Supreme Court of India
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR.versusRAJNESH KUMAR JAMINDAR & ORS.
- Citation
- 2009 INSC 512
- Decided
- 15 April 2009
- Disposal
- Dismissed
- Bench
- S B SINHA
Holding
The Federation is a 'State' under Article 12, the compulsory retirement orders were arbitrary and unlawful, and 50% back wages must be awarded to all affected employees, with no entitlement to full back wages under the 1995 Act.
Summary
The Madhya Pradesh State Co‑operative Dairy Federation Ltd., a society incorporated under the Madhya Pradesh Cooperative Societies Act, ordered the compulsory retirement of 52 employees who had completed 20 years of service. Sixteen employees challenged the order and were awarded 50% back wages by a Single Judge, while a Division Bench reinstated 36 employees with only 20% back wages. The Federation appealed, arguing it was not a 'State' within Article 12 and that the retirement orders were valid; the employees appealed for higher back wages and contended that the Disabilities Act, 1995 applied. The Supreme Court held that the Federation is a 'State' under Article 12 because it is functionally and financially controlled by the Government and performs public‑interest functions. It found the compulsory retirement orders arbitrary and unsupported by material, thus invalid, and directed that 50% back wages be granted to all affected employees, rejecting the claim for full back wages under the 1995 Act. The Federation's appeal was dismissed and the employees' appeals were allowed.
Issues considered
- Whether the Madhya Pradesh State Co‑operative Dairy Federation Ltd. qualifies as a 'State' within the meaning of Article 12 of the Constitution of India.
- Whether the orders of compulsory retirement of the employees were valid and complied with the procedural and substantive requirements of the Regulations.
- Whether Regulation 49(2) of the Federation's service Regulations applies to grant back wages, and what percentage of back wages is appropriate.
- Whether the Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, entitles the appellant to full back wages.
Legislation cited
Subjects
Article 12State within the meaning of ConstitutionCompulsory retirementBack wagesJudicial reviewCo‑operative societyDisabilities Act 1995Public function
Judgment
[2009] 6 S.C.R. 182
A M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR.
v.
RAJNESH KUMAR JAMINDAR & ORS.
(Civil Appeal No. 2442 of 2009)
APRIL 15, 2009
B
[S.B. SINHA AND ASOK KUMAR GANGULY, JJ.]
Constitution of India, 1950 - Article 12 - Madhya
Pradesh State Co-operative Dairy Federation Limited - Held:
C Is a 'State' within the meaning of Article 12 - Federation is
part of the Government department - It carries on commercial
activities, works for achieving better economic development
and nutritional value, public health of section of people - It
monitors functioning of societies under it.
D
Service Law:
M.P. State Co-operative Dairy Federation Ltd.
Employees Recruitment, Classification and Conditions of
Service Regulations, 1985 - Regulation 13 - Compulsory
E retirement - Re-instatement - Grant of 50% back wages to
16 employees and 20% to 36 employees - On appeal, held:
Federation having adopted rules and circulars by State
Government for passing orders of compulsorily retirement,
was bound by it - It did not act upon the same - There were
F no material to show that employees had become dead wood,
inefficient or corrupt - Order of compulsory retirement was not
passed by way of punishment, thus, regulation 49(2)
governing payment of back wages not applicable - Order
granting 50% back wages to 16 employees was not interfered
G with - It cannot be understood as to why Division Bench
granted 20% back wages to other employees - Thus, 50%
back wages_ should have been granted - One of the
employees continued in service not as a disabled person
under 1995 Act, thus not entitled to entire back wages -
H 182
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 183
RAJNESH KUMAR JAMINDAR & ORS .
•
Disabilities (Equal Opportunities, Protection of Rights and Full A
Participation) Act, 1995 - Madhya Pradesh Co-operative
Societies Act, 1960.
Appellant-M.P. State Co-operative Dairy Federation
Ltd. is a society registered and incorporated under the
B
Madhya Pradesh Cooperative Societies Act, 1960. It was
constituted to promote sale of milk and its products inter
·- alia with a view to provide employment to agriculturists,
milk suppliers so as to enable it to implement a World
Bank Scheme effectively. Respondents-employees of the
Federation, completed 20 years of service. The orders of
c
compulsory retirement was issued against 52 employees.
16 employees challenged the order. Federation filed
appeals and the same were dismissed but only 50% back
wages was granted to the employees. As regards 36
employees, the Division Bench of High Court directed D
reinstatement of the said respondents with only 20%
back wages.
The questions which arose for consideration in these
appeals is whether Madhya Pradesh State Co-operative E
Dairy Federation Limited is a 'State' within the meaning
of Article 12 of the Constitution of India; and whether the
order of High Court was justified.
)
Dismissing the appeals filed by Federation and
allowing that of employees, the Court F
HELD:1.1. Appellant-M.P. State Co-operative Dairy
Federation Ltd. was a part of the Departmept of the
' Government. It not only carries on commercial activities,
it works for achieving the better economic development G
f 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 H
t
184 SUPREME COURT REPORTS [2009] 6 S.C.R.
•
A societies under it. It is an apex body. Therefore, the
appellant would come within the purview of the definition
of 'State' as contained in Article 12 of the Constitution of
India. [Paras 28 and 29) [208-E-H]
B Kuna/ Singh v. Union of India and Another (2003) 4 SCC
524; Dinesh Kumar Sharma v. M.P. Dugdh Mahasangh
Sahakari Samiti Maryadit 1993 MPLJ 786; Ajay Hasia v.
Khalid Mujib Sehravardi (1981) 1 SCC 722; Ramana
Dayaram Sheffy v. International Airport Authority of India
(1979) 3 SCC 489; Chander Mohan Khanna v. National
C Council of Educational Research and Training (1991) 4 SCC
578; M.P. State Co-operative Dairy Federation and Others v.
Madan Lal Chourasia 2007 (2) M.P.L.J. 594; Pradeep Kumar
Biswas v. Indian Institute of Chemical Biology (2002) 5 SCC
111; Rajasthan State Electricity Board v. Mohan Lal (1967)
D 3 SCR 377; P.K. Ramachandra Iyer and Others. V. Union of
India and others (1984) 2 SCC 141; Sabhajit Tewary v. Union -
of India (1975) 1 SCC 485; Mysore Papers Mills Ltd. v.
Mysore Paper Mills Officers' Association and Another (2002)
2 SCC 167; Sukhdev Singh v. Bhagatram Sardar Singh
· E Raghuvanshi (1975) 1 SCC 421; Virendra Kumar Srivastava
v. U.P. Rajya Karmachari Ka/yan Nigam and Another (2005)
1 SCC 149; Zee Telefilms Ltd. and Another v. Union of India
and Others (2005) 4 SCC 649; State of U.P. v. Neeraj Awasthi
and Others (2006) 1 SCC 667 and S.S. Rana v. Registrar,
F Coop. Societies and Another (2006) 11 SCC 634, referred
to.
2.1. The law relating to compulsory retirement in
public interest is no longer res integra. The provisions
G 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: when
it is based on no material; when it is arbitrary; when it is
without application of mind; and when there is no
H
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 185
RAJNESH KUMAR JAMINDAR & ORS.
evidence in support of the case. [Para 32] [210-B-D] A
Baikunta Nath Das and Another v. Chief District Medical
Officer, Baripada and Another (1992) 2 SCC 299 and State
of Gujarat v. Umedbhai M. Patel (2001) 3 SCC 314; Pritam
Singh v. Union of India & Ors. (2005) 9 SCC 748, referred B
to.
2.2. 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 C
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. [Para 37) [215-B-C]
\
D
Manager, Government Branch., Press and Another v. D.B.
Be//iappa (1979) 1 SCC 477; SriJt. S.R. Venkataraman v.
Union of India and Another (1979) 2 SCC 491 and P.
Mohanan Pillai v. State of Kera/a and Others (2007) 9 SCC
497, referred to. E
2.3. An order of compulsory retirement is found to be
stigmatic inter alia, in the event the employer has lost
confidence. However, he can be subjected to compulsory
retirement inter alia if he has outlived his utility. [Para 38)
[215-D-G] F
Chandu Lal v. Management of Mis. Pan American world
Airways Inc. (1985) 2 SCC 727; Jagdish Parsad v. Sachiv,
Zila Ganna Committee, Muzaffarnagar and Another (1986) 2
SCC 338; State of Uttar Pradesh v. Madan Mohan Nagar AIR G
1967 SC 1260; Allahabad Bank Officers' Association and
Another v. Allahabad Bank and Others (1996) 4 SCC 504
and State of Gujarat v. Umedbhai M. Patel (2001) 3 SCC 314,
referred to.
H
186 SUPREME COURT REPORTS [2009] 6 S.C.R.
• •
A 2.4. 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
8 been taken to compulsorily retire the employees, by
amending the Regulations. 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 to give
c 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. [Para 34] [213-
G-H; 214-A-B]
2.5. Each case was required to be considered on its
D 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
E 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. The employer would be bound by the rule of
F 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.
[Para 35] [214-C-F]
G
H. V. Nirmala v. Kamataka State Financial Corporation
(2008) 7 sec 639, referred to.
Vitarelfi v. Seaton 359 US 535, referred to.
H 2.6. An authority discharging a public function must
M.P. STATE CO-OP. DAIRY FEON. LTD. & ANR. v. 187
RAJNESH KUMAR JAMINDAR & ORS.
act fairly. It, for the said purpose, cannot take into A
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 B
them to find out a correct answer. It was, therefore,
imperative that the criteria laid down in the circulars
issued by the State of Madhya Pradesh should have been
scrupulously followed. [Para 39] [217-E-G]
2.7. While a power is exercised by an authority,
c
ordinarily, the reasons contained in the order should be
supported by the materials on records. Federation,
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 D
its power. 'Interest of the Federation' 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 E
nor any such ground had been taken in the counter-
affidavit before the High Court. [Paras 40, 41 and 43] [217-
H; 218-A-B, D-E]
•
2.8. The submission that the High Court should not F
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 G
> 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 laid down by the State, which has
been adopted by the Federation, had not been acted
H
188 SUPREME COURT REPORTS (2009] 6 S.C.R.
A upon, the order must be held to have been suffering from
jurisdictional error. Therefore, there is no infirmity in the
judgment of the High Court. [Paras 44 and 46] [218-E-G;
219-B]
Mundrika Dubey and Ors. State of Bihar and Ors. 2008
8
(4) SCC 458, referred to. [Para 44]
2.9. A bare perusal of the Regulation 49 (2) would
clearly show that it applies in a case where an order of
dismissal and/ or compulsory retirement by way of
C punishment is set aside. It is not a case where order of
compulsory retirement had been passed by way of
punishment. Respondents-employees were not charged
with any misconduct. The order of compulsory retirement
was issued in terms of the Regulation 13 of the
D Regulations only. Even the Single Judge had granted
50% back wages in favour of 16 employees. The Division
Bench did not interfere therewith. It cannot be
understood as to why the Division Bench thought fit to
grant 20% back wages in respect of other employees.
E Therefore, 50% back wages should have been granted.
[Paras 47 and 48] [219-E-H; 220-A-B]
2. 10. As regard the appellant in civil appeal arising out
of SLP (C) No. 17705 of 2008, his services were continued
not as a disabled person within the provisions of the
F Disabilities (Equal Opportunities, Protection of Rights and
Full Participation) Act, 1995. He was treated equally and,
thus, there is 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. It
G is evident from the record that even before the 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.
Furthermore, submission had not been raised before the
H .Division Bench. It may be true that in a given case, this
- M.P. STATE co.OP. DAIRY FEDN. LTD. & ANR. v.
RAJNESH KUMAR JAMINDAR & ORS.
189
,. eourt may allow the appellant to raise such a contention. A
Therefore, it cannot be accepted that in terms of the 1995
Act, the appellant should be given 100% back wages.
[Paras 51 and 52) [221-A-D]
Case Law Reference:
B
1993 MPLJ 786 Referred to. Para 14
(1981) 1 sec 122 Referred to. Para 14
(1979) 3 sec 489 Referred to. Para 14
c
(1991) 4 sec 578 Referred to. Para 14
2007 (2) M.P.L.J. 594 Referred to. Para 15
(20021 5 sec 111 Referred to. Para 15
(1967) 3 SCR 377 Referred to . Para 20 D
• (1984) 2 sec 141 Referred to. Para 21
(1975) 1 sec 485 Referred to. Para 21
(2002) 2 sec 167 Referred to. Para 22 E
(1975) f sec 421 Referred to. Para 23
(2005) 1 sec 149 Referred to. Para 24
(2005) 4 sec 649 Referred to. Para 25
F
(2006) 1 sec 667 Referred to. Para 26
(2006) 11 sec 634 Referred to. Para 27
(1992) 2 sec 299 Referred to. Para 32
G
(20011 3 sec 314 Referred to. Para 32
;
(2005) 9 sec 148 Referred to. Para 32
359 us 535 Referred to. Para 36
H
A
180 SUPREME COURT REPORTS
(2008) 1 sec 639
[2009] 6 S.C.R.
..,
-
.
Referred to. Para 36
""' (1979) 1 sec 477 Referred to. Para 37
(1979) 2 sec 491 Referred to. Para 37
(2001) 9 sec 497 Referred to. Para 37
B
(1985) 2 sec 121 Referred to. Para 38
(1986) 2 sec 338 Referred to. Para 38
~
AIR 1967 SC 1260 Referred to. Para 38
c
(1996) 4 sec 504 Referred to. Para 38
(2001) 3 sec 314 Referred to. Para 38
(2008) 4 sec 458 Referred to. Para 42
D (2003) 4 sec 524 Referred to. Para 52
CIVIL APPELLATE JURISDICTION : Civil Appeal No. •
2442 of 2009.
From the Judgment & Order dated 9.10.2007 of the High
E
Court of Judicature at Jabalpur, Madhya Pradesh in Writ
Appeal No. 1339 of 2006.
WITH
(.
F C.A. Nos. 2443, 2446, 2447, 2449, 2452, 2454, 2456, 2458,
2460,2462,2467,2469,2471,2472,2473,2474,2475,2476,
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.
G
C.N. Sreekumar, M.T. George, K.N. Madhusoodanan,
Dushyant Parashar and T.G. Narayanan Nair for the Appellants.
Vivek K. Tankha, Suryanarayan Singh, Pragati Neekhra
H
- M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v.
RAJNESH KUMAR JAMINDAR & ORS.
(for AP & J Chambers), Vikas Upadhyay, (B.S. Banthia),
191
A
Akshat Shrivastava, P.P. Singh, lnderjeet Yadav, Rahul
Shrivastava, Kunal Verma, Arup Jain, Supria Jain, K. Krishan,
B.K. Singh, Arun Kumar Beriwal, Jayant Kumar Mehta for the
Respondents.
B
The Judgment of the Court was delivered by
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 c
the meaning of 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 D
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 E
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 F
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 G
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 registered
under the Indian Companies Act, 1956. Its object was
development and procurement of milk and for bringing out a H
192 SUPREME COURT REPORTS
A 'white revolution'.
[2009] 6 S.C.R.
-
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
8
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
C 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,
D 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.
E Its functions are enumerated in Bye-law Nos. 3.2.1 to 3.2.26.
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
F 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
G 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:
H
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 193
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
"13. Compulsory Retirement A
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 8
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.
c
2. Any employee who has completed 20 years of
service at any time would be able to retire from the
Federation, however, before retiring at least three
months notice in writing has to be given to the
concerned officer in this regard. If he wants to retire D·
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."
E
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.
F
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
~~ G
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. H
194 SUPREME COURT REPORTS [2009] 6 S.C.R.
A 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
B 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:
c "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
D 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."
E
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,
F it will be seen whether 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."
G
Yet again, by a circular letter dated 20.03.2003, it was
directed:
"Under above mentioned subject State Government has
decided accordingly :
H
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 195
RAJNESH KUMAR JAMINDAR & ORS. [S.8. SINHA, J.]
, r (1) referred memorandum dated 12.12.2001 issued by A
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 B
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 c ~
., 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 D
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. E
(two) any of the Government Employee, shall not be
retired from the service on the ground of normal
disability, if within one year of the date of screening
he is going to be retired after completing his age F
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: G
"... 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
H
196 SUPHEME COURT REPORTS [2009) 6 S.C.R.
A 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
8 considemd as 'good' and 'good' has been considered as
'very good' for the purpose of evciluation.
On making a review, following criteria have been
prescribed by the Government for the purpose of
compulsory retirement:-
c
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.
D
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 necessary that every
E 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.
F 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,"
G 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
H
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 197
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
786]. Inter alia relying on or on the basis of the decisions of A
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 B
that the Federation is not a 'State', opining:
(i) The entire share capital is not held by the State
Government.
(ii) The entire expenditure of the cooperative societies C
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. D
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, E
·, 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.
F
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 Hon1ble Judges, the Chief Justice of G
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. Indian Institute of Chemical
Biology [(2002) 5 SCC 111], the tests laid down therein only
were required to be considered, holding: H
198 SUPREME COURT REPORTS [2009] 6 S.C.R.
A "... 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
B 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
c 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
D
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."
E
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:
F "17. Bye-law 2.2 of the bye-laws of the Federation defines
the Board of Directors of the Federation to 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."
G 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
H the Board of Directors as many as 8 members are the
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 199
r
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
nominees of the State Government, Central Government A
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, B
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
c
•
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. D
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 E
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. Bye law 30.3 of the bye-laws states that the
Managing Director shall execute the business and work as F
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
G
j. 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
H
200 SUPREME COURT REPORTS [2009] 6 S.C.R.
A 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'
·B 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
c 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 t.he.federation can at
any time call a General Assembly tdt'discuss emergency
D 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
Board of Directors of the Federation, the distribution of
E 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
F 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)."
G
A
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
H behalf of the Federation, in support of the appeals, would
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 201
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
-l i contend: A
(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 B
Sharma (supra) to hold that the Federation is a
'State' within the meaning of Article 12 of the
Constitution of India.
(ii) The Federation having been running into huge
losses, the conditions precedent for retirement of c
the employees of the Federation as contained in
Regulation 13 of the Regulations having been
< satisfied, the impugned judgment c~nnot be
'
sustained.
-.<'
D
17. Mr. Vivek K. Tankha, learned senior counsel appearing
on behalf of contesting respondents and Mr. Vikas Upadhyay,
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:
E
(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. F
;
(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.
G
(iii) Regulations governing the conditions of service
J. being statutory in character and the Federation,
having adopted the government circulars and rules
for the purpose of implementation of its policy to
retire compulsorily a large number of employees, H
\
202 SUPREME COURT REPORT!) [2009] 6 S.C.R.
A were bound to follow the sa. ne. )
(iv) Tl'ie Scrutiny Committet~ and the Review
Committee having not only co nsisted of the officers
1
of the State but also the· Registrar of the
Cooperative Societies, it was ·,futile to move to the
B
Registrar of the Cooperative Societies for setting
aside the impugned circulars issued with regard to
compulsory retirement.
(v) Having regard to the Regulations governing
C 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
D 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
E to entire back wages.
19. Article 12 of the Constitution of India reads as under:
"12. Definition.-ln this part, unless the context otherwise
requires, 'the State' includes the Government and
F 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."
G 20. The development of law in this regard in view of the
decisions rendered by this Court begirriing from t11e Rajasthan
State Electricity Board v. Mohan Lal [(H' ,7) 3 SCR 377], Ajay .,
Hasia (supra) and other decisions including a Seven - Judge
Bench decision of this Court in Pradeep Kumar Biswas (supra),
H is to say the least phenomenal.
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 203
RAJNESH KUMAR JAMINDAR & ORS. (S.B. SINHA, J.]
21. We may also notice that P.K. Ramachandra Iyer and A
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) B
was overruled in Pradeep Kumar Biswas (supra) to the extent
it followed the decision in Sabhajit Tewaty v. Union of India
[(1975) 1 sec 485).
22. In Mysore Paper Mills Ltd. v. Mysore Paper Mills
Officers' Association and Another [(2002) 2 SCC 167) Mysore C
Paper Mills Ltd. was 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 D
:> under its control.
23. In Pradeep Kumar Biswas (supra), the following tests
have been laid down by a Seven-Judge Bench of this Court:
E
(i) Formation of the body
(ii) Objects and functions
(iii) Management and control
F
(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:
G
"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 H
204 SUPREME COURT REPORTS [2009] 6 S.C.R.
A lead one to characterize an operation as State action." •
(SCC p. 454, para 96)
(2) "Another factor which might be considered is whether
the operation is an important public function." (SCC p. 454,
para 97)
B
(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
func~ion is of such public importance and so closely related
c 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
D 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
E 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
F 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 fl. 507, para 14)
G
(2) Where the financial assistanc• of the State is so much ~
as to meet almost entire expenditure of the corporation, it
would afford some indication of the corporation being
impregnated with Governmental character. (SCC p. 508,
H
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 205
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.)
~ra1~ A
(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 8
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, C
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
0
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): · E
"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 F
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 G
Article 12. On the other hand, when the control is merely
regulatory whether under statute or otherwise, it wou!d not
serve to make the body a State."
24. In Virendra Kumar Srivastava v. U.P. Rajya H
206 SUPREME COURT REPORTS [2009) 6 S.C.R.
A Karmachari Ka/yan 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.
B
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
C Telefilms Ud. and Another v. Union of India and Others [(2005)
4 sec 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.
D
However, the minority noticed:
"70. Broadly, there are three different concepts which exist
for determining the questions which fall within the
expression "other authorities":
E
(i) The corporations and the societies created by the State
for carrying on its trading activities in terms of Article 298
of thei Constitution wherefor the capital, infrastructure, initial
-
investment and financial aid, etc. are provided by the State .
F 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.
G (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.
H 71. There cannot be same standard or yardstick for judging
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 207
RAJNESH KUMAR JAMINlJAR & ORS. [S.B. SINHA, J.]
different bodies for th,~ purpose of ascertaining as to A
whether any of th~'m fulfills the requirements of law therefor
or not.
80. The concept that a1ll public sector undertakings
incorporated und~r the Companies Act or the Societies 8
Registration Ac.t· or any o•ther Act for answering the
description of Sfate mtist be financed by the Central
Government and I be under its 1deep
•
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 C
the duties and functions perfom~ed by it. The primary
question which is required to be post.~d is whether the body
in question e>:ercises public functio~ ..
110. Tests •evolved by- the. courts t~ave, thus, been
expanded from time to time and apiplied having regard to D
). the factual matrix obtaining in eactl case. Development in
this branch of law as in othe~s has c.llways found
differences. Development of law h~d never "been an easy
task and probably would never be./ ',
E
The majority despite ho1lding that BCCI is not a 'State'
within the meaning of Article 12 of the Constitution of India
opined that a writ petition under Article 226 of the Constitution
of India would be maintainable against it.
26. In State of U.P. v. Neeraj Awasthi and Others [(2000, F
1 SCC 667], U.P. State Ag1ricultural Produce Market Board has
been held to be a 'State', holding: ·
"33. The Board is "State" within thf~ meaning of Article 12
of the Constitution. It was cons'tituted in terms of the G
provisions of the said Act. As the powers and functions of
the Board as also. the Statei in terms of the provisions of
the statute having been del1ineated, they must act strictly
in terms thereof. It is a statutory authority. Its powers, duties
and functions are governed loy the statute. It .is responsible H
208 SUPREME COURT REPORTS [2009] 6 S.C.R.
•
A 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
B 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
c 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
D
restriction on the power of the Market Committee by
limiting the annual expenditure made in this regard not
exceeding 10% of the total annual receipt of the
Committee."
E 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 ..
F a part of the Department of the Government. It not only carries
on commmcial 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, vi.z., nutritional value and health. It undertakes a training
and research work. Guidelines issued by it are binding on the
G 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'
H as contained in Article 12 of the Constitution of India.
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 209
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
....
30. The learned Single Judge called for the records. It was A
found that the Regulations were amended in conformity with the
government circulars and, thus, the said amendment was valid.
It was noticed that at least in cases of 16 employees, the
'.r. •· average grading being "good", their services could not have
been dispensed with. B
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
c
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:
D
~ "(a) There has been no rationalization of marking
system when conversion has taken place from
grading to award of marks by the Screening
Committee.
E
(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
F
the employer.
(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 G
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.
H
210 SUPREME COURT REPORTS (2009] 6 S.C.R.
A (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."
·8 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 .
C 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;
D
(iii) When it is without application of mind; and
(iv) When there is no evidence in support of the case.
In Baikuntha Nath Das and Another v. Chief District
E Medical Officer, Baripada and Another [(1992) 2 SCC 299],
this Court held:
"34. The following principles emerge from the above
discussion:
F
(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
G 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
H context of an order of compulsory retirement. This does not
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 211
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
' mean that judicial scrutiny is excluded altogether. While the A·
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 8
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 c
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 D
;. post notwithstanding the adverse remarks, such remarks
lose their sting, more so, if the promotion is based upon
merit (selection) and not upon seniority.
(v) An order of compulsory retirement is not liable to E
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
J
be a basis for interference."
In State of Gujarat v. Umedbhai M. Patel [(2001) 3 SCC F
314), this Court held:
"11. The law relating to compulsory retirement has now
crystallised into definite principles, which could be broadly
summarised thus: G
•· (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 H
212 SUPREME COURT REPORTS [2009) 6 S.C.R.
>
A · 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
B 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.
c
(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
D 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.
E
(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:
F
"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
G
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
H
'.;
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 213
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
a privileged document. It contained details to which the A
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 B
charges were found proved against the appellant, the
appellant admitted that he had supplied the absentee
.. details .
*** *** ***
c
' 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 D
undertaken. Considering the facts extracted hereinbefore,
we find that the exercise of power by the respondent falls
in the category of arbitrary exercise of power."
33. Before us, like before the learned Single Judge and E
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 F
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 G
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 H
214 SUPREME COURT REPORTS [2009] 6 S.C.R.
A 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
B service, the necessity 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
c 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
D 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
E formulated the criteria required to be applied for passing orders
of compulso1y 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 \..
F kinds of decisions, the same should substantially be complied
with even if the same are directory in nature.
36. This rule was enunciated by Mr. Justice Frankfurler in
Vitarelli v. Seaton [359 US 535], wherein the learned Judge
said:
G
'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
H requirements that bind such agency, that procedure must
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 215
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.]
~ be scrupulously observed .... This judicially evolved rule of A
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. Kamataka State Financial
B
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 c
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. Be//iappa
(1979) 1 sec 477 : AIR 1979 SC 429, Smt. S.R. D
Venkataraman v. Union of India and Another (1979) 2 SCC
;, 491 : AIR 1979 SC 49 and P. Mohanan Pillai v. State of
Kera/a and Others (2007) 9 SCC 497]
38. It is a well-settled principle of law that an order of
compulsory retirement is found to be stigmatic inter alia, in the E
event the employer has lost confidence [See Chandu Lal v.
Management of Mis. 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, Zita Ganna
Committee, Muzaffamagar and Another (1986) 2 SCC 338 F
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].
G
- 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
H
216 SUPREME COURT REPORTS (2009) 6 S.C.R.
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
B is made the condition for passing the order, the court
would infer therefrom that the real intention of the
Government was to punish the government servant on the
basis of that charge or imputation and not to exercise the
power of compulsory retirement. But mere reference to the
c rnle, 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
D
only to the assessment of his worl< 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
E 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
F [(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:
G
(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.
-
H (ii) Ordinarily, the order of compulsory retirement is not to
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 217
RAJNESH KUMAR JAMINDAR & ORS. [S.S. SINHA, J.]
be treated as a punishment coming under Article 311 of A
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 8
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.
c
(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
0
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.
E
(viii) Compulsory retirement shall not be imposed as a
punitive measure."
39. It is also a well-settled principle of law that an authority
dischar.ging a public function must act fairly. It, for the
aforementioned purpose, cannot take into consideration an F
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, G
. therefore, imperative that the criteria laid down in the circulars
0
· issued by the State of Madhya Pradesh should have been
scrupulously followed.
40. Federation, therefore, in our opinion, having regard to H
218 SUPREME COURT REPORTS (2009] 6 S.C.R.
A 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
B
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.
c 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.
D
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.
E
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
F 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
G 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
H
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 219
RAJNESH KUMAR JAMINDAR & ORS. (S.B. SINHA, J.]
factual findings as to which section of the employees should A
be brought within the parameters of 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
8
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
c
the court and the employee is reinstated without any
further departmental proceeding, then the period of
absence from the period of suspension, will be o
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."
E
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
~ noLa case where order of compulsory retirement had been
passed by way of punishment. Respondents - employees F
herein were not charged with any misconduct. 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 G
_,,_ 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 ii) respect of other employees. The decisions H
220 SUPREME COURT REPORTS [2009) 6 S.C.R.
A placed before us show that this Court keeping in view tha 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.
8
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
C under:
"47 - Non-discrimination in Government employment
(1) No establishment shall dispense with, or reduce in rank,
an employee who acquires a disability during his service:
D
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:
E
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. ,..
F (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,
G 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
H
M.P. STATE CO-OP. DAIRY FEDN. LTD. & ANR. v. 221
RAJNESH KUMAR JAMINDAR & ORS. [S.B. SINHA, J.)
• at that point of time. His services were continued not as a A
disabled person. within the provisions of the 1995 Act. He was
\re~teq 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 giv~n 50% of their back wages.
B
~2. i;urthermore, 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 Kuna/ Singh v. Union of India and
Another [(2003) 4 SCC 524] whereupon strong reliance has C
been placed, but it is riot 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 D
indicated hereinbefore, the said contention was again not
4 raised before the Division Bench. We, therefore, are not
inclined to agree with the contention that in terms of the 1995
Act, the ai:mellimt should be given 100% back wages.
E
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.
..;
N.J. Appeal dismissed. F
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