THE HOB’BLE SRI JUSTICE RAMESH RANGANATHAN W.P.Nos. 22339 of 2003, 18015, 25014, 23537, 18679, 20225, 20976, 20534, 20475, 20392, 18954, 18950, 18949 of 2004 and 1808 of 2005 COMMON JUDGMENT: W.P.No.18015 of 2004 Between: 1. M/s Godavari Valley Labour Contract Co-operative Society Ltd., Rajahmundry and 67 others ….. Petitioners and 1. Oil and natural Gas Corporation Ltd., rep. By its Chairman & Managing Director, Jeevan Bharati Building, New Delhi …. Respondents And 2 others Counsel for the petitioners: Sri V.Venkataramana Counsel for the respondents: Sri E.Manohar, Senior Counsel THE HOB’BLE SRI JUSTICE RAMESH RANGANATHAN W.P.Nos. 22339 of 2003, 18015, 25014, 23537, 18679, 20225, 20976, 20534, 20475, 20392, 18954, 18950, 18949 of 2004 and 1808 of 2005 COMMON JUDGMENT: M/s Godavari Valley Labour Contract Co-operative Society Limited and several contract labourers, in this batch of writ petitions, question the action of the respondents in not considering their cases for recruitment, in terms of the agreement dated 24.03.2003, as arbitrary and unconstitutional, and seek a direction to the respondents to consider and appoint them as technical and non-technical employees in the services of the respondent-Corporation with all consequential benefits. While in some of the writ petitions, the petitioners seek regularization of their services, both Sri V. Venkata Ramana and Sri K. Chidambaram, learned counsel for the petitioners, would submit that the petitioners were not pressing for the relief of regularization and were merely asking for their cases to be considered, for recruitment, in terms of the agreement dated 24.03.2003. Since the facts involved are more or less common, in the entire batch, it would suffice if the facts as stated in W.P.No.18015/2004 are noted. The 1st respondent, a statutory corporation, engaged in exploration, extraction and sale of petroleum products, has; one of its units situated at Rajahmundry, East Godavari District. Pursuant to abolition of the contract labour system in certain works and establishments under the government of India notification dated 08.09.2004, the petitioners herein, who were working as contract labour, filed writ petitions before this Court seeking a declaration that they were entitled to be absorbed in the establishment of the principal employer i.e., the 1st respondent-Corporation. In seeking the relief of absorption, the petitioners had placed reliance on the judgment of the Supreme Court in Air India Statutory Corporation v. United Labour Union wherein it was held that consequent upon abolition of the contract l;abour system, a direct employment stands established between the contract labour and the principal employer by eliminating the intermediary contractor. However, subsequent thereto, the Supreme Court in Steel Authority of India Limited v. National Union Waterfront Workers overruled the earlier judgment in Air India Statutory Corporation (1 supra) and held that even after abolition of the contract labour system, no direct employment gets established between the contract labour and the principal employer and if the contract system is a sham and the Industrial Court, on evidence, recorded a finding that the intermediary contractor was bogus, it was not improper to grant appropriate relief to the contract labour. Pursuant to the judgment of the Supreme Court in Steel Authority of India Limited (2 supra), various contract labourers, working in the 1st respondent-Corporation, are said to have invoked the provisions of the Industrial Disputes Act seeking absorption of their services, and that the Industrial disputes raised had been stayed by this Court. The contract labourers resorted to direct action and struck work pursuant to which an agreement was entered into on 24.03.2003 confirming the earlier minutes of the meeting dated 12.01.2003. In the meeting held on 12.01.2003 between officials of the Rajahmundry Asset of the 1st respondent-corporation and the joint action committee on behalf of the contract labourers, it was agreed to create and fill 60 posts to meet the operational requirements, to support the process of recruitment, to make efforts to fill up 60 posts per year and a total number of 300 posts during a period of five years. The minutes records that the members of the society, whoever was suitable for such identified posts, as per ONGC Modified Recruitment & Promotion Rules, 1980, and was registered with the employment exchange, would only be considered for appointment by granting age relaxation wherever required. These conditions recorded in the minutes of the meeting held on 12.01.2003 is confirmed in the memorandum of agreement dated 24.03.2003, and clause IV (xx) thereof reads as under: “As agreed to in Clause 8 of MOM dated 12.01.2003, the posts to be filled in every year for five years, will be filled in by giving due regard to seniority”. On the ground that the respondent had not notified any recruitment process, though 1 ½ years had elapsed since the agreement was entered on 24.03.2003, and despite several representations requesting the respondent to abide by the said agreement, to notify the a recruitment process and to consider the cases of contract labourers for appointment in regular posts, no response was forthcoming, the petitioners have chosen to approach this Court. The grievance of the petitioners – contract labourers is that they are now paid a consolidated pay of Rs.5,000/- and if they are appointed afresh, on regular basis, they would get more than Rs.10,000/- per month. Petitioners would contend that since the respondent – corporation had entered into the agreement with its eyes open, it was not entitled to resile from enforcing the agreement. Petitioners would submit that they have the required experience as they have been working as contract labour for more than 10 years and are fully qualified for recruitment as per the prescribed educational standards. On behalf of respondents 2 and 3, representing the Krishna Godavari Project of the 1st respondent-corporation at Rajahmundry, a counter affidavit is filed by Sri N.S.L.N. Swamy, chief manger (IR) of the respondent-corporation, wherein it is stated that since the agreement is non-statutory, no enforceable right was conferred on the petitioners to seek a writ of Mandamus from this Court to implement the agreement dated 24.03.2003. It is stated that employment in the 1st respondent- corporation is governed by the ONGC Recruitment & Promotion Regulations, 1980 and that the corporation, under the said agreement dated 24.03.2003, did not agree to appoint the petitioners but had agreed to have their cases considered along with other candidates as and when recruitment takes place, provided they were sponsored by the employment exchange. It is stated that all the parties to the agreement were aware of the fact that consideration of the case of petitioners was subject to creation of posts and accord of permission for recruitment by the corporate management of the 1st respondent-corporation. It is stated that respondents 2 and 3 had appraised the corporate management of all these events on 05.04.2003, that the Rajahmundry Asset, represented by respondents 2 and 3, is neither competent to take decisions or to enter into such agreements. Reference is made to the meeting held on 12.01.2003 wherein the request of the joint action committee, representing the workmen, for regularization of their services was ruled out and it was made clear that it was not possible to take them on casual basis or to make payments directly to contractual workers as all these alternative demands were in the nature of regularization. It is stated that there is no embargo on the respondent –corporation to engage contract labourer to handle its intermittent works as the same is permitted under the Contract Labour (Regulation & Abolition) Act. It is stated that the understanding, in the meeting held on 12.01.2003, was merely tentative and, in substance, the respondents had agreed to make efforts for normal recruitment provided the corporate management sanctioned the posts and gave permission to resort to recruitment. It is stated that the competent authority, to create posts and permit filing up the posts through a process of recruitment, was the corporate management at the headquarters of the 1st respondent and that the understanding of parties, both in the meeting dated 12.01.2003 and the agreement dated 24.03.2003, was that recruitment was subject to creation of posts and permission being accorded by the corporate management to undertake recruitment and since no such permission was accorded either to create posts or to make recruitment, petitioners were not entitled to have their cases considered for appointment on regular basis. It is stated that the respondent-corporation has been entrusting jobs, of intermittent nature, on contract basis and has been liberally making payment to the contractors and that the contract labourers were being paid Rs.5,000/- per month which was far above the minimum wage prescribed of Rs.3,000/- per month. It is contended that employment in public sector undertakings cannot be contracted to be given or confined to any one group of persons and that the petitioners had no right either for recruitment or selection on preferential basis. It is stated that creation of posts and decision to recruit are policy decisions to be taken by the corporate management and that the writ petition in this regard is not maintainable as the petitioners neither had a legal nor a statutory right to seek such a relief. On behalf of the first respondent, a counter affidavit is filed by Sri M.K. Basu, chief manager (P&A) R&P of ONGC, wherein reference is made to the ONGC Policies Book of Delegated Powers (BDP) 1994, as modified by office order dated 01.01.2002, wherein the power to create posts up to E-7 was delegated to the chairman and managing director of the respondent company. It is stated that since the power and the jurisdiction to accord sanction for creation of posts vests with the chairman and managing director and since the chairman and managing director had not accorded sanction for creation of posts, the relief sought for in the writ petition could not be granted. It is stated that the decision, in the minutes of the meeting dated 12.01.2003 and the agreement dated 24.03.2003, with regard to creation of posts, was illegal, ultra vires and not enforceable since the stipulations therein were without approval of the competent authority i.e., the chairman and managing director. The 1st respondent would submit that, by circular dated 13.05.1994, all establishments of the 1st respondent-corporation were informed that there would be no recruitment from outside/within the department unless the same had been examined, recommended by the general manager (human resources group) and approved by the director (p) and the chairman and managing director. Reference is also made to the government of India circular dated 10.04.2000, by which the 1st respondent is said to be guided, whereby companies were directed to reduce the number of posts by 10%. It is also stated that 1st respondent has introduced a voluntary retirement scheme for its employees as the existing man power of approximately 38000 was in excess of its requirement. Under the Scheme, 712 employees are said to have opted for voluntary retirement in the year 2003, 522 in the year 2004 and in this view also there was no possibility to create posts in the company. It is also stated that oil and gas business is highly risk and probabilistic in nature and its growth depends upon its success, that the quantum/magnitude of activities varies from time to time and is full of uncertainties, that in view of new exploration licensing policy of the government of India, the monopoly of ONGC in the field of exploration and exploitation of oil and natural gas no longer exists and many of the oil exploratory blocks had been allotted to private companies, multi- national companies and other public sector undertakings through a competitive bidding process and this would be also a contributing factor for downsizing/optimizing the existing man power and there was no possibility of resorting to creation of posts for the purpose of recruitment. It is stated that in view thereof, no action was taken on the proposal submitted by the Rajahmundry Asset, pursuant to the minutes and memorandum of agreement dated 12.1.2003 and 24.3.2003, with regards creation of posts. An affidavit is filed by the chairman and managing director, on behalf of the 1st respondent company, wherein it is stated that he had gone through the counter affidavit filed by Sri M.K.Basu, on behalf of the 1st respondent, that Sri M.K.Basu is authorized to file the counter affidavit on behalf of the 1st respondent and the averments were approved. In their reply affidavit, petitioners would submit that the Book of Delegated Powers (BDP-1994) was further amended on 16.5.2002 and that the appointing authority for Class III and Class IV posts is the head, support at Assets/Basins and that the Chairman and Managing Director was the appointing authority for executive posts above the category of E-V. It is stated that even in the executive category upto grade E-4 i.e, E-1 to E-4, it was the director (human resources) who was the competent authority and not the chairman and managing director. Reliance is also placed on the employees hand book of ONGC, Rajahmundry, revised up to 31.3.2003, wherein Chapter III relates to recruitment and promotion. It is mentioned thereunder that while recruitment to executive posts is to be made centrally by the corporate office, recruitment to non-executive posts would be at the regional/project level. It is contended that under the memorandum of understanding dated 12.1.2003 and agreement dated 24.3.2003, creation of posts, contemplated in Class III and IV posts, is at Rajahmundry Project/Basin. It is stated that it is not the chairman and managing director, but the board of directors who may have the authority to create posts. Petitioners would submit that the very fact that contract labourers were being engaged, to discharge functions of Class III and Class IV posts, for the past 15 to 20 years clearly establishes that there was need and justification for creating regular posts and it was for this reason that an understanding was arrived at in the meeting held on 12.1.2003 recording the minutes and an agreement was subsequently entered into on 24.3.2003. Petitioners would deny the respondent’s contention that the minutes and agreement were illegal and ultravires and would state that the internal governance of the 1st respondent was not known to the petitioners. It is stated that it is possible that the Chairman and managing director may not be knowing about the total number of Class III and Class IV employees working in ONGC all over the country as matters relating to recruitment and other service conditions are not dealt with by the chairman and managing director. It is stated that under the corporate structure, creation of posts is by the board of directors and while the chairman and managing director is one of the members of the board, there was no delegation of powers, in his favour, to create posts. Petitioners would contend that since the respondents have not furnished details regarding the requirement of Class III and Class IV posts at Rajahmundry, necessary inference has to be drawn that such posts are required. Reference is made to letter dated 8.12.2004 addressed to the General Chief, HR, Telebhavan, Dehradun by the Chief Manager, HR of the Rajahmundry Asset wherein reference is made both to the memorandum of understanding and agreement, while requesting the head office to convey its decision as the societies were pressing hard for filling up of posts. Relying on the said letter dated 8.12.2004, petitioners would contend that both the memorandum of understanding dated 12.1.2003 and the agreement dated 24.3.2003 was to the knowledge of the corporate office. Reliance is also placed on the Nallappan report where it is stated that the optimum manpower required for Rajahmundry Asset was 723 for Class III posts and 1368 for Class IV/V posts. It is stated that the Nallappan report relates exclusively to the Krishna Godavari Asset at Rajahmundry. With regards the Voluntary Retirement Scheme it is stated that the scheme is only for officers and executives and not for Class III and Class IV employees. Petitioners would contend that in the absence of disclosing the excess staff in Class III and Class IV posts and since the Nallappan report clearly discloses the optimum manpower requirement at Krishna Godavari Asset, the respondents were not justified in contending that there is no scope either for creation of posts or for implementing the memorandum of understanding and the subsequent agreement. Sri V.Venkataramana, learned counsel for the petitioners, whose submissions were adopted by Sri K.Chidambaram, learned counsel for the other petitioners, would submit: 1. Inaction of the respondents in not assessing the manpower requirement of Class III and Class IV posts in Rajahmundry Asset (Krishna Godavari Project) is arbitrary and irrational; 2. Since the regional/project head had suggested for a study/analysis of the manpower requirement of Class III and Class IV posts in the Rajahmundry Asset, the respondents should have placed before this Court, the actual requirements of posts at the Rajahmundry Asset and since no such details have been placed by the respondents, an adverse inference has to be drawn, out of compulsion, that 300 posts are available 3. The memorandum of understanding dated 12.1.2003 and the agreement dated 24.3.2003 are not ultra vires the powers of the signatories since nothing contrary to the recruitment rules has been agreed to by them. 4. Both the memorandum of understanding dated 12.1.2003 and the agreement dated 24.3.2003 operate on the principle of promissory estoppel and legitimate expectation and necessitate implementation by issuance of a writ of Mandamus; 5. Both the memorandum of understanding and the agreement are not in violation of any rule or regulation nor do they violate Articles 14 and 16 of the Constitution of India and as such the defence of respondents that these agreements are unenforceable is not tenable. Learned counsel would refer to clause 8 of the Minutes of meeting held on 12.1.2003 read with Clause IV(xx) of the agreement dated 24.3.2003 which provide for filling up of 300 posts after their creation. Learned counsel would fairly concede that no promise was made by the Rajahmundry unit to create posts as it would then have been ultravires their powers. It is only stated by the signatories that all posts to be filled up by recruitment would also be made available to contract labour. Learned counsel would submit that what is being questioned in this writ petitions is the inaction of the 1st respondent – corporation and its failure to take a decision as to whether or not to create posts since it is only if posts are created, would the question of filling up the posts arise and it is only when it is decided to fill up the posts so created, would the petitioners, under the memorandum of understanding dated 12.1.2003 and the agreement dated 24.3.2003, be entitled also to be considered. Learned counsel would contend that since the project officials, in the memorandum of understanding and the agreement, had no acted ultravires their powers, it is not open to the corporate management to contend that the memorandum of understanding and the agreement were liable to be ignored. Learned counsel would contend that an obligation is cast on the 1st respondent to analyse its manpower requirement, that it is only on such analysis and on ascertaining its actual manpower requirement would the question, as to whether additional posts are required to be created, arise for consideration. While conceding that the Nallappan report was not binding on the respondents, Sri V.Venkataramana, learned counsel for the petitioners, would submit that the endeavour of the petitioners to place reliance on the Nallappan report was to elicit a response from the respondents regarding their intention whether or not to implement the report. Learned counsel would rely on Hira Tikko v. Union Territory, Chandigarh and submit that once posts are created and at the stage of filling up the posts, the petitioners would have the legitimate expectation to be considered. Learned counsel would urge that a sympathetic view be taken by the Court since all the petitioners have been working as contract labourers for more than 25 years and had no further avenues for regular appointment. Learned counsel would ventilate the grievance of the petitioners that the chairman and managing director was kept in the dark about the aforesaid events at the Rajahmundry Asset of the 1st respondent – corporation and if he were to be appraised of the factual position, the 1st respondent Corporation would have adopted a more humane approach and would have taken necessary steps to redress the long felt grievance of the petitioners for being considered for appointment on a regular basis in Rajahmundry Asset of the 1st respondent corporation. Sri E.Manohar, learned senior counsel appearing on behalf of the respondent – corporation, would refer to the agreement dated 24.3.2003 wherein “ONGC” has been defined as Rajahmundry Asset and contend that since the agreement has been entered into by the Rajahmundry Asset of the 1st respondent – corporation, such an agreement was not automatically binding on the corporate office more so when the signatories, in entering into such an agreement, had acted ultra vires. Learned senior counsel would submit that the power to create posts admittedly is not with the signatories of the agreement and since the 1st respondent has no intention to create posts, the question of filling up the posts and considering the cases of petitioners for recruitment, while filling up the posts, did not arise. Learned senior counsel would refer to certain portions of the counter affidavit of the 1st respondent in support of his submission that the 1st respondent has no intention of creating Class III and Class IV posts in the Rajahmundry Asset of the 1st respondent corporation. Learned senior counsel would rely on Food Corporation of India v. Bhanu Lodh. Since the averments in the counter affidavit, with regards creation of posts was not in categorical terms, to a query from the Court, Sri E.Manohar, learned senior counsel, appearing on behalf of the 1st respondent, would submit that the 1st respondent has no intention, at present, to create Class III and Class IV posts in Rajahmundry Asset of the 1st respondent – corporation. Before examining the contentions raised in these batch of writ petitions, it is necessary to note the long struggle of the contract labourers, of the Rajahmundry Asset and KG Basin of ONGC, for regularization of their services. Pursuant to the judgment in Air India Statutory Corporation (1 supra) wherein the Supreme Court had held that the contractor was an intermediary between the workmen and the principal employer and the moment the contract labour system stood prohibited under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970, the embargo to continue as contract labourers was put an end to, that a direct relationship was provided between the workmen and the principal employer, and thereby the principal employer became responsible for taking the services of the workmen hitherto regulated through the contractor, the contract labourers of Rajahmundry Asset of ONGC filed several writ petitions seeking regularization of their services. During the pendency of the writ petitions before this Court the judgment in Air India Statutory Corporation (1 supra) was overruled by a Constitution Bench of the Supreme Court in Steel Authority of India Ltd. (2 supra), wherein the consequences which followed issuance of a notification under, Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970, were detailed as under:- “(1) contract labour working in the establishment concerned at the time of issue of notification will cease to function; (2) the contract of principal employer with the contractor in regard to the contract labour comes to an end; (3) no contract labour can be employed by the principal employer in any process, operation or other work in the establishment to which the notification relates at any time thereafter; (4) the contract labour is not rendered unemployed as is generally assumed but continues in the employment of the contractor as the notification does not sever the relationship of master and servant between the contractor and the contract labour; (5) the contractor can utilise the services of the contract labour in any other establishment in respect