PEPSU ROAD TRANSPORT CORPORATION, PATIALA  THROUGH ITS MANAGING DIRECTOR & ANR. versus S. K. SHARMA & ORS.
[2016] 4 S.C.R. 24, Supreme Court of India, 2016
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2016] 4 S.C.R. 24 
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PEPSU ROAD TRANSPORT CORPORATION, PATIALA 
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THROUGH ITS MANAGING DIRECTOR & ANR. 
v. 
S. K. SHARMA & ORS. 
(Civil Appeal No. 4703 of2009) 
AUGUSTOS,2016 
[SHIVA KIRTI SINGH AND R. BANUMATHI, JJ.) 
. Service Law : .Retiral benefits - Claim for pension instead of 
Contributory Provident Fund (CPF) - Validity - Respondents, 
government employees transferred to Corporation - In terms of the 
then prevailing regulation, Corporation provided only for CPF and 
not pension - Respondents on retirement obtained such retiral 
benefits, without any pmtest - However, when Corporation 
introduced pension in 1992 respondents claimed entitlement to 
pension - Held: The respondents participated and contributed to 
the scheme of CPF and obtained the benefits of retirement from the 
Corporation, without any protest -1.f the employees chose to accept 
the transition of their service from one concern to another and 
acquiesced then they cannot be permitted to turn back and challenge 
the entire developments after a gap of decades especially after their 
retirement - Respondents had accepted to continue as employees of 
Corporation pursuant to order of merger/tran.~fer, therefore, on 
completing their service under the Corporation and reaching the 
age of retirement they were entitled to receive only the benefits of 
CPF and gratuity - Since they accepted those retiral benefits, there 
111as no relationship left between the Corporation and the
respondents and in such a situation further claim was totally 
untenable. 
D.R. Gurushantappa v. Abdul Khuddus Anwar and Ors. 
1969 (3) SCR 425 : 1969 (1) SCC 466 - followed. 
Mysore State Road 7hmsport Corporation v. A. Krishna 
Rao and Anr. 1973(1) SLR 1080; PEPSU Road 
Tramport Corporation, Patiala v. Mangat Singh and 
Ors. 2011 (6) SCR 564 : 2011 (11) SCC 702 - referred 
to. 
24
PEPSU ROAD TRANSPORT CORP., PATIALA 
25 
THR. ITS M. D. v. S. K. SHARMA 
National Insurance Company Ltd. v. Kirpal Singh 2014 (1) 
A 
SCR 380 : 2014 (5) SCC 189 - distinguished. 
Vice Chancellor, Utkal University & Ors. v. S.K. Ghosh & 
Ors.1954 AIR 217 : 1954 SCR 883; S.R. Bhanrale v. U1iion 
of India and Ors. 1996 (3) Suppl. SCR 763 : 1996 (10) SCC 
172; Fertilizer Corporation of India Ltd. v. Union of India 
B 
& Ors.1996 (2) SCR816 : 1996 (3) SCC 325; S.K. .Rattan v. 
· Union qf India & Ors. 2013 (12) SCR 743 : 2014 (4) SCC · 
144; State of Haryana & Ors. v. Amar Nath Bansal 1997 
(1) SCR 262 : 1997 (10) SCC 700 - distinguished. 
State of Punjab v. Nirmal Singh 2007 (8) SCC 108 - held 
C 
inapplicable. 
Case Law Reference 
2~11 (6) SCR 564 
referred to 
para8 
1954 SCR 883 
distinguished 
para9 
2007 (8) SCC108 
held inapplicable 
para 10 
1996 (3) Suppl. SCR763 
distinguished 
.rara 11 
1996 (2) SCR 816 
distinguished 
para 12 
~973(1) SLR 1080 
referred to 
para 12 
2014 (1) SCR 380 
·distinguished 
para 13 
2013 (12) SCR 743 
distinguished 
para 13 
1997 (l)SCR 262 
distinguished 
para 13 
1969 (3) SCR 425 
followed 
para 16 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4 703 
of2009. 
From the Judgment and Order dated 24~04.2006 of the High Court 
of Punjab and Haryana at Chandigarh in L.P.A. No. 700 of 2002 in 
C.W.P. No. 11908of1992. 
Rakesh Dwivedi. Sr. Adv., K. K. Mohan, Ms. Apoorva Garg, Advs. 
for the Appellants. 
S. K. Sharma, Abhishek Puri, Mrs. Reeta
Dewan Puri, P; N. Puri, 
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M. K. Dua, Advs. for the Respondents. 
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.[2016] 4 S.C.R. 
The Judgment of the Court was delivered by 
SHIVA KIRTI SINGH, J. I. This appeal by special leave assails 
the judgment and order dated 24.04.2006 passed by a Division Bench of 
High Cou1t of Punjab and Haryana dismissing LPA No. 700 of 2002 
preferred by the appellants and affirming the judgment oflearned Single 
Judge dated 11.01.2002 whereby Writ Petition bearing CWPNo. 11908 
of 1992 preferred by some of the respondents was allowed. Some had 
preferred to file suits and Civil Appeals which were dismissed. Their 
Regular Second Appeal No. 430 of 1995 was tagged with the above 
writ petition and was allowed by the same common judgment enabling 
all the 21 respondents to refund a pa1t ofCPF (Govt. Contribution) or 
agree for adjustment, to obtain pensionary benefits. 
2. The respondents filed the writ petition in 1992 claiming that 
they were appointed originally in a department of PEPSU described as 
PEPSU Roadways, between January 1955 and September 1956. It is 
not in dispute that in the PEPSU Roadways the respondents' appointment 
was only on temporary basis. PEPSU Roadways lost its utility due to 
creation of PEPSU Road Transport Corporation (hereinafter referred 
to as the ·corporation'). Copy of notification dated 07.01.1956 available 
on record shows that Corporation was created by this notification under 
the provisions of the Road Transport Corporation Act, 1950 enforced 
with effect from I
0.08.1954. The State Government through the Chief 
Secretary issued a letter dated 16.10.1956 informing the General 
Manager, PEPSU Roadways, Patiala (with reference to PEPSU 
Roadways' communication dated 14.10.1956) that His Highness the 
Rajpramukh had ordered the transfer of PEPSU Roadways to the PEPSU 
Road Transport Corporation (with effect from 15.10.1956 forenoon) on 
various terms and conditions in respect to evaluation of the assets of the 
PEPSU Roadways as well as sharing the burden for payment of the 
employees of the Corporation. The letter indicates that the Corporation 
was requested to draw up the agreement required by clause (h) of sub-
section (2) of Section 19 of the Road Transport Corporation Act, 1950 
and forward the same to the Government for approval and signatures. 
On account of the States Reorganization Act the merger of State of 
PEPSU with the State of Punjab became effective from 01.11.1956. 
Through an Order no. 61 dated 30.11.1956 the Corporation admitted 
that PEPSU Roadways stood taken over by the Corporation from 
16.10.1956 (before noon), so the services of all the temporary employees
PEPSU ROAD TRANSPORT CORP., PATIALA THR. ITS 
M. D. v. S. K. SHARMA [SHIVA KIRT! SINGH, J.l 
stood transferred to the Corporation with effect from 16. I 0. 1956 on the 
prevailing terms and conditions till the approval of new terms and 
conditions by the Corporation. The respondents never challenged this 
declaration, got promotions etc. and continued to serve the Corporation 
till they all retired between 1989 and 1991. It is not in dispute that PEPSU 
Road Transport Corporation Regulations which was framed in I 957 
provided for Contributory Provident Fund (CPF). There was no provision 
for grant of pension. Much after the retirement of the respondents, only 
with effect from 15.06.1992 the Corporation framed PRTC Employees 
Pension/Gratuity and General Provident Fund Regulations, ~992 
(hereinafter described as 'Regulations of 1992'). Under t'hese 
Regulations, for the first time pension was introduced in the Corporation. 
3. Soon after the enforcement of Regulations of 1992 the 
respondents who had already received their retiral benefits under the 
1957 Regulations filed the writ petition at hand. Or!ginally the grievance 
of the respondents in the writ petition was as to why the Regulations of 
1992 have not been made retrospective but through an amendment in 
1998, the writ petition was substantially amended so as to claim that 
they continued to be employees of the State in the department of PEPSU 
Roadways till PEPSU State was reorganized and from 01.11.1956, the
date of reorganization they became employees of State of Punjab with 
right to pension as available to Government servants. The Single Judge 
allowed the writ petition on the premise that the respondents had simply 
been transferred from the parent department to serve in the Corporation 
and therefore they continued to be Government servants because there 
was no order passed for their absorption in the Corporation. The Letters 
Patent Appeal preferred by the appellants was dismissed by the judgment 
and order dated 24.04.2006 which is under challenge in this appeal. 
4. It is significant to note that the letter of Chief Secretary dated 
16.10.1956 informing the General Manager, PEPSU Roadways of 
Government's decision on the subject of transfer ~f PEPSU Roadways 
to the Corporation was not placed before the High Court by the writ 
petitioners although it finds a specific mention in Order no. 61 dated 
30.11.1956 passed by the General Manager, PEPSU Road Transport 
Corporation. Hence this Court, apparently in the larger interest of justice, 
by order dated 20.08.2015 permitted the appellants to place on record 
the consent of the respondents and necessary documents to show that 
the respondents accepted transfer from PEPSU Roadways to the 
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Corporation. The additional fresh documents were filed after service 
upon the respondents who were granted accommodation on that ground 
on 24.11.2015. The additional documents were filed with an affidavit on 
behalfofappellants and include a copy ofletter dated l 6.10.1956. The 
respondents have not objected to the correctness and authenticity of the 
additional documents and hence those documents have been taken on 
record and used by learned senior counsel for the appellants in support 
of his contentions. 
5. On behalf of the appellants learned senior counsel Mr. Rakesh 
Dwivedi first took us through the letter dated 16.10.1956 and also the 
subsequent order dated 30.11.1956. He showed by way of illustration 
that one of the respondents Mr. 0.P. Trehan through letter dated 
01.03.1965 had opted to serve the Corporation. He also placed reliance 
on order dated 02.06.1986 of the Corporation by which Mr. S.K. Shanna, 
another respondent was promoted as Sr. Depot Manager which he 
accepted. That order clearly stipulated that he will be governed by the 
rules in force and those that may subsequently be fra1ned for the officers 
of the Corporation. Before advancing submissions in respect of issues 
of law, Mr. Dwivedi emphasised that being temporary employees of 
PEPSU Roadways till 15.10.1956, the respondents under then prevailing 
service rules of the State Government were not entitled to pension as
temporary employees even till their department i.e, PEPSU Roadways 
was merged with the. Corporation by the decision of the State 
Government. Therefore, it is contended that they have not suffered any 
adverse consequences on account of merger; rather they became 
permanent employees of the Corporation, obtained promotions and on 
retirement availed all the lawfully admissible benefits ofCPF and gratuity 
without any protest and demur. 
6. On behalf ofappellants Mr. Dwivedi has advanced the following 
submissions: 
(I) The relevant Depa1iment, PEPSU Roadways itself ceased to 
exist and be a Department and was merged with the Corporation 
totally and completely by 16.10.1956. The Depa1iment merged 
along with the posts, assets, liabilities and the respondent 
employees. There was no protest or challenge to such merger by 
way of transfer of the entire Department to the Corporation. 
(2) The word "transfer" is not used in the Government's decision 
evidenced by letter dated 16.10.1956 in the narrow sense of
PEPSU ROAD TRANSPORT CORP., PATIALA THR. ITS 
M. D. v. S. K. SHARMA [SHIVA KIRT! SINGH, J.] 
"transfer and posting" to another post or place. Rather, it connotes 
transfer as merger of the entire Department with assets, liabilities, 
posts and employees including their service and hence there was 
no occasion or need for any order of absorption in respect of the 
respondents. 
(3) Since the transfer/merger of the Department was complete much 
before the date 01.11.1956 when PEPSU State merged with the 
State of Punjab under the States Reorganization Act, the 
respondents cannot claim to have become employees of State of 
Punjab by virtue of Section 115 of States Reorganization Act. 
This provision could have helped them only ifthe Department-
PEPSU Roadways could have existed till 01.11.1956 or ifthey 
had been simply deputed to work in the Corporation under usual 
terms of deputation while retaining their lien on posts available 
under the State Government. 
7. Learned senior counsel for the appellants elaborated his 
submissions by contending that the High Court erred in relying upon 
various sub-sections and provisos to Section 115 of the States 
Reorganization Act and such e1Tor was on account of failure to appreciate 
that the respondents ceased to have for them any post in the Government 
due to complete transfer/merger of the PEPSU Roadways with the 
Corporation much before 01.11.1956. It was also contended that the 
High Court failed to appreciate that as temporary
employees with very 
little service to their credit, the respondents were not put to any 
disadvantage on account of transfer/merger because being temporary 
employees in 1955 and 1956, they were then not entitled to pension 
under the PEPSU Services Regulations governing pensions, particularly 
sub-rule (a) of Rule 1.2 in Chapter 1 which contains general rules relating 
to pensions for superior and inferior service. The rule reads thus: 
"Cases in which claims to pension are inadmissible 
1.2 In the following cases no claim to pension is admitted:-
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(a) When a Government servant is holding an appointment of a 
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temporary nature or is paid for definite work done for the 
Government without being permanently employed." 
8. Lastly, it was contended on behalf of appellants that the High 
Court should not have entertained the writ petition in 1992 or allowed 
substantial amendments in 1998 to permit claims made belatedly after 
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decades and after superannuation from the service 0rthe Corporation. 
Such claims should have been rejected on the ground of delay. In support 
of this plea reliance was placed upon judgment in the case of PEPSU 
Road Transport Corporation, Patiala v. Mangat Singh and Ors.' 
In this case the respondents were still in service as the employees of the 
appellant Corporation when the Regulations of 1992 introduced a pension 
scheme but they did not exercise option for pension within the stipulated 
time. Moreover, they also availed ofretiral benefits arising out ofCPF 
and gratuity without any protest. This Court held that the respondents on 
account of failure on their part, could not claim benefit under the pension 
scheme. Particular reliance was placed upon the following observations 
at the end of paragraph 35; 
" ..... On the receipt of CPF amount, the relationship between 
employee and employer ceases to exist without leaving any further 
legal right or obligation qua each other." 
Since most of the respondents in that case also had retired after 
serving for several years since the enforcement of Regulations of 1992 
and had advanced claim for pension afte!· accepting CPF etc., in para 52 
th is Court counted the delay of about eight years from the introduction 
of pension scheme in 1992 and held such delay was Linreasonable. On 
that basis it has been urged on behalf of appellants that through
amendment made in 1998 the respondents gave up their claim for pension 
under the Regulations of 1992 and instead claimed pensionary rights by 
indirectly mounting a challenge to the decision of the State Government 
evident from letter dated 16.10. I 956, merging PEP SU Roadways with 
the Corporation. Their claim of being in the employment of State and to 
have suffered the effect of States Reorganization Act and merger of 
PEPSU State with the State of Punjab on OJ.I 1.1956 was clearly a 
claim made after unusual delay of several decades and the High Court 
should not have condoned such delay. 
9. In reply, Mr. S.K. Sharma learned counsel for the respondents 
advanced arguments in support of the impugned judgment. As per his 
submissions, even after the transfer of Roadways Department to the 
Corporation, there was legal necessity of issuing formal orders showing 
absorption of respondents as employees of Corporation under a valid 
resolution of the Corporation. He relied upon findings of the High Court 
that there was no order or resolution for such absorption. On behalf of 
1 (2011) 11sec102
PEPSU ROAD TRANSPORT CORP .. PATIALA THR ITS 
M. D. v. S. K. SHARMA [SHIVA KIR1 I SINCJH . .I ] 
respondents reliance was placed upon judgment in the case of Vice 
Chancellor, Utkal University & Ors. v. S.K. Ghosh & Ors.', to 
support the proposition that a corporate body like University acts through 
formal resolution arrived at in a proper manner by the competent body. 
The facts of this case were entirely different. The appellant before this 
Court was Vice-Chancellor of a University who was aggrieved by the 
High Court judgment interfering with the cancellation of an examination 
through resolutions of the University Syndicate. The High Court 
invalidated the resolution for want of proper notice vi de agenda for the 
meeting as well as lack of justification for cancellation of the examination. 
This Court reversed the judgment of the High Court on both counts. The 
ratio of the judgment does not help the respondents. 
l 0. Respondents next relied upon judgment in the case of State 
of Punjab v. Ni rm al Singh.3 In this case State of Punjab was aggrieved 
by impugned judgment of the High Court whereby minor punishment 
imposed upon Nirmal Singh was set aside. This Court allowed the appeal 
and reversed the judgment of the High Court on a finding that there was 
no requirement under the rule to grant a personal hearing for imposition 
of a minor penalty and that the High Cou1i had erred in treating the 
order of the competent authority as a non-speaking order. This case
also 
is not relevant for deciding the controversy at hand. 
11. To meet the allegation of delay, reliance was placed upon S.R. 
Bhanrale v. Union oflndia and Ors) The appellant in that case retired 
as an officer in the Department ofTelecommunications, Government.of 
India and received pension immediately on retirement. For no good 
reasons his other retiral benefits and claims remained unsettled in spite 
of several representations. After serving the notice under Section 80 
CPC and approximately after three years he moved the Central 
Administrative Tribunal. While the matter was pending with this Court, 
upon directions of the Department, the appellant was paid some of the 
benefits. At the stage of final hearing, this Court considered the 
circumstances and observed that in the facts of the case the Union of 
India was not justified in raising the bar oflimitation against the dues of 
the appellant. It cannot be claimed by way of general rule simply on the 
basis of aforesaid judgment that in all cases of claim for pension, the 
plea of delay or limitation cannot be considered by a writ court. Only 
2 AIR 1954 SC 217 
' (2007) s sec 1 os 
' (1996) 10 sec 112 
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where the retiral benefits have been wrongly withheld and not paid despite 
numerous representations and as observed in para 4 of the aforesaid 
judgment the delay is not of decade or so the Court may not appreciate 
a plea of limitation raised by the Government. In the present case 
admission or declaration made by the Corporation on 30.11.1956 through 
Order no. 61 that services of the respondents, i.e., of all temporary 
employees stood transferred to the Corporation with effect from 
16.10.1956 and shall be governed by the new terms and conditions as 
and when approved by the Corporation was within the knowledge of the 
respondents and they accepted such orders of the Government and the 
Corporation from 1956 till their retirement and even thereafter till the 
enforcement of Regulations of 1992 which led to tiling of writ petition by 
them in 1992. Clearly the respondents acquiesced to the entire situation 
and accepted their status as employees of the Corporation leading to 
admissible retiral benefits. In such circumstances, the aforesaid judgment 
cannot help the respondents. The appellant Corporation was fully justified 
in raising the plea of delay and latches. The High Court erred in ignoring 
such plea when the delay was quite unusual. We tii1d no material to 
satisfactorily explain such delay. 
12. Appearing for some of the respondents, further reply was 
advanced by Mr. M.K. Dua, Advocate. He
contended that as per Section 
11 of the States Reorganization Act, the merger of PEPSU with Punjab 
State was effected on 01.11.1956 and therefore from such date, by virtue 
of Section 115( I) of the States Reorganization Act the respondents were 
rightly treated by the High Court to have acquired the status of 
Government servant in the successor State of Punjab. He referred to 
pleadings in the writ petition to the effect that in 1956 the respondents 
were transferred to the Corporation without being given any opportunity 
of exercising option. It was also urged that in reply the other side did not 
controvert such a plea nor there was any reply to the claim that the 
respondents were not issued with any formal order of absorption. He 
relied upol1judgment of this Court in Fertilizer Corporation oflndia 
Ltd. v. Union oflndia & Ors.5 in support of a proposition that unless 
the absorbing body/authority issues an order fo1' absorption of a 
Government officer in its service on a permanent basis, mere 
correspondence or any order of notification issued by others cannot confer 
benefits of absorption on such Government officer. It would suffice to 
note that the claim ofabsorption made by an individual officer was being 
' ( t996) 3 sec 325
PEPSU ROAD TRANSPORT CORP., PATIALA THR. ITS 
M. D. v. S. K. SHARMA [SHIVA KIRT! SINGH, J.] 
denied by the absorbing body and the proposition noted above was mooted 
by the Court in the facts where such individual claim is being denied by 
the concerned organization. The facts in the present case are entirely 
different. In support of same proposition oflaw reliance has been placed 
upon Mysore State Road Transport Corporation v. A. Krishna Rao 
and Anr.6 In Mysore State R.T.C. case the concerned employee of 
Bangalore Transport Company Ltd. by virtue of statutory provisions 
became employee of the State. Thereafter there was no order of transfer 
or merger of the concerned department with the subsequently formed 
Corporation. The Corporation was directed to take over only those 
employees who opted for its service. Since the concerned respondent-
employee was not given any notice of option it was held that he could 
not claim to be an employee of the Corporation. 
13. Respondents have placed reliance also upon case ofNational 
Insurance Company Ltd. v. Kirpal Singh 7 to contend that since 
provision for payment of pension is beneficial in nature, the provision 
ought to receive a liberal interpretation so as to serve the object of the 
pension scheme as well as any special scheme like a voluntary retirement 
scheme. On facts the said judgment dealt with the provisions ofVoluntary 
Retirement Scheme which required interpretation. The present case does 
not raise any such
issue as to interpretation of any pension scheme. 
Reliance was also placed upon case of S.K. Rattan v. Union of India 
& Ors.• Para 13 of that judgment contains the reasons indicated by this 
Court for holding that by sheer transfer of an employee from an institution 
like CBI to another organization, the officer cannot be made to suffer in 
his service conditions without framing appropriate rules under Article 
309 of the Constitution as it would amount to discrimination for no 
justifiable reasons. In that case, the submission on behalf of the Union of 
India were not accepted because this Court found that till the officer 
retired from service, no separate service rules had been framed for the 
officers of the organization where he was transferred but in the case at 
hand the PEPSU Road Transport Corporation Regulations providing for 
CPF has been framed as back as in 195 7. The said judgment is therefore 
of no help to respondents. Reliance placed upon State of Haryana & 
Ors. v. Amar Nath Bansal9 is equally misconceived because in that 
6 1973(1) SLR 1080 
1 (2014) s sec 189 
' (2014) 4 sec 144 
' (1997) 10sec100 
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case there was no dispute that the respondent was an employee of the 
State of PEPSU and. therefore. on and from the appointed date he 
became amenable to Punjab Service Rules under which he was rightly 
retired at the prescribed age. In reply, learned senior counsel for the 
appellants has rightly taken a stand that most of the cases noted above 
on which respondents have placed reliance relate to individual employees 
who had been transferred on deputation and, therefore, are clearly 
distinguishable. They can have no application to the present matter 
because prior to 01.11.1956 the respondents had ceased to be 
Government servants under the PEPSU State with effect from 16.10.1956 
and had become servants of the Corporation. 
14. Further reply of the appellants is that respondents chose not to 
challenge or resist the decision of the PEPSU State whereby the entire 
department where they were working as temporary employee was by 
transfer merged with the Corporation. They chose this course because 
they had no right to post held by them and cou Id have been out of 
employment. Since the department itself ceased to exist there were no 
posts on which the respondents could claim lien and in absence of any 
such post or lien they cannot claim to be Government employee of 
· PEPSU State till 01.11.1956, the date of the merger of PEPSU State 
with Punjab. By placing reliance upon Section 34 oftlie Road
Transpo11 
Corporation Act, 1950, it has been urged on behalf of the appellants that 
the State Government has statuto1y power to give the Corporation general 
instructions including directions relating to the recruitment, conditions of 
service and wages to be paid to the employees etc. The Corporation is 
saddled with a statutory obligation not to depart from such general 
instructions. Therefore, the letter of Chief Secretary dated 16.10.1956 
containing direction of the State Government was binding upon the 
appellant-Corporation and as a result without need ofany individual orders 
of absorption the entire establishment of the transferred department had 
to be taken over by the Corporation. The absorption oftlie employees in 
law was complete on 16.10.1956 due to such order of transfer and 
amalgamation. The Corporation had no option to seek options and to 
issue orders of absorption as per its discretion or will. The respondents 
being temporary employees had the option either to quit the service of 
the Corporation or challenge the orders or directions of the State 
Government but they chose to do neither. 
15. By relying upon paragrap,h 54 of the unamended writ petition
l'l~PSU ROAD TRANSPORT CORP., PATIALA THR. ITS 
M. D. v. S. K. SHARMA [SHIVA KIRTI SINGH, J J 
learned senior counsel for the appellants submitted that in fact the 
respondents had admitted in their initial stand that PEPSU Roadways 
merged with the Corporation on 16.10.1956. A perusal of said paragraph 
54 shows that respondents accepted the aforesaid facts and their only 
stand was since "they did not give any option to the effect they would 
not claim any pensionary benefits", they will remain Government 
employees entitled to pensionary benefits. 
16. The main controversy in this case is whether the claim of the 
respondents, a group of twenty one employees of PEPSU Roadways 
that in spite of transfer of that department to the Corporation they continue 
to be actually Government servants and therefore entitled to retiral 
benefits instead ofCPF is acceptable or not. Jn this controversy. a judgment 
of this Court though rendered in slightly different factual matrix is 
substantially relevant and helpful. In D.R. Gurushantappa v. Abdul 
Khuddus Anwar and Ors. 10 an issue arose in the context of election 
of the Mysore Legislative Assembly as to whether the respondent was 
holding office of profit under the Government. The respondent no. I of 
that case was initially a Government servant but subsequently the 
Government concern where he was working was taken over by a 
company registered under the Indian Companies Act, 1956. The shares 
of the company were fully owned by
the Government but after the 
Government undertaking was taken over by the company, the employees 
were no longer governed by the Mysore Civil Services Regulations, their 
conditions of service came to be determined by the standing orders of 
the company. The first contention against respondent no. I was that 
since he was initially a Government servant, even after the concern was 
taken over by the company he would continue to be in the service of the 
Government. While dealing with this issue in paragraph 3, this Court 
rejected the contention in the following words: 
"3. So far as the first point is concerned, reliance is placed primarily 
on the circumstance that. when the concern was taken over by 
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the Company from the Government there were no specific 
agreements terminating the Government service of Respondent 
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I, or bringing into existence a relationship of master and servant 
between the Company and Respondent I. That circumstance. by 
itself. cannot lead to the conclusion that Respondent I continued 
to be in government service. When the undenaking was taken 
1" I %9 (I) S('( .. f(,(1 
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over by the Company as a going concern, the employees working 
in the undertaking were also taken over and since, in law, the 
Company has to be treated as an entity distinct and separate from 
the Government, the employees, as a result of the transfer of the 
undertaking, became employees of the Company and ceased to 
be employees of the Govern"''""'·" 
17. In the facts of the cas~, we have no hesitation to hold that the 
High Court erred in allowing the writ petition and second appeal of the 
respondents and in dismissing the Letters Patent Appeal of the appellants. 
The judgments on which the respondents have relied upon for advancing 
the submission that they cannot lose the status of a Government servant 
till they are absorbed in the Corporation after offering an option in favour 
of such absorption is entirely misconceived and inapplicable in the facts 
of the present case. The stand of the respondents could have been 
acceptable had there been no decision of the PEPSU State as evidenced 
by the letter of Chief Secretary dated 16.10.1956 which finds mention 
and reiteration by way of admission by the Corporation in order dated 
JO. I I. J 956. There can be no such belated challenge to the decision of 
PEPSU State whereby PEPSU Roadways, one of the departments came 
into and merged with the Corporation lock, stock and barrel before the 
merger of PEPSU with Punjab on 0 J. J J. J 956. Hence, the
provisions of 
the States Reorganization Act ceased to have any significance in the 
matter because the respondents ceased to be employees of State 
Government of PEPSU prior to OJ. J J. J 956. They accepted such merger 
and alteration of their service conditions without any protest. Since J 957, 
under the Regulations of the Corporation they participated and contributed 
to the scheme of CPF and obtained the benefits of retirement from the 
Corporation between J 985 and 199 J without any protest. The High Court 
clearly erred in ignoring such conduct of the respondents, the effect of 
the Chief Secretary's letter dated 16. I 0.1956 containing decision of 
PEPSU State and its acceptance by the Corporation reflected by the 
order dated 30.11.1956. The High Court further erred in relying upon 
Jaw which is applicable when there is no merger of Government concern 
with the private concern but only individual employees are transferred 
on deputation or on foreign service to other organizations/services. The 
ordinary rules providing for asking of option or issuance of letters of 
absorption depend upon nature of stipulations which may get attracted 
to a case of deputation. There may be similar stipulations in case of 
merger by transfer. But if there are no such stipulations like in the present
PEPSU ROAD TRANSPORT CORP., PATIALA THR. ITS 
M. D. v. S. K. SHARMA [SHIVA KIRT! SINGH, J.] 
case then the transferee concern like the Corporation has no obligation 
to ask for options and to issue letters of options to individual employees 
who become employees of the transferee organization simply by viiiue 
of order and action of transfer of the whole concern leading to merger. 
No doubt in case of any hardship, the affected employees have the 
option to protest and challenge either the merger itself or any adverse 
stipulation. However, if the employees choose to accept the transition of 
their service from one concern to another and acquiesce then after 
decades and especially after their retirement they cannot be permitted 
to turn back and challenge the entire develop1nents after a gap of 
decades. 
18. On the basis of laws and facts discussed above, we are 
constrained to hold that the respondents had accepted to continue as 
employees of Corporation pursuant to order of merger/transfer of PEPSU 
Roadways with effect from 16.10.1956 and on completing their service 
under the Corporation and reaching the age of retirement they were 
entitled to receive only the benefits ofCPF and gratuity as admissible to 
them under then prevailing regulations of the Corporation. Since they 
accepted those retiral benefits there is no relationship left between the 
Corporation and the respondents and in such a situation further claim 
against the Corporation that it should treat the
respondents to be 
Government servants and adjust their retiral benefits accordingly was 
totally untenable and wrongly allowed by the High Court. The impugned 
judgment of the High Court granting relief to the respondents is therefore 
set aside. The second appeal and the writ petition of the respondents 
shall stand dismissed. This appeal is accordingly allowed but the parties 
are left to bear their own costs. 
Divya Pandey 
Appeal allowed. 
37 
A 
B 
c 
D 
E 
F