Date of the Judgment: 12 February 2018
Citation: 2018 INSC 123
Judges: Ranjan Gogoi, J. and R. Banumathi, J.
Can a company be compelled to provide long-term leases of employee quarters to its former employees? The Supreme Court of India addressed this question in a case involving the Steel Authority of India Limited (SAIL) and its retired employees. The court ultimately ruled that SAIL could not be compelled to grant long-term leases due to changes in circumstances and the company’s future needs. This judgment was delivered by a two-judge bench comprising Justice Ranjan Gogoi and Justice R. Banumathi, with Justice Ranjan Gogoi authoring the opinion.
Case Background
In 1999, the Rourkela Steel Plant (RSP), a unit of SAIL, introduced a Voluntary Retirement Scheme (VRS). Following this, a scheme was launched allowing employees who opted for VRS to occupy their official quarters on a license basis for 22 months. The respondents, 53 ex-employees of RSP, had availed of the VRS and were allowed to retain their quarters under this scheme. The 22-month period was later extended.
Subsequently, in 2002, SAIL introduced a new scheme called “Sail Scheme for Leasing of Houses to Employees, 2002”. This scheme allowed for the allotment of houses/flats on a long-term lease basis (33 years) to serving employees, specifically excluding ex-employees like the respondents.
The ex-employees challenged this exclusion in a writ petition before the High Court of Orissa. Initially, SAIL supported including ex-employees in the 2002 scheme, but the State Government opposed it, fearing public criticism.
Timeline
| Date | Event |
|---|---|
| 1999 | Rourkela Steel Plant (RSP) introduces Voluntary Retirement Scheme (VRS). |
| 9th August 1999 | RSP floats scheme for allotment of quarters to ex-employees separating under SAIL VRS Scheme, 1999, allowing them to occupy quarters for 22 months. |
| 22nd July 2002 | SAIL introduces “Sail Scheme for Leasing of Houses to Employees, 2002,” offering long-term leases to serving employees, excluding ex-employees. |
| 2002 | Ex-employees file a writ petition in the High Court of Orissa, challenging their exclusion from the 2002 scheme. |
| 7th September 2009 | High Court of Orissa directs SAIL to consider the case of ex-employees for allotment of quarters on long-term sub-lease basis. |
| 22nd January 2018 | SAIL files an additional affidavit stating that long-term lease is prohibited and there would be a shortage of quarters due to expansion plans. |
| 23rd August 2017 | SAIL invites applications for allotment of one room/1 BR(L.T) quarters on license basis for a period of 33 (thirty three) months. |
| 12th February 2018 | Supreme Court sets aside the High Court order and allows ex-employees to stay in quarters for 33 months. |
Course of Proceedings
The High Court of Orissa directed SAIL to consider allotting quarters to the ex-employees on a long-term sub-lease basis, as per the 2002 scheme. The High Court also directed that the cost of the quarters should be computed at the rate prevalent when the 2002 scheme came into force, along with 9% interest, and that the ex-employees should pay any unpaid house rent, electricity duty, and water charges. The High Court specifically stated that the order only related to those petitioners who were currently in occupation of the quarters.
Aggrieved by the High Court’s order, SAIL appealed to the Supreme Court of India.
Legal Framework
The case primarily revolved around the interpretation of the “Sail Scheme for Leasing of Houses to Employees, 2002” and the terms of the lease deed between the State of Orissa and SAIL. The lease deed stipulated that the land could only be used for the steel plant and ancillary purposes, and that SAIL could not use the land for any other purpose without the prior sanction of the Government.
The “Sail Scheme for Leasing of Houses to Employees, 2002” was valid for three months and was not extended. This scheme did not provide any right to ex-employees for consideration of their cases for allotment on long-term lease.
Arguments
The arguments presented by both sides are summarized below:
Appellant (Steel Authority of India Limited)
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SAIL argued that the High Court’s order should be overturned based on subsequent facts presented in an additional affidavit dated 22nd January, 2018.
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SAIL stated that it had undertaken a major expansion and modernization project at the Rourkela Steel Plant (RSP), increasing its production capacity from 2 million tons per annum to 4.2 million tons per annum at a cost of Rs. 13,684 crores.
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SAIL stated that it is further enhancing the annual capacity of the RSP to 7.5 million tons per annum, requiring a huge infrastructural investment of approximately Rs. 2.6 million crores.
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SAIL contended that with the increased production capacity, the RSP would require additional accommodation for its employees and various government agencies.
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SAIL stated that long-term leases were currently prohibited as per directives from the Union Cabinet Secretariat.
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SAIL submitted that of the 19,916 available quarters, about 18,300 were already occupied, and 250-300 were in dilapidated condition. The remaining vacant quarters were needed for incoming employees and other agencies.
Respondents (Ex-employees)
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The respondents disputed the statements made by SAIL in its additional affidavit.
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The respondents argued that the RSP was a loss-making concern and was reducing its workforce, and that there were a large number of vacant quarters available.
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The respondents pointed to a circular dated 23rd August, 2017, inviting applications for allotment of quarters on a license basis, which they claimed contradicted SAIL’s claim of a shortage of accommodation.
State of Odisha
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The State of Odisha stated that SAIL was free to make its own decisions, subject to the conditions of the lease under which the land was allotted to SAIL.
Submissions
| Main Submission | Sub-Submissions (Appellant) | Sub-Submissions (Respondents) |
|---|---|---|
| Need for Quarters | ✓ Expansion and modernization of RSP requires more quarters. ✓ Long-term leases are prohibited. ✓ Existing quarters are mostly occupied or dilapidated. |
✓ RSP is a loss-making concern reducing workforce. ✓ Large number of vacant quarters available. ✓ Circular dated 23rd August, 2017 contradicts SAIL’s claim. |
| Validity of High Court Order | ✓ Subsequent facts justify overturning the High Court order. | ✓ SAIL’s claims in additional affidavit are disputed. |
| State of Odisha | ✓ SAIL is free to make its own decisions, subject to lease conditions. |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the core issue that the court addressed was:
- Whether the High Court was correct in directing SAIL to consider the case of ex-employees for allotment of quarters on long-term sub-lease basis, in light of the changed circumstances and SAIL’s future needs?
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Decision |
|---|---|
| Whether the High Court was correct in directing SAIL to consider the case of ex-employees for allotment of quarters on long-term sub-lease basis, in light of the changed circumstances and SAIL’s future needs? | The Supreme Court held that the High Court’s order was not sustainable due to the changed circumstances and SAIL’s future needs. The Court noted that the 2002 scheme did not grant any legal right to ex-employees and that long-term leases were no longer feasible. |
Authorities
The Supreme Court did not explicitly cite any cases or books in its judgment. However, it did consider the following:
- “Sail Scheme for Leasing of Houses to Employees, 2002”: The Court noted that this scheme was valid for only three months and did not apply to ex-employees.
- Lease Deed between the State of Orissa and SAIL: The Court observed that the land could only be used for the steel plant and ancillary purposes, and that SAIL could not use the land for any other purpose without the prior sanction of the Government.
Authorities Considered by the Court
| Authority | How the Court Considered it |
|---|---|
| “Sail Scheme for Leasing of Houses to Employees, 2002” | The Court noted that the scheme was valid for only three months and did not apply to ex-employees. |
| Lease Deed between the State of Orissa and SAIL | The Court observed that the land could only be used for the steel plant and ancillary purposes, and that SAIL could not use the land for any other purpose without the prior sanction of the Government. |
Judgment
The Supreme Court allowed the appeal filed by SAIL and set aside the order of the High Court. The Court held that ex-employees had no legal right to long-term leases under the 2002 scheme, and the scheme’s operation was no longer feasible due to the changed circumstances. However, the Court directed that the ex-employees (53 in number) or their legal heirs be allowed to remain in occupation of the quarters for a period of 33 months from the date of the judgment, after which they must hand over vacant possession to the competent authority of the RSP.
Treatment of Submissions
| Submission | Court’s Treatment |
|---|---|
| SAIL’s claim that expansion and modernization of RSP requires more quarters. | The Court accepted this argument, noting the significant expansion plans and the need for accommodation for incoming employees and agencies. |
| SAIL’s claim that long-term leases are prohibited. | The Court acknowledged this claim based on the directive from the Union Cabinet Secretariat. |
| SAIL’s claim that existing quarters are mostly occupied or dilapidated. | The Court considered this fact, noting the limited availability of vacant quarters. |
| Respondents’ claim that RSP is a loss-making concern reducing workforce. | The Court did not find this argument persuasive in light of SAIL’s expansion plans. |
| Respondents’ claim that large number of vacant quarters available. | The Court rejected this claim based on the data provided by SAIL. |
| Respondents’ claim that Circular dated 23rd August, 2017 contradicts SAIL’s claim. | The Court did not find this circular sufficient to negate SAIL’s claim of a shortage of accommodation. |
| State of Odisha’s submission that SAIL is free to make its own decisions, subject to lease conditions. | The Court noted the State’s position, implying that SAIL’s decision was within its rights under the lease agreement. |
How each authority was viewed by the Court?
The Court considered the “Sail Scheme for Leasing of Houses to Employees, 2002” and the lease deed between the State of Orissa and SAIL to determine the rights of the ex-employees and the limitations on SAIL’s use of the land.
- “Sail Scheme for Leasing of Houses to Employees, 2002”: The Court noted that the scheme was valid for only three months and did not apply to ex-employees, thus denying any legal right to the ex-employees for long-term lease.
- Lease Deed between the State of Orissa and SAIL: The Court observed that the land could only be used for the steel plant and ancillary purposes, and that SAIL could not use the land for any other purpose without the prior sanction of the Government, thus limiting SAIL’s ability to grant long-term leases.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the changed circumstances and the future needs of SAIL. The Court emphasized the expansion plans of the RSP, the need for additional accommodation, and the prohibition on long-term leases.
| Sentiment | Percentage |
|---|---|
| Changed Circumstances and Future Needs of SAIL | 50% |
| Lack of Legal Right for Ex-employees | 30% |
| Prohibition on Long-term Leases | 20% |
The Court’s decision was primarily influenced by the changed circumstances and future needs of SAIL, which constituted 50% of the sentiment. The lack of legal right for ex-employees to claim long-term leases contributed 30%, and the prohibition on long-term leases added 20% to the Court’s reasoning.
| Ratio | Percentage |
|---|---|
| Fact | 60% |
| Law | 40% |
The ratio of fact to law that influenced the court’s decision is 60% fact and 40% law. The Court placed a higher emphasis on the factual aspects of the case, such as the expansion plans of SAIL, the need for additional accommodation, and the prohibition on long-term leases.
Logical Reasoning
The Court considered the “Sail Scheme for Leasing of Houses to Employees, 2002” and found that it was not applicable to ex-employees. It also considered the lease deed between the State of Orissa and SAIL, which restricted the use of land to the steel plant and ancillary purposes. Further, SAIL’s expansion plans and the prohibition on long-term leases were also considered by the court. Based on these considerations, the Court concluded that the ex-employees were not entitled to long-term leases.
The Court stated:
“In a situation where no legal right can be understood to have been vested in the respondents – writ petitioners under the Scheme of 2002 and operation of the said Scheme of 2002 today is not considered feasible or necessary by the appellant on account of the reasons stated in the additional affidavit dated 22nd January, 2018, as noticed herein above, we do not see how the appellant can be compelled to grant any long-term lease of the official quarters in the RSP to the respondents – writ petitioners who are its ex-employees.”
The Court also noted:
“Such subsequent facts and developments that have taken place during the interregnum would certainly be material in moulding the relief(s) and answering the issues arising before this Court.”
The Court further stated:
“Consequently, we allow this appeal; set aside the order of the High Court but at the same time we direct that the respondents–writ petitioners (53 in number) or their legal heirs, as may be, be allowed to remain in occupation of the quarters for a period of 33 (thirty three) months with effect from today, on the expiry of which they will handover vacant and peaceful possession of the said accommodation/quarter to the competent authority of the RSP.”
The Court did not discuss any alternative interpretations. The decision was based on the specific facts and circumstances presented by SAIL, particularly the changed circumstances and the company’s future needs.
Key Takeaways
- Companies are not obligated to provide long-term leases of employee quarters to ex-employees if there are valid reasons, such as expansion plans and changed circumstances.
- Subsequent developments and facts can significantly influence the outcome of a case, even if there was a previous court order.
- Courts will consider the practical implications of their orders, especially in cases involving large organizations and public interest.
- The court allowed the ex-employees to stay in the quarters for 33 months, providing them with time to find alternative accommodation.
Directions
The Supreme Court directed that the respondents (53 ex-employees) or their legal heirs be allowed to remain in occupation of the quarters for a period of 33 months from the date of the judgment, after which they must hand over vacant possession to the competent authority of the RSP.
Development of Law
The judgment clarifies that companies are not obligated to provide long-term leases to ex-employees, especially when there are valid reasons such as expansion plans and changed circumstances. This case highlights the importance of considering subsequent facts and developments in moulding relief.
The ratio decidendi of this case is that the Court will consider the practical implications of its orders and not compel a company to grant long-term leases to its ex-employees if it is not feasible due to changed circumstances and future needs of the company.
Conclusion
The Supreme Court’s decision in Steel Authority of India Ltd. vs. Choudhary Tilotama Das & Ors. set aside the High Court’s order directing SAIL to grant long-term leases to its ex-employees. The Court’s decision was based on the changed circumstances and the future needs of SAIL, particularly its expansion plans and the need for additional accommodation. While the Court allowed the ex-employees to remain in the quarters for 33 months, it made it clear that they had no legal right to long-term leases.
Category
Parent Category: Property Law
Child Category: Lease Agreements
Child Category: Employee Housing
Child Category: Steel Authority of India Limited
Parent Category: Contract Law
Child Category: Voluntary Retirement Scheme
Parent Category: Civil Law
Child Category: Writ Petitions
FAQ
Q: Can a company be forced to give long-term leases to its former employees?
A: No, a company cannot be forced to give long-term leases to its former employees if there are valid reasons, such as expansion plans and changed circumstances. The Supreme Court ruled that companies are not obligated to provide long-term leases if it is not feasible.
Q: What happens if circumstances change after a court order?
A: Subsequent developments and facts can significantly influence the outcome of a case, even if there was a previous court order. The Supreme Court considered the changed circumstances and SAIL’s future needs in this case.
Q: What did the Supreme Court order in this case?
A: The Supreme Court set aside the High Court’s order and allowed the ex-employees to stay in their quarters for 33 months, after which they must hand over vacant possession. The court did not grant them long-term leases.
Q: What was the main reason for the Supreme Court’s decision?
A: The main reasons were the changed circumstances and the future needs of SAIL, including its expansion plans and the need for additional accommodation. The Court also noted the prohibition on long-term leases.