STATE OF H.P. & ORS. versus RAJESH CHANDER SOOD ETC. ETC.
[2016] 6 S.C.R. 851, Supreme Court of India, 2016
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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[2016] 6 S.C.R. 
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the salaries/emoluments of employees of CAM UL either under 
any statute or contract or otherwise. 
15. The learned Counsel for the respondent contended that the 
same issue arose for consideration in Kapila Hingorani (I) v. State 
of Bihar, (2003) 6 SCC 1 (for short "Kapila Hingorani (I)") and 
B 
the issue has been answered in their favour. Reference is invited 
to the following question, which was set down as one of the 
questions arising for consideration in that case: (SCC p.17, para 
20) 
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"2. Whether having regard to the admitted position that the 
government companies or corporations referred to 
hereinbefore are "State" within the meaning of Article 12 of 
the Constitution oflndia, the State ofBihar having deep and 
pervasive control over the affairs thereof, can be held to be 
liable to render all assistance to the said companies so as to 
fulfill its own and/or the corporations' obligations to comply 
with the citizens' rights under Articles 21 and 23 of the 
Constitution oflndia?" 
16. Reference is also invited to the following observations of this 
Court in considering the said questiOn (Kapila Hingorani (I), SCC, 
pp. 20-21, paras 30-31 & 33-34): 
"30. The government companies/public sector undertakings 
being 'State' would be constitutionally liable to respect life 
and liberty of all persons in terms of Article 21 of the 
Constitution oflndia. They, therefore, must do so in cases of 
their own
employees. The Government of the State of Bihar 
for all intent and purport is the sole shareholder. Although in 
law, its liability towards the debtors of the company may be 
confined to the shares held by it but having regard to the 
deep and pervasive control it exercises over the government 
companies; in the matter of enforcement of human rights 
and/or rights of the citizen to life and liberty, the State has 
also an additional duty to see that the rights of employees of 
such corporations are not infringed. 
31. The right to exercise deep and pervasive control would 
in its turn make the Government ofBihar liable to see that 
the life and liberty clause in respect of the employees is fully
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
safeguarded. The Government of the State of Bihar, thus, 
had a constitutional obligation to protect the life and liberty 
of the employees of the government-owned companies/ 
corporations who are the citizens oflndia. It had an additional 
liability having regard to its right of extensive supervision 
over the affairs of the company. 
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33. The State having regard to its right of supervision and/ 
or deep and pervasive control, cannot be permitted to say 
that it did not know the actual state of affairs of the State 
Government undertakings and/or it was kept in the dark that 
the salaries of their employees had not been paid for years 
leading to starvation death and/or commission of suicide by 
a large number of employees. Concept of accountability 
arises out of the power conferred on an authority. 
34. The State may not be liable in relation to the day-to-day 
functioning of the companies, but its liability would arise on 
its failure to perform the constitutional duties and functions 
by the public sector undertakings, as in relation thereto lie 
the State's constitutional obligations. The State acts in a 
fiduciary capacity. The failure on the part of the State in a 
case of this nature must also be viewed from the angle that 
the statutory authorities have failed and/or neglected to 
enforce the social-welfare legislations enacted in this behalf 
e.g. the Payment of Wages Act,
the Minimum Wages Act 
etc. Such welfare activities as adumbrated in part IV of the 
Constitution oflndia indisputably would cast a duty upon the 
State being a welfare State and its statutory authorities to do 
all things which they are statutorily obligated to perform. 
Reference is invited to the fact that this Court directed the 
Bihar government to release Rs. 50 crores and deposit it 
with the High Court for disbursing salaries of employees of 
government corporations/companies. The contention of 
respondent is that the direction of the High Court, is in 
consonance with the said view. 
17. The learned Counsel for the respondent also relied upon the 
following observations in Kapila Hingorani (II) v. State ofBihar, 
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(2005) 2 SCC 262 (for short "Kapila Hingorani (II)): (SCC p. 
268, paras 26-27) 
"26. We, therefore, do not appreciate the stand taken by the 
State of Bihar now that it does not have any constitutional 
obligation towards a section of citizens viz. the employees of 
the public sector undertakings who have not been paid salaries 
for years. 
27. We also do not appreciate the submissions made on behalf 
of the State of Bihar that the directions issued were only 
one-time direction. In Clause 4 of the directions, it was clearly 
stated that the State for the present shall deposit a sum of 
Rs. 50 crores before the High Court for disbursement of 
salaries to the employees of the corporations. Furthermore, 
the matter had been directed to be placed again after six 
months." 
This Court also issued further interim directions to the State of 
B!har to deposit a further sum of Rs.SO crores and the State of 
Jharkhand to deposit a sum of Rs.25 crores to meet the arrears of 
salaries of public sector undertakings. 
18. We have carefully examined the said two decisions. The two 
decisions are interim orders made in a writ petition under 
Article 32 of the Constitution. The said orders have not finally 
decided the issues/questions raised, nor laid down by any principle 
or' law. The observations extracted above as also other 
observations and directions are purely tentative as will be evident 
from the following
observations in Kapila Hingorani (I): (SCC pp. 
34-35, paras 74 & 76) 
"74. We, however hasten to add that we do not intend to lay 
down a law, as at present advised, that the State id directly or 
vicariously I iable to pay salaries/remunerations of the 
employees of the public sector undertakings or the government 
companies in all situations. We, as explained hereinbefore, 
only say thatthe State cannot escape its liability when a human 
rights problem of such magnitude involving the starvation 
deaths and/or suicide by the employees has taken place by 
reason of non-payment of salary to the employees of public 
sector undertakings for such a long time .... 
xxx 
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STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
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[JAGDJSH SINGH KHEHAR, J.] 
76. This order shall be subject to any order that may be passed 
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subsequently or finally." 
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19. The position is further made clear in Kapila Hingorani (II) as 
under: (SCC p. 270, para 37) 
· 
"37. We make it clear that we have not issued the 
aforementioned directions to the States ofBihar and Jharkhand 
on the premise that they are bound to pay the salaries of the 
employees of the public sector undertakings but on the ground 
that the employees have a human right as also a fundamental 
right under Article 21 which the States are bound to protect. 
The directions, which have been issued by this Court on 
9.5.2003 as also which are being issued herein, are in 
furtherance of the human and fundamental rights of the 
employees concerned and not by way of an enforcement of 
their legal right to an;ears of salaries. The amount of salary 
payable to the employees or workmen concerned would 
undoubtedly be adjudicated upon in the proper proceedings. 
However, these directions are issued which are necessary 
for their survival." 
20. It is thus clear that directions were not based on legal right of 
the employees. but were made to meet a human right problem 
involving starvation deaths and suicides. But in the case on hand, 
relief is claimed and granted by proceeding on the basis that the 
employees of corporations/bodies answering the definition of 
"State" have a legal right to
get their salaries from the State 
Government. In fact Kapila Hingorani (I) and Kapila Hingorani 
(JI) specifically negative such a right." 
46. We shall now endeavour to consider the various legal 
parameters on the basis whereof, learned counsel for the rival parties 
have premised their respective submissions. 
4 7. First and foremost, it is essential for us to determine whether 
or not a vested right came to be created in the employees of the corporate 
bodies, when they came to be governed by 'the 1999 Scheme'. The 
submission at the hands oflearned counsel for the appellant-State was, 
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that no such vested right was created, by the time the repeal notification 
was issw~d on 2.12.2004. The contention oflearned counsel representing 
the State was, that under paragraph 4 of 'the 1999 Scheme', a right to 
draw pension would emerge, only when a concerned employee attained 
the age of superannuation, subject to the condition that he had rendered 
the postulated qualifying service. It was submitted, that prior to the 
fulfillment of the aforesaid condition, no employee under 'the 1999 
Scheme', could be considered as being possessed of a vested right, to 
receive_ oension. 
48. Having given our thoughtful consideration to the aforesaid 
submission, we are of the view, that such of the employees who had 
exercised their option to be governed by 'the 1999 Scheme', came to be 
regulated by the said scheme, immediately on their having submitted 
their option. In addition to the above, all such employees who did not 
exercise any option (whether to be governed, by the Employees' 
Provident Funds Scheme, 1995, or by 'the 1999 Scheme'), would 
automatically be deemed to have opted for 'the 1999 Scheme'. All new 
entrants would naturally be governed by 'the 1999 Scheme'. All those 
who had moved from the provident fund scheme to the pension scheme, 
would be deemed to have consciously, foregone all their rights under the 
Employees' Provident Funds Scheme, 1995. It is of significance, that all 
the
concerned employees by moving to 'the 1999 Scheme', accepted, 
that the employer's contribution to their provident fund account (and the 
accrued interest thereon, upto 31.3.1999), should be transferred to the 
corpus, out of which their pensionary claims, under 'the 1999 Scheme' 
would be met. It is therefore not possible for us to accept, that the 
concerned employees would be governed by 'the 1999 Scheme' only 
from the date on which they a~ained the age of superannuation, and that 
too - subject to the condition that they fulfilled the prescribed qualifying 
service, entitling them to claim pension. Every fresh entrant has the 
statutory protection under the Provident Fund Act. All fresh entrants 
after the introduction of 'the 1999 Scheme', were extended the benefits 
of 'the 1999 Scheme', because of the exemption granted by competent 
authority under the Provident Fund Act. They too, therefore possessed 
similar rights as the optees. 
49. With effect from 1.4.1999, the employees who had opted for 
'the 1999 Scheme' (or, who were deemed to have opted for the same) 
were no longer governed by the provisions of the Provident Fund Act
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
(under which they had statutory protection, for the payment of provident 
fund). Consequent upon an exemption having been granted to the 
concerned corporate bodies by the competent authority under the 
Provident Fund Act, the Employees Provident Funds Scheme, 1995, was 
replaced, by 'the 1999 Scheme'. All direct entrants after 1.4.1999, were 
also entitled to the rights and privileges of 'the 1999 Scheme'. We are 
therefore of the considered view, that the submissions advanced on behalf 
of the State of Himachal Pradesh premised on the assertion, that no 
vested right accrued to the employees of the concerned corporate bodies, 
on the date when 'the I 999 Scheme' became operational (with effect 
from 1.4.1999), or to the direct entrants who entered service thereafter, 
cannot be accepted. In this behalf it would also be relevant to emphasize, 
that as soon as the concerned employees came to be governed by 'the 
1999 Scheme', a contingent right came to be vested in them. -The said 
contingent right created a right in the employees to claim pension, at the 
time of their retirement. Undoubtedly, the aforesaid contingent right 
would crystalise only upon the fulfillment of the postulated conditions, 
expressed on behalfof the appellants (on having rendered, the postulated 
qualifying service). However, once such a contingent right was created, 
every employee in whom the said right was created, could
not be 
prevented or forestalled, from fulfilling the postulated conditions, to claim 
pension. Any action pre-empting the right to pension, emerging out of 
the conscious option exercised by the employees, to be governed by 'the 
1999 Scheme' (or to the direct entrants after the introduction of 'the 
1999 Scheme'), most definitely did vest a right in the respondent-
employees. 
50. We are also of the view, that there is merit in the contention 
advanced on behalf of the respondent-employees, inasmuch as, the seeds 
of the right to receive pension, emerge from the very day, an employee 
enters a pensionable service. From that very date, the employee 
commences to accumulate qualifying service. His claim for pension 
would obviously crystalise, when he acquires the minimum prescribed 
qualifying service, and also, does not suffer a disqualification, disentitling 
him to a claim for pension. 
51. In the above view of the matter, it is not possible for us to 
accept, that the rights of the concerned employees under 'the 1999 
Scheme', can be stated to get vested, only on the date when a concerned 
employee would attain the age of superannuation, and satisfy all the pre-
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requisites for a claim towards pension. We are also persuaded to accept 
the contention advanced on behalf of the respondent-employees, that 
the cause of action to raise a claim for pension, would arise on the date 
when a concerned employee actually retires from service. Any employee 
governed by a pension scheme, enrolls to earn qualifying service, 
immediately on his enrolment into the pensionable service. Every such 
employee must be deemed to have commenced to invest in his evt:-ntual 
claim for pension, from the very day he enters service. More so, in the 
present controversy, by having expressly chosen to forego his rights, 
under th;: Employees' Provident Funds Scheme, I 995. 
52. We shall deal with the issue, whether or not such a contingent 
right, as was vested in the respondent-employees on their having opted 
for 'the 1999 Scheme' (or in the fresh entrants, on their very appointment), 
was binding and irrevocable, at a later stage of our consideration. 
53. The second most important issue which deserves to be 
addressed by us, in the facts and circumstances of the present case is, 
whether or not the State Government was justified in postulating a cut-
off date, by which some of the employees governed by 'the 1999 Scheme' 
(those who had retired prior to 2.12.2004) were entitled to draw pension 
under 'the 1999 Scheme', whereas others, who had not retired by the 
time the repeal notification
was issued on 2.12.2004, were deprived of 
such benefits. In this behalf, the contention of the learned counsel for 
the respondent-employees was, that all those who had opted (or deemed 
to have opted) for 'the 1999 Scheme', and all the new entrants after the 
introduction of'the 1999 Scheme', constituted a homogenous class, and 
it was impermissible for the State Government, to have treated them 
differently. It was submitted, that the aforesaid classificatioP was 
invidioys, inasmuch as, there was no reasonable basis for such 
classification, nor was there any discernable object, for bifurcating the 
homoge'lous class of pensioners. It was submitted, that whilst those 
who had retired on the date of the repeal notification, would be entitled 
to pensionary benefits, those who retired on the following day, would be 
deprived of the same. Learned counsel for the rival parties have, relied 
on a series of judgments in support of the respective propositions 
canvassed by them. We have extracted the same, while recording their 
submissions. 
54. Having given our thoughtful consideration to the issue 
canvassed, and having gone through the judgments cited, we are of the
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
considered view, that this Court has repeatedly upheld a cut-off date, for 
extending better and higher pensionary benefits, based on the financial 
health of the employer. A cut-off date can therefore legitimately be 
prescribed for extending pensionary benefits, if the funds available cannot 
assuage the liability, to all the existing pensioners. We are therefore 
satisfied to conclude, that it is well within the authority of the State 
Government, in exercise ofits administrative powers (which it exercised, 
by issuing the impugned repeal notification dated 2.12.2004) to fix a cut-
off date, for continuing the right to receive pension in some, and depriving 
some others of the same. This right was unquestionably exercised by 
the State Government, as determined by this Court, in the R.R. Verma 
case (supra), wherein this Court held, that the Government was vested 
with the inherent power to review. And that the Government was free 
to alter its earlier administrative decisions and policy. Surely, this is 
what the State Government has done in the present controversy. But 
this Court in the above mentioned judgment, placed a rider on the exercise 
of such power by the Government. In that, the exercise of such power, 
should be in consonance with all legal and statutory obligations. 
55. It is equally true, that the power of administrative review can 
only be exercised, for a good and valid
justification. Such justification 
besides being founded on reasonable consideration, should also not be 
violative of any legal right - statutory or constitutional, vested in the 
affected employees. Insofar as the permissibility of the administrative 
action taken, in issuing the impugned repeal notification dated 2. I 2.2004 
is concerned, whether the said power was exercised by the State 
Government for good and valid reasons, and/or whether the same violated 
any statutory or constitutional right vested in the respondent-employees, 
shall be examined by us in the succeeding paragraphs. 
56. In order to demonstrate, that the repeal notification dated 
2. 12.2004, was impermissible in law, reliance was placed on the U.P. 
RaghavendraAcharya case (supra). We are of the view, that the above 
judgment does not have any bearing on the facts and circumstances of 
this case. In the above judgment, the primary contention which weighed 
with this Court, in rejecting the contention advanced by the State 
Government was, that through an executive determination (by a letter, 
dated 17. I 2.1993), the State Government had breached a statutory rule, 
regulating the fixation of pension (Rule 296, of the Karnataka Civil 
Services Rules). The above position is not available in the present case, 
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inasmuch as, no contention has been advanced at the behest of the 
respondent-employees, that the action taken by the State Government 
(in issuing the repeal notification, dated 2.12.2004), violated any legal 
obligation or statutory right. So also, the judgment relied upon on behalf 
of the respondent-employees in the D.S. Nakara case (supra), wherein 
the employees' claim for pension, was based on existing rules. And 
even so, in the Chairman, Railway Board case (supra), wherein it was 
held, that vested rights under the rules, could not be taken away. It 
would also be relevant to mention, that in the last judgment referred to 
above, it was observed, that the employees who had retired from service, 
had been deprived of their pensionary rights, as the amended rule was 
not prospective, but was retrospective. In the instant case, the repeal 
notification does not adversely affect those employees who had retired 
prior to 2.12.2004, before the said notification was issued. The above 
referred judgment is also, therefore inapplicable to the present 
controversy. The conclusion recorded hereinabove, also emerges on a 
perusal of paragraphs 31 and 33 of the above judgment. It is therefore 
apparent, that the validity of the impugned notification cannot be assailed 
on the basis of the judgments cited above. We shall now deal with the 
legal submissions advanced on behalf of the respondent-employees, in
their attempt to invalidate the repeal notification, dated 2.12.2004. 
57. The first legal contention advanced on behalf of the respondent-
employees was based on the principle of estoppel/promissory estoppel. 
It was the assertion of learned counsel, that the respondent-employees 
had altered their position to their detriment, on their having opted (or 
deemd to have opted) to be governed by 't.he 1999 Scheme'. In order to 
highlight the above assertion it was submitted, that the entire employer's 
contribution towards provident fund (alongwith, the accumulated interest 
thereon), was foregone by the respondent-employees. The said amount 
unquestionably belonged to the respondent-employees, and their right 
over the same was protected under the Provident Fund Act. It was 
submitted, that the aforesaid option was exercised by the respondent-
employees, only when the offer to extend pensionary benefits, was 
voluntarily made to the employees by the State Government. It was 
contended, that the promise to pay pensionary benefits, which was 
containtid in the offer of the State Government, could not be unilaterally 
revoked, under the principle of estoppel/promissory estoppel. It was 
submitted, that the instant action of the State Government (taken by
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
way ofissuing the repeal notification, dated 2.12.2004), would seriously 
impair the financial benefits which had accrued to the respondent-
employees, under 'the 1999 Scheme'. It was pointed out, that all that 
the respondent-employees had gained, by foregoing the employer's 
contribution (and the accrued interest, thereon), has been lost, consequent 
upon the issuance of the impugned notification, dated 2.12.2004. 
58. We are of the considered view, that the principle of estoppel/ 
promissory estoppel cannot be invoked at the hands of the respondent-
empbyees, in the facts and circumstances of this case. It is not as ifthe 
rights which had accrued to the respondent-employees under the 
Employees' Provident Funds Scheme, 1995 (under which the respondent-
employees were governed, prior to their being governed by 'the 1999 
Scheme') have in any manner been altered to their disadvantage. All 
that was taken away, and given up by the respondent-employees by 
way of foregoing the employer's contribution upto 31.3.1999 (including, 
the accrued interest thereon), by way of transfer to the corpus fund, 
was re~t_ored to the respondent-employees. All the respondent-
employees, who have been deprived of their pensionary claims by the 
repeal notification dated 2.12.2004, would be entitled to all the rights 
which had accrued to them, under the Employees' Provident Funds 
Scheme, 1995. It is therefore, not
possible for us to accept, that the 
respondentcemployees can be stated to have been made to irretrievably 
alter their position, to their detriment. Furthennore, all the corporate 
bodies (with which the respondent-employees, are engaged) are 
independent juristic entities, as held in State of Assam v. Barak Upatyaka 
D.U. Kannachari Sanstha (supra). The mere fact, that the corporate 
bodies under reference, are fully controlled by the State Government, 
and the State Government is the ultimate authority to detennine their 
conditions of service, under their Articles of Association, is 
inconsequential. Undoubtedly, the respondent-employees are not 
Government employees. The State Government, as a welfare measure, 
had ventured to honestly extend some post-retiral benefits to employees 
of such independent legal entities, on the mistaken belief, arising out of a 
miscalculation, that the same can be catered to, out of available resources. 
This measure was adopted by the State Government, not in its capacity 
as the employer of the respondent-employees, but as a welfare measure. 
Whe:i it became apparent, that the welfare measure extended by the 
State Government, could not be sustained as originally understood, the 
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same was sought to be withdrawn. We are of the view that the principle 
invoked on behalf of the respondent-employees, cannot be applied in the 
facts of the present case, specially, in view of the decision in Mis. 
Bhagwati Vanaspati Traders v. Senior Superintendent of Post Offices, 
Meerut, AIR 2015 SC 901, wherein this Court held as under:-
"The first contention advanced at the hands of the learned counsel 
for the appellant was based on the decision rendered by this Court 
in Tata Iron & Steel Co. Ltd. v. Union of India & Ors., (2001) 2 
sec 41, wherefrom learned counsel invited our attention tO the 
following observations:-
"20. Estoppel by conduct in modern times stands elucidated 
with the decisions of the English Courts in Pickard v. Sears, 1837 
6 Ad. & El. 469, and its gradual elaboration until placement of 
its true principles by the Privy Council in the case of Sarat 
Chunder Dey v. Go pal Chunder Laha, ( 1891-92) 19 IA 
203, whereas earlier Lord Esher in the case of Seton Laing·· 
' Co. v. Lafone, 1887 19 Q.8.D. 68, evolved three basic elements 
of the doctrine ofEstoppel to wit: 
"Firstly, where a man makes a fraudulent misrepresentation 
and another man acts upon it to its true detriment: Secondly, 
another may be where a man_ makes a false statement 
negligently though without fraud and another person acts upon 
it: And thirdly, there may be circumstances under which, 
where a
misrepresentation is made without fraud and without 
negligence, there may be an Estoppel." 
Lord Shand, however, was pleased to add one further element 
to the effect that there may be statements made, which have 
induced other party to do that from which otherwise he would 
have abstained and which cannot properly be characterized as 
misrepresentation. In this context, reference may be made to 
the decisions of the High Court of Australia in the case of 
Craine v. Colonial Mutual Fire Insurance Co. Ltd., 1920 28 
C.L.R. 305. Dixon, J. in his judgment in Grundt v. The Great 
Boulder Pty. Gold Mines Pty. Ltd., 1938 59 C.L.R. 641, stated 
that,; 
"In measuring the detriment, or demonstrating its existence, 
one does not compare the position of the representee, before
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
and after acting upon the representation, upon the assumption 
that the representation is to be regarded as true, the question 
of estoppel does not arise. It is onlv when the representor 
wished to disavow the assumption contained in his 
representation that an estoppel arises, and the question of 
detriment is considered. accordingly, in the light of the position 
which the representee would be in if the representor were 
allowed to disavow the truth of the representation." 
(In this context see Spencer Bower and Turner: Estoppel by 
Representation, 3rd Ed.). Lord Denning also in the case of 
Central Newbury Car Auctions Ltd. v. Unity Finance Ltd., 1956 
(3)All ER 905, appears to have subscribed to the view of Lord 
Dixon, J. pertaining to the test of'detriment' to the effect as to 
whether it appears unjust or unequitable that the representator 
should now be allowed to resile from his representation, having 
regard to what the representee has done or refrained from · 
doing in reliance on the representation, in short, the party 
asserting the estoppel must have been induced to act to his 
detriment. So )orig as the assumption is adhered to, the party 
who altered the situation upon the faith of it cannot complain. 
His complaint is that when afterwards the other party makes a 
different state of affairs, the basis of an assertion of right against 
him then, if it is allowed, his own original
change of position 
will operate as a detriment, (vide Grundts: High Court of 
Australia (supra)). 
21. Phipson on Evidence (Fourteenth Edn.) has the following 
to state as regards estoppels by conduct. 
"Estoppels by conduct, or, as they are still sometimes called, 
estoppels by matter in pais, were anciently acts of notoriety 
not less solemn and formal than the execution of a deed, 
such as livery of seisin, entry, acceptance of an estate and 
the like, and whether a party had or had not concurred in an 
act of this sort was deemed a matter which there could be 
no difficulty in ascertaining, and then the legal consequences 
followed (Lyon v. Reed, (1844) 13 M & W 285 (at p. 309). 
The doctrine has, however, in modern times, been extended 
so as to embrace practically any act or statement by a party 
which it would be unconscionable to petmit him to deny. The 
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rule has been authoritatively stated as follows: 'Where one 
by his words or conduct willfully causes another to believe 
the existence of a certain state of things and induces him to 
act on that belief so as to alter this own previous position, the 
former is concluded from averring against the latter a dif-!'erent 
state of things as existing at the same time.' (Pickard v. Sears 
(supra)). And whatever a man's real intention may be, he is 
deemed to act willfully 'if he so conducts himself that a 
reasonable man would take the representation to be true and 
believe that it was meant that he should act upon it.' 
(Freeman v. Cooke, 1848 (2) Exch. 654: at p. 663). 
Where the conduct is negligent or consists wholly of omission, 
there must be a duty to the person misled (Mercantile Bank 
v. Central Bank, 1938 AC 287 at p. 304, and National 
Westminster Bank v. Barclays Bank International, 1975 Q.B. 
654 ). This principle sits oddly with the rest of the law of 
estoppel, but it appears to have been reaffirmed, at least by 
implication, by the House of Lords comparatively recently 
(Moorgate Mercantile Co. Ltd. v. Twitchings, (1977) AC 
890). The explanation is no doubt that this aspect of estoppel 
is properly to be considered a part of the law relating to 
negligent representations, rather than estoppel properly so-
called. If two people with the same source of information 
assert the same truth or agree to
assert the same falsehood 
at the same time, neither can be estopped as against the 
other from asserting differently at another time (Square v. 
Square, 1935 P. 120)." 
22. A bare perusal of the same would go to show that the 
issue of an estoppel by conduct can only be said to be available 
in the event of there being a precise and unambiguous 
representation and on that score a further question arises as to 
whether there was any unequivocal assurance prompting the 
assured to alter his position or status. The contextual facts 
however, depict otherwise. Annexure 2 to the application form 
for benefit of price protection contains an undertaking to the 
following effect:-
" We hereby undertake to refund to EEPC Rs ... the amount 
. paid to us in full or part thereof against our application for
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.) 
price protection. In terms of our application dated against 
exports made during ... In case any particular declaration/ 
certificate furnished by us against our above referred to 
claims are found to be incorrect or any excess payment is 
determine to have been made due to oversight/wrong 
calculation etc. at any time. We also undertake to refund the 
amount within 10 days of receipt of the notice asking for the 
refund, failing which the amount erroneously paid or paid in 
excess shall be recovered from or adjusted against any other 
claim for export benefits by EEPC or by the licensing 
authorities of CCI & C." 
and it is on this score it may be noted that in the event of there 
being a specific undertaking to refund for any 
amount erroneously paid or paid in excess (emphasis supplied), 
question of there being any estoppel in our view would not 
arise. In this context correspondence exchanged between the 
parties are rather significant. In particular letter dated 
30.11.1990 from the Assistant Development Commissioner for 
Iron & Steel and the reply thereto dated 8.3.1991 which 
unmistakably record the factum ofnon-payment of JPC price." 
It is apparent from the factual position narrated above, that the 
original action of the State Government was bonafide, and for the welfare 
of the respondent-employees. The State Government cannot be accused 
of having misrepresented to the
respondent-employees in any manner. 
The provisions of 'the 1999 Scheme', clearly bring out, that the pension 
scheme would be self-financing, and would be administered from the 
corpus fund created out of the employer's contribution to their CPF 
account (alongwith the accrued interest thereon). When the above 
foundational basis for introducing the pension scheme, was found to be 
an incorrect determination/calculation, the same was withdrawn. In the 
above view of the matter, it would not be possible to infer, that the State 
Government, induced the respondent-employees, to move to 'the 1999 
Scheme'. Accordingly, it would not be possible to apply the principle of 
estoppel/promissory estoppel, to the facts of the present case. 
59. We are also of the view, that the principle of estoppel/ 
promissory estoppel, is not applicable in a situation, where the original 
position, which the individual enjoyed before altering his position (by 
opting, or deemingly opting- for being governed by 'the 1999 Scheme') 
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A 
can be restored. For the instant proposition, reference may be made to 
the judgment in Pratima Chowdhury v; Kalpana Mukherjee, (2014) 4 
sec 196, wherein it was held as under:-
" We shall, however, endeavour to deal with the· principle of 
estoppel, so as to figure whether, the rule contained in Section 115 
B 
of the Indian Evidence Act could have been invoked, in the facts 
and circumstances of the present case. Section 115 of the Indian 
Evidence Act is being extracted hereinabove:-
" 115. Estoppel.- When one person has, by his declaration, act 
or omission, intentionally caused or permitted another 
c 
person to believe a thing to be true and to act upon such 
belief, neither he nor his representative shall be allowed, 
in any suit or proceeding between himself and such person 
or his representative, to deny the truth of that thing. 
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Illustration 
A intentionally and falsely leads B to believe that certain 
land belongs to A, and thereby induces B to buy and pay for 
it. The land afterwards becomes the property of A, and A 
seeks to set aside the sale on the ground that, at the time of 
the sale, he had no title. He must not be allowed to prove his 
want of title." 
It needs to be understood, that the rule of estoppel is a doctrine 
based on fairness. It postulates, the exclusion of, the truth 
of the matter. All, for the sake of fairness. A perusal of the 
above provision reveals four salient pre conditions
before 
invoking the rule of estoppel. Firstly, one party should make 
a factual representation to the other party. Secondly, the 
other party should accept and rely upon the aforesaid factual 
representation. Thirdly, having relied on the aforesaid factual 
representation, the second party should alter his position. 
Fourthly, the instant altering of position, should be such, that 
it would be iniquitous to require him to revert back to the 
original position. Therefore. the doctrine of estoppel would 
apply only when, based on a representation bv the first party, 
the second party alters his position, in such manner. that it 
would be unfair to restore the initial position.''
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
Since there is no dispute, that the original position (the rights enjoyed 
by the respondent-employees, under the Employees Provident Fund 
Scheme, 1995) available before 'the 1999 Scheme' was given effect to, 
has actually been restored, we are of the considered view, that the 
principle sought to be invoked on behalf of the respondent-employees, 
cannot augur in a favourable determination for them, because it is not 
possible to conclude, that it would be unfair to restore them to their 
original position. In fact, in view of the financial incapacity to continue 
'the 1999 Scheme', the only fair action would be to restore the employees, 
to th.i Employees Provident Funds Scheme, 1995. This has actually 
been done by the State Government.· It is therefore not possible in law, 
to apply the principle of estoppel/promissory estoppel, to the facts of the 
present controversy. 
60. Moving to the next contention. A serious dispute has been 
raised before us, in respect of the financial viability of'the 1999 Scheme'. 
Insofar as the appellant-State is concerned, it was asserted on its behalf, 
that a high level committee, was constituted by the Finance Department 
of th"' State Government, on 21.1.2003. The said committee comprised 
of managing directors, of the concerned public sector undertakings and 
corporations. The task of the high level committee was, to examine the 
financial viability of 'the
1999 Scheme'. The said committee submitted 
a report dated 28.10.2003, returning a finding, that 'the 1999 Scheme' 
was not financially viable, and would not be self-sustaining. It is therefore, 
that a tentative decision was taken by the State Government, to withdraw 
'the 1999 Scheme'. 
61. To determine the modalities for withdrawing 'the 1999 
Scheme', on the basis of the above report, the matter was jointly examined 
by the Finance Department and the Law Department of the State 
Government, wherein, in consonance with the advice tendered by the 
Law Department it was decided, that 'the 1999 Scheme' should not be 
withdrawn retrospectively. Based on the advice of the Law Department, 
it was finally decided, that those who had commenced to draw pensionary 
benefits under 'the 1999 Scheme', would not be deprived of the same. 
And that, 'the 1999 Scheme' should be withdrawn prospectively, for 
those whose right to receive pensionary benefits had not arisell, as they 
had not yet retired from service. In the above view of the matter, it was 
contwded on behalf of the State Government, that the action of the 
State Government, in issuing the repeal notification dated 2. I 2.2004, was 
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certainly not an arbitrary exercise of the power of administrative review. 
It was submitted, that the same was based on two factors. Firstly, the 
financial unviability of the scheme. And secondly, those who had already 
commenced to draw pensionary benefits under 'the 1999 Scheme', were 
not to be affected. It was therefore pointed out, that the classification 
made by the State Government was reasonable and justifiable in law, 
and it also had a nexus to the object sought to be achieved. 
62. It is in the above scenario, that the legality andjusticiability of 
'the 1999 Scheme', will have to be examined. The submission advanced 
at the behest of the respondent-employees was, that it was not permissible 
for the State Government to advance any such plea, because the State 
Governnent must be deemed to have examined the financial viability of 
the scheme, before 'the 1999 Scheme' was given effect to. And that, it 
does not lie in the mouth of the State Government, after giving effect to 
'the 1999 Scheme', to assert that 'the 1999 Scheme' was not financially 
viable. It was insisted, that even if data pertaining to the financial viability 
• 
of the scheme, as was sought to be relied upon was correct, financial 
deficiencies if any, could be catered to by the State Government, from 
the vast financial resources available to it. And further, that 'the 1999 
Scheme' in terms of the determination rendered by
the High Court, even 
if permitted to be repealed, should not impact the rights of the respondent-
employees, towards pensionary benefits. 
63. We have given our thoughtful consideration to the above 
contention. It is not possible for us to accept the instant contention, 
advanced on behalf of the respondent-employees. The calculations 
projected at the behest of the State Government, to demonstrate tht: 
financial unviability of the scheme, have not been disputed. The same 
have been detailed in paragraph I 0 above. The basis thereof, projected 
by the high level committee, admittedly constitutes the rationale for issuing· 
the repeal notification dated 4.12.2004. We are of the view, that the 
consideration at the hands of the State Government was conscious and 
pointed. And was supported by facts and figures. It is apparent, that 
out of 17 corporations/boards who were invited to express their views 
on the issue, only 7 had actually done so. It is not the case of the 
respondent~employees, that any one of those who had expressed their 
views, contested the fact, that the pension scheme was not self-financing. 
Those who expressed their views, affirmed that the pension scheme 
could be salvaged only with Government support. Those who did not
STATE OF H.P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
express their views, obviously had no comments to offer. The position 
projected by the State Government, therefore, cannot be considered to 
have been effectively rebutted. Certain facts and figures, have indeed 
been projected, on behalf of the respondent-employees. These have 
been recorded by us in paragraphs 39 and 40. Financial calculations can 
not be made casually, on a generalized basis. In the absence of any 
authenticity, and that too with reference to all the 20 corporate entities 
specified in Schedule I of 'the 1999 Scheme', the projections made on 
behalf of the respondent-employees, cannot be accepted, as constituting 
a legitimate basis, for a favourable legal determination. Since the 
respondent-employees have not been able to demonstrate, that the 
foundational basis for withdrawing 'the 1999 Scheme', was not premised· 
on any arbitrary consideration, or alternatively, was not founded on any 
irrelevant consideration, it is not possible for us to accept the contention, 
that ~he withdrawal of 'the 1999 Scheme', was not based on due 
consideration, or that, it was irrational or arbitrary or unreasonable. We 
are a!so satisfied, that the action of the State Government, in allowing 
those who had already started earning pensionary benefits under 'the 
1999 Scheme', was based on a legitimate classification, acceptable in 
law. In the above view of the matter, tile action of the State
Government 
cannot be described as arbitrary, and as such, violative of Article 14 of 
the Constitution oflndia. We are also satisfied in concluding, that the 
understanding of the State Government (which had resulted in introducing 
'the 1999 Scheme') on being found to be based on an incorrect calculation, 
with reference to the viability of the corpus fund (to operate 'the 1999 
Scheme'), had to be administratively reviewed. And that, the State 
Government's determination in exercising its power of review, was well 
founded. 
64. It is also not possible for us to accept, that any Court has the 
jurisdiction to fasten a monetary liability on the State Government, as is 
the natural consequence, of the impugned ordef passed by the High 
Court, unless it emerges from the rights and liabilities canvassed in the 
lis itself. Budgetary allocations, are a matter of policy decisions. The 
State Government while promoting 'the 1999 Scheme', felt that the same 
would be self-financing. The State Government, never intended to 
allocate financial resources out of State funds, to run the pension scheme. 
The State Government, in the instant view of the matter, could not have 
been burdened with the liability, which it never contemplated, in the first 
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place. Moreover, it is the case of the respondent-employees themselves, 
that a similar pension scheme, floated for civil servants in the State of 
Himachal Pradesh, has also been withdrawn. The State Government 
has demonstrated its incapacity, to provide the required financial 
resources. We are therefore of the view, that the High Court should not 
(-as it could not) have transferred the financial liability to run 'the 1999 
Scheme', to the State Government. Similar suggestions made by the 
concerned corporate bodies, cannot constitute a basis for fastening the 
residuary liability on the Government. 
65. The action of the State Government, in revoking 'the 1999 
Scheme' vide notification dated 2.12.2004, was also assailed as being 
discrimbatory. And as such, violative of Article 16 of the Constitution of 
India. In this behalf, the submission advanced on behalf of the 
respondent-employees was, that the State Government extended similar 
benefits to Government employees under the Central Civil Services 
(Pension) Rules, 1972. The said pensionary benefits extended to 
Government servants, were also sought to be withdrawn. It was however 
pointed out, that while withdrawing the pensionary benefits from the 
Governr.tent employees, the State Government had taken a decision to 
protect all existing employees, who had entered into Government service, 
till the revocation of the pension scheme. It was
submitted, that the 
High Court had, by the impugned order, similarly protected only the existing 
employees, who were in service, as on the date of issuance of the repeal 
notification, dated 2.12.2004. It was contended, that the State 
Government's action, in not treating the employees of corporate bodies, 
goveme1 by 'the 1999 Scheme', similarly as it had treated employees in 
Government service, was clearly discriminatory. It was submitted, that 
two sets' of employees similarly situated, were treated differently. It 
was pointed out, that whilst protection was extended to one set of 
employees, similar benefits were denied to the other set of employees. 
66. We have given our thoughtful consideration of the plea of 
discrimination, advanced at the behest of the respondent-employees. It 
is not possible for us to accept, that the employees of corporate bodies, 
can demand as of right, to be similarly treated as Government employees. 
Whilst it can be stated that Government employees of the State of 
Himachal Pradesh are civil servants, the same is not true for employees 
of corporate bodies. Corporate bodies are independent entities, and 
their employees cannot claim parity with employees of the State
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
Government. The State Government has a master-servant relationship 
with the civil servants of the State, whilst it has no such direct or indirect 
nexus with the employees of corporate bodies. The State Government 
may legitimately choose to extend different rights in terms of pay-scales 
and retiral benefits to civil servants. It may disagree, to extend the same 
benefits to employees of corporate bodies. The State Government would 
be well within its right, to deny similar benefits to employees of corporate 
bodies, which are financially unviable, or iftheir activities have resulted 
in financial losses. It is common knowledge, that when pay-scales are 
periodically reviewed for civi I servants, they do not automatically become 
applicable to employees of corporate bodies, which are wholly financed 
by the Government. And similarly, not even to employees of Government 
companies. Likewise, there cannot be parity with Government 
employees, in respect of allowances. So also, of retiral benefits. The 
claim for parity with Government employees is therefore wholly 
misconceived. rt is, therefore, not possible for us to accept the contention 
advanced on behalf of the respondent-employees, that the action of the 
State Government was discriminatory. 
67. Another reason for us to conclude, that the action of the State 
Government was not discriminatory is, that despite having revoked 'the 
1999
Scheme' through the notification dated 2.12.2004, the State 
Government had permitted such of the Government owned corporations 
in the State of Himachal Pradesh, which were not suffering any losses, 
to promote their own pension schemes, and to extend pensionary benefits 
to their employees, on an individual basis, in the same/similar fashion as 
had been attempted by the State Government, through 'the 1999 Scheme'. 
In the instant view of the matter also, we are of the opinion, that the 
action of the State Government cannot be assailed, on the ground of 
discrimination. 
68. We shall now consider, whether the State Government which 
had introduced 'the 1999 Scheme', had the right to repeal the same. In 
answering the above issue, it needs to be consciously kept in mind, that 
the employees of corporate bodies, who were extended the benefits of 
'the 1999 Scheme', as already noticed above, were not employees of 
the State Government. 'The 1999 Scheme' was, therefore, just a welfare 
scheme introduced by the State Government, with the object of 
ameliorating the final)cial condition of employees, who had rendered 
valuable service in State owned corporations. In order to logically 
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appreciate the query posed, we may illustratively take into consideration 
a situation, wherein an organization similar to the one in which the 
respondent-employees were engaged, suffered such financial losses, as 
would make the sustenance of the organization itself, unviable. Can the 
employees of such an organization, raise a claim in law, that the corporate 
body be not wound up, despite its financial unworkability? Just because, 
the resultant effect would be, that they would lose their jobs. The answer 
to the above query, has to be in the negative. The sustenance of the 
organization itself, is of paramount importance. The claim of employees, 
who have been engaged by the organization, to run the activities of the 
organization, is of secondary importance. If an organization does not 
remain financially viable, the same cannot be required to remain 
functional, only for the reason that its employees, are not adversely 
impacted. When and how a decision to wind up an organization is to be 
taken, is a policy decision. The decision to wind up a corporation may 
be based on several factors, including the nature of activities rendered 
by it. In a given organization, sometimes small losses may be sufficient 
to order its closure, as its activities may have no vital bearing on the· 
residents of the State. Where, an organization is raised to support 
activities on which a large number of people in the
State are dependent, 
the same may have to be sustained, despite the fact that there are 
substantial losses. The situations are unlimited. Each situation has to be 
regulated administratively, in terms of the policy of the State Government. 
Whether a corporate body can no longer be sustained, because its 
activities are no longer workable, practicable, useable, or effective, either 
for the State itself, or for the welfare of the residents of the State, is for 
the State Government to decide. Similarly, when and how much, is to be · 
paid as wages (or allowances)to employees ofan organization, is also a 
policy decision. So also, post-retiral benefits. All these issues fall in the 
realm of executive determination. No Court has any role therein. For 
the reasons recorded hereinabove, in our considered view, the conditions 
of service including wages, allowances and post-retiral_ benefits of 
employees of corporate bodies, will necessarily have to be determined 
administratively, on the basis ofrelevant factors. Financial viability, is 
an important factor, in such consideration. In the facts and circumstances 
of the present case, it is not possible for us to accept, the contention 
advanced on behalf of the respondent-employees, that the State 
Government should provide financial support for sustaining 'the 1999 
Scheme', at least for such of the employees, who were engaged on or
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
before the date of issuance of the repeal notification (-4.12.2004). We 
would like to conclude the instant submission by recording, that the 
respondent-employees have not been able to make out a case, that the 
notification dated 2.12.2004, repealing 'the 1999 Scheme', was in any 
manner, capricious, arbitrary, illegal or uninformed, and as such, we would 
further conclude, that the respondent-employees cannot be considered 
as being entitled, to any relief, through judicial process. 
69. Having recorded our aforesaid conclusion, it is not necessary 
for us to examine the submissions advanced at the hands of the 
respondent-employees, that the action of the State Government, in issuing 
the repeal notification dated 2.12.2004, would violate Article 21 of the 
Constitution oflndia. All the same, since the contention was raised, we 
consider it just and appropriate, to examine and deal with the same. The 
contention advanced on behalf of the respondent-employees was, that 
the fundamental rights enshrined in the Constitution, do not extend to 
merely, providing for survival or animal existence. Article 21, it was 
pointed out, has been interpreted by this Court, as extending the right to 
life and liberty- as the right to live, with human dignity. It was submitted, 
that 'the 1999 Scheme', which allowed better post-retiral benefits to the 
respondent-employees, was an extension of such a benefit.
'The 1999 
Scheme', it was submitted, would have resulted in ameliorating the 
conditions of the respondent-employees, after their retirement. The 
submission advanced on behalf of the respondent-employees is seemingly 
attractive, but is not acceptable as a proposition oflaw. A welfare scheme, 
may or may not aim at providing, the very basic rights to sustain human 
dignity. In situations where a scheme targets to alleviate basic human 
rights, the same may possibly constitute an irreversible position, as 
withdrawal of the same, would violate Article 21 of the Constitution. 
Not so, otherwise. Herein, the Employees' Provident Funds Scheme, 
1995, sponsored under the Provident Fund Act, is in place. The same 
was sought to be replaced, by 'the 1999 Scheme'. 'The 1999 Scheme' 
was an effort at the behest of the State Government, to provide still 
better retiral benefits. 'The 1999 Scheme' was not a measure, aimed at 
providing basic human rights. Therefore, 'the 1999 Scheme' can not be 
treated as irreversible. The same would not violate Article 21 of the 
Constitution, on its being withdrawn. It is not in dispute, that after the 
repeal notification dated 2.12.2004, the erstwhile Employees' Provident 
Funds Scheme, 1995, has been restored to such of the employees, who 
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were impacted by the said repeal notification. We are of the view, that 
the repealing of 'the 1999 Scheme', in the facts and circumstances of 
this case, cannot be deemed to have in any manner, violated the right of 
the respondent-employees, under Article 21 of the Constitution oflndia. 
70. It is also not possible to accept, the contention advanced on 
behalf of the respondent-employees, based on Article 300A of the 
Constitution oflndia. We have deliberated hereinabove, the nature of 
the right created by 'the 1999 Scheme'. We have examined all the legal 
submissions advanced on behalf of the respondent-employees. We have 
arrived at the conclusion, that action of the State Government, was well 
within its authority. We have also held the same to be based on due 
consideration. We have therefore, rejected the assertion made on behalf 
of the respondent-employees, that the impugned notification dated 
2.12.2004, was unconstitutional, irrational, arbitrary or unreasonable. It 
is accordingly not possible for us to accept, the challenge raised by the 
respondent-employees, that they had been deprived of their right to 
pensionary benefits, without the authority in law. We are therefore of 
the view, that the claim raised on behalf of the respondent-employees, 
by placing reliance on Article 300A of the Constitution of India, is 
misconceived. 
71. Our determination, with reference to all the issues
canvassed 
above, would also answer the question left open in paragraph 52 above. 
Namely, whether or not the contingent right, as was vested in the 
respondent-employees, was binding or irrevocable. We may now sum 
up the position determined by us, in the foregoing paragraphs. It is no 
doubt true that we have concluded, that 'the 1999 Scheme', created a 
contingent right in the respondent-employees. The respondent-employees 
comprise of all those employees of corporate bodies, who had opted for 
'the 1999 Scheme', immediately on its having been introduced; all those, 
who were deemed to have opted for 'the 1999 Scheme' by not having 
exercised any option; and all those who were appointed after the 
introduction of'the 1999 Scheme'. The first issue that arises is, whether 
any express right or obligation existed, between the respondent-employees 
and the State Government. One can understand, such a claim arising 
out of an obligation between an employer and his employees, where 
there is a quid pro quo-a trade off based on a relationship (as between, 
an employer and employee). We have however concluded, that there . 
was no such relationship between the State Government, and the
STATE OF H. P. v. RAJESH CHANDER SOOD ETC. ETC. 
[JAGDISH SINGH KHEHAR, J.] 
respondent-employees. All the corporate bodies in which the respondent-
employees were/are engaged, are independent juristic entities. It is 
therefore apparent, that the claim raised by the respondent-employees, 
is not based on any right or obligation between the parties. We have 
also examined the submissions advanced by learned counsel premised 
on various constitutional provisions (-Articles 14, 16, 21 and 300A of the 
Constitution oflndia ), but have found, that no right can be stated to have 
been violated, thereunder. We have also examined the other legal 
submissions, advanced on behalf of the respondent-employees, and have 
found the same, as unjustified. The issue whether administrative review 
was permissible, after 'the 1999 Scheme' had become operational, has 
been answered in the affirmative. And finally, we have concluded, that 
the exercise of such power, while issuing the repeal notification, was 
based on due consideration. We therefore hereby uphold, the legality 
and constitutionality of the notification dated 2.12.2004. 
72. For the reasons recorded hereinabove, the present appeals 
stand allowed. The impugned order dated 19.12.2013 passed by the 
High Court is accordingly, set aside. 
Note: The emphases supplied in all the quotations in the instant 
judgment, are ours. 
Nidhi Jain 
Appeals allowed. 
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