Case: State Of Tamil Nadu  Vs. V.S. Balakrishnan

The Tamil Nadu Government decided in March 1972 to form a government company with a view to take over the entire business activity of the Dairy Development Department of the State Government. As a consequence the Tamil Nadu Dairy Development Corporation Limited (the Corporation) was incorporated onThe objects of the Corporation were to carry on the business of production. collection and distribution of milk throughout the State of Tamil Nadu. The Tamil Nadu Government by the order dateddirected the transfer of 431 posts in various cadres of the Dairy Development Department to the Corporation with effect from296 posts were transferred along with the incumbents of the said posts and the remaining transferred posts were vacant. Subsequently, by another order 331 posts217 with incumbentswere further transferred to the Corporation with effect fromThe incumbents of the posts were to be treated on deputation/foreign service to the Corporation2. While the question of absorbing about 500 employees on deputation/foreign service serving the Corporation was under consideration, the Tamil Nadu Government came to be seized of another similar situation pertaining to the deputationists with theIndustries Development Corporation Limited (the Industries Corporation). The Government issued Government Order (GO) No. 73l datedwherein the terminal benefits to be given to the employees who opted to join the service of the Industries Corporation were provided. The benefits included the payment of pension/gratuity earned by the employees for the period they remained in government service. They were also allowed to have the full pension commuted or to draw the same simultaneously along with the salary they were to get from the Industries Corporation3. The Tamil Nadu Government by GO No. 378 dateddecided to extend the benefits of GO No. 731meant for Industries Corporation employeesto all government servants who were permanently absorbed in any of the public sector undertakings4. The government servants working in the Corporation were askedpresumably with reference to GO No. 378to exercise their options either for permanent adsorption in the Corporation or for reversion back to the State Government. It is, however, the case of the Government that in the mean while a decision was taken to keep GO No. 378 in abeyance. It is further stated by the Government that since the Corporation was likely to be replaced by a cooperative federation, the action in respect of the options obtained from the employees of the Corporation was dropped5. It would be useful to mention here that GO No. 731 and GO No. 378 were amended by GO No. 284 datedand the employees to whom the aforesaid GOs were applicable were disallowed simultaneous withdrawal of pension and it was provided that they would be entitled to pension for the period they served the Government only after their retirement from the government undertakings. The benefit of commutation of pension, if not availed earlier, was to be available only on retirement from the public sector undertaking6. The employees of the Industries Corporation filed Writ Petition Nos. 1917 and 1928 of 1980 (S. Ananda v. State of T. N. decided onbefore the Madras High Court wherein it was stated that the petitioners therein were given certain terminal benefits by GO No. 731 and they became entitled to the said benefits on their permanent absorption in the Industries Corporation. It was further contended that the withdrawal of those benefits by GO No. 284, after their options had been accepted was wholly arbitrary and in violation of the doctrine of promissory estoppel. The High Court came to the conclusion that accepting the terminal benefits offered in GO No. 731, the employees had exercised their options which were accepted and the terminal benefits were granted to them by the Government. The High Court further came to the conclusion that the options of the employees were linked with GO No. 731 and as such could not be unilaterally withdrawn. The High Court, therefore, allowed the writ petitions and directed that the petitioners therein were entitled to the benefits which were offered to them under GO No. 7317. Coming back to the employees of the Corporation with whom we are concerned, the Government issued another order datedby which the Corporation was replaced by the Tamil Nadu Cooperative Milk Producers Federation (the Federation) with effect fromAll the employees of the Corporation including those who were on deputation/foreign service were transferred to the Federation8. The Tamil Nadu Government finally issued GO No. 1921 datedproviding for the terminal benefits to be given to the government employees who were working with the Corporation and thereafter with the Federation on deputation/foreign service. It was stated in the government order that the employees, opting for permanent absorption in the Federation, would be given the following terminal benefits1. Transfer of General Provident Fund accumulation to the Provident Fund account under the Federation2. Immediate cash payment of gratuity3. The pension in respect of the period spent in government service to be calculated the time of transfer but payable by the State Government only on retirement of the employee from the Federation. The employee on retirement from the Federation would be entitled to commute up to 1/3rd value of pension like government employees who retire from government service4. (A) In the case of industrial workers who do not opt for service in the Federation would be reverted to their parent department if there is no post to accommodate them in the parent department, they would be paid retrenchment compensation according to the labour laws4. (B) In the case ofworkers who do not opt to serve the Federation, they would be reverted to their parent department. If there is no post in their parent department to accommodate them they would be givenas provided for in the Tamil Nadu Pension Rules5. Family Pension.Since the optee for permanent absorption in the Federation would cease to be a government servant, the Governments liability for family pension would cease6. Earned Leave.The employee would be paid by Government cash equivalent of 50 per cent of the quantum of earned leave at his credit as on the date of absorption. The balance of credit will be transferred to the accounts of the individual under the Federation with full leave liability thereof being paid to the undertaking by Government to meet the leave salary payable to the employees absorbed in the undertaking7. Other kinds of leave on absorption of the employee in the Federation the Governments liability towards leave on medical certificate and leave on private affairs will cease8. Any further liberalisation of pension rules decided by Government for government employees after the permanent absorption of a government servant in the Federation would not be extended to them9. In cases where an employee at the time of absorption has less than ten years service in Government and is not eligible to pension, he will be eligible only to proportionate service gratuity in lieu of pension andgratuity based on the length of serviceThe GO No. 1921 further provided that the crucial date for calculating the terminal benefits in respect of the employees opting to join the Federation would be from the date of formation of the Federationor from the date of continuous service of the deputationist in the Federation whichever is later9. TheGO No. 1921 was challenged before the Tamil Nadu High Court by way of three writ petitions by the employees working on deputation/foreign service with the Federation. These writ petitions were later on transferred to the Tamil Nadu Administrative Tribunal (the Tribunal). Some original applications were also filed before the Tribunal challenging the same government order. All the matters were heard together by the Tribunal. The Tribunal by its lengthy judgment datedallowed the applications and held as under" (1) The orders issued in GOMs No. 1921, Agriculture datedrequires to be reconsidered in the light of the observation in this order and accordingly we quash that order(2) Persons who have retired on reaching the age of superannuation or otherwise before specific orders are issued for their absorption in the Tamil Nadu Cooperative Milk Producers Federation after considering the option of the individuals in each case, will be retiring as government servants and will be entitled to all the benefits on that basisThis will apply not only to the applicants before us but also to all persons retiring before they are absorbed in the Federation on the basis of their option, by specific orders in each caseSince the delay in cases of persons who have retired already had arisen due to pendency of these proceedings for a decision regarding their status, no interest will be payable except under the government orders regarding gratuity." *

Court's reasoning:
11. We agree with Mr. Chidambram that a government servant cannot be deprived of his status as a "civil servant" without his consent. This proposition of law is unexceptionable. But at the same time the facts and circumstances of this case leave no manner of doubt that the only course left for theis to accept the service under the Federation as permanent employees. The Corporation was created in the year 1972 and 762 posts were transferred to the Corporation by the State Government. Obviously, all these posts constituted the Dairy Development Department of the Government. There may not be as many posts left in the Dairy Development Department to accommodate those employees who decline to opt for permanent absorption in the service of the Federation. Therefore, the only practical way to solve the problem at this point of time and in the special facts and circumstances of this case, would be to hold that all the employees shall be deemed to have opted to join the service of the Federation. Weare, however, inclined to examine the question as to whether the terminal benefits offered in GO No. 1921 are reasonable or are arbitrary in anyWe have given our thoughtful consideration to the contention raised by Mr. Chidambram that the employees are entitled to the terminal benefits as provided in GO No. 378. We are not inclined to agree with him. It is no doubt correct that some sort of options were given to the employees in the year 1975 but the same were not acted upon for the reason that the operation of GO No. 378 was put in abeyance and later on it was substituted by GO No. 284. Apart from that a decision was taken to wind up the Corporation and in its place constitute a Cooperative Federation. In this view of the matter, we find no fault with the stand of the State Government that the action in respect of the options was dropped. We, therefore, see no force in the contention that the respondents are entitled to the terminal benefits as provided in GO No.are of the view that once an optee for permanent absorption in the Federation is entitled to pro rata pension in respect of the period of service rendered by him under the Government, he is also entitled to the benefit of the family pension. We, therefore, strike down para 3(c) of the GO and direct that the respondents shall be entitled to the benefit of family pension on the basis of pro rata pension given to them. Similarly, we see no justification why the employees, after their permanent absorption in the service of the Federation, be not given the benefit of further liberalisation of pension rules, if any, in respect of the pension which they are already drawing from the Government. This provision is also on the face of it arbitrary. We, therefore, strike down para 3(f) of the said GO and hold that the employees after their permanent absorption with the Federation shall be entitled to the benefit of the liberalised pension rules, if any, in future. All other provisions of GO No. 1921 are reasonable and as such we uphold the same15. We make it clear that all those employees who have retired afterthey shall be deemed to have opted to join the service of the Federation permanently and, as such. they would be entitled to the terminal benefits in terms of GO No. 1921