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CASE NO.:

Appeal (civil) 302 of 2004

PETITIONER:

Rajinder Singh Chauhan & Ors.

RESPONDENT:

State of Haryana and Ors.

DATE OF JUDGMENT: 21/11/2005

BENCH:

ARIJIT PASAYAT & R.V. RAVEENDRAN

JUDGMENT:

J U D G M E N T

ARIJIT PASAYAT, J.

Appellants call in question legality of the judgment

rendered by a Division Bench of the Punjab and Haryana High

Court holding that the appellants' stand about applicability

of Section 25-N of the Industrial Disputes Act, 1947 (in

short the 'Act') was not correct.

Controversy lies within a narrow compass.

Appellants were employees of the Haryana State

Federation of Consumers Co-operative Wholesales Stores

Limited (in short the 'CONFED'), fourth respondent herein.

The service conditions of its employees are covered by

CONFED Staff Service Rules, 1975 (in short the 'Rules'). On

account of continued financial losses, a restructuring plan

for gainful employment for employees was prepared. It was

noted that Retail Outlets (in short the 'ROL') were causing

huge loss to the organization. Therefore, it was decided

that all ROL should be closed being financially non-viable.

Retrenchment compensation in terms of Section 25-F of the

Act was paid. In the retrenchment order it was specifically

stated as follows:

"It is made clear that employees of CONFED

from where the retrenchment is being effected

are not covered by Chapter V-B of the

Industrial Dispute Act, 1947, necessitating

any permission under Section 25-N of the said

Act. Therefore the retrenchment is being

effected in accordance with Chapter V-A by

employing with Section 25-F and other

provisions of the said Chapter."

Questioning the retrenchment, writ petitions were filed

before the High Court taking the stand that provisions of

Section 25-N and not Section 25-F were applicable and in any

event the appellants were entitled to the benefit in terms

of Rule 35(b) of the Rules. High Court did not find any

substance in the stand and dismissed the Writ Petitions

holding that there was compliance with the requirements of

Section 25-F(b) of the Act.

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According to the learned counsel for the appellants the

High Court has erroneously held that Section 25-N has no

application. Even otherwise, it was contended that the

appellants were entitled to the benefits available under

Rule 35(b).

It was in this context submitted by the learned counsel

for the appellants that after completion of the probation

period, the appellants had become permanent employees and,

therefore, they were governed by the Rules and the benefits

under Rule 35(b) were clearly applicable.

In response, learned counsel for the respondents

submitted that the High Court's view is in order.

In order to appreciate rival submissions the relevant

provisions need to be noted. Section 25-F, 25-K, 25-L and

25-N of the Act read as follows:

"25-F: Conditions precedent to retrenchment

of workmen: No workman employed in any

industry who has been in continuous service

for not less than one year under an employer

shall be retrenched by that employer until \026

(a) the workman has been given one

month's notice in writing indicating the

reasons for retrenchment and the period

of notice has expired, or the workman

has been paid in lieu of such notice,

wages for the period of the notice;

(b) the workman has been paid, at the

time of retrenchment, compensation which

shall be equivalent to fifteen days'

average pay (for every completed year of

continuous service) or any part thereof

in excess of six months; and

(c) notice in the prescribed manner

is served on the appropriate

Government (or such authority as may

be specified by the appropriate

Government by notification in the

Official Gazette).

25-K: Application of Chapter V-B: (1) The

provisions of this Chapter shall apply to an

industrial establishment (not being an

establishment of a seasonal character or in

which work is performed only intermittently)

in which not less than one hundred workmen

were employed on an average per working day

for the preceding twelve months.

(2) If a question arises whether an

industrial establishment is of a seasonal

character or whether work is performed

therein only intermittently, the decision of

the appropriate Government thereon shall be

final.

25-L: For the purpose of this chapter, - (a)

'Industrial Establishment" means:

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(i) a factory as defined in clause (m) of

Section 2 of the Factories Act, 1948(63 of

1948);

(ii) a mine as defined in clause (j) of sub-

section(1) of Section 2 of the Mines Act,

1952 (35 of 1952); or

(iii) a plantation as defined in clause (f)

of Section 2 of the Plantations Labour Act,

1951 (69 of 1951);

(b) notwithstanding anything contained in

sub-clause(ii) of clause (a) of Section 2 ;

(i) in relation to any company in which

not less than fifty-one percent of the paid

up share capital is held by the Central

Government, or

(ii) in relation to any corporation (not

being a corporation referred to in sub-clause

(i) of clause (a) of Section 2) established

by or under any law made by Parliament,

the Central Government shall be the

appropriate Government.

25-N: CONDITIONS PRECEDENT TO RETRENCHMENT OF

WORKMEN:

(1) No workman employed in any industrial

establishment to which this Chapter applies,

who has been in continuous service for not

less than one year under an employer shall be

retrenched by that employer until, -

(a) the workman has been given three

months' notice in writing indicating the

reasons for retrenchment and the period of

notice has expired, or the workman has been

paid in lieu of such notice, wages for the

period of the notice; and

(b) the prior permission of the

appropriate Government or such authority as

may be specified by that Government by

notification in the Official Gazette

(hereafter in this section referred to as the

specified authority) has been obtained on an

application made in this behalf.

(2). An application for permission under sub-

section (1) shall be made by the employer in

the prescribed manner stating clearly the

reasons for the intended retrenchment and a

copy of such application shall also be served

simultaneously on the workmen concerned in

the prescribed manner.

(3) Where an application for permission under

sub-section (1) has been made, the

appropriate Government or the specified

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authority, after making such enquiry as it

thinks fit and after giving a reasonable

opportunity of being heard to the employer,

the workmen concerned and the persons

interested in such retrenchment, may, having

regard to the genuineness and adequacy of the

reasons stated by the employer, the interests

of the workmen and all other relevant

factors, by order and for reasons to be

recorded in writing, grant or refuse to grant

such permission and a copy of such order

shall be communicated to the employer and the

workmen.

(4) Where an application for permission has

been made under sub-section (1) and the

appropriate Government or the specified

authority does not communicate the order

granting or refusing to grant permission to

the employer within a period of sixty days

from the date on which such application is

made, the permission applied for shall be

deemed to have been granted on the expiration

of the said period of sixty days.

Xxx xxx xxx

(7). Where no application for permission

under sub-section (1) is made, or where the

permission for any retrenchment has been

refused, such retrenchment shall be deemed to

be illegal from the date on which the notice

of retrenchment was given to the workman and

the workman shall be entitled to all the

benefits under any law for the time being in

force as if no notice had been given to him.

Xxx xxx xxx

(9). Where permission for retrenchment has

been granted under sub-section (3) or where

permission for retrenchment is deemed to be

granted under sub-section (4), every workman

who is employed in that establishment

immediately before the date of application

for permission under this section shall be

entitled to receive, at the time of

retrenchment, compensation which shall be

equivalent to fifteen days' average pay for

every completed year of continuous service or

any part thereof in excess of six months."

Section 25-F appears in Chapter V-A of the Act which

relates to lay-off and retrenchment. Section 25-K, L and N

appear in Chapter V-B which relates to special provisions

relating to lay-off, retrenchment and closure in certain

establishments. In other words Chapter V-A deals with the

general provisions relating to lay-off and retrenchment,

while special provisions have been made for certain

establishments covered by Chapter V-B. Section 25-N refers

to workman in an industrial establishment. The expression

"Industrial Establishment" is defined in Section 25-L,

which means a factory or a mine or a plantation.

Admittedly, the employer is not covered by the definition of

the "Industrial Establishment". Therefore, the High Court

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was right in holding that Section 25-N has no application.

There is no dispute that the requirements of Section

25-F have been complied with by the employer.

The residual question is whether any benefit was to be

extended under Rule 35. Rule 4, 10(5&6) and 35(b) of the

Rules read as follows:

"Rule 4 (a) "Permanent" employee means an

employee who has been continued on vacant

permanent post. The staff of the federation

shall be classified into the following:

1.

Class-I

Managing Director, Addl.

Managing Director

2.

Class-II

Business Manager, Accounts

officers, general Manager,

establishment officer and

Assistant Manager.

3.

Class-III

Accountants, Assistants,

purchase and Sale Assistant

Accounts Assistant,

Storekeepers, Cashiers, Clerks,

Stenographers/Steno-typists and

Salesmen.

4.

Class-IV

Driver, Peons, Daftri,

Chowkidar and Sweepers.

4(b). "Probationer" means an employee who

is provisionally employed to fill a permanent

vacancy of post and has not been made

permanent or confirmed in services. The

probation period will be 12 months for all

the posts of Class I, II, III which may

further be extended by such time as deemed

fit, but in no case it will exceed 24 months,

in all. The probation period for Class-IV

shall be 6 months which may further be

extended by such time as may be deemed fit

but in no case total period of probation

shall exceed 12 months.

4(c). "Temporary" employee means an

employee who has been appointed for a limited

period for work which is of an essentially

temporary nature.

4(d). An "Apprentice" means a learner who

is given a nominal stipend during the period

which will ordinarily be of 6 months before

he is taken up as a temporary employee.

4(e). Every employee shall be given a written

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order regarding his appointment,

confirmation, promotion, transfer and ending

of service as the case may be.

Rule 10 (5): If the work and conduct of an

employee during the period of probation is

found satisfactory, he will be confirmed from

the date of completion of the probation

period.

10(6). No employee will be deemed to have

been confirmed in the federation service

unless specific orders in this regard are

issued. The appointing authority shall have

to take a decision regarding confirmation or

reversion or removal of a probationer within

the prescribed period of probation.

35(b). Confirmed employee shall be entitled

to one month's pay and allowance for every

completed year of service. In addition to

this, they will also be entitled to such pay

and allowance as may be due to them on

account of accumulated earned leave upto the

maximum of one month.

Rule 35(b) inter-alia provides that confirmed employees

shall be entitled to one month's pay and allowance for every

completed year of service on retrenchment of service. In

addition they are entitled to pay and allowance as may be

admissible to them on account of accumulative earned leave

upto the maximum of one month.

The stand of the respondents was that the appellants

were not confirmed employees. The appointment order of each

of the appellants contains the stipulations which are as

follows:

"1. Your appointment as Sales man is purely

temporary.

2. During the period of probation, your

services are liable to be terminated

without giving any notice or assigning any

reason.

3. You shall be governed by the terms and

conditions contained in the Staff Service

Rules of the Federation, amended from time

to time."

This is a case where the period of probation is fixed

having regard to Rule 4(b) read with Rule 10 as quoted above.

Rule 10(6) no doubt provides that no employee shall be deemed

to have been confirmed in the service unless specific order

in this regard is issued. Relying on this provision, learned

counsel for the fourth respondent submitted that there was no

specific orders of confirmation and, therefore, the

appellants should be deemed to have continued as probationers

till the date of termination of their services. A similar

stand was considered in Om Prakash Maurya v. U.P. Co-

operative Sugar Factories Federation, Lucknow and Ors. (AIR

1986 SC 1844). A Constitution Bench of this Court in The

State of Punjab v. Dharam Singh (AIR 1968 SC 1210) noted as

follows:

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"Where as in the present case, the service

rules fix a certain period of time beyond

which the probationary period cannot be

extended and an employee appointed or

promoted to a post on probation is allowed to

continue in the post after completion of the

maximum period of probation without an

express order of confirmation, he cannot be

deemed to continue in that post as a

probationer by implication. The reason is

that such an implication is negatived by the

service rule forbidding extension of the

probationary period beyond the maximum period

fixed by it. In such a case, it is

permissible to draw the inference that the

employee allowed to continue in the post on

completion of the maximum period of probation

has been confirmed in the post by

implication."

In High Court of M.P. through Registrar and Ors. v.

Satya Narayan Jhavar (2001 (7) SCC 161), this Court

categorised the provisions for probation as follows:

"The question of deemed confirmation in

service jurisprudence, which is dependent

upon the language of the relevant service

rules, has been the subject-matter of

consideration before this Court, times

without number in various decisions and there

are three lines of cases on this point. One

line of cases is where in the service rules

or in the letter of appointment a period of

probation is specified and power to extend

the same is also conferred upon the authority

without prescribing any maximum period of

probation and if the officer is continued

beyond the prescribed or extended period, he

cannot be deemed to be confirmed. In such

cases there is no bar against termination at

any point of time after expiry of the period

of probation. The other line of cases is that

where while there is a provision in the rules

for initial probation and extension thereof,

a maximum period for such extension is also

provided beyond which it is not permissible

to extend probation. The inference in such

cases is that the officer concerned is deemed

to have been confirmed upon expiry of the

maximum period of probation in case before

its expiry the order of termination has not

been passed. The last line of cases is where,

though under the rules maximum period of

probation is prescribed, but the same

requires a specific act on the part of the

employer by issuing an order of confirmation

and of passing a test for the purposes of

confirmation. In such cases, even if the

maximum period of probation has expired and

neither any order of confirmation has been

passed nor has the person concerned passed

the requisite test, he cannot be deemed to

have been confirmed merely because the said

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period has expired."

In above view of the matter, the stand of the

appellants that they were deemed to have been confirmed at

the end of 24 months and they were permanent employees is in

terra firma. 'Salesmen' belong to Class III of the category

of permanent employees. The definition of "Probationer"

given in Rule 4(b) fully supports the appellants' stand that

the probation period shall not exceed 24 months in all.

Therefore as was held in Om Prakash's case, Satya Narayan

Jhavar's case and Dharam Singh's case (supra) the appellants

inferentially have to be treated as permanent employees, and

consequently the benefits under Rule 35(b) were available to

them. But the same shall not be in addition to what is

payable under Section 25-F. The amount which is higher of

the two i.e. of Section 25-F or Rule 35(b) shall be paid to

the appellants. If any amount has already been paid in

terms of Section 25-F the same shall be adjusted while

making the payment under Rule 35(L), which shall be made

within three months. The appeal is allowed to the aforesaid

extent. No costs.