A.M. Khanwilkar, J.@mdashRule made returnable forthwith, by consent. Counsel for the Respondents in the respective petitions waive notice. Taken up for final disposal, by consent. As common questions are involved, these petitions are disposed of by this common Judgment.
2. All these petitions were proceeded together as common questions have been raised in these matters.
3. Writ Petition No. 2457 of 2012 is filed by the Union representing Licensed/Approved Aircraft Maintenance Engineers employed by Respondent No. 1 throughout India and abroad.
4. Writ Petition No. 391 of 2013 is filed by the Union representing Licensed/Approved Aircraft Maintainance technical staff employed by Respondent No. 1 throughout India and abroad.
5. Writ Petition (Lodging) No. 2896 of 2012 is filed by the Union claiming to be the largest representative organisation of the Aircraft Engineers employed by Respondent No. 1.
6. Lastly, Writ Petition (Lodging) No. 585 of 2013 has been filed by the employees of Union claiming to represent all the Aircraft Technicians and Foremen category of the erstwhile Indian Airlines Limited employed by Respondent No. 1 throughout India and abroad.
7. Notably, the reliefs claimed in all these petitions are similar. It is prayed that Respondent No. 1 be restrained from hiving-off/demerging the Engineering Department of Respondent No. 2. In the alternative, Respondent No. 1 may be directed to continue the concerned employees, whose cause is espoused by the petitioners-unions employed in the Engineering Department of the erstwhile Air India Limited as the employees of and on the payroll of Respondent No. 1, maintaining all their existing terms and conditions of service and only send them on deputation basis to Respondent No. 2. It is further prayed that direction be issued to set up an expert Committee to study the feasibility including economic viability of the hiving/demerging of the Engineering Department of Respondent No. 1 to Respondent No. 2.
8. Briefly stated, Respondent No. 1 has set up a wholly owned subsidiary in the name of Air India Engineering Services Limited (AIESL), the Respondent No. 2, and planned hiving-off/demerging the entire Engineering Department of Respondent No. 1 to Respondent No. 2. After becoming aware about this development, the employees'' unions made representations to the Management to desist from proceeding with the said proposal of hiving-off/demerging the entire Engineering Department of Respondent No. 1 and until detailed feasibility study by an independent concern was undertaken in that behalf. Having noticed that inspite of doubts expressed in some quarters about the viability of demerging of the entire Engineering Department of Respondent No. 1 to Respondent No. 2 and, more particularly, as the employees employed by Respondent No. 1 in the said Department apprehended retrenchment either by Respondent No. 1 or after the demerger by Respondent No. 2 on some pretext and, further, because there was strong possibility of Respondent No. 2 not able to sustain the business competition and eventually likely to be closed down, decided to move the Regional Labour Commissioner (Central), Respondent No. 3, to intervene in the industrial dispute and admit the demand into conciliation under the provisions of the Industrial Disputes Act, 1947 (for short, ''the Act''). The apprehension of the employees of Respondent No. 1 employed in the said Department became stronger as their salaries were also not paid for the month of July, August, September, 2012 nor the last six months PLI (Productivity Linked Incentive), amongst other allowances, and benefits were offered to them. It is stated that the conciliation proceeding in that regard are in progress. It is not necessary to burden with the details of the issues involved in those proceedings for considering the nature of reliefs claimed in the present petitions.
9. Suffice it to observe that the petitioners have rushed to this Court by way of present petitions after being convinced that Respondent No. 1 was going ahead with the hiving-off of the Engineering Department and that the services of the employees employed in the Engineering Department would be transferred to Respondent No. 2 unlike some of the employees of Respondent No. 1 were to be sent to Respondent No. 2 only on deputation. As the petitioners were more than convinced that Respondent No. 1 was not even willing to negotiate on these matters and instead, the notices were received by the employees of Respondent No. 1 employee in the Engineering Department proposing to transfer them to Respondent No. 2, the petitioners have filed the present petitions for the reliefs as aforesaid.
10. Respondent No. 1 have contested these petitions. At the outset, they have raised preliminary objections. Firstly, that the petitioners have alternative and efficacious remedy for resolution of the industrial dispute as provided by law. Secondly, the petitions suffer from laches and unexplained delay. According to the Respondents, these petitions are an attempt to slow down the execution of the policy decision taken at the highest level by the Government of India, if not stifle the same. In other words, these petitions are motivated and an attempt to arm twist the Air India and the Union of India for which the same should not be entertained. The Respondents, in the affidavit sworn by the General Manager of Respondent No. 1, have asserted that Air India, for some time and even today, continues to go through serious financial crisis which seriously threatens the very existence of Air India. Air India has incurred losses which run into tens of thousands of crores. Further, the Air India being a national carrier, can be bailed out only by the Government of India. The Government of India has been infusing funds into Air India from time to time which has enabled it to remain afloat. The current losses of Air India are approximately Rs. 30,000/- crores as on 30.9.2012. Unless the Government of India is permitted to bail out Air India, as is proposed in the Turn Around Plan (for short, ''TAP''), there may be no other option but to wind up Air India, which may result in huge financial and other losses not only to Air India but also to the country and would also result in job loss to approximately 25000 employees of Air India. In the affidavit, it is further stated that these petitions pertain to a policy decision of the Government of India with which the Courts should be loathe to interfere. Further, no case has been made out to interfere with the policy decision of the Government of India. It is then stated that the TAP and the policy decision of the Government of India has attained Cabinet Approval after a detailed technical and financial analysis by experts in the field including SBI Capital Markets Ltd. (SBI Caps) and Deloitte. Judicial Review of that policy decision is impermissible in law. It is further stated that the employees, who are members of the petitioner unions have no right, muchless vested right, in the Maintainance, Repair and Overhaul (MRO) business and judicial review of the transfer of that business to Respondent No. 2 is not permissible in law. That action is based on policy decision on economic matters taken at the highest level by the Government of India and the Court must be circumspect in conducting any enquiry or investigation to question the judgment and wisdom of the experts, who were engaged in the process of formulation of the policy decision. The petitioners have raised issues which cannot be examined by this Court in writ petitions. Further, it is a settled position in law that even if some persons are at the disadvantage and suffer losses on account of stated Government policy, that by itself is not sufficient for the Court to interfere in the matter unless it is shown to be arbitrary, capricious and malafide. It is asserted that the policy decision has been taken not only by the Air India but at the highest level by the Government of India because the survival of Air India is at stake. Further, the rights, if any, of the petitioners and its members can only be subject to supervening public interest of the TAP for Air India succeeding.
11. The process followed in formulation of the policy has been spelt out in this reply affidavit. It commenced with the decision taken in the Cabinet meeting held on 13.8.2009 whereby it was decided to constitute a Group of Ministers (GOM) to consider the financial situation of Airlines and Airport Authority of India (AAI) and to suggest possible remedial measures. The GOM started monitoring the financial and operational performance of Air India w.e.f. 21.10.2009 and in the process, held 8 meetings. The GOM in its meeting held on 22.6.2011 decided to constitute a Committee of Group of Officers (GoO) under the Finance Ministry to examine the TAP and FRP submitted by Air India in consultation with SBI Caps and vetted by M/s. Deloitte, an independent consultant. The GOM accepted the recommendations of GoO presented in the meeting held on 28.10.2011 and directed that the same may be placed before the Cabinet for its consideration. The Cabinet had then approved the TAP of Air India at its meeting held on 12.4.2012. The Respondents have placed on record the relevant minutes of the Cabinet as well as the Committees, proposal and the reports/recommendations of the experts on record in support of its stand that the entire process was the outcome of due deliberations and extensive consultation. It is only after being fully satisfied that the demerger of Engineering Department of Air India was the only way forward, the policy decision in that behalf has been taken.
12. It is stated in the reply affidavit that the merger of erstwhile Air India and Indian Airlines in the year 2007 had created Strategic Business Units (SBUs) in the areas of MRO and Ground Handling (GH) activities. It was thus, envisaged to improve the operations of these SBUs and establish them as independent entities serving various customers. The Air India now proposes to focus on core air transport operations and hive these SBUs into its subsidiaries and establish them as self sufficient and profitable entities, in line with international standard practices. The transfer of SBUs into subsidiaries would also result in the enhanced focus on MRO and GH operations, which by themselves are a growing market. It would also have advantages of improving quality of services benchmarked to international/global standards; creating a new work culture with customer focus; facilitating improved productivity on a low cost platform; creating accountability for growth and profits; future induction of employees into subsidiaries will provide opportunities for more efficient recruitment and service terms; leverage scope economies by offering complete spectrum of services under one roof; leverage scale economies by segregation of demand from various sources thereby reducing cost of operations.
13. After having said this, the reply affidavit proceeds to assert that AIESL is a wholly owned subsidiary of Air India, and was incorporated on March 11, 2004 for the purposes of carrying out Engineering and other allied activities. Air India proposes to develop AIESL as MRO company providing the necessary initial support in terms of infrastructure and domain knowledge. Engineering services which are presently performed in-house would be hived-off to this subsidiary alongwith infrastructure facilities. The intent of hiving-off the MRO operations into a separate subsidiary is to attract a significant amount of third party work from India and its neighbouring countries. The subsidiary company is expected to enter into joint ventures with local/ foreign firms and would undertake Engineering services for Air India as well as for third parties/Airlines in India and abroad. There have been several joint ventures, alliances across the world for enhancing the Engineering capability. For example, all other international Airline companies, who have followed this pattern, have been mentioned.
14. The affidavit then proceeds to highlight the MRO Market- Opportunities and Outlook. As per the projections, Respondent No. 2 subsidiary company is expected to get huge opportunity in the MRO market and accordingly, proposes to have MRO facilities in partnership with established players in the industry including Boeing, Airbus and GE. The establishment of the facilities with airframe/engine manufacturers would also result in savings in maintainance cost. The prospective MRO services providers in India can target not only the Indian Aviation market but also the market within a 5 hour flying time from India. All these aspects were reckoned in formulation of policy by the Government of India pertaining to MRO and hiving them which policy decision has been approved at the highest level by the Cabinet after a detailed study done by the experts and extensive consultation.
15. The Respondents assert that the policy decision is a step taken towards bringing back the viability for survival of an otherwise financially distressed Airline and that the Government has assured putting in the "taxpayers money" with the condition that the Airline submits a plan of revival and assures that it will make all attempt to revive. The affidavit also asserts that Air India is the oldest Airline in India and has been in MRO business since long. It has the expertise to start MRO on a profitable model in India. In fact, Air India has been providing the know-how to other Airlines not only in India but also to neighbouring countries in terms of technical and managerial in all fields pertaining to MRO. The functionality of the AIESL is part and parcel of the TAP. The beneficiary of TAP is the whole company alongwith its employees. On these assumptions, the Cabinet approval was granted to the said TAP which has been made functional and in furtherance whereof, the Government of India has since 2009 disbursed an amount of Rs. 7,200/- crores to Air India. The employees of Air India have been benefited because of the said assistance provided by the Government of India. In substance, the policy decision taken by the Government of India in approving the TAP is in public interest, keeping in mind all aspects including the feasibility issues. The decision by no stretch of imagination is arbitrary or can be stated to be capricious and malafide.
16. The reply affidavit also proceeds to give the relevant breakup about the target customers who are expected to be both from India and abroad. As per the projections, the first year total revenue is expected to be Rs. 793.5 crores which would include business from third parties. The business plan shows that AIESL will progressively increase its third party business from Rs. 132 crores in 2012-2013 to nearly Rs. 2057.4 crores in 2021-2022. The AIESL will turn EBITDA positive in 2014-2015. The policy envisages that the Service Tax, if any, paid by Air India for work done would be entitled for CENVAT credit on Service Tax paid by Air India.
17. In other words, the policy weaves into several factors for strengthening the financial position of Air India and also to optimise the business plans to make MRO and GH a profitable model in India. The AIESL has, therefore, been set up with an authorised capital of Rs. 1000/- crores. That clearly demonstrates that the Company has potential to move forward on a stand alone basis relating to MRO activities.
18. The stand taken by Respondent No. 1 has been supported by Respondent No. 4 by filing affidavit of Under Secretary of Ministry of Civil Aviation, Government of India. The sum and substance of this affidavit is that the hiving-off/demerger of the Engineering Department of the Air India and of MRO to Air India''s fully owned subsidiary would positively contribute towards correcting skewed aircraft to employee ratio and would substantially benefit Air India financially. This has become essential because of necessity to compete with various private Airlines and as Air India has lost this pre-dominant market share over the past few years. This affidavit also reiterates that the policy decision has been taken after exhaustive consultations and duly scrutinised by the Cabinet in its meeting held on 6.9.20012.
19. As aforesaid, the Respondents have not only produced the proposal and other documents but have also placed copy of the Cabinet note and the Minutes of the Cabinet meeting also on record to justify its stand and to demonstrate that all aspects have been duly considered at the highest level. It is noticed that the Authorities were conscious of the three options available with the Air India qua the employees required to be transferred/sent on deputation because of the hiving-off/demerger of the Engineering Department. The first option was by offering VRS. Secondly, by enforcing Compulsory Retirement and Thirdly Spin off Cargo, MRO and GH into Subsidiary units enabling the transfer of manpower. The GOM recommended setting up of support business for MRO, GH and Cargo and directed that the Cabinet note alongwith credible plan for revival of Air India should be prepared and placed before the Cabinet for early decision. The policy decision has been taken by the Government of India only after consideration of all these recommendations and consultation papers. The Cabinet was also informed that the terms and conditions of employment of Air India and that the Air India Management had already briefed the concerned employees'' Unions/Associations about the same.
20. In substance, the Respondents have not only refuted all the material averments in the petitions; but have also asserted that the decision of hiving-off has not been taken casually but after due deliberations and consultations at different levels in the Government and also after considering the experts'' opinion, at the highest level by the Cabinet. That is a policy decision of the Government of India and not limited to some business or commercial decision taken by Respondent No. 1 on its own. The policy decision has been taken by the Government of India in the interests of the general public, of which judicial review is not permissible. As regards the apprehension of the petitioners about the viability of Respondent No. 2, that has been stoutly denied. Instead, it is asserted that Respondent No. 2, after the implementation of the TAP, would become a profit making venture within a period of seven years, keeping in mind the projections made by the Department as well as the experts. The Respondents pray that the petitions be dismissed also because the grievance of the petitioners is not genuine and in fact, is an attempt to stifle and slow down the process of hiving-off of the concerned undertaking of Respondent No. 1 to effectuate the policy decision of the Government of India. Inasmuch as, the concerned employees of Respondent No. 1 have been reassured of continuity of service and also protection of all the existing service conditions, pay and allowances, career progression, benefits and perquisites and all the benefits of past service. In other words, there would be no change in the service conditions whatsoever.
21. According to the Respondents, the employees cannot be heard to challenge the policy decision of their employer so long as their service conditions are not affected in any manner. The Respondents have also asserted that the action of transfer of the concerned employees to Respondent No. 2, is in conformity with Section 25FF of the Industrial Disputes Act. Even the argument of the petitioners about non-compliance of Section 9-A of the Industrial Disputes Act has been countered being devoid of merits. In that, Section 9-A has no application to the fact situation of the present case; and also because it is inapplicable to the Respondents by virtue of Notification issued in that behalf. The argument of the petitioners about discrimination on account of sending some of the employees on deputation and others on transfer has also been countered by the Respondents. The Respondents have prayed for dismissal of the Writ Petitions being ill-advised, founded on misinformation and also because the same are motivated.
22. The broad contentions of the petitioners can be delineated thus:
According to Mr. Chinoy, for the petitioners, in Writ Petition No. 2457 of 2012, the Respondent Nos. 1 and 2 are instrumentalities of the State being owned and controlled by the Government of India and therefore, are under a constitutional obligation to act fairly and not arbitrarily with its employees. From the facts and circumstances on record, it can be noticed that there has been no real attempt to assess the commercial or business viability of Respondent No. 2, post transfer. On the other hand, there is reason to believe that independent MRO activity is not and will not be financially viable. The option of hiving-off has been preferred as against the alternative to offering VRS and enforcing compulsory retirement to reduce Air India''s "manpower and staff costs". This has been done because of the "Aircraft to employee ratio in AI is extremely unviable" and by hiving-off the Department around 7000 employees would positively contribute towards correcting the skewed aircraft to employee ratio and would benefit AI financially. This has been done in disregard of the apprehensions expressed by the Officials at different level and without consideration/assessment of the viability of the Respondent No. 2 or of the future of the said 7000 employees of the AI which were sought to be transferred to Respondents No. 2. The casualness of the decision can also be discerned from the fact that the service tax liability has not been considered in the MRO business plan. Moreover, the Government of India as well as the Authorities of AI were fully aware that Respondent No. 2 which has been created as subsidiary of Respondent No. 1 will not be viable and that admittedly, it would start earning net profits only from 7th year onwards. Moreover, the report of the working group on civil aviation for the 12th Five Year Plan 2012-2017 indicates that MRO operations in Dubai, Singapore, Malaysia are more cost effective because of the import duty, VAT and Service Tax. Similarly, the Officials of AI in a paper/presentation in July, 2011 pointed out that complex and multi tiered tax structure in India makes MRO uncompetitive and that the high taxes make third party Aircraft maintenance servicing more expensive than international rates in excess of 50%. Further, the hangers of AI to be used by Respondent No. 2 do not have FAA/EASA approval-a pre-requisite for receiving third party MRO contracts. In addition, admittedly, AI owes Rs. 100/- crores to the Engineering Department employees towards arrears of wages for the period 1997-2006 and manges to pay wages because of the infusion of funds from Government of India. As the Respondent No. 2 is not expected to make net profits until seven years, there will be further financial strain on the Respondent No. 2 and would lack the ability to pay wages and terminal benefits to its employees. As a matter of fact, the decision to transfer 7000 employees of AI to Respondent No. 2 has been taken only with a view to reduce AI''s work force/wage bill without any real review/assessment of the commercial viability of Respondent No. 2 and despite the knowledge that Respondent No. 2 is not commercially viable. Viewed in this perspective, the decision of hiving-off of MRO of Respondent No. 1 is arbitrary and unfair and has been resorted to as a legal device/attempt to draw a legal corporate wing. As a matter of fact, the Respondent No. 2 is a wholly owned subsidiary of Respondent No. 1. It is and will be completely controlled by Respondent No. 1. Admittedly, no immovable property will be transferred to Respondent No. 2. There are indications that even the movable properties such as tools and equipments of Respondent No. 1 will not be transferred to Respondent No. 2. All this leaves no manner of doubt that the transfer is a sham transaction and will have to be treated as non-est in the eyes of law. Moreover, discriminatory treatment has been meted out by sending some of the employees of Respondent No. 1 on deputation to Respondent No. 2. While the rest are sent on transfer. The impugned decision of hiving-off has been taken by the Respondent No. 1 and Respondent No. 4 to circumvent the law, including Section 25O and 25N of the Industrial Disputes Act. According to the learned Counsel, in law, there will be no transfer, more so, within the meaning of Section 25FF of the Industrial Disputes Act. For that reason, the petitioners are entitled to a declaration that notwithstanding the purported transfer of the Engineering Department and its employees to the Respondent No. 2, the said employees will continue to be the employees of Respondent No. 1. To buttress the above submission, reliance has been placed on the decisions in the case of
23. Mr. Singhvi, appearing for the petitioners in Writ Petition No. 391 of 2013, has adopted the argument advanced by Mr. Chinoy referred to above. In addition, however, he submits that the employees of Respondent No. 1-AI have a choice not to accept the transfer as the decision to transfer them has been taken unilaterally and without their consent or a tripartite agreement, muchless in consultation. In his submission, the dictum of the Apex Court in the case
24. In the present case, contends Mr. Singhvi, the transfer was not covered by Section 25FF of the Act and, more particularly, the contours specified by the Apex court in that behalf. In his submission, Section 25FF is attracted only when the ownership or management of the whole undertaking has been transferred; if the business of an undertaking, which is a separate and distinct undertaking, that can be transferred, but if it is found that the transfer is a sham and fictitious transfer, that transfer would not receive the protection of Section 25FF, as in the present case. Thus, the common law principle would come into play and such transfer cannot be effected unilaterally and without the consent of the employees. It is then contended that in any case, the decision of hiving-off, being in the nature of reorganisation of the Department, the same was covered within the meaning of Items 1, 8, 10 and 11 of Schedule IV of the Act and for which reason, notice of change was required to be given to the employees u/s. 9-A of the Act. Having failed to do so, the transfer is non-est in the eyes of law. He further submits that reliance placed by the Respondents on the notification issued by the Government of Maharashtra u/s. 9-A of the Act will be of no avail. In fact, the same is not in force after the repeal of the Air Corporations Act, as has been held by the Apex Court in the case of
25. Mr. Dhond, learned senior counsel appearing for the petitioner in Writ Petition No. 2896 of 2012, besides adopting the abovesaid submissions, has pointed out that there is strong reason to believe that the intention of the Respondents of hiving-off/demerger of Engineering Department to Respondent No. 2, is, to eventually retrench the transferred employees. That can be seen from the circumstance which has come to light. In that, the Respondent No. 1, after hiving-off its Engineering Department to Respondent No. 2, has proceeded to invite public tenders for service of aircraft engines. If the facility was available in-house, there was no reason to invite bids for that work. Moreover, the contract in that behalf has been awarded to a third party. In other words, the Respondent No. 2, even though a subsidiary and fully owned and controlled by Respondent No. 1, will have to compete for getting work from Respondent No. 1. Further, there is no guarantee that the work would be awarded to Respondent No. 2. Instead, it may be awarded to third parties because of competitive rates given by them. As a result, the Respondent No. 2 will have to fend for itself; and eventually, will be forced to close down, in due course of time. Thus, the decision of hiving-off/demerger is a device to get rid of and retrench large force of employees of AI.
26. Mr. V.P. Vaidya appeared for the petitioner in Writ Petition No. 585 of 2013, espousing the cause of Aircraft Technicians. He has adopted the arguments advanced by the counsel adverted to hereinbefore.
27. Mr. Setalwad, learned Additional Solicitor General, appeared for the contesting Respondents. He has reiterated the stand taken by the Respondents on affidavit and has countered each of the submissions made by the counsel for the respective petitioners. In his submission, all these petitions deserve to be dismissed being devoid of merits and also because the same are motivated petitions. He has reiterated preliminary objections regarding maintainability of the petitions on the ground of laches as also because the petitioners have efficacious alternative remedy. In that, the substance of the grievance is about non-compliance of the mandate of the provisions of the Industrial Disputes Act, 1947, which, essentially, is an industrial dispute to be adjudicated in appropriate proceedings. He would then submit that this court should be loathe to interfere with the policy decision and more so, when it has been taken at the highest level by the Government, in larger public interest. Further, it is not possible nor it is open to this court to critically analyze the opinion given by the experts, which is the subtle attempt of the petitioners. The court has to take into account the totality of the opinion ultimately reached by the Cabinet. In that decision of the Cabinet, all the experts opinion and consultation papers would get subsumed. The decision of the Cabinet of the Government of India is the final and decisive policy statement. That cannot be questioned on the basis of some notings found in the consultation papers or office record which, in law, there is a presumption of having been duly considered by the Cabinet before taking the final decision. That being the subjective satisfaction of the Cabinet, judicial review thereof is impermissible. He further submits that in any case, in the fact situation this case, it is fully covered by Section 25FF of the said Act. He submits that Section 25FF recognises that transfer of an undertaking is an inherent power of the employer. In addition, even the Articles of Association of Respondent No. 1 places no limitation on the Respondent No. 1 to take recourse to hiving-off of its Undertaking and to create subsidiary for continuance of business of such Undertaking by the subsidiary. That, however, has to do done, and it has so been done in the present case, by protecting all the service conditions of the employees, their pay and allowances, benefits and without affecting the continuity of service and benefits of the past service. There is no adverse change in the service conditions of the concerned employees in any manner. He further submits that the question of complying with the requirement of Section 9-A would not arise in the present case on account of the fact that none of the conditions of service, referred to in the Fourth Schedule of the Act, qua the employees of Respondent No. 1, who will be transferred to Respondent No. 2, have been affected in any manner. He submits that in a case of transfer of Undertaking, the question of taking consent of the employees or entering into tripartite agreement with the employees to be so transferred, is not necessary at all. The ownership of the Undertaking would now vest in the Respondent No. 2 which, no doubt, is a subsidiary of Respondent No. 1. At the same time, the Respondent No. 2 is an independent entity and will be in complete control of its management and business. The fact that the Respondent No. 2 is a fully owned subsidiary of Respondent No. 1 is of no significance and will have no effect on the bona-fide and genuineness of the transfer of the Undertaking to Respondent No. 2. The decision of hiving-off is in furtherance of the policy decision of the Government of India which is essentially to re-arrange the affairs of Respondent No. 1 - AI. For, AI has suffered huge accumulated losses as of September 2012, at around Rs. 30,000 crores; and its debt-net position has turned negative to the extent of Rs. 8,121 crores as on 31st March, 2011. The estimated operative cash losses suffered by AI is about Rs. 15 crores to Rs. 16 crores "per day" and if this trend continues, there would be no option for the Government, but to wind up Air-India. The turn-around plan prepared by the Government of India is to infuse funds to the extent of Rs. 8,000 crores in 2009-2010, Rs. 1,200 crores in 2010-2011, Rs. 1,200 crores in 2011-2012 and Rs. 4,000 crores in December, 2012. That process is now irreversible and keeping in mind the larger public interest, the decision of hiving-off of the concerned department should not be interfered lightly on some technicalities or, for that matter, hyper-technical argument of the petitioners who are not prejudiced or affected in any manner and especially when their working conditions, continuity of service, including past service has been fully protected in every respect. He has, therefore, prayed for dismissal of all these petitions with costs.
28. After having considered the rival submissions and going through the pleadings and documents on record, we deem it apposite to first advert to the background in which the policy decision of hiving-off of the concerned departments of the Respondent No. 1 has been taken by the Government of India, which the Respondent No. 1 is only implementing and taking it to its logical end. Concededly, the Respondent No. 1 is an instrumentality of the State. To effectuate the decision taken by the Government of India, Respondent No. 2 (also an Instrumentality of the State) was incorporated as a fully owned subsidiary of Respondent No. 1 for undertaking the MRO activities independently being conducted by Engineering Department of the Respondent No. 1. These activities are undertaken at various locations in India by Respondent No. 1. The object of hiving-off the concerned Department of Respondent No. 1 was intended to capitalise the opportunities emerging from the group of aviation sector in India and neighbouring regions. In view of the growing aviation market, the MRO activities are not only in demand but are indispensable. Considering the logistical situation and the prevailing market conditions relating to MRO facilities in the Middle-East, South-East Asia and European Countries, after study undertaken in 2009, it transpired that the MRO costs, in India, is expected to be upto 60% lower than the European Euro and 20% lower than in Asia Pacific. Accordingly, the Turn Around Plan (TAP) for Respondent No. 1 was prepared, which intends to capitalise the growing civil aviation market and also to target not only Indian Aviation Market but also market within a five hours flying time from India. This TAP envisages that on taking some corrective steps, the Respondent No. 2 may be able to cater to the Airlines based in India which has a market share of 30% of CFM Engines and 50% of GE Engines and in due course, in around seven years period, the Respondent No. 2 would turn out to be a profit making undertaking. Accordingly, this TAP was duly considered and vetted at different levels in the Government of India; as it not only required infusion of huge funds but also transfer of the employees of the concerned Department of AI to its newly incorporated subsidiary. The necessity of having such TAP was felt when the Government of India reviewed the financial position of AI on 24th June, 2009. AI was directed to come up with a business plan along with the financial restructure plan duly vetted by professional financial/management consultants, indicating the operational measures required to improve the functioning of the Company. Accordingly, a Committee of Secretaries (CoS) under the Chairmanship of the Cabinet Secretary was constituted in July, 2009 to undertake necessary review and to closely monitor the TAP. The Respondent No. 1 informed the said CoS that SBI Capital Market Limited was appointed to examine the figures of profit and loss and cash-flow statements presented by SBI Capitals for AI for different scenario with cost reduction and with revenue enhancement along with cost reduction. On submission of that report, the CoS on 29th August, 2009 reviewed the situation. In that meeting, AI presented the TAP which included cost reduction, revenue enhancement and business and operational measures taken by it. The Government of India then decided to constitute a Group of Ministers (GOM) headed by the Finance Minister to review the status of Civil Aviation Sector including financial structure of AI and Airports Authority of India (AAI). The GOM in its meeting held on 3rd February, 2010 pondered over the reports and consultation papers pertaining to MRO activities of Respondent No. 1 which were suggested to be handled by an independent Company, so that, AI can concentrate on the core passenger business. The GOM submitted recommendation in this behalf to be placed before the Cabinet. It is significant to note that the GOM itself was a very high level wide based body constituted to examine the entire matter. It consisted of Finance Minister, Home Minister, Minister of Petroleum and Natural Gas, the Deputy Chairman of the Planning Commission, Minister of State (IC) for Civil Aviation and the invitees included the Secretaries of Ministries of the concerned Departments i.e. Finance Department, Civil Aviation, Department of Expenditure, Planning Commission and Petroleum and Natural Gas. This Committee, in the ordinary course of business obviously, must have examined every aspect in respect to the presentation given by the Respondent No. 1 AI for its TAP.
29. Notably, AI appointed the experts i.e., Delloitte, pursuant to the directions received from the Government of India to undertake the review of the TAP and to submit report thereon. The said expert, Delloitte, submitted a detailed final report dated 11.2.2011 running into 79 pages, regarding review of TAP. This obviously has been prepared on the basis of preceding other working papers. This final report deals with the summary of review of operational TAP; review projections; expense projection; SWOT analysis; and also annexures on evaluation of Indian market; domestic passenger market; trained in-capacity and yield; review heads; expense heads; management representations made by the AI; assumptions made by the AI in the TAP; and around 30 exhibits processed and considered in preparation of the review report. The SWOT analysis pertains to Strength, Weaknesses, Opportunity and Threats. This, in our opinion, is an exhaustive and indepth work done for preparation of the final report necessary for taking a decision on the subject to be considered at the highest level in the Government of India. After this expert''s report was received regarding MRO activities in the 4th meeting of GoM dated 26.6.2011, after due consideration of all aspects, direction was given to circulate the report given by Delloitte and to also give specific presentation before the GOM. It was also decided that the Ministry of Civil Aviation will take decision in line with the Cabinet Committee on Economic Affairs (CCEA) to bring up a note for operationalisation of GH and MRO subsidiaries of AI and to circulate the same.
30. As per these directions, it is also noticed that a report was submitted to Government of India by GoO to examine the TAP and Financial Restructuring Plan (FRP) in the month of October, 2011. Even this report of GoO exhaustively dealt with the issue of MRO operations, which is part of TAP, wherein detailed analysis has been done with regard to the activities of MRO and GH operations. The central point which has been driven in these reports is about the advantages of hiving-off. It would enable AI to concentrate on its core activities, mainly, passenger airlines business and the activities of GH. Engineering and MRO carried out under the umbrella of AI could be hived-off, so as to maintain a leaner workforce in AI and to bring down the aircraft manpower ratio to international levels. The GoO, therefore, recommended hiving-off of MRO and GH functions forthwith, as was proposed in the TAP by AI. Besides this, recommendation was also made for infusion of equity in AI, to be made contingent upon meeting the target date for hiving off.
31. It is also noticed that an independent assessment in regard to the financial restructuring plan of AI has been done by SBI Capital Markets Limited. Report in that behalf was submitted in February, 2012. Even this report was placed before the Government of India for consideration. The report deals with the capitation TAP-Strategic Initiatives and hiving-off of MRO SBU into Respondent No. 2 AIESL. The in-depth study in regard to operationalisation of AIESL, MRO Market- Opportunities and Outlook, Airframe MRO facility with BOEING at Nagpur, Airframe MRO facility with EADs at Delhi and MRO facility with GE was done. After due deliberations and consideration of all these reports and consultation papers, the issue of transfer of employees to Respondent No. 2 was also discussed as a part of implementation of TAP.
32. Thereafter, a Cabinet Note dated 29.8.2012 was prepared by the Ministry of Civil Aviation for operationalisation of AIESL, which deals with several issues in that regard. An approval was sought from the Cabinet for operationalisation of AIESL with an authorised capital of Rs. 1,000/- crores and equity infusion of Rs. 375/- crores in the next three years, as per para 3.5 of the Note. Only after examining all the relevant aspects, the Cabinet granted approval to the terms of para 8 of the Cabinet Note on 6.9.2012. Even this Cabinet Note has been made part of the paperbook though it is stated to be a secret document. The Note for the Cabinet prepared by the Ministry of Civil Aviation dated 29.8.2012 is the summation of the consultation papers and the advice which was eventually approved by the Cabinet on 6.9.2012 in terms of paragraph 8 thereof, which reads thus:
8. APPROVAL SOUGHT:
Approval of the Cabinet is solicited on the following:
(i) Ex-post facto approval to the establishment of AIESL and AIATSL as explained in Para 3 of this note;
(ii) Operationalisation of the existing subsidiary company, AIESL with an authorized capital of Rs. 1000 crores and equity infusion of Rs. 375 crore in the next 3 years as per Para 3.2 of this note;
(iii) Operationalisation of the existing subsidiary company, AIATSL with an authorized capital of Rs. 1000 crores; and equity infusion of Rs. 393 crore in the next 12 years. Out of this an amount of Rs. 150 crore is required in the first year itself as per Para 3.4 of this note;
(iv) Course of action as suggested in para 6 above relating to transfer of employees and assets from AI to AIATSL and AIESL.
33. Suffice it to observe that the process followed by the Government of India in taking the abovesaid policy decision of hiving-off of the concerned Departments of AI, has been taken after due deliberations, consultation and consideration of the entire relevant material including the expert''s opinion and including the adverse notings found on the files on the subject. What is decisive is the final policy decision taken by the Cabinet, being the final authority in that regard as per the Government Business Rules. However, the grievance and apprehension of the petitioners is founded on some adverse comments found in the files and the consultation papers about the feasibility and viability of Respondent No. 2. In our opinion, however, what has to be considered is the final decision of the highest authority and more importantly, the exhaustive process followed both by Respondent No. 1 in preparing and presenting the final TAP and also during the consideration thereof by the Government of India before taking the final policy decision. That has been done after due deliberations and consultations at different levels including with the experts.
34. Having said this, it will not be open for this Court to undertake judicial review, muchless, of the subjective satisfaction of the concerned Authorities on the basis of which such a policy decision has been taken. Notably, it is not a business practice decision taken by Respondent No. 1 as such, but a policy decision taken by the Government of India "in the larger public interest" which will have to be upheld and taken to its logical end by all concerned and in particular, by Respondent No. 1. That process is neither reversible nor can be interdicted on the basis of some unfounded apprehensions of the petitioners, who are only the employees of Respondent No. 1; and moreso, when they have been assured of complete protection of all their working conditions and including of continuity of service and past service in every respect. It is not only the long drawn process followed but also the contents of the expert''s reports and the TAP manifest the exhaustive consideration of all aspects concerning the issue of hiving-off/demerger of the concerned Departments of Respondent No. 1. As aforesaid, the apprehension of the petitioners are essentially based on some adverse noting in the file found which has been made available to the petitioners through RTI. We had the advantage of perusing the Note for the Cabinet dated 29.8.2012 prepared by the Ministry of Civil Aviation which is the basis of the policy decision taken by the Government of India. We are in agreement with the submission of the Respondents that this Court should be loathe to interfere with the policy decision which is taken after proper and due deliberations which process had started in June, 2009 and culminated with the Cabinet decision dated 6.9.2012.
35. As per the projections in the TAP, the Respondent No. 2 would become profit making undertaking in the span of seven years. That clearly belies the apprehension of petitioners about loss of job or likelihood of retrenchment. We have no reason to doubt those projections nor have the requisite expertise to do critical analysis thereof. Indubitably, from the projections in the TAP, coupled with the commitment of Government of India of translating it into action by infusing substantial funds towards the authorised capital of the Respondent No. 2 and the equity infusion, there is no reason to entertain the apprehension of the petitioners that the Respondent No. 2 is not a viable undertaking. We cannot persuade ourselves to accept the apprehensions of the petitioners to be real and substantial. Further, the petitioners are only employees and not experts on the subject. As against that, we have on record the successive reports and consultation papers including from the experts on the subject, obtained by the Respondent No. 1 and duly considered by the Government of India at different levels and finally by the Cabinet of Ministers, which is the highest Authority. As is noticed, the Respondent No. 1 had three options, but as per the policy decision, it preferred the third option of transferring the employees along with the Engineering Department to Respondent No. 2, instead of VRS or Compulsory Retirement Options. That too, by providing all such transferred employees with continuity of service, protecting their working conditions and also past service. In other words, the Respondents have acted fairly qua the concerned employees. Viewed thus, there is no tangible reason as to why the petitioners should resist the decision of hiving-off the concerned Departments of Respondent No. 1 and vesting the management and business thereof in the Respondent No. 2-its subsidiary.
36. Let us now turn to the issues raised by the petitioners. The first apprehension is of the possibility of closing down of Respondent No. 2 in due course or Respondent No. 2 indulging in retrenchment of some of the employees at a later point to bring down the aircraft manpower ratio to international levels. This, in our opinion, is an unsubstantiated apprehension. Secondly, the circumstances emerging from the record and the policy decision are indicative of Authorities having taken a conscious decision to increase the efficiency and productivity of the organisation. As per the projections in the TAP, the Respondent No. 2 would turn into a profit making undertaking within seven years time. The profit will be registered not because of retrenchment of employees but because of more productivity, which can be achieved only with the help of its employees. Assuming that the Respondent No. 2 at a later point of time was to resort to retrenchment of some of the employees; as and when that happens, those employees may take recourse to legal remedy. But, that cannot be the basis or justification to interdict the process of hiving-off, which is based on a just, fair and rational approach to arrive at the stated policy decision, taken at the highest level by the Government of India in the interests of the general public and moreso, when it is in conformity with the provisions of the governing law.
37. The next grievance of the Petitioners is that the decision of hiving-off is without any tangible basis and is intended only to bring down the aircraft manpower ratio to international levels, which is presently skewed ratio as compared to the other international airlines. Even this grievance of the petitioners, in our opinion, is devoid of merits. We say so because, the relevant reports and including the Cabinet decision which are part of the record, indicate to the contrary. The experts as well as the concerned Government Departments have prepared exhaustive technical reports. The attempt of the petitioners was, in the first place, to rely on some adverse noting found in the files or the concerned consultation papers. That cannot be the basis to accept the grievance of the petitioners that no proper viability assessment has been done with regard to Respondent No. 2. As aforesaid, the final policy decision taken by the Cabinet ought to prevail and as implicitly having traversed and overruled the adverse notings found in the files and the consultation papers.
38. The petitioners, however, contend that the so called assessment done by the experts is not enough nor proper. It is not possible to countenance this submission. The reports are technical reports and dealing with all aspects concerning the issue of hiving-off/ demerger of the concerned Departments of Respondent No. 1. It is not possible for us to sit over those reports and do critical analysis thereof. The final conclusion in the concerned reports is on the clear understanding that the Respondent No. 2 would finally turn out to be a profitable venture as per the TAP in about seven years period. So long as the petitioners'' working condition remain unaffected in every respect, we fail to understand as to how challenge to the decision of hiving-off/ demerger of the concerned Departments of Respondent No. 1 can be put in issue at their instance. We are not at all impressed by the grievance of the petitioners that the decision of hiving-off/demerger has been taken by the Respondent No. 1 without any proper viability assessment therefor.
39. The next apprehension of the petitioners is that the Respondent No. 1 is diverting its business to third parties, which can be and ought to be handled in-house in its Engineering Department. In that, the Respondent No. 1 recently issued tender in respect of engineering and maintenance work of its aircraft. Even the Respondent No. 2 had to compete in that tender process alongwith others. However, eventually, the contract was awarded to third party. This argument completely overlooks that after the hiving-off / demerger of Engineering Department of Respondent No. 1 and the management and control thereof vested in the Respondent No. 2, both being separate legal entities, in law, there is nothing wrong if the Respondent No. 1 wants to get its job done from agency who would offer competitive bid. That does not mean that the Respondent No. 1 was diverting its business with a view to create a situation forcing closure of Respondent No. 2 or retrenchment of employees of Respondent No. 2. It needs no repetition that the Respondent No. 2 has been created to tap the growing MRO civil aviation business in the region and not only to depend on the job from Respondent No. 1. The management of Respondent No. 2, on the other hand, will have to adopt to innovative skills and techniques, instead of its employees making grievance of loss of business of Respondent No. 2 or about the diversion of business of Respondent No. 1, as the case may be. In our opinion, this can be no basis to doubt the policy decision taken by the Government of India and in furtherance whereof, the hiving off of the concerned departments of Air-India is being effected.
40. The Respondents have justly relied on the exposition of the Apex Court in
41. Suffice it to observe that the argument under consideration does cannot persuade us to say that the policy decision in the present case is arbitrary, discriminatory or malafide. It may be useful to advert to the observations of the Apex Court in the case of
22. The criticism of the project being ''unconventional'' does not add to or advance the legal contention any further. The question is not whether it is un-conventional by the standard of the extant practices, but whether there was something in the law rendering it impermissible. There is, no doubt, a degree of public accountability in all governmental enterprises. But, the present question is one of the extent and scope of judicial review over such matters. With the expansion of the State''s presence in the field of trade and commerce and of the range of economic and commercial enterprises of government and its instrumentalities there is an increasing dimension to governmental concern for stimulating efficiency, keeping costs down, improved management methods, prevention of time and cost overruns in projects, balancing of costs against time-scales, quality-control, cost-benefit ratios etc. In search of these values it might become necessary to adopt appropriate techniques of management of projects with concomitant economic expediencies. These are essentially matters of economic policy which lack adjudicative disposition, unless they violate constitutional or legal limits on power or have demonstrable pejorative environmental implications or amount to clear abuse of power. This again is the judicial recognition of administrator''s right to trial and error, as long as both trial and error are bona fide and within the limits of authority.
(emphasis supplied)
42. The Apex Court, even in Balco''s case (supra), in paragraph 47, has expounded that, in matters relating to economic issues, the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona-fide and within limits of authority. It observed as follows:
47...Even though the workers may have interest in the manner in which the Company is conducting its business, inasmuch as its policy decision may have an impact on the workers rights, nevertheless it is an incidence of service for an employee to accept a decision of the employer which has been honestly taken and which is not contrary to law. Even a government servant, having the protection of not only Articles 14 and 16 of the Constitution but also of Article 311, has no absolute right to remain in service. For example, apart from cases of disciplinary action, the services of government servants can be terminated if posts are abolished. If such employee cannot make a grievance based on part III of the Constitution or Article 311 then it cannot stand to reason that like the petitioners, non-government employees working in a company which by reason of judicial pronouncement may be regarded as a State for the purpose of part II of the Constitution, can claim a superior or a better right than a government servant and impugn its change of status. In taking of a policy decision in economic matters at length, the principles of natural justice have no role to play. While it is expected of a responsible employer to take all aspects into consideration including welfare of the labour before taking any policy decision that, by itself, will not entitle the employees to demand a right of hearing or consultation prior to the taking of the decision.
(emphasis supplied)
43. The next issue raised is that even though the Respondent No. 2 is described as a subsidiary of Respondent No. 1, but the ownership of the management as well as business of Respondent No. 2 still vests in the Respondent No. 1. Not only that, the ownership of movables and immovables required for the business of Respondent No. 2 also continues to vest in Respondent No. 1. In the context of this submission, the Respondents have filed affidavit of Shri S.N. Bhattacharya, General Manager (IR) of Respondent No. 1 dated 22nd March, 2013, which reads thus:-
1. I am making this affidavit in pursuance of the oral directions of this Hon''ble Court as made at the hearing of the aforesaid Writ Petition by this Hon''ble Court on 21st March 2013 in regard to the clarification as regards transfer of the movable and immovable assets to the 2nd Respondent AIESL. I am making this affidavit without prejudice to all the contentions and submissions as made on behalf of this Respondent in the affidavits filed in the present Petition and also the oral submissions advanced in the course of arguments.
2. I say that as part of the hiving off the Engineering Department (MRO) of Air India to AIESL and in regard to the operationalization thereof, the relevant movable assets of the Engineering Department shall be transferred to AIESL. So far as the immovable assets of the Engineering Department are concerned AIESL will have exclusive rights thereto on a permanent basis. It is not possible to transfer the immovable properties to AIESL since they are leasehold assets on lease from authorities such as Airport Authority of India (AAI) and Government Authorities.
44. This affidavit is a complete answer to the apprehension of the petitioners that the ownership of movables will not be transferred in favour of Respondent No. 2. As regards the ownership of immovable properties, the Respondents are justified in taking a stand that the same cannot be transferred because of legal compulsion on account of being leasehold assets and lease conditions from authorities in that behalf. That does not mean that the control of management and business of Respondent No. 2 would continue to remain with Respondent No. 1, as is contended. For, the management of the Respondent No. 2 is with its Board of Directors and Executives, which is distinct from that of Respondent No. 1. The fact that the personnel therefor have been drawn from the organizational set-up of Respondent No. 1 does not mean that the management of Respondent No. 2 is or will be controlled by Respondent No. 1 as such. The Executive set-up of Respondent No. 2 is expected to and also entitled to take its own decision with regard to the management of Respondent No. 2. The fact that the Respondent No. 1 recently resorted to tender process for undertaking its engineering job-work, is, in itself, indicative of separation of business activities and not of control thereof with the Respondent No. 1. Suffice it to observe that the argument of the petitioners that the ownership, management and control of Respondent No. 2 is and will remain under control of Respondent No. 1 is unfounded and ill-advised.
45. The next argument of the petitioners is that no steps have been taken as of date by the Respondent No. 2 to seek approval of the FAA / EASA which is essential for receiving third party MRO contracts. Even this apprehension merely deserves to be stated to be rejected. Inasmuch as, the approval in the name of Respondent No. 2 will have to be obtained, independently. That will be possible only after the process of hiving-off / demerger is taken forward. That application could not have been made by the Respondent No. 1 for and on behalf of Respondent No. 2 in anticipation. The Respondents, through counsel, have assured the court that the application for obtaining approval of FAA / EASA to enable Respondent No. 2 to undertake third party MRO contracts, is being processed and requisite approval will be shortly issued by the authorities in the name of Respondent No. 2. Except placing this position on record, we do not deem it necessary to dilate on this issue any further.
46. It was then argued on behalf of the petitioners that the Engineering Department which has been hived-off to Respondent No. 2 is already in financial difficulty. There is a staggering amount of outstanding wages payable to its employees, to the extent of Rs. 100 crores. Further, there is no guarantee that the Respondent No. 2 would become self-sufficient and self-sustaining, in any case, before seven years as per the projections in TAP. This argument will have to be negatived keeping in mind the exhaustive reports and consultation papers pertaining to TAP. From that, it is amply clear that all financial aspects have been taken into account and then the final decision of hiving off was taken at the highest level. There is no reason, therefore, to doubt the decision of hiving off on the basis of the point under consideration. In our opinion, the apprehension is the outcome of misinformation and devoid of merits.
47. The fact that Respondent No. 2 will be wholly dependent on Government of India for financial support, at least for some time, does not mean that the policy decision is either arbitrary, discriminatory or malafide. That, in fact, has been taken in the larger public interest, as is noticed from the circumstances on record. It is well established position that the employees have no vested right, muchless to question the policy decision of the employer about reorganisation or hiving-off, as in the present case. Once it is found that the policy decision is taken after due deliberation and consideration of all aspects at the highest level, nothing more needs to be examined. Moreover, the concerned employees have been assured of and protected of all existing service conditions and including continuity of service and past service. Suffice it to observe that there is sufficient material on record to reassure that the Government of India has committed itself to support the TAP of Respondent No. 1, which includes the process of hiving-off of the concerned Departments, management and business whereof, would then vest with Respondent No. 2. Further, during the course of arguments, the Respondents through Counsel, assured that all benefits, privileges and facilities given to secure the interests of employees of Respondent No. 1, the same will be extended to the employees of Respondent No. 2, to be transferred from Respondent No. 1 - AI whilst they remain in service. In view of this assurance, we find no reason as to why the petitioners should still entertain any apprehension about the viability of Respondent No. 2.
48. The petitioners would then contend that the Respondent No. 2, even after hiving-off process is completed, would only act as a contractor of Respondent No. 1. This argument is canvassed on the basis of the so called agreement to be executed between Respondent No. 1 and 2, to which they have had access. We are not impressed by this submission. Firstly because, the foundation or the factual matrix in support of this submission is not part of the petition. It has come only in the form of written submissions and during the oral arguments. Secondly, we have no reason to doubt the stand taken by the Respondents before this Court that it is not a case of creating Respondent No. 2, to be later on appointed as a contract of Respondent No. 1. But, it is a pure and clear arrangement of hiving off / demerger of the concerned Department of AI in favour of Respondent No. 2, a separate juristic entity. The petitioners cannot be permitted to rely on the so called copy of the agreement yet to be executed between Respondent Nos. 1 and 2. Nor we would venture into interpreting only one or two clauses thereof brought to our notice in the written submissions filed on record to answer this contention. For the time being, we would accept the stand of the Respondents that Respondent No. 2 has been created as a fully owned subsidiary of Respondent No. 1 as a consequence of the decision to hive-off the concerned department of the Respondent No. 1 AI and not as its contractor, which decision was taken at the highest level by the Government of India. We are not inclined to accept the argument that the said policy decision is either arbitrary, discriminatory or malafide.
49. That takes us to the other legal issues raised by the petitioners. The first is about the purport of Section 25FF of the said Act. The said provision reads thus:
25FF. Compensation to workmen in case of transfer of undertakings.- Where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 25F, as if the workman had been retrenched:
Provided that nothing in this section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if-
(a) the service of the workman has not been interrupted by such transfer;
(b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and
(c) the new employer is, under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer.
(emphasis supplied)
50. The argument is that the decision of hiving-off/demerger, in the fact situation of the present case, is not covered by the abovesaid provision. Inasmuch as, it is hiving-off of a part of the activity of Respondent No. 1 AI and not of an undertaking as such.
51. In the first place, Section 25FF comes into play only in a case of transfer of ownership or management of an undertaking to a new employer and not limited to some activities of the undertaking. It must be transfer of the undertaking, de facto or de jure, as the case may be. In the present case, it is indisputable that the entire Engineering and GH Department is hived-off from AI. The management and business of concerned Departments would vest in the fully owned subsidiary created by Respondent No. 1 for that purpose, i.e., Respondent No. 2. It is not a case of transfer of only part of the activities in the given Department to Respondent No. 2, as is contended. There is no basis to support this argument. On the other hand, the record, including the stand of the Respondents before this Court, would indicate that the decision taken is to hive-off the entire Engineering and GH Department of Respondent No. 1. Thus understood, it will be a case of transfer of ownership or management of an undertaking within the meaning of Section 25FF of the Act. This conclusion reached by us is also reinforced from the sweep of the definition of expression "undertaking" as found in this provision. The expression "undertaking" has been defined in Section 2(ka) of the Act, which reads thus:
(ka) "industrial establishment or undertaking" means an establishment or undertaking in which any industry is carried on:
Provided that where several activities are carried on in an establishment or undertaking and only one or some of such activities is or are an industry or industries, then,-
(a) if any unit of such establishment or undertaking carrying on any activity, being an industry, is severable from the other unit or units of such establishment or undertaking, such unit shall be deemed to be a separate industrial establishment or undertaking;
(b) if the predominant activity or each of the predominant activities carried on in such establishment or undertaking or any unit thereof is an industry and the other activity or each of the other activities carried on in such establishment or undertaking or unit thereof is not severable from and is, for the purpose of carrying on, or aiding the carrying on of, such predominant activity or activities, the entire establishment or undertaking or, as the case may be, unit thereof shall be deemed to be an industrial establishment or undertaking;
(emphasis supplied)
52. In our opinion, therefore, the provisions of Section 25FF are attracted in the present case.
53. Section 25FF is essentially a provision for compensation to be paid to workman in case of transfer of Undertaking in which he was working, as if the workman had been retrenched by the transferor employer. It contains a deeming provision. In that, even though with the transfer of undertaking to a new employer, the concerned employee may continue with the new employer in the same capacity and not in fact retrenched at the time of such transfer, but the new employer accepts that employee as having suffered interruption in his service due to such transfer or the terms and conditions of his service are altered to be made less favourable before the transfer and / or his earlier service is not treated as continuous, in law, by virtue of this deeming provision the transferor employer is obliged to pay such employees prescribed compensation as if he was a case of retrenchment by him.
54. This provision applies only to the workmen covered under the provisions of Industrial Disputes Act and not to executive employees of the concerned Undertaking. The mandate of Section 25FF on a bare perusal, is that, before the Undertaking "is" transferred, the workman is entitled to notice and compensation as prescribed in Section 25F of the Act, if it is not covered by the exceptions carved out in the proviso to that section.
55. As observed earlier, the material on record in this case evinces that the ownership and management of the Engineering and GH Department of Respondent No. 1-AI is transferred to Respondent No. 2, in terms of the policy decision of the Government of India referred to above. But since it is a case of protecting all the service conditions referred to in the proviso to section 25FF, of the workmen to be transferred to Respondent No. 2 and not being interrupted by such transfer as also the terms and conditions of service applicable to them after transfer will be in no way less favourable to them than applicable immediately before the transfer and the new employer-Respondent No. 2 is committed to take the workmen/employees in service with continuity of service and including past service with no adverse change in the service conditions, the requirement of giving notice and compensation as prescribed u/s 25F of workmen/employees stands dispensed with, in law.
56. The next legal question is: whether the purported hiving-off / demerger is a sham - as the ownership and control of the business and management of Respondent No. 2 would remain with the Respondent No. 1. This argument will have to be stated to be rejected. For, we have already found that the impugned action of hiving-off / demerger is based on the policy decision taken at the highest level by the Government of India in larger public interest and is neither arbitrary, discriminatory or malafide. For the same reasons, even this ground will have to be negatived. As noted earlier, although the Respondent No. 2 is a fully owned subsidiary of Respondent No. 1, in law, is a separate juristic person. Similarly, the Executive Personnel having been drawn from the organisation of Respondent No. 1 on deputation, does not mean that the ownership or for that matter, the management or control of Respondent No. 2 would vest in the Respondent No. 1. The Respondent No. 2 being a separate juristic person, is entitled to and is expected to act independently in conformity with the business policies of the holding company. That does not mean that the transfer or demerger is a sham, as is contended. Further, merely because the immovable property of Respondent No. 1, on which the Respondent No. 2 would operate and continue to do business is not transferred in its name, can be no reason to label the hiving-off / demerger as sham. The Respondent No. 1 has given good justification for its inability to transfer the immovable assets in the name of Respondent No. 2, due to legal compulsion and Lease conditions imposed by different Authorities. It has come on record that the movable assets and including the tools and machineries have been taken over and will be transferred in favour of the Respondent No. 2. Thus, after the demerger, the Respondent No. 2 will have the ownership of movable assets and also complete control over its management and business. Taking any view of the matter, therefore, the argument of demerger being sham, in the fact situation of the present case, does not commend to us. As a necessary corollary, the argument that provisions of Section 25FF will have no application because, in law, there is no transfer of undertaking, will have to be negatived.
57. The next legal contention is on the assumption that the provisions of Section 25FF have no application to the present case. That contention having been rejected, it is unnecessary to delve upon the argument that as per the Common Law Principle, the management was under obligation to obtain consent of its employees before the demerger proposal was finalised and in particular, deciding to transfer the employees to Respondent No. 2. Once it is found that the case is covered by Section 25FF of the Act, the Common Law Principle will have no application. However, according to the petitioners, even if Section 25FF is applicable to the case on hand, the management was obliged to take consent of its employees as per the Common Law Principle to observe fairness. This argument will have to be rejected on the basis of the exposition of the Apex Court in the case of Mettur Beardsell (supra), wherein, it has been held that the transfer of employee cannot be invalidated because no prior consent of the employee was obtained, in matters covered by Section 25FF of the Act. Further, as observed by the Apex Court in Balco''s case (supra), transfer on account of transfer of Undertaking is an incidence of service for an employee and it is for the employee to accept that decision of the employer which has been honestly taken and which is not contrary to law. Moreover, the principles of natural justice have no role to play in relation to taking of a policy decision such as in the present case. The employees are not entitled to demand a right of hearing or consultation prior to taking of the decision.
58. The petitioners, however, contend that the dictum in the case of Mettur Beardsell (supra) is not a correct exposition of law. It is not possible for us to delve upon this argument. The fact remains that the dictum of the Apex Court that the consent of the employee is not required in the matter of transfer of undertaking, is binding on us, and therefore Common Law Principle has no application. If the express statutory provision becomes applicable, the question of invoking Common Law Principle, does not arise.
59. The petitioners, however, have placed emphasis on the decision in the case of BCCP Mazdoor Sangh (supra) to contend that the employer is expected to observe fairness if it is a matter of transfer of undertaking and the mandate of Article 14 of the Constitution will stare at his face. We shall deal with the efficacy of the said decision a little later. Suffice it to observe that this decision is not an authority on the proposition that even if the case is governed by the express statutory provision, the employer is bound to comply with common law principle.
60. That takes us to the next legal contention that the employer is obliged to at least have some consultation with the employees before taking a decision in the matter of their transfer as a consequence of transfer of Undertaking. Further, just as the transferee-employer has a right not to continue the services of the transferred employees, even the transferred employees have a right not to accept the transfer and continue with the transferor-employer as before.
61. As regards the requirement of consultation with the employees before taking decision on the matter of transfer of Undertaking, we would straight away reject the same for two reasons. Firstly, in the present case, it is noticed from the record that the representatives of the employees Unions had also given presentation at some stage before the final policy decision was taken by the Cabinet of the Government of India. Moreover, as held by the Apex Court in Balco''s case (supra), the question of employee influencing the decision of transfer of Undertaking to be taken by the employer does not arise. The employees have no vested right to continue in the employment and that right enures to them because of the statutory protection. Further, the employer, while taking such decision, has right to trial and error methods as long as both trial and error are bona-fide and within limits of authority. More importantly, the policy decision taken by the employer is an incidence of service for an employee to accept that decision of the employer which has been honestly taken and which is not contrary to law.
62. With regard to consultation before transferring the employees to Respondent No. 2 or, for that matter, the employee has also right not to accept the transfer and continue to work with the transferor-employer unless a tripartite agreement is entered between the parties, also does not commend to us. The argument is essentially founded on the basis of decisionin the case of Noakes vs. Doncaster Amalgamated Collieries 1940 All ER 549 of the House of Lords wherein it is held that in a case of transfer of property, rights and liabilities of the Colliery Company under the Companies Act the transfer of the contract of personal service would not be automatic. No doubt, the contract of personal service cannot be lightly brushed aside. However, once the case is covered by Section 25FF, the argument as advanced is unavailable - which is relevant for common law principles. In that sense, in law, there is no obligation on the employer to consult his employees either before taking decision on transfer of Undertaking or the transfer of workmen, as the case may be. It would then follow that there would be no requirement of entering into tripartite agreement. No doubt the decision in the case of Noakes (supra) has been noticed by the Apex Court in
63. The next question is whether the transferred employees of Respondent No. 1 have vested right to remain in service of Respondent No. 1. The employees, who are governed by the provisions of Section 25FF of the Act merely have right to notice and compensation as prescribed. The Apex Court has reaffirmed the position that the workmen can have right to compensation or right to work at the transferred place, but not both. The question of workmen insisting to continue with the transferor-employer even though the transfer of Undertaking is bona-fide and not contrary to law cannot be countenanced. When the Undertaking is transferred as per law, the employees in that Undertaking also stand transferred. If the conditions of transfer are covered by the proviso to Section 25FF, in that case, the question of employees getting notice and compensation as prescribed u/s 25FF would also not arise, in law. The employer is not even obliged to give notice and compensation to such workmen. Suffice it to observe that the employees have no vested right to remain in service of Respondent No. 1 notwithstanding the transfer of Undertaking. They are, however, free to take compulsory retirement or VRS, if they so desire, after being part of the Undertaking of Respondent No. 2, post transfer.
64. The next contention is about the breach of Section 9-A of the Act and as a consequence thereof to invalidate the transfer of employees. Section 9-A reads thus:
9-A. Notice of change.- No employer, who proposes to effect any change in the conditions of service applicable to any workman in respect of any matter specified in the Fourth Schedule, shall effect such change,-
(a) without giving to the workmen likely to be affected by such change a notice in the prescribed manner of the nature of the change proposed to be effected; or
(b) within twenty-one days of giving such notice:
Provided that no notice shall be required for effecting any such change-
(a) where the change is effected in pursuance of any settlement or award; or
(b) where the workmen likely to be affected by the change are persons to whom the Fundamental and Supplementary Rules, Civil Services (Classification, Control and Appeal) Rules, Civil Services (Temporary Service) Rules, Revised Leave Rules, Civil Service Regulations, Civilians in Defence Services (Classification, Control and Appeal) Rules or the Indian Railway Establishment Code or any other rules or regulations that may be notified in this behalf by the appropriate Government in the Official Gazette, apply; or;
(c) where the change is effected due to updating or replacing of the existing machinery, computerisation or increase in the immovable property and increase in production and that,-
(i) such change shall not affect the total wages of the workmen and their hours of work; and
(ii) the employer provides all the legitimate and required facilities such as training etc., to the workmen to acquire the skill of new job.
(emphasis supplied)
We may also avert to the Fourth Schedule, which reads thus:-
CONDITIONS OF SERVICE FOR CHANGE OF WHICH NOTICE IS TO BE GIVEN
1. Wages, including the period and mode of payment;
2. Contribution paid, or payable, by the employer to any provident fund or pension fund or for the benefit of the workmen under any law for the time being in force;
3. Compensatory and other allowances;
4. Hours of work and rest intervals;
5. Leave with wages and holidays;
6. Starting alteration or discontinuance of shift working otherwise than in accordance with standing orders;
7. Classification by grades;
8. Withdrawal of any customary concession or privilege or change in usage;
9. Introduction of new rules of discipline, or alteration of existing rules, except in so far as they are provided in standing orders;
10. Rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workmen;
11. Any increases or reduction (other than casual) in the number of persons employed or to be employed in any occupation or process or department or shift, not occasioned by circumstances over which the employer has no control.
65. On a bare perusal of these provisions, the same comes into play only in cases of change in the conditions of service specified in the Fourth Schedule. In the present case, the Respondents having reassured the employees of protecting their wages including the period and mode of payment of compensatory and other allowances and all other service conditions and including continuity of service and past service, none of the Items mentioned in the Fourth Schedule will have any application.
66. Emphasis was, however, placed on Items 1, 8, 10 and 11. On the finding already recorded, Item 1 will have no application to the case on hand. Inasmuch as, the wages including the period and mode of payment to the transferred employees has been assured and protected. Even the customary concession or privilege or change in usage as was applicable to the employees of Respondent No. 1 has been assured and protected. In that sense, it is not a case of change of that service conditions.
67. Turning to Item 10, it envisages rationalisation, standardisation or improvement of plan or technique "which is likely to lead to retrenchment of workmen". For the sake of argument, we may accept that the decision to hive-off/demerge the concerned Departments of AI has been taken for rationalisation, but that, per se, may not be sufficient. What is required to be established is that such rationalisation is likely to lead to retrenchment of workmen. That evidence is not forthcoming. As a matter of fact, this issue may give rise to an industrial dispute which ordinarily must be decided before the appropriate forum. However, the petitioners have chosen to raise this issue in the present proceedings that on account of transfer of undertaking, there is likelihood of transferred employees being retrenched sooner or later. We have already dealt with that aspect while considering the challenge to the decision of hiving-off / demerger on this count, in the earlier part of this judgment. We have found that the decision is taken with due deliberation and in consultation with the experts and after fair amount of consideration at different levels. It is a bonafide policy decision taken in the interests of the general public. There is nothing in any of these working papers or the final decision to even remotely suggest that as a consequence of hiving-off, the Respondent No. 1 must resort to retrenchment of the employees working in the concerned Department which will be hived-off. Nor there is any remote indication that the Respondent No. 2, in due course, must take steps to retrench the transferred employees. On the other hand, the TAP, as approved at the highest level, envisages that, the purpose of hiving-off of the concerned Department of AI was to make AI i.e., Respondent No. 1 leaner so as to bring down the aircraft manpower ratio to international and acceptable levels. Inasmuch as, its present ratio was a skewed ratio, as compared to the best practices and standards of other international airlines. Suffice it to observe that the impugned action does not contemplate retrenchment of workmen. It would, therefore, follow that the provisions of Section 9-A will have no application.
68. Coming to Item 11 of the Fourth Schedule, that applies in cases where any increase or reduction (other than casual) in the number of persons employed or to be employed in any occupation or process or Department or shift, not occasioned by circumstances over which the employer has no control. In the present case, the decision of the employer is to transfer the undertaking. The entire undertaking is being transferred on "as is where is" basis. That would neither result in increase nor reduction in the number of persons employed or to be employed by the transferee undertaking. Understood thus, even Item 11 will have no application. As a result, Section 9-A does not come into play at all.
69. In view of this discussion, it is not necessary for us to examine the stand of the Respondents that in any case, Section 9-A will have no application on account of the notification dated 29.8.1960. The petitioners, however, would contend that the said notification is no more in force after the repeal of the concerned enactment under which it was issued, as held by the Apex Court in the cases of Air India (supra) and Indian Airlines (supra). Having held that no case is made out of breach of any of the matters specified in the Fourth Schedule, any other infringement, if any, will be of no avail to attract Section 9-A of the said Act. Hence, even this contention fails and is rejected.
70. The next contention was that the decision to hive-off/demerge has been taken so as to circumvent the obligations u/s. 25N and 25O of the Act. Section 25N of the Act applies to matters of retrenchment of workmen. That situation has no application to the present case, not being a case of retrenchment of workmen; but purely a case of transfer of an undertaking covered by express provision in section 25FF, while fully protecting the service conditions and including continuity of service and past service of the employees, to be transferred to Respondent No. 2 undertaking, which is incidentally a wholly owned subsidiary of Respondent No. 1.
71. As regards Section 25O of the Act, that applies to closing down an undertaking, which is completely different and distinct dispensation than a case of transfer of undertaking governed by separate provision, such as Section 25FF. Accordingly, even this argument does not take the matter any further for the petitioners.
72. The next argument is of discrimination between the employees of Respondent No. 1. In that, some of the employees have been sent on deputation to Respondent No. 2 while some are sent on transfer. This grievance has been answered by the Respondents on the assertion that as per the TAP, the executive personnel to be made responsible for the management of Respondent No. 2 will have to be drawn from Respondent No. 1, on deputation, who can be sent back to Respondent No. 1 in due course. However, as regards non-executive employees, since the concerned Departments have been hived-off/demerged from Respondent No. 1 AI, no activity pertaining thereto would remain with AI. For that reason, the employees prior to such hiving-off / demerger working for Respondent No. 1 will have no work in the Respondent No. 1, instead that work would be available only in Respondent No. 2 undertaking. As a result, it was expedient to transfer all such no executive employees to Respondent No. 2 being a distinct class of persons. In other words, the decision to send some employees of Respondent No. 1 on deputation and some on transfer basis is neither arbitrary nor unfair muchless discriminatory. It is consistent with the object sought to be achieved to effectuate the process of hiving-off / demerger. Accordingly, the argument of discrimination does not take the matter any further.
73. In fact, somewhat similar situation was noticed by the Apex Court in the case of Gurmail Singh v. State of Punjab & Ors. (supra). In that case, the State took a decision to transfer all the tube wells in the Branch to Punjab State Tube Well Corporation, a Company wholly owned and managed by the State of Punjab. As a consequence, the State decided to terminate the services of the petitioners therein. The argument of the petitioners of discrimination because of transfer of other staff members such as Engineers, Clerks, etc. on deputation came to be rejected as can be discerned from paragraph 17 of the decision in Gurmail Singh (supra). In other words, it was neither improper nor illegal for the Respondents to draw the Executive Personnel on deputation from Respondent No. 1 to be sent to Respondent No. 2 and to transfer the non-executive employees working in the erstwhile Engineering Department to Respondent No. 2, as a package of transfer of Undertaking. Thus, the argument of the petitioners that even the no executive employees of Engineering Department could be sent on deputation completely overlooks the fact that there would be no work available which was presently discharged by them in the concerned Department of the Respondent No. 1 which, as a consequence of the transfer, would be hived-off and stand transferred to Respondent No. 2.
74. The last contention of the petitioners is that the contract of personal service cannot be assigned unilaterally. We have already dealt with this aspect in the earlier part of this Judgment. In the cases covered by section 25FF, it will not be a case of assignment of contract of personal service as such; but a new employer taking over the running undertaking, by way of transfer. The issue is already concluded in the light of the decisions of the Apex Court.
75. We shall now turn to the decision of the Apex Court in the case of Gurmail Singh (supra). Much emphasis was placed on the basis of some observations in this decision. However, what must be noticed is that the decision has been rendered in the context of the facts of that case. The Court found as of fact that the services of petitioners were "terminated", by the transferor-employer, which action was held to be unfair. The Court, however, upheld the decision of the State to transfer the tube wells of the Irrigation Branch to the Corporation. The Court noticed that there was no reason to doubt the bonafides and genuineness of that arrangement. Thereafter, it proceeded to examine the question as to whether the State is under obligation to protect the terms and conditions of service of tube-well operators. After having analysed the gamut of decisions on the subject, it went on to observe in paragraphs 16, 17 and 21 as follows:
16. The Supreme Court was dealing with a case of genuine transfer between two parties-a predecessor and a successor-at arms length where the principles of the law of contracts clearly held the field. The employees of the predecessor had no privity of contract with the successor and could make no claims against him. The industrial law, however, safeguarded his interests by inserting Section 25FF and giving him a right to compensation against his former employer on the basis of a notional retrenchment except in cases where the successor, under the contract of transfer itself, adequately safeguarded them by assuring them of continuity of service and of employment terms and conditions. In the result, he can get compensation or continuity but not both. The present case before us raises an allied, but sometimes more important issues, as to whether there cannot be situations in which the court or industrial adjudicator, should, in the interests of justice, fairplay and industrial peace, hold the employee entitled to continuity with the successor without being compelled to be satisfied with compensation from the predecessor. The Supreme Court itself has visualised such a case and made it clear that if a transfer is fictitious or benami, Section 25FF has no application at all. Of course, in such a case, "there has been no change of ownership or management and despite an apparent transfer, the transferor employer continues to be the real employer and there has to be continuity of service under the same terms and conditions of service as before and there can be no question of compensation". A second type of cases which comes to mind is one in which there is form, and perhaps also in law, a succession but the management continues to be in the hands of the same set of persons organised differently such as in Bombay Garage Ltd. v. Industrial Tribunal and Artisan Press v. L.A.T. In such cases, the transferee and transferor are virtually the same and the over-riding principle should be that no one should be able to frustrate the intent and purpose of the law by drawing a corporate veil across the eyes of the court (see, Palmer, Company Law, 23rd Edn., pages 200-201, paras 8 and 10 and the decision in Kapur v. Shields, cited therein). These exceptions to the above rules, we think, would still be operative. But it is not necessary here to decide whether this principle will help us to identify the corporation with the State Government in the present case for the present purposes, particularly as there is a catena of cases which do not approve of such identification (see
17. Looking at the facts of this case in the above perspective, it appears to us that the State Government has acted arbitrarily towards the appellants. It is true that the State Government was incurring losses and decided to transfer the tubewells to the Corporation. This decision would have been the most unexceptionable, prudent and perhaps the only decision that the Government could have taken, if it had decided to completely cut itself off thereafter from any responsibility or liability arising out of the operation of the tubewells. But that the Government did not do. As pointed out earlier, the State Government, although transferring the tubewells, undertook to recoup any losses that the Corporation might incur as a result of the transfer. The result, therefore, was that, despite the transfer of tubewells to the Corporation the Government continues to bear the losses arising from this activity. But, while doing so, it has abridged the rights of the appellants by purporting to transfer only the tubewells and retrenched the appellants from service as a consequences. A grievance has been made that, while several other members of staff belonging to the irrigation department such as engineers, clerks, etc. have been sent on deputation to the Corporation, the State has only chosen to retrench the service of as many as 498 tubewell operators. This differential treatment may not amount to discrimination as contended by the appellants because those others belonged to categories of Government staff which could come back to Government service in the event of the Corporation finding their services unnecessary at a future date, for one reason or another as they were persons with general qualifications who could be fitted into the other work of the irrigation branch. The tubewell operators, however, could not have been sent on deputation because there was no possibility at all of their being fitted into the irrigation branch later, in case the Corporation could find no use for them because, once the tubewells had been transferred for good to the Corporation, the Government could find no openings for them in the service. While, therefore, we do not agree with the appellant that the State Government discriminated against the appellants as compared with the other members of the staff by sending them on deputation but not the appellants, we think that this treatment meted but to the other staff shows that the Government did not hesitate to burden the Corporation with the liability of their salary etc. while serving on deputation which would only augment the losses, if any, that the Corporation would incur by operating the tubewells. But when it came to the case of the appellants, the Government has considered it fit to retrench their services, simultaneously making some arrangement or issuing some directions enabling the Corporation to absorb them as if they were fresh recruits. The assurance that they would be paid according to their original scales of pay and at their original leaves of pay came as a later development only because of the pending litigation. It was very fair on the part of the State Government to decide that, as the tubewells would be operated by the Corporation, it would be prudent to run them with the help of the appellants rather than recruit new staff therefore and that the Government should bear the burden of any losses which the Corporation might incur as a result of running the tubewells. But having gone thus far, we are unable to see why the Government stopped short of giving the appellants the benefit of their past services with the Government when thus absorbed by the Corporation. Such a step would have preserved to the appellants their rightful dues and retirement benefits. The conduct of the Government in depriving the appellants of substantial benefits which have accrued to them as a result of their long service with the Government, although the tubewells continue to be run at its cost by a Corporation wholly owned by it, is something which is grossly unfair and inequitable. This type of attitude designed to achieve nothing more than to deprive the employees of some benefits which they had earned, can be understood in the case of a private employer but comes ill from a State Government and smacks of arbitrariness. Acting as a model employer, which the State ought to be, and having regard to the long length of service of most of the appellants, the state, in our opinion, should have agreed to bear the burden of giving the appellants credit for their past service with the Government. That would not have affected the Corporation or its employees in any way-except to a limited extent indicated below-and, at the same time, it would have done justice to the appellants. We think, therefore, that this is something which the State ought to be directed to do.
21. To sum up, even before the insertion of Section 25FF in the Act, the employees of a predecessor had no right to claim re-employment by the successor in business save in exceptional circumstances. Even where available, that claim was not a matter of absolute right but one of discretion, to be judicially exercised, having regard to all the circumstances. An industrial tribunal, while investigating such a claim, had to carefully consider all the aspects of the matter. It had to examine whether the refusal to give re-employment was capricious and industrially unjustified on the part of successor in business or whether he could show cause for such refusal on reasonable and bona fide grounds such as want of work, inability of the applicant to carry out the available work efficiently, late receipt of the application for re-employment in view of prior commitments or any other cause which in the opinion of the tribunal made it unreasonable to force the successor-in-interest to give re-employment to all or any of the employees of the old concern. This discretion given to industrial courts is no longer generally available because of the insertion of Section 25FF. But in a case where one or both of the parties is a State instrumentality, having obligations under the Constitution, the Court has a right of judicial review over all aspects of transfer of the undertaking. It is open to a court, in such a situation, to give appropriate directions to ensure that no injustice results from the change-over. In the present case, the parties to the transfer are a State on the one hand and a fully owned State Corporation on the other. That is why we have examined the terms and conditions of the transfer and given appropriate directions to meet the needs of the situation. We, therefore, direct the State Government and the Corporation-which is but a wholly owned State instrumentality bound to act at the behest of the State-to carry out our directions above, the Corporation being at liberty to amend its rules and regulations, if necessary, to give effect to the same.
(emphasis supplied)
76. The Apex Court has reaffirmed that the safeguard provided in Section 25FF to the employee is right to compensation against his former employer on the basis of a notional retrenchment - except in cases where the successors, under the contract of transfer itself, adequately safeguarded them by assuring them of continuity of service and of employment terms and conditions. It is held that the employee can get compensation or continuity in service, but not both. The Court then dealt with three different situations to analyse as to whether the employer can be allowed to take recourse to the provisions of Section 25FF. In the present case, the first two situations dealt with, in our opinion, have no application. For, in the first situation, it will have to be found that the transfer is fictitious or benami. No such finding can be recorded in the present case. The second situation, is, that inspite of succession, the management continues to be in the hands of the same set of persons, organised differently. In other words, the transferee and transferor are virtually the same. We have already discussed this aspect in extenso in the earlier part. We have found that the Respondent No. 1 and its fully owned subsidiary-Respondent No. 2 are separate juristic persons. The management in both the Undertakings will be distinct. Both the Undertakings are free to independently manage their business. The Respondent No. 1 can and will have no control over the management of Respondent No. 2. The fact that the management personnel in Respondent No. 2 have been drawn on deputation from Respondent No. 1, does not mean that the transferee and transferor are virtually the same. Therefore, reliance placed on the second situation by the petitioners as applicable to the case on hand, is inapposite. As regards the third situation is where the transferor and/or transferee is a State or the State instrumentalities. The Court while adverting to its earlier decision in
77. The next judgment pressed into service by the petitioners is BCPP Mazdur Sangh (supra). The observations in this judgment will have to be understood in the context of the facts of that case and will have no application to the controversy on hand. In that case, the Court found as of fact that the employees were "appointed by NTPC". The services of those employees was sought to be governed by the Agreement dated 22nd May, 1990, in particular, clauses 8.2 and 16.3 thereof between Balco and NTPC and resultantly, the arrangement between Balco and Sterlite in terms of Agreement dated 20th June, 2002. The Court noted that since the concerned employees were appointed by NTPC much before the Agreement dated 20th May, 1990, and which could not be given retrospective effect, it proceeded to hold that such employees, in law, would continue to be in service of NTPC and not bound by the concerned Agreements. Any change in the service conditions as applicable to NTPC employees cannot be done unilaterally qua those employees. Whereas, the Agreements in question proceed on the assumption that the said employees were part of establishment of Balco which later on became private sector undertaking due to policy of disinvestment. There was difference in the conditions of service of employees of NTPC and of Balco. On this factual matrix, the Court proceeded to examine the controversy. Therefore, the observations found therein, will have to be understood in that context only. In the present case, however, having found that the transfer would not alter the working service conditions or the continuity of service and including past service in any manner; and both the Respondent No. 1 and Respondent No. 2 being instrumentalities of the State, coupled with the fact that the policy decision of hiving-off the concerned Departments of Respondent No. 1 to vest in the Respondent No. 2 having been taken at the highest level by the Government of India in larger public interest, this decision will have no application.
78. In the case of Anakapalla Co-operative Agricultural (supra), the first question considered by the Apex Court was whether the appellant is a successor-in-interest of the company. The court found that the question as to whether a purchaser of interest of an industrial concern can be held to be a successor-in-interest of the vendor will have to be decided on a consideration of several relevant questions as referred to at page 626 of the reported judgment. The court then also examined the scheme of proviso to Section 25FF and while doing so observed thus:-
The scheme of the proviso to S. 25FF emphasizes the same policy. If the three conditions specified in the proviso are satisfied, there is no termination of service either in fact or in law, and so, there is no scope for the payment of any compensation. That is the effect of the proviso. Therefore, reading S. 25FF as a whole, it does appear that unless the transfer falls under the proviso, the employees of the transferred concern are entitled to claim compensation against the transferor and they cannot make any claim for re-employment against the transferee of the undertaking. Thus, the effect of the enactment of S. 25FF is to restore the position which the legislature had apparently in mind when S. 25FF was originally enacted on 4 September 1956. By amending S. 25FF the legislature has made it clear that if industrial undertakings are transferred, the employees of such transferred undertakings should be entitled to compensation unless; of course, the continuity in their service or employment is not disturbed and that can happen if the transfer satisfies the three requirements of the proviso.
In this connection, it is necessary to point out that even before S. 25FF was introduced in the Act for the first time, when such questions were considered by industrial adjudication on general grounds of fairplay and social justice, it does not appear that employees of the transferred concern were held entitled to both compensation for termination of service and immediate re-employment at the hands of the transferee. The present position which results from the enactment of S. 25FF, as amended, is, therefore, substantially the same as it was at the earlier stage. It is common ground that if a transfer is fictitious and benami, S. 25FF has no application at all. In such a case, there has been no change of ownership or management and despite an apparent transfer, the transferor employer continues to be the real employer and there has to be continuity of service under the same terms and conditions of service as before and there can be no question of compensation.
(emphasis supplied)
This decision has already been considered in the subsequent decisions of the Apex Court to which we have made reference hitherto. Even this judgment would be useful to answer the controversy in favour of the Respondents, rather than the petitioners.
79. The petitioners have then relied on the decision in the case of R.S. Madho Ram & Sons. Even this decision examines the scope of Section 25FF and has been considered in the subsequent decisions of the Apex Court to which reference has already been made.
80. Reliance is then placed on the decision in the case of Workmen, Food Corporation of India vs. Food Corporation of India (supra), in particular paragraphs 17 and 19 thereof which deal with the purport of Section 9-A of the Act. In view of the finding already recorded by us that Section 9-A has no application to the fact situation of the present case, we do not think it essential to dilate further on this judgment.
81. Reliance was then placed by the petitioners on the decision in the case of Mohammed Noor & Ors. (supra) to contend that the theoretical concept of ownership appears to be that a person can be considered to be owner if he has absolute dominion over it in all respects and is capable of transferring such ownership. This decision is pressed into service in support of the argument that the ownership and management of the business of Respondent No. 2 would continue to be under the control of Respondent No. 1 and further that the ownership of even movable and immovable assets continue to be vested in Respondent No. 1. We have already dealt with this aspect in the earlier part of the judgment. We have held that the management and control of business hived-off / demerged and transferred to Respondent No. 2 is intended to be completely under the control of Respondent No. 2 being a separate juristic person, regardless of being wholly owned subsidiary of Respondent No. 1. Even the issue regarding transfer of ownership of movables has already been satisfactorily answered with by the Respondent No. 1 on affidavit filed before this court. The fact that the immovable properties to be used by Respondent No. 2 for its business cannot be transferred to Respondent No. 2 due to legal compulsions and lease conditions imposed by the authorities, it does not follow that the management and control of Respondent No. 2 will be under Respondent No. 1, as argued.
82. We may now turn to the decisions relied upon by the Respondents. Reliance is placed on the exposition in the case of
83. Reliance is also placed by the Respondents on the decision in Balco Employees Union (Regd.) vs. Union of India & ors. (supra), in particular, on paragraph 26, 36, 37, 46 to 49, 57, 93 and 98 in support of the argument that wisdom and feasibility of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provisions or the Constitution. For testing the correctness of a policy, the proper forum is Parliament and not the Courts. Further, the policy decision on economic matters, the Court should be very circumspect in conducting any enquiry or investigation and must be most reluctant to impugn the judgment of the experts who may have arrived at a conclusion unless the Court is satisfied that there is illegality in the decision itself. As regards the claim of the workers, useful discussion is found in paragraphs 47 to 50 of the same decisioni. The reasons which weighed with the Apex Court in relation to the process of disinvestment, on the same analogy, it is not open for the petitioners herein to question the policy decision of hiving-off / demerger taken at the highest level by the Government of India. We find substance in this submission.
84. Reliance is then placed on the decision in the case of
23. We have given our thoughtful consideration to the rival submissions made by the respective counsel appearing for the respective parties. In our opinion, the present writ petitions filed by the employees merits to be dismissed. Since Disinvestment was a policy decision of the Government of India. This Court also has held that the said policy decision should be least interfered in judicial review and that the Government employees have no absolute right under Article 14, 21 and 311 of the Constitution of India and that the Government can abolish the post itself. In the present case, the petitioners are not government servants and are merely employees of a public sector undertaking. This apart, the service conditions of the petitioners are being protected under the new management on the Disinvestment of the Hotel and the fact that other hotels are also in an advanced stage of Disinvestment in pursuance of the policy decision taken by the Government of India for Disinvestment of the hotel units. We see no reason to interfere with the aforesaid decision. In case ultimately the petitioners are aggrieved by any aspect of terms of reference and formalization of agreement and completion of Disinvestment it is always open to the petitioners to approach the courts for redressal of their grievances.
25. We have also carefully perused the scheme. It is evident from the scheme itself that all the employees were to be retained as stipulated in the transfer documents on the same terms and conditions of service for 1 year and they were entitled for payment of gratuity and provident fund as per the then existing scheme. The terms and conditions of service applicable to the employees was not in any way be less favourable than those applicable to them immediately on the date thereof....
(emphasis supplied)
85. The Court placed emphasis on the fact that the service conditions of the petitioners were fully protected under the new management consequent to disinvestment, as in this case. Further, it, being the policy decision taken by the Government of India, does not warrant interference. Similar approach can be and must be adopted in the fact situation of the present case.
86. Reliance is then placed by the Respondents on the decision in the case of
38. Shri P.P. Rao, argued that the minutes of the meeting dated 16.3.2000 as also the notification dated 5.2.2001 were liable to be quashed on the ground of gross violation of principles of natural justice. Learned Counsel urged that the appellant Association was not associated in the discussions at the time of the basic policy decision taken in 1993 and 1994 nor were they party to the discussions on 10.3.1998. They were also excluded from participating in the meeting dated 16.3.2000 and as such they were denied any say in the process of decision making affecting the rights of its members. According to the learned Counsel the exclusion of the appellants was in gross violation of principles of natural justice and fairness in action. The argument is clearly incorrect. The employees of Indian Airlines did not and could not have any say in the policy making. We do not find any such right nor is any such right established before us. It is one thing to consult an Association or as the came may be a Union for considering its views and quite another to recognize a right of such Union while taking the policy decision. We are not prepared to accept that the Indian Airlines Officers did not have in their mind the future of Indian Airlines employees and were totally oblivious to the same while framing the policy decision. In fact the Report of the Committee under the Chairmanship of Shri B.S. Gidwani in para 18 specifically makes the reference to the strong protest from the various unions of Indian Airlines including that of the Indian Airlines Commercial Pilots Union. It is noted therein that the Union formed a Coordination Committee for the purpose and sent representations expressing their resentment over the decision. Paras 18, 19 and 20 of this Report specifically refer to the protests by the Trade Unions particularly para 20 refers to the proposal of the Government to create Short Haul Operations Department (SHOD) in Indian Airlines. It is in pursuance of this that ultimately on 24th May, 1994 a separate SHOD Department was created. Condition No. 5 of this was as follows:
For those employees who presently possess a particular designation but do not have the requisite length of service for such a post, in accordance with Indian Airlines Rules, the following procedure will be followed:
i) Basic Pay will be protected.
ii) The persons concerned will be given the designation commensurate with his/her length of service and that designation will remain till he/she puts in the length of service required in accordance with the Rules of Indian Airlines.
39. We have before us one of the appointment orders in pursuance of this decision dated 24.5.1994. Initially, therefore, while considering the merger of Vayudoot with Indian Airlines it is not as if the authorities were oblivious to the future of the employees both of Vayudoot as well as Indian Airlines. It is by way of policy to protect the interests of both the Vayudoot as well as the Indian Airlines that SHOD came to be created on 24.5.1994 which was to remain as a separate Department without affecting the then Indian Airlines staff. It, therefore, cannot be suggested that the authorities were not alive to the representations made by the Indian Airlines employees or their Unions. The minutes of 10.3.1998 meeting specifically mention as under:
In order to absorb such a large number of employees the Indian Airlines created Short Haul Operations Department which consisted of Vayudoot employees in their grouped order of seniority as per their length of service with designation as were applicable in Indian Airlines. This took care of the opposition from the IA''s Unions and absorption of Vayudoot employees on the one hand and met with the direction of the Government on the other.
(Emphasis supplied)
The minutes further go on to suggest that 1023 employees of SHOD started representing against the lack of gainful utilization of their services, maintenance of separate seniority-list from that of the Indian Airlines employees, lack of avenues for career progression, etc. The minutes also suggest that various cadres such as the Pilots, Engineers and the Technicians as also the general category staff and officers repeatedly represented and held discussion with the management of Indian Airlines. It was, therefore, that the decisions were taken. True it is that the Appellant Union was not called for direct negotiations in this but firstly it cannot be said that the policy makers were not alive to the welfare of the Indian Airlines employees and secondly we did not see any right in favour of the appellant Association so that their non participation in policy making would result in wiping out the said policy decision altogether. This is not the case where the principles of natural justice could be brought in so as to hold that if the appellant Association was not made a party to the discussions for policy making, such decision making the policy would be hit by the principles of natural justice. After-all the number of SHOD employees was also substantial. They were in all 1023 employees. Therefore, once they were made the part of Indian Airlines family, their grievances were also liable to be considered and it is because of that that ultimately a decision was taken for their fusion with the Indian Airlines employees by way of a policy enumerating conditions therefore. Where it is seen that the authorities were alive to the service conditions of the Indian Airlines employees and had their future in mind also, the authorities were not bound to negotiate with the Appellant Association before formulating the policy. Such policy which is framed without active negotiations with the Appellant Association would not (for that reason alone) be rendered non est and would suffer from the vice of arbitrariness. After-all in ultimate policy which has been culled out, we do not see any arbitrariness, on the other hand we find the equities in between the Indian Airlines employees and SHOD employees to have been properly balanced and counter-balanced. The non participation of the appellant Association, in our opinion, under the peculiar facts and circumstances of this case would not be fatal to the policy decision. Where we have found the ultimate policy decision as also the principles on the basis of which said decision is taken to be blemishless, we would not chose to annihilate that decision and the principles on the sole ground that the appellant union was not heard.
45. Our attention was repeatedly drawn to the counter affidavit filed by Indian Airlines before Justice Ramamoorthy where it was said that the two cadres were not comparable. However, one must bear in mind that at that time the only question was as to whether the erstwhile Vayudoot employees could be allowed to compete for the higher posts in Indian Airlines when there was a complete compartmentalization between the employees of Vayudoot and Indian Airlines in the sense that the Indian Airlines employees could not be transferred to Vayudoot and vice-a-versa and further the SHOD employees were to be maintained as a separate and distinct Department from the Indian Airlines. The defence raised in that case, at that time, could not be said to be a be all and end all of the matter so as to hold that the two cadres even at the later point of time were wholly incomparable so that they could not be integrated at all. We have already clarified above that the matter of integration or as the case may be, fusion of these employees was a matter of policy which had become necessary in order to contain the grievances of substantial number of Vayudoot employees. Any such policy decision, unless the said decision was arbitrary, unreasonable or capricious, could not have been challenged by the employees as rightly held by the Division Bench of the Delhi High Court, which judgment is impugned before us. There is a specific observation in S.L. Dutta''s case, more particularly in para 18 thereof to the following effect:
18 The court should rarely interfere where the question of validity of a particular policy is in question and all the more so where considerable material in fixing of policy are of a highly technical or scientific nature. A consideration of a policy followed in the Indian Air Force regarding the promotional chances of officers in the Navigation Stream of the Flying Branch in the Air Force qua the other branches would necessarily involve scrutiny of the desirability of such a change which would require considerable knowledge of modern aircraft, scientific and technical equipment available in such aircraft to guide in navigating the same, tactics to be followed by the Indian Air Force and so on. These are matters regarding which judges and lawyers of courts can hardly be expected to have much knowledge by reasons of their training and experience. In the present case there is no question of arbitrary departure from the policy duly adopted because before the decision not to promote Respondent 1 was taken, the policy had already been changed. There was no question mala fides moreover the change in policy in this case cannot be said to be unwarranted by the circumstances prevailing as the matter was considered at some length by as many as 12 Air Marshals and the Chief of Air Staff of Indian Air Force....
These observations would make us slow in interfering with the policy decision. Even the managerial duties in the Indian Airlines as well as Vayudoot would involve the technical questions as to the nature of duties, training required and desirable qualifications. Again we cannot ignore the lengthy deliberations in various meetings to arrive at a proper decision taken by the responsible persons like Senior officers of Ministry of Civil Aviation, Senior Officers including the CMD of Indian Airlines as also the Ex-Director of SHOD and the Director (HRD) of Indian Airlines. In the wake of these personalities spending their valuable time to frame the policy regarding the fusion, we would be slow to interfere with such policy.
(emphasis supplied)
In view of this judgment, the argument of the petitioners that the impugned policy decision is vitiated being unilateral qua the transferred employees, does not merit consideration.
87. The next decision justly pressed into service by the Respondents is in the case of
40. But, quite apart from this objection based on lack of proper and adequate pleading, we think that even on merits the observations made by B.M. Lal, J. were clearly unjustified. There is not an iota of evidence to establish or even as much as to indicate that the State Government was actuated by any collateral purpose or was guilty of any ''sinister underhand dealing'' or was prompted by any corrupt motive in reaching the policy decision dated 30th December, 1984. What the learned Judge has said is based entirely on conjecture and suspicion and approach which does not go well with judicial disposition of a case. There are two important factors which throw considerable light in determining whether a policy decision is mala fide or motivated by improper considerations. One relates to the manner and method of reaching the policy decision and the other to the circumstances in which the policy decision is taken and the considerations which have entered into the making of it. Now, it is clear from the detailed statement of facts which we have given at the commencement of this judgment that the entire process commencing with the representation of the M.P. Distillers'' Association in July 1983 and culminating in the policy decision dated 30th December 1984 was spread over a period of about 17 months and it included gathering of information, on-spot inspection of the sites, collegiality of deliberations, candour of inter-departmental and intra-departmental communication and a dialectical interaction of different multilateral viewpoints. The policy decision was an informed and reasoned decision arrived at after detailed inquiries, fact-finding efforts and reports spreading over a period of more than a year and a half. Several queries and issues were raised by the Finance Department boldly and fearlessly and these queries and issues were fully and frankly death with, clarifications were given and the entire matter was fully considered. There was no attempt at any stage of suppress discussion and debate or to avoid or side-track or push under the carpet any doubts or questions raised by any of the parties involved in the deliberations. It is also significant that the policy decision was not arrived at by a single individual in the secrecy of his chamber but it was by the entire Cabinet and it was based on the recommendations made by the Cabinet Sub-Committee which was composed of four Ministers assisted by officers from different departments belonging to the highest scholars of the civil service. It may also be noted that the Cabinet Sub-Committee considered the matter from different angles, obtained relevant information, sent a Committee of officers for spot inspection, took stock of the valuation and the likely investment, reviewed the problem and worked out the solution and made its recommendations to the Cabinet. The entire proceedings of the Cabinet Sub-Committee were before the Cabinet including the reasons for which the recommendations were made and it was after considering these recommendations that the Cabinet reached the policy decision. The entire proceedings show that there was complete openness of discussion and deliberation. There was no suddenness of decision, no impulsive caprice or arbitrariness in reaching the decision. The policy decision was plainly and avowedly an informed and institutionalised decision and the manner in which it was reached is clearly indicative that it was neither mala fide nor guided by any corrupt or collateral considerations.
88. Reliance is then placed by the Respondents on the decision in the case of
89. Reliance is then placed by the Respondents on the decision in the case of
90. Reliance is also placed by the Respondents on the decision in the case of Mettur Beardsell Ltd. (supra), in particular, paragraphs 8 & 10. In paragraph 10, the Court observed thus:
10. Elaborate arguments were advanced on the question as to whether an employee''s consent is a must u/s 25FF of the Act. The common law rule that an employee cannot be transferred without consent, applies in master-servant relationship and not to statutory transfers. Though great emphasis was laid by learned Counsel for the Respondent on Jawaharlal Nehru University v. Dr. K.S. Jawatkar and Ors., a close reading of the judgment makes it clear that the common law rule was applied. But there is not any specific reference to Section 25FF or its implication. There is nothing in the wording of Section 25FF even remotely to suggest that consent is a pre-requisite for transfer. The underlying purpose of Section 25FF is to establish a continuity of service and to secure benefits otherwise not available to a workman if a break in service to another employer was accepted. Therefore, the letter of consent of the individual employee cannot be a ground to invalidate the action.
(emphasis supplied)
91. This decision is clearly an authority on the proposition that consent of individual employee not obtained, can be no ground to invalidate the action which is otherwise covered by Section 25FF of the Act.
92. While parting, we may place on record that the applicants in Chamber Summons No. 8/2013, which was allowed to be withdrawn vide order dated 19th March, 2013, have since filed substantive Writ Petition (on 21.3.2013), pursuant to the liberty granted in that order. That Writ Petition, we were informed bears Lodging No. 771 of 2013. The Counsel for the said petitioners made oral request to take up the said Petition for hearing. Since the arguments of both sides were completed in the present batch of Petitions and we had reserved the Judgment to enable the parties to file written submissions, as requested by them, we called upon the Counsel for the said petitioners to take instructions from his clients whether he would be adopting the arguments already canvassed by other Advocates and also ask for the same reliefs as claimed in the present Petitions. However, on instructions, he stated that his clients have asked for further reliefs. On this submission, we made it clear to the learned Counsel that the said petitioners are free to pursue further reliefs and contentions sought by them, which were not dealt with in the present Judgment and we should not be understood to have expressed any opinion in that behalf on merits. However, his request to hear that petition cannot be entertained at such belated stage, as it would inevitably result in hearing the entire matter afresh. In this backdrop, the present Petitions, hearing whereof, has been completed, were adjourned for pronouncement of Judgment. In the result, we hold that these petitions are devoid of merits and must be dismissed with costs. Ordered accordingly.
