National Aluminium Ors. V. Ananta Kishore Rout & Ors.

National Aluminium Ors. V. Ananta Kishore Rout & Ors. in India

National Aluminium Ors. V. Ananta Kishore Rout & Ors. [2014] Insc 255 (8 May 2014)

Court Judgment Information

  • Year: 2014
  • Date: 8 May 2014
  • Court: Supreme Court of India
  • INSC: [2014] INSC 255

Text of the Court Opinion


Civil Appelate Jurisdiction

CIVIL APPEAL No. 5989 of 2008 National Aluminium Co. Ltd. & Ors. .Appellant(s) Ananta Kishore Rout & Ors. .Respondent(s) With Civil Appeal No.5992 of 2008 Civil Appeal No.5993 of 2008


1. The Appellant herein, National Aluminium Company Limited (NALCO) has established two schools for the benefit of the wards of its employees. These schools are known as Saraswati Vidaya Mandir (SVM) and located at NALCO Nagar in Angul district and at Damandjodi in Koraput district, Orissa. Management of these schools is presently in the hand of Saraswati Vidya Mandir (SVS) which is affiliated to Vidya Bharati Akhila Bharatiya Sikhya Sansthan.

2. Two Writ Petitions were filed by the employees of each of school in the Orissa High Court, Cuttack for a declaration that they are the employees of NALCO and be treated as such, with consequential prayer that these employees be also accorded suitable pay scales as admissible to the employees of NALCO. Having regard to the commonality of fact, situation under which these writ petitions were filed, as well as singularity of the issue involved, both these writ petitions were heard together by the High Court, the outcome of which is the judgment dated 21st December, 2006. The High Court has accepted the case of these employees of SVM holding them to be the employees of the NALCO. As a sequittor, direction is issued to the NALCO to make available the benefits, which are enjoyed by other employees of the NALCO. Present appeals, filed by NALCO, question the validity of the aforesaid judgment of the High Court.

3. We may first take note of those facts which are not in dispute.

These are as follows:

NALCO is a Public Sector Enterprise under the Government of India. It is Company incorporated under the Indian Companies Act, 1956 with its registered office at Bhubaneswar, Orissa. NALCO is engaged in manufacture and production of Alumina and Aluminium. It has its manufacturing units: one at NALCO Nagar, Angul and at Damanjodi in Koraput district.

4. In the year 1984, NALCO established two schools in the townships set up by it for its employees working in its manufacturing units at NALCO Nagar, Angul and at Damanjodi, with a view to provide educational facility mainly to the children of its employees from primary to +2 level though the children from neighbouring area are also given admissions. It also provided necessary infrastructure, such as land, building, furniture, library, laboratory equipments and other assets. The said schools admittedly are unaided private schools. On 15th May, 1985, NALCO entered into two separate but identical agreements for the aforesaid schools with the Central Chinmoy Mission Trust, Bombay (in short, CCMT) whereunder the NALCO entrusted the management of the schools on contract basis to CCMT and the schools were called Chinmay Vidyalayas. According to the these agreements, NALCO agreed to pay an amount of Rs.10,000/- per annum to CCMT as donation towards the supervision charges for each school.

5. These Agreements acknowledged the fact that the two schools have been established by the NALCO and to start and run those schools, it had approached CCMT. The Agreements further stipulated terms and conditions on which CCMT was to run and manage these schools. It is a common case of the parties that the schools have been recognized by the State Government (Education Department) and also affiliated to the Orissa Board of Secondary Education. As per the requirements of the Statute governing school education, every school is required to constitute a Managing Committee. Accordingly, these Agreements also provided that the powers to establish, maintain and manage the schools shall vest in the Managing Committee consisting of seven members. Out of these seven members, four were the nominees of CCMT and three persons were nominated by the NALCO.

Chairman, Vice-Chairman and Secretary-cum-correspondent were to be the nominees of CCMT. Though the admission in the schools is open to all children irrespective of caste, creed and community, preference is to be given to the children of the employees of the NALCO. Apart from constructing the building and providing requisite furniture and fittings, NALCO was also to provide quarters at its own cost for teachers and staff members of the schools. NALCO also agreed to provide residential accommodation to every employee in due course. Significantly, the employees of the schools were to be treated at par with NALCO employees so far as the medical, consumer co-operative, club and similar facilities are concerned. NALCO also agreed to meet the revenue deficit as per Clause 15 of the said Agreement which reads as under:

“15. That NALCO shall meet the revenue defit of Chinmaya Vidyalaya, Damanjodi on the actual basis. Since NALCO shall be meeting the capital expenditure and the revenue deficit, NALCO shall have the right to fix the tuition fees and other charges from time to time for children of NALCO employees and others.”

6. These agreements were terminable at the instance of the parties by giving six months prior notice in writing to the other party. In the event of termination the agreements, the services of the staff employed by the school were liable to be terminated in accordance with the terms of their appointment in these schools.

7. These agreements came to an end by efflux of time in the year 1990. It appears that CCMT was not interested in continuing with the aforesaid arrangement. This led NALCO to find another organization for running and managing the schools. It is how SVS came into the picture which agreed to manage both the schools.

Accordingly Agreement dated 18th May, 1990 was entered into by NALCO with SVS. As per the Agreement, name of the school was changed from Chinmaya Vidyalaya Damanjodi to Saraswati Vidya Mandiar (SVM). As per this agreement NALCO agreed to pay Rs.2,000/- per month to the SVS towards its supervision charges which was enhanced from time to time and this figure was Rs.50,000/- per annum at the time of the filing of the writ petitions in the High Court. Even as per this Agreement, the Executive Authority of these two schools vests in the Managing Committee to be constituted separately for each of the schools. This Managing Committee is constituted with the following members:

“a) The respective unit heads of Damanjodi/Angul or its nominee shall be the ex-officio president;

b) A nominee of the Finance department of the respective units of NALCO;

c) A nominee of the Personnel Admn. Department of the respective units of NALCO;

d) A representative of the parents/guardians who hsall be an employee of NALCO to be co-opted by the Managing Committee respectively for each school at the units;

e) 4 members to be nominated by the Samiti;

f) The headmaster of the school;

g) A representative of the teachers;

h) A part-time representative of the Samiti who shall act as the ex-officio member-secretary of the Managing Committees.” The aforesaid clause in the Agreement is with a proviso that the relevant provisions of the Orissa Education Act and Rules shall be kept in view while making aforesaid nominations.

8. Accordingly, two Managing Committees were constituted; one for each school and both have been registered under the Societies Registration Act, 1860. As per the provision contained in clause 4 of the aforesaid Agreement, other clauses relating to placing at the exclusive disposal of the SVS, the two school premises along with requisite furniture/fittings, library, laboratory games equipments, audio-visual, etc. remain as it is. Likewise provision for providing deficit funds, after accounting for the fee and other amounts received from the students, by NALCO is also maintained.

Other functions which are specifically assigned to the Managing Committee, as per this Agreement, are as follow:

“(a) Audit of the schools accounts by the Auditors appointed by the Managing Committee.

(b) Managing Committee to raise funds by way of donation and voluntary contribution including power to borrow funds or raise loans for the purpose of the schools after getting prior approval of the Samiti, without any liability to NALCO.”

9. It is also significant to note that apart from providing usual termination clause, as per this Agreement, the Samiti agreed to retain the services of the existing teachers and staff in both the schools as provided in clause 25 thereof, which is to the following effect:

“25. It has been agreed by the Samiti to retain the services of the existing teachers and staffs in both the schools on their existing terms and conditions of service and the Managing Committee in due course may review the position.”

10. Since the teaching and non-teaching staff working in the aforesaid schools had no service conditions, there was discontentment among the employees. Therefore, it was thought proper to frame rules regulating conditions of service for such employees. A joint meeting was convened for this purpose wherein certain modalities were worked out to frame rules regarding recruitment and conditions of services of the employees of the schools and a committee for this purpose was constituted comprising of the authorities of both the schools at Angul and Damanjodi, the Manager (Personnel) of NALCO and the Secretary of SVS. A set of draft rules was framed under the name and style ‘Saraswati Vidyamandir Employees’ Recruitment and Conditions of Service Rules, 1995’ (Rules’ hereinafter). The Rules so framed were approved by the Corporate office of NALCO.

11. These Rules provide for the scales of pay of different categories of employees, the modalities for recruitment of Principal, teachers and other non-teaching staff and determination of seniority of the employees besides fixing the age of superannuation etc.

12. It cannot be disputed that as per these Rules, it is the Managing Committee’s of the schools, which are registered as societies under the Societies Registration Act, undertake the recruitment of the teaching and other staff, issue appointment letters and take all other decisions in respect of the services of teaching and other staff including promotion, pay fixation, seniority, grant of leave, disciplinary action, retirement, termination etc. This has been so demonstrated by NALCO by producing copies of the orders issued by the MCs relating to each of the aforesaid aspects. Not only this, it has been so provided under the Rules as well. Rule 4 prescribes the method of recruitment;

Rule 2(a) defines the appointing as MC; Rule 4(11) deals with the cadre of posts; Rule 20 touches the aspect of termination of service; and Rule 24 deals with the discipline and disciplinary action.

13. From these facts, narrated above, one can easily find out as to what are the respective cases of both the parties. The employees of both schools filed the writ petitions to lay the claim that they are the employees of the NALCO on the ground that real control and supervision of the schools, including the staff is that of NALCO which has the final say in all vital matters. It was their argument that though the appointments are made by the Managing Committees of the schools, it is on the recommendation of the Selection Committee of which the authorities of NALCO are the members. Further, since inception of the school, an officer in the rank of General Manager of NALCO has been functioning as the President of the Managing Committee, and an officer in the rank of Chief Manager/DGM (Personal Admn.), and the DGM (Finance) are the other two members. That apart, the building furniture/fittings and all necessary paraphernalia for running of the schools is provided by and is the responsibility of NALCO. Even the finances are provided by NALCO the financial budget is approved by the Board of Director of the NALCO. NALCO even fixes the tuition fee. No transaction of the schools can be made without the approval of DGM (Finance), NALCO which includes the expenditure with regard to the salary component, provident fund, medical reimbursement, leave travel concession, festival advance, increments, etc. Teaching and non-teaching staff of the schools are allotted with residential quarters by the NALCO. It was thus argued that NALCO plays a decisive role in the matter of appointment of the employees as well as in the management of the schools.

14. On the other hand, the case of the NALCO was that Managing Committees are the societies registered under Societies Registration Act having independent legal status; it is these MCs which are not only the appointing authorities but disciplinary authorities with all controlling power over these employees and therefore NALCO cannot be treated as the employer of the staff of the schools.

15. The High Court after considering the respective submissions and perusing the material on record came to the conclusion that real control and supervision over these employees and even over the schools, was that of NALCO. Some of the relevant discussion in the impugned judgment is extracted below:

“A bare look at the basic document, i.e. agreement dated 15th May, 1985 entered into between the NALCO and CCMT, Clause 20 of it, as indicated above, would show that on termination of the agreement, only the name of the Chinmaya Vidyalaya cannot be used by NALCO and subsequently, the place of CCMT has been taken over by SVS. From the voluminous documents as referred to above, there can be no second opinion in regard to the fact that the schools were established by the NALCO, funded by NALCO authorities and it has deep and pervasive control over the schools. It is the NALCO, which pays the salary, Provident fund, and makes the medical reimbursement, the SVS as stated in its affidavit, only looked to the discipline, curriculum and management of the schools. In this regard, we may refer to a decision rendered by this Court in OJC No.4581985 (Duryodhan Swain & Ors. vs. Fertiliser Corporation of India and others) on 22.11.1990, wherein a similar question arose. Twenty-one petitioners serving in the Fertilizer Higher Secondary school in different capacities had filed the said writ petition. The said school was imparting teaching in + 2 course and on account of the welfare need of its employees, the school was given grant and was converted into a Higher Secondary School. Even though a managing committee was constituted for the said school, representatives of trade unions and of guardians and parents as well as the officials of the corporation were also included.

The financial control of the school rested in a larger measure with the corporation and it was fully financed by the corporation. In those prevailing facts and circumstances, this court held that the corporation had deep and pervasive control over the working of the school and ultimately, directed the corporation to accept the petitioners to be its employees.

Now in the instant case, at the cost of repetition, we may say that the agreement dated 18.05.1990 entered into between the NALCO and the SVS (Annexure 1) and the agreement dated 15.05.1985 entered into between the NALCO and CCMT (Annexure 19) as indicated above, would amply prove the control of NALCO over the schools in finance, payment, discipline and administration.

This fact is further corroborated and strengthened by the submission of the learned counsel for the SVS that it only carries on the activities of providing better educational aid and that it is not an educational agency.

It is a peculiar case, where there is no denial that all the employees are getting much higher scale of pay than that of the employees of the aided and unaided schools under the state and their pay structure is totally different and even much better than the employees of all the Government educational institutions functioning of the state. It has become possible only due to the reason that the entire finance is being paid by NALCO and if NALCO withdraws itself from the schools, neither SVS and SVM would be able to meet the expenses of the schools.

The agreement dated 15.05.1985 as well as the conduct of the parties and the transactions that are carried on from 1985 till today, would indicate that NALCO has deep and pervasive control over the management of the schools and it is NALCO, which is the educational agency in establishing the schools. The argument advanced by Mr. R.K. Rath, learned counsel for NALCO, and Mr. B.N. Rath, learned counsel appearing for SVS in both the Writ Petitions do not detract from the position that the schools are being managed and financed by the NALCO and from the documents.

It is crystal clear that the ownership and overall management of the schools are retained by the NALCO while CCMT and SVM or SVS as the case may be, have taken up the responsibility of running the schools at different point of time because they have expertise and experience in the field of teaching.” 16. Before us arguments of both the parties remain the same. Mr. P.P. Rao, learned Senior Counsel appearing for the Appellant in one appeal and Mr. Ashok Gupta, Senior Advocate appearing in the other appeal of NALCO challenged the aforesaid line of thinking of the High Court. It was argued by Mr. Rao that the High Court took into consideration those facts which were irrelevant and not germane to decide the controversy viz. over the whether NALCO had any deep and comprehensive control and supervision over the teaching and other staff of the school. His submission was that establishment of the school with necessary infrastructure was not at all relevant factor.

The schools were set up by NALCO acknowledging its responsibility as a model employer which can be termed as a step towards “Corporate Social Responsibility”. As a welfare measure, NALCO wanted to provide this facility in the two NALCO campuses. However, by providing land, building and infrastructure and setting up of the school, all of it has been handed over to the outside agency to run these schools. For running these schools, it is that outside agency which had to employ the staff and settle their service conditions.

In so far as provision of providing financial assistance is concerned, it was only to the extent of meeting shortfall, again, keeping in mind good corporate governance. He argued that the real test in such a case was to examine as to which authority was the appointing authority of the employees, and was fixing terms and conditions of the employment, including fixing their service conditions like pay fixation, seniority, grant of leave, promotion etc. When all these powers were with the Managing Committee or the SVS which was so specifically provided in the service rules as well, duly approved by the Director of Education, by no stretch of imagination these employees could be called as the employees of NALCO.

17. Another submission of Mr. Rao was that even the High Court has accepted, in the impugned judgment, that the employees of these schools are enjoying much higher scales of pay than that of the employees of aided and unaided schools under the State of Orissa and their pay structure is much better than the employees of even the Government educational institutions functioning in the State. He, thus, argued that when it is established as an admitted fact that the salaries and services conditions of the employees of these schools are far superior than their counter parts in working in aided, unaided and government schools, there was no reason for these employees to file these petitions. Elaborating this proposition, the submission of Mr. Rao was that even if it is assumed that they are the employees of NALCO, no direction could have been given to give them the pay scales which are enjoyed by the employees of NALCO, in the absence of any parity inasmuch as principle of equal pay for equal work has no application in a case like this as the duties, functions, job requirements and even the eligibility conditions for appointment of such staff were materially different from the employees of the NALCO. Therefore, the High Court could not give any direction to NALCO to make available the benefits which are being enjoyed by other employees of NALCO to the employees of these schools. To buttress this argument he referred to the following judgments:

(i) A.K. Bindal & Anr. v. Union of India & Ors.; (2003) 5 SCC 163; (ii) State of West Bengal & Anr. v. West Bengal Registration Copywriters Association and Anr.;

(2009) 14 SCC 132, (iii) Nihal Singh & Ors. v. State of Punjab & Ors; (2013) 10 Scale 162

18. Mr. Ashok Gupta, in addition, argued that the impugned direction to treat the employees of the school as that of NALCO, amended to giving them the status of public employment which was impermissible inasmuch as the procedure for recruitment by NALCO for its own staff was entirely different. Further, whether the agreement entered into with SVS is a camouflage an aspect which could not have been gone into in writ proceedings under Article 226 of the Constitution. He also argued that impugned direction of the High Court would discourage the corporate sector, private or public, to take up welfare measures for its employees and would be counter productive to the principle of corporate good governance, which is now mandatorily provided under new Companies Act, enacted by the Parliament in the year 2013.

19. Mr. Venugopal, the learned Senior Counsel appearing for the employees of the schools defended the judgment of the High Court and the directions contained therein. He referred to all those documents and provisions as per which NALCO had been exercising effective control in functioning of these schools. These features have already been mentioned above. Thrust of his submission was that even when there was cloak of Managing Committee, apparently running the show, it was only a subterfuge, when examined in the light of the aforesaid documents reflecting that the real control was that of NALCO which was pulling the strings. Apart from highlighting that the schools were established by NALCO which remain the property of NALCO, it is even providing entire infrastructure as well as full financial support on continuous basis. Further the schools were established for the benefit of the children of NALCO’s employees. He also referred to various documents, which are taken note of by the High Court as well, to buttress his submission that the actual decision making authority from the stage of recruitment process to that of termination of these employees, is NALCO. From these documents, he drew the attention of the Court to the following aspects:

“(i) Though the appointments are made by the Managing Committees of the School, selection process of appointment is controlled by NALCO which has financial say in the matter.

(ii) Appointments are made on the recommendation of the Selection Committee of which authorities of NALCO are the members.

(iii) President of the Managing Committee is the General Manager of NALCO. Likewise Chief Manager/DGM (Personnel Administration) is member of the Managing Committee who takes care of personnel managing of the Managing Committee.

Financial affairs of the Schools are controlled by DGM (Finance) of NALCO as a member of the Managing Committees.

In this way administrative and financial control is exercised by NALCO.

(iv) Entire expenses incurred for running of the school are borne by NALCO and no transaction can be made without the approval of DGM (Finance), NALCO including the expenses with regard to the salary, Provident Fund, medical reimbursement, Leave Travel Concession, festival advance, increments etc.

(v) Teaching and non-teaching staff of the schools also enjoyed the facilities of Consumer Cooperative Society by NALCO as well as NALCO Hospital, like any other employees of NALCO.

(vi) Budgetary provisions for the school are made by the NALCO authorities every year. NALCO appoints auditors to audit the accounts of the schools. NALCO has provided residential quarters to the teaching and non-teaching staff of the school in the NALCO Township at par of the employees of the NALCO.

(vii) Documents show that day to day grievances of the staff of different schools and other issues are addressed by NALCO Authorities.”

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