Holding

Employees are not entitled to pension for service rendered before the college was taken over; only service from the date of takeover counts, and the State cannot recover pension already paid.

Summary

The respondents were employees of a private medical college that was taken over by the State of Bihar under the Bihar Private Medical Colleges (Taking over) Act, 1977. After the takeover they continued on an ad‑hoc basis and were later regularised as government employees, receiving pension calculated only from the date of takeover. They filed writ petitions seeking pension for the entire period of their service, including the time served under the private management, and the High Court allowed their claim. The Supreme Court held that, under Section 6 of the Act and Rule 58 of the Bihar Pension Rules, only service rendered after the college was taken over can be counted for pension, as the employees ceased to be employees of the private management and their earlier service does not meet the conditions for government pension. Consequently, the Court set aside the High Court judgment, allowed the State's appeals, and clarified that the State cannot claim a refund of pensions already paid.

Issues considered

Whether service rendered by employees of a private medical college before its takeover can be counted towards pension under the Bihar Pension Rules.
Whether the liability for pensionary benefits of such employees passes to the State Government under Section 3(3) of the Bihar Private Medical Colleges (Taking over) Act, 1977.
Whether Rule 58 of the Bihar Pension Rules precludes counting pre‑takeover service for pension eligibility.
Whether the State Government is entitled to recover pension benefits already granted to the employees.

Legislation cited

Bihar Pension Ruless. Rule 58

Subjects

pensionprivate medical college takeoverservice creditad hoc appointmentBihar Private Medical Colleges (Taking over) ActBihar Pension Rulesgovernment employeeretrospective benefit

Judgment

A STA TE OF BIHAR
v.
S.A. HASSAl'l AND ANR.

MARCH 5, 2002

B [S.N: PHUKAN AND P. VENKATARAMA REDDI, JJ.]

Service Law

Bihar Private Medical Colleges (Taking over) Act, 1977-S 3(1);:-
•
~·
C Pensionary benefits-Grant of-Private Medical College-Taken over by State
Government-Employees of Private College continued in the services of State
Government on ad hoc basis-Retirement-Pensionary benefits granted from
the date of taking over of the college-Claim for extension of benefit from the
date of initial appointment-Entitlement of-Held, from the date of taking
D · fiver of the college, the employees, ceased to be employees of erstwhile
management-No specific provision for counting the previous service~Thus,
employees not entitled to claim any benefit for the period of service rendered '
under the private management-Bihm· Pension Rules-Rule 58.

Respondents were employees of a private Medical College. Subsequently,
E th_e Management of the said College was taken over by the State Government
under S. 3(1) of the Bihar Private Medical Colleges (Taking over) Act, 1977.
Respondents were continued as employees of the College initially on ad hoc
basis and thereafter their services were regularised. On retirement from
service, respondents were granted pensionary benefits counting the period of
service from the date of taking over of the college till the date of retirement.
F Respondents filed writ petitions claiming that they were entitled to get the
benefit for the period of service from the initial appointment in the college
under the private management till their date of retirement. High court allowed
the writ petitions. Hence the present appeals by State Government.

G Allowing the appeals, the Court

HELD: 1.1. The respondents are not entitled to claim the benefit of the
period of their service while they were under the emp!oyment of the erstwhile
management for the purpose of calculation of their pension and pensionary .
liabilities. (197-C]
H 190
STATE v. S.A. HASSAN 191

1.2. Sub-section (I) of Section 6 of the Bihar Medical Colleges (faking A
over) Act provides in clear and explicit terms that from the date of the
notification issued under sub-section (1) all members of the staff employed in
the college shall cease to be employees of the college body. The effect of this
provision is that the respondents ceased to be employees of the erstwhile
management of the college. At the same time, the proviso to the said sub- B
section (1) declares that the staff employed in the college shall continue to
serve in the college on ad hoc basis till a decision under sub-sections (3) and
( 4) is taken by the State Government. Therefore, both the respondents
continued to serve the college on an ad hoc basis and as a result, "\Vhatever
the contract of employment which the employees had with the erstwhile
Management, came to an end. Thus, from the date of taking over the college, C
the respondents ceased to be employees of the erstwhile management and they
became employees of the State Government on an ad hoc basis. This ad hoc
appointment was subsequently regularized and, therefore, they became
permanent employees of the State Government. As on the date of taking over
the college, the terms of appointment between the erstwhile management and D
the respondents ceased to exist and they became employees of the State
Government on an ad hoc basis, they cannot claim any benefit for the service
rendered by them in the college while it was under private management, there
being no specific provision to count.the previous service by any extent.
(194-G-H; 195-A-C)
E
1.3. In the instant case, there is no material on record to show that tile
erstwhile Management was liable for any pension or pensionary liabilities in
relation to its employees. Moreover, Section 6 which deals specifically with
the subject of determination of terms and conditions of the teaching staff and
other employees of the college, but it does not mention anything about giving
weigbtage of past service for any purpose. There is also no order of State F
Government in this regard in terms of sub-section (3) of Section 6. Thus, it
cannot be accepted that the private management was liable to pay service
benefits to the respondents such as pension etc. and as the college was taken
over by the State Government, this liability has passed on to the State
Government. (195-H; 196-A) G
2. Rule 58 of the Bihar Pension Rules, clearly provides that a
Government servant does not qualify for pension unless he conforms to three
conditions viz. (1) his service must be under Government (2) the employment
must be substantive and permanent, and (3) service must be paid by the
Government In view of this Rule the respondents cannot claim the period of H
192 SUPREME COURT REPORTS [2002) 2 S.C.R.

A their service before the college was taken over as they were neither under
the employment of the Government nor their salaries were paid by the
Government Under the specific Rule 58 the past service rendered by the
respondeqts in the college while it was under the private management cannot
be counted. (197-A-B]

B 3. However, the State Government shall not be entitled to claim refund
of any pension or pensionary benefits already granted to any employees and
also to the respondents. (197-D]

CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 2096-
2097 ·of 2000. -..,.
c·
From the Judgment and Order dated 2.9.99 of the Patna High Court in
C.W.J.C. No. 3S99/97 (R) with C.W.J.C. No. 304 of 1998 (R).

Ashok Mathur, Rajesh Pathak and Harshvardan Jha for the Appellant.

D · Raju Ramchandran, Praneet Ranjan, Rajeev Singh and Prashant
Chaudhary for the Respondents.

The Judgment of the Court was delivered by
PHUKAN, J. These two appeals by special leave arise from the
judgment dated 05-02~ 1999 of the Patna High Court, Ranchi Bench. Briefly
E stated facts are as follows:-

The MGM Medical College used to be run by a private registered
society. The respondents in these two appeals were employees of the College.
By Bihar Private Medical Colleges (Taking Over) Act, 1977 (for short 'the
Act'.), the State Government by issuing a notification under sub-section ( l)
F of Section 3 of the Act took over.the management of the college on 22nd of
January, 1979. In terms of the provisions of the Act both the respondents
continued as employees of the college on an ad hoc basis and, thereafter,
their services were regularised in terms of Section 6 of the Act. They retired
from the service on attaining the age of superannuation and their pension .and
G pensionary benefits were granted counting the period of service from the date
of taking over of the college till the date of retirement. Both the respondents
filed two separate writ petitions before the High Court claiming that they are
entitled to get the benefit for the period of service from the initial appointment
in the college under the private management till their date of retirement. Both
the petitions were heard together and by the impugned judgment, writ
H petitions were allowed and the benefits were directed to be given by the State
STATE v. S.A. HASSAN [PHUKAN, J.] 193

Government. Hence, the State is in appeal before this Court. A
From the impugned judgment we find that the matter came up before
a learned Single Judge of the High Court who after noticing two conflicting
decisions on the subject directed the matter to be placed before the Full
Bench after obtaining the order of the Hon 'hie Chief Justice. In the impugned
judgment, the Division Bench was of the opinion that it was not a fit case that B
may be referred to a Full Bench as the point involved was no longer res
int~gra 'inasmuch as the question has already been decided in several cases
by the Division Bench of this Court'. Reference was made by the Division
Bench to some earlier judgments of the court. Accordingly, by the impugned
judgment, relief as prayed for was granted by allowing both the writ petitions. C

Mr. Ashok Mathur, learned counsel for the State of Bihar has drawn
our attention to some other decisions of the High Court wherein a contrary
view was expressed. Therefore, Mr. Mathur has submitted that these conflicting
views have to be resolved by this ·court so that similar disputes which may
come up in future may be decided in terins of law laid down by this Court. D
The learned counsel has fairly stated that in case the impugned judgment is
set aside, State will not ask for refund of any pension or pensionary benefits
granted to the employees of the college. In regard to the present appeals, the
learned counsel has stated that as there was no stay order by this Court of the
impugned judgement, the benefits to both the respondents ought to have been E
granted and if not granted it will be so done by the State Government and
the result of these appeals would not affect their cases.

We have perused some of the judgments of the High Court, copies of
which are on record and we find that High Court has not assigned any reason
· for counting or refusing to count the period of service. for the purpose of F
pensionary benefit while the employees were serving in the college before it
was taken over. In fact no reference was made by the High Court to the
provisions of the Act, more particularly Section 6. Therefore, we have to
examine the present dispute with reference to the relevant provisions of tl!e
Act.
G
Section 6 of the Act deals with the determination of terms of teaching
staff and other employees of the medical colleges taken over by_ the State
Government and as the present controversy has turned almost entirely upon
the meaning and effect of the provisions of this section, it will be convenient
to extract the said section. H
194 SUPREME COURT REPORTS [2002] 2 S.C.R.

A "6. Determination of terms of the teaching staff and other employees
of college.-

l. As from the date of the notified order, all the staff employed in the
college shall cease to be the employees of the College body.

B Provided that they shall contmue to serve the College on an ad hoc
basis till a decision under sub-section (3) and (4) is taken by the State
Gov.emment.

2. The State Government will set up one or more Committees of
experts and knowledgeable persons which will examine the bio-data
c of each member of the teaching staff and ascertain whether
appointment, promotion or confomation was made in accordance with
the University Regulations and in keeping with the guidelines laid
down by the Medical Council of India and take into consideration all
other relevant materials including length of service in the college,
D and submit its report to the State Government.

3. The State Government on receipt of the report of the Committee
or Committees, as the case may be, will decide in respect of each
member of teaching staff on the merits of each case, whether to
absorb him in Government service or whether to terminate his service
E or to allow him to continue on an ad hoc basis for a fixed term or on
contract and shall, where necessary, redetermine the rank, pay,
allowance and other conditions of service.

4. The State Government shall similarly determine the tern1 of
appointment and other conditions of service of other categories of
F staff of the college on the basis of facts to be ascertained either by
a Committee or by an officer entrusted with the task and the provisions
><
of sub-section (2) and (3) shall apply mutatis mutandi to such case." I

Sub-section (I) of Section 6 of the Act provides in clear and explicit
G terms that from the date of the notification issued under sub-section (1) all
members of the staff employed in the college shall cease to be employees of
the college body. The effect of this provision is that the respondents ceased
to be employees of the erstwhile management of the college. At the same
time, the proviso to the said sub-section ( 1) declares that the staff employed
in the college shall continue to serve in the college on an ad hoc basis till a
H decision under sub-sections (3) and (4) is taken by the State Government.
STATE v. S.A. HASSAN [PHUKAN, J.] 195
Therefore, both the respondents continued to serve the college on an ad hoc A
basis and as a result, whatever the contract of employment which the
employees had with the erstwhile Management, came to an end, Thus, from
the date of taking over the college, the respondents ceased to be employees
of the erstwhile management and they became employees of the State
Government on an ad hoc basis. This ad hoc appointment was subsequently B
regularised and, therefore, they became permanent employees of the State
Government. As on the date of taking over the college, the terms of
appointment between the erstwhile management and the respondents ceased
to exist and they became employees of the State Government on an ad hoc
basis, they cannot claim any benefit for the service rendered by them in the
college while it was under private management, there being no specific C
provision to count the previous service to any extent.

Mr. Raju Ramchandran, learned senior counsel appearing for the
respondents has submitted that the private management was liable to pay
rvice benefits to the respondents such as pension etc. and as the college
was taken over by the State Government, this liability has passed on to the D
State Government. In this connection learned senior counsel has drawn our
attention to sub-section (3) of Section 3 of the Act. The said sub-section
reads as follows:-

"3. (3) All the liabilities and obligations of the College under any
agreement or contract entered into bonafide before the date of taking E
over shall devolve and shall be deemed to have devolved on the State
Government."

Sub-section ( 1) of Section 3 of the Act provides for the taking over of
a private medical colleges by issuing a notification and according to sub-
section (2) of the said section whatever assets and properties the college had, F
these would vest in the State Government and sub-section (3) provides for
devolution of all the liabilities and obligations of the College on the State
Government. This sub-section (3) would operate where the assets of the
college were taken over by the State Government in terms of sub-section(!).
According to the learned senior counsel for the respondents, these liabilities G
would also include pension and other pensionary liabilities of the respondents
while they were employees of the college before it was taken over. But there
is no material on record to show that the erstwhile Management was liable
for any pension or pensionary liabilities in relation to its employees. Moreover,
Section 6 which deals specifically with the subject of determination of terms
and conditions of the teaching staff and other employees of the college, but H
196 SUPREME COURT REPORTS [2002] 2 S.C.R.

A it does not mention anything aoout giving weightage of past service for any
purpose. There is also no order of State Government in this regard in terms
of sub-section (3) of Section 6. We, therefore, do not find any force in the
contention of Mr. Raju Ramachandran, .learned senior counsel for the
respondents.

B Learned senior counsel for the n_:spondents has submitted that the
High Court by various decisions has settled the po~ition that the employees
are entitled to get theif pension. and other retiral benefits after counting their
past· service in the CQilege prior to its ·taking over by the Government and
therefore on the principle. of stare decisis this court may not reinterpret the
C Act and upset- the settled position. This contention has no force inasmuch as '""t·
from the judgments made available to us and the judgment of the learned
Single Judge we find'1hat there are conflicting decisions of the High Court
as stated earlier arrd, therefore, the present appeal has been filed. .

Lea.med senior counsel for respondents has submitted that as the Act
D is completely silent on the question of counting the previous service towards
pension and in the absence of any specific provision, there is a legitimate
expectation of r,espondents to get their pension and other retiral benefits after \..._
counting the past period of service in the college. There is neither factual nor
legal basis for such principle. The legislature in explicit and unambiguous
E terms has laid down in Section 6 of the Act that after taking over of the
college the ~mployees shall cease to be employees of the erstwhile management
and they shall continue as ad hoc employees of the Government till such time
as they are absorbed in accordance with the procedure laid down in the Act.
Therefore, this contention has no force. j

F Learned counsel for the appellant has drawn our attention to the Bihar
Pension Rules more particularly Rule 58 and ha~ submitted that a government
employee can claim pension only if he qualifies the conditions laid down in
. the rule. We may extract below the relevant portions of Rule 58 of the said
Rules:- ·
G "SR. The service of a Govc;mment servant does not qualify for pension
unless it conforms to the foilowin~ three conditions:-

First - The service must be under Government. Second - The
employment must be substantive and permanent.

H Third - The service must be paid by Government.
STATE v. S.A. HASSAN [PHUKAN,J.] 197

Rule 58 is clear that a Government servant does not qualify for pension A
unless he conforms to three conditions viz. (1) his service must be under
Government, (2) the employment must be substantive and permanent, and (3)
service must be paid by the Government. Jn view of this Rule the respondents
cannot claim the period of their service before the college was taken over as
they were neither under the employment of the Government nor their salaries B
were paid by the Government. Under the specific Rule 58 the past service
rendered by the respondents in the college while it was under the private
management cannot be counted.

We are, therefore, of the opinion that the respondents are not entitled
to claim the benefit of the period of their service while they were under the C
employment of the erstwhile management for the purpose of calculation of
their pension and pensionary liabilities. Consequently, we hold that the findings
of the High Court are not sustainable in law. Accordingly, appeals are allowed
by .setting aside the impugned judgment. The judgment rendered by us will
"ome into effect prospectively i.e. apply to the cases of employees who retire
on superannuation after the date of this judgment. The State Government D
shall not be entitled to claim refund of any pension or pensionary benefits
already granted to any employees and also to the respondents. We are giving
this direction especially for the reason that the State Government allowed a
number of judgments in adverse to it to become final and there was consequent
uncertainty in legal position.
E
Appeals are allowed by setting aside the judgment. Parties to bear
their own cost.

S.V.K.l. Appeals allowed.