Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO .2442 OF 2009
(Arising out of SLP (C) No.25505 of 2007)
M.P. State Co-op. Dairy Fedn. Ltd. & Anr. … Appellants
Versus
Rajnesh Kumar Jamindar & Ors. … Respondents
WITH
CIVIL APPEAL NOs. 2443,2446, 2447, 2449,
2452, 2454, 2456, 2458, 2460, 2462, 2464, 2467, 2469, 2471, 2472,
2473, 2474, 2475, 2477, 2478, 2480, 2481, 2482, 2483, 2484, 2485,
2486, 2487, 2489, 2494, 2495, 2496, 2497, 2498, 2499, 2500, 2502,
2503, 2504, 2505, 2506, 2507, 2508-2525, 2526, 2527, 2528, 2529,
2530-2531, 2532, 2533 OF 2009
(Arising out of SLP (C) Nos.9, 11, 12, 20, 26, 52, 87, 184, 185, 202,
205, 249, 342, 345, 351, 353, 357, 386, 389, 396, 462, 585, 586,624,
692, 770, 779, 784, 804, 806, 816, 817, 825, 1360, 1716, 1772, 2205,
2208, 2211, 2235, 5123, 2249, 2478, 5102-5119, 6418, 6477, 6995,
7502, 4879-4880 of 2008, 24873 of 2007 and 17705 of 2008)
J U D G M E N T
S.B. Sinha, J .
1. Leave granted.
2. Whether Madhya Pradesh State Co-operative Dairy Federation
Limited (for short “the Federation”) is a ‘State’ within the meaning of
2
Article 12 of the Constitution of India is the question involved in these
appeals.
3. Before us, there are 52 matters. Out of 52 concerned employees, 16
Writ Petitions were allowed by a learned Single Judge. Writ appeals filed
there against by the Federation were dismissed but only 50% back wages
had been granted to the employees. Respondents have not questioned the
correctness of the said judgment. Remaining 36 writ petitions were
dismissed by a learned Single Judge. However, writ appeals filed there
against have been allowed directing reinstatement of the concerned
respondents with only 20% back wages.
4. Federation is a society registered and incorporated under the
provisions of the Madhya Pradesh Cooperative Societies Act, 1960 (for
short “the Act”). It is an apex society classified as a Central Society. It is
registered under Section 9 of the Act. The Government of Madhya Pradesh
through its Veterinary Department had been carrying out in certain areas of
the State activities of supply of milk through its offices established for the
said purpose. A company known as Madhya Pradesh State Dairy
Development Corporation Limited was incorporated on or about 22.03.1975
for carrying out the business of sale of milk and its products. It was
3
registered under the Indian Companies Act, 1956. Its object was
development and procurement of milk and for bringing out a ‘white
revolution’.
5. Federation was constituted to promote sale of milk and its products
inter alia with a view to providing employment to agriculturists, milk
suppliers so as to enable it to implement a World Bank scheme effectively.
The said company underwent voluntary winding up. Its assets both movable
and immovable were transferred to the Federation as part of shareholdings of
the State Government.
6. Federation is a federal society within the meaning of Section 2(k) of
the Act. It is also an apex society within the meaning of Section 2(a-1) of
the Act. It has its own bye-laws. Bye-law No. 3 provides for betterment of
the economic conditions of agriculturists and milk producers by monitoring
the activities as also different programmes relating to production, collection,
Processing, distribution and marketing of milk and milk products. From
time to time, it helps and provides technical assistance to the primary
societies, independent bodies which are engaged in the production of milk
and its proper distribution in urban areas. It also issues guidelines. Its
functions are enumerated in Bye-law Nos. 3.2.1 to 3.2.26.
4
7. In terms of Section 55 of the Act, the Registrar framed regulations
known as the M.P. State Cooperative Dairy Federation Ltd. Employees
Recruitment, Classification and Conditions of Service Regulations, 1985
(for short “the Regulations”). Indisputably, terms and conditions of
employment of the employees of the Federation are governed by the said
Regulations; Regulation 13 whereof provides for compulsory retirement of
an employee on attaining the age of 55 years or on completion of 25 years of
service. Regulation 13 was amended with effect from 24.12.2001 providing
for compulsory retirement of an employee of the Federation on attaining the
age of 50 years or completion of 20 years of service. It reads as under:
“ 13. Compulsory Retirement
1. The appointing officer has the powers that
he can without giving any reason
compulsory retire any employee on
completion of twenty years of his service
and on this ground any claim for special
compensation would not be rejected,
however, this power would be exercised in
those circumstances when the appointing
officer is of the view that it is in the interest
of the Federation and it can be done by
giving 3 months prior intimation otherwise
not.
2. Any employee who has completed 20 years
of service at any time would be able to retire
from the Federation, however, before
5
retiring at least three months notice in
writing has to be given to the concerned
officer in this regard. If he wants to retire
before the completion of the period of
notice, then he would be paid the amount
equivalent to the salary and allowances
which is less than three months.”
8. The said provision is at par with Rule 42(b) of the Madhya Pradesh
Civil Service (Pension) Rules, 1976 applicable to the government servants.
The said provision is also at par with the circular letter issued by the State
Government on 22.08.2000.
9. Indisputably, pursuant to or in furtherance of Regulation 13 of the
Regulations, a Scrutiny Committee as also a Review Committee were
constituted for the purpose of finding out as to how many employees can be
compulsorily retired in terms thereof.
10. It is also not in dispute that during the period 1975 to 1981, no
guideline had been laid down in regard to the mode and manner for
recording of annual confidential reports. Such parameters, however, were
introduced in the year 1986-87.
6
11. Respondents indisputably have completed 20 years of service. A
Scrutiny Committee constituted therefor scrutinized the service records of
the respondents for about 20 years. The formula for determination of the
fitness of the concerned employees to continue in the service of the
Federation was the same which is made applicable to the case of the
government servants; in terms whereof the entire service records of the
employees were required to be considered wherefor the grading in the
confidential reports was to be made on the following basis:
“For “Outstanding” category four marks, for “Very
Good” category three marks, for “Good” category
two marks, for “Average” category one mark, and
for “Poor” category zero marks has been allotted.
The total marks are to be divided by the number of
years for which the confidential reports are
available and which have been considered. It is
further stated that in case the average marks are
two or more than two then the employee should
not be compulsorily retired and on the other hand
if he gets less than two average marks he should be
compulsorily retired.”
12. The circular letter issued by the Government of Madhya Pradesh
dated 22.08.2000 inter alia provides:
“ (d) An evaluation of complete service records
should not be below ‘good’ Cagetory – B.
Simultaneously, it will be seen whether
7
there is any decline in the working
efficiency of the Government servant. It is
to be seen whether the working efficiency,
especially in preceding five years has
declined or not.”
Yet again, by a circular letter dated 20.03.2003, it was directed:
“Under above mentioned subject State
Government has decided accordingly :
(1) referred memorandum dated 12.12.2001
issued by this Department which was having
directions for drawing average marks on the
basis of service period by showing the
classification marks of the confidential
reports of the government employee on
average basis for the purpose of screening, is
being hereby cancelled.
(2) The standards for screening that were fixed
by the referred memorandum dated
22.03.2000 in its para 2(1), now deleting its
standard No.4 following standards are now
being prescribed :
Standard No. (4)
(one) though at the time of screening whole record
of the employee should be checked, even then any
government employee should not be held retired
on the basis of normal disability, if his previous 5
years of service has been found satisfactory, or if
he has been promoted on some higher grade in last
5 years and his services on the higher grade have
been found satisfactory.
(two) any of the Government Employee, shall not
be retired from the service on the ground of normal
8
disability, if within one year of the date of
screening he is going to be retired after completing
his age of superannuation. Abovesaid condition
shall not be applicable in cases of employees
having doubtful integrity.”
13. The report of the Scrutiny Committee was placed before the Review
Committee, which in its report recorded:
“…During the course of examination, it has also
been observed on perusal of the Confidential
Reports that in some Confidential Reports for
certain years, the group/category have not been
marked but the marks have been awarded. The
Confidential Report has the categories of ‘poor’
and ‘very poor’ while on the circular for evaluation
issued by the State, there being no category ‘very
poor’, the ‘very poor’ category has been treated as
‘poor’, ‘poor’ has been treated as ‘average’,
‘average’ has been considered as ‘good’ and
‘good’ has been considered as ‘very good’ for the
purpose of evaluation.
On making a review, following criteria have
been prescribed by the Government for the
purpose of compulsory retirement:-
1. Recommendations may be made after
considering complete records of the
employee for the purpose of his honesty and
integrity being in doubt.
2. Depletion in physical capacities.
3. An evaluation of the goodwill and working
efficiency of a Government servant may be
carried out on the basis of complete service
records of the Government servant. It is not
9
necessary that every adverse comment
and/or such comment which can be given
the nomenclature of adverse comment must
be communicated to the employees.
4. An all round evaluation of records of total
period of service : must not below “good”
category. Simultaneously, it may also be
seen that is there any decline in the working
efficiency of the Government servant.
Especially, whether there is any decline in
the working efficiency in preceding five
years,”
14. The question as to whether the Federation is a ‘State’ within the
meaning of Article 12 of the Constitution of India or not came up for
consideration before a Full Bench of the Madhya Pradesh High Court in
Dinesh Kumar Sharma v. M.P. Dugdh Mahasangh Sahakari Samiti Maryadit
[1993 MPLJ 786]. Inter alia relying on or on the basis of the decisions of
this Court in Ajay Hasia v. Khalid Mujib Sehravardi [(1981) 1 SCC 722],
Ramana Dayaram Shetty v. International Airport Authority of India [(1979)
3 SCC 489] and Chander Mohan Khanna v. National Council of Educational
Research and Training [(1991) 4 SCC 578 : AIR 1992 SC 76], it was held
that the Federation is not a ‘State’, opining:
(i) The entire share capital is not held by the State Government.
10
(ii) The entire expenditure of the cooperative societies is not met by
the State Government.
(iii) It does not enjoy a monopoly status.
(iv) The State Government does not have any deep and pervasive
control over the societies.
It was, however, noticed that the Managing Director is appointed by
the State Government but the Chairman of the Federation has a right to
contest election; its functions inter alia being to encourage the villagers, the
persons engaged in the sale of milk and milk products, to give them
employment, primarily resting on the cooperative principles which are not
carried out pursuant to the State requirements in discharge of State’s
obligations for health, safety or general welfare of public generally.
15. The matter, however, was referred to a Special Bench in M.P. State
Co-operative Dairy Federation and Others v. Madan Lal Chourasia [2007 (2)
M.P.L.J. 594] for reconsideration of the said decision. Speaking for the
Special Bench, consisting of five Hon’ble Judges, the Chief Justice of the
High Court noticed that the six authoritative tests culled out in the case of
Ajay Hasia (supra) having been reconsidered in Pradeep Kumar Biswas v.
11
Indian Institute of Chemical Biology [(2002) 5 SCC 111], the tests laid
down therein only were required to be considered, holding:
“…The Federation was registered as a Co-
operative Society under the M.P. Co-operative
Societies Act, 1960 on or about 13-5-1980. Bye-
law 3.1 of the Bye-laws of the Federation states
that the main object of the Federation comprised of
conducting various programmes of manufacture,
collection, processing, distribution and sale of milk
and milk products for the economic development
of the farmers and for developing and safeguarding
the milk business, milk producing animals and for
the economic development of the groups engaged
in milk production and spreading and developing
other joint activities…the main object of the
Federation discussed above clearly show that the
work of the Federation relates to economic
development of farmers, who are engaged in
production and sale of milk in the State of Madhya
Pradesh and this work has been taken up by the
State Government through the agency of the
Federation because development of milk and milk
products and economic development of farmers
carrying the business of sale of milk and milk
products are part of the functions of a welfare
State.”
It was found that the State Government and the Central Government
were having more than 91% of shares in terms of Bye-laws 4.0, 4.9 and
4.9.1. It was noticed:
“17. Bye-law 2.2 of the bye-laws of the Federation
defines the Board of Directors of the Federation to
12
mean the Board constituted, elected and nominated
under the bye-laws. Bye-law 22 provides for
composition of the Board of Directors and the
Council for Federation.”
It noticed the composition of the Board of Directors of the Federation
to hold:
“It will be clear from the aforesaid composition of
the Board of Directors of the Federation that out of
13 members of the Board of Directors as many as
8 members are the nominees of the State
Government, Central Government and their
agencies.
18. Under bye-law 27 of the bye-laws of the
Federation, vast powers have been vested in the
Board of Directors of the Federation including the
power to appoint, dismiss, suspend and regularize
the services of the employees of the Federation
such as Managers, Secretaries, Officers, Clerks
and to fix their powers, duties, wages and
allowances. The Board of Directors of the
Federation appear to have under the bye-laws of
the Federation over all administrative powers and
since the majority of the Board of Directors are
nominees of the State Government and the Central
Government as representatives of their respective
departments and not as experts as contended by
Mr. Singh, we hold that the administrative control
of the Federation is with the Government.
19. Bye law 30 of the bye-laws of the Federation is
titled 'Managing Director' and bye-law 30.1 states
that for managing the business of the Federation,
Managing Director shall be appointed by the State
Government. Bye law 30.2 states that the
Managing Director of the Federation shall be a
Chief Executive and will work under the control,
direction and guidance of the Board of Directors.
13
Bye law 30.3 of the bye-laws states that the
Managing Director shall execute the business and
work as per powers given to him, from time to
time, by the Board of Directors and he can
delegate his powers given by the Board of
Directors to his subordinate officers and he will
place the information of delegation of his powers
to subordinate officers in the next meeting of the
Board of Directors. It will thus be clear that the
Managing Director is not only appointed by the
State Government but is also under the control,
direction and guidance of the Board of Directors,
which is dominated by the Government nominee.
Hence, day to day functioning of the Federation is
also controlled by the Government though the
Managing Director and the Board of Directors of
the Federation…”
It was furthermore noticed:
“20. Bye law 17 of the bye-laws is titled 'General
Assembly' and bye law 17.1 states that the General
Assembly of the Federation will have the
supremacy under the Act, Rules and Bye-laws.
Bye law 17.2 deals with the composition of the
General Assembly and says that it will comprise of
elected members of the Milk Union and all the
nominated members of Board of Directors. Bye
law 17.3 states that the Federation will call a
General Assembly every year, which will be
before three months of the end of financial year
and bye law 17.4 states that the Federation can at
any time call a General Assembly to discuss
emergency work. Bye law 18 states that the
General Assembly will consider the subjects
mentioned therein and these are mainly the budget
and programme presented by the Board of
Directors, the annual financial report placed by the
14
Board of Directors of the Federation, the
distribution of profits and decision on the audit
application and audit removal report of the Board
of Directors. These provisions relating to the
General Assembly of the Federation show that the
General Assembly was also dominated by the
Board of Directors. As the Board of Directors is
dominated by the nominees of the Government, the
General Assembly will also take decisions in its
meeting in the manner as desired by the
Government. Hence, the Federation is also
dominated and controlled by the Government
administratively and functionally as in the cases of
Pradeep Kumar Biswas and Virendra Kumar
Srivastava (supra).”
On the aforementioned findings, the decision of the Full Bench in
Dinesh Kumar Sharma (supra) was overruled.
16. Mr. C.N. Sreekumar, learned counsel appearing on behalf of the
Federation, in support of the appeals, would contend:
(i)
The Special Bench of the High Court committed a serious error in
refusing to consider the authoritative pronouncement of this Court
in Ajay Hasia (supra) as also its earlier decision in Dinesh Kumar
Sharma (supra) to hold that the Federation is a ‘State’ within the
meaning of Article 12 of the Constitution of India.
15
(ii) The Federation having been running into huge losses, the
conditions precedent for retirement of the employees of the
Federation as contained in Regulation 13 of the Regulations having
been satisfied, the impugned judgment cannot be sustained.
17. Mr. Vivek K. Tankha, learned senior counsel appearing on behalf of
contesting respondents and Ms. Pragati Neekhra, learned counsel appearing
on behalf of the appellant in Civil Appeal arising out of SLP (C) No. 17705
of 2008, on the other hand, would urge:
(i) The share capital, functional control and the administrative control
being completely in the hands of the Government of the State, the
Federation is a ‘State’ within the meaning of Article 12 of the
Constitution of India.
(ii) As the decision of this Court in Pradeep Kumar Biswas (supra)
governs the field and the criteria laid down therein being satisfied,
no exception can be taken to the impugned judgment.
(iii) Regulations governing the conditions of service being statutory in
character and the Federation, having adopted the government
circulars and rules for the purpose of implementation of its policy
16
to retire compulsorily a large number of employees, were bound to
follow the same.
(iv) The Scrutiny Committee and the Review Committee having not
only consisted of the officers of the State but also the Registrar of
the Cooperative Societies, it was futile to move to the Registrar of
the Cooperative Societies for setting aside the impugned circulars
issued with regard to compulsory retirement.
(v) Having regard to the Regulations governing payment of back
wages, as contained in Regulation 49(2) of the Regulations, the
entire back wages should be directed to be paid.
18. An additional contention has been raised in the Civil Appeal arising
out of SLP (C) No. 17705 of 2008 that the appellant therein having been
suffering from disability within the meaning of the provisions of the Persons
with Disabilities (Equal Opportunities, Protection of Rights and Full
Participation) Act, 1995 (for short “the 1995 Act”), Section 47 thereof would
be attracted and, thus, the appellant was entitled to entire back wages.
19. Article 12 of the Constitution of India reads as under:
17
“12. Definition.—In this part, unless the context
otherwise requires, ‘the State’ includes the
Government and Parliament of India and the
Government and the legislature of each of the
States and all local or other authorities within the
territory of India or under the control of the
Government of India.”
20. The development of law in this regard in view of the decisions
rendered by this Court beginning from the Rajasthan State Electricity Board
v. Mohan Lal [(1967) 3 SCR 377], Ajay Hasia (supra) and other decisions
including a Seven – Judge Bench decision of this Court in Pradeep Kumar
Biswas (supra), is to say the least phenomenal.
21. We may also notice that P.K. Ramachandra Iyer and Others v. Union
of India and Others [(1984) 2 SCC 141] wherein Indian Council for
Agricultural Research (ICAR) was held to be a ‘State’ within the meaning of
Article 12 of the Constitution of India, was distinguished in Chander Mohan
Khanna (supra). However, Chander Mohan Khanna (supra) was overruled
in Pradeep Kumar Biswas (supra) to the extent it followed the decision in
Sabhajit Tewary v. Union of India [(1975) 1 SCC 485].
22. In Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers’
Association and Another [(2002) 2 SCC 167] Mysore Paper Mills Ltd. was
18
held to be a ‘State’ within the meaning of Article 12 of the Constitution of
India as it was substantially financed and controlled by the Government,
managed by the Board of Directors nominated and removable at the instance
of the Government and carrying on functions of public interest under its
control.
23. In Pradeep Kumar Biswas (supra), the following tests have been laid
down by a Seven-Judge Bench of this Court:
(i) Formation of the body
(ii) Objects and functions
(iii) Management and control
(iv) Financial aid, etc.
The dicta of Mathew, J. in Sukhdev Singh v. Bhagatram Sardar Singh
Raghuvanshi [(1975) 1 SCC 421] was quoted with approval therein is in the
following terms:
“17. For identifying such an agency or
instrumentality he propounded four indicia:
(1) “A finding of the State financial support plus
an unusual degree of control over the management
and policies might lead one to characterize an
operation as State action.” (SCC p. 454, para 96)
19
(2) “Another factor which might be considered is
whether the operation is an important public
function.” (SCC p. 454, para 97)
(3) “The combination of State aid and the
furnishing of an important public service may
result in a conclusion that the operation should be
classified as a State agency. If a given function is
of such public importance and so closely related to
governmental functions as to be classified as a
governmental agency, then even the presence or
absence of State financial aid might be irrelevant
in making a finding of State action. If the function
does not fall within such a description, then mere
addition of State money would not influence the
conclusion.” (SCC p. 454, para 97)
(4) “The ultimate question which is relevant for
our purpose is whether such a corporation is an
agency or instrumentality of the Government for
carrying on a business for the benefit of the public.
In other words, the question is, for whose benefit
was the corporation carrying on the business?”
(SCC p. 458, para 111)”
This Court referred to Ajay Hasia (supra) wherein the tests gathered
from the decision of this Court in Ramana Dayaram Shetty (supra) were
stated in the following terms:
“(1) One thing is clear that if the entire share
capital of the corporation is held by Government, it
would go a long way towards indicating that the
corporation is an instrumentality or agency of
Government. (SCC p. 507, para 14)
(2) Where the financial assistance of the State is so
much as to meet almost entire expenditure of the
corporation, it would afford some indication of the
20
corporation being impregnated with Governmental
character. (SCC p. 508, para 15)
(3) It may also be a relevant factor ... whether the
corporation enjoys monopoly status which is State
conferred or State protected. (SCC p. 508, para 15)
(4) Existence of deep and pervasive State control
may afford an indication that the corporation is a
State agency or instrumentality. (SCC p. 508, para
15)
(5) If the functions of the corporation are of public
importance and closely related to Governmental
functions, it would be a relevant factor in
classifying the corporation as an instrumentality or
agency of Government. (SCC p. 509, para 16)
(6) ‘Specifically, if a department of Government is
transferred to a corporation, it would be a strong
factor supportive of this inference’ of the
corporation being an instrumentality or agency of
Government.” (SCC p. 510, para 18)”
It was held in Pradeep Kumar Biswas (supra):
“40. The picture that ultimately emerges is that the
tests formulated in Ajay Hasia are not a rigid set of
principles so that if a body falls within any one of
them it must, ex hypothesi, be considered to be a
State within the meaning of Article 12. The
question in each case would be — whether in the
light of the cumulative facts as established, the
body is financially, functionally and
administratively dominated by or under the control
of the Government. Such control must be
particular to the body in question and must be
pervasive. If this is found then the body is a State
within Article 12. On the other hand, when the
control is merely regulatory whether under statute
or otherwise, it would not serve to make the body a
State.”
21
24. In Virendra Kumar Srivastava v. U.P. Rajya Karmachari Kalyan
Nigam and Another [(2005) 1 SCC 149], this Court held the respondent
therein to be a ‘State’ within the meaning of Article 12 of the Constitution of
India, applying the tests of administrative control, financial control and
functional control.
25. The question as to whether the Board of Control for Cricket in India
(BCCI) which is a private body but had a control over the sport of cricket in
India is a ‘State’ within the meaning of Article 12 of the Constitution of
India came up for consideration before a Constitution Bench of this Court in
Zee Telefilms Ltd. and Another v. Union of India and Others [(2005) 4 SCC
649] wherein the majority felt bound by the dicta laid down in Pradeep
Kumar Biswas (supra) to opine that it was not a ‘State’ within the meaning
of Article 12 of the Constitution of India.
However, the minority noticed:
“70. Broadly, there are three different concepts
which exist for determining the questions which
fall within the expression “other authorities”:
(i) The corporations and the societies created by
the State for carrying on its trading activities in
terms of Article 298 of the Constitution wherefor
the capital, infrastructure, initial investment and
22
financial aid, etc. are provided by the State and it
also exercises regulation and control thereover.
(ii) Bodies created for research and other
developmental works which are otherwise
governmental functions but may or may not be a
part of the sovereign function.
(iii) A private body is allowed to discharge public
duty or positive obligation of public nature and
furthermore is allowed to perform regulatory and
controlling functions and activities which were
otherwise the job of the Government.
71. There cannot be same standard or yardstick for
judging different bodies for the purpose of
ascertaining as to whether any of them fulfils the
requirements of law therefor or not.
80. The concept that all public sector undertakings
incorporated under the Companies Act or the
Societies Registration Act or any other Act for
answering the description of State must be
financed by the Central Government and be under
its deep and pervasive control has in the past three
decades undergone a sea change. The thrust now is
not upon the composition of the body but the
duties and functions performed by it. The primary
question which is required to be posed is whether
the body in question exercises public function.
110. Tests evolved by the courts have, thus, been
expanded from time to time and applied having
regard to the factual matrix obtaining in each case.
Development in this branch of law as in others has
always found differences. Development of law had
never been an easy task and probably would never
be.”
The majority despite holding that BCCI is not a ‘State’ within the
meaning of Article 12 of the Constitution of India opined that a writ petition
23
under Article 226 of the Constitution of India would be maintainable against
it.
26. In State of U.P. v. Neeraj Awasthi and Others [(2006) 1 SCC 667],
U.P. State Agricultural Produce Market Board has been held to be a ‘State’,
holding:
“33. The Board is “State” within the meaning of
Article 12 of the Constitution. It was constituted in
terms of the provisions of the said Act. As the
powers and functions of the Board as also the State
in terms of the provisions of the statute having
been delineated, they must act strictly in terms
thereof. It is a statutory authority. Its powers,
duties and functions are governed by the statute. It
is responsible for constitution of the Market
Committees for the purpose of overseeing that
agriculturists while selling their agricultural
produce receive the just price therefor. It not only
regulates sale and purchase of the agricultural
produce but also controls the markets where such
agricultural produces are bought and sold. The
Board is entitled to levy market fee and recover the
same from the buyers and sellers through Market
Committees. Indisputably, the Market Committees
and the Board have power to appoint officers and
servants. Although the power of the Board in this
respect is not circumscribed, that of the Market
Committees is. The Market Committees can
appoint only such number of secretaries and other
officers as may be necessary for efficient discharge
of its functions. Terms and conditions of such
services are to be provided by it. Section 19 of the
Act, however, imposes further restriction on the
power of the Market Committee by limiting the
24
annual expenditure made in this regard not
exceeding 10% of the total annual receipt of the
Committee.”
27. In S.S. Rana v. Registrar, Coop. Societies and Another [(2006) 11
SCC 634], Pradeep Kumar Biswas (supra) has been followed.
28. We have noticed the history of the Federation. It was a part of the
Department of the Government. It not only carries on commercial activities,
it works for achieving the better economic development of a section of the
people. It seeks to achieve the principles laid down in Article 47 of the
Constitution of India, viz., nutritional value and health. It undertakes a
training and research work. Guidelines issued by it are binding on the
societies. It monitors the functioning of the societies under it. It is an apex
body.
29. We, therefore, are of the opinion that the appellant herein would come
within the purview of the definition of ‘State’ as contained in Article 12 of
the Constitution of India.
30. The learned Single Judge called for the records. It was found that the
Regulations were amended in conformity with the government circulars and,
25
thus, the said amendment was valid. It was noticed that at least in cases of
16 employees, the average grading being “good”, their services could not
have been dispensed with.
31. The Division Bench of the High Court, furthermore, noticed that
although in many cases, the ACRs were not available but an attempt had
been made to grant “average” on the basis of the year. It was furthermore
found that although the Scrutiny Committee was required to lay emphasis on
the grading of last five years, there was no justification why the last two
years’ grading had not been taken into consideration. It was furthermore
held that the process of weeding out does not satisfy the test of
rationalization, stating:
“(a) There has been no rationalization of marking
system when conversion has taken place
from grading to award of marks by the
Screening Committee.
(b) The principle of average that has been
applied by the Screening Committee is not
an acceptable one as the best average
principle should have ordinarily been
applied in the absence of non-availability of
the ACR, for the ACRs are maintained and
kept by the employer.
26
(c) There was no justification to fix a cut off
date when the Screening Committee met at a
later stage.
(d) Though the Circular postulates that last five
years ACRs have to be taken into
consideration for the purpose of finding out
whether there has been declining of progress
in the performance of the employee the last
two years ACRs were not considered.
(e) In certain cases benefit of promotion were
conferred by the said facet has not been
taken into consideration at all which reflects
non-application of mind.”
It was, however, opined that back wages to the employees should be
confined to 20%.
32. The law relating to compulsory retirement in public interest is no
longer res integra. The provisions had been made principally for weeding
out dead wood. An order of compulsory retirement being not penal in nature
can be subject to judicial review inter alia:
(i) When it is based on no material;
(ii) When it is arbitrary;
(iii) When it is without application of mind; and
(iv) When there is no evidence in support of the case.
27
In Baikuntha Nath Das and Another v. Chief District Medical Officer,
Baripada and Another [(1992) 2 SCC 299], this Court held:
“34. The following principles emerge from the
above discussion:
(i) An order of compulsory retirement is
not a punishment. It implies no stigma nor any
suggestion of misbehaviour.
(ii) The order has to be passed by the
government on forming the opinion that it is in the
public interest to retire a government servant
compulsorily. The order is passed on the subjective
satisfaction of the government.
(iii) Principles of natural justice have no
place in the context of an order of compulsory
retirement. This does not mean that judicial
scrutiny is excluded altogether. While the High
Court or this Court would not examine the matter
as an appellate court, they may interfere if they are
satisfied that the order is passed (a) mala fide or
(b) that it is based on no evidence or (c) that it is
arbitrary — in the sense that no reasonable person
would form the requisite opinion on the given
material; in short, if it is found to be a perverse
order.
(iv) The government (or the Review
Committee, as the case may be) shall have to
consider the entire record of service before taking
a decision in the matter — of course attaching
more importance to record of and performance
during the later years. The record to be so
considered would naturally include the entries in
the confidential records/character rolls, both
favourable and adverse. If a government servant is
promoted to a higher post notwithstanding the
adverse remarks, such remarks lose their sting,
more so, if the promotion is based upon merit
(selection) and not upon seniority.
28
(v) An order of compulsory retirement is
not liable to be quashed by a Court merely on the
showing that while passing it uncommunicated
adverse remarks were also taken into
consideration. That circumstance by itself cannot
be a basis for interference.”
In State of Gujarat v. Umedbhai M. Patel [(2001) 3 SCC 314], this
Court held:
“11. The law relating to compulsory retirement has
now crystallised into definite principles, which
could be broadly summarised thus:
(i) Whenever the services of a public servant are
no longer useful to the general administration, the
officer can be compulsorily retired for the sake of
public interest.
(ii) Ordinarily, the order of compulsory retirement
is not to be treated as a punishment coming under
Article 311 of the Constitution.
(iii) For better administration, it is necessary to
chop off dead wood, but the order of compulsory
retirement can be passed after having due regard to
the entire service record of the officer.
(iv) Any adverse entries made in the confidential
record shall be taken note of and be given due
weightage in passing such order.
(v) Even uncommunicated entries in the
confidential record can also be taken into
consideration.
(vi) The order of compulsory retirement shall not
be passed as a short cut to avoid departmental
enquiry when such course is more desirable.
(vii) If the officer was given a promotion despite
adverse entries made in the confidential record,
that is a fact in favour of the officer.
29
(viii) Compulsory retirement shall not be imposed
as a punitive measure.”
In Pritam Singh v. Union of India & Ors. [(2005) 9 SCC 748], this
Court held:
“13. In our opinion, the High Court has committed
an error in not interfering with the punishment of
compulsory retirement even though the appellant
submitted that the misconduct alleged against him
was not at all an offence or even a serious mistake.
The act of misconduct alleged against him was that
he supplied a list of absentee details to one of the
employees, who was fighting a case before the
Tribunal against the Railways. This list contained
the ticket numbers of the workers of a shop, who
were absent on that date. This was neither a
confidential document nor a privileged document.
It contained details to which the employee
concerned had a right of information. The
appellant being a Superintendent Grade II and in
charge of the information acted bona fide in good
faith while supplying the information. In our
opinion, this kind of an act was neither a
misconduct nor a serious mistake. When the
charges were found proved against the appellant,
the appellant admitted that he had supplied the
absentee details.
*
16. This Court in the case of Union of India v. G.
Ganayutham while examining the scope of judicial
review held that “reasonableness”, “rationality”
and “proportionality” are the grounds on the basis
of which judicial review of the administrative
order can be undertaken. Considering the facts
extracted hereinbefore, we find that the exercise of
30
power by the respondent falls in the category of
arbitrary exercise of power.”
33. Before us, like before the learned Single Judge and the Division
Bench of the High Court, various discrepancies in the report of the Scrutiny
Committee as approved by the Review Committee were pointed out. The
examples placed before us clearly demonstrate that neither the Scrutiny
Committee nor the Review Committee took into consideration the relevant
factors germane for the purpose of passing such an order and in fact had
taken into consideration irrelevant factors which were not germane therefor.
34. Some of the employees, for a number of years, had been shown to be
good officers; ACRs of some of whom in some of the years have been “very
good”. As has been noticed hereinbefore, the Scrutiny Committee as also
the Review Committee proceeded to determine each individual case keeping
in view the ACRs of the employees concerned from 1980, since when the
Federation had started functioning, to the year 2000, when the decision had
been taken to compulsorily retire the employees, by amending the
Regulations. We have noticed hereinbefore that although criteria adopted by
the State were required to be considered for the purpose of determining the
suitability or otherwise of the employees to continue in service, the necessity
31
to give special consideration to the performance of the employees for the last
five years before the order was passed had been given a complete go-by.
The learned Single Judge as also the Division Bench, as noticed
hereinbefore, clearly held that for the purpose of weeding out the dead
wood, it was absolutely necessary to take into consideration the performance
of each of the employees at least for the last two years.
35. Each case, thus, was required to be considered on its own merit. The
broad criteria, which are not only applicable generally for the
aforementioned purpose, were required to be followed but there cannot be
any doubt or dispute that the criteria laid down by the State was imperative
in character. Thus, the Federation adopted the rules and circulars made or
issued by the State Government. The Federation itself having formulated
the criteria required to be applied for passing orders of compulsory
retirement was, thus, bound thereby. It is now a well-settled principle of law
that the employer would be bound by the rule of game. It must follow the
standard laid down by itself. If procedures have been laid down for arriving
at some kinds of decisions, the same should substantially be complied with
even if the same are directory in nature.
32
36. This rule was enunciated by Mr. Justice Frankfurter in Vitarelli v.
Seaton [359 US 535], wherein the learned Judge said:
‘An executive agency must be rigorously held to
the standards by which it professes its action to be
judged. … Accordingly, if dismissal from
employment is based on a defined procedure, even
though generous beyond the requirements that bind
such agency, that procedure must be scrupulously
observed. … This judicially evolved rule of
administrative law is now firmly established and, if
I may add, rightly so. He that takes the procedural
sword shall perish with that sword.’ ”
[See also H.V. Nirmala v. Karnataka State Financial Corporation
(2008) 7 SCC 639]
37. The power of judicial review of a superior court although a restricted
one, has many facets. Its jurisdiction is not only limited in the cases where
the administrative orders are perverse or arbitrary but also in the cases where
a statutory authority has failed to perform its statutory duty in accordance
with law. An order which is passed for unauthorized purpose would attract
the principles of malice in law. [See Managaer, Government Branch Press
and Another v. D.B. Belliappa (1979) 1 SCC 477 : AIR 1979 SC 429, Smt.
S.R. Venkataraman v. Union of India and Another (1979) 2 SCC 491 : AIR
1979 SC 49 and P. Mohanan Pillai v. State of Kerala and Others (2007) 9
SCC 497]
33
38. It is a well-settled principle of law that an order of compulsory
retirement is found to be stigmatic inter alia, in the event the employer has
lost confidence [See Chandu Lal v. Management of M/s. Pan American
World Airways Inc. (1985) 2 SCC 727 at 730, para 8], or he has concealed
his earlier record [See Jagdish Parsad v. Sachiv, Zila Ganna Committee,
Muzaffarnagar and Another (1986) 2 SCC 338 at 342-343, para 9].
He can, however, be subjected to compulsory retirement inter alia if
he has outlived his utility [The State of Uttar Pradesh v. Madan Mohan
Nagar, AIR 1967 SC 1260 at 1262].
In Allahabad Bank Officers’ Association and Another v. Allahabad
Bank and Others [(1996) 4 SCC 504], it was held:
“17. The above discussion of case-law makes it
clear that if the order of compulsory retirement
casts a stigma on the government servant in the
sense that it contains a statement casting aspersion
on his conduct or character, then the court will
treat that order as an order of punishment,
attracting provisions of Article 311(2) of the
Constitution. The reason is that as a charge or
imputation is made the condition for passing the
order, the court would infer therefrom that the real
intention of the Government was to punish the
34
government servant on the basis of that charge or
imputation and not to exercise the power of
compulsory retirement. But mere reference to the
rule, even if it mentions grounds for compulsory
retirement, cannot be regarded as sufficient for
treating the order of compulsory retirement as an
order of punishment. In such a case, the order can
be said to have been passed in terms of the rule
and, therefore, a different intention cannot be
inferred. So also, if the statement in the order
refers only to the assessment of his work and does
not at the same time cast an aspersion on the
conduct or character of the government servant,
then it will not be proper to hold that the order of
compulsory retirement is in reality an order of
punishment. Whether the statement in the order is
stigmatic or not will have to be judged by adopting
the test of how a reasonable person would read or
understand it.”
The question came up for consideration before a Division Bench of
this Court in State of Gujarat v. Umedbhai M. Patel [(2001) 3 SCC 314]
wherein Balakrishnan, J., as the learned Chief Justice then was, summarized
the law, thus:
“11. The law relating to compulsory retirement has
now crystallised into definite principles, which
could be broadly summarised thus:
(i) Whenever the services of a public servant are
no longer useful to the general administration, the
officer can be compulsorily retired for the sake of
public interest.
35
(ii) Ordinarily, the order of compulsory retirement
is not to be treated as a punishment coming under
Article 311 of the Constitution.
(iii) For better administration, it is necessary to
chop off dead wood, but the order of compulsory
retirement can be passed after having due regard to
the entire service record of the officer.
(iv) Any adverse entries made in the confidential
record shall be taken note of and be given due
weightage in passing such order.
(v) Even uncommunicated entries in the
confidential record can also be taken into
consideration.
(vi) The order of compulsory retirement shall not
be passed as a short cut to avoid departmental
enquiry when such course is more desirable.
(vii) If the officer was given a promotion despite
adverse entries made in the confidential record,
that is a fact in favour of the officer.
(viii) Compulsory retirement shall not be imposed
as a punitive measure.”
39. It is also a well-settled principle of law that an authority discharging a
public function must act fairly. It, for the aforementioned purpose, cannot
take into consideration an irrelevant or extraneous matter which is not
germane for the purpose for which the power is sought to be exercised. The
Scrutiny Committee as also the Review Committee was required to pose
unto themselves a correct question of law so as to enable them to find out a
correct answer. It was, therefore, imperative that the criteria laid down in
36
the circulars issued by the State of Madhya Pradesh should have been
scrupulously followed.
40. Federation, therefore, in our opinion, having regard to the fact that
there was no material to show that the respondents – employees had become
dead wood, inefficient or corrupt, must be held to have abused its power.
41. ‘Interest of the Federation’ as contained in Regulation 13 of the
Regulations would not mean that services of a large number of employees
should be dispensed with only for the purpose of cutting administrative
expenses. Even such a power does not exist in terms of the Regulations nor
any such ground had been taken in the counter-affidavit before the High
Court.
42. Strong reliance has been placed by Mr. Sreekumar on a recent
decision of this Court in Mundrika Dubey and Others v. State of Bihar and
Others [(2008) 4 SCC 458] wherein orders of compulsory retirement by way
of an economic measure had been found to be in the interest of the
employer.
37
43. It may be placed on record that neither there exist any such provision
nor such a stand had been taken before the High Court. Furthermore, it is
well-settled that while a power is exercised by an authority, ordinarily, the
reasons contained in the order should be supported by the materials on
records.
44. Submission of Mr. Sreekumar, that the High Court should not have
interfered with the order of compulsory retirement keeping in view the fact
that no malafide has been alleged in the Scrutiny Committee nor any case of
discrimination has been made out, cannot be accepted. It is one thing to say
that a yardstick has been fixed for the purpose of taking recourse to the
power of compulsory retirement but there cannot be any doubt or dispute
that such yardstick must be based on relevant criteria. If the relevant
criteria, as has been laid down by the State, which has been adopted by the
Federation, had not been acted upon, the order must be held to have been
suffering from jurisdictional error.
45. It may be true that the superior courts in exercise of their power of
judicial review ordinarily would not go into the factual findings as to which
section of the employees should be brought within the parameters of
38
Regulation 13 of the Regulations and which of them would not, but, in this
case, we are concerned with a different question.
46. We, therefore, do not find any infirmity in the judgment of the High
Court.
47. So far as the question of payment of back wages is concerned, we may
notice Regulation 49(2) of the Regulations, which reads as under:
“49 (2) When the termination or retirement of
an employee from his service has been set
aside by the court and the employee is
reinstated without any further departmental
proceeding, then the period of absence from
the period of suspension, will be treated s
the period on duty for all purposes including
the grant of salary and allowances. The
amount of subsistence allowance to him if
has been paid will be deducted from the
payable amount under this sub rule.”
A bare perusal of the said Regulation would clearly show that it
applies in a case where an order of dismissal and/ or compulsory retirement
by way of punishment is set aside. It is not a case where order of
compulsory retirement had been passed by way of punishment.
Respondents – employees herein were not charged with any misconduct.
39
The order of compulsory retirement was issued in terms of the Regulation 13
of the Regulations only.
48. Various decisions have been placed before us with regard to grant of
back wages. Even the learned Single Judge had granted 50% back wages in
favour of 16 employees. The Division Bench did not interfere therewith.
We, therefore, fail to understand as to why the Division Bench thought fit to
grant 20% back wages in respect of other employees. The decisions placed
before us show that this Court keeping in view the facts and circumstances
of each case had refused to grant 75% back wages.
49. We, therefore, are of the opinion that 50% back wages should have
been granted.
50. In Civil Appeal arising out of SLP (C) No. 17705 of 2008, as noticed
hereinbefore, an additional ground has been taken that Section 47 of the
1995 Act would be attracted in the case of the appellant. Section 47 of the
1995 Act reads as under:
“47 - Non-discrimination in Government
employment
40
(1) No establishment shall dispense with, or reduce
in rank, an employee who acquires a disability
during his service:
Provided that, if an employee, after acquiring
disability is not suitable for the post he was
holding, could be shifted to some other post with
the same pay scale and service benefits:
Provided further that if it is not possible to adjust
the employee against any post, he may be kept on
a supernumerary post until a suitable post is
available or he attains the age of superannuation,
whichever is earlier.
(2) No promotion shall be denied to a person
merely on the ground of his disability:
Provided that the appropriate Government may,
having regard to the type of work carried on in any
establishment, by notification and subject to such
conditions, if any, as may be specified in such
notification, exempt any establishment from the
provisions of this section.”
51. The learned counsel submits that his client suffered disability in 1991.
The 1995 Act, thus, did not come into force at that point of time. His
services were continued not as a disabled person within the provisions of the
1995 Act. He was treated equally and, thus, we see no reason as to why the
entire back wages should be granted in his favour whereas all other
employees would be given 50% of their back wages.
41
52. Furthermore, such a contention had not been raised before the
Division Bench. It may be true that in a given case, this Court may allow
the appellant to raise such a contention, as was done in the case of Kunal
Singh v. Union of India and Another [(2003) 4 SCC 524] whereupon strong
reliance has been placed, but it is not automatic.
It is evident from the record that even before the learned Single Judge
the said contention was not raised at the first instance. Only in the review
petition, the said contention was raised. But, the said review petition was
dismissed. As indicated hereinbefore, the said contention was again not
raised before the Division Bench. We, therefore, are not inclined to agree
with the contention that in terms of the 1995 Act, the appellant should be
given 100% back wages.
53. For the reasons aforementioned, the appeals filed by the Federation
are dismissed and that of the employees are allowed to the extent
aforementioned with costs. Counsel’s fee assessed at Rs. 10,000/- in each
appeal.
………………………….J.
[S.B. Sinha]
..…………………………J.
[Asok Kumar Ganguly]
42
New Delhi;
April 15, 2009