Supreme Court Upholds Union of India in Service Law Dispute Over Status of Railway Co-operative Store Employees. Co-operative Society Employees Not Treated as Railway Employees Under Railway Establishment Manual as Society Has Independent Legal Existence.

Case Note & Summary

The Supreme Court of India, in a three-Judge Bench, considered appeals by special leave filed by the Union of India (Railway Board) against orders of the Central Administrative Tribunal, Hyderabad Bench. The dispute concerned the employment status of persons appointed by Railway Employees' Consumer Co-operative Stores at Rajahmundry, Visakhapatnam, Vijianagaram and Dharmavaram in South-Central Railway. The respondents, employees of these co-operative stores, had filed original applications before the Tribunal seeking declarations that they were regular Railway employees in Class III posts and entitled to regular salary, promotion, increments and arrears from the dates of their appointments. The Tribunal allowed the applications, following an earlier decision of the Madras Bench in O.A. No. 305/88, and directed payment of salary from the dates the applications were filed. The Madras Bench decision was later confirmed by a two-Judge Bench of the Supreme Court in C.A. No. 2932/91, and a review petition was dismissed. However, when the special leave petitions came up, the matter was referred to a larger Bench for examination of the fundamental question. The admitted facts were that the co-operative stores were registered under the Andhra Pradesh Co-operative Societies Act, 1964 and were organised by the Railway Administration as a social welfare measure to inculcate thrift and a co-operative spirit among railway employees. The societies consisted of serving members of the Railway Administration, and one-third of members were nominated by the Railway Administration. Working of the societies was supervised by welfare officers appointed by the Railway Administration. The Railway Establishment Manual, a non-statutory set of orders, prescribed the procedure for organising such welfare activities. The core legal issue was whether officers, employees and servants appointed by such co-operative societies or stores could be declared to be regularly appointed Railway employees under the Railway Establishment Manual and entitled to all consequential benefits. The Additional Solicitor General argued that the co-operative stores were separate legal entities registered under a State Act, managed by committees elected by their members, and their employees were appointed, controlled and paid by the societies. The Registrar of Co-operative Societies had supervisory control, and disputes were to be resolved through arbitration under the Act. The Railway Administration merely provided welfare amenities like rent-free accommodation, electricity and medical facilities, but had no control over selection, appointment or payment of salaries. Therefore, the ratio in M.M. Khan, which dealt with statutory canteens under Section 46 of the Factories Act, was inapplicable. The respondents contended that the co-operative stores were organised at the instance of the Railway Administration, their work was supervised by welfare officers, subsidies were paid, and the society was merely an intervening agency or veil. They relied on M.M. Khan and Parimal Chandra Raha to claim that the employees were entitled to be treated as railway employees and that denial of parity violated their constitutional right to equal treatment. The Court examined the provisions of the Andhra Pradesh Co-operative Societies Act, 1964, noting that a registered society is a body corporate with a separate legal identity, its ultimate authority vests in the general body, and its employees are appointed by the committee or president according to bye-laws. The Act comprehensively regulates management, audit, dispute resolution, winding up and offences. The Railway Establishment Manual only prescribes the procedure for organising welfare activities, without giving the Railway Administration any managerial or administrative control over the staff of the societies. The Court distinguished M.M. Khan, which involved recognised canteens under a statutory obligation imposed by Section 46 of the Factories Act where 100 or more workers are employed; such statutory obligation did not exist for co-operative stores. The mere provision of welfare amenities did not create an employer-employee relationship. Accordingly, the Supreme Court allowed the appeals, set aside the orders of the Central Administrative Tribunal, and held that employees of railway co-operative stores registered under the State Co-operative Societies Act were not railway employees and were not entitled to the benefits claimed. The Court's reasoning emphasized the separate legal personality of the society and the absence of any master-servant relationship with the Railway Administration.

Headnote

Issue of Consideration

Final Decision

The Supreme Court allowed the appeals and set aside the orders of the Central Administrative Tribunal, holding that employees of railway co-operative stores are not railway employees.

Law Points