MOHAMMAD SADIQ AND ORS. v. STATE OF UTTAR PRADESH AND ORS

Citation: [2007] 10 S.C.R. 189

Court: Supreme Court of India

Bench: ARIJIT PASAYAT, LOKESHWAR SINGH PANTA

Case summary

MOHAMMAD SADIQ AND ORS. v. STATE OF UTTAR PRADESH AND ORS.pdf

Judgment text

MOHAMMAD SADIQ AND ORS. 'y v. STATE OF UTIAR PRADESH AND ORS. SEPTEMBER 21, 2007 [DR. ARIJIT PASAYAT AND LOKESHWARSINGH PANTA,JJ. ] Labour Laws: y Uttar Pradesh Absorption of Retrenched Employee of Government/Corporations in Government Service Rules, 1991-ss. 2(b) and 2(c)-Closure of Institution registered under Societies Registration Act-Retrenchment of its employees-Writ Petition- Single Judge of High Court directing absorption of retrenched employees holding the institution as an instrumentality of the Government-Order ofSingle Judge reversed by Division Bench of High Court-On appeal, held: The retrenched employees are not A entitled to be absorbed-Absorption Rules are not applicable to the Institution in question-As the Institution is not an instrumentality of the State and the same has not been constituted under any Uttar Pradesh Act-Societies Registration Act, 1860. The institution, ofwhich the appellants were the employees, was registered under Societies Registration Act, 1860.

It decided to close .. down one ofits centres and the workmen employed therein, were to >. be retrenched after paying compensation. Appellants-retrenched employees filed Writ Petition. Single Judge of High Court allowed the same holding that the Institution was wholly owned, controlled and managed by the State Government and directed appointment ofthe employees by their absorption in any other institution ofState Government. Special appeal, thereagainst was allowed by High Court holding that the institution was not an instrumentality of the -y State Government and hence could not be termed as State Government or a public Corporation. In appeal to this Court, appellant contended that even though, ..

the institution was registered under Societies Registration Act, that does not mean that it was not established or constituted under any State Act, and hence they were entitled to protection under Uttar Pradesh Absorption of Retrenched Employees of Government/ Corporation in Government Service Rules, 1991. Dismissing the appeals, the Court HELD: 1. Uttar Pradesh Absorption ofRetrenched Employees ofGovernment/Corporations in Government Service Rules, 1991 '"( are not applicable to the Institution. A bare reading ofss. 2(b) and 2(c) ofthe Absorption Rules, makes the positions clear that in order to bring application ofthe Rules the public corporation has to be a body corporate established or constituted by or under any Uttar Pradesh Act. The fundamental requirement is that the corporation should have been constituted by or under any Uttar Pradesh Act. Undisputedly, the Societies Registration Act is a Central Act.

The Institution is not an instrumentality ofthe State and/or could not be termed to be State Government or a public Corporation. There was no material placed before the High Court to establish that IERT is an instrumentality ofthe State. . [Paras 3, 7, 8, 9 and 10] [192-D-E; 193-A-B; 198-A-B-C] 2. Even ifa society or institute is registered under the Societies Registration Act and some functionaries ofthe State Government are the members ofthe institute, such an institute may not be termed as an instrumentality ofthe State, ifdeep and pervasive control over \ the affairs ofthe institute was not with the State Government. There is basic distinction between a Society and a Corporation. [Para 7] [193-B-C] Pradeep Kumar Biswas v. Indian Institute ofChemical Biology and Ors. , [2002] 5 SCC 111; Board a/Trustees, Ayurvedic and Unani Tibia College, Delhi v. State ofDelhi (Now Delhi Adminstration) and Anr. , AIR (1962) SC 458, relied on. Ajay Hasia andOrs. v. Khalid Mujib Sebravardi andOrs.

, [1981] 1 sec 722, referred to. ~ y CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4590 of 2004. From the Judgment and Order dated 13. 02. 2004 ofthe High Court ofJudicature at Allahabad in Special Appeal No. 681 of2002. P. Vishwanantha Shetty, S. J. Aristotle, Yatish Mohan, E. C. Vidya Sagar, Shekhar Prit Jha and Dr. Bheem Pratap Singh for the Appellants. Dinesh Dwivedi, Niranjana Singh, Abhishek Chaudhary and Seita Vaidyalingam for the Respondents. The Judgment ofthe Court was delivered by DR. ARIJIT PASAYAT, J. 1. These appeals are inter-linked and are directed against common judgment ofthe Allahabad High Court. By the impugned judgment the order passed by the learned Single Judge was set aside. 2. Background facts in a nutshell are as follows: .... l. Retrenched employees of Institute of Engineering and Rural Technology (for short 'IERT'), 105 in number, filed a writ petition against the State ofU. P.

and its functionaries as well as the IERT praying for quashing the order dated 24. 3. 1999 by which it was decided that the Training-cum-Production Centre ofIERT was to be closed down w. e. f. 31. 3. 1999 and the workmen employed were to be retrenched after paying compensation. .. ,,: While allowing the writ petition the learned Single Judge gave directions which essentially read as follow:- "... The respondents are directed to prepare a list ofthe employees who were appointed prior to 1. 10. 1986 in the production-cumtraining Centre ofIERT, and were working continuously till the date oftheir retrenchment i. e. 31. 3.

1999 by excluding those who have retired, or have not given their option for absorption, to be absorbed in the vacancies in other polytechnics ofthe State of Government, which are recognized and funded or in any other technical institution, or any post which it may deem to be fit, in accordance with their eligibility and after relaxing age and other tenns and conditions ofrecruitment. As and when petitioners are offered absorption on any equivalent post, they will vacate the quarters occupies by some ofthem in the premises ofIERT. Since petitioners have accepted retrenchment compensation, no direction with regard to payment of salary is required to be given. The State Government is directed to draw the list, prepare the scheme and to offer appointment by absorption, preferably within a period of four months. There is no order as cost. " 3. The present respondents questioned correctness ofthe order by filing special appeal before the High Court.

By the impugned judgment the High Court ~llowed the special appeal. It held that IERT is not an instrumentality of the State and/or could not be tenned to be State Government or a public Corporation. It was held that the finding of learned Single Judge that IERT is wholly owned, controlled and managed by the State Govern1nent is not correct. 4. Learned counsel for the appellants submitted that the basic ).... questions are as follows:- (a) Whether IERTwas an instrumentality ofthe State. (b) Whether the Uttar Pradesh Absorptions of Retrenched Employees of Government/Corporations in Government Service Rules, 1991 (in short the 'Absorption Rules') is applicable to the writ petitioners-appellants. (c) Whether after receiving compensation, the concerned employees could question the closure. 5.

It was submitted that IERT is registered under the Societies Registration Act, 1860 (in short the 'Societies Act') and in tenns ofthe Absorption Rules the concerned employees were entitled to be given protection ofthe Absorption Rules. It is submitted that the expression "established" means that the institution has come into existence and, therefore, even though IERT has been registered under the Societies Act, that does not mean it is not established or constituted under any Uttar Pradesh Act. -~ 6. In response, learned counsel for the respondent submitted that the concept of "established" or "constituted" is different from a body registered under the Societies Act. 7. The contentions raised need consideration. It has been accepted that there was no material placed before the High Court to establish that IERT is an instrumentality of the State. In Pradeep Kumar Biswas v. Indian Institute ofChemical Biology and Ors.

, [2002] 5 SCC 111, it has been clearly stated that even ifa society or institute is registered under the Societies Act and some functionaries ofthe State Government are the members ofthe institute, such an institute may not be termed as an instrumentality ofthe State, ifdeep and pervasive control over the affairs ofthe institute was not with the State Government Texts formulated in Ajay Rasia and Ors. v. Khalid Mujib Sehravardi and Ors. , [1981] I sec 722 were highlighted. There is basic distinction between a society and a corporation. In Board ofTrustees, Ayurvedic and Unani Tibia College, Delhi v. State ofDelhi (Now Delhi Administration) and Anr. , 0 AIR (1962) SC 458, it was inter alia held as follows: "(9) The first and foremost question is whether the old Board was a corporation in the legal sense of that word. What is a Corporation? Corporations may be divided into two main classes, namely, corporations aggregate and corporations sole.

We are not concerned in the present case with corporation sole. "A Corporation aggregate has been defined as a collection of individuals united into one body under a special denomination, having perpetual succession under an artificial form, and vested by • ~ the policy ofthe law with the capacity ofacting in several respects as an individual, particularly oftaking and granting property, of contracting obligations and of suing and being sued, ofenjoying privileges and immunities in common, and ofexercising a variety ofpolitical rights, more or less extensive, according to the design ofits institution, or the powers conferred upon it, either at the time ~ of its ~reation or at any subsequent period of its existence". (Halsbury's Laws of England, 3rd Edn. Vol. 9, page 4. ) A corporation aggregate has therefore only one capacity, namely, its corporate capacity. A corporation aggregate may be a trading ~ corporation or a non-trading corporation.

The usual examples of a trading corporation are (1) charter companies, (2) companies ~ incorporated by special acts of parliament, (3) companies registered under the Companies Act, etc. Non-trading corporations are illustrated by (1) municipal corporations, (2) district boards, (3) benevolent institutions, (4)universities etc. An essential element in the legal conception ofa corporation is that its identity is continuous, that is, that the original member of members and his or their successors are one. In law the individual corporators, or members, ofwhich it is composed are something wholly differentfrom the corporation itself; for a corporation is a legal personajru,1 as much as an individual.

Thus, it has been held that a name is essential to a corporation; that a corporation aggregate can, as a general rule, only act or express its will by deed under its common seal; that at the present day in England a corporation is created by one or other oftwo methods, namely, by Royal Charter of incorporation from the Crown or by the authority of Parliament that is to say, by or by virtue of statute. There is authority oflong standing for saying that the essence ofa corporation consists in (1) lawful authority ofincorporation, (2) the persons to be incorporated, (3) a name by which the persons are incorporated, (4) a place, and (5) words sufficient in law to show incorporation. No particular words are necessary for the creation ofa corporation; any expression showing an intention to incorporate will be sufficient. _.... __ 10.

The learned Advocate for the petitioners has referred us to ' various provisions ofthe Societies Registration Act, 1860 and has contended that the result of these provisions was to make the Board a corporation on registration. It is necessary now to read some ofthe provisions ofthat Act. The Act is entitled an Act for the registration ofliterary, scientific and charitable societies and the preamble states that it was enacted for improving the legal condition ofsocieties established for the promotion ofliterature, science, or the fine arts, or for the diffusion ofusefi,11 knowledge etc. , or for charitable purposes. Section 1ofthe Act states that any seven or more persons associated for any literary, scientific, or charitable ~ purpose, or for any such purpose as is described in Section 20 of the Act may, by subscribing their names to a memorandum of y association and filing the same with the Registrar or Joint-stock Companies form themselves into a society under the Act.

Section 2 lays down that th~ memorandun1 ofassociation shall contain and · one ofthe particulars it must contain is ''the objects ofthe society". Section 3 deals with registration and the fees payable therefor. Sections 5 and 6 are important for our purposes and should be read in full. "5. The property, movable and immovable, belonging to society registered under this Act, ifnot vested in trustees, shall be deemed to be vested, for the time being, in the governing body of such society, and in all proceedings, civil and criminal, may be described as the property ofthe governing body ofsuch society by their proper title. 6.

Every society registered under this Act may sue or be sued in the name ofthe president, chairman, or principal secretary, or trustees, as shall be determined by the rules arid regulations ofthe society, and, in default ofsuch deterrllination, in the mune ofsuch person as shall be appointed by the governing body for the occasion: Provided that it shall be competent for any person having a claim or demand against the society, to sue the president or chairman, or principal secretary ofthe trustees thereof, ifon an application /i--. • to the governing body some other officer or person be not nominated to be the defendant. " Section 7provides for non-abatement ofsuits or proceedings and the continuance ofsuch suits or proceedings in the name ofor against the successor ofthe person by or against whom the suit was brought.

Section 8 says that ifajudgment is recovered against a person or officer named on behalfofthe society, such judgment shall not be put in force against the property, movable or immovable, or against the body ofsuch person or officer, but against the property ofthe society. Section 10 provides that in certain circumstances mentioned therein a member ofthe society may be sued by the society; but ifthe defendant shall be successful in any such suit brought at the instance ofthe society and shall be adjudged to recover his costs, he may elect to proceed to recover the same from the officer in whose name the suit was brought, or from the society. Sections 13 and 14 provide for dissolution ofsocieties and the consequences ofsuch dissolution. These provisions have also an important bearing on the questions before us and are quoted in full. "13.

Any number not less than three-fifths ofthe members of any society may detennine that it shall be dissolved, and thereupon it shall be dissolved forthwith, or at the time then agreed upon, and all necessary steps shall be taken for the disposal and settlement ofthe property ofthe society, its claims and liabilities, according to the rules ofthe said society applicable thereto, ifany, and, if not then as the governing body shall find expedient, provided that, in the event ofany dispute arising among the said governing body or the members ofthe society, the adjustment ofits affairs shall be referred to the principal court ofOriginal civil jurisdiction ofthe district in which the chiefbuilding ofthe society is situate, and the Court shall make such order in the matter as it shall deem requisite: Provided that no society shall be dissolved unless three-fifths ofthe members shall have expressed a wish for such dissolution by their votes delivered in person, or by proxy, at a general meeting convened for the purpose : Provided that whenever any Government is a member of, or a contributor to, or otherwise interested in any society registered under this Act, such society shall not be dissolved, without the consent ofthe Government ofthe State ofregistration.

14. Ifupon the dissolution ofany society registered under this Act there shall remain, after the satisfaction of all its debts and liabilities, any property whatsoever, the same shall not. be paid to or distributed among the members ofthe said society or any of them, but shall be given to some other society, to be determined by the votes of not less than three-fifths ofthe members present r personally or by proxy at the time ofthe dissolution, or, in default thereof, by such Court as aforesaid : Provided, however, that this clause shall not apply to any society which shall have been founded or established by the contributions ofshareholders in the nature of a Joint Stock Company. " 8. The other crucial question is whether the Absorption Rules applied to IERT.

The relevant provisions in the rules read as follows: "In exercise ofthe powers conferred by the proviso to Article 309 ofthe Constitution, the Governor is pleased to make the following rules to provide for the absorption in Government Service ofthe retrenched employees of the Government or of Public Corporations. THE UTTAR PRADESH ABSORPTION OF RETRENCHED EMPLOYEES OF GOVERNMENT OR PUBLIC CORPORATIONS IN GOVERNMENT SERVICE RULES, 1991. xx xx xx xx 2(b) "Public Corporation" means a body corporate established or constituted by or under any Uttar Pradesh Act expect a University of local authority constituted for the purpose of Local SelfGovernment and includes a government Company within the meaning ofSection 617 ofthe Companies Act, 1956 in which the State Government has prepondering interest.

2(c) "Retrenched Employees'' means a person who was appointed on a post under the Government or a public corporation on or before October 1, 1986 in accordance with the procedure laid down for recruitment to the post and was continuously working in any post under the Government or such corporation up to date ofhis retrenchment due to reduction in, or winding up of, any establishment or the Government of the Public Corporation, as the case may be and in respect of whom certificate ofbeing retrenched employees has been issued by his appointing authority. '' 9. A bare reading ofthe provisions makes the positions clear that in order to bring application ofthe Rules the public corporation has to be a body corporate established or constituted by or under any Utrar Pradesh Act. 10. The fundamental requirement is that the corporation should have been constituted by or under any Uttar Pradesh Act. Undisputedly, the Societies Act is a Central Act. 11.

The impugned judgment ofthe High Court does not suffer from any infirmity to warrant interference. The appeals are dismissed but without any order as to costs. K. K. T. Appeals dismissed.