Contract Service Followed by Regularization Counts for Seniority: Himachal Pradesh HC

The Himachal Pradesh High Court has reinforced the autonomy of state-owned corporations to regularize contractual staff to meet operational exigencies, ruling that such service must be counted for seniority even if subsequent regular appointments occur through the Public Service Commission. This verdict cements the principle that policy decisions taken by a Board of Directors to retain specialized manpower during a corporation's nascent stage cannot be retrospectively challenged by later recruits.

In a detailed judgment, Justice Jiya Lal Bhardwaj dismissed a challenge to the seniority of Assistant Engineers who were initially recruited on a contract basis before being regularized by the Himachal Pradesh Power Corporation Limited (HPPCL). The Court underscored that since the petitioners were not even part of the cadre when the regularization policy was enacted, they lacked the standing to dismantle established seniority lists.

Key Takeaways

Corporate Policy Autonomy

State-owned companies possess the discretionary power to regularize contract employees to prevent the loss of trained personnel to competitors.

Seniority Protection

Contractual service followed immediately by regularization must be considered for service benefits and seniority, provided the initial recruitment followed a transparent process.

Locus Standi Constraints

Employees cannot challenge regularization or recruitment decisions that were finalized before they were even appointed to the service cadre.

Advertisement Integrity

While corporations should ideally adhere to advertised vacancy numbers, minor deviations to fill additional posts from an existing panel during initial growth phases are not inherently illegal.

Court Rationale on Regularization and Seniority

The Court observed that the HPPCL, being a state-owned power generation company incorporated under the Companies Act, 1956, faced significant challenges in retaining qualified engineers due to competition from private players. The decision to regularize contractual engineers after one year was a conscious policy move by the Board of Directors to ensure the timely execution of Asian Development Bank-funded projects.

The Court, in its reasoning, observed: "The petitioners once not borne in the cadre and further the conscious decision taken by the BOD of respondent No.2-Corporation to regularize the services of the private respondents after completion of one year of service, their initial period of service cannot be ignored for the purpose of assigning them seniority before regularization, in view of the fact that respondent No.2-Corporation, being a company, had taken a policy decision to regularize their services and further their appointments were made after issuance of the advertisement."

The Court further highlighted that the petitioners failed to challenge the core decision of the Board of Directors (BOD) dated 20.01.2009, which authorized the regularization. Referring to the precedent in Devinder Kumar and others vs. State of Himachal Pradesh and another and connected petitions, the Court noted that where the recruitment process for contract staff is identical to regular procedures (involving advertisements and selection panels), they are entitled to seniority benefits.

The Court has following directions:

"Consequently, I do not find any merit in the present petition, and the same is accordingly dismissed. No order as to costs. Pending application(s), if any, also stands disposed of."

Ratio

When a State Corporation adopts a policy decision to regularize contractual employees who were recruited through a transparent selection process to meet operational exigencies, the period of contract service followed by regularization cannot be ignored for the purpose of seniority. Furthermore, subsequent appointees through a separate recruitment agency cannot challenge such regularization or seniority if the policy was implemented prior to their entry into the cadre.

Background

The dispute arose when the petitioners, who were recruited as Assistant Engineers (Civil) through the Himachal Pradesh Public Service Commission in 2010, challenged the seniority list of 2013. They argued that private respondents, who were initially appointed on contract basis by HPPCL in 2008 and 2009, should not be placed above them in the seniority list. The petitioners contended that the HPPCL had illegally regularized contract staff and filled more posts than originally advertised in 2008.

However, the Corporation and private respondents argued that the decision to regularize was taken by the BOD in January 2009 well before the petitioners applied for their posts in October 2009. They argued that the retention of manpower was critical for power project deadlines. The Court agreed, noting that the petitioners remained silent for years after joining and only approached the court once the respondents were promoted to the E2 level. The Court relied on Devinder Kumar and others vs. State of Himachal Pradesh and another and connected petitions to hold that the contract service was valid for seniority as the initial recruitment was not 'dehors' the rules.

Case Details:
Case No.: CWPOA No.2712 of 2019
Case Title: Er. Sharad Bhandral & Ors. Versus State of H.P. and Ors.
Appearances:
For the Petitioner(s): Mr. K.D. Shreedhar, Senior Advocate with Ms. Shreya Chauhan, Advocate.
For the Respondent(s): Mr. Vishav Deep Sharma, Additional Advocate General, for respondent No.1; Mr. Vivek Negi, Advocate, for respondent No.2; Mr. Ankush Dass Sood, Senior Advocate with Mr. Karan Singh Parmar, Advocate, for respondents No.3 to 33.

Source: 2026 CaseBase(HP) 9438