State may reverse employee absorption under Section 331(2) after statutory notice and hearing; no departmental enquiry is required.

The respondents were employees of erstwhile Gram Panchayat Bangawan, District Anuppur, which was converted into Nagar Parishad Bangawan by Gazette Notification dated 26.09.2016.

Committees were constituted to determine the assets, liabilities and employees to be absorbed into the newly constituted Nagar Parishad.

Following complaints alleging large-scale irregularities and illegal absorption of persons who were not employees of the erstwhile Gram Panchayat, the State ordered an enquiry.

On the basis of the enquiry material, the State Government exercised revisional powers under Section 331(2) of the Madhya Pradesh Municipalities Act, 1961 and, by order dated 15.07.2022, cancelled the absorption proceedings; consequential termination orders were issued on 22.07.2022.

The learned Single Judge quashed both orders, holding that the statutory opportunity of hearing required by the proviso to Section 331(2) had not been given, while granting liberty to the authorities to proceed afresh in accordance with law.

The State preferred the present batch of writ appeals, with W.A. No. 609 of 2025 treated as the leading case.

The proviso to Section 331(2) of the Madhya Pradesh Municipalities Act, 1961 mandates that, before an order is varied or reversed, notice must be given to interested parties and they must be afforded an opportunity to appear and be heard in support of the order sought to be varied.

The requirement is mandatory, but the statute does not prescribe a regular departmental enquiry as a condition precedent to the State Government’s exercise of revisional jurisdiction.

The State may examine the legality and propriety of absorption proceedings where relevant material discloses irregularities, including absorption contrary to the statutory scheme governing employees of erstwhile Gram Panchayats.

The Court also distinguished Shrawan Kumar Jha v. State of Bihar, 1991 Supp (1) SCC 330, because hearing had been afforded in the present case, and held that State of Karnataka v. Uma Devi (3), (2006) 4 SCC 1, concerning regularisation of illegal appointments, did not govern the controversy.

The Division Bench held that the record demonstrated actual compliance with Section 331(2): the State had directed that all affected employees be heard, prepared a hearing programme, issued individual notices for hearings on 22.04.2022 and 23.04.2022, subsequently arranged an online hearing on 12.05.2022, and served notices physically and through WhatsApp; several employees also submitted replies.

The respondents’ contention that their individual statements had not been recorded did not establish denial of the statutory hearing, since the preliminary enquiry and the subsequent statutory hearing served different purposes, and Section 331(2) did not require a departmental enquiry.

The documentary material regarding service and participation had not been effectively controverted and could not be disregarded merely because the complete record was voluminous.

The Court further found that the State had relevant grounds to scrutinise the absorption process, particularly in view of the disparity between the actual number of erstwhile Panchayat employees and the number allegedly absorbed, and held that judicial review did not warrant substitution of the Court’s view for that of the competent authority acting within jurisdiction on relevant material.

The consequential termination order did not independently invalidate the proceedings, as the principal decision dated 15.07.2022 had followed the requisite hearing process.

It held that the State Government had jurisdiction under Section 331(2) to examine and cancel the irregular absorption proceedings and had complied with the mandatory requirement of notice and hearing before passing the order dated 15.07.2022.

All writ appeals were allowed, the learned Single Judge’s common order dated 23.01.2024 was set aside, and the State’s orders were consequently upheld.