Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987 Equivalent citations: 1987 AIR 1370, 1987 SCR (3) 19, AIR 1987 SUPREME COURT 1370, 1987 LAB. I. C. 987, 1987 (1) SERVLJ 147, 1987 3 JT 328, (1987) 1 RENCJ 147, (1987) 2 JT 328 (SC), 1987 UJ(SC) 2 252, 1987 SCC (L&S) 239, (1987) 2 LAB LN 274, (1987) 2 SCJ 644, 1987 (3) SCC 413, (1987) 1 CURLR 424, (1987) 54 FACLR 665, (1987) 2 BOM CR 705, 1987 89 BOM LR 254 Author: O. Chinnappa Reddy Bench: O. Chinnappa Reddy, V. Khalid PETITIONER: SECURITY GUARDS BOARD FOR GREATERBOMBAY & THANA DISTT. ETC. Vs. RESPONDENT: SECURITY & PERSONNEL SERVICE PVT. LTD.& ORS. ETC. DATE OF JUDGMENT28/04/1987 BENCH: REDDY, O. CHINNAPPA (J) BENCH: REDDY, O. CHINNAPPA (J) KHALID, V. (J) CITATION: 1987 AIR 1370 1987 SCR (3) 19 1987 SCC (3) 413 JT 1987 (2) 328 1987 SCALE (1)1198 ACT: Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981: s. 23 read with ss. 22 and 1(4)--Exemption from Act--Denial of to security agencies or agents--Validity of-Government whether required to state reasons. Administrative Law: Exemption from provisions of a statute--Refusal of--Government whether to state reasons. HEADNOTE: Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  1 Section 1(4) of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981 makes the provisions of the Act applicable to security guards who were not direct and regular employees of the factory or the establishment. A 'security guard' is defined in s. 2(10) as a person who is engaged or is to be engaged through any agency or an agent to do security work. Section 3 empowers the State Government to make schemes to provide for the registration of employers and security guards and the terms and conditions of employment of registered security guards and their general welfare. Section 22 provides for preserva- tion or' existing rights and privileges of security guards if they are more favourable to them than those under the Act. Section 23 empowers the State Government to exempt security guards from the operation of the provisions of the Act or any scheme made thereunder. The Security Guards Board was constituted under s. 6 of the Act and the Private Security Guards (Regulation or' Employment and Welfare) Scheme, 1981 was also made to give effect to the Act. The respondents' applications for exemption from the provisions of the Act having been rejected by the State Government they filed writ petitions before the High Court which were dismissed by a Single Judge. 20 On appeal, the Division Bench took the view that the applications had been rejected as a result of the policy decision not to grant exemption to any security agency and that this was wrong, that each application for exemption had to be considered on its own merits and so disposed of, and consequently directed the Government to consider the appli- cations afresh. In these appeals, it was contended for the appellant Security Guards Board that s. 23 of the Act did not contem- plate the grant of exemption in favour of a security agency, on which ground alone the applications were liable to be rejected, and that the applications were rejected after consideration on merits and not on the basis of any policy decision. For the respondents it was argued that if s. 23 was read in the light of s. 22 it would follow that an agency could ask for exemption from the operation of the Act, that wherever the conditions of service were better than those proposed under the scheme the Government was under a duty to grant exemption, and that the Act did not contemplate the abolition of the agency system as such or termination of the contract of employment between the agency and the security guards, or for the transfer of the services of the security guards from the employment of the agency to that of the factory or establishment. Allowing the appeals, the Court, HELD: 1. The orders of the State Government refusing to grant exemption to the respondents from the operation or' the provisions of the Maharashtra Private Security Guards Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  2 (Regulation of Employment and Welfare) Act, 1981 do not call for any interference. [32GH] 2. Section 23 of the Act read with s. 1(4) and the definition of 'security guard' in s. 2(10) makes it apparent that the exemption is in regard to security guards employed in any factory or establishment or in any class or classes of factories or establishments and not in respect of an agency or an agent. All security guards employed in a facto- ry may be exempted or security guards of a particular grade or doing a particular type of work in the factory may be exempted. Again, all security guards employed in a class of factories, say textile mills, may be exempted. All security guards in textile mills doing a particular type of work or drawing a particular scale of pay may be exempted. The correlationship of the security guards or classes of securi- ty guards who may be exempted from the operation of the Act is to the factory or establishment or class or classes of factories or establishments in which they work and not to the agency or agent through and by whom they are employed. [30A-D] 21 3. The question is not one of locus standi at all but which or what class of security guards are to be exempted from the operation of the Act and the scheme. The security guards or classes of security guards employed in a factory or establishment or in a class or classes of factories or establishments may apply to the Government to exempt them from the operation of the Act. Similarly a factory or an establishment or a class or classes of factories or estab- lishments may apply to the Government to exempt security guards employed in their factories or establishments from the operation of the Act. Where security guards have been engaged or are to be engaged through an agency or agent in any factory or establishment or a class of factories or establishments, such an agency Or agent may also apply to the Government, not t9 exempt all security guards engaged or to be engaged through them but to exempt security guards engaged or to be engaged in a factory or establishment or a class of factories or establishments. The exemption to be granted by the Government is not to be of any agency or agent but only of security guards employed in a factory or establishment or a class or classes of factories or estab- lishments. [30H-31 A; 30E; G; 31 AB] 4. Even if s. 23 is read in the light of s. 22 it does not follow that any agency can ask for exemption from the operation of the Act of all security guards employed through them. All that s. 22 provides in effect is that the rights or privileges of any registered security guard shall not be altered to his detriment, which only means that if hitherto as an employee of the agency the terms and conditions of his service were more attractive on the whole than the terms and conditions of service offered by the Act and the scheme under the factory or establishment, the original terms and Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  3 conditions of service will be preserved and become applica- ble to their service under the factory or establishment. [31B-D] 5. The Act and the scheme provide for termination of the contract of employment between the agency and the security guards, and by necessary implication the services of the security guards will stand transferred to the service of the factory or establishment on allotment to it by the Board. It is in that fashion, among other things, that security of service is secured to the security guards. [31-DE] 6. In cases of this nature where exemptions are sought from the operation of the Act, it is not necessary for the Government to state its reasons. Of course if there is a charge of mala fides or arbitrariness. the Court may look into the matter to discover if there were any mala fides or if the refusal of the Government was arbitrary. In the instant case. there was none. [32GH] 22 7. The merits of each case were fully considered by the Government and the applications were rejected because it was their policy not to grant exemption if it was not in the interest of the security guards. There was no predeter- mined policy decision as such. [32F] 8. Every individual registered security guard who was previously working in a factory or establishment will be allotted to the same factory or establishment and if the total package of the terms and conditions of his service were better than the terms and conditions of service offered by the Board such person would be employed on the previous terms and conditions of service. [33CD] 9. Charging of 'capitation fee' by a union before spon- soring a security guard tot registration under the scheme is not permissible under the Act or the scheme. [33E] JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1926-50 of 1986 etc. From the Judgment and Order dated 20.2. 1986 of the Bombay High Court in O.S. Appeal Nos. 616, 673,674 to 692,694 and 725 of 1985. Soli J. Sorabji, K.K. Singhvi, A.K. Gupta, B. Bhushan, N.P. Mohindra, J.P. Cama, Mukul Mudgal, A.M. Khanwilkar, K.V. Murrup Menon, Mrs. V.D. Khanna, M.G. Ramachandran, Pratap H. Toprani, Sanjeev Anand and A.S. Bhasme for the appearing parties. The Judgment of the Court was delivered by CHINNAPPA REDDY, J. It appears that there were serious complaints about the service conditions of about 70,000 persons working as Security Guards in various factories and establishments in Greater Bombay and Thane Industrial Com- plex, the majority of whom were employed through about 250 Security Agencies operating in those areas. Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  4 The complaints related not merely to insufficient remuneration paid to them by the agencies, but also to insecurity of service and other forms of exploitation. There was a sample survey conducted by the Government of Maharashtra to ascertain the extent of exploita- tion and to secure information regarding the service condi- tions of the Security Guards. The sample survey revealed that most of the agencies were not registered under the Shops and Establishments Act. There was only one registered union but that union accounted for membership of 2200 only. It was found that most of the Security Guards did not enjoy the benefit of any Provident Fund Scheme or any scheme of Gratuity. Most of them were not covered by the Employees' State Insurance Scheme and had no medical facilities. Leave facilities were inadequate. Rest intervals were not properly provided. Wages were low and only a few agencies paid over- time and bonus. Most of them did not also have either drink- ing water facility, canteen facility or transport facility. A very meager percentage of Guards were provided with living quarters. It was recommended that it was absolutely neces- sary to prevent exploitation of the unprotected Security Guards and to provide them with better service conditions. Pursuant to the report of the committee which made the sample survey, the Government issued the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Ordinance. The Ordinance was replaced by the Maharashtra Private Security Guards (Regulation of Employment and Wel- fare) Act, 1981. The vires of the Act were challenged in various writ petitions filed in the High Court of Bombay by Security Agencies. They were dismissed by the High Court and a petition for special leave to appeal under Art. 136 of the Constitution was dismissed by the Supreme Court on January 5, 1983. While dismissing the special leave petition, the Supreme Court gave the following directions: "It appears that some of the petitioners have applied to the State Government to accord exemption to them from the operation of the provisions of the Private Security Guards (Regulation of Employment and Welfare). Scheme, 1981 and those applications are under the consideration of the State Government. We, therefore, direct that the above scheme shall not be enforced as against the petitioners herein till the end of January 1983. The State Government should dispose all applications made by the petitioners before January 31, 1983." This order was subsequently modified in the following manner: "The order dated January 5, 1983 is modified by deleting the entire portion of the order following upon the words "these special leave petitions are dismissed." The scheme will be brought into force forthwith." In the judgment of the learned Single Judge who dis- missed the writ petitions initially, the learned Judge had held that it was competent for security agencies to seek exemption from the operation of the provisions of the Act. As many as 139 security agencies applied to the Government under sec. 23 of the Act for grant of exemption from the provisions of the Act. These applications were first screened by the Advisory Committee who recommended that exemption might be granted to 21 agencies. The cases of four other agencies which were not recommended by the Advisory Committee were again investigated by the Labour Commissioner who recommended that these four agencies Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  5 also might be granted exemption from the provisions of the Act. On June 28, 1984, the Government of Maharashtra finally rejected all the applications for exemption filed by the various security agencies. Several security agencies thereupon filed writ petitions in the High Court of Bombay. The twenty five writ petitions filed by the twenty one agencies whose cases were recommended by the Advisory Committee and the four agencies whose cases were recommended by the Labour Commissioner were admitted by the High Court and the rest were dismissed in limine. The twenty five writ petitions which were admitted were also finally dismissed on July 11, 1985 by a learned Single Judge. On appeals preferred by the twenty five secu- rity agencies, a Division Bench of the Bombay High Court directed the State Government to consider afresh the appli- cations for exemption. An objection raised on behalf of the Security Guards Board and the Government of Maharashtra that security agencies could not seek exemption under sec. 23 of the Act was overruled. The Bombay High Court took the view that the applications had been rejected as a result of the policy decision not to grant exemption to any security agency and that this was wrong. The High Court held that each application for exemption had to be considered on its own merits and so disposed of. Hence the direction to the Government to consider the applications afresh. The Security Guards Board constituted under sec. 6 of the Act has preferred these twenty five appeals against the judgment of the Bombay High Court. Shri K.K. Singhvi, learned counsel for the appellant, the Security Guards Board for Greater Bombay and Thana District, argued that sec. 23 of the Act did not contemplate the grant of exemption in favour of a security agency and therefore, the applications for exemption were liable to be rejected on that ground alone. He further submitted that the High Court was wrong in holding that the applications had been rejected on the basis of any policy decision. They were rejected after consideration of all the applications on merits. If there was a policy decision such a decision was arrived at on a consideration of all the applications for exemption and it was that none of the applications deserved to be allowed. Shri Soli Sorabji and other learned counsel, who followed him, argued that the Act did not contemplate the abolition of the agency system as such and it was only meant to regulate and provide better conditions of service for Security Guards. Wherever the conditions of service were better than those proposed under the Scheme, the Government was under a duty to grant the necessary exemption so that the employees may have the benefit of the advantageous conditions of service. According to them, this result flowed from a perusal of the Act, in particular sees. 22 and 23. It was also urged that the High Court was right in its conclu- sion that the applications for exemption had not been re- jected on merits but because of a policy decision. We may now proceed to consider the rival submissions with reference to the provisions of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981. The preamble to the Ordinance which preceded the Act recited, ". ....and whereas the Governor of Maharashtra is satisfied that circumstances exist which render it necessary for him to take immediate action to make a law for regulat- ing the employment of private Security Guards employed in factories and establishments in the State of Maharashtra and for making better provision for their terms and conditions of employment and welfare, through the establishment of a Board therefore, and for matters connected therewith ....... ". The long title of the Act is, "An Act for regulating the employment of private Security Guards employed in factories and establishments in the State of Maharashtra and for making better provisions for their terms and conditions of employment and welfare, through the establishment of a Board therefore, and for matters connected Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  6 therewith." Sec. 1(4) makes the Act applicable, "to persons who work as Security Guards in any factory or establishment, but who are not direct and regular employees of the factory or the establishment as the case may be." Secs. 2(1), (3), (4), (5), (8) and (10) defines the expres- sions "agency", "employer", "establishment", "facto- ry", "principal employer" and "Security Guard" as follows:- " "agency", or "agent", in relation to a Security Guard, means an individual or body of individuals or a body Corporate, who undertakes to execute any security work or watch and ward work for any factory or establishment by engaging such Security Guard on hire or otherwise, or who supplies such Security Guards either in groups or as an individual, and includes a sub-agency or a sub-agent; "employer", in relation to a Security Guard engaged by or through an agency or agent, means the principal employer, and in relation to any other Security Guard, the person who has ultimate control over the affairs of the factory or establishment and includes any other person to whom the affairs of such factory or establishment are entrusted, wheth- er such person is called an Agent, Manager or by any other name prevailing in the factory or establishment; "establishment" means an establishment as defined in clause (8) of section 2 of the Bombay Shops and Establishments Act, 1948; "factory" means a factory as defined in clause (m) of section 2 of the Factories Act, 1948; "principal employer" means an employer who has engaged Security Guards through an agency or agent; "Security Guard" or "private Security Guard" means a person who is engaged or is to be engaged through any agency or an agent, wheth- er for wages or not, to do security work or watch and ward work in any factory or estab- lishment and, includes any person, not em- ployed by any employer or agency or agent, but working with the permission of, or under an agreement with, the employer or agency or agent, but does not include the members of any employer's family or any person who is a direct and regular employee of the principal employer;" Section 3 empowers the State Government for the purposes of ensuring an adequate supply and full and proper utilisation of Security Guards in factories and establishments and generally for making better provisions in the terms and conditions of employment of such workers, to make one or more schemes to provide for the registration of emp- Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  7 loyers and Security Guards in any factory or establishment and to provide for the terms and conditions of employment of registered Security Guards and to make provisions for the general welfare of such Security Guards. The matters in regard to which provisions may be made in the scheme are also set out in sec. 3(2) (a) to (n). We may mention that clause (d) of sec. 3(2) in particular relates to terms and conditions of employment, including the rates of wages, hours of work, maternity benefit, over-time payment, leave with wages, provision for gratuity and conditions as to weekly and other holidays and pay in respect thereof. We should also mention here that sec. 3(2)(g) provides that the scheme may prohibit, restrict or otherwise control the employment of Security Guards to whom the scheme does not apply and the employment of Security Guards by employers to whom the scheme does not apply. Sec. 3(3) provides that the scheme may further provide for punishment for a contraven- tion of any provision of the scheme with imprisonment or with fine. Sec. 4 prescribes the procedure for making, varying or revoking a scheme. Sec. 6 provides for the con- stitution of a Board for the Security Guards in any area. Sec. 8 prescribes the powers and duties of the Board. Sec. 15 provides for the constitution of an Advisory Committee. Secs. 19, 20 and 21 provide for the application of Workmen's Compensation Act, Payment of Wages Act and Maternity Benefit Act to Security Guards. Secs. 22 and 23 are important. Sec. 22 provides for the preservation of existing rights and privileges if they are more favourable and sec. 23 provides for exemption from the provisions of the Act. These provi- sions are important for our present purposes. They are as follows:- "22. Nothing contained in this Act shall affect any rights or privileges, which any registered Security Guard employed in any factory or establishment is entitled to, on the date on which this Act comes into force, under any other law, contract, custom or usage applicable to such Security Guard, if such rights or privileges are more favourable to him than those to which he would be entitled under this Act and the Scheme: Provided that, such Security Guard shall not be entitled to receive any corre- sponding benefit under the provisions of this Act and the Scheme. 23. The State Government may, after consulting the Advisory Committee, by notification in the Official Gazette, and subject to such condi- tions and for such period as may be specified in the notification, exempt from the operation of all or any of the,provisions of this Act or any Scheme made thereunder, all or any class or classes of Security Guards employed in any factory or establishment or in any class or classes of factories or establishments, if in the opinion of the State Government, all such Security Guards or such class or classes of Security Guards are in the enjoyment of benefits, which are on the whole not less favourable to such Security Guards than the benefits provided by or under this Act or any Scheme made thereun- der: Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  8 Provided that, before any such notification is issued, the State Government shall publish a notice of its intention to issue such notification, and invite objections and suggestions in respect thereto and no such notification shall be issued until the objec- tions and suggestions have been considered and a period of one month has elapsed from the date of first publication of the notice in the Official Gazette: Provided further that, the State Government may, by notification in the Offi- cial Gazette, at any time, for reasons to be specified, rescind the aforesaid notification." Pursuant to the powers conferred by s. 4 of the Act, the Government of Maharashtra after consulting the Advisory Committee made the Private Security Guards (Regulation of Employment and Welfare) Scheme, 1981. Paragraph 11 of the Scheme requires the Board to maintain (1) a register of employers, and (2) a Pool Register which shall be a register of Security Guards. Paragraph 12 empowers the Board to arrange for the classification of Security Guards in suit- able categories as may be determined by it from time to time. Paragraph 14 requires 'every employer who has engaged private Security Guards on the appointed day or at any time thereafter to 'get himself registered with the Board' by applying in the prescribed form. The employer of an estab- lishment coming into existence after the commencement of the Scheme is required to apply for registration simultaneously with the commencement of its business. Paragraph 15 requires 'any Security Guard who was working on the appointed day or at any time thereafter in the employment in the area to which the Scheme applies' to 'apply to the Board' in the prescribed form. Paragraph 25 provides that every registered Security Guard shall be deemed to have accepted the obligation of the Scheme. A registered Security Guard in the pool who is available for work is required not to engage himself for employment under any registered employer unless he is allotted to that employer by the Secretary of the Board. A registered Security Guard in the pool who is avail- able for work is further required to carry out directions of the Board and to accept employment under any registered employer for which he is considered suitable by the Board. Paragraph 26 provides that every registered employer shall accept the obligations of the Scheme. A registered employer is required not to employ a Security Guard other than a Security Guard who has been allotted to him by the Secre- tary. A registered employer is however at liberty to employ Security Guard directly, A registered employer is required to disburse to the Security Guard the wages and other allow- ances directly, if so directed by the Board and send to the Board a statement of such payment within the prescribed time. Paragraph 27 prohibits the employment by a registered employer of a Security Guard unless the Security Guard is a registered Security Guard or a directly employed Security Guard. Paragraph 29 makes detailed provision for wages, allowances and other conditions of service of Security Guards. Paragraph 30 provides for the disbursement of wages and other allowances to the Security Guards. Paragraph 31 provides for disciplinary procedure. Paragraph 32 prohibits the termination of employment of registered Security Guard except in accordance with the provisions of the Scheme. Paragraph 33 and paragraph 34 provide for appeals and termi- nation. Paragraph 35 provides. for revision. Paragraph 37 provides for the cost of operating the Scheme and makes provision for amenities and benefits to the registered Security Guards. It is obvious from s. 1(4) and the very definition of 'Security, Guard' that the Act and, therefore, the Scheme are not applicable to persons who are direct and regular employees of a factory or Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  9 establishment but are applicable only to persons working in any factory or establishment who are engaged or are to be engaged through an agency or agent and to persons who though not employed by the employer or agency or agent are working with their permission or under an agreement with them. Section 23, we have seen, provides for exemption from the operation of all or any of the provi- sions of the Act or any scheme made thereunder of "all or any class or classes of Security Guards employed in any factory or establishment or in any class or classes of factories or establishments." The basic condition to be satisfied is that the State Government should be of the opinion that "all such Security Guards or such class or classes of Security Guards are in the enjoyment of benefits, which are on the whole not less favourable to such Security Guards than the benefits provid- ed by or under this Act or any Scheme made thereunder. "A close scrutiny of s. 23, particularly in the light of s. 1(4) read with the definition of 'Security Guard', makes it clear that the exemption is not in respect of an agency or an agent or even a factory or establishment but in respect of all or any class or classes of Security Guards employed in any factory or establishment or in any class or classes of factories or establishments. In other words, the exemp- tion is in regard to 'Security Guards', employed in any factory or establishment or in any class or classes of factories or establishments. The exemption may be in respect of all the Security Guards employed in a factory or estab- lishment or in a class or classes of factories or establish- ments or in respect of a class or classes of Security Guards so employed. For example, all Security Guards employed in factory may be exempted or Security Guards of a particular grade or doing a particular type of work in factory may be exempted. Again all Security Guards employed in a class of factories, say textile mills may be exempted. All Security Guards in all textile mills doing a particular type of work or drawing a particular scale of pay may be exempted. The correlationship of the Security Guards or classes or Securi- ty Guards who may be exempted from the operation of the Act is to the factory or establishment or class or classes of factories or establishments in which they work and not with the agency or agent through and by whom they are employed. This analysis has however no bearing on the question of locus standi of the persons who may seek the intervention of the State Government by the issue of notifications for exemption. Obviously the Security Guards or classes or Security Guards employed in a factory or establishment may apply to the Government to exempt them from the operation of the Act. Similarly Security Guards or classes of Security Guards employed in classes of factories or establishments may apply to the Government to exempt them from the opera- tion of the Act. Again a factory or an establishment or a class or classes of factories or establishments may apply to the Government to exempt Security Guards employed in their factories or establishments from the operation of the Act. Though agencies or agents do not enter the picture directly, since the very definition of Security Guards means persons engaged or to be engaged through an agency or agent, it must follow that where Security Guards have been engaged or are to be engaged through them in any factory or establishment or a class of factories or establishments, such agency or agent may also apply to the Government, not to exempt all Security Guards engaged or to be engaged through them out to exempt Security Guards engaged or to be engaged in a factory or establishment or a class of factories or establishments. The question is not one of locus standi at all but which or what class of Security Guards are to be exempted from the operation of the Act and the Scheme. Therefore, we are of the view that even an agency or agent may apply to the Government to grant exemption, but the exemption to be granted by the Government is not to be of any agency or agent but only of Security Guards employed in a factory or establishment or a class or classes of factories or establishments. Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  10 One of the submissions of the learned counsel was that if s. 23 was read in the light of s. 22 it would follow that an agency could ask for exemption from the operation of the Act of all Security Guards employed through them. We do not see how that follows. All that s. 22 provides in effect is that the rights or privileges of any registered Security Guard shall not be altered to his detriment. It only means that if hitherto as an employee of the agency, the terms and conditions of his services were more attractive on the whole than the terms and conditions of service offered by the Act and the scheme under the factory or establishment, the original terms and conditions of service will be preserved and become applicable to their service under the factory or establishment. It was submitted by the learned counsel that the Act and the Scheme did not provide for termination of the contract of employment between the agency and the Secu- rity Guard or for the transfer of the services of the Secu- rity Guards from the employment of the Agency to that.of the factory or establishment. We do not agree with the submis- sion. By necessary implication, the services of the Security Guards will stand transferred to the service of the factory or establishment on allotment to it by the Board. It is in that fashion, among other things, that security of service is secured to the Security Guards. The High Court appeared to think that all the applica- tions were rejected on the ground that a policy decision had been taken not to grant exemption in any case. The High Court relied on the affidavit of Shri Rajadhyaksha. It was stated in the affidavit of Shri Rajadhyaksha that the opin- ion of the Advisory Committee was sought on the applications for exemption and the Advisory Committee recommended the applications of 21 applicants. Later the cases of four other applicants were recommended by the Labour Commissioner. After referring to these circumstances, Shri Rajadhyaksha stated in the affidavit. "I say that after the receipt of the recommen- dations from the Advisory Committee by the Department of Industries, Energy and Labour, all the papers were submitted to the Chief Minister through the Minister for Labour and the Minister of State for Labour to con- sider whether to publish the notice of the Government's intention to issue such notifica- tion and invite objections and suggestions in respect thereto. I say that after considering all the pros and cons of the problem, the Hon'ble the Chief Minister, in consultation with the Hon'ble Minister for Labour and the Hon'ble Minister of State for Labour took the decision that none of the agencies who had applied for exemption should be granted exemp- tion under s.23 of the said Act because grant- ing of such exemption will not be in the interest of the Security Guards employed with the agencies." Later again Shri Rajadhyaksha stated; "I say that simply because the Advisory Com- mittee had recommended the case for exemption, it was not obligatory on the State Government to publish a notice of its intention to issue notification for exemption as alleged therein. I say that it was for the Government to con- sider the entire matter and to decide whether such a notification should be issued or not and if as a matter of policy and after going through the entire case the Government decided not to grant exemption no exception Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  11 can be taken to the decision of the State Government." We do not read the affidavit of Shri Rajadhyaksha to say that there was a predetermined policy decision pursuant to which all the applications for exemption were rejected without any consideration on merits. What the deponent of the affidavit meant to say was that the merits of each case were fully considered and the applications were rejected because it was their policy not to grant exemption if it was not in the interest of the Security Guards; A complaint was made that the Government did not state its reasons for rejecting the applications for exemption. We do not think that in cases of this nature where exemptions are sought from the operation of the Act, it is necessary for the Government to state its reasons. Of course, if there is a charge of mala-fides or arbitrariness, the court may look into it to discover if there are any mala-fides or if the refusal of the Government was arbitrary. We do not think that the orders refusing to grant exemptions in the present cases call for any interference on the sole ground of fail- ure to state reasons. In the result all the appeals are allowed and the writ petitions filed in the High Court are dismissed. Civil Writ Petition No. 12319 of 1985 filed by one of the agencies in this Court is also dismissed. The State of Maharashtra has also filed a special leave petition against the judgment of the Bombay High Court. It is disposed of on the same lines as the civil appeals. On behalf of some of the Security Guards a writ petition was filed in the Bombay High Court and it has been withdrawn to this Court to be disposed of along with the appeals. One of the contentions raised in the writ petition filed by the workmen is that the Scheme does not offer any continuity or guarantee of employment to those who are already working in factories or establishments having been engaged through agencies. We are assured by Shri K.K. Singhvi, learned counsel for the Board that every individual registered Security Guard who was previously working in a factory or establishment will be allotted to the same factory or estab- lishment and if the total package of the terms and condi- tions of his service were better than the terms and condi- tions of service offered by the Board such person should be employed on the previous terms and conditions of service. The assurance of Shri Singhvi is made part of our order. The learned counsel for the workmen also urged that there was an insistence upon payment of 'capitation fee' and sponsoring by a union before a Security Guard was registered under the Scheme. This, of course is not permissible under the Act or the Scheme and whoever has been so insisting will desist from doing so. P.S.S. Appeals allowed. Security Guards Board For ... vs Security & Personnel Service Pvt. Ltd.& ... on 28 April, 1987  12