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Judgment
As Per Mr. Ajay Pratap Singh, Member (Judicial):
Heard the parties at substantial length.
The precise common question that arises for determination in the both Original Applications and they are heard analogously and being disposed of by this Common Order with consent and at request –
―Whether the applicants have any vested legal right to not to exercise their option to continue on deemed deputation till retirement or to seek permanent absorption in the 100% government owned seven new Defence Public Sector Undertakings, in light of policy decision to convert OFB into 7 corporate entities in national interest?‖
FACTS IN BRIEF
The factual background for each of these OAs is as under:-
1. O.A. No.1218 of 2026
Present OA has been filed by the IOFSOA of Group ‗A‘, Gazetted Officers of Indian Ordnance Factories Service and two other IOFS officers, to protect interest of its officers. The respondent no. 1, Department of Defence Production, Ministry of Defence, is the cadre controlling authority for IOFS, erstwhile OFB and newly created 7 D.P.S.U. and DOPT is the nodal ministry for cadre review, service rule amendment or any change of service conditions of cadre. Applicants are IOFS, Group ‗A‘ Officers, Defence Civil Service under the Ministry of Defence established to manage and administer the Indian Ordnance Factories. They are governed by IOFS (Group A) RR 2002 SRO No. 227 framed by President of India under proviso to Article 309 of the Constitution and career progression etc. is in accordance with RR 2002. The statutory rules provide for advancement of career prospects and other welfare measures.
Cabinet Committee on Security on 29.7.2020 approved dissolution of OFB and transfer of employees (Group A, B & C) of OFB to new DPSU and the Directorate of Ordnance (Coordination & Services). GOI has corporatised the functions of the 41 production units (Ordnance Factories) of OFB, functioning under the DDP. DDP has issued OM dt. 24.9.2021 for the dissolution of OFB and transfer of its assets and liabilities to the newly constituted DPSUs and Directorate of Ordnance (Coordination & Services).
OM dt. 24.9.2021 provides that all OFB employees, (Group A, B & C) shall be transferred en-masse to the new DPSUs on terms of foreign service, initially for 2 years in accordance with Rule 37-A of CCS (Pension) Rules, 1972 and each of the newly formed DPSUs is required to frame rules and regulations governing service conditions of the absorbed employees on deemed deputation to the respective DPSUs within a period of 2 years. It is also stated that until such time as the employees continue on deemed deputation to the new DPSUs, they shall remain governed by all extant rules, regulations and orders applicable to Central Govt. servants including related to pay-scales, allowances, leave, medical facilities, career progression and other service conditions.
OM dt. 24.9.2021, GOI decided to constitute a Directorate of Ordnance (Coordination & Services) Directorate under DDP w.e.f. 1.10.2021 in replacement of the existing OFBHQ. The Directorate of Ordnance (Coordination & Services) DDP, MOD, Kolkata issued OM dt. 1.10.2021, issued 7 separate orders, all dt. 1.10.2021, directing the en-masse transfer of Group A, B & C employees of erstwhile OFB to the newly formed DPSUs in terms of foreign service and on deemed deputation for 2 years in accordance with Rule 37-A of CCS (P) Rules 1972. Thereafter vide OM dt. 4.11.2025 respondents finally issued the period of deemed deputation for third time and extended period is expiring on 30.9.2026.
Applicant no. 1 has submitted representation dt.14.11.2024 stating that OMs adversely affecting officers' rights and conditions of service as under:
The newly established 7 DPSUs carved out of OFB do not have any right to offer option for permanent absorption from officers of IOFS and the option is to be served by the GOI as the officers recruited by Govt. and their services governed by RR framed by GOI.
The OM dt.24.9.2021 on the corporatization of OFB, Group ‗A‘ of the IOFS cadre have been divided into two parts one posted in the Directorate of Ordnance (Coordination & Services) and other posted in Production units — resulted in creation of eight categories of IOFS officers without any official division of IOFS cadre.
Allocation of officers to the respective DPSU is purely incidental based on posting that DPSU, incidental and without any specific skills, experience or suitability for the organisation.
Different DPSUs have specific distinct future trajectory depending upon the specific domain of defence manufacturing in which it operates. The respondent no. 1 has violated principles of natural justice and by arbitrary exercise of power contrary to Article 14 & 16 of the Constitution transferred to new DPSUs on basis of posting as on the appointed date, without considering the service experience and career progression in the IOFS cadre.
OMs dt. 26.8.2025, 15.9.2025 common terms of absorption and OM dt. 21.1.2026, common HR Rules do not take into account specific skills.
There is no clarity and Group A IOFS officers posted on deemed deputation in DPSUs are drawing their salaries from the respective DPSUs and those posted in DOO-C&S Delhi, Kolkata and various field units are treated as on deemed deputation are drawing salaries from the Consolidated Fund of India (CFI) and not from DPSUs. Thus process of deemed deputation not implemented as per policy framework.
Applicant no. 1 further submitted that pursuant to issuance of the option form, officers who opted for to continue as Govt. servant and they are to be sent to a surplus cell and same would amount to an indirect abolition of the cadre, adversely affecting promotional avenues and other service conditions. Thus representation dt. 20.11.2024 was sent to issue a fresh OM – clarifying and confirming that the deemed deputation of all IOFS officers shall remain valid and operative until the retirement of the last IOFS Officer.
Applicant no. 1, also submitted representation dt. 28.3.2025 and stated that Rule 37-A of the CCS (Pension) Rules, 1972 is not applicable to officers belonging to an Organised Group 'A' Service. The OFB was not a department but a sub-attached office to DDP, a deptt. under Ministry of Defence and DDP is not corporatised completely hence Rule 37-A cannot be applied. The officers of Organised Govt. Group 'A' Service (OGAS) cannot be sent to a surplus cell as contemplated under Sub-Rule (6) of Rule 37A as Organised Group A Service cannot be declared surplus as provided in DOPT Handbook for personnel officers, 1987. (A-16).
Sub clause (1) of Rule 37-A states that whenever a Govt. Deptt. is converted into DPSU — where OFB was not a deptt. but a sub-attached office to DDP, a deptt. under MOD. So Rule 37-A can be applied if complete DDP is corporatised, and not in present case.
As per sub-clause (2) of Rule 37-A, if the option form is served,
As per sub-clause (6) of Rule 37-A, officers who opt to remain Govt. employees will be repatriated through surplus cell.
If surplus employees will be considered as per CCS Redeployment Rules, 1990 except against those vacancies except filled by competitive exam which means they willnot remain part of any cadre.
Respondent no.1 requested that IOFS officers be retained on deemed deputation until the retirement of the last Officer. It is settled precedent that no organized service has been abolished to date.
Applicant requested respondent no.1 to retain IOFS officers on deemed deputation until the retirement of the last officer, and till dated no organized service has been abolished notwithstanding the corporatization of several deptt. under Govt. of India. Applicant filed OA 2934/25 and vide order dt.4.8.2025, respondent no. 1 was directed to decide. Applicant made representation dt. 14.8.2025 to consider IOFS OA's represent that All Group ‘A’ officers of IOFS shall be under deemed deputation till their retirement. Respondent issued unclear impugned letter dt.15.9.2025 (A-1) by R-1 DDP.
Vide O.M. dt. 4.8.2025, a Committee constituted to resolve issue of absorption but respondent not provided any clear policy regarding the future service conditions of officers who may not opt for absorption.
Respondent no. 1 is proceeding to coerce the officers of IOFS into exercising their option to force Group ‗A‘ officers of IOFS to opt for absorption, even though there are various important issues and matters, which have not been clarified till date and in relation to which no rules and regulations have been framed as on date.
DPP; GOI OM 24.9.21 — specifically provided that each of the newly created DPSU shall frame rules and regulations governing the service conditions of the employees proposed to be absorbed and thereafter seek option for permanent absorption from employees on deemed deputation within a period of 2 years. The OM 24.9.2021 categorically assured that the service conditions of the absorbed employee would not be inferior to the existing service conditions applicable to them under the Govt.
The Common terms of absorption vide O.M. dt. 21.1.2026, and HR Policy dt. 5.1.2026, reveals several inconsistencies and structural deficiencies and materially affects the future service conditions of applicants and same are inferior to the existing service conditions governing the applicants under present cadre structure. This position is contrary to assurance given by GOI in O.M. dt. 24.9.2021 — that the service conditions of employees after corporatization shall not be inferior to those presently applicable.
The HR Policy provides for that promotions shall be subject to other conditions as prescribed in the rules, and these conditions at present not been defined, and this is in contradiction to the existing IOFS service rules, prescribing defined eligibility conditions, benchmarks and qualifying service requirement applied uniformly. The promotion under Organised Group ‗A‘ Service was based on principle of seniority-cum-merit or merit-cum-seniority, thereby ensuring reasonable predictability in career progression. Proposed system effectively subordinates seniority to competitive performance ranking.
The absorption framework permits initial absorption beyond sanctioned strength and subject to later adjustment within overall strength. Such an approach reflects absence of structured cadre planning and creates a real possibility of grade imbalance are operational consequences. In these circumstances officers are being asked to exercise option despite the admitted absence of a clear and stable manpower structure in the receiving DPSUs and such a framework creating potentially forced choice with uncertain outcome.
The documents issued by respondents provide detailed consequences of absorption, but there is no clarity on service conditions, career progression and organisational placement of officers who may choose to remain in Govt. service.
The respondents are seeking option once exercised and processed, the service status of officers would undergo irreversible change, thereby causing serious prejudice to the applicants and OA will be infructuous.
Terms and conditions of absorption OM dt. 21.01.2026 and common HR Rules of 7 DPSUs are vague and do not give complete details of essential terms and conditions on which the officers of IOFS would be absorbed and there are several uncertainties in said terms communicated by Respondent No. 1. The respondent no. 1 is deliberately not providing the officers of IOFS with such information to address grievances despite representations and process of seeking option is arbitrary.
Group ‗A‘ officers of IOFS are working under deemed deputation till 30.09.2026, can be served option form at any time by their DPSUs as DPSUs are in final stage of framing rules and regulations and there is absolutely no clarity in the policy regarding status & condition of service of officers of IOFS, who are similarly situated and posted in respective DPSUs on deemed deputation and those on deputation to various Ministries.
The challenge in this OA is not to policy decision of Govt. to corporatise the erstwhile OFB or to create new DPSU. The limited challenge in this OA is to —
The procedure and legal framework adopted for transition of manpower of an Organised Group ‗A‘ service, namely IOFS, which has been undertaken without following the statutory regime governing cadre officers and manner.
Per-Contra, the respondents have submitted reply stating that the Cabinet in its meeting held on 16.06.2021 had approved, and a committee would be constituted by DDP for guiding the new DPSUs to frame rules and regulations related to the service conditions of the absorbed employees. Accordingly, a committee headed by Joint Secretary (Land Systems), DPP and its sub-group having representatives from DDP, Department of Pension and Pensioners' Welfare (DoP&PW), Department of Public Enterprises, Security Printing and Minting Corporation of India Limited, Bharat Electronics Limited and Director (HR) of 7 new DPSUs have been constituted by DDP for guiding the new DPSUs on framing rules and regulations related to service conditions of the employees to be absorbed.
Respondents have further stated in the reply that Comprehensive consultations with Department of Public Enterprises on pay & allowances, with the Department of Pension & Pension Welfare on pension related matters, with Department of Financial Services / PFRDA on NPS and relevant issues of absorption package to be offered by 7 new DPSUs were held and draft of common terms of absorption for employees of erstwhile OFB has been prepared by the 7 new DPSUs. Thereafter, DPP has held the Inter-Ministerial consultations with Ministry of Expenditure, Deptt. of Public Enterprises and Deptt. of Pension and Pensioners' Welfare on draft common terms of absorption. Package of 7 new DPSUs. DPP has asked Munitions India Ltd (MIL) of one of 7 DPSUs, to organise stakeholders' consultation and vide letter dt.28.11.2025, invited representatives of all recognised federations and their affiliated unions/associations and common draft terms of absorption also sent to them, and also put up on intranet system of DDO (C&S) for information on common draft terms of absorption amongst all the employees of erstwhile OFB.
Respondents have further stated in their reply that All recognised federations and associations of Group A, B, C employees have formed a united forum called United Forum of Ordnance Employees (in short UFOE) and submitted their joint representation dt.21.11.2025 that Govt. should issue a notification for retaining the status of the Defence Civilian Employees of Ordnance Factories as Central Government employees till retirement.
The present applicant – IOFSOA has also demanded to retain Central Govt. status for those employees who do not opt for absorption, their career framework, and also demanded to address on the issues related to cadre continuity, service conditions and career progression for employees who choose to remain under Govt. service.
Respondents have further stated in their reply that Common terms of absorption package is prepared as per the Government norms, after extensive deliberations with the concerned Ministries and package is at draft stage.
Reply has been filed also stating that HR policies and CDA Rules have been framed by the new DPSUs based on the government rules and regulations and once finalised, the common terms of the absorption shall be notified by the new DPSUs to employees of erstwhile OFB, fully complying the extant guidelines of the Government. Further, as per Rule 37 of Rules 2021 offer of absorptions, such Govt. servants shall be asked to exercise this option. The absorption into DPSU is not mandatory but optional, at the discretion of employees.
2. O.A. No.3500 of 2026
The applicants are Junior Works Managers (Technical) under DDP, erstwhile OFB employees. The respondents have issued O.M. dated 15.06.2026, the common absorption package and extension of deemed deputation till retirement for employees who do not opt for permanent absorption and exercise of options for permanent absorption in the respective DPSUs. The employees continuing as deemed deputationists would continue to be governed by the extant rules applicable to the Central Government servants. Respondents have issued O.M. dated 15.06.2026 and thereafter issued instructions dated 25.06.2026, manner and timelines for exercise of option and no administrative framework was notified for employees opting for deemed deputation till retirement. The applicants are required to submit their option before 15.10.2026 on deemed deputation till retirement or for permanent absorption in a DPSU.
The applicants submitted representation dt. 09.07.2026, raising issues related to their service conditions and the same has not been considered despite commencement of option process, the recognised service associations including IOFGOA, NDGBGOA and LDRI have raised similar issues as to disclosure of CCA, promotional mechanism, cadre review etc. and other service conditions applicable to employees continuing as Central Government servants. The respondents have failed to notify a comprehensive and administrative framework, governing the applicants, who continue as central government servants. The applicants are being compelled to exercise a final and irrevocable option without being informed of the complete service consequences of the alternative of continued govt. service.
The present OA No. 3500/2026 has been filed to impugn option process and the consequential administrative actions as the same require, the applicants to make an irrevocable choice without notifying and operationalising the service framework to those who opt to elect to continue as Govt. Servant. Hence, to stay the operation and effect of furnishing options and issue direction to respondents to restrain the operation of the ongoing option process pursuant to O.M. dt.15.06.2026 and 25.06.2026.
SUBMISSIONS
Learned Senior Advocate alongwith Mr. Dev Devansh Advocate appearing for the applicants contended that —
The DDP is the cadre controlling authority of all the Group ‗A‘ employees and any clarifications regarding Group ‗A‘ officers does not fall within powers of DOO(C&S).
Applicants are continuing as Central Government employees on deemed deputation and the present OA is to provide clarity regarding the terms and conditions of deemed deputation does not provide the definite framework of terms and conditions. Respondents have not clarified the terms and conditions applicable to officers who do not opt for absorption and continue in government service as deemed deputation, so as to enable the concerned officers to exercise their options on or before 15.10.2026.
Respondents are required to disclose the framework governing those who opt to remain in Government servants, so as to make informed and legally effective choice between absorption in a DPSU and continuation in Government service, and to ensure that the corporatisation process does not adversely affect the officers who continue as Government servant.
The concern of the applicants, effect of absorption as IOFS cadre, its promotional avenues who elect to remain in Government service. Applicants are basically seeking preservation of the IOFS cadre and promotional avenues and continue to remain Central Govt. servants with existing service conditions and benefits are not reduced on period of deemed deputation.
Respondents be directed to identify and implement the governing Rules and orders to ensure service conditions are preserved on deemed deputation. Respondents are giving assurance either existence of a general statement of assurances and difficulties faced on deemed deputation in relation to transfers, training, deputation, HBA, vehicle allowances and other service related matters.
The respondents be directed to provide clarifications before exercise of their options on or before 15.10.2026, so that option is exercised freely on clear leagally ascertainable framework.
Respondents be directed to place on record uniform framework governing the service conditions of IOFS officers who continue as central Govt. servants on deemed deputation till retirement.
Ms. Archana Pathak, learned Additional Solicitor General of India with Mr. Dharmendra Kumar Pandey, learned Sr. CGSC and Ms. Prachi, learned counsel for the respondents argued that —
Applicants in the present OA had sought continuation on deemed deputation till retirement. The Competent Authority vide DDP OM dt. 15.6.2026 has considered the issues of the employees who do not opt for absorption in the new DPSUs will continue on deemed deputation till retirement and till such time the employees remain on the deemed deputation to the new DPSUs and they shall continue to be subject to all the extant rules, regulations and orders as are applicable to the Central Government servants.
Applicants have filed M.A. No. 3075/2026 for clarification regarding the service conditions applicable to officers opting to continue in Govt. service. The said clarification issued on 2.9.2026 and duly notified on employees portal of intranet system.
As on date more than 92% of the employees i.e. 54,804 of employees out of total 59,465 have already exercised their option through this portal. The OA is devoid of merits deserves to be dismissed.
The policy decision undertaken to convert OFB — a Govt. department into 7, 100% Govt. owned DPSUs. The policy decision undertaken strictly in national interest and to enhance functional autonomy, operational efficiency and to enhance in defence manufacturing in national security interest.
The process of calling for options from the employees of the erstwhile OFB is strictly in conformity with Rule 37 of Rules 2021. The OM dt. 15.6.2026, explicitly provides that employees who do not opt for permanent absorption into the new DPSUs shall continue on deemed deputation in Govt. service till their superannuation. The services of employees on deemed deputation to be governed by the extant rules applicable to Central Govt. employees pursuant to Cabinet decision of 2021.
The exercise of option for permanent absorption in new DPSUs is purely voluntary and optional and does not have element of compulsory absorption. The option to continue on deemed deputation till superannuation under O.M. dt. 15.6.2026, ensures that service status of IOFS officers is already protected including under Article 311 of Constitution.
The present case relating to the policy decision to convert OFB into 7 DPSUs is in national interest. The power of policy making lies solely with respondents and this Tribunal should not interfere with the policy decision made in national interest.
The similarly placed applicants –IOPSO filed O.A. No.200/00116/2022 titled Indian Ordinance Factories Service Officers Association, in representative capacity alongwith large number of employees before Jabalpur Bench of this Tribunal. The Batch of OA 116/2022 and 1038/2022, stands dismissed vide common order dt.23.04.2026. The present OAs also deserve to be dismissed.
ANALYSIS AND REASONS
We have heard learned counsel for the parties at lengths and also examined the record and material placed on record.
The issue involved in the present case — ―whether applicants have any vested and legal right not to exercise their option to revert back to the government or to seek permanent absorption in the 100% government owned seven new DPSUs based on the policy decision of Government?‖
Now reverting to the case in our hand. The fact of the matter that OFB Head Quarters, Kolkata was a Subordinate Office under DDP and under the OFB, there were 41 Ordnance Factories, 9 Training Institutes, 3 Regional Marketing Centres, 4 Regional Controllerates of Safety, 25 Hospitals and 24 Schools.
Several Committees were set-up in the past to improve the performance of OFB and all the committees in turn have recommended for conversion of Ordnance factories from a Government Department into a public sector company as a measure to improve self-reliance in our defence preparedness.
In order to enhance functional autonomy, efficiency and to enhance growth potential in Ordnance Factories, a proposal was submitted for approval of the Cabinet Committee on Security (in short CCS) to convert Ordnance Factory Board (in short OFB), a subordinate office of Ministry of Defence into one or more than one 100% Government Owned Corporate entities registered under the Companies Act, 2013 which was approved by the CCS in its meeting held on 29.7.2020 and CCS also approved constitution of an Empowered Group of Ministers (in short EGoM) to oversee and guide the entire process including redeployment plan of employees.
The CCS in its meeting has accorded approval to convert OFB — a subordinate office of Ministry of Defence, into Government Owned Corporate entities. The Government of India has issued an O.M. dt 21.6.2021, reads as :—
―No.I(5)/2021/OF/DP(Plg-V) Government of India Ministry of Defence Department of Defece Production New Delhi, 21st June, 2021
Office Memorandum
Subject: Cabinet approval to convert the production units of Ordnance Factory Board into 07 Defence Public Sector Undertakings (DPSUs) with 41 units.
The Cabinet Committee on Security (CCS) in its meeting held on 29.07.2020 had approved to covert Ordnance Factory Board (OFB), a subordinate office of Ministry of Defence into one or more than one 100% Government owned corporate entities, registed under the Companies Act, 2013.
2.It is informed that the Cabinet in its meeting held on 16.06.2021 has now inter-alia approved to convert the production units of OFB into 07 DPSUs with 41 units, as mentioned at Annexure-I.
3.Separate OMs on the related matters would be issued subsequently.‖
[Emphasis Supplied]
Another, O.M. dated 24.9.2021, issued in respect of dissolution of OFB and transfer of assets and liabilities of OFB to PSU and Directorate of Ordnance. The O.M. dated 24.9.2021, for ready reference reads as:—
―No.I(5)/2021/OF/DP(Plg-V)/01 Government of India Ministry of Defence Department of Defece Production New Delhi, 24th September, 2021
Office Memorandum
Subject: Dissolution of Ordnance Factory Board and transfer of assets and liabilities of Ordnance Factory Board to new Public Sector Undertakings and Directorate of Ordnance (Coordination & Services).
In pursuance of the decision of the Union Cabinet on 16th June, 2021, the Government of India has decided to corporatise the functions of the 41 production units (Ordnance Factories) of the Ordnance Factory Board ("OFB"), functioning under the Department of Defence Production, Ministry of Defence (DDP"). Accordingly, the undersigned is directed to state that the Government of India has decided to transfer, with effect from 1st October, 2021 ("Appointed Date), the management, control, operations and maintenance of these 41 units to 7 Government companies (wholly owned by the Government of India), namely (i) Munitions India Limited, (ii) Armoured Vehicles Nigam Limited, (iii) Advanced Weapons and Equipment India Limited, (iv) Troop Comforts Limited, (v) Yantra India Limited, (vi) India Optel Limited, and (vii) Gliders India Limited (collectively "New DPSUs) in respect of (a) production activities, viz production of arms, ammunitions, weapons, vehicles, defence equipment and non-defence equipment; and (b) identified non-production activities, as set out in Annexure A. The Government of India has also decided to transfer, with effect from the Appointed Date, the management, control, operations and maintenance of certain identified non-production units of OF8 and identified surplus land at 16 production units of OFB to the Directorate of Ordnance Coordination & Services) ("Directorate") under the DDP, as set out in Annexure B. The New DPSUs have been incorporated as Government companies (wholly owned by the Government of India) with limited liability by shares under the Companies Act 2013 with registered office and corporate offices as set out in Annexure A.
2.Accordingly, on and with effect from the Appointed Date, OFB, which has been set up vide Ministry of Defence letter no. 1(82)/78/D(Fy.I) dated 09.01.1979, shall cease to exist as a body.
3.The Government of India has decided to transfer all assets and liabilities of OFB to the New DPSUs and the Directorate as per the structure set out in Annexures A and B with effect from the Appointed Date. The transfer of assets and liabilities to the New DPSUs and the Directorate will be subject to the following terms and conditions: -
(i)The New DPSUs and the Directorate will carry out the duties and responsibilities regarding the objectives /businesses as set out in Annexures A and B, in accordance with rules and such other directions as may be given by the Government of India from time to time.
(ii)The assets and liabilities of OFB functioning under the DDP will stand transferred to the New DPSUs and the Directorate as per the structure set out in Annexures A and B of this memorandum, with effect from the Appointed Date. The details of the assets and liabilities will be worked out as per records availability with the units and the DDP as on the Appointed Date after records and accounts are finalised upto this period. It is clarified for the avoidance of doubt that the assets will stand transferred to the New DPSUs and the Directorate as per the structure set out in Annexures A and B of this memorandum, notwithstanding such assets as of date being reflected in the assets registers of different production units.
(iii)A separate OM would be issued regarding sharing of such assets/facilities which are traditionally being used commonly by two or more production/non-production units ("Common assets").
(iv)The assets and liabilities in respect of the business currently being carried out on account of the Government shall stand transferred to the New DPSUS on the Net Asset Value thereof. The Net Asset Value of the assets comprising the business being transferred to the respective New DPSUs has been provisionally assessed as INR 79,271 Crores as on 31.03.2021 (Annexure C). The said sum will be treated as the provisional value of the business being transferred to and taken over by the New DPSUs subject to finalisation of the transfer value within 3 months of the Appointed Date in consultation with the DDP.
(v)The capital structure of the New DPSUs with effect from the Appointed Date shall be as set out in Annexure D.
(vi)The New DPSUs and the Directorate as the successor shall be responsible for all assets and liabilities and for satisfactory execution of all agreement, contracts and/or obligations in force which pertains to the respective businesses and responsibilities being transferred to them (as set out in Annexures A and B).
(vii)The New DPSUs and the Directorate shall be solely responsible for honouring and performing all respective contracts / agreement and shall be liable for any defaults, delays or non-performance. The New DPSUs shall keep for all times the Government indemnified from all claims, in connection with their respective businesses (as set out in Annexure A).
4.DDP shall be the sole arbiter for resolving any issues regarding implementation of the aforesaid corporatisation exercise and related matters.
5.These orders will come into effect from 1st October, 2021. (Appointed Date).
6.A Compliance Report regarding implementation of the aforesaid decisions/directives would be submitted to DDP by the new DPSUs and the Directorate by 31.12.2021.‖
[Emphasis Supplied]
In the light of Memorandum of Undertaking dated 29.9.2021, Ministry of Defence, Department of Defence Production passed a Resolution dt.1.10.2021, whereby corporatization of 49 Ordnance Factories, Training Institutes, Regional Marketing Centres etc. has taken place.
The Gazette notification dated 1.10.2021 in respect of corporatization of the OFB is reproduced as under :—
―Ministry of Defence (Department of Defence Production
RESOLUTION New Delhi, the 1 October, 2021
No.7(E)- By virtue of the Memorandum of Understanding dated 29th September, 2021 entered into between the President of India (acting through Shri Puneet Agarwal, Joint Secretary to Government of India, Department of Defence Production (DDP), Ministry of Defence) and Munitions India Limited, Armoured Vehicles Nigam Limited, Advanced Weapons and Equipment India Limited, Troop Comforts Limited, Yantra India Limited, India Optel Limited and Gliders India Limited (the seven companies collectively referred to as "New DPSUs"), the activities in the production of arms, ammunitions, weapons, vehicles, defence equipment and non-defence equipment (which were earlier undertaken by the 41 units of Ordnance Factory Board ("OFB") under Department of Defence Production, Ministry of Defence) have been transferred to the New DPSUs with effect from 1st October, 2021 ("Appointed Date"), as per the structure set out in Annexure A. Further, the management, control, operations and maintenance of certain identified non-production units of OFB and identified surplus land at 16 production units of OFB have been transferred to the Directorate of Ordnance (Coordination & Services) ("Directorate") under the DDP with effect from 1st October, 2021, as set out in Annexure B.
2.On and with effect from the Appointed Date, OFB, which has been set up vide Ministry of Defence letter no. 1(82)/78/D(Fy.I) dated 09.01.1979, shall cease to exist as a body.
3.All the assets and liabilities of OFB stand transferred to the New DPSUs and the Directorate, as per the structure set out in Annexures A and B.
4.All the existing contracts, agreements, deeds, purchase orders and Memorandum of Understandings entered into by OFB or any of its production and non-production units with various suppliers, contractors, vendors, companies, Organisations and individuals in respect of supply of plant and machinery, raw materials, purchase of land and building, Transfer of Technology and supply of services or any other arrangement, subsisting on the date of transfer of business and/or required for operations of the New DPSUs and Directorate (as per the structure set out in Annexures A and B) and with subscribers of all types of services to be provided by the New DPSUs and Directorate, will also stand transferred to the New DPSUs and the Directorate (as per the structure set out in Annexures A and B) with effect from the Appointed Date.
5.The New DPSUs and the Directorate will be solely responsible for honouring these contracts, agreements, deeds, purchase orders and Memorandum of Understandings for their due performance and in case of disputes to sue and be sued as the successor/assignee under the contracts, agreements, deeds, purchase orders and Memorandum of Understandings and shall be liable for any defaults, delays, or non-performance.
6.With effect from the Appointed Date, any reference, in any correspondence, bills, notices, and other documents to the OFB, having been issued prior to the Appointed Date shall, wherever the context so permits and allows, be read as reference to the New DPSUs and the Directorate, as per the structure set out in Annexures A and B.
7.With effect from the Appointed Date, in any bill, notice, or other document issued by the New DPSUs and the Directorate, bearing any reference to the OFB, shall, wherever the context so permits and allows, be read as reference to the New DPSUs and the Directorate, as per the structure set out in Annexures A and B.
8.With effect from the Appointed Date, all cheques, drafts or other instruments under which payment is to be made. in favour of the Government of India in respect of monies owed to the OFB, wherever the context so permits and allows, be drawn in favour of the New DPSUs and the Directorate, as per the structure set out in Annexures A and B."
[Emphasis Supplied]
As evident from the aforesaid policy decision of the Government of India in order to enhance functional autonomy, efficiency and to increase production in the interest of the nation and in the interest of the employees, safeguarding their service conditions including wages and retirals benefits. The CCS has also constituted an EGOM in its meeting held on 29.7.2020 to safeguard their wages and retirals benefits and constituted as :—
"Minister of Defence - Chairperson. Minister of Home Affairs. Minister of Finance. Minister of Law and Justice. Minister of Labour and Employment. Minister of State in the Ministry of Personnel, Public Grievance and Pensions.' The Terms of Reference of the EGOM were as under:
"(i). Conversion of Ordnance Factory Board into a single Defence Public Sector Undertaking (DPSU) or as multiple DPSUs.
(ii). Transfer of non-production entitles like Training Institutes, or Controllerates of Safety to the proposed entity/entities.
(iii). Matters related to various categories of employees (Group A, B and C) including protection of their salary and pension of existing employees, number of employees to be transferred to the proposed entity/ entities; terms of their transfer/ absorption; responsibility of pension liability of pre-2004 employees, etc.
(iv). Grandfathering of orders already being executed by OFB and for which facilities have been created in OFB to ensure continuity in supply of strategic arms and ammunitions.
(v). Financial support that may be provided to the entity/entities to make them economically viable and self reliant for purposes like working capital, modernization of equipment, settlement of employees' dues etc.
(vi). Treatment for land assets of OFB.
(vii). Future of Indian Ordnance Factories Health Service.
(viii). Any other related matter, as required."
[Emphasis Supplied]
The Union Cabinet in its meeting held on 16.6.2021, approved conversion of production units of OFB into 7 DPSUs and erstwhile OFB employees were transferred en-masse to the new DPSUs on terms of foreign service on deemed deputation, without deputation allowances.
The erstwhile OFB employees belonging to 41 production units and non-production units were transferred en-masse to new DPSUs on deemed deputation to the new entities and subject to all rules and regulations as are applicable to the Govt. servants. OFB Employees including Group A, B & C and their pay scales, allowances, leave, medical facilities, career progression and other service conditions will be continued as per extant rules, regulations as are applicable to the Central Govt. Servants.
The erstwhile OFB employees, transferred en-masse would remain on deemed deputation till the time they exercise the option of getting permanently absorbed in the PSUs. The respondents have stated on affidavit that the service conditions of the absorbed employees would not be inferior to the existing ones.
Rule 37A of CCS (Pension) Rules, 1972 amended as Rule 37 of CCS (Pension) Rules, 2021, notified wef 1.10.2021. Rule 37 of Rules 2021 and Rule 29 of (I) WPS Rules, 2021 is the rule governing treatment of employees consequent upon conversion of government department into a PSU. The erstwhile OFB employees are given offer of absorption by way of exercise of the option and absorption into DPSU is not mandatory but optional at the discretion of the employees. Rule 37(2) of Rules 2021 and Rule 29 of (I) NPS Rules 2021 reads as:—
Clause (2) of Rules 2021 :—
―The public sector undertaking shall frame its rules and regulations within a time frame not exceeding five years. After such rules and regulations are framed by the public sector undertaking, all Government servants on deemed deputation shall be asked, within a period not exceeding three months from the date of notification of the rules and regulations by the public sector undertaking, to exercise their option to revert back to the government or to seek permanent absorption in the public sector undertaking. Such Government servants shall be asked to exercise this option within a period of three months from the date of the communication asking the Government servants to exercise the options.' [Emphasis Supplied]
Rule 29 of (I) NPS Rules 2021 i.e. Power of Central Government to provide for residual matters mentions :—
―Any related issues not specifically covered in these rules, shall be decided in terms of the relevant provisions in this regard contained in the Central Civil Services (Pension) Rules, Fundamental Rules, Supplementary Rules or any general or special order issued by the Government provided it is not repugnant to or inconsistent with the provisions of these rules.‖ [Emphasis Supplied]
As evident from Rule 37(2) of Rules 2021, on conversion of the Department of Central Government into a Central Public Sector Enterprise, the concerned CPSE shall offer the option to revert back to the Government or to seek permanent absorption in CPSE from the employees.
We have considered the matter. The plain reading of Clause (2) of Rule 37 of Rules, 2021 stipulates all Government servants on deemed deputation shall be asked to exercise their option to revert back to the Government or to seek permanent absorption in PSU. The Rule 37(2) stipulates all Government servants and includes all Group A, B & C employees including Group A Service.
Learned counsel for the respondents have much emphasised that the policy decision taken in order to bring in efficiency in new DPSUs and self-reliance of the nation in defence. The exercising the option for absorption in new DPSU is purely voluntary and optional or to remain on deemed deputation. The policy decision has been taken in national interest, the question of interference by the court does not arise and presses for dismissal of the present OA and the applicants have already been protected.
Learned counsel for the applicants also argued and in sum and substance submitted that the members of the IOFS are at present on deemed deputation and respondents have not clarified the terms and conditions for those IOPS members, who do not opt of absorption and want to continue in government service as deemed deputations till retirement so to exercise their option on or before 15.10.2026 and till than not to insist on submitting option form.
Respondents' have stated on affidavit that consequent to the policy decision, the employees of the erstwhile OFB were placed on deemed deputation. All such personnel continue to remain central government employees, governed by the extant rules, regulations and orders applicable to the Central Government servants.
EGOM has approved DOP OM dated 15.06.2026 stipulates that till such time employees remain on deemed deputation, they shall continue to be subject to all the extant rules, regulations and orders as are applicable to the Central Govt servants. The Common Absorption package vide O.M. dt 15.06.2026, has redressed the grievance of the applicants and relief claimed by granting the option to continue on deemed deputation until retirement. The respondents have granted the relief sought and service benefits of IOFS officers, who do not opt for absorption remains as government employees till retirement.
O.M. dated 15.06.2026, already provides that employees who do not opt for permanent absorption into the new DPSUs shall continue on deemed deputation in govt service till their superannuation. The service conditions of employees on deemed deputation shall continue to be governed by DDP as per extant rules applicable to Central govt employees.
As per Rule 37 of Rules 2021, frame work adopted by the respondents dealing with treatment of employees on conversion of a government department & employees on conversion of into a CPSE. In terms of clause (2) of Rule 37 of Rules 2021, DDP has notified time line for all eligible employees of erstwhile OFB - reads as-
| S. No. | Provision | Timeline |
|---|---|---|
| (1) | Notification of Rules and Regulations (Common Absorption Package) by each of the 07 new DPSUs. | 01.07.2026 (Completed) |
| (2) | Seeking option from all the employees of erstwhile OFB (other than O.F. Schools & O.F. Hospitals) including employees on deputation/lien to other Ministries/Department for absorption in 7 new DPSUs. | 16.07.2026 (Commenced) |
| (3) | Last date for exercising option including submission of ink signed copies to seek permanent absorption in any of the 07 new DPSUs or to continue in Government service. | 15.10.2026 (by 1700 hrs) |
The option is being sought by way of policy decision of Govt of India based on cabinet approval. The last date is 15.10.2026 for exercising option to seek permanent absorption in any of the new DPSUs or to continue in Government service in deemed deputation till retirement. More than 92 % of the employees as on 14.09.2026 have already exercised their option.
Gazette Notification dated 02.09.2026 has been issued to amend and insert proviso below sub-rule (7) of Rule 37 of Rules, 2021 reproduced as under-
“Provided that nothing in this sub-rule shall be applicable to the employees (other than OF Schools and OF Hospitals) of erstwhile Ordnance Factory Board who do not opt for absorption in DPSUs, such employees shall continue to be on deemed deputation till retirement in the DPSUs, created from the conversion of its production units, on terms of foreign service without any deputation allowance”. [Emphasis Supplied]
We have given our thoughtful consideration to the prayer of the applicants not to insist to members of IOFS to submit statutory option forms, being sought as ongoing exercise of offer of absorption, pursuant to policy decision of Government of India based on Cabinet approval.
Learned Additional Solicitor General argued that the respondents have clarified each and every apprehension, issue raised by the applicant. The matter relates to policy decision and the applicants have to exercise their options by 15.10.2026 the proviso below sub-rule (7) of Rule 37 of Rules 2021 has protected interest of applicants claimed in both the OAs and at this stage, the OA deserves to be dismissed.
The learned senior counsel for the applicants fairly submits at the Bar that the relief claimed in para 8 (b) stands fulfilled and relief claimed in para 8 (f) to preserve service conditions of IOFS also stands protected to the extent clarifications furnished on affidavit dated 01.08.2026 filed on 03.08.2026 and additional affidavit 02.09.2026 filed on 03.09.2026 but same is not by competent authority.
We have considered the matter. The respondents issued O.M. dated 15.06.2026, whereby EGOM has already approved common absorption package to be offered to the applicants and extension of deemed deputation period, who do not opt for absorption for new DPSUS till retirement. Thereafter instructions dated 25.06.2026 also issued by DDP, MoD – calling for options as per Rule 37 of Rules 2021 for exercising option of permanent absorption in any of 7 DPSUS or to continue in government service. In the Rules 2021, proviso below sub-rule (7) of Rule 37 of Rules 2021 has been inserted latest vide gazette notification dt.03.09.2026 and rights of erstwhile employees of OFB, who do not opt for absorption in new DPSUS, such employees shall continue to be on deemed deputation till retirement to the DPSUS and the proviso inserted on repatriation to Govt. Service they shall not be redeployed through the surplus cell of the Govt. and all erstwhile OFB employees (except of schools and OF Hospitals) shall continue to be in deemed deputation of DPSUS till retirement. The claim of applicants prima-facie raised in these OAs not to redeployed through surplus cell of the Govt. and allow to continue till retirement from DPSUS as deputationist has been accepted already stands redressed by the respondents. We are of our considered opinion that applicants have failed to establish any infringement of statutory or constitutional right and no writ in nature of mandamus can be issued. So also the ongoing exercise of seeking option by 15.10.2026 is by the competent authority and no writ in nature of certiorari can be issued and interim order dated 20.07.2026 directing respondents not to insist upon the members of the applicant-Association exercising the option for permanent absorption or deemed deputation hereby stands vacated and OA is liable to be dismissed and no interference is called for. So also all the interim orders stand vacated.
Respondents have filed reply affidavits and additional affidavit and ensured that the service condition of the existing employees of OFB are protected as central Govt. employees and will be entitled to the same benefits which they were drawing prior to conversion of OFB into corporate entities, 100% owned by the Government. The proviso inserted below sub-rule (7) of Rule 37 of Rules, 2021 vide gazette notification dt.2.09.2026 and same has come into effect from 02.09.2026 has redressed the grievance of the applicants. The proviso carves out an exception to sub-section (7) of Rule 37 of Rules 2021 that erstwhile OFB employees, who do not opt for absorption in DPSUS, the such employees, applicants shall continue to be on deemed deputation till retirement in the DPSUS and provision of sub-rule (7) of Rule 37 of Rules, 2021 shall not be made applicable to these erstwhile OFB employees. In our considered opinion, the main relief claimed in these OAs, already been redressed and both the OAs being devoid of merits, and no interference called for.
The policy decision of the Govt. of India taken in national interest and it is well settled in law that courts do not interfere with policy decision of govt. of India.
In case of Indian Telecom Service Association versus Union of India, in Civil Writ No. 7544/2001, the Govt. of India transferred Telecom operations in UT of Delhi, Bombay, New Bombay and Thane Municipal area from DoT to newly incorporated govt. company known as MTNL and transferred the staff of DOT to MTNL on existing terms and conditions without allowance. The options for permanent absorption into MTNL were called from Group A and B officers. The order dated 08.05.2020 for options was challenged in the OA before P.B. of the Tribunal. The Tribunal has held that there is no compulsion to opt and first ground of challenge fails, and there is no enforceable legal right to consult the applicant-Association. The terms and conditions of absorption in MTNL are spelt out and any terms of applicants are alleged to affect applicants to disadvantage same can be assailed by them and disposed the O.A. No. 1252/2020.
The said order dated 12.10.2001 in OA No. 1252/2000 was disposed of was under challenge by the applicant-Association to set-aside order dated 08.05.2000 by UOI seeking option for permanent absorption in MTNL. Hon‘ble High Court of Delhi vide final order dated 22.05.2002 held that it would be appropriate of the official respondents to act with due dispatch and expediency in the matter of ensuring that policy planning, and administrative decisions as proposed by official respondents does not suffer on account of the litigations and dismissed the C.W. No. 7544/2001 vide final judgment dated 22.03.2002 with direction to the official respondents to act ensuring that policy decisions does not suffer on account of litigation.
The Hon‘ble High Court of Delhi dismissed the CW 7544/2001 petition filed by Association and case in our hand issue raised also relating to policy decision of Govt. of India. We see no legal enforceable right in favour of present-applicants and we are of the view that no direction can be issued to interfere in the policy decision of govt of India.
Dr. N.C. Singhal versus Union of India & Ors (1980) 3 SCC 29. Their Lordships observed that – ―creation and abolition of posts is a matter of government policy and every sovereign government has this power in the interest and necessity of internal administration. The question on decision of post is dictated by policy decision or exigencies of circumstances and necessity. The creation, continuance and abolition of post are all decided by the Government in the interest of administration and general public.‖
The Hon‘ble Supreme Court has held that in policy decision no interference is warranted. In Bajaj Hindustan Limited Vs. Sir Shadi Lal Enterprised Ltd. (2011) 1 SCC 640. The Apex Court has observed as under :-
"21.It is settled law that in the areas of economics and commerce, there is far greater latitude available to the executive than in other matters. The Court cannot sit in judgment over the wisdom of the policy of the legislature or the executive. Thus in Balco Employees' Union (Regd.) v. Union of India [(2002) 2 SCC 333] it was observed: (SCC pp. 381-82, paras 92-93)
"92.In a democracy, it is the prerogative of each elected Government to follow its own policy. Often a change in Government may result in the shift in focus or change in economic policies. Any such change may result in adversely affecting some vested interests. Unless any illegality is committedin the execution of the policy or the same is contrary to law or mala fide, a decision bringing about change cannot per se be interfered with by the court.
93.Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved."
In the same decision in SCC para 39 it was observed: (Balco Employees' case [(2002) 2 SCC 333], SCC pp. 358-59)
"39.In Premium Granites v. State of T.N. [(1994) 2 SCC 691] while considering the court's powers in interfering with the policy decision, it was observed at p. 715 as under: (SCC para 54)
'54. It is not the domain of the court to embark upon unchartered ocean of public policy in an exercise to consider as to whether a particular public policy is wise or a better public policy can be evolved. Such exercise must be left to the discretion of the executive and legislative authorities as the case may be."
22.In SCC para 41 of the aforesaid decision in Balco employees' case [(2002) 2 SCC 333] this Court quoted from its earlier decision in M.P. Oil Extraction v. State of M.P. [(1997) 7 SCC 592] as follows: (SCC p. 611, para 41)
"41.... The executive authority of the State must be held to be within its competence to frame a policy for the administration of the State. Unless the policy framed is absolutely capricious and, notbeing informed by any reason whatsoever, can be clearly held to be arbitrary and founded on mere ipse dixit of the executive functionaries thereby offending Article 14 of the Constitution or such policy offends other constitutional provisions or comes into conflict with any statutory provision, the court cannot and should not outstep its limit and tinker with the policy decision of the executive functionary of the State. This Court, in no uncertain terms, has sounded a note of caution by indicating that policy decision is in the domain of the executive authority of the State and the court should not embark on the unchartered ocean of public policy and should not question the efficacy or otherwise of such policy so long the same does not offend any provision of the statute or the Constitution of India. The supremacy of each of the three organs of the State i.e. legislature, executive and judiciary in their respective fields of operation needs to be emphasised. The power of judicial review of the executive and legislative action must be kept within the bounds of constitutional scheme so that there may not be any occasion to entertain misgivings about the role of judiciary in outstepping its limit by unwarranted judicial activism being very often talked of in these days. The democratic set-up to which the polity is so deeply committed cannot function properly unless each of the three organs appreciate the need for mutual respect and supremacy in their respective fields."
37.It was held in the above decision as well as in India Cement Ltd. v. Union of India [(1990) 4 SCC 356: AIR 1991 SC 724] that even if some persons are at a disadvantage and suffered losses on account of formulation and implementation of the government policy that is not by itself sufficient ground for interference by the Court.
40.Economic and fiscal regulatory measures are a field where Judges should encroach upon very warily as Judges are not experts in these matters. The impugned policy parameters were fixed by experts in the Central Government, and it is not ordinarily open to this Court to sit in appeal over the decisions of these experts. We have not been shown any violation of law in the impugned notification or press note.
45.In our opinion there should be judicial restraint in fiscal and economic regulatory measures. The State should not be hampered by the Court in such measures unless they are clearly illegal or unconstitutional. All administrative decisions in the economic and social spheres are essentially ad hoc and experimental. Since economic matters are extremely complicated this inevitably entails special treatment for distinct social phenomena. The State must therefore be left with wide latitude in devising ways and means of imposing fiscal regulatory measures, and the Court should not, unless compelled by the statute or by the Constitution, encroach into this field.
46.In our opinion, it will make no difference whether the policy has been framed by the legislature or the executive and in either case there should be judicial restraint. The Court can invalidate an executive policy only when it is clearly violative of some provisions of the statute or Constitution or is shockingly arbitrary but not otherwise."
[Emphasis Supplied]
The Hon’ble Supreme Court in Distribution of Essential Supplies and Services During Pandemic, In Re, (2021) 7 SCC 772, observed that:
"15.It is trite to state that separation of powers is a part of the basic structure of the Constitution. Policy-making continues to be in the sole domain of the executive. The judiciary does not possess the authority or competence to assume the role of the executive, which is democratically accountable for its actions and has access to the resources which are instrumental to policy formulation. However, this separation of powers does not result in courts lacking jurisdiction in conducting a judicial review of these policies. Our Constitution does not envisage courts to be silent spectators when constitutional rights of citizens are infringed by executive policies. Judicial review and soliciting constitutional justification for policies formulated by the executive is an essential function, which the courts are entrusted to perform.
[Emphasis Supplied]
For the reasons stated hereinabove and in our considered opinion. So also in view of the law laid down by the Hon‘ble Supreme Court in the case of Bajaj Hindustan Limited Vs. Sir Shadi Lal Enterprised Ltd. (supra) and in Distribution of Essential Supplies and Services During Pandemic, in Re (supra), The policy decision taken in the interest of the nation to strengthen the defence production and no interference is called for and the OAs devoid of merits and hereby dismissed.
All interim orders also stand vacated.
Accordingly, both the OAs devoid of merits, is hereby dismissed.
There shall be no order as to costs.
As a sequel thereof, pending MA(s), if any, also stands disposed of.
Copy of this order be placed in each Original Application.
The Registry is directed to upload the order on the website forthwith.