[Cites 16, Cited by 0]

Punjab-Haryana High Court

N.K. Rana And Ors. vs State Of Haryana And Ors. on 6 April, 2026

CWP-6740-2003 (O&M) -1-

IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH

CWP-6740-2003 (O&M)

Dr. N.K. Rana and others ....Petitioners

Versus

State of Haryana and others ...Respondents

Reserved on: 29.01.2026
Pronounced on: 06.04.2026
Uploaded on: 06.04.2026

Whether only the operative part of the judgment is pronounced? No
Whether full judgment is pronounced? Yes

CORAM: HON'BLE MR. JUSTICE HARPREET SINGH BRAR

Present: Mr. K.D.S. Hooda, Advocate
for the petitioners.

Mr. Pritam Singh Sidhu, Senior Advocate
with Mr. Deepak Singh Saini, Advocate
for respondent No.2.

Mr. Piyush Khanna, Addl. A.G., Haryana.

HARPREET SINGH BRAR, J.

1. The present petition has been preferred under Articles 226/227 of

the Constitution of India seeking issuance of a writ in the nature of Certiorari

for quashing impugned orders/decisions (Annexures P-12, P-13, P-17, P-19 and

P-20). Further, for issuance of a writ in the nature of Mandamus directing the

respondents to implement decisions (Annexure P-3, P-3/A and P-4) and thereby

treat the petitioners to have been permanently absorbed in the Irrigation

Department or direct the respondents to absorb the petitioners in the said

department.

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2. Learned counsel for the petitioners inter alia submitted that the

Irrigation Department had a unit known as the Underground Water Survey

Division. Subsequently, respondent No.2- Haryana State Minor Irrigation

(Tubewell) Corporation (HSMITC) was established in the year 1970, under the

Companies Act, 1956. Notably, 100% of the shares of respondent No.2-

HSMITC are held by the State Government. He further submitted that the

assets and staff of the Underground Water Survey Division were transferred

from the Irrigation Department to respondent No.2-HSMITC as well. However,

the said Division was renamed as- 'Ground Water Directorate' in respondent

No.2-HSMITC. It would be relevant to mention that respondent No.2-HSMITC

was concerned with research, study and exploration related to groundwater,

including stoppage of wastage caused by seepage in unlined water courses. It

also sought to provide irrigation facility to farmers along with design

fabrication and creation of lift irrigation pumps etc.

3. Learned counsel further argued that the Ground Water Directorate,

being a research and development unit of the Irrigation Department, was

funded by the said Department from 1970-71 to 1994-95, i.e. even after its

transfer to the respondent-HSMITC. Vide memo 03.04.1997 (Annexure P-3),

the Government of Haryana noted that the Ground Water Directorate is being

funded by and is working on behalf of the Irrigation Department since the year

1970, and thus, should be transferred back to it. Thereafter, a meeting dated

04.09.1997 (Annexure P-3/A) was held under the Chairmanship of the Chief

Minister of the State of Haryana, wherein a decision was taken to constitute a

unified, independent 'State Ground Water Authority' by merging the Ground

Water Directorate of the respondent No.2-HSMITC and Groundwater Cell of

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the Agriculture Department. Consequent to the decision dated 03.04.1997

(Annexure P-3), the Managing Director, HSMITC passed an order dated

01.01.1998 (Annexure P-4), whereby the petitioners were transferred to the

Irrigation Department on permanent basis. In compliance with the same, the

petitioners submitted their joining report with the Irrigation Department on

07.01.1998 (Annexure P-5). Thus, even though the petitioners physically

worked at the HSMITC premises, they were employees of the Irrigation

Department.

4. Thereafter, the Managing Director, HSMITC sent a report dated

15.03.2002 (Annexure P-6) to the Government, recommending closure of

respondent No.2-HSMITC, except for the Ground Water Directorate and

Tubewell Drilling Cell, as the staff of the HSMITC was sitting idle. On the

basis of the said recommendation, in the meeting dated 25.03.2002 (Annexure

P-7), headed by the Chief Minister, a decision was taken to close HSMITC,

however, the aspect of retention of staff of the Ground Water Directorate was

overlooked. Subsequently, a meeting of the Board of Directors of the

respondent-HSMITC was convened on 18.04.2002 (Annexure P-8) wherein it

was decided that steps be taken to downsize the existing apparatus and adjust

the staff before closure of the Corporation.

5. Learned counsel further submitted that consequently, the Director,

Ground Water Directorate wrote a letter dated 09.04.2002 (Annexure P-9) to

the Managing Director, HSMITC, requesting him to implement the decisions

(Annexure P-3 and P-4) to merge the Ground Water Directorate with Irrigation

Department, at the earliest. However, soon after the meeting dated 18.04.2002,

an application dated 30.04.2002 (Annexure P-10) under Section 25-O of the

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Industrial Disputes Act, 1947 was filed by the respondent-HSMITC for its

closure, citing lack of any major work and losses of Rs.115 crore as the reason.

6. The petitioners represented against the closure, however, on

27.06.2002 (Annexure P-12) an order was passed by respondent no.3, granting

permission for the same. On 01.07.2002, a public notice was issued by the

respondent-HSMITC in the newspaper- 'The Tribune' stating that all the

workemen/staff are relieved from their duties. w.e.f. 30.06.2002. Individual

orders (Annexure P-14) were also collected by the petitioners along with

cheques for salary of June, 2002 and three month notice period. Aggrieved by

the closure and termination, the petitioners filed CWP No.12614 of 2002 before

this Court seeking quashing of Annexures P-12 to P-14 and in the alternative,

absorption in the Irrigation Department. By a composite order, on 26.09.2002,

this Court disposed of all 41 connected writ petitions, directing the respondents

to treat these writ petitions are applications for review within the meaning of

Section 25-O of the Industrial Disputes Act, 1947. In purported compliance,

respondent No.3 heard all the petitioners and their additional written

representations. However, on 14.01.2003 (Annexure P-17), the review

applications were dismissed with a slight modification that the closure would

be effected from 30.07.2002 instead of 30.06.2002. Furthermore, in terms of

order dated 26.09.2002 of this Court, the issue of closure was also reconsidered

by the Board of Directors in its meeting held on 04.02.2003 and all affected

employees submitted their objections to it. Surprisingly, on the same day i.e.

04.02.2003 (Annexure P-19), the Board of Directors rejected all the objections

filed by the petitioners and other employees against the impending closure.

7. Learned counsel for the petitioners further submitted that the

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petitioners have served the respondent-Corporation with utmost dedication for

all these years and due to their dedicated efforts, the respondent No.2-HSMITC

played a vital role in providing irrigation to the farmers of the State and also

water conservation. Instead of acknowledging the efforts of the petitioners, the

respondent No.2-HSMITC has abdicated its responsibility towards the

petitioners, who have become overage to seek employment elsewhere, having

served the respondent No.2-HSMITC in their twilight years. Further still, the

State Government is the real employer of the petitioners as they control 100%

shares of the respondent No.2-HSMITC and additionally, the Groundwater

Directorate was ordered to be merged into the Irrigation Department. The State

Government cannot take the shelter of the corporate veil merely because the

respondent No.2-HSMITC has been established and registered the Companies

Act, 1956. Further, he relied upon the judgment of the Hon'ble Supreme Court

in S. Govinda Rajulu vs. The Andhra Pradesh State Constitution Corporation

Ltd. AIR 1987 SC 1801 and submitted that the surplus staff was required to be

absorbed in other government departments post-closure. The judgment in S.

Govinda Rajulu (supra) was also followed by a Division Bench of this Court

in Haryana Tanneries Employees Union Regd Jind Haryana vs. State of

Haryana and others CWP-9469-1988.

8. Even prior to formation of respondent No.2-HSMITC on

01.04.1970, the petitioners were serving under the Irrigation Department in the

Underground Water Survey Division. Thereafter, when the Groundwater

Directorate was created in the respondent No.2-HSMITC, the entire financial

liability including the pay of the petitioners was being shouldered by the

Irrigation Department. Lastly, the Groundwater Directorate was not constituted

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with the primary objective to earn profit, rather, right from the inception, it was

intended to carry out research, study and exploration of the groundwater

resources to conserve water and provide irrigation facilities to farmers. As such,

the petitioners are deemed to be permanent employees of the Irrigation

Department.

9. Per contra, learned counsel for respondent No.2-HSMITC

submitted that the working of the respondent No.2-HSMITC was actively under

review from time to time since it was running into huge losses. After weighing

all the pros and cons, it was decided to close down the respondent No.2-

HSMITC and retrench the service of all employees including the petitioners in

terms of Article 135 of the Articles of Association. Further, under Article 105,

the Managing Director of the HSIMTC was duly authorized by the Board of

Directors to take appropriate decisions to close down the respondent No.2-

HSMITC. After completing all the legal formalities under Section 25-O of the

Industrial Disputes Act, 1947, the appropriate authority passed a well-reasoned

speaking order allowing the closure. It is not a case where the petitioners were

not heard or their objections were not considered. Moreover, the petitioners

who fall under the definition of 'workman' as provided under Section 2(s) of

the Industrial Disputes Act, 1947, have already been provided retrenchment

compensation as stipulated by Section 25-O (8) of the said Act. Further, the

petitioners who were covered under the applicable Service By-laws were

provided 03 months' salary in lieu of notice, as per Clause 8.2 thereof. Learned

counsel further relied on the judgment rendered by a Division Bench of this

Court in D.K. Chawla vs. State of Haryana 2001 (3) RSJ 589 to submit that no

employee can claim absorption in any other department as a matter of right.

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Therefore, the present writ petition deserves to be dismissed.

10. The respondent No.2-HSMITC had sustained losses in 27 out of

the 31 years of its existence. The claim of the petitioners that the losses

incurred are majorly due to waiving off lining charges of Rs.113 crore are

unfounded as neither were they waived off, nor were these charges the only

source of loss. Moreover, the respondent No.2-HSMITC did not have sufficient

source of income to pay salary to its 3916 employees. It was only after

thoroughly examining the possibility of saving the respondent No.2-HSMITC

that a decision was taken to close the same. The Appropriate Authority had

allowed the application for closure as per law and the services of the employees

of the respondent No.2-HSMITC were also lawfully dispensed with. Learned

counsel also categorically denies the assertion that the Groundwater Directorate

was functioning under the aegis of the Irrigation Department. Consequent to the

formation of respondent No.2-HSMITC, the assets and liabilities relating to

Groundwater Directorate were also transferred to the HSMITC. The

Groundwater Directorate was not an exclusive Research and Development unit

of the Irrigation Department and, formed a part of the HSMITC and thus is

covered under the closure carried out under the Industrial Disputes Act, 1947.

11. Having heard learned counsel for the parties and after perusing the

record with their able assistance, it transpires that the petitioners were working

in respondent No.2-HSMITC, a company incorporated in the year 1970 under

the Companies Act, 1956. It appears that the respondent No.2-HSMITC had

suffered a loss of Rs.11,536.82 lakh as against paid up share capital of Rs.10.89

crore, as on 31.03.2001. Since the respondent No.2-HSMITC did not have a

significant enough source of income, it became unviable to continue running

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the said Corporation. In fact, it could not even shoulder the annual wage bill of

Rs.35.53 crore. Left with no other option, proceedings were initiated under

Section 25-O of the Industrial Disputes Act, 1947 and respondent No.2-

HSMITC was eventually closed.

12. Section 25-O of the Industrial Disputes Act, 1947 reads as follows:

"25-O. Procedure for closing down an undertaking.--

(1) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner: Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work.

(2) Where an application for permission has been made under sub-

section (1), the appropriate Government, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen and the persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refused to grant such permission and a copy of such order shall be communicated to the employer and the workmen. (3) Where an application has been made under sub-section (1) and the appropriate Government does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.

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(4) An order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order.

(5) The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (2) or refer the matter to a Tribunal for adjudication: \ Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.

(6) Where no application for permission under sub-section (1) is made within the period specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workmen shall be entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down.

(7) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order. (8) Where an undertaking is permitted to be closed down under sub- section (2) or where permission for closure is deemed to be granted under sub-section (3), every workman who is employed in that undertaking immediately before the date of application for permission under this section, shall be entitled to receive compensation which shall be equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months"

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Notably, the petitioners have not raised any arguments against the

procedure followed in furtherance of the application under Section 25-O of the

Industrial Disputes Act, 1947. Further still, the relevant authorities have duly

considered adequacy of reasons for closure and its effect of public welfare,

after providing an opportunity of personal hearing to the petitioners and other

stakeholders. While this Court can sympathise with the personal loss caused to

the petitioners, the same cannot form a reason to set aside the closure since it

was accomplished in alignment with the established procedure. A perusal of

impugned orders/notices (Annexures P-12, P-13, P-17, P-19 and P-20)

indicates that they have been passed by the appropriate authority after

considering all the objections raised by the stakeholders and by providing

reasons which is indicative of due application of mind.

13. Further still, it has been emphatically argued that the petitioners

worked in the Groundwater Directorate that is essentially a unit of the Irrigation

Department. A perusal of the record indicates that vide memo dated 03.04.1997

(Annexure P-3), it was decided that the Groundwater Directorate shall be

transferred back to the Irrigation Department. However, the operation of memo

dated 03.04.1997 (Annexure P-3) was stayed by respondent-HSMITC vide

office order dated 13.01.1998 (Annexure R-2/6). Further still, vide letter dated

11.05.1999 (Annexure R-2/7), it was categorically decided that the respondent

No.2-HSMITC cannot be integrated with the Irrigation Department. These

aforementioned decisions (Annexure R-2/6 and R-2/7) have not been

challenged by the petitioners.

14. Additionally, while the State OF Haryana holds a 100% of the

shares of the respondent No.2-HSMITC, the latter remains a separate juristic

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entity, being incorporated under the Companies Act, 1956. A two-Judge bench

of the Hon'ble Supreme Court in Heavy Engineering Mazdoor Union vs. State

of Bihar 1970 AIR SC 82 emphasized that a government company is distinct

from its shareholders. Speaking through Justice J.M. Shelat, the following was

held:

"4. ...An incorporated company, as is well known, has a separate existence and the law recognises it as a juristic person separate and distinct from its members. This new personality emerges from the moment of its incorporation and from that date the persons subscribing to its memorandum of association and others joining it as members are regarded as a body incorporate or a corporation aggregate and the new person beings to function as an entity. [cf. Saloman v. Saloman and Co., 1897 AC 22]. Its rights and obligations are different from those of its shareholders. Action taken against it does not directly affect its shareholders. The company in holding its property and carrying on its business is not the agent of its shareholders. An infringement of its rights does not give a cause of action to its shareholders. Consequently, it has been said that if a man trusts a corporation he trusts that legal persona and must look to its assets for payment; he can call upon the individual shareholders to contribute only if the Act or charter creating the corporation so provides. The liability of an individual member is not increased by the fact that he is the sole person beneficially interested in the property of the corporation and that the other members have become members merely for the purpose of enabling the corporation to become incorporated and possess only a nominal interest in its property or hold it in trust for him. (cf. Halsbury's Laws of England, 3rd Ed. Vol. 9, p. 9). Such a company even possesses the nationality of the country under the laws of which it is incorporated, irrespective of the nationality of its members and does not cease to have that nationality even if in times of war it falls under enemy control. (cf. Janson v. Driefontain Consolidated Mines, 1902 AC 484 and Kuenigl v. Donnersmarck, 1955 (1) QB 515.) The company so incorporated derives its powers and NEHA 2026.04.06 17:53 I attest to the accuracy and integrity of this document Punjab and Haryana High Court, Chandigarh CWP-6740-2003 (O&M) -12-

functions from and by virtue of its memorandum of association and its articles of association. Therefore, the mere fact that the entire share capital of the respondent-company was contributed by the Central Government and the fact that all its shares are held by the President and certain officers of the Central Government does not make any difference. The company and the share-holders being, as aforesaid distinct entities the fact that the President of India and certain officers hold all its shares does not make the company an agent either of the President or the Central Government. A notice to the President of India and the said officers of the Central Government, who hold between them all the shares of the company would not be a notice to the company; nor can a suit maintainable by and in the name of the company be sustained by or in the name of the President and the said officers."

15. As such, there is no justification to the claim of the petitioners that

they be considered employees of the State Government, which owned all the

shares of the respondent No.2-HSMITC, especially since their assertion that the

Groundwater Directorate is a unit of the Irrigation Department has been

dismantled. Furthermore, evidently, the employer-employee relationship only

persisted between the petitioners and respondent No.2-HSMITC, and not the

State Government by means of the Irrigation department. A two-Judge bench of

the Hon'ble Supreme Court in A.K. Bindal vs. Union of India, 2003(2) SCT

957, speaking through Justice G.P. Mathur, highlighted the difference between

an employee of a Government and an employee of a Government Company in

the following manner:

"17. The legal position is that identity of the Government Company remains distinct from the government. The Government Company is not identified with the Union but has been placed under a special system of control and conferred certain privileges by virtue of the provisions

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contained in Sections 619 and 620 of the Companies Act. Merely because the entire share holding is owned by the Central Government will not make the incorporated company as Central Government. It is also equally well settled that the employees of the Government Company are not civil servants and so are not entitled to the protection afforded by Article 311 of the Constitution (See Pyare Lal Sharma v. Managing Director (1989)3 SCC 448)."

As such, in the absence of a duly enacted policy covering the

same, the petitioners cannot claim absorption into the Irrigation department as a

matter of right.

16. The respondent No.2-HSMITC was closed because of financial

distress. Even though the State held 100% of the shares in HSMITC, if it has

been so decided that it cannot shoulder the cost of continuing business, in

absence of a strong argument regarding procedural impropriety or gross harm

to public interest, this Court cannot issue directions to undo the said closure for

benefit of a few employees at such a belated stage. At the most, the petitioners

can claim compensation, which admittedly, they have already received in terms

of the statutory scheme and the applicable by-laws.

17. Accordingly, the present petition is dismissed being bereft of any

merit.

18. Pending miscellaneous application(s), if any, shall also stand

disposed of.


                                                                               (HARPREET SINGH BRAR)
                                                                                     JUDGE
                  06.04.2026
                  Neha


                                                 Whether speaking/reasoned      :     Yes/No
                                                 Whether reportable             :     Yes/No
NEHA
2026.04.06 17:53
I attest to the accuracy and integrity of this
document
Punjab and Haryana High Court,
Chandigarh