Himachal Pradesh High Court
Hpsidc Officers Welfare Association ... vs State Of Himachal Pradesh And Ors on 27 December, 2022
Author: Satyen Vaidya
Bench: Satyen Vaidya
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWPOA No. 3215 of 2019 Reserved on: 19.12.2022 .
Decided on: 27.12.2022
HPSIDC Officers Welfare Association and ors. ....Petitioners.
Versus
State of Himachal Pradesh and ors. ...Respondents
Coram
For the petitioners
r to
The Hon'ble Mr. Justice Satyen Vaidya, Judge. Whether approved for reporting? 1 yes :Mr. Sunil Mohan Goel, Advocate.
For respondent No.1 :Mr. Desh Raj Thakur, Additional Advocate General with Mr. Narender Thakur, Deputy Advocate General.
For respondent No.2. : Mr. Balwant Kukreja, Advocate.
Satyen Vaidya, Judge By way of instant petition, petitioners have prayed for following substantive reliefs:-
"a. That this Hon'ble Court may kindly be pleased to issue a writ of certiorari quashing Annexure P-13 communication dated 18.10.2011 and Annexures P-15 communication dated 22.02.2012 issued by respondent No.1."
1 Whether reporters of the local papers may be allowed to see the judgment?
::: Downloaded on - 29/12/2022 20:41:23 :::CIS 2"b. That this Hon'ble Court may kindly be pleased to issue a writ of mandamus directing the respondent State to ratify the amendment carried out by the Board of Directors of respondent .
number 2-Company in clause 12 of the Service Bye Laws of respondent No. 2-Corporation, vide Resolution dated 23.09.1992 with further direction to respondent No.2-Corporation to pay to the members of petitioner No. 1-Association including petitioners 2 to 23 gratuity on their superannuation from the service of the respondent Corporation as per Clause 12 of the service Bye Laws as they stand after the amendment incorporated vide Resolution dated 2309.1992 by respondent No. 2-Corporation."
2. Brief facts necessary for adjudication of the petition are that respondent No.-2-Corporation ( for short 'SIDC') is a Government Company incorporated under Companies Act, 1956 having its own Memorandum and Articles of Association. Petitioner No. 1 is an Association of Officers of SIDC. Petitioners No. 2 to 23 are/were the officers of SIDC and also the members of petitioner No.1.
3. Petitioners have approached this Court with the grievance that respondent No. 1, vide its decision dated 24.10.2011, Annexure P-13 and decision dated 22.02.2012, Annexure P-15, has caused serious prejudice to their legal vested rights. Petitioners are entitled to retirement gratuity ::: Downloaded on - 29/12/2022 20:41:23 :::CIS 3 in terms of the Service Bye Laws of SIDC and Group Gratuity Scheme of LIC subscribed by it. According to the petitioners, as per Service Bye Laws of SIDC and Group .
Gratuity Scheme subscribed by it, there is no outer limit in terms of payable retirement gratuity to petitioners and other members of petitioner No. 1-Association, whereas respondent No. 1 is trying to impose the rules applicable to the State Government employees whereby the outer limit of gratuity is fixed at Rs. 10,00,000/-
4. The facts of the case are more or less admitted.
SIDC, has not denied the factual position and has simply come out with a stand that it is bound by the orders of State Government in terms of Article 143 of the Articles of Association of SIDC. Respondent No. 1 has not submitted any reply. There is only one affidavit sworn by Joint Secretary, Industries to the Government of H.P. in response to certain questions posed by this Court vide its order dated 18.04.2012. In such affidavit also, the factual position has not been denied. The only assertion made on behalf of State Government is that it has already directed SIDC to implement the directions issued by the State Government, vide Annexures P-13 and P-15.
::: Downloaded on - 29/12/2022 20:41:23 :::CIS 45. The Service Bye Laws of SIDC from the inception provided that its officers shall be entitled to payment of gratuity on retirement at the rate of 15 days .
salary in a year multiplied by the number of years rendered in service by the incumbent, subject, however to maximum limit of salary equivalent to twenty months. On 10.03.1986, the Board of Directors (for short 'BOD') of SIDC approved the introduction of a Group Gratuity Scheme of LIC (for short, "the scheme"). The entitlement of the petitioners for gratuity remained the same as earlier provided in the Bye Laws. Thus, the rights of petitioners were not affected, rather, the LIC had promised to discharge the liability of SIDC towards payment of gratuity on receipt of periodical premium. The Service Bye Laws of SIDC were accordingly amended. The trust was formed and was again approved by the Board of Directors on 07.04.1986.
6. The rules framed under the scheme provided for payment of gratuity to the officers of SIDC. Rule 8 of Section IV of the Rules provided as under:-
"8. Benefits on Survival to Superannuation Date:-
Upon a member's retirement at superannuation date, there shall become payable to the Trustees, for the benefit of the member, an amount equal to 15 days salary as on the Annual Renewal Date last preceding the Superannuation Date multiplied by the total number of ::: Downloaded on - 29/12/2022 20:41:23 :::CIS 5 years of service completed by the Member, subject to a maximum of 20 months' salary.
The Trustees shall pay the benefits to the Member in accordance with the provisions of Appendix (1).
Members who have not rendered 5 years' service, .
shall not be entitled to any benefits hereunder. The Assurances effected in respect of such Members would be surrendered by the Trustees and the Surrender Value credited to surplus Account."
7. Subsequently, on 19.10.1990 the SIDC carried amendment in Clause-12 of Service Bye Laws and decided that gratuity shall be paid to the petitioners as was payable to State Government employees. State Government approved the amended Bye Laws in exercise of powers under Article 143 (i) of Articles of Association.
8. Petitioners and other affected employees of the SIDC raised objection. The Board of Directors reviewed its decision, vide its meeting held on 23.09.1992 and decided to grant gratuity to its employees, in accordance with the Scheme adopted by it.
9. The fact remained that the employees of SIDC were getting the gratuity in terms of its Service Bye Laws and the Scheme.
10. In 2011, the Auditors from the office of Accountant General raised objection with respect to the grant of gratuity to the employees of SIDC, on the ground that it exceeded the limit of Rs. 10,00,000/- prescribed for ::: Downloaded on - 29/12/2022 20:41:23 :::CIS 6 the State Government employees. SIDC defended its decision, but State Government, vide impugned Annexure P-13 on 24.10.2011 directed the SIDC to adhere to the .
amendment carried in Bye Laws on 19.10.1990. SIDC again requested the State Government to review its decision, but respondent No. 1 reiterated its earlier decision, vide impugned Annexure P-15, dated 22.02.2012.
11. I have heard learned counsel for the parties and have also gone through the record.
12. It has been contended on behalf of the petitioners that the decisions of State Government communicated, vide impugned Annexures P-13 and P-15, are harsh and arbitrary. As per petitioners, premium towards Group Gratuity Scheme of LIC is paid from the contributions made by the petitioners and other members of the Scheme. State Government does not bear any financial burden in this regard. The amount of gratuity is paid by LIC to SIDC, which further is disbursed to the retiring officers. It is further submitted that the SIDC, otherwise, is a profit earning Government Company and for such reason two other Government undertakings namely Nahan Foundry Limited and Small Scale Corporation were ::: Downloaded on - 29/12/2022 20:41:23 :::CIS 7 merged with SIDC. On this count, SIDC had borne the burden of losses of these two entities to the extent of about Rs. 5 Crores. The employees of SIDC had objected for .
such merger, on the ground that they would be ultimate sufferers in terms of restrictions on their service conditions, but Government of India while approving the Scheme of Merger in February, 2011, has specifically agreed that the payment of allowances and other employees benefits to those employees of SIDC, who were in service on the date of merger would not be reduced or adversely affected. Further contention of petitioners is that though the SIDC is wholly owned and controlled by State, but still is an independent autonomous entity. The State Government decision to force the SIDC to amend its Bye Laws is clearly arbitrary being without any rationale and justified reasons.
13. It is not in dispute that earlier there was a Government Company known as 'Himachal Pradesh Minerals and Industries Development Corporation Ltd.' (for short, "MIDC") which was incorporated in the year 1966 under the Companies Act, 1956. The name of said Company was changed as 'Himachal Pradesh State ::: Downloaded on - 29/12/2022 20:41:23 :::CIS 8 Industries Development Corporation Ltd'. after approval of Government of India and thus, the SIDC was registered as a Company under the Companies Act on 21.10.1986. The .
objects of SIDC as detailed in Memorandum of Association clearly spelt the intent of State Government to relinquish some of its functions to compete in the open market by Industrial Development in the State. It is also inferable from the Articles of Association that sufficient provisions were made for independent/autonomous working of SIDC. The Board of Directors was vested with administrative and decision making powers in respect of various functions of SIDC. It was by virtue of clause 143 of Articles of Association that certain decisions of Directors were held to be reserved for the decision of the Government of H.P. which included rules governing the conditions of service of the employees provident fund and other rules, creation of reserved and special fund.
14. Chapter-12 of the Bye Laws governing service condition of the employees of SIDC as incorporated originally provided for payment of gratuity. Bye Laws 12.4 specifically provided for entitlement to the rates of gratuity as under:-
::: Downloaded on - 29/12/2022 20:41:23 :::CIS 9"12.4. The rates of gratuity payable to an employee shall be as follows:-
a) For every completed year of service or part thereof in excess of six months, the employer .
shall pay gratuity to an employee at the rate of fifteen days' pay based on the rate of pay last drawn by the employee concerned.
b) The amount of gratuity payable to an employee shall not exceed twenty months' pay."
15. In continuation of aforesaid Bye Laws and as a matter of financial prudence SIDC adopted Group Gratuity Scheme of LIC by entering into an agreement with the LIC. As per this Scheme, against payment of periodical premium, LIC had undertaken to discharge liability of SIDC towards payment of gratuity to its employees.
16. SIDC, as noticed above, had come into being on 21.10.1986 and it had stepped into the shoes of MIDC.
The fact of the matter is that that Group Gratuity Scheme of LIC had been adopted by MIDC. On coming into being of SIDC, the said Scheme continued without any reservation shown by the State Government. It is clearly visible that the State Government had not raised any such objection. After amending its Bye Laws on 19.10.1990, SIDC had again reviewed its decision on 23.09.1992 and ::: Downloaded on - 29/12/2022 20:41:23 :::CIS 10 inconformity there with the gratuity was being paid to the employees of SIDC. Again, the State Government never objected to such action of SIDC. It is only on the objection .
of Auditor of Accountant General in the year 2011 that the SIDC had to move the case to State Government for ratification of its decision and evidently thereafter State Government has refused such ratification.
17. Apparently, Clause-143 of Articles of Association, more particularly, Sub-Clause (ii), thereof has been incorporated for the purposes of government control on the affairs of SIDC touching the matters having serious bearing on its affairs. The vestment of such powers with State Government cannot be said to be absolute in the sense that it cannot be used arbitrarily. The arbitrariness corrodes the very purpose of vestment of power. More absolute the power, higher becomes the necessity for its use with fairness and due care/caution. The decision of the authority having power need to have some rationale and justifications, which should also have the backing of objectivity.
18. In the given facts of the case in hand, the State Government has failed to justify its stand, so much ::: Downloaded on - 29/12/2022 20:41:23 :::CIS 11 so that, it has not been able to file reply. Nothing has come forth, as to why, the SIDC has been directed to follow the principle of payment of gratuity as applicable .
to the State Government employees. There should not be any reason with the State to deny the benefit available to the petitioners, when there is no financial burden in this regard on the State Government. The gratuity is paid by LIC. The premium is paid to LIC from the contributions of the petitioners and other similarly situated employees of SIDC. During the course of hearing, it has been submitted that SIDC has, in fact, received the amount of gratuity in respect of those petitioners who have, now, retired in terms of scheme. SIDC has paid such petitioners a sum of Rs. 10,00,000/- only and remaining amount is lying with it. This further makes the stand of respondent-State totally incomprehensible.
19. It is further not understandable, in case, the State Government had felt any financial constraints for granting the benefit of gratuity to the petitioners in terms of Bye Laws of SIDC, it would not have meddled with its entity by merging sick undertakings with the profit earning undertaking. Even if it was to be done, it ::: Downloaded on - 29/12/2022 20:41:23 :::CIS 12 should not have been done at the cost of the vested right of its employees.
20. This Court has not been able to find any .
reason for justification of stand taken by State Government, in result, petition is allowed. Annexure P-13, dated 24.10.2011, and Annexure P-15, dated 22.02.2012, are quashed. Respondent No. 1 is directed to ratify the amendment carried out by the Board of Directors of SIDC with a purpose to enable it to disburse the gratuity to the petitioners in terms of its Bye Laws as also the Group Gratuity Scheme of LIC adopted by it.
21. The petition is, accordingly, disposed of, so also the pending miscellaneous application, if any.
(Satyen Vaidya)
27th December, 2022 Judge
(sushma)
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