respectively.

6. On 21.6.1996 respondent No.1 S. Manickam, petitioner in Writ

Petition No.3707/2001, represented that since his transfer to JVC he

had been working in the same cadre. Had he continued in TANMAG he

would have become eligible for promotion. Even though under the

3 transfer order it was provided that there would be no change in terms

and conditions of employment, apart from other facilities he was

monetarily losing more than Rs.2,000/- a month. It was also pointed

that since JVC had not been able to take up any work on chemical

beneficiation project, he was apprehensive about his future employment

prospects. Since there was uncertainty in the implementation of the

project and originally his employment was for Rotary Kiln Plant, he be

reverted back to TANMAG. It appears that no decision was taken on the

representation.

7. By G.O.Ms No 140 dated 11.5.98 it was decided to close the JVC.

A joint request was made by six employees in the letter dated 31.10.1998

including the three respondents herein seeking reversion back to

TANMAG. By letter dated 26.11.98 the respondents and the other

employees were informed that they were permanently transferred to the

JVC, namely, M/s. India Magnesia Products Limited (hereinafter referred

to as IMPL). Accordingly, they were relieved from the service of the

company from the afternoon of 31.7.1991. As such they have no lien in

TANMAG and no right to claim a reversion of their services from M/s.

IMPL to TANMAG. Thus their request was rejected.

8. The order dated 26.11.1998 was challenged by the respondents in

the respective writ petitions contending that the respondents were

4 recruited by TANMAG and were transferred with all service benefits, pay

protection, etc., to M/s. IMPL (the JVC) when it was formed. When it was

closed all its assets were transferred back to TANMAG. The employees

transferred from TANMAG to the JVC should also be automatically

reverted back to TANMAG. The action of TANMAG in not re-transferring

the respondents to its service is erroneous. They, therefore, prayed for

quashing the said order dated 26.11.1998 with a consequential direction

to TANMAG to re-transfer/absorb the respondents in the service of

TANMAG with all benefits such as seniority on par with their immediate

juniors, arrears of pay and allowances with service benefits that would

have been accrued in favour of the respondents if they had continued in

the service of TANMAG.

9. The TANMAG resisted the writ petitions by filing counter affidavit

by contending that TANMAG is a separate entity and no writ is

maintainable against it. It was pleaded that even though the Board of

Directors are named by the Government, the Company is managed by

the Managing Director under the control and superintendence of the

Board of Directors. It is also stated in the counter affidavit that the

respondents were recruited for the project as per the advertisement.

Thereafter the respondents were transferred to the JVC on the basis of

the advance notice dated 18.3.1991. It was made clear that their services

were permanently transferred and they were relieved from TANMAG from

5 31.7.1991. It is accepted that their service conditions were protected at

the time of transfer to the JVC. After the transfer the respondents have

lost their lien. They became the employees of the JVC. Therefore they

have no right to demand reversion to TANMAG merely because the JVC

had been closed. It is also stated in the counter affidavit that the

respondents having opted and given their willingness to be absorbed in

the JVC, it was not open to them to claim that they should be re-

transferred to TANMAG on the closure of the JVC.

10. The learned single Judge after considering the rival submissions

held that the respondents have lost the lien in TANMAG due to their

transfer to the JVC. On transfer, they became the staff of the JVC. The

claim of the respondents for being sent on deputation, under Clause 2.17

of the Service Rules having been rejected they cannot claim that they

should be reverted back to TANMAG. Consequently the writ petitions

were dismissed.

11. Being aggrieved by the aforesaid judgment of the learned single

judge respondents filed the three writ appeals. On behalf of the

respondents it was submitted before the Division Bench that TANMAG

was a shareholder of JVC. It had transferred the land and machinery to

the aforesaid company. The services of the respondents had been

transferred to the JVC as the appellant had an interest in JVC. In such

6 circumstances the company was not justified in claiming that the

respondents had lost their lien in TANMAG on being transferred to JVC.

They are, therefore, entitled to be reverted back to TANMAG. It was

emphasised that none of the respondents was willing to join the joint

venture company. They were literally compelled to join in view of the

agreement that had been signed by them at the time when they initially

joined the services of TANMAG.

12. On the other hand, it was submitted by the appellant that on the

permanent absorption of the respondents in the JVC, they had lost their

lien. The closure of the JVC cannot revive the lien in TANMAG.

13. The Division Bench upon consideration of the submissions of the

parties concluded that the respondents are entitled to be taken back by

TANMAG in terms of the earlier transfer order, which protects the service

conditions of the respondents. It was further held that TANMAG is not

justified in contending that appellants having lost their lien in TANMAG

cannot be retransferred. The assurance given in the letter dated

11.5.1991 clearly states that the transfer of service is without any

disadvantage. It was, therefore, held that the stand taken by TANMAG

is contrary to the assurance given to the respondents when they were

compulsorily transferred to the JVC. It is noticed that all the assets of

JVC on its closure have been taken over by TANMAG. There is no

7 justification in denying absorption of the respondents who are unable to

seek any other employment at this age of above 50 years. It is held that

TANMAG is bound by the assurance given to the respondents while

seeking their consent for transfer to JVC. This is particularly so, as it

was stated that the terms and conditions of employment enjoyed by them

in TANMAG are protected. It is further held that since JVC was closed at

the instance of TANMAG, the appellant has put the respondents in a

disadvantageous position. Therefore, TANMAG is estopped from

contending that the respondents will not be absorbed. With these

observations the judgment of the learned Single judge has been set aside.

The appellant has been directed to absorb the respondents with

continuity of service and other attendant benefits without back wages.

14. We have heard the learned counsel for the parties. Mr. P.P. Rao,

learned Senior Advocate, appearing for the appellant submitted that the

Division Bench has erred in applying the principle of estoppel. The only

promise made to the respondents was that during their services with the

JVC their terms and conditions and employment will be protected. No

assurance was given that JVC will not be closed down in the future at

any time. There was also no promise held out that in case the company

is closed down they would be reabsorbed in the appellant. In any event

learned senior counsel submitted that the writ petition did not even

claim the relief on the basis of the promissory estoppel. There are no

8 pleadings to lay the foundation to claim any relief on the basis of the

doctrine of promissory estoppel.

15. Learned counsel for the respondents, however, submitted that

initially 16 persons had been transferred to the JVC. Subsequently most

of these persons joined some other concerns. They are, therefore, not

claiming re-absorption. At present, there are only three respondents who

need to be accommodated by the appellant.

16. We have considered the submissions made by the learned counsel

for the parties. A perusal of the correspondence would show that initially

the respondents were reluctant to leave the services of the appellant.

However, they were aware that their services were liable to be terminated

due to non-availability of work for which they were qualified. On 2.5.91

respondents addressed a letter to the appellants that they would like to

continue the services in TANMAG, otherwise as per Clause 2.17 of the

Service Rules they were wiling to work in the JVC. Rule 2.17 of the

Service Rules provides as under:

"The Management reserves the Right to depute any staff member/officer of the company to any other organization, on terms not inferior to those enjoyed by him in the company."

The request of the respondents to be sent on deputation was not

accepted by the appellants. By letter dated 11.5.1991 the respondents

9 were informed that it is not possible to depute them to JVC as per Clause

2.17. The respondents were permanently transferred to the JVC by letter

dated 20.6.1991. They were also informed that the date of joining in

service in TANMAG shall be deemed to be the date of joining at the JVC

for reckoning the length of service for all purposes including the payment

of gratuity. Therefore, it becomes quite evident that the appellant as well

as the respondents were well aware about the nature of terms and

conditions which were protected. After the permanent transfer fresh

letter of appointment dated 25.7.1991 was served upon the respondents.

Therefore, it is clear that the services of the Respondents having been

terminated, their lien in TANMAG, also stood terminated.

17. It was only when the respondent No.1 S. Manickam, petitioner in

Writ Petition No.3707/2001 became apprehensive about the closure of

the unit, he submitted a representation on 21.6.1996 to the respondents

seeking re-absorption in TANMAG. In this letter, the respondent narrated

the entire history of his services with TANMAG. It is emphasized that his

services were transferred to the JVC under compelling circumstances.

At that time, he had been assured that there will not be any change in

the terms and conditions of employment as stipulated in TANMAG. It is

stated that he had accepted the transfer under compelling circumstances

and joined JVC on the clear understanding that all privileges, perquisites

and other facilities enjoyed by him in TANMAG shall be protected. His

10 grievance was that since his transfer to JVC, he has been working in the

same cadre in which he had joined TANMAG in 1983. Had he remained

in TANMAG, he would have become eligible for promotion. He also

emphasized that there was a loss of more than Rs.2000/- per month in

his remuneration. Finally, he stated that it has not been possible for the

JVC to take up the work on Chemical Beneficiation Project. Many of the

officers whose services had been transferred to JVC along with him have

left the service. He was therefore apprehensive of his future employment

career. Hence, he sought his reversion back to the respondents.

18. A perusal of the aforesaid letter makes it abundantly clear that

there was no representation made to this respondent that he would be

ensured employment till the age of superannuation with the JVC. The

other two respondents have also not referred to any document which

would indicate that any promise of future continuous employment was

held out to them by TANMAG. In fact they had been earlier categorically

informed that their services were liable to be terminated as they had

become surplus. They were offered an alternative to be transferred to the

JVC. Therefore, with their eyes open, the respondents had accepted the

job in JVC. Their request for deputation, as provided under Clause 2.17

of the Service Rules, had been specifically rejected. They were in danger

of losing their jobs under Clause 2.14 which enables the company to

terminate services of the employees by giving three months' notice or

11 salary in lieu thereof. They, therefore, accepted the alternative of a job

with JVC. This was clearly, so to speak, "lesser of the two evils". A job in

JVC was better than no job at all. The Division Bench noticed that the

respondents had accepted the loss of their lien in TANMAG. They were

seeking re-absorption on the closure of the JVC. There was no assurance

that there will be no closure of the JVC under any circumstances. The

Division Bench in its anxiety to help the respondents, who were in

danger of losing their jobs at the age of 50 years and above, seems to

have stretched the principle of promissory estoppel beyond the tolerable

limits. Undoubtedly, while exercising the extraordinary original

jurisdiction under Article 226/227 of The Constitution of India the High

Court ought to come to the rescue of those who are victims of injustice,

but not at the cost of well established legal principles. The

circumstances in which a High Court could issue an appropriate writ

under these articles was delineated by a constitution bench of this Court

in the case of State of Orissa Vs. Ram Chandra Dev, AIR 1964 SC 685

wherein Gajendragadkar, J. speaking for the court observed as follows:

"Under Article 226 of the Constitution, the jurisdiction of the High Court is undoubtedly very wide. Appropriate writs can be issued by the High Court under the said article even for purposes other than the enforcement of the fundamental rights and in that sense, a party who invokes the special jurisdiction of the High Court under Article 226 is not confined to cases of illegal invasion of his fundamental rights alone. But though the jurisdiction of the High Court under Article 226 is wide in that sense, the concluding words of the article clearly indicate that before a writ or an appropriate order can be issued in favour of a party, it must be established that the party has a right and

12 the said right is illegally invaded or threatened. The existence of a right is thus the foundation of a petition under Article 226."

The aforesaid settled position was reiterated in the case of State of W.B.

Vs. Calcutta Hardware Stores, (1986) 2 SCC 203 in the following

words:

"Although the powers of the High Court under Article 226 of the Constitution are far and wide and the Judges must ever be vigilant to protect the citizens against arbitrary executive action, nonetheless, the Judges have a constructive role and therefore there is always the need to use such extensive powers with due circumspection. There has to be in the larger public interest an element of self- ordained restraint."

In this case, there is no finding recorded by the Division Bench as to

which legal or fundamental right of the respondents has been infringed.

The relief in this case is granted only on the basis of the doctrine of

promissory estoppel. In these circumstances it was the duty of the High

Court to analyze the facts to ensure that the principles of estoppels could

appropriately be invoked in this case to help the respondents. In our

opinion, the High Court erred in not performing this cautionary exercise.

In view of the factual situation, as noted above, we are unable to accept

that the respondents were put to disadvantage acting upon any

unequivocal promise made by the appellants.

19. The doctrine of promissory estoppel as developed in the

administrative law of this country has been eloquently explained in

13 Kaniska Trading Vs. Union of India (1995) 1 SCC 274 by Dr. A.S.

Anand, J, in the following words :

"11. The doctrine of promissory estoppel or equitable estoppel is well established in the administrative law of the country. To put it simply, the doctrine represents a principle evolved by equity to avoid injustice. The basis of the doctrine is that where any party has by his word or conduct made to the other party an unequivocal promise or representation by word or conduct, which is intended to create legal relations or effect a legal relationship to arise in the future, knowing as well as intending that the representation, assurance or the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, the promise, assurance or representation should be binding on the party making it and that party should not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings, which have taken place or are intended to take place between the parties."

In our opinion, on the basis of facts on record in this case, the claim of

the respondents would not be covered by the principles enunciated

above. In view of the facts narrated above, the Division Bench clearly

committed an error of law in concluding that there has been a breach of

principles of promissory/ equitable estoppel. Therefore, the High Court

erred in issuing the direction/writ in the nature of mandamus directing

the appellants to reabsorb the appellants in the service of TANMAG.

20. Before we part with the judgment, it would be appropriate to notice

that during the hearing of these appeals, the respondents had been

permitted to make the representation to the appellants for

14 reconsideration of their request. The respondents had, therefore,

submitted a representation on 15.2.2010. Learned counsel for the

appellant, however, stated that it was not possible for the appellant to

accommodate the respondents, however, in case in future any vacancy

arises, the request of the respondents may be considered.

21. In view of the above, the appeals are allowed. The impugned

judgment of the Division Bench under appeal is set aside. There will be

no order as to costs.

.....................................J. [ B. SUDERSHAN REDDY ]

..........................................J. NEW DELHI: [ SURINDER SINGH NIJJAR ] MARCH 29, 2010.

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